AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1998
REGISTRATION NO. 333-63367
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 1998-A AUTOMOBILE LEASE
SECURITIZATION TRUST
(ISSUER WITH RESPECT TO THE NOTES)
------------------------
WORLD OMNI LEASE SECURITIZATION L.P.
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN AND TRANSFEROR OF THE SUBI CERTIFICATE
TO THE TRUST)
WORLD OMNI LT
(ISSUER WITH RESPECT TO THE SUBI AND THE SUBI CERTIFICATE)
AUTO LEASE FINANCE L.P.
(ORIGINATOR OF WORLD OMNI LT AND TRANSFEROR OF THE SUBI AND THE SUBI CERTIFICATE
TO THE TRANSFEROR 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 PRINCIPAL EXECUTIVE OFFICES OF WORLD OMNI LEASE SECURITIZATION L.P. AND AUTO
LEASE FINANCE L.P.)
------------------------
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>
CHARLES A. SWEET, ESQ. REED D. AUERBACH, ESQ.
WILLIAMS & CONNOLLY STROOCK & STROOCK & LAVAN LLP
725 TWELFTH STREET, N.W. 180 MAIDEN LANE
WASHINGTON, D.C. 20005 NEW YORK, NEW YORK 10038
</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. /x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / __________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / __________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE
OF SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1)
<S> <C> <C> <C>
Automobile Lease Backed Notes, Class A-1....................... $ 430,000,000 100% $ 430,000,000
Automobile Lease Backed Notes, Class A-2....................... $ 440,000,000 100% $ 440,000,000
Automobile Lease Backed Notes, Class A-3....................... $ 410,000,000 100% $ 410,000,000
Automobile Lease Backed Notes, Class A-4....................... $ 351,383,000 100% $ 351,383,000
1998-A Special Unit of Beneficial Interest Certificate(2)...... (3) (3) (3)
Total.......................................................... $1,631,383,000 100% $1,631,383,000
<CAPTION>
TITLE OF EACH CLASS AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTRATION FEE(4)
<S> <C>
Automobile Lease Backed Notes, Class A-1....................... $119,334
Automobile Lease Backed Notes, Class A-2....................... $122,394
Automobile Lease Backed Notes, Class A-3....................... $114,055
Automobile Lease Backed Notes, Class A-4....................... $ 97,759
1998-A Special Unit of Beneficial Interest Certificate(2)...... (3)
Total.......................................................... $453,542
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) The 1998-A Special Unit of Beneficial Interest (the 'SUBI') issued by World
Omni LT will constitute a beneficial interest in specified assets of the
assets of World Omni LT, including certain lease contracts and the
automobile and light duty trucks relating to such lease contracts. The SUBI
is not being offered to investors hereunder but will be transferred first by
Auto Lease Finance L.P. to World Omni Lease Securitization L.P. A 1998-A
Special Unit of Beneficial Interest Certificate (the 'SUBI Certificate')
issued by World Omni LT and representing a 100% undivided interest in the
SUBI will then be transferred to the Owner Trustee for the World Omni 1998-A
Automobile Lease Securitization Trust issuing, and pledged to the Indenture
Trustee as security for, the Automobile Lease Asset Backed Notes, Class A-1,
Class A-2, Class A-3 and Class A-4. The SUBI Certificate is not being
offered to investors hereunder.
(3) Not applicable.
(4) A registration fee of $295 has previously been paid.
------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
$1,631,383,000
WORLD OMNI 1998-A
AUTOMOBILE LEASE SECURITIZATION TRUST
$430,000,000
FLOATING RATE AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-1
$440,000,000
FLOATING RATE AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-2
$410,000,000
FLOATING RATE AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-3
$351,383,000
FLOATING RATE AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-4
WORLD OMNI LEASE SECURITIZATION L.P.
(Transferor)
WORLD OMNI FINANCIAL CORP.
(Servicer)
------------------------
The Floating Rate Automobile Lease Asset Backed Notes referred to above (the
'Class A Notes') will be issued by the World Omni 1998-A Automobile Lease
Securitization Trust (the 'Trust'), a Delaware business trust created pursuant
to a Securitization Trust Agreement between World Omni Lease Securitization L.P.
(the 'Transferor'), PNC Bank, Delaware, as owner trustee (the 'Owner Trustee')
and The Bank of New York, as indenture trustee (the 'Indenture Trustee'). The
Class A Notes will be issued pursuant to an Indenture between the Trust and the
Indenture Trustee. The Class A Notes will be secured by the property of the
Trust, which will consist of a 100% undivided 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 certain accounts and 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, including the Residual Value Insurance Policy, 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 MATERIAL RISKS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE CLASS A NOTES, SEE 'RISK FACTORS' ON PAGE 19 HEREIN.
------------------------
THE CLASS A NOTES WILL REPRESENT OBLIGATIONS OF THE TRUST AND WILL NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF WORLD OMNI LEASE SECURITIZATION L.P.,
AUTO LEASE FINANCE L.P., WORLD OMNI LT, WORLD OMNI FINANCIAL CORP.,
PNC BANK, DELAWARE OR ANY OF THEIR RESPECTIVE AFFILIATES OTHER
THAN THE TRUST.
------------------------
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 ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) THE TRANSFEROR(1)(3)
<S> <C> <C> <C>
Per Class A-1 Note................................. 100% 0.190% 99.810%
Per Class A-2 Note................................. 100% 0.205% 99.795%
Per Class A-3 Note................................. 100% 0.215% 99.785%
Per Class A-4 Note................................. 100% 0.235% 99.765%
Total.............................................. $1,631,383,000 $3,426,250.05 $1,627,956,749.95
</TABLE>
(1) Plus accrued interest, if any, calculated at the related Note Rate from and
including the date of initial issuance.
(2) The Transferor 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 Transferor estimated to be
$1,174,000.
------------------------
The Class A Notes are offered by the Underwriters, subject to prior sale,
when, as and if issued to and accepted by the Underwriters, subject to approval
of certain legal matters by counsel for the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Class A Notes 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 November 19, 1998, against payment in immediately
available funds.
------------------------
JOINT BOOK RUNNERS
CREDIT SUISSE FIRST BOSTON MERRILL LYNCH & CO.
CO-MANAGERS
FIRST UNION CAPITAL MARKETS
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY
------------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 6, 1998
<PAGE>
(Cover continued from previous page)
The SUBI initially will evidence a beneficial interest in specified
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, 1998, payments made under certain insurance policies relating to
such lease contracts, the related lessees and such leased vehicles, including
the Residual Value Insurance Policy, and certain other Origination Trust Assets
(collectively, the 'SUBI Assets'), as more fully described under 'The Trust and
the SUBI--The SUBI'. From time to time until principal is first distributed to
the Noteholders, 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 Notes. For further information regarding the Trust, the
SUBI and the Origination Trust, see 'The Trust and the SUBI' and 'The
Origination Trust'.
The Notes will consist of four classes of senior notes (respectively, the
'Class A-1 Notes', the 'Class A-2 Notes', the 'Class A-3 Notes' and the 'Class
A-4 Notes', and collectively, the 'Class A Notes') and one class of subordinated
Notes (the 'Class B Notes', and together with the Class A Notes, the 'Notes').
The Class A Notes will be the only Notes offered hereby. The Class B Notes will
initially be held by an affiliate of the Transferor. Information concerning the
Class B Notes is provided herein only for a better understanding of the Class A
Notes. The initial principal amount of the Class B Notes will be $92,592,000 and
the Class B Notes will be subordinated to the Class A Notes to the extent
described herein. The Transferor will own the undivided equity interest in the
Trust (the 'Transferor Interest'). The Transferor Interest will be subordinated
to the Notes as described herein. For further information regarding the Notes,
see 'Description of the Notes'.
In general, no principal payments will be made on the Class A-2 Notes until
the Class A-1 Notes have been paid in full, no principal payments will be made
on the Class A-3 Notes until the Class A-1 Notes and the Class A-2 Notes have
been paid in full, and no principal payments will be made on the Class A-4 Notes
until the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes have been
paid in full. Following payment in full of the Class A-3 Notes, principal
payments will be made on the Class A-4 Notes and the Class B Notes, pro rata,
based on the Class A Percentage and Class B Percentage, respectively.
Interest on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes will accrue at the respective floating interest rates
specified herein and will be distributed to holders of the Class A Notes on the
fifteenth day of each month (or, if such day is not a Business Day, on the next
succeeding Business Day), beginning December 15, 1998 (each, a 'Distribution
Date'). Principal will be distributed to holders of the Notes to the extent
described herein on each Distribution Date beginning in January 2000, or, in
certain limited circumstances, earlier, as more fully described herein. The
final maturity date for each Class of Class A Notes will be the December 2004
Distribution Date.
The Class A Notes will have the benefit of an interest rate swap (the
'Class A Interest Rate Swap'). Merrill Lynch Derivative Products AG will be the
counterparty to the Class A Interest Rate Swap. Payments received by the Trust
pursuant to the Class A Interest Rate Swap will be available to pay interest due
on the Class A Notes on each Distribution Date to the extent described herein.
There currently is no secondary market for the Class A Notes 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 Notes. 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 Notes', it is a
condition of issuance that each of Moody's Investors Service, Inc., Standard &
Poor's, a division of The McGraw-Hill Companies, Inc. and Fitch IBCA, Inc. rates
each Class of Class A Notes in its highest rating category.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF ANY CLASS OF NOTES,
INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS,
ii
<PAGE>
SYNDICATE SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE 'UNDERWRITING'.
AVAILABLE INFORMATION
The Transferor, 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 Notes 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.
iii
<PAGE>
OVERVIEW OF TRANSACTION
[FLOWCHART OF OVERVIEW OF TRANSACTIONS]
iv
<PAGE>
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 at page 99 for the location herein of certain capitalized
terms.
<TABLE>
<S> <C>
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. ('ALF L.P.')
an Undivided Trust Interest (the 'UTI') representing the entire
beneficial interest in the unallocated assets of the Origination
Trust. ALF 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. ALF L.P. will sell its interest in the SUBI to World Omni Lease
Securitization L.P. (the 'Transferor') and the Transferor will in
turn contribute the entire interest in the SUBI to the World Omni
1998-A Automobile Lease Securitization Trust (the 'Trust'). In
return, the Trust will issue certain securities, including the Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes being
offered hereby. The undivided equity interest in the Trust will be
permanently retained by the Transferor. ALF 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 Transferor or one or more other
entities. The Trust and the Noteholders 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 created pursuant to a securitization trust
agreement dated as of October 1, 1998 (the 'Agreement'), among the
Transferor, PNC Bank, Delaware, as owner trustee (in such capacity
(together with its successors and assigns), the 'Owner Trustee') and
The Bank of New York ('BONY'), as indenture trustee (in such
capacity, the 'Indenture Trustee'). The property of the Trust will
consist primarily of the SUBI, which will evidence a beneficial
interest in certain specified assets of the Origination Trust
(including Insured Residual Value Loss Amounts paid under the
Residual Value Insurance Policy), Class A Net Swap Receipts and
monies on deposit in the Reserve Fund and in certain other accounts
established as described herein.
The Origination Trust was formed by ALF L.P., as grantor and initial
beneficiary, and VT Inc., as trustee (the 'Origination Trustee'). The
sole general partner of ALF L.P. is Auto Lease Finance LLC (as
successor by merger to Auto Lease Finance, Inc.),
</TABLE>
<PAGE>
<TABLE>
<S> <C>
a Delaware single member limited liability company ('ALF LLC') which
is a wholly owned, special purpose subsidiary of World Omni. ALF LLC
may not transfer its general partnership interest in ALF L.P. so long
as any financings involving interests in the Origination Trust
(including the transaction described herein) are outstanding. World
Omni is the sole member of ALF LLC and the sole limited partner of
ALF L.P. VT Inc. is an Alabama corporation and a wholly owned,
special purpose subsidiary of U.S. Bank National Association ('U.S.
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,
including the Residual Value Insurance Policy. The SUBI initially
will evidence a beneficial interest in a specified portion of the
Origination Trust Assets, including: (i) certain lease contracts (the
'Initial Contracts') originated by Dealers located throughout the
United States; (ii) the automobiles and light duty trucks relating
thereto (the 'Initial Leased Vehicles'); (iii) certain monies due
under or payable in respect of the Initial Contracts and the Initial
Leased Vehicles on or after September 1, 1998 (the 'Initial Cutoff
Date'); (iv) payments made under certain insurance policies
(including Insured Residual Value Loss Amounts paid under the
Residual Value Insurance Policy) relating to the Initial Contracts,
the related lessees and the Initial Leased Vehicles; and (v) 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 Noteholders
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, together with certain related Origination Trust Assets,
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. These Dealers offer
automobiles and light duty trucks for lease pursuant to
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
World Omni-approved terms and documentation. For further information
regarding World Omni's lease business, see 'World Omni'.
The SUBI will evidence an indirect beneficial interest, rather than a
direct legal interest, in the SUBI Assets. The SUBI will not
represent a beneficial interest in any Origination Trust Assets other
than the SUBI Assets. Payments made on or in respect of Origination
Trust Assets other than the SUBI Assets will not be available to make
payments on the Notes. For further information regarding the SUBI,
see 'Summary--Security for the Notes--The SUBI', 'The Trust and the
SUBI--The SUBI' and 'The Origination Trust'.
The Transferor............................ The Transferor is a Delaware limited partnership, the sole general
partner of which is World Omni Lease Securitization LLC (as successor
by merger to World Omni Lease Securitization, Inc.), a Delaware
single member limited liability company ('WOLS LLC'), which is a
wholly owned, special purpose subsidiary of World Omni. WOLS LLC may
not transfer its general partnership interest in the Transferor 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 member of WOLS LLC
and the sole limited partner of the Transferor.
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 is the sole member of both ALF LLC and WOLS LLC.
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, 1998 (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 Owner Trustee and the Indenture Trustee will be third party
beneficiaries of the Servicing Agreement, as described under
'Additional Document Provisions--The Servicing Agreement--Indenture
Trustee and Owner Trustee as Third-Party Beneficiaries'.
Securities Offered........................ The Automobile Lease Asset Backed Notes (the 'Notes') will consist of
four classes of senior Notes (the 'Class A-1 Notes', the 'Class A-2
Notes', the 'Class A-3 Notes' and the 'Class A-4 Notes',
respectively, and collectively, the 'Class A Notes') and one class of
subordinated notes (the 'Class B Notes'). Generally, no principal
payments will be made on the Class A-2 Notes until the
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Class A-1 Notes have been paid in full, no principal payments will be
made on the Class A-3 Notes until the Class A-1 Notes and the Class
A-2 Notes have been paid in full, and no principal payments will be
made on the Class A-4 Notes until the Class A-1 Notes, Class A-2
Notes and Class A-3 Notes have been paid in full, in each case as
more fully described under 'Description of the Notes-- Distributions
on the Notes--Application and Distributions of
Principal--Amortization Period'. The Class B Notes will be
subordinated to the Class A Notes so that (i) interest payments will
not be made in respect of the Class B Notes until interest in respect
of the Class A Notes has been paid, (ii) principal payments will not
be made in respect of the Class B Notes until the Class A-1, Class
A-2 and Class A-3 Notes have been paid in full and (iii) if other
sources available to make payments of principal and interest on the
Class A-4 Notes are insufficient, amounts that otherwise would be
paid in respect of the Class B Notes generally will be available for
that purpose, as more fully described under 'Description of the
Notes--Distributions on the Notes'. The undivided equity interest in
the Trust will be permanently retained by the Transferor (the
'Transferor Interest'). The Transferor Interest will be subordinated
to the Notes as described under 'Summary--Security for the
Notes--Subordination of the Transferor Interest'. Only the Class A
Notes are being offered hereby. The Class A Notes will be issued in
book-entry form in minimum denominations of $1,000 and integral
multiples thereof, as set forth under 'Description of the
Notes--Book-Entry Registration' and '--Definitive Notes'. The Class B
Notes will initially be held by an affiliate of the Transferor.
Information concerning the Class B Notes is provided herein only for
a better understanding of the Class A Notes.
Each Note will represent the right to receive monthly payments of
interest at the related Note 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 (i.e., from a portion of
the payments received on or in respect of the Contracts and the
Leased Vehicles) and, in certain circumstances, from Transferor
Amounts that otherwise would be distributable in respect of the
Transferor Interest, Insured Residual Value Loss Amounts paid under
the Residual Value Insurance Policy, Class A Net Swap Receipts and
monies on deposit in the Reserve Fund.
On the date of initial issuance of the Notes (the 'Closing Date'),
the Trust will issue $430,000,000 aggregate principal amount of Class
A-1 Notes (the 'Initial Class A-1 Note Balance'), $440,000,000
aggregate principal amount of Class A-2 Notes (the 'Initial Class A-2
Note Balance'), $410,000,000 aggregate principal amount of Class A-3
Notes (the 'Initial Class A-3 Note Balance'), $351,383,000 aggregate
principal amount of Class A-4 Notes (the 'Initial Class A-4 Note
Balance' and, together with the Initial Class A-1 Note Balance, the
Initial Class A-2 Note Balance and the Initial Class A-3 Note
Balance, the 'Initial Class A Note Balance') and $92,592,000
aggregate principal amount of Class B Notes (the 'Initial Class B
Note Balance' and, together with the
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
Initial Class A Note Balance, the 'Initial Note Balance'). The
aggregate principal amounts of the Class A-1, Class A-2, Class A-3
and Class A-4 Notes and the Class B Notes will, except in certain
circumstances described under 'Summary--The Revolving Period;
Subsequent Contracts and Subsequent Leased Vehicles', remain fixed at
their respective Initial Class Note Balances during the Revolving
Period and, to the extent described herein, will decline thereafter
during the Amortization Period as principal is paid on the Notes. The
'Class Note Balance' of any Class of Notes on any day will equal the
Initial Class Note Balance, reduced by the sum of all distributions
made in respect of principal (including any reimbursements of Loss
Amounts allocable to such Class and Note Principal Loss Amounts in
respect of such Class) on or prior to such day on the related Class
of Notes and those Note Principal Loss Amounts in respect of such
Class, if any, which have not been reimbursed as described herein.
The 'Class A Note Balance' will mean the sum of the Class A-1, Class
A-2, Class A-3 and Class A-4 Note Balances. The 'Note Balance' with
respect to the Notes will mean the sum of the Class A Note Balance
and the Class B Note Balance.
The amount of the Transferor Interest will initially equal
$39,682,871.20 (which amount will equal approximately 2.25% of the
Aggregate Net Investment Value as of the Initial Cutoff Date) and on
any day will equal the difference between the Aggregate Net
Investment Value, calculated as described under 'Summary-- Security
for the Notes--The SUBI' and 'Summary--The Contracts', and the Note
Balance. As more fully described under 'Description of the
Notes--General', the Aggregate Net Investment Value can change daily.
Registration of the Notes................. Each Class of Class A Notes initially will be represented by one or
more notes 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 Notes (each, a 'Note Owner') will hold his
or her interest through DTC, in the United States, 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
Note Owner will be able to receive a definitive Note representing
such person's interest, except in the limited circumstances described
under 'Description of the Notes--Definitive Notes'. Unless and until
definitive Notes are issued, Note Owners will not be recognized as
holders of record of Class A Notes 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 Notes,
see
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
'Description of the Notes--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 December 15, 1998
(each, a 'Distribution Date'), distributions in respect of the Class
A Notes will be made to the holders of record of the Class A-1, Class
A-2, Class A-3 and Class A-4 Notes (respectively, the 'Class A-1
Noteholders', the 'Class A-2 Noteholders', the 'Class A-3
Noteholders' and the 'Class A-4 Noteholders', and collectively, the
'Class A Noteholders') as of the day immediately preceding such
Distribution Date or, if Definitive Notes are issued, the last day of
the immediately preceding calendar month (each such date, a 'Record
Date'). On each Distribution Date, the Indenture Trustee will
distribute interest to the Class A Noteholders, based on the related
Class Note Balance as of the immediately preceding Distribution Date
(after giving effect to reductions in such Class Note Balance as of
such immediately preceding Distribution Date) or, in the case of the
first Distribution Date, on the Initial Class Note Balance, in the
case of (i) the Class A-1 Notes, at an annual percentage rate equal
to One-Month LIBOR plus 0.35% (the 'Class A-1 Note Rate'), (ii) the
Class A-2 Notes, at an annual percentage rate equal to One-Month
LIBOR plus 0.40% (the 'Class A-2 Note Rate'), (iii) the Class A-3
Notes, at an annual percentage rate equal to One-Month LIBOR plus
0.45% (the 'Class A-3 Note Rate') and (iv) the Class A-4 Notes, at an
annual percentage rate equal to One-Month LIBOR plus 0.55% (the
'Class A-4 Note Rate'). One-Month LIBOR shall generally equal the
London interbank offered quotations for one-month United States
dollar deposits determined as of the applicable LIBOR Determination
Date as described herein. See 'Description of the
Notes--Determination of One-Month LIBOR'. All such payments will be
calculated on the basis of the actual number of days from and
including the prior Distribution Date (or in the case of the initial
Distribution Date, the Closing Date) to but excluding the related
Distribution Date and a 360-day year.
The final maturity date for each Class of Class A Notes (the 'Stated
Maturity Date') will be the December 2004 Distribution Date. A
'Business Day' will be a day other than a Saturday or Sunday or a day
on which banking institutions in New York, New York, Chicago,
Illinois, Wilmington, Delaware, Deerfield Beach, Florida, or Mobile,
Alabama, are authorized or obligated by law, executive order or
government decree to be closed. As described under 'Description of
the Notes--Distributions on the Notes-- Distributions of Interest',
distributions in respect of interest on the Class B Notes will be
subordinated to distributions in respect of interest on the Class A
Notes under certain circumstances.
Class A Interest Rate Swap................ On the date of issuance of the Notes, the Trust will enter into the
Class A Interest Rate Swap with the Class A Swap Counterparty. The
Class A Interest Rate Swap will have a notional amount (the 'Notional
Amount') as of any Deposit Date or Distribution Date, equal to the
Class A Note Balance, as of the close of business on the preceding
Distribution Date after giving effect to distributions on
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
such Distribution Date; provided, however, with respect to the first
Deposit Date and Distribution Date, the Notional Amount will be equal
to the Initial Class A Note Balance. Pursuant to the Class A Interest
Rate Swap, (x) on each Distribution Date, a payment will be made by
the Trust to the Class A Swap Counterparty (if the following is a
positive number), or (y) on each Deposit Date a payment will be made
by the Class A Swap Counterparty to the Trust (if the following is a
negative number), of an amount equal to (i) one-twelfth of the
product of (A) the Notional Amount and (B) the Swap Rate (or, with
respect to the first Deposit Date and Distribution Date, an amount
specified in the Agreement) minus (ii) the product of (A) a fraction,
the numerator of which is the actual number of days from and
including the prior Distribution Date to but excluding the related
Distribution Date (or, with respect to the first Deposit Date and
Distribution Date, the actual number of days from the date of
issuance of the Notes to but excluding the first Distribution Date)
and the denominator of which is 360, (B) the Notional Amount and (C)
One-Month LIBOR with respect to the related Distribution Date. If
such amount is positive it will be referred to herein as the 'Class A
Net Swap Payment', and if such amount is negative, it will be
referred to herein as the 'Class A Net Swap Receipt'. The 'Swap Rate'
is 5.03%.
Any Class A Net Swap Receipt in respect of a Deposit Date will be
deposited in the Distribution Account and will be available to make
distributions of interest due on the Class A Notes on the related
Distribution Date. Any Class A Net Swap Payment in respect of a
Distribution Date will be paid out of funds on deposit in the SUBI
Collection Account. See 'The Class A Interest Rate Swap'.
Class A Swap Counterparty................. Merrill Lynch Derivative Products AG will be the swap counterparty
with respect to the Class A Interest Rate Swap (in such capacity, the
'Class A Swap Counterparty'). See 'The Class A Interest Rate
Swap--The Class A Swap Counterparty'.
The Revolving Period; Subsequent Contracts
and Subsequent Leased Vehicles.......... No principal will be payable on the Notes until the January 2000
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 and including the Closing Date and ending on the day immediately
preceding the commencement of the Amortization Period (i.e., the
earlier of December 1, 1999 or the date of an Early Amortization
Event) (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, Class A-4 and Class B Note Balances at
constant levels during the Revolving Period, except to the extent
there are unreimbursed Note Principal Loss Amounts in respect of any
such Class, in which case the Note Balance of the related Class of
Notes will decrease, although such amounts may be reimbursed as
described under 'Description of the Notes--Distributions on the
Notes--Distributions of Interest'. The events that might lead to the
termination of the Revolving Period
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
prior to its scheduled termination date are described under
'Description of the Notes--Early Amortization Events'. On any
calendar day (i) in each month (beginning December 1998) 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 and certain Loss Amounts that otherwise would be
reimbursed to the Noteholders 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 December 1998) during the Revolving Period the amount of
Principal Collections and such otherwise reimbursable Loss Amounts 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 and all such reimbursable Loss Amounts will be
distributed as principal to Noteholders on the immediately succeeding
Distribution Date. For further details concerning the application of
Principal Collections and Loss Amounts, see 'Summary--Amortization
Period; Principal Payments', 'Risk Factors--Risk of Absence of Funds
for Reimbursement of Loss Amounts', 'The Trust and the SUBI--The
SUBI' and 'Description of the Notes--Distributions on the Notes--
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 Contracts--Representations, Warranties and Covenants'. If
allocations are being made in respect of any one or more previous
Other SUBI(s) 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. 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 7.75% (each, a 'Discounted Contract') will be
discounted to present value at a rate of 7.75%, thereby effectively
reallocating a portion of the payments received in respect of the
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
principal component of the Contracts to Interest Collections and
providing additional credit enhancement for the benefit of the
Noteholders. 'Collections' with respect to any Collection Period will
include all net collections received on or in respect of the
Contracts and Leased Vehicles during such Collection Period other
than Insured Residual Value Loss Amounts paid under the Residual
Value Insurance Policy, 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,
Net Repossessed Vehicle Proceeds and other Net Liquidation Proceeds
and any Undistributed Transferor Excess Collections in respect of the
immediately preceding Collection Period, but shall not include, and
(as appropriate) shall be net of (i) Payments Ahead with respect to
one or more future Collection Periods, (ii) amounts paid to the
Servicer in respect of outstanding Advances, Matured Leased Vehicle
Expenses, Repossessed Vehicle Expenses, other Liquidation Expenses
and Insurance Expenses, (iii) late payment charges, payments of
insurance premiums, excise taxes or similar items and (iv) 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 Noteholders on the related Distribution Date
as reimbursement of Loss Amounts allocable to the Notes (as described
under 'Description of the Notes-- Distributions on the
Notes--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. 'Net Matured
Leased Vehicle Proceeds' will be Matured Leased Vehicle Proceeds
received during a Collection Period net of Matured Leased Vehicle
Expenses incurred during such Collection Period.
Amortization Period; Principal
Payments................................ The 'Amortization Period' will commence on the earlier of December 1,
1999 (the 'Amortization Date') or the day on which an Early
Amortization Event occurs, and will end when each Class of Notes has
been paid in full and all Note Principal Loss Amounts and Class B
Note 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 and certain reimbursed Loss Amounts 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-3 Notes have been paid in full, all Principal
Collections for the related Collection Period that are allocable to
the Notes will be distributed as principal payments first to the
Class A-1 Noteholders until the Class A-1
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
Notes have been paid in full, second, to the Class A-2 Noteholders
until the Class A-2 Notes have been paid in full, third, to the
Class A-3 Noteholders until the Class A-3 Notes 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-4 Noteholders and to the holders of
record of the Class B Notes (the 'Class B Noteholders' and, together
with the Class A Noteholders, the 'Noteholders'), respectively. On
each Distribution Date after the Class A-3 Notes 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 Notes
will be distributed to the Class A-4 Noteholders and the Class B
Noteholders, respectively, until the related Class of Notes has been
paid in full. Certain Loss Amounts incurred during the Amortization
Period will be reimbursed to the Noteholders as described below. The
'Class A Percentage' will mean the Class A Note Balance immediately
after the Class A-3 Notes have been paid in full, as a percentage of
the Note Balance at such time, and the 'Class B Percentage' will mean
the Class B Note Balance immediately after the Class A-3 Notes have
been paid in full, as a percentage of the Note 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
Notes exceed its Note Balance. In addition, under certain
circumstances, (i) Class A Noteholders will be entitled to receive
reimbursement of Loss Amounts as a distribution of principal from
sources other than Principal Collections and (ii) principal allocable
to the Class B Notes may instead be distributed in respect of Loss
Amounts allocable to the Class A-4 Notes, Class A-4 Note Principal
Loss Amounts and accrued and unpaid interest thereon, as described
under 'Description of the Notes--Distributions on the Notes--
Distributions of Interest', 'Description of the Notes--Distributions
on the Notes--Application and Distributions of Principal' and 'Risk
Factors--Risk of Absence of Funds for Reimbursement of Loss Amounts'.
See 'Description of the Notes--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 Notes in respect of a Collection Period (the
'Principal Allocation') generally will mean the Principal Collections
in respect of such Collection Period 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 Note Balance and the denominator of which is the Aggregate Net
Investment Value, calculated as described under 'Summary--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 Notes--Calculation of
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Investor Percentage and Transferor 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 Noteholders in amounts that are greater
relative to the declining balance of the Note Balance than would be
the case if no fixed Investor Percentage were used to determine the
percentage of Principal Collections distributed in respect of the
Notes. 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
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% and (ii) 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 Noteholders in the same manner and priority as
principal is distributed in respect of the Notes as described in the
preceding paragraphs. See 'Description of the Notes--Distributions on
the Notes--Distributions of Interest' and 'Description of the Notes--
The Accounts--The SUBI Collection Account--Withdrawals from the SUBI
Collection Account' for further information regarding the foregoing
matters.
Optional Redemption....................... The Notes will be subject to redemption if the Transferor exercises
its option to purchase all of the assets of the Trust, which option
may be exercised 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 Note Balance has been reduced to an amount
less than or equal to 10% of the Initial Note Balance, at a purchase
price determined as described under 'Description of the
Notes--Termination of the Trust; Redemption of the Notes'.
Security for the Notes.................... The security for the Notes 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 ALF L.P., as grantor and
initial beneficiary, the Origination Trustee and U.S. Bank, as trust
agent (in such capacity, the 'Trust Agent'). The SUBI and the entire
beneficial interest in the SUBI Assets will be evidenced by a
certificate (the 'SUBI Certificate') that will be issued by the
Origination Trust pursuant to a supplement to the Origination Trust
Agreement dated as of October 1, 1998 (the 'SUBI Supplement' and,
together with the Origination Trust Agreement, the 'SUBI Trust
Agreement'). The Indenture Trustee and the Owner Trustee will be
third party beneficiaries of the SUBI Trust Agreement.
The Origination Trust Assets evidenced by the SUBI will primarily
include the Contracts and the Leased Vehicles. The SUBI will not
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
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 Notes. For more information regarding the SUBI, see 'The Trust
and the SUBI' and 'The Origination Trust'.
B. The Residual Value Insurance
Policy............................... On the Closing Date, Federal Insurance Company, a wholly owned
subsidiary of The Chubb Corporation ('Federal' or the 'RV Insurer'),
will issue an insurance policy (the 'Residual Value Insurance
Policy') to the Transferor (with the Origination Trustee, the Owner
Trustee, the Indenture Trustee and ALF L.P. also named as insureds),
which will provide coverage for the Insured Residual Value Loss
Amount for any Collection Period. The aggregate maximum amount
payable under the Residual Value Insurance Policy with respect to any
Leased Vehicle will be the lesser of $60,000 and its insured residual
value, calculated as described under 'Security for the Notes--The
Residual Value Insurance Policy'. Additionally, the aggregate maximum
amount payable under the Residual Value Insurance Policy will not
exceed the aggregate insured residual values of all Leased Vehicles.
Prior to each Distribution Date, the Servicer will make a claim for
any Insured Residual Value Loss Amount under the Residual Value
Insurance Policy. The proceeds of any such claim will be used to make
the payments described under 'Description of the Notes--
Distributions on the Notes--Distributions of Interest'. For a fuller
description of these mechanics, see 'Security for the Notes--The
Residual Value Insurance Policy'.
The 'Insured Residual Value Loss Amount' for any Collection Period
will be the lesser of (i) the Investor Percentage of the Residual
Value Loss Amount, and (ii) any shortfall in the amount required to
make all payments (other than deposits into the Reserve Fund)
required to be made on the related Distribution Date that are
described under 'Description of the Notes--Distributions on the
Notes--Distributions of Interest', after application of the Investor
Percentage of Interest Collections and Transferor Amounts otherwise
payable in respect of the Transferor Interest, as described below
under 'Summary--Security for the Notes--Subordination of the
Transferor Interest'.
C. The Reserve Fund..................... The Trust will have the benefit of the Reserve Fund maintained with
the Indenture Trustee for the benefit of the Noteholders and the
Transferor (as holder of the Transferor Interest). The Reserve Fund
is designed to provide additional funds for the benefit of the
Noteholders in the event that on any Distribution Date Interest
Collections allocable to the Notes for the related Collection Period,
plus the Class A Net Swap Receipt, plus Transferor Amounts otherwise
distributable in respect of the Transferor Interest, plus any Insured
Residual Value Loss Amount paid under the Residual Value Insurance
Policy for the related Collection Period, less any Class A Net Swap
Payment are insufficient to pay, among other things, the sum of (i)
accrued interest and any overdue interest (with interest thereon) at
the applicable Note Rate on the Notes on such Distribution Date, (ii)
any Loss Amount for such Collection Period
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
allocable to the Notes, calculated as described under 'Description of
the Notes--Calculation of Investor Percentage and Transferor
Percentage', and (iii) any unreimbursed Note Principal Loss Amounts,
together with interest thereon at the applicable Note Rate. Monies on
deposit in the Reserve Fund also will be available to Noteholders
should Collections ultimately be insufficient to pay in full any
Class of Notes. For further information regarding the Reserve Fund,
see 'Security for the Notes--The Reserve Fund'.
The Reserve Fund will be created with an initial deposit by the
Transferor of $17,636,578.71 (the 'Initial Deposit') (which amount
will equal 1.0% 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 Interest
Collections, as more fully described under 'Description of the
Notes--Distributions on the Notes--Distributions of Interest', (ii)
income realized on the investment of amounts on deposit in the
Reserve Fund and (iii) in certain circumstances, 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 Transferor 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 Notes--The Reserve
Fund--The Reserve Fund Cash Requirement'.
The Transferor may be required under certain circumstances to deposit
funds into the Reserve Fund in an amount equal to certain Reserve
Fund supplemental requirements. For a description of the
circumstances under which the Transferor will be required to make
such deposits, see 'Security for the Notes--The Reserve Fund'. For
further information regarding deposits into the Reserve Fund, see
'Description of the Notes--Distributions on the Notes-- Distributions
of Interest'.
After giving effect to all payments from the Reserve Fund on a
Distribution Date, monies that are in excess of the Reserve Fund Cash
Requirement generally will be paid to the Transferor, free and clear
of any lien of the Trust.
D. Subordination of the Transferor
Interest............................. The Transferor Interest will initially equal $39,682,871.20, and will
represent the entire equity interest in the Trust. However, to
provide additional credit enhancement for the Notes, on each
Distribution Date, no payments will be made to the Transferor in
respect of the Transferor Interest until all payments required to be
made on such Distribution Date that are described under 'Description
of the Notes--Distributions on the Notes--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 Transferor, see 'Description of the Notes--
Certain Payments to the Transferor'.
The Contracts............................. The Contracts will consist of a pool of retail closed-end lease
contracts originated by Dealers located throughout the United States,
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
each of 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 74,744 lease contracts. As of the
Initial Cutoff Date, the Lease Rate of the Initial Contracts ranged
from 3.20% to 13.00%, with a weighted average Lease Rate of 8.65%.
The aggregate of the original principal balances of the
Initial Contracts as of their respective dates of origination was
$1,894,114,728.78. As of the Initial Cutoff Date, the aggregate
Outstanding Principal Balance of the Initial Contracts was
$1,772,260,190.52, the aggregate Residual Value of the Initial Leased
Vehicles was $1,218,938,715.18 and the Initial Contracts had a
weighted average original term of 41.15 months and a weighted average
remaining term to scheduled maturity of 32.86 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 and
Loss Amounts that otherwise would be reimbursed to the Noteholders,
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 the present value of all remaining
Monthly Payments on such Contract and the Residual Value of the
related Leased Vehicle, calculated using a discount rate of 7.75%,
and (ii) all Contracts other than Discounted Contracts will equal
their Outstanding Principal Balance. As of the Initial Cutoff Date,
the
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
aggregate Discounted Principal Balance of the Initial Contracts and
the Aggregate Net Investment Value was $1,763,657,871.20.
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'. Manufacturers' program vehicles are vehicles
which have been sold directly by manufacturers to rental car
companies and returned to the manufacturer for resale.
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
Trust in the Leased Vehicles by virtue of its ownership of the SUBI
or any security interest of the Indenture Trustee. Therefore, the
Indenture Trustee will not have a perfected lien in the Leased
Vehicles, although it will have a perfected security interest in the
SUBI Certificate and certain other assets. For further information
regarding the titling of the Leased Vehicles and the interest of the
Indenture Trustee therein, see 'The Origination Trust--Contract
Origination; Titling of Leased Vehicles' and 'Certain Legal Aspects
of the Contracts and the Leased Vehicles--Back-up Security
Interests'.
The Accounts.............................. The Indenture Trustee will maintain the SUBI Collection Account for
the benefit of the Noteholders. 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, but excluding Insured Residual Value Loss Amounts paid under the
Residual Value Insurance Policy) ('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 (excluding Insured
Residual Value Loss Amounts paid under the Residual Value Insurance
Policy) (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 as a deduction from
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
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 'Description of the Notes--The Accounts-- The
SUBI Collection Account'.
On the Business Day immediately preceding each Distribution Date
(each, a 'Deposit Date'), the following amounts will be deposited
into the SUBI Collection Account: (i) Advances by the Servicer and
(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. Thereafter, Interest Collections
(and, with respect to the Deposit Date in any month following the
month during which the Amortization Period commences, Principal
Collections) on deposit in the SUBI Collection Account in respect of
the related Collection Period will be deposited into the Distribution
Account maintained by the Indenture Trustee for the benefit of the
Noteholders and the Transferor. Any Insured Residual Value Loss
Amount paid under the Residual Value Insurance Policy will be
deposited into the SUBI Collection Account (if it relates to the
Revolving Period) or the Distribution Account (if it relates to the
Amortization Period) within one Business Day of receipt by the
Servicer. Any Required Amount will be withdrawn from the Reserve Fund
and deposited into the Distribution Account on each Distribution
Date. Any Class A Net Swap Receipt will be deposited into the
Distribution Account on the Deposit Date. All payments to Noteholders
will be made from the Distribution Account. 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 generally will be paid to the Transferor. For
further information regarding these deposits and payments, see
'Description of the Notes--The Accounts--The Distribution Account'
and '--The SUBI Collection Account'.
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 any 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 (the 'Servicing Fee'), payable on each
Distribution Date, equal to one-twelfth of 1% of the Aggregate Net
Investment Value as of the first day of the related Collection Period
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
(or, in the case of the first Distribution Date, one-twelfth of 1% 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................................ Cadwalader, Wickersham & Taft, special federal income tax counsel to
the Transferor, is of the opinion that the Class A Notes will be
characterized as indebtedness for federal income tax purposes, as
described under 'Material Income Tax Considerations--Federal
Taxation'. Each Class A Noteholder, by its acceptance of a Class A
Note, and each Note Owner, by its acquisition of an interest in the
Class A Notes, will agree to treat the Class A Notes 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 the Class A Notes, 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 Notes, see 'Material 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 Notes should consult its counsel before making a
purchase, and the fiduciary of such plan and such legal advisors
should consider the matters discussed herein.
Ratings................................... It is a condition of issuance of the Class A Notes that each of
Moody's Investors Service, Inc. ('Moody's'), Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. ('Standard & Poor's') and
Fitch IBCA, Inc. ('Fitch' and, together with Moody's and Standard &
Poor's, the 'Rating Agencies') rates each Class of Class A Notes in
its highest rating category. The ratings of the Class A Notes 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 Notes, inasmuch as such rating does not comment as to
market price or suitability for a particular investor. The ratings of
the Class A Notes will be based primarily upon the value of the
Initial Contracts, the Residual Value Insurance Policy (see 'Security
for the Notes--The Reserve Fund--Other Reserve Fund Requirements' for
information regarding the effect of a downgrade by a Rating Agency of
the credit rating of the RV Insurer), the Reserve Fund, the Class A
Interest Rate Swap, the Class A Swap Counterparty (see 'Risk
Factors--Risks Associated with the Class A Swap Counterparty' for
information regarding the effect of (i) a downgrade by a Rating
Agency of the counterparty rating of the Class A Swap Counterparty
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
and (ii) a payment default by the Class A Swap Counterparty) and the
terms of the Transferor Interest and the Class B Notes. There is no
assurance that any such rating will not be lowered or withdrawn by
the assigning Rating Agency if, in its judgment, future circumstances
so warrant. In the event that a rating with respect to any Class of
Class A Notes 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 Notes. Any reduction in the rating
assigned to the Class A Swap Counterparty or the RV Insurer may
result in a reduction in the rating of the Class A Notes. For further
information concerning the ratings assigned to the Class A Notes,
including the limitations of such ratings, see 'Ratings of the Class
A Notes'.
</TABLE>
18
<PAGE>
RISK FACTORS
RISK OF LIMITED LIQUIDITY; ABSENCE OF SECONDARY MARKET
There is currently no market for the Class A Notes. The Underwriters
expect, but will not be obligated, to make a market in each Class of Class A
Notes. There can be no assurance that a secondary market for the Class A Notes
will develop or, if one does develop, that it will provide the related
Noteholders with liquidity of investment or will continue for the life of the
related Class A Notes.
RISK OF ABSENCE OF FUNDS FOR REIMBURSEMENT OF LOSS AMOUNTS
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 not be reimbursed to the Noteholders but will be
treated as if such amount constituted Principal Collections received during the
Collection Period in which such Distribution Date occurs. Accordingly, to the
extent that amounts are available for the reimbursement of such Loss Amounts as
described herein, such amount will be available for reinvestment in Subsequent
Contracts and Subsequent Leased Vehicles. If the related Distribution Date
occurs during the Amortization Period and to the extent such amounts are
available, they will be distributed to the Noteholders, in the following order
and priority: first to the Class A-1 Noteholders until the Class A-1 Notes have
been paid in full, second to the Class A-2 Noteholders until the Class A-2 Notes
have been paid in full, third to the Class A-3 Noteholders until the Class A-3
Notes have been paid in full and thereafter the Class A Percentage and the Class
B Percentage of any such remaining reimbursable amounts will then be distributed
to the Class A-4 Noteholders and the Class B Noteholders, respectively. If the
Note Balance of the Class B Notes has been reduced to zero, such amounts will be
allocated to the Class A Noteholders, pro rata, based on the Class A-1, Class
A-2, Class A-3 and Class A-4 Allocation Percentages. Such distribution of
principal will be made from: (i) any remaining portion of the Investor
Percentage of the Interest Collections for the related Collection Period, (ii)
Transferor Amounts otherwise payable to the Transferor in respect of the
Transferor Interest; (iii) Insured Residual Value Loss Amounts paid under the
Residual Value Insurance Policy; (iv) amounts on deposit in the Reserve Fund;
and (v) in the case of the Class A-4 Notes, amounts otherwise payable as
principal to the Class B Noteholders, to the extent available after the
distributions described under clauses (i) through (ix) of 'Description of the
Notes--Distributions on the Notes--Distributions of Interest'. So long as World
Omni is the Servicer, the Servicing Fee will be subordinated to (among other
things) the reimbursement of Loss Amounts, and amounts that otherwise would be
used to pay the Servicing Fee will be included in any remaining portion of the
Investor Percentage of Interest Collections as described in clause (i) above.
Such remaining portion also may include Undistributed Transferor Excess
Collections in respect of the preceding Collection Period. With respect to any
Distribution Date, the 'Class A-1 Allocation Percentage' will mean the Class A-1
Note Balance as a percentage of the Note Balance, calculated as of the last day
of the related Collection Period. The 'Class A-2 Allocation Percentage', the
'Class A-3 Allocation Percentage' and the 'Class A-4 Allocation Percentage' will
be calculated in the same manner as the Class A-1 Allocation Percentage,
appropriately modified to relate to the Class A-2, Class A-3 or Class A-4 Notes,
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 Notes. To
the extent that Principal Collections and Loss Amounts that otherwise would be
reimbursed to the Noteholders 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 will increase.
Loss Amounts that are not reimbursed will be allocated first to the Class B
Notes until the Note Balance of the Class B Notes has been reduced to zero and
then to the Class A Notes, pro rata, based on the Class A-1, Class A-2, Class
A-3 and Class A-4 Allocation Percentages. 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 Notes could incur a
loss on their investment. World Omni's agreements with its Dealers generally do
not provide for recourse to the Dealer for unpaid amounts in respect of a
defaulted lease contract. For further information on Dealer repurchase
obligations, see 'The Origination Trust--Contract Origination; Titling of Leased
Vehicles'.
'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
19
<PAGE>
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, (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 Leased Vehicle Proceeds for such Collection Period, and (c) any losses
(up to the respective Discounted Principal Balance) on Contracts terminated on
or prior to their Maturity Dates during such Collection Period by agreement
between the Servicer and the lessee in connection with the payment of less than
their respective Outstanding Principal Balances pursuant to World Omni's
pro-active lease termination program, as described under 'Maturity, Prepayment
and Yield Considerations'.
As more fully described under 'Security for the Notes--The Residual Value
Insurance Policy', the Residual Value Insurance Policy will be drawn upon to pay
any Insured Residual Value Loss Amount, as described under 'Description of the
Notes--Distributions on the Notes--Distributions of Interest', after application
of the Investor Percentage of Interest Collections, the Class A Net Swap Receipt
and Transferor Amounts otherwise payable in respect of the Transferor Interest.
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. No assurance can be given as to the
likely levels of Residual Value losses over the life of the Notes.
MATURITY AND PREPAYMENT RISKS
No principal will be paid to any Class A Noteholders until the January 2000
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 and reimbursements of Loss Amounts 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 perceptions 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 World Omni or its 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 Noteholders 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 Notes. See 'Description of the
Notes--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.
The rate of payment of principal on the Notes 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 will ordinarily be distributed to
Noteholders during the Amortization Period according to the timing of their
receipt, the rate of principal payments on the Notes and the yield to maturity
of the Class A Notes generally will be directly related to the rate at which
payments on or in respect of the Contracts and the Leased Vehicles are made.
20
<PAGE>
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
Noteholders as more fully described under 'Description of the
Notes--Distributions on the Notes--Distributions of Interest'. The rate of
payment of principal of the Class A Notes 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
Transferor of its right to purchase all of the assets of the Trust at its option
under certain circumstances pursuant to the Agreement, thereby triggering a
redemption of the Notes. 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 or a high level of
Loss Amounts may shorten the final maturity of and may significantly affect the
yields on each Class of Class A Notes. See 'Description of the
Notes--Termination of the Trust; Redemption of the Notes', '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 a part of
this program, during the last several months of a lease contract World Omni may
selectively offer certain incentives to encourage lease terminations, which may
result in residual value losses. As also more fully described under 'Maturity,
Prepayment and Yield Considerations', World Omni estimates that over calendar
years 1995, 1996, 1997 and the six months ended June 30, 1998, an average of
approximately 73% of the number of retail automobile and light duty truck lease
contracts in its portfolio (including lease contracts owned by the Origination
Trustee on behalf of the Origination Trust and 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 the Origination Trustee on behalf of the Origination
Trust and 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'.
RISKS ASSOCIATED WITH SEQUENTIAL PAYMENT OF PRINCIPAL ON THE NOTES
In general, no principal payments (including Covered Loss Amounts) will be
made on the Class A-2, Class A-3, Class A-4 or Class B Notes until the Class A-1
Notes have been paid in full, on the Class A-3, Class A-4 or Class B Notes until
the Class A-1 and Class A-2 Notes have been paid in full, or on the Class A-4 or
Class B Notes until the Class A-1, Class A-2 and Class A-3 Notes have been paid
in full. On each Distribution Date during the Amortization Period, all Principal
Collections (and Covered Loss Amounts) for the related Collection Period that
are allocable to the Notes will be distributed first to the Class A-1
Noteholders until the Class A-1 Notes have been paid in full, second to the
Class A-2 Noteholders until the Class A-2 Notes have been paid in full, third to
the Class A-3 Noteholders until the Class A-3 Notes have been paid in full and
thereafter the Class A Percentage and the Class B Percentage of any such
remaining Principal Collections (and Covered Loss Amounts) will then be
distributed as principal payments to the Class A-4 Noteholders and the Class B
Noteholders, respectively.
Principal payments in respect of the Class A-4 and Class B Notes will be
based on the fixed Class A Percentage and Class B Percentage, which will be
calculated when the Class A-1, Class A-2 and Class A-3 Notes have been paid in
full. Since Uncovered Loss Amounts will be allocated first to the Class B Notes
until the Note Balance of the Class B Notes has been reduced to zero and then to
the Class A Notes, pro rata, based on the Class A-1, Class A-2, Class A-3 and
Class A-4 Allocation Percentages, Class A-2 Notes may be allocated more
21
<PAGE>
Loss Amounts than the Class A-1 Notes as a relative percentage of their
respective Initial Note Balances, Class A-3 Notes may be allocated more Loss
Amounts than the Class A-1 or Class A-2 Notes as a relative percentage of their
respective Initial Note Balances, and Class A-4 Notes may be allocated more Loss
Amounts than the Class A-1, Class A-2 or Class A-3 Notes as a relative
percentage of their respective Initial Note Balances, primarily because Loss
Amounts will be allocated on each Distribution Date based on the then-current
Class A-2, Class A-3 and Class A-4 Allocation Percentages, which will increase
as the Note Balance of each Class of Class A Notes 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, the SUBI Certificate or other property of the
Trust, which may occur under certain circumstances involving an Insolvency Event
with respect to the Transferor (as described under 'Description of the
Notes--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 Swap Counterparty based on the termination payment, if any, due and to
the Class A Noteholders based on the respective Class A Note Balances until the
Class A Swap Counterparty and the Class A Notes have been paid in full, and
second, to the Class B Noteholders. See 'Additional Document Provisions--The
Indenture--Events of Default'.
RISKS ASSOCIATED WITH GEOGRAPHIC, ECONOMIC AND OTHER FACTORS
The Dealers which originated and will originate the Contracts are located
(and, therefore, the lessees generally are and will be located) throughout the
United States, with the largest percentage of Initial Contracts originated in
(and the largest percentage of Subsequent Contracts expected to be originated
in) the Five State Area. Less than 5% of the total number of Initial Contracts
were originated in any State other than a State in the Five State Area. For a
further breakdown of these percentages, see 'The Contracts--Characteristics of
the Contracts--Distribution of the Initial Contracts by State'. Due to the
geographic concentration of Contracts in the Five State Area, adverse economic
conditions in one of more of the States therein may have a disproportionate
impact on the performance of the SUBI Assets. Economic factors such as
unemployment, interest rates, the rate of inflation and consumer perceptions of
the economy may affect the rate of prepayment and defaults on the Contracts and
the ability to sell or otherwise dispose of Leased Vehicles relating to Matured
Contracts for an amount at least equal to their respective Residual Values.
These economic factors, as well as other factors such as consumer perceptions of
used vehicle values, also may affect the ability to realize the Residual Values
of Leased Vehicles upon sale. Certain shortfalls in respect of the Residual
Values of Leased Vehicles relating to Matured Contracts will be covered by the
Residual Value Insurance Policy, as and to the extent described under 'Security
for the Notes--The Residual Value Insurance Policy'.
RISKS ASSOCIATED WITH 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. World Omni will make representations
and warranties that each Contract complies with all requirements of law in all
material respects. If any such representation and warranty proves incorrect, has
certain material adverse effects and is not timely cured, World Omni will be
required to make a Reallocation Payment (together with, under certain
circumstances during the Amortization Period, Reallocation Deposit Amounts) into
the SUBI Collection Account and reallocate the related Contract and Leased
Vehicle out of the SUBI, as described under 'The Contracts--Representations,
Warrants and Covenants' and 'Description of the Notes--Reallocation Payments and
Reallocation Deposit Amounts'. For further information regarding consumer
protection laws, see 'Certain Legal Aspects of the Contracts and the Leased
Vehicles--Consumer Protection Laws'.
22
<PAGE>
RISKS ASSOCIATED WITH ERISA LIABILITIES
The Origination Trust Assets, including the SUBI Assets, could become
subject to liens in favor of the Pension Benefit Guaranty Corporation (the
'PBGC') to satisfy unpaid ERISA obligations of any member of an 'affiliated
group' that includes World Omni, SET, JMFE and their respective affiliates. Such
a PBGC lien would have priority over the interest of Noteholders in any SUBI
Assets that are not subject to a prior perfected security interest in favor of
the Indenture Trustee (i.e., the Leased Vehicles). The ratings of the Class A
Notes 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 Notes address the likelihood of the payment of principal of and interest
on the Class A Notes pursuant to their terms, as described under 'Ratings of the
Class A Notes'. However, the Transferor believes that the likelihood of any such
liability being asserted against the Origination Trust Assets or, if so
asserted, being successfully pursued, is remote. 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 these conditions will continue in the future.
RISKS ASSOCIATED WITH VICARIOUS TORT LIABILITY
Although the Origination Trust will own the Leased Vehicles and the Trust
will have an interest therein evidenced by the SUBI, the Leased Vehicles 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 lessee 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 Notes could incur a loss on
their investment. See 'Security for the Notes--The Contingent and Excess
Liability Insurance Policies' and 'Certain Legal Aspects of the Origination
Trust and the SUBI--The SUBI'.
All of the Contracts will contain provisions requiring the lessees to
maintain levels of insurance satisfying applicable state law. In addition, in
the event that any such insurance has lapsed or 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
Notes--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
23
<PAGE>
Other SUBI Assets or UTI Assets, investors in the Class A Notes could incur a
loss on their investment. For further information regarding the potential for
third-party claims against the Origination Trust Assets, see 'The Origination
Trust--Allocation of Origination Trust Liabilities', 'Certain Legal Aspects of
the Origination Trust and the SUBI-- The SUBI', 'Certain Legal Aspects of the
Contracts and the Leased Vehicles--Vicarious Tort Liability' and 'ERISA
Considerations'.
RISKS IN THE EVENT OF AN INSOLVENCY OF WORLD OMNI; SUBSTANTIVE CONSOLIDATION
WITH WORLD OMNI
The Transferor 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 ALF LLC, ALF L.P., WOLS LLC, the Transferor, the
Origination Trust or the Trust with those of World Omni. With respect to WOLS
LLC and ALF LLC, these steps include their creation as separate, special purpose
finance subsidiaries of World Omni pursuant to limited liability company
agreements containing certain limitations (including the requirement that each
must have a board of managers, known as a 'board of directors', including 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 Transferor and ALF L.P., these steps include their creation as
separate, special purpose limited partnerships of which WOLS LLC and ALF LLC,
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 Transferor 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, unreimbursed Advances made by World Omni, as
Servicer, pursuant to the Servicing Agreement, and payments made by World Omni
to the Transferor, pursuant to the Support Agreement or otherwise, 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 Notes 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 Transferor, or if certain other events
relating to the bankruptcy or insolvency of the Transferor were to occur (each,
an 'Insolvency Event') the Amortization Period would commence.
On the Closing Date, Williams & Connolly, counsel to ALF LLC, ALF L.P., the
Transferor, WOLS LLC 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 ALF LLC, ALF
L.P., the Transferor, WOLS LLC, the Origination Trust or the Trust with those of
World Omni. In addition, on the Closing Date, counsel to the Transferor will
render an opinion to the effect that (i) the transfer of the SUBI Certificate by
the Transferor to the Trust constitutes a sale of the SUBI Certificate and the
beneficial interest in the SUBI Assets evidenced thereby, subject in each case
to the rights of the Transferor as the holder of the Transferor Interest and the
rights of the Indenture Trustee as pledgee of the SUBI Certificate, or (ii) if
such transfer does not constitute a sale, then the Agreement creates a valid
perfected security interest of the Trust in the Transferor'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'.
24
<PAGE>
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 Indenture Trustee,
as more fully described under 'Security for the Notes--The Contingent and Excess
Liability Insurance Policies' and 'Certain Legal Aspects of the Contracts and
Leased Vehicles--Vicarious Tort Liability'.
RISKS ASSOCIATED WITH THE CLASS A SWAP COUNTERPARTY
The Contracts bear interest at a fixed rate while the Class A Notes bear
interest at a floating rate. The Trust will enter into the Class A Interest Rate
Swap with the Class A Swap Counterparty to mitigate the basis risk associated
with an increase in floating rates that results in the weighted average of the
Note Rates on the Class A Notes exceeding the weighted average Lease Rates on
the Contracts. If a Class A Net Swap Receipt is due to the Trust, a default by
the Class A Swap Counterparty may affect the Trust's ability to make interest
payments on the Class A Notes, which could result in a loss to the Class A
Noteholders.
In addition, an Early Amortization Event will occur in the event that
either (a) the Class A Swap Counterparty fails to make a required payment within
five calendar days of the date such payment was due or (b) the Class A Swap
Counterparty or the Trust fails, within 30 calendar days of the date on which
the counterparty ratings of the Class A Swap Counterparty fall below the
required ratings of any of the Ratings Agencies as specified in the Agreement,
to (i) obtain a replacement interest rate swap agreement with terms
substantially the same as the Class A Interest Rate Swap or (ii) establish any
other arrangement satisfactory to the applicable Rating Agency, in any case such
that the Rating Agency will not reduce or withdraw its ratings of any Class of
the Class A Notes. For a discussion of the prepayment risks associated with the
occurrence of an Early Amortization Event, see '--Maturity and Prepayment
Risks'.
Following an Indenture Event of Default or an Insolvency Event and the sale
of the SUBI at the direction of the Noteholders, so long as the Class A Swap
Counterparty has not breached any of its obligations, it may be entitled to a
termination payment. Amounts available to make such a payment shall be paid pro
rata (based on the amount of the termination payment due to the Class A Swap
Counterparty, on the one hand and the Class A Note Balance on the other) between
the Class A Swap Counterparty and the Class A Noteholders. See 'Additional
Document Provisions--The Indenture--Events of Default'. In such event, the Class
A Noteholders may suffer a loss.
In addition, if the Trust defaults in its obligation to pay Class A Net
Swap Payments to the Class A Swap Counterparty, the Trust may no longer have the
benefit of the Class A Interest Rate Swap. As a result of a termination of the
Class A Interest Rate Swap, there may not be funds available to pay interest on
the Class A Notes at the applicable Note Rate.
RISKS ASSOCIATED WITH EVENT OF DEFAULT
Investors should be aware that the amount of principal or interest required
to be paid to holders of any Class of the Class A Notes prior to the maturity
date for that Class of Class A Notes generally will be limited to amounts
available in the Distribution Account for payment to Noteholders. Therefore, the
failure to pay principal or interest on a Class of Class A Notes generally will
not result in the occurrence of an Indenture Event of Default until the Stated
Maturity Date for the Class A Notes. See 'Additional Document Provisions--The
Indenture'. Accordingly, Noteholders may not seek to enforce any remedies for
the failure to pay principal or interest on a Class of Class A Notes until the
Stated Maturity Date for the Class A Notes.
RISKS ASSOCIATED WITH YEAR 2000 COMPLIANCE
Year 2000 compliance refers to the ability of computer systems to respond
to the problems created by the fact that many computer programs have been
written using two digits rather than four digits to define the applicable year.
As a consequence, unless modified, such systems are not able to differentiate
between 2000 and 1900 and may generate erroneous data or cause interruptions in
system processing. While certain aspects of World Omni's businesses could
operate on a manual basis for a period of time, in the event Year 2000
25
<PAGE>
compliance for its significant information technology ('IT') systems were not
reached, World Omni believes that it would be unable to sustain its current
level of performance and customer service. World Omni is therefore committed to
taking all appropriate actions to achieve Year 2000 compliance for its
significant IT systems before the millennium change date.
World Omni has identified all significant IT applications that will require
remediation, which in some cases will involve the replacement of systems, to
ensure Year 2000 compliance. Before the end of 1998, World Omni will have
initiated formal communications with all significant third party suppliers that
provide operational support and non-IT systems to determine the extent to which
it would be vulnerable in the event that one or more of those third parties fail
to remediate their own Year 2000 issues. While World Omni believes that it does
not have significant exposure to significant suppliers' Year 2000 problems, it
is seeking compliance assurances from such significant suppliers. As of October
15, 1998, substantially all of World Omni's IT systems have been remediated. All
remaining in-house developed software is scheduled for completion by November
1998. Except for three systems for which testing is scheduled to be completed
during the second quarter of 1999, all of World Omni's significant vendor
software is scheduled to be compliant by the end of 1998. The three systems that
will be tested during the second quarter of 1999 have been certified by the
vendors to be Year 2000 compliant. The total costs of the Year 2000 project have
not had nor are they anticipated to have a material impact on World Omni's
financial position or results of operations or its ability to perform its
obligations and its duties as Servicer.
World Omni does not anticipate that Year 2000 issues with respect to its
computer systems will have a material adverse effect on the Trust or the
Origination Trust, the Origination Trust Assets, the SUBI Assets or the
servicing of such Origination Trust Assets or SUBI Assets. The date on which
World Omni believes it will complete the Year 2000 modifications is based on
management's best estimates, which were derived utilizing numerous assumptions
of future events, including the continued availability of certain resources,
third party modification plans and other factors. However, there can be no
assurances that these estimates will be achieved, and actual results could
differ materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes and similar uncertainties.
THE TRUST AND THE SUBI
GENERAL
The Trust and the Noteholders 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 Notes. For
further information regarding the Origination Trust, see 'The Origination
Trust'.
THE TRUST
Pursuant to the Agreement, the Transferor will create the Trust by
transferring and assigning the SUBI, represented by the SUBI Certificate, to the
Trust in exchange for the Notes and a certificate evidencing the Transferor
Interest. (Agreement, Section 2.02). The property of the Trust will primarily
include (i) the SUBI, which evidences the entire beneficial interest in certain
specified Origination Trust Assets (i.e., the SUBI Assets), (ii) Class A Net
Swap Receipts, (iii) such amounts as from time to time may be held in the
Distribution Account and the Reserve Fund, and investments of such amounts and
(iv) the Owner Trustee's and the Trust'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 investments of such amounts.
If the protection provided to the Class A Noteholders by (i) the Investor
Percentage of certain excess Interest Collections; (ii) Class A Net Swap
Receipts; (iii) amounts otherwise payable to the Transferor in respect of the
Transferor Interest; (iv) so long as World Omni is the Servicer, amounts
otherwise payable in respect of the Servicing Fee; (v) Insured Residual Value
Loss Amounts paid under the Residual Value Insurance Policy; (vi) available
monies on deposit in the Reserve Fund; (vii) the subordination of interest
payments otherwise payable to the Class B Noteholders; and (viii) in the case of
the Class A-4 Notes, the subordination of principal payments otherwise payable
to the Class B Noteholders is insufficient, the Class A Noteholders ultimately
will
26
<PAGE>
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 to the Indenture Trustee which in turn will be
distributed to the Noteholders. 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 Notes may thus be
subject to delays in payment and may incur losses on their investment in the
Class A Notes as a result of defaults or delinquencies by lessees and because of
depreciation in the value of the related Leased Vehicles. See 'The Origination
Trust--Allocation of Origination Trust Liabilities', 'Security for the
Notes--The Reserve Fund', 'Additional Document Provisions--The Servicing
Agreement--Insurance on Leased Vehicles', 'Certain Legal Aspects of the
Origination Trust and the SUBI--The SUBI' 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
(which account, and the funds therein, will be pledged to the Indenture Trustee
for the benefit of the Noteholders), (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,
including Insured Residual Value Loss Amounts payable under the Residual Value
Insurance Policy, (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 Notes--Distributions on the
Notes--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 Notes 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, to the
Transferor. The Transferor will transfer and assign the SUBI Certificate to the
Trust pursuant to the Agreement, and the Trust will pledge the SUBI Certificate
to the Indenture Trustee pursuant to the Indenture.
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, the SUBI Certificate, Other SUBIs representing
divided interests in
27
<PAGE>
other portfolios of Origination Trust Assets (the 'Other SUBI Assets') and
certificates representing Other SUBIs or portions thereof (the 'Other SUBI
Certificates'), the UTI representing a divided interest in the remaining
portfolio of Origination Trust Assets not allocated as SUBI Assets or Other SUBI
Assets (the 'UTI Assets') and one or more certificates representing the UTI or
portions thereof (the 'UTI Certificates'); (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).
ALLOCATION OF ORIGINATION TRUST LIABILITIES
The Origination Trust Assets are comprised of several portfolios of assets
other than the SUBI Assets, including six portfolios of Other SUBI Assets and
the remaining portfolio of UTI Assets. ALF 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 other financings. 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. Pursuant to the Origination Trust Agreement, as among the
beneficiaries of the Origination Trust and their pledgees, an Origination Trust
liability relating to a particular Origination Trust Asset will be allocated to
and charged against the allocated portfolio of Origination Trust Assets to which
it belongs. Origination Trust liabilities that are incurred with respect to the
Origination Trust Assets generally will be borne pro rata among all portfolios
of Origination Trust Assets. The Origination Trustee, the beneficiaries of the
Origination Trust (including the Trust) and their pledgees (including the
Indenture Trustee) will be bound by this allocation. In particular, 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 Notes or a beneficial interest in the Notes,
Noteholders and Note Owners will be deemed to have waived any claim that they
might otherwise have with respect to Other SUBI Assets and the UTI Assets. For
further information regarding these matters, see 'Additional Document
Provisions--The SUBI Trust Agreement--The SUBI, the Other SUBIs and the UTI' and
'Certain Legal Aspects of the Origination Trust and the SUBI--The SUBI'.
ALF LLC AND ALF L.P.
ALF LLC, a single member limited liability company, is a wholly owned,
special purpose finance subsidiary of World Omni and was organized under the
laws of Delaware in September 1998 (as successor by merger to Auto Lease
Finance, Inc.), solely for the purpose of acting as the successor general
partner of ALF L.P. (and to engage directly in activities in which ALF L.P. may
engage). ALF L.P. was formed as a limited partnership under the laws of Delaware
in June 1994 solely for the purpose of being grantor and initial beneficiary of
the Origination Trust, holding the UTI and the UTI Certificates, acquiring
interests in the SUBI and the Other SUBIs and engaging in related transactions.
ALF LLC's limited liability company agreement and ALF 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. ALF LLC generally may
not transfer its general partnership interest in ALF L.P. so long as any
financings involving interests in the Origination Trust (including the
transaction described herein) are outstanding. World Omni is the sole member of
ALF LLC and the sole limited partner of ALF L.P. The principal office of ALF
L.P. is located at 6150 Omni Park Drive, Mobile, Alabama and its telephone
number is (334) 639-7500.
28
<PAGE>
THE ORIGINATION TRUSTEE
The Origination Trustee is a wholly owned, special purpose subsidiary of
U.S. Bank that was organized in 1993 solely for the purpose of acting as
Origination Trustee. U.S. Bank, as Trust Agent, serves as agent for the
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
U.S. Bank no longer can be the Trust Agent, the designee of ALF L.P. (who may
not be ALF L.P. or any affiliate thereof) will have the option to purchase the
stock of the Origination Trustee for a nominal amount. If ALF 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, U.S. 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 throughout the United States 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, the Residual Value Insurance Policy and other residual value insurance
policies that may relate to Other SUBI Assets or the UTI Assets; (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 Owner Trustee, as holder of the SUBI Certificate, or the
Indenture Trustee, as pledgee 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.
29
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Class A Notes (i.e., the proceeds of
the public offering of the Class A Notes minus expenses relating thereto) will
be applied by the Transferor to purchase the SUBI Certificate from ALF L.P.
THE TRANSFEROR
The Transferor is a limited partnership formed under the laws of Delaware
in June 1994. The sole general partner of the Transferor, WOLS LLC, is a single
member limited liability company and a wholly owned, special purpose finance
subsidiary of World Omni that was organized under the laws of Delaware in
September 1998 (as successor by merger to World Omni Lease Securitization,
Inc.), solely for the purpose of acting as the successor general partner of the
Transferor (and to engage directly in activities in which the Transferor may
engage). WOLS LLC generally may not transfer its general partnership interest in
the Transferor 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 member of WOLS LLC and
the sole limited partner of the Transferor. The principal office of the
Transferor is located at 6150 Omni Park, Mobile, Alabama 36609 and its telephone
number is (334) 639-7500.
The Transferor and WOLS LLC were organized solely for the purpose of
acquiring interests in the SUBI and the Other SUBIs, issuing asset-backed notes
and certificates and engaging in related transactions. The limited partnership
agreement of the Transferor and the limited liability company agreement of WOLS
LLC 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 Transferor and World Omni provides that World Omni
will, directly or indirectly, retain 100% ownership of the Transferor and that
under certain circumstances World Omni will make contributions or loans or
provide or arrange for financial assistance to the Transferor in order to ensure
that the Transferor maintains positive partners' capital. The Support Agreement
will provide that World Omni's total obligations thereunder will not exceed $100
million. The Support Agreement does not constitute a guarantee by World Omni of
the Notes or any other obligations of the Transferor. The Support Agreement
provides that no person other than the Transferor and WOLS LLC 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 Transferor and WOLS LLC, there can be no
assurance that the Indenture Trustee or the Noteholders 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 throughout the United States, with a full range of distribution and
financial services. WOLS LLC and ALF LLC 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 is wholly owned by Toyota Motor
Corporation, the largest automotive company in Japan. In addition, for a fee SET
processes Lexus vehicles in the Five State Area and processes Lexus parts in a
nine state area. SET's consolidated revenues for the years ended December 31,
1997, December 31, 1996 and December 31, 1995 were approximately $4.5 billion,
30
<PAGE>
$4.2 billion and approximately $3.8 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 1,000 Dealers located throughout the United States.
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 for review and credit evaluation to one of World Omni's central
operations centers, which are located in St. Louis, Missouri (the 'St. Louis
Center') and Deerfield Beach, Florida (the 'Deerfield Office'), as applicable.
At the St. Louis Center or the Deerfield Office, each application is reviewed,
evaluated and 'scored' as described under 'World Omni--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 St. Louis
Center and a center located in Mobile, Alabama (the 'Mobile Center'), which
handle collection activities, operational accounting, insurance verification and
dealer and customer inquiries for World Omni. In addition, the St. Louis 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, 1997,
December 31, 1996 and December 31, 1995, World Omni and its affiliates had
approximately 305,000, 232,000 and 156,900 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 $6.5 billion, $4.6 billion and $2.8
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 $4.8 billion, $3.3 billion and $2.0 billion, respectively. For the
years ended December 31, 1997, December 31, 1996 and December 31, 1995, World
Omni's consolidated gross revenues were approximately $359 million, $275 million
and $228 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.
CERTAIN ADMINISTRATIVE AND LEGAL PROCEEDINGS
As part of its regular examination process of the consolidated Federal
income tax returns of JMFE and its subsidiaries (which include World Omni) for
certain prior years, the Internal Revenue Service (the 'IRS') currently is
reviewing, among other things, certain transactions that were consummated in
prior years that are similar to the transactions described in this Prospectus.
The IRS has proposed treating (a) such transactions as sales rather than
financings for Federal income tax purposes, which would affect World Omni's
depreciation deductions and (b) each of the Origination Trust and securitization
trusts created for such transactions as an association taxable as a corporation
rather than a trust for Federal income tax purposes. In connection with each
transaction, World Omni received an opinion of tax counsel to the effect that
such transactions were properly treated as financings for Federal income tax
purposes and that neither the Origination Trust nor the securitization trusts
created for such transactions would be treated as an association taxable as a
corporation for Federal income tax purposes. While management believes that any
challenge by the IRS, if made, would be unsuccessful, there can be no assurance
of this result. Furthermore, in connection with this examination, the IRS has
proposed changes to a number of other positions that were taken on such tax
returns.
31
<PAGE>
Management is vigorously defending its positions and believes that the
ultimate resolution of all of the issues referred to above will not have a
material adverse effect on Noteholders, JMFE's or World Omni's operations and
financial condition or the financial condition of the Origination Trust. If,
however, the IRS were to prevail on certain issues it could have a material
adverse effect on JMFE's or World Omni's operations and financial condition or
the financial condition of the Origination Trust. Nevertheless, management
believes that, even if the IRS were to prevail on all of these issues it would
not result in any material impairment of World Omni's ability to perform its
obligations and its duties as Servicer under the Servicing Agreement. However,
there can be no assurance of this result.
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 and annual income. Upon receipt by the applicable office, 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 various 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 determinant 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 and whether the vehicle is new or used), each of which
assigned at least a 50% weighting to the credit bureau report. The Fair, Isaac
scorecard system was implemented in the fourth quarter of 1990 and was used for
substantially all lease contracts originated from that time until February 1997.
In an effort to increase the predictiveness of the scorecards, World Omni
implemented an updated scorecard system, also developed by Fair, Isaac
specifically for World Omni, in February 1997. The updated scorecard system
includes three retail credit and two lease scorecards (which, for lease
scorecards, differ according to the geographic location of the dealer and, for
retail scorecards, whether the vehicle is new or used and the credit 'depth' of
the applicant). The revised scorecards place a greater emphasis upon the credit
bureau report.
Each of these numerical scoring models is intended to provide a means of
analysis to assist in decision making, but the final decision rests with World
Omni's credit specialists. Under World Omni's guidelines, a credit specialist
generally may not override the scorecard analysis of applications above or below
the cutoff score by more than a limited percentage of such applications
(depending on vehicle make and geographic location). 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 to fine tune the scoring model
according to statistical indications in order to continually assure the
statistical validity of
32
<PAGE>
the scoring models. In limited circumstances, lessees with established credit
histories with World Omni may be pre-approved for new leases without the use of
a numerical scorecard and, under certain circumstances, lessees having certain
minimum credit bureau scores may be automatically approved.
For the six months ended June 30, 1998 and the years ended December 31,
1997, December 31, 1996 and December 31, 1995, World Omni, either directly or
through the Origination Trust or certain special purpose finance subsidiaries of
World Omni, on average, booked approximately 59%, 63%, 70% and 71%,
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 updated numerical scorecards. 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), World Omni 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 any payments due from the
customer. World Omni 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 that must name the Dealer's
assignee (with respect to the Contracts, the Origination Trustee on behalf of
the Origination Trust) as an 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 by World Omni (through its third-party contracted agents) upon
execution of the lease contract.
COLLECTION, REPOSSESSION AND DISPOSITION PROCEDURES
Collection efforts are made by World Omni as Servicer, which, in some
cases, 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. In general, guidelines for collection of lease contracts and
repossession of leased vehicles include the following:
<TABLE>
<CAPTION>
NUMBER OF DAYS DELINQUENT ACTION
------------------------- ------
<S> <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
33
<PAGE>
program standards, and then may be sold to automobile dealers primarily in World
Omni's dealer network for retail sale. World Omni also disposes of off-lease
vehicles through 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, fleet lessors and
others.
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 originated by Dealers located throughout the United States,
including lease contracts assigned to the Origination Trust and lease contracts
originated by World Omni and assigned to special purpose finance subsidiaries of
World Omni, as of and for the years ended December 31, 1993 through December 31,
1997 and as of and for the six month period ended June 30, 1998.
As shown on these tables, World Omni's delinquency rates trended up in 1995
and 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. During
the six month period ended June 1998, delinquencies declined due to the
generally higher credit quality of World Omni's non-Toyota lease portfolio,
which has increased as a percent of its total lease portfolio, and due to a
general improvement in the credit quality of Toyota leases booked by World Omni
over the past year.
Net Repossession Losses as a percentage of Average Net Receivables
increased in both 1995 and 1996. The increase in 1995 was driven primarily by an
increase in the Average Net Repossession Loss per Liquidated Lease Contract
which was generally due to higher average amounts being financed and higher
residual values. These same factors continued to cause an increase in the
Average Net Repossession Loss per Liquidated Lease Contract during 1996. In
addition, loss severity during 1996 was negatively affected by a general
weakening in the used car market. The higher frequency of repossession in 1996
was due to a general trend of weaker overall consumer credit quality nationally
as well as World Omni adjusting, to a limited extent, its credit policies.
Net Repossession Losses as a percent of Average Net Receivables remained
substantially unchanged during 1997 and the first half of 1998. Average Net
Repossession Loss per Liquidated Lease Contract increased during this period as
a result of increases in residual values financed and a continuation of the soft
market for used vehicles. The Number of Repossessions as a percentage of Average
Lease Contracts Outstanding during 1997 and the first half of 1998 declined due
to the general improvement in the credit quality of World Omni's lease
portfolio, as noted above.
Residual value losses and the number of vehicles returned to and sold by
World Omni has increased steadily since 1994. In 1995, losses and returns
increased as a result of special programs on shorter term leases. Losses in 1996
increased over 1995 as a result of generally higher residual values, higher
losses on shorter term leases (i.e. leases with terms 24 months or shorter) and
an increase in the losses on leases with other maturities. There are no short
term leases included in the Initial Contracts nor will any be included in the
Subsequent Contracts. In addition, during 1996 there was some weakening in the
used car market relative to the prior three years. Generally, the 1996 trends
continued through 1997 and the first half of 1998, resulting in higher vehicle
returns and losses during this period.
For the entire year 1997 and the first half of 1998, the used vehicle
market was relatively weak. If the used vehicle market continues to experience
weakness, World Omni's returns and losses in the future could be negatively
affected. Based upon prior experience, World Omni does not believe that its loss
experience or those recent negative trends will materially adversely affect
Class A Noteholders 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. In addition, the data
presented below may be affected by the growth and relative lack of seasoning of
the portfolio. Accordingly, 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.
34
<PAGE>
RETAIL VEHICLE LEASE CONTRACT DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AT JUNE 30, ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Dollar Amount of Lease
Contracts(1)....................... $ 6,952,408 $6,527,588 $4,641,992 $2,798,830 $1,823,823 $1,039,888
Ending Number of Lease Contracts..... 323,593 304,863 231,942 156,471 114,298 71,198
Percentage of Lease Contracts
Delinquent(2)(3)(4)
31-60 Days......................... 1.17% 1.27% 1.42% 1.12% 0.97% 0.88%
61-90 Days......................... 0.20 0.23 0.13 0.08 0.03 0.04
91 Days or More.................... 0.04 0.06 0.03 0.01 0.01 0.00
----------- ---------- ---------- ---------- ---------- ----------
Total........................... 1.41% 1.56% 1.58% 1.21% 1.01% 0.92%
</TABLE>
- ------------------
(1) Based on the sum of all principal amounts outstanding under lease contracts
(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, 1998 approximately 371
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.
RETAIL VEHICLE LEASE CONTRACT REPOSSESSION AND LOSS EXPERIENCE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AT JUNE 30, ------------------------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Dollar Amount of Lease
Contracts(1)....................... $ 6,952,408 $6,527,588 $4,641,992 $2,798,830 $1,823,823 $1,039,888
Ending Number of Lease Contracts..... 323,593 304,863 231,942 156,471 114,298 71,198
Average Lease Contracts
Outstanding........................ 314,579 268,305 194,492 133,069 93,023 58,605
Repossessions:
Number of Repossessions............ 3,099 5,843 4,297 2,519 1,776 1,287
Number of Repossessions as a
Percentage of:
Lease Contracts Outstanding(4)..... 1.92% 1.92% 1.85% 1.61% 1.55% 1.81%
Average Lease Contracts
Outstanding(4)..................... 1.97% 2.18% 2.21% 1.89% 1.91% 2.20%
Losses:
Average Net Receivables
Outstanding........................ $ 6,753,172 $5,602,946 $3,718,336 $2,243,790 $1,426,382 $ 817,452
Net Repossession Losses(2)........... $ 21,073 $ 35,351 $ 23,196 $ 11,347 $ 6,283 $ 3,811
Average Net Repossession Loss per
Liquidated Lease Contract(1)(3).... $ 6,800 $ 6,050 $ 5,398 $ 4,505 $ 3,538 $ 2,961
Net Repossession Losses as a
Percentage of Average Net
Receivables(4)..................... 0.62% 0.63% 0.62% 0.51% 0.44% 0.47%
</TABLE>
- ------------------
(1) Based on the sum of all principal amounts outstanding under lease contracts
(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) The number for June 30, 1998 has been annualized.
35
<PAGE>
RESIDUAL VALUE LOSS EXPERIENCE(1)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AT JUNE 30, -----------------------------------------------
1998 1997 1996 1995 1994 1993
----------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Number of Leased Vehicles Scheduled to
Terminate....................................... 41,151 78,002 36,413 25,677 14,775 17,218
Number of Leased Vehicles Returned to and Sold by
World Omni...................................... 16,318 22,555 5,018 4,611 779 2,050
Full Termination Ratio(2)......................... 39.7% 28.9% 13.8% 18.0%(3) 5.3% 11.9%
Total Losses/Gains on Vehicles that Reached
Scheduled Term (4).............................. $31,258(5) $27,338(5) $ 3,700 $ 1,893 $ (168) $ 503
Average Loss/Gain(4)(6)........................... $ 1,916 $ 1,212 $ 737 $ 411 $ (216) $ 245
</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 1992,
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) The ratio for the year ended December 31, 1995 includes special program
short-term lease contracts referenced under 'Delinquency, Repossession and
Loss Data' above. Excluding those vehicles, the ratio would have been 7.1%.
(4) Figures do not include expenses incurred in disposal of vehicles returned to
World Omni.
(5) Does not include losses related to World Omni's incentive programs of
approximately $5,976,422 and $1,879,447 at June 30, 1998 and December 31,
1997, respectively.
(6) Dollars not in thousands.
36
<PAGE>
THE CONTRACTS
GENERAL
The Initial Contracts consist of a pool of 74,744 closed-end retail lease
contracts, having an aggregate Outstanding Principal Balance as of the Initial
Cutoff Date of $1,772,260,191, 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
Notes--Distributions on the Notes-- 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
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 also meet the foregoing
criteria. Principal Collections (and reimbursements of Loss Amounts) will be
reinvested in eligible leases selected by World Omni in its discretion, except
that (i) 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 (ii) 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
37
<PAGE>
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 Risks' and 'Maturity, Prepayment
and Yield Considerations'.
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.
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 amount of the
Monthly Payment times the number of Monthly Payments not yet made, plus (ii) any
other amounts unpaid by the lessee, other than excess mileage and excessive wear
and use charges, arising under the Contract and not prohibited by applicable
law, plus (iii) any official fees and taxes related to the termination of the
Contract, plus (iv) the Residual Value, plus (v) a disposition fee in the amount
set forth in the Contract (either $250.00 or $350.00), minus (vi) the 'Realized
Value' (as described below) of the Leased Vehicle, minus (vii) the unearned
lease charges calculated in accordance with an actuarial method. Under the
actuarial method of determining the unearned lease charges under clause (vii)
above, the Contracts will provide that the monthly lease charges (including
those for the month in which the early termination occurs) are earned in advance
on the scheduled due dates of the Monthly Payments and that the Monthly Payments
are deemed to have been received on their scheduled due dates. 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,
plus (ii) all collection, repossession, storage, preparation and sale expenses
of the Leased Vehicle, plus (iii) attorneys' fees and disbursements incurred
after default and referral to an attorney not to exceed 15% of the amount a
lessee owes (or such lesser rate as may be required under applicable law), plus
(iv) simple interest at a rate of 15% per year (or such lesser rate as may be
required under applicable law) on all expenses incurred by the lessor and all
obligations that a lessee owes after termination of the Contract, other than
earned but unpaid lease charges.
The 'Realized Value' of a Leased Vehicle is the price the Servicer receives
at the time of disposition of the Leased Vehicle. World Omni shall sell the
Leased Vehicles at wholesale or otherwise determine its wholesale value in a
commercially reasonable manner. However, each Contract provides that the lessee
has the right to obtain from a qualified independent appraiser acceptable to the
lessor a written 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 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 related to the relationship between payments on the
Contracts and the effective yield on the Notes.
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. In the event that any of the
foregoing shortfalls are not covered from the Investor Percentage of certain
excess Interest Collections, amounts otherwise payable to the Transferor in
respect of the Transferor Interest, the Servicing Fee otherwise payable to the
Servicer (so long as World Omni is the Servicer), Insured Residual Value Loss
Amounts paid under the Residual Value Insurance Policy, amounts on deposit in
the Reserve Fund, the subordination of interest payments otherwise payable to
the Class B Noteholders and, in the case of the Class A-4 Notes, the
subordination of principal payments otherwise payable to the Class B
Noteholders, in each case to the extent described herein, investors in the Class
A Notes could suffer a loss on their investment.
38
<PAGE>
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 November 30, 1999 in the case of the
Subsequent Contracts; (iii) has a Maturity Date on or after October 1, 1999 and
no later than July 31, 2003 in the case of the Initial Contracts and no later
than November 30, 2004 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 and the Initial Leased Vehicles:
INITIAL CONTRACTS
<TABLE>
<CAPTION>
AVERAGE MINIMUM MAXIMUM
------- ------- -------
<S> <C> <C> <C>
Original Principal Balance................................. $25,341.36 $7,418.92 $93,142.44
Outstanding Principal Balance(1)........................... $23,711.07 $7,424.24 $87,971.62
Residual Value............................................. $16,308.18 $2,958.66 $59,855.40
Lease Rate(1).............................................. 8.65%(2) 3.20% 13.00%
Seasoning (months)(1)...................................... 8.29(2) 2 26
Remaining Term (months)(1)................................. 32.86(2) 13 58
</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..................................................... 32,184 43.06%
United States manufacturers................................. 39,110 52.33
Other Japanese manufacturers................................ 452 0.60
Other foreign manufacturers................................. 2,998 4.01
------ ------
Total..................................................... 74,744 100.00%
</TABLE>
39
<PAGE>
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>
INITIAL PERCENTAGE OF AGGREGATE
PERCENTAGE OF CUTOFF DATE INITIAL CUTOFF DATE
NUMBER OF NUMBER OF OUTSTANDING OUTSTANDING
LEASE RATE RANGE INITIAL CONTRACTS INITIAL CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
3.00% to 3.99%........ 59 0.08% $ 1,142,258.43 0.06%
4.00% to 4.99%........ 1,242 1.66 24,217,701.96 1.37
5.00% to 5.99%........ 4,944 6.61 90,405,348.30 5.10
6.00% to 6.99%........ 5,055 6.76 97,959,285.95 5.53
7.00% to 7.99%........ 5,682 7.60 122,075,968.40 6.89
8.00% to 8.99%........ 25,777 34.49 692,520,176.96 39.08
9.00% to 9.99%........ 25,336 33.90 592,913,077.18 33.46
10.00% to 10.99%........ 4,475 5.99 103,029,360.44 5.81
11.00% to 11.99%........ 1,809 2.42 40,999,427.11 2.31
12.00% to 12.99%........ 365 0.49 6,997,585.79 0.39
------ ------ ----------------- ------
Total................. 74,744 100.00% $1,772,260,190.52 100.00%
</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>
INITIAL PERCENTAGE OF AGGREGATE
PERCENTAGE OF CUTOFF DATE INITIAL CUTOFF DATE
NUMBER OF NUMBER OF OUTSTANDING OUTSTANDING
YEAR OF MATURITY INITIAL CONTRACTS INITIAL CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ---------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
1999.................... 106 0.14% $ 2,246,431.78 0.13%
2000.................... 18,422 24.65 423,222,581.93 23.88
2001.................... 43,242 57.85 1,004,267,992.68 56.67
2002.................... 9,772 13.08 254,408,921.28 14.35
2003.................... 3,202 4.28 88,114,262.85 4.97
------ ------ ----------------- ------
Total................. 74,744 100.00% $1,772,260,190.52 100.00%
</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>
INITIAL PERCENTAGE OF AGGREGATE
PERCENTAGE OF CUTOFF DATE INITIAL CUTOFF DATE
NUMBER OF NUMBER OF OUTSTANDING OUTSTANDING
STATE BALANCE INITIAL CONTRACTS INITIAL CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE
- ------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Florida................. 24,020 32.14% $ 528,123,058.45 29.80%
North Carolina.......... 10,876 14.55 242,246,242.50 13.67
Georgia................. 8,751 11.71 197,891,535.75 11.17
Alabama................. 5,213 6.97 117,433,482.94 6.63
All other states........ 25,884 34.63 686,565,870.88 38.73
------ ------ ----------------- ------
Total................. 74,744 100.00% $1,772,260,190.52 100.00%
</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 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,
40
<PAGE>
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) ALF LLC (or its
predecessor), ALF L.P., WOLS LLC (or its predecessor), the Transferor 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, and the
related Leased Vehicle is covered by the Residual Value Insurance Policy; (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 the lesser of (i) $60,000 and (ii) 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 Loss Amounts that otherwise would be reimbursed to the
Noteholders) 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 Indenture Trustee
receives confirmation (written or oral) 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 Notes
or the Class B Notes, 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; (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 67%. (Servicing Agreement, Section 8.02).
41
<PAGE>
The Servicing Agreement will provide that upon the discovery by the
Origination Trustee, World Omni, the Owner Trustee, the Indenture Trustee or the
Transferor 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 Noteholders 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 Notes.
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 over calendar
years 1995, 1996, 1997 and the six months ended June 30, 1998 an average of
approximately 73% 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.
As a part of its pro-active lease termination program, World Omni actively
monitors its overall portfolio, and selectively offers incentives to encourage
customer loyalty and to minimize anticipated residual value losses on lease
contracts scheduled to reach maturity in the near term. These incentives
generally occur during the last year of a lease contract (typically, the last
six months), and for the years 1996, 1997 and the six months ended June 30, 1998
the losses relating to these incentives were $223,303, $1,879,447 and
$5,976,422, respectively. World Omni may continue the use of these incentive
programs in the future. All such losses relating to the Contracts will
constitute Residual Value Loss Amounts and, therefore, will be covered by the
Residual Value Insurance Policy.
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
assurances 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 Notes
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 Noteholders. In the event 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 Noteholders who receive such amounts may
not be able to reinvest the related payments of principal received on the Class
A Notes at yields as high as
42
<PAGE>
the related Note 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 Notes. 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 Notes.
Additionally, although monies on deposit in the Accounts and Principal
Collections (and Loss Amounts that otherwise would be reimbursed to the
Noteholders) 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
Notes--Distributions on the Notes--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
Noteholders will be borne entirely by the Class A Noteholders.
The yield to an investor who purchases Class A Notes 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 Notes 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 Notes, (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 Noteholders until the Class A-1 Notes have been paid in
full, by Class A-3 Noteholders until the Class A-1 and Class A-2 Notes have been
paid in full or by Class A-4 and Class B Noteholders until the Class A-1, Class
A-2 and Class A-3 Notes have been paid in full. In addition, the Class A
Percentage and the Class B Percentage of Principal Collections allocable to the
Notes will be calculated when the Class A-1, Class A-2 and Class A-3 Notes have
been paid in full, and then used to determine the distribution of principal
payments on the Class A-4 Notes and the Class B Notes, as described under 'Risk
Factors--Maturity and Prepayment Risks' and '--Risks Associated with Sequential
Payment of Principal on the Notes', which may affect the maturity and yield on
the Class A-4 Notes. An amount equal to the Covered Loss Amount will be
reimbursed first to the Class A-1 Noteholders until the Class A-1 Notes have
been paid in full, second to the Class A-2 Noteholders until the Class A-2 Notes
have been paid in full, third to the Class A-3 Noteholders until the Class A-3
Notes have been paid in full and thereafter the Class A Percentage and the Class
B Percentage of any such remaining reimbursable amounts will then be distributed
to the Class A-4 Noteholders and the Class B Noteholders, respectively; provided
that if the Note Balance of the Class B Notes has been reduced to zero, Covered
Loss Amounts will be reimbursed to the Class A Noteholders, pro rata, based on
the Class A-1, Class A-2, Class A-3 and Class A-4 Allocation Percentages.
Uncovered Loss Amounts will be allocated first to the Class B Notes until the
Note Balance of the Class B Notes has been reduced to zero and then to the Class
A Notes, pro rata, based on the Class A-1, Class A-2, Class A-3 and Class A-4
Allocation Percentages. In addition, the Investor Percentage of the net proceeds
of any sale or other disposition of the SUBI, the SUBI Certificate and other
property of the Trust, which may occur under certain circumstances involving an
Indenture Event of Default (as described under 'Additional Document
Provisions--The Indenture--Events of Default'), to the extent such net proceeds
constitute Principal Collections, will be distributed first, on a pro rata
basis, to the Class A Swap Counterparty based on the termination payment, if
any, due and to the Class A Noteholders based on the respective Class A Note
Balances until the Class A Swap Counterparty and the Class A Notes have been
paid in full, and second, to the Class B Noteholders.
43
<PAGE>
The following information is provided solely to illustrate the effect of
prepayments of the Contracts on the Class A-1 Note Balance, the Class A-2 Note
Balance, the Class A-3 Note Balance and the Class A-4 Note Balance and the
weighted average life of each Class of Class A Notes 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) 0.30% ABS for the first six
months of the life of the Contract, (ii) 0.50% ABS for the seventh through
twelfth month of the life of the Contract, (iii) 0.65% ABS for the thirteenth
through eighteenth month of the life of the Contract, (iv) 0.85% ABS for the
nineteenth through twenty-fourth month of the life of the Contract, (v) 1.10%
ABS for the twenty-fifth through thirtieth month of the life of the Contract and
(vi) 1.60% ABS following the thirtieth 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 Transferor exercises its optional purchase
option of the property of the Trust as described herein; (v) all distributions
of principal (including any Accelerated Principal Distribution Amount) and
interest on the Class A Notes are made on the dates specified herein; (vi) the
Servicing Fee is 1% per annum of the Aggregate Net Investment Value; (vii) all
prepayments are full Prepayments; (viii) the Revolving Period ends on December
1, 1999; (ix) the Initial Contracts have assumed Lease Rates of 7.75%, and were
originated eight months prior to the Initial Cutoff Date; (x) the Closing Date
is November 19, 1998; (xi) 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 7.75% and
Residual Values equal to 65% of the original Outstanding Principal Balances
thereof, were originated on October 30, 1998 and that otherwise have terms that
are substantially similar to those of the Initial Contracts; and (xii) One-Month
LIBOR remains constant at 5.283%, and the Swap Rate is 5.03%.
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 Loss
Amounts with respect to the Revolving Period that otherwise would be reimbursed
to the Noteholders, 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 and Loss Amounts with respect to
the Revolving Period that otherwise would be reimbursed to the Noteholders, 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 Note Balance, the Class A-2
Note Balance, the Class A-3 Note Balance or the Class A-4 Note Balance, as the
case may be, and the weighted average lives of each Class of Class A Notes 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 Notes 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 Note Balance
of each Class of Class A Notes 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 no
prepayments on a Contract, '50% Prepayment Assumption' assumes that a Contract
will prepay at 50% of the Prepayment Assumption, and so forth.
44
<PAGE>
PERCENTAGE OF INITIAL CLASS A PRINCIPAL BALANCE REMAINING
AND WEIGHTED AVERAGE LIFE OF CLASS A-1 NOTES
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTIONS
------------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.......................................................... 100% 100% 100% 100% 100%
May 1999.................................................................... 100 100 100 100 100
November 1999............................................................... 100 100 100 100 100
May 2000.................................................................... 75 65 52 35 13
November 2000............................................................... 0 0 0 0 0
May 2001.................................................................... 0 0 0 0 0
Weighted Average Life (Years)(1)............................................ 1.64 1.56 1.49 1.43 1.36
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
- ------------------
(1) The weighted average life of the Class A-1 Notes 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 Note Balance.
PERCENTAGE OF INITIAL CLASS A PRINCIPAL BALANCE REMAINING
AND WEIGHTED AVERAGE LIFE OF CLASS A-2 NOTES
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTIONS
------------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.......................................................... 100% 100% 100% 100% 100%
May 1999.................................................................... 100 100 100 100 100
November 1999............................................................... 100 100 100 100 100
May 2000.................................................................... 100 100 100 100 100
November 2000............................................................... 100 80 51 0 0
May 2001.................................................................... 0 0 0 0 0
Weighted Average Life (Years)(1)............................................ 2.29 2.18 2.02 1.84 1.70
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
- ------------------
(1) The weighted average life of the Class A-2 Notes 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 Note Balance.
PERCENTAGE OF INITIAL CLASS A PRINCIPAL BALANCE REMAINING
AND WEIGHTED AVERAGE LIFE OF CLASS A-3 NOTES
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTIONS
------------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.......................................................... 100% 100% 100% 100% 100%
May 1999.................................................................... 100 100 100 100 100
November 1999............................................................... 100 100 100 100 100
May 2000.................................................................... 100 100 100 100 100
November 2000............................................................... 100 100 100 97 0
May 2001.................................................................... 87 69 37 0 0
November 2001............................................................... 0 0 0 0 0
Weighted Average Life (Years)(1)............................................ 2.67 2.61 2.48 2.20 1.77
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
(Footnote on next page)
45
<PAGE>
(Footnote from previous page)
- ------------------------
(1) The weighted average life of the Class A-3 Notes 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 Note Balance.
PERCENTAGE OF INITIAL CLASS A PRINCIPAL BALANCE REMAINING
AND WEIGHTED AVERAGE LIFE OF CLASS A-4 NOTES
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTIONS
------------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Initial Percentage.......................................................... 100% 100% 100% 100% 100%
May 1999.................................................................... 100 100 100 100 100
November 1999............................................................... 100 100 100 100 100
May 2000.................................................................... 100 100 100 100 100
November 2000............................................................... 100 100 100 100 87
May 2001.................................................................... 100 100 100 70 0
November 2001............................................................... 54 41 0 0 0
May 2002.................................................................... 0 0 0 0 0
Weighted Average Life (Years)(1)............................................ 3.14 3.01 2.93 2.62 2.35
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
- ------------------
(1) The weighted average life of the Class A-4 Notes 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-4 Note Balance.
CLASS A NOTE FACTORS AND TRADING INFORMATION;
REPORTS TO CLASS A NOTEHOLDERS
The 'Class A-1 Note Factor', the 'Class A-2 Note Factor', the 'Class A-3
Note Factor' and the 'Class A-4 Note Factor' will each be a seven-digit decimal
that the Servicer will compute each month indicating the Class A-1, Class A-2,
Class A-3 or Class A-4 Note 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
Note Balance of the related Class of Class A Notes. Each Note 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, Class A-3 or Class A-4 Note Principal Loss Amounts. During the
Amortization Period, each Note Factor will decline to reflect reductions in the
related Note Balance resulting from distributions of principal and unreimbursed
Class A-1, Class A-2, Class A-3 or Class A-4 Note Principal Loss Amounts, if
any. The portion of the Class A Note Balance for a given month allocable to a
Class A Noteholder can be determined by multiplying the original denomination of
the holder's Class A Note by the related Note Factor for that month.
Pursuant to the Agreement, The Bank of New York, as Indenture Trustee, will
provide to all registered holders of the Class A Notes (which shall be Cede as
the nominee of DTC unless Definitive Notes 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, Class A-3 and Class A-4 Note Factors and various other items of
information. Note Owners may obtain copies of such reports upon a request in
writing to the Indenture Trustee. In addition, Class A Noteholders 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 Noteholders and Note Owners, see 'Description of the
Notes--Statements to Noteholders' and 'Description of the Notes--Book-Entry
Registration'.
46
<PAGE>
DESCRIPTION OF THE NOTES
The Notes will be issued pursuant to the Indenture (the 'Indenture'), a
form of which, together with forms of the Agreement, 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', 'The Contracts--Characteristics at the
Contracts--Representations, Warranties and Covenants', 'Security for the Notes'
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 Indenture,
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 Notes will be issued in denominations of $1,000 and integral
multiples thereof in book-entry form. (Indenture, Section 2.02). The Class A
Notes will initially be represented by notes registered in the name of Cede, the
nominee of DTC. No Note Owner will be entitled to receive a note representing
such owner's Note, except as set forth below. Unless and until Class A Notes are
issued in fully registered certificated form ('Definitive Notes') under the
limited circumstances described below, all references herein to distributions,
notices, reports and statements to Class A Noteholders will refer to the same
actions made with respect to DTC or Cede, as the case may be, for the benefit of
Note Owners in accordance with DTC procedures. (Indenture, Section 2.10). See
'Description of the Notes--Book-Entry Registration' and '--Definitive Notes'.
The outstanding principal amount of each class of Notes (each, a 'Class')
at any time will be equal to the initial principal amount of such Class of
Notes, less the sum of (i) all payments made on or prior to such date allocable
to principal, (ii) the amount of Note Principal Loss Amounts allocable to such
Class of Notes, if any, which have not been reimbursed as described herein and
(iii) in the case of the Class B Notes, any unreimbursed Class B Note Principal
Carryover Shortfall. (Agreement, Section 1.01). See 'Description of the Notes--
Distributions on the Notes'. Each Note will represent the right to receive
payments of interest at the related Note 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 and Accelerated Principal Distribution Amounts allocable
to Notes of the related Class, Transferor Amounts otherwise payable to the
Transferor in respect of the Transferor Interest, the Servicing Fee (so long as
World Omni is the Servicer) and Insured Residual Value Loss Amounts payable
under the Residual Value Insurance Policy, in each case to the extent described
herein. As described under 'Description of the Notes--Distributions on the
Notes', the right of the Class B Notes to receive payments of interest and
principal also will be subordinated to the right of the Class A Notes to receive
such payments.
The Transferor will permanently retain the certificate representing the
Transferor Interest (the 'Transferor Certificate'), which will represent the
entire equity interest in the Trust including the right to receive the
Transferor Percentage of Interest Collections and Principal Collections
calculated as described under 'Description of the Notes--Calculation of Investor
Percentage and Transferor Percentage'. The Transferor Certificate will be
subordinated to the Notes to the extent described under 'Description of the
Notes--Certain Payments to the Transferor'.
During the Revolving Period, the Note Balance will remain constant except
in certain limited circumstances where there are unreimbursed Note Principal
Loss Amounts. During the Amortization Period, the Note Balance will decline as
the Investor Percentage of Principal Collections and Accelerated Principal
Distribution Amounts are distributed to the Noteholders and as Note Principal
Loss Amounts are incurred. 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.
47
<PAGE>
TRANSFER OF THE SUBI
On the Closing Date, pursuant to the Agreement, the Transferor will deliver
the SUBI Certificate to the Owner Trustee and transfer and assign to the Trust,
without recourse, all of its right, title and interest in and to the SUBI,
represented by the SUBI Certificate. The Owner Trustee will, concurrently with
such delivery, transfer and assignment, deliver the Notes and the Transferor
Certificate on behalf of the Trust to or upon the order of the Transferor.
(Agreement, Sections 2.02 and 4.02).
Pursuant to the Agreement, the Transferor will represent and warrant that
immediately prior to the transfer and assignment of the SUBI Certificate to the
Trust, 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 such Contract. 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 Transferor 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 Transferor 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 Transferor 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 TRANSFEROR PERCENTAGE
Pursuant to the Servicing Agreement, the Servicer will allocate between the
Notes and the Transferor Certificate, based on the applicable Investor
Percentage and the Transferor 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 with respect to repossessions. (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) Loss Amounts and Interest Collections, the percentage equivalent
of a fraction (not to exceed 100%) the numerator of which is the Note Balance on
the last day of the immediately preceding Collection Period (or, in the case of
the first Collection Period, the Initial Note Balance) and the denominator of
which is 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
48
<PAGE>
of a fraction (not to exceed 100%) the numerator of which is the Note Balance
and the denominator of which is 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
'Transferor 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 in
each Collection Period will be allocated to the Noteholders based on the
relationship of the Note 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 may
vary monthly during the Revolving Period, because the Note 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 as of the last day of the Revolving Period.
CERTAIN PAYMENTS TO THE TRANSFEROR
On each Distribution Date, the Indenture Trustee will pay to the
Transferor, from amounts on deposit in the Distribution Account in respect of
the related Collection Period, the following amounts (the 'Transferor Amounts'):
(i) if such Distribution Date is in respect of the Revolving Period, the
Transferor Percentage of Interest Collections and (ii) if such Distribution Date
occurs in any month following the month in which the Amortization Period
commences, the Transferor Percentage of Interest Collections and, to the extent
that the Transferor Interest is equal to or greater than zero, the Transferor
Percentage of Principal Collections. The foregoing payments will be made net of
the Transferor 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 Transferor because the Transferor Interest is less than or equal to zero
('Unallocated Principal Collections') will be retained in the Distribution
Account for payment to Noteholders.
Notwithstanding the foregoing, no Transferor Amounts will be paid to the
Transferor on a Distribution Date unless (i) the amounts described in clauses
(i) through (xvi) of the first paragraph under 'Description of the
Notes--Distributions on the Notes--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).
DETERMINATION OF ONE-MONTH LIBOR
The Servicer will determine One-Month LIBOR for each Distribution Date on
the second business day prior to the preceding Distribution Date (or, in the
case of the initial Distribution Date, the second business day prior to the date
of issuance of the Notes) (each a 'LIBOR Determination Date'). For purposes of
calculating One-Month LIBOR, a business day is any day on which dealings in
deposits in U.S. Dollars are transacted in the London interbank market.
'One-Month LIBOR' means, as of any LIBOR Determination Date, the rate for
deposits in U.S. Dollars for a period of the Designated Maturity (commencing on
the previous Distribution Date) which appears on the Telerate Page 3750 as of
11:00 a.m., London time, on such date. If such rate does not appear on Telerate
Page 3750, the rate for that day will be determined on the basis of the rates at
which deposits in U.S. Dollars are offered by the Reference Banks at
approximately 11:00 a.m., London time, on that day to prime banks in the London
interbank market for a period of the Designated Maturity (commencing on the
previous Distribution Date). The Servicer will request the principal London
office of each of the Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, the rate for that day will be the
arithmetic mean of the quotations. If fewer than two quotations are provided as
requested, the rate for that day will be the arithmetic mean of the rates quoted
by major banks in New York City, selected by the Servicer, at approximately
11:00 a.m., New York City time, on that day for loans in U.S. Dollars to leading
European banks for a period of the Designated Maturity (commencing on the
previous Distribution Date).
'Designated Maturity' shall mean, for any LIBOR Determination Date, one
month.
49
<PAGE>
'Telerate Page 3750' means the display page currently so designated on the
Dow Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
'Reference Banks' means four major banks in the London interbank market
selected by the Servicer.
DISTRIBUTIONS ON THE NOTES
General
On the second Business Day prior to each Distribution Date (each, a
'Determination Date'), the Servicer will inform the Indenture Trustee of, among
other things, the amount of Interest Collections and Principal Collections, the
Investor Percentage, the Transferor Percentage, the Class A-1, Class A-2, Class
A-3 and Class A-4 Note Factors, the Class A-1, Class A-2, Class A-3, Class A-4
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 Class A Net Swap Receipt or the Class A Net Swap Payment, the
amounts to be distributed to the Noteholders and to the Transferor in respect of
the Transferor Interest and the Reserve Fund Supplemental Requirement (if any).
(Servicing Agreement, Sections 9.02 and 10.01).
Distributions of Interest
On each Distribution Date, the Indenture Trustee will make the following
payments in the amounts and order of priority described below. The Indenture
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, together with (i) Transferor Amounts
that would otherwise be payable to the Transferor in respect of the Transferor
Interest on such Distribution Date, plus (ii) to the extent necessary to make
the distributions described below other than in clause (ix), the sum of any
Insured Residual Value Loss Amounts paid under the Residual Value Insurance
Policy in respect of such Collection Period and the amount withdrawn from the
Reserve Fund in respect of the Required Amount, if any, plus (iii) to the extent
needed to make distributions described in clauses (iii), (x) and (xi), to the
Class A-4 Noteholders during the Amortization Period, amounts that would
otherwise be distributable to the Class B Noteholders 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 Indenture Event of Default as a result of the
Indenture Trustee having received written instructions from holders of
Notes evidencing Voting Interests of not less than a majority in interest
of the Class A Notes (voting together as a single class) or a majority in
interest of the Class A Notes and Class B Notes (voting together as a
single class) to sell or dispose of the SUBI, to the Indenture Trustee, the
Investor Percentage of Capped Indenture Trustee Administrative Expenses,
and to the Owner Trustee, the Investor Percentage of Capped Owner Trustee
Administrative Expenses;
(ii) first from the Class A Net Swap Receipt and then from the amounts
remaining after the application of clause (i) above, to (A) each Class of
Class A Noteholders, interest at the related Note Rate on the Class A-1,
Class A-2, Class A-3 or Class A-4 Note Balance, as applicable, as of the
immediately preceding Distribution Date (after giving effect to any
reduction in such Note 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, Class A-3 or Class A-4 Note Balance, as applicable,
calculated on the basis of the actual number of days from and including the
prior Distribution Date (or in the case of the initial Distribution Date,
the Closing Date) to but excluding the related Distribution Date and a
360-day year, together with any unpaid Class A-1, Class A-2, Class A-3 or
Class A-4 Interest Carryover Shortfall, as applicable and (B) the Class A
Swap Counterparty, the Class A Net Swap Payment, if any, with respect to
such Distribution Date, plus any Class A Net Swap Payments previously due
but not paid; provided, however, if the funds available are not sufficient
to make the distributions specified in subclauses (ii)(A) and (ii)(B), such
funds will be allocated pro rata between the
50
<PAGE>
Class A Noteholders and the Class A Swap Counterparty based on the
respective amounts due in each such subclause;
(iii) to each Class of Class A Noteholders, accrued and unpaid
interest at the related Note Rate, on any unreimbursed Class A-1, Class
A-2, Class A-3 and Class A-4 Note Principal Loss Amount, as applicable;
(iv) from amounts remaining after the application of clauses (i), (ii)
and (iii) above, to, or for the benefit of, the Class B Noteholders,
interest at a rate per annum not expected to exceed 7.75% (the 'Class B
Note Rate' and, together with the Class A-1, Class A-2, Class A-3 and Class
A-4 Note Rates, the 'Note Rates'), on the Class B Note Balance as of the
immediately preceding Distribution Date (after giving effect to any
reduction in the Class B Note Balance on such immediately preceding
Distribution Date) or, in the case of the first Distribution Date, on the
Initial Class B Note Balance, calculated on the basis of a 360-day year
consisting of twelve 30-day months, together with any unpaid Class B
Interest Carryover Shortfall;
(v) to the Servicer, reimbursement of the Investor Percentage of
Capped Contingent and Excess Liability Premiums;
(vi) to the Origination Trustee, the Investor Percentage of Capped
Origination Trust Administrative Expenses;
(vii) in circumstances other than as set forth in clause (i) above, to
the Indenture Trustee, the Investor Percentage of Capped Indenture Trustee
Administrative Expenses, and to the Owner Trustee, the Investor Percentage
of Capped Owner Trustee Administrative Expenses;
(viii) 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;
(ix) to the Reserve Fund, until the amount on deposit therein equals
the Reserve Fund Cash Requirement;
(x) to the Class A Noteholders, (a) so long as the Note Balance of the
Class B Notes has not been reduced to zero, an amount equal to the Covered
Loss Amount for the related Distribution Date, sequentially, commencing
with the Class A-1 Noteholders until the Note Balance of each such Class
has been reduced to zero, or (b) if the Note Balance of the Class B Notes
has been reduced to zero, pro rata, based on the Class A-1, Class A-2,
Class A-3 and Class A-4 Allocation Percentages, an amount equal to the sum
of the Covered Loss Amount and the Uncovered Loss Amount for the related
Distribution Date;
(xi) to each Class of Class A Noteholders, the aggregate of the
amounts allocable to such Class pursuant to clause (x) above that were not
previously distributed pursuant to such clause or this clause (each such
amount, a 'Class A-1 Note Principal Loss Amount', 'Class A-2 Note Principal
Loss Amount', 'Class A-3 Note Principal Loss Amount' or 'Class A-4 Note
Principal Loss Amount', respectively);
(xii) to the Class B Noteholders, accrued and unpaid interest at the
Class B Note Rate on any unreimbursed Class B Note Principal Loss Amount
and any unreimbursed Class B Note Principal Carryover Shortfall;
(xiii) to the Class B Noteholders, an amount equal to the Uncovered
Loss Amount incurred during the related Collection Period;
(xiv) to the Class B Noteholders, the aggregate of the amounts
allocable pursuant to clause (xiii) above that were not previously
distributed pursuant to such clause or this clause (each such amount, a
'Class B Note Principal Loss Amount'), together with any Class B Note
Principal Carryover Shortfall;
(xv) 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
(xvi) to the Indenture Trustee, the Owner Trustee and the Origination
Trustee, as applicable, the Investor Percentage of all specified expenses
incurred with respect to the Indenture, the Notes, the Trust or
51
<PAGE>
the Origination Trust in excess of the Capped Administrative Expenses that
have been paid but have not yet been reimbursed (the 'Uncapped
Administrative Expenses'). (Agreement, Sections 1.01 and 3.03).
Notwithstanding the foregoing, as more fully described under 'Description
of the Notes--Distributions on the Notes--Application and Distributions of
Principal', on any Distribution Date relating to a Collection Period during the
Revolving Period, for purposes of reinvestment, amounts otherwise payable to
Noteholders pursuant to clauses (x), (xi), (xiii) and (xiv) above (whether from
Interest Collections, Transferor Amounts that otherwise would be payable to the
Transferor, Insured Residual Value Loss Amounts paid under the Residual Value
Insurance Policy, or from amounts on deposit in the Reserve Fund) 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 and the Class A Net Swap
Receipt allocated to the Notes for the related Collection Period, after giving
effect to the distributions in clauses (i) through (xvi) above, will constitute
'Excess Collections'. On each Distribution Date that occurs (i) during the
Revolving Period, Excess Collections will be paid to the Transferor and (ii)
during the Amortization Period, an amount equal to the related Accelerated
Principal Distribution Amount will be paid to Noteholders as a payment of
principal and any remaining Excess Collections will be paid to the Transferor.
On any Distribution Date, the Transferor may (at its option) instruct the
Indenture Trustee not to pay any or all of such remaining Excess Collections to
it, but instead to redeposit such amount ('Undistributed Transferor Excess
Collections') into the SUBI Collection Account for application as Collections in
respect of the Collection Period during which such Distribution Date occurs. The
Transferor will have no further claim to any Undistributed Transferor Excess
Collections so deposited into the SUBI Collection Account, except insofar as
they become Excess Collections that are payable to the Transferor for a
succeeding Collection Period. To the extent that an Accelerated Principal
Distribution Amount is paid to Noteholders 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 Noteholders until the Class A-1 Notes
have been paid in full, second, to the Class A-2 Noteholders until the Class A-2
Notes have been paid in full, third, to the Class A-3 Noteholders until the
Class A-3 Notes 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-4 Noteholders and the Class B Noteholders, respectively. If any
Transferor Amounts are required to be applied to make any of the distributions
in clauses (i) through (xvi) above, the Interest Collections that are part of
the Transferor Amounts will be applied before any Principal Collections that are
part of the Transferor Amounts are so applied. (Agreement, Sections 1.01 and
3.03).
In the event on any Distribution Date there remains any shortfall in
amounts required to be distributed to the Class A-1 Noteholders, Class A-2
Noteholders, Class A-3 Noteholders and Class A-4 Noteholders under clause (ii)
and on any Distribution Date on which the Note Balance of the Class B Notes has
been reduced to zero, there remains any shortfall in amounts required to be
distributed to the Class A-1 Noteholders, Class A-2 Noteholders, Class A-3
Noteholders and Class A-4 Noteholders under clauses (iii), (x) or (xi) above,
then the amount available will be distributed pro rata to such Noteholders based
on the Class A-1 Allocation Percentage, the Class A-2 Allocation Percentage, the
Class A-3 Allocation Percentage and the Class A-4 Allocation Percentage,
respectively. (Agreement, Section 3.03).
If and to the extent that the full amount distributable on a Distribution
Date pursuant to clauses (i) through (xvi) above exceeds the Investor Percentage
of Interest Collections for the related Collection Period (plus in the case of
clause (ii) above, the Class A Net Swap Receipt, for such Distribution Date),
then (i) Transferor Amounts otherwise distributable to the Transferor will be
applied to such shortfall, (ii) if such Transferor Amounts are insufficient to
cover such shortfall, then the proceeds of a claim under the Residual Value
Insurance Policy for any Insured Residual Value Loss Amount will be applied to
such shortfall (other than any shortfall in amounts to be deposited into the
Reserve Fund as set forth in clause (ix) above), and (iii) if available
Transferor Amounts and any claim under the Residual Value Insurance Policy are
insufficient to cover such shortfall, then the Required Amount will be withdrawn
from the Reserve Fund and applied to such shortfall (other than any shortfall in
amounts to be deposited into the Reserve Fund as set forth in clause (ix)
above). (Agreement, Section 3.03).
52
<PAGE>
'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 up to but not exceeding $100,000 in any calendar year. (SUBI
Trust Agreement, Section 10.01). 'Capped Indenture Trustee Administrative
Expenses' will equal the amounts sufficient to pay the Indenture Trustee's
compensation and certain other expenses up to but not exceeding $50,000 in any
calendar year (or $100,000 in a calendar year in which an Indenture Event of
Default occurs with respect to which the Indenture Trustee sells or otherwise
disposes of the SUBI). 'Capped Owner Trustee Administrative Expenses' will equal
amounts sufficient to pay the Owner Trustee's compensation and certain other
expenses up to but not exceeding $5,000 in any calendar year. (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, up to but not exceeding $550,000 in any
calendar year.
'Covered Loss Amounts' for any Distribution Date will equal the lesser of
(i) the Investor Percentage of Loss Amounts for such Distribution Date and (ii)
amounts available for distribution described under 'Description of the
Notes--Distributions on the Notes--Distributions of Interest' remaining after
application of clauses (i) through (ix) thereunder.
'Uncovered Loss Amounts' for any Distribution Date will equal the excess of
(i) the Investor Percentage of Loss Amounts for such Distribution Date over (ii)
Covered Loss Amounts for such Distribution Date.
A 'Note Principal Loss Amount' with respect to any Distribution Date will
equal the sum of any Class A-1, Class A-2, Class A-3, Class A-4 and Class B Note
Principal Loss Amount and will represent a loss of principal in respect of Loss
Amounts allocable to the Notes and will arise when the Investor Percentage of
Interest Collections, Insured Residual Value Loss Amounts paid under the
Residual Value Insurance Policy, the Required Amount, the Transferor Amounts
and, with respect to any Class A-4 Note Principal Loss Amount, amounts otherwise
payable in respect of principal to the Class B Noteholders are not sufficient to
cover such loss. As described under 'Description of the Notes--General', any
Note Principal Loss Amounts allocable to a Class of Class A Notes which are not
reimbursed as provided herein will reduce the Note Balance of such Class of
Class A Notes. (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 Notes 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 Note 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 Noteholders on such Distribution
Date. The 'Class A-2 Interest Carryover Shortfall', the 'Class A-3 Interest
Carryover Shortfall', the 'Class A-4 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 Notes, the Class A-3 Notes, the Class A-4 Notes and the Class B
Notes, respectively. (Agreement, Section 1.01).
The 'Class B Note 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-3 Notes are paid in full, will equal the
amount, if any, of the Class B Percentage of the Investor Percentage of
Principal Collections for such Distribution Date that is instead applied to the
distribution of principal to the Class A Noteholders, pursuant to clauses (iii),
(x) and (xi) above. The Class B Percentage of the Investor Percentage of
Principal Collections 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 Note Balance as a percentage of the Note Balance,
calculated as of the last day of the related Collection Period.
53
<PAGE>
The 'Voting Interests' of the (i) Class A Notes will be allocated among the
Class A-1, Class A-2, Class A-3 and Class A-4 Noteholders or Note Owners, as the
case may be, in accordance with their respective Class Note Balances, as the
context may require, and (ii) Class B Notes will be allocated among the Class B
Noteholders in accordance with the Class B Note Balance represented thereby.
Notwithstanding the foregoing, in certain circumstances, any Class A Notes or
Class B Notes, as the case may be, held or beneficially owned by ALF LLC, ALF
L.P., the Transferor, WOLS LLC, World Omni or any of their respective affiliates
shall be excluded from such determination. (Agreement, Section 1.01).
The 'Required Amount' will equal the lesser of (i) the amount on deposit in
the Reserve Fund on the related Deposit Date after all deposits thereto
(including pursuant to clause (ix) above) and (ii) the amount, if any, by which
(a) the full amount distributable on the related Distribution Date pursuant to
clauses (i) through (viii) and (x) through (xvi) above exceeds (b) the sum of
(1) the Investor Percentage of Interest Collections for the related Collection
Period above (plus in the case of clause (ii) above, the Class A Net Swap
Receipt for the related Distribution Date), (2) any Transferor Amounts applied
to cover such distributable amount on such Distribution Date, and (3) any
Insured Residual Value Loss Amounts paid under the Residual Value Insurance
Policy with respect to the related Collection Period. (Agreement, Sections 1.01,
3.03 and 3.04). For further details regarding the Reserve Fund, see 'Security
for the Notes--The Reserve Fund'.
Application and Distributions of Principal
Revolving Period. No principal will be payable to the Class A Noteholders
until the January 2000 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 (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 (including Loss Amounts that otherwise would be
reimbursed to the Noteholders which for this purpose are treated as Principal
Collections, as described under 'Description of the Notes-- Distributions on the
Notes--Distributions of Interest') 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 Indenture 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 (and Loss Amounts that otherwise would be
reimbursed to the Noteholders) 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 December 1998) during the
Revolving Period the amount of such Principal Collections and Loss Amounts 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
Noteholders on the immediately succeeding Distribution Date. (Servicing
Agreement, Section 8.02; SUBI Trust Agreement, Section 11.02; Agreement, Section
8.01).
54
<PAGE>
'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-3
Notes have been paid in full, the Indenture 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 Notes as
principal first to the Class A-1 Noteholders until the Class A-1 Notes have been
paid in full, second, to the Class A-2 Noteholders until the Class A-2 Notes
have been paid in full, third, to the Class A-3 Noteholders until the Class A-3
Notes 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-4 Noteholders and the Class B
Noteholders, respectively. The Indenture Trustee will also distribute to Class
A-1 Noteholders 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 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 Noteholders of each Class of Class A
Notes will not exceed the Initial Note Balances of such Class of Notes. (SUBI
Trust Agreement, Section 11.02; Indenture, Section 2.06; Agreement, Section
3.03).
In general, no principal payments (including amounts with respect to
Covered Loss Amounts) will be made on the Class A-2 Notes until the Class A-1
Notes have been paid in full, on the Class A-3 Notes until the Class A-1 and
Class A-2 Notes have been paid in full, or on the Class A-4 or Class B Notes
until the Class A-1, Class A-2 and Class A-3 Notes have been paid in full.
Following the reduction of the Note Balance of the Class B Notes to zero,
principal payments will be distributed on a pro rata basis to the Class A Notes.
Uncovered Loss Amounts will be allocated first to the Class B Notes until the
Note Balance of the Class B Notes has been reduced to zero and then to the Class
A Notes, pro rata, based on the Class A-1, Class A-2, Class A-3 and Class A-4
Allocation Percentages. Amounts with respect to Uncovered Loss Amounts will not
be allocated or reimbursed to any Noteholder once the related Notes have been
paid in full. In addition, the Investor Percentage of the net proceeds of any
sale or other disposition of the SUBI, the SUBI Certificate or other property of
the Trust, which may occur under certain circumstances involving an Indenture
Event of Default (as described under 'Additional Agreement Provisions--The
Indenture--Events of Default'), to the extent such net proceeds constitute
Principal Collections, will be distributed first, on a pro rata basis, to the
Class A Swap Counterparty based on the termination payment, if any, due and to
the Class A Noteholders based on the respective Class A Note Balances until the
Class A Swap Counterparty and the Class A Notes have been paid in full, and
second, to the Class B Noteholders. See 'Additional Document Provisions--The
Indenture--Events of Default.'
In addition, on any Distribution Date relating to the Amortization Period
from and after the Distribution Date on which the Class A-3 Notes 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
Noteholders in respect of the Class B Percentage of the Investor Percentage of
Principal Collections collected or received in respect of the related Collection
Period will instead be distributed as principal payments to the Class A-4
Noteholders up to an amount equal to the sum of (i) the Class A-4 Allocation
Percentage of the Investor Percentage of Loss Amounts incurred during the
related Collection Period, (ii) any Class A-4 Note Principal Loss Amounts and
(iii) accrued and unpaid interest on any Class A-4 Note Principal Loss Amounts,
as set forth under 'Description of the Notes--Distributions on the
Notes--Distributions of Interest'.
Principal payments made during the Amortization Period in respect of the
Class A-1 Notes, the Class A-2 Notes or Class A-3 Notes, as applicable, will
consist primarily of the Investor Percentage of all Principal Collections during
the related Collection Period. Principal payments made in respect of the Class
A-4 Notes and the Class B Notes (once the Class A-1 Notes, Class A-2 Notes and
Class A-3 Notes 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.
55
<PAGE>
THE ACCOUNTS
The Distribution Account
On or prior to the Closing Date, the Servicer will establish a trust
account with and in the name of the Indenture Trustee for the benefit of the
Noteholders and the Transferor, as holder of the Transferor Certificate, from
which all payments with respect to the Notes will be made (the 'Distribution
Account'). (Agreement, Section 3.01). Within one Business Day of receipt, the
Servicer will deposit all Insured Residual Value Loss Amounts paid under the
Residual Value Insurance Policy (if they relate to the Amortization Period) into
the Distribution Account (Agreement, Section 3.02). On each Deposit Date, all
Principal Collections and Interest Collections with respect to the related
Collection Period and the Class A Net Swap Receipt 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 Transferor in the case of exercise of its right to purchase the SUBI
represented by the SUBI Certificate when the Note Balance is less than or equal
to 10% of the Initial Note Balance.
The SUBI Collection Account
On or prior to the Closing Date, the Origination Trustee will establish a
trust account with and in the name of the Indenture Trustee for the benefit of
the Noteholders and the Transferor, as holder of the Transferor Certificate,
into which collections on or in respect of the Contracts and the Leased Vehicles
generally will be deposited (the 'SUBI Collection Account' and, together with
the Distribution Account and the Reserve Fund, the 'Accounts'). (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, and Insurance 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 covenants has occurred; (viii) Undistributed
Transferor Excess Collections and (ix) with respect to the Revolving Period,
Insured Residual Value Loss Amounts paid under the Residual Value Insurance
Policy. (Servicing Agreement, Sections 2.02, 8.02, 9.02 and 9.04; SUBI Trust
Agreement, Section 12.01).
'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, but will
not include Insured Residual Value Loss Amounts paid under the Residual Value
Insurance Policy. (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 and Insured Residual Value Loss Amounts paid under the Residual Value
Insurance Policy, 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, Insurance 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
56
<PAGE>
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 Indenture Trustee is provided with confirmation (written or oral)
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 Notes. (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 Indenture Trustee, as pledgee of the SUBI, and the
Transferor on the related Deposit Date. The Servicer, however, will account to
the Indenture Trustee, the Origination Trustee, the Noteholders and the
Transferor 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 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 Notes--Distributions on the
Notes--Application and Distributions of Principal--Revolving Period'.
(Agreement, Section 3.02; SUBI Trust Agreement, Section 12.01; Servicing
Agreement, Sections 2.02, 8.02 and 9.02).
In the event that on any date the Servicer supplies the Origination Trustee
and the Indenture Trustee with an officer's certificate setting forth the basis
for such withdrawal, the Indenture 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, 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 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'.
Maintenance of the Accounts
The Accounts will be maintained with the Indenture Trustee so long as
either (i) the short-term unsecured debt obligations of the Indenture Trustee
are rated at least P-1 by Moody's and A-1 by Standard & Poor's (and, if such
obligations are rated by Fitch, at least F-1 by Fitch) (the 'Required Deposit
Ratings') or (ii) the Indenture Trustee 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 Indenture Trustee. If the
Indenture Trustee at any time does not qualify under either of these criteria,
the Servicer shall, with the assistance of the Indenture Trustee, 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 Indenture Trustee 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 or the Reserve Fund 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
57
<PAGE>
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 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, Section 12.01; Agreement, Sections 3.01 and 3.04;
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 Moody's and Standard & Poor's (and, if such investments are rated by
Fitch, of Fitch) from time to time as being consistent with its then-current
rating of each Class of Notes. (Agreement, Section 1.01).
EARLY AMORTIZATION EVENTS
As described above, the Revolving Period will continue until the close of
business on the last day of November 1999 and the Amortization Period will begin
on December 1, 1999 and continue to the earlier of the payment in full of the
Notes 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 or the Notes 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 Transferor 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 or Noteholders and
which continues unremedied for 60 days after the giving of written notice
of such failure (a) to the Transferor or the Servicer, as the case may be,
by the Indenture Trustee or the Origination Trustee or (b) to the
Transferor or the Servicer, as the case may be, and to the Indenture
Trustee by holders of Notes evidencing not less than 25% of the Voting
Interests of the Class A Notes and the Class B Notes, voting together as a
single class;
(iii) failure to cure the inaccuracy of certain representations,
warranties and certificates of the Transferor 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
or Noteholders 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 Indenture,
the Agreement, the backup security agreement (the 'Backup Security
Agreement'), the SUBI Trust Agreement or the Servicing Agreement;
(iv) the occurrence of certain Insolvency Events relating to the
Transferor;
(v) creation of any lien or encumbrance not otherwise permitted by the
Indenture, the Agreement, the Backup Security Agreement, the SUBI Trust
Agreement or the Servicing Agreement on the SUBI Assets, which lien or
encumbrance is not released or bonded over within 60 days of its creation;
(vi) the Transferor, 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;
(vii) if on the twenty-fifth day of any month (beginning December
1998) the amount of Principal Collections and Loss Amounts that otherwise
would be available to be reimbursed to the Noteholders 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;
58
<PAGE>
(viii) an Event of Servicing Termination or an Event of Default under
the Indenture (an 'Indenture Event of Default') occurs;
(ix) 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 $4,409,144.68 (i.e., 0.25% multiplied by the
Aggregate Net Investment Value as of the Initial Cutoff Date);
(x) any Leased Vehicle is no longer covered by the Residual Value
Insurance Policy or one or more policies with substantially similar
coverage and provisions issued by an insurer acceptable to each Rating
Agency, or an alternative mechanism to support Residual Values of Leased
Vehicles implemented in accordance with the procedures required for
amendment of the Agreement (as described in 'Additional Document
Provisions--Additional Agreement Provisions--Amendment');
(xi) the failure of the Class A Swap Counterparty to make a required
payment within five calendar days of the date such payment was due; or
(xii) the failure of the Trust or the Class A Swap Counterparty,
within 30 calendar days of the date on which the counterparty ratings of
the Class A Swap Counterparty fall below the required ratings of any of the
Ratings Agencies as specified in the Agreement, to (i) obtain a replacement
interest rate swap agreement with terms substantially the same as the Class
A Interest Rate Swap or (ii) establish any other arrangement satisfactory
to the applicable Rating Agency, in any case such that the Rating Agency
will not reduce or withdraw its ratings of any Class of the Class A Notes.
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 Noteholders 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 Noteholders will begin receiving distributions of principal
earlier than they would otherwise have under the Agreement, and Class A-2, Class
A-3 and Class A-4 Noteholders may 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 Notes.
STATEMENTS TO NOTEHOLDERS
On each Distribution Date, the Indenture Trustee will include with each
distribution to each Noteholder as of the close of business on the related
Record Date (which, in the case of the Class A Notes, shall be Cede as the
nominee of DTC unless Definitive Notes 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 for such Collection Period;
(ii) the amount being distributed to Noteholders (the 'Note
Distribution Amount');
(iii) the amount of the Note Distribution Amount allocable to interest
and to principal on each Class of Notes;
(iv) the amount of the Note 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, any Class A-4
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, unpaid Class A-4 Interest Carryover Shortfall
and unpaid Class B Interest Carryover Shortfall, after giving effect to
distribution of the Note Distribution Amount;
(vi) the Note Balance, the Class A-1 Note Balance, the Class A-2 Note
Balance, the Class A-3 Note Balance, the Class A-4 Note Balance, the Class
B Note Balance, the Class A-1 Note Factor, the Class A-2
59
<PAGE>
Note Factor, the Class A-3 Note Factor, the Class A-4 Note Factor, the
Class A-1 Allocation Percentage, the Class A-2 Allocation Percentage, the
Class A-3 Allocation Percentage, the Class A-4 Allocation Percentage and
the Class B Allocation Percentage as of such Distribution Date, in each
case after giving effect to distribution of the Note Distribution Amount;
(vii) the aggregate amount, if any, of the reimbursement of Covered
Loss Amounts and Uncovered Loss Amounts included in distribution of the
Note Distribution Amount and the amount thereof allocated to each Class of
Noteholders;
(viii) the amount of the Note Distribution Amount allocable to
reimbursement of previous Class A-1 Note Principal Loss Amounts, Class A-2
Note Principal Loss Amounts, Class A-3 Note Principal Loss Amounts, Class
A-4 Note Principal Loss Amounts and Class B Note 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 Note
Principal Loss Amounts, Class A-2 Note Principal Loss Amounts, Class A-3
Note Principal Loss Amounts, Class A-4 Note Principal Loss Amounts and
Class B Note Principal Loss Amounts, after giving effect to distribution of
the Note Distribution Amount;
(x) the amount of any unreimbursed Class B Note Principal Carryover
Shortfall;
(xi) the Investor Percentage of the Servicing Fee;
(xii) the amount of any Required Amount included in the Note
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 any Reserve Fund supplemental requirement;
(xiii) the Transferor Amount, if any, included in the Note
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 amounts of Advances made in respect of such Collection
Period and the amount of unreimbursed Advances on such Distribution Date;
(xvii) certain information used in determining compliance with the
Charge-off Test Rate and the Delinquency Test;
(xviii) the Insured Residual Value Loss Amount, if any, for such
Distribution Date; and
(xix) the Class A Net Swap Receipt or the Class A Net Swap Payment,
for such Distribution Date.
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 Note or Class B Note, as
applicable. Copies of such statements may be obtained by Noteholders or Note
Owners by a request in writing addressed to the Indenture Trustee. In addition,
within the prescribed period of time for tax reporting purposes after the end of
each calendar year during the term of the Agreement, the Indenture Trustee will
mail to each person who at any time during such calendar year shall have been a
Class A or Class B Noteholder or a Note 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; REDEMPTION OF THE NOTES
The respective obligations and responsibilities of the Transferor and the
Indenture Trustee created by the Agreement will terminate upon the earliest to
occur of (i) the disposition of the SUBI, or its expiration or termination by
virtue of 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 prescribed in the Agreement,
(ii) the
60
<PAGE>
day following the Distribution Date on which the Notes have been paid in full
and after which there is no unreimbursed Note Principal Loss Amount or Class B
Note Principal Carryover Shortfall (together with accrued interest thereon) and
(iii) the purchase of the corpus of the Trust and the resulting redemption of
the Notes as
described below. In order to avoid excessive administrative expenses, the
Transferor will be permitted at its option to purchase all of the assets of 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 Note
Balance is less than or equal to 10% of the Initial Note Balance. The purchase
price will be equal to the greater of (i) the sum of the Class A Note Balance
and the Class B Note Balance, in each case plus accrued and unpaid interest
thereon at the related Note Rate, plus certain other accrued and unpaid amounts,
if any, due to the Noteholders or the Servicer, and (ii) the Aggregate Net
Investment Value as of the last day of the preceding Collection Period. If the
Transferor purchases the assets of the Trust, the Indenture Trustee will furnish
a redemption notice to each Noteholder not more than 30 days and not less than
15 days prior to the applicable Redemption Date. Failure to give notice of
redemption, or any defect in the notice, to any Noteholder of any Note selected
for redemption will not impair or affect the validity of the redemption of any
Note. The Notes will, on the Redemption Date, become due and payable and no
interest will accrue on the Notes for any period after such Redemption Date.
(Agreement, Sections 7.01 and 7.02; Indenture, Section 2.06).
The final distribution to any Noteholder will be made only upon surrender
and cancellation of such Noteholder's Note at an office or agency of the
Indenture Trustee specified in the notice of termination. Any funds remaining
that are payable in such final distribution to a Noteholder, after the Indenture
Trustee has taken certain measures to locate such Noteholder and such measures
have failed, will be distributed to the Transferor. (Indenture, Section 2.06).
BOOK-ENTRY REGISTRATION
Note 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 Notes. 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 Notes are issued, it is anticipated that the
only Class A Noteholder will be Cede, as the nominee of DTC. Note 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). 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 Notes 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.
61
<PAGE>
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.
Note 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 Notes 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 Notes in DTC's records. The ownership interest of each Note Owner in
turn will be recorded on the DTC Participants' and Indirect DTC Participants'
respective records. Note Owners will not receive written confirmation from DTC
of their purchase, but Note 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
Note Owner entered into the transaction. Transfers of ownership interests in the
Class A Notes will be accomplished by entries made on the books of DTC
Participants acting on behalf of Note Owners.
To facilitate subsequent transfers, all Class A Notes deposited by DTC
Participants with DTC will be registered in the name of Cede, as nominee of DTC.
The deposit of Class A Notes 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 Note Owners and its records will reflect only the identity of the DTC
Participants to whose accounts such Class A Notes are credited, which may or may
not be the Note 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 Note 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 Notes 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 Note Owners will 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 Indenture Trustee, the Owner Trustee, the Origination Trustee, the
Servicer or the Transferor, 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 Notes to DTC will be the responsibility of the Indenture Trustee,
disbursement of such payments to DTC Participants will be the responsibility of
DTC and disbursement of such payments to Note Owners will be the responsibility
of DTC Participants and Indirect DTC Participants. As a result, under the
book-entry format, Note 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 Note
Owner to pledge Class A Notes to persons or entities that do not participate in
the DTC system, or otherwise take actions with respect to such Class A Notes,
may be limited due to the lack of a physical Note for such Class A Notes.
Neither DTC nor Cede will consent or vote with respect to the Class A
Notes. Under its usual procedures, DTC mails an 'Omnibus Proxy' to the Indenture
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
62
<PAGE>
to whose accounts the Class A Notes are credited on that record date (identified
in a listing attached to the Omnibus Proxy). None of the Transferor, the
Servicer, the Origination Trustee, the Owner Trustee nor the Indenture Trustee
will have any liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests of the Class A Notes 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 34 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 34 currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing, and
interfaces with domestic markets in more than 25 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 Board establishes policy for the
Euroclear System. 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.
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 Notes 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 'Material 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 Noteholder on behalf of a Cedel
63
<PAGE>
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 Notes 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 NOTES
Definitive Notes will be issued to Note 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 Notes, and neither the Indenture Trustee nor the
Transferor is able to locate a qualified successor, (ii) the Transferor, at its
option, elects to terminate the book-entry system through DTC or (iii) after an
Indenture Event of Default, Note Owners representing in the aggregate more than
50% of the Voting Interests of the Class A Notes (voting together as a single
class) advise the Indenture 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 Note Owners.
Upon the occurrence of any of the events described in the immediately
preceding paragraph, the Indenture Trustee will be required to notify all Note
Owners, through Participants, of the availability through DTC of Definitive
Notes. Upon surrender by DTC of the certificates representing the related Class
A Notes and the receipt of instructions for re-registration, the Indenture
Trustee will issue Definitive Notes to Note Owners, who thereupon will become
Noteholders for all purposes of the Agreement. (Indenture, Section 2.12).
Payments on the related Class A Notes will thereafter be made by the
Indenture Trustee directly to holders of such Class A Notes in accordance with
the procedures set forth herein and to be set forth in the Indenture. Interest
payments and any principal payments on the Definitive Notes on each Distribution
Date will be made to holders in whose names the Definitive Notes 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 Note 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. (Indenture,
Section 2.06). The final payment on any Class A Notes (whether Definitive Notes
or global certificates registered in the name of Cede representing the Class A
Notes), however, will be made only upon presentation and surrender of such
Definitive Notes or global certificates at the office or agency specified in the
notice of final distribution to Class A Noteholders. (Indenture, Section 2.06).
Definitive Notes will be transferable and exchangeable at the offices of
the Indenture Trustee or the Note Registrar to be set forth in the Agreement. No
service charge will be imposed for any registration of transfer or exchange, but
the Indenture Trustee may require payment of a sum sufficient to cover any tax
or other governmental charge imposed in connection therewith. (Indenture,
Section 2.04).
THE INDENTURE TRUSTEE
The Bank of New York will be the Indenture Trustee under the Indenture. The
Corporate Trust Office of the Indenture Trustee is located at 101 Barclay
Street, Floor 12 East, New York, New York 10286. The Bank of New York is not
affiliated with World Omni, although it does act as a service provider to World
Omni.
The Indenture Trustee may resign at any time, in which event the Trust will
be obligated to appoint a successor Indenture Trustee. Noteholders representing
in the aggregate more than 50% of the Voting Interests of the outstanding Notes
(voting together as a single class) may remove the Indenture Trustee by
delivering notice thereof to the Indenture Trustee and the Trust. The Trust may
also remove the Indenture Trustee if the Indenture Trustee ceases to be eligible
to continue as such under the Indenture, becomes legally unable to act or
becomes insolvent. In such circumstances, the Trust will be obligated to appoint
a successor Indenture Trustee. Any resignation or removal of the Indenture
Trustee and appointment of a successor Indenture Trustee will not become
effective until acceptance of the appointment by such successor Indenture
Trustee. (Indenture, Section 6.10).
The Indenture 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
64
<PAGE>
those laws, and subject to supervision or examination by 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. As co-trustee or separate trustee need not meet these eligibility
requirements. (Indenture, Sections 6.08 and 6.14 ).
Noteholders representing in the aggregate more than 50% of the Voting
Interests of the outstanding Notes (voting together as a single class) generally
will have the power to direct any proceeding for any remedy available to the
Indenture Trustee under the Agreement, and the exercise of any trust or power
conferred on the Indenture Trustee by the Agreement (including actions by the
Indenture Trustee in its capacity as a party to, or a third-party beneficiary
of, the SUBI Trust Agreement or the Servicing Agreement). However, the Indenture
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
Noteholders. (Indenture, Section 5.14).
A Noteholder may institute proceedings under the Indenture, but only if
such holder previously has given to the Indenture Trustee written notice of
default and unless the Noteholders representing in the aggregate not less than
25% of the Voting Interests of the outstanding Notes (voting together as a
single class) have made written request upon the Indenture Trustee to institute
such proceeding in its own name as Indenture Trustee and have offered to the
Indenture Trustee reasonable indemnity and the Trustee for 60 days has neglected
or refused to institute any such proceeding. (Indenture, Section 5.09). The
Indenture Trustee will be under no obligation to exercise any of the rights 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
Noteholders, unless such holders have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby. (Indenture, Section 6.03). Noteholders
will have no express right to institute a proceeding directly under the SUBI
Trust Agreement or the Servicing Agreement.
List of Noteholders
Upon a written request of the Servicer, the Indenture Trustee, as Note
Registrar, will provide to the Servicer within 15 days after receipt of such
request a list of the names and addresses of all Noteholders. In addition, three
or more Noteholders or Noteholders representing in the aggregate not less than
25% of the Voting Interests of any Class of outstanding Notes, upon compliance
by such Noteholders with certain provisions of the Agreement, may request that
the Indenture Trustee, as Note Registrar, afford such Noteholders access during
business hours to the current list of Noteholders for purposes of communicating
with other Noteholders with respect to their rights under the Indenture.
(Indenture, Section 7.02). For further information regarding communications with
Noteholders, see 'Description of the Notes--Book-Entry Registration' and
'--Definitive Notes'.
The Indenture will not provide for the holding of any annual or other
meetings of Noteholders.
65
<PAGE>
SECURITY FOR THE NOTES
GENERAL
The Notes will be secured by all of the property of the Trust, which will
primarily consist of the SUBI as evidenced by the SUBI Certificate, as 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. As described under 'Certain Legal
Aspects of the Origination Trust and the SUBI--The SUBI' and 'Certain Legal
Aspects of the Contracts and the Leased Vehicles--Back-up Security Interests',
the Indenture Trustee also will have a security interest in the Contracts and
Contract Rights susceptible of perfection by the filing of a financing statement
under the Uniform Commercial Code (the 'UCC'). The Indenture Trustee will also
have a security interest in the SUBI Collection Account, the Distribution
Account and the Reserve Fund, the Contingent and Excess Liability Insurance
Policies and the Residual Value Insurance Policy described below and will be a
third-party beneficiary of the SUBI Trust Agreement and the Servicing Agreement.
In no event will the Owner Trustee or the Indenture Trustee be deemed to have a
perfected security interest in the Leased Vehicles.
THE RESERVE FUND
On or prior to the Closing Date, the Owner Trustee will establish a trust
account with and in the name of the Indenture Trustee for the benefit of the
Noteholders and the Transferor, as holder of the Transferor Certificate (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, should, among other things, Transferor
Amounts and Insured Residual Value Loss Amounts paid under the Residual Value
Insurance Policy with respect to such Collection Period not be sufficient to
cover such shortfalls. In addition, to the extent not otherwise required to make
any of the payments described under 'Description of the Notes--Distributions on
the Notes--Distributions of Interest', monies on deposit in the Reserve Fund
will be available to make payments to the Noteholders should Collections
ultimately be insufficient to reduce the Class A-1 Note Balance, the Class A-2
Note Balance, the Class A-3 Note Balance, the Class A-4 Note Balance or the
Class B Note 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 Transferor of the Initial
Deposit. On each Distribution Date, the funds in the Reserve Fund will be
supplemented by (i) certain Interest 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 to the Transferor as Transferor 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) $17,636,578.71
(i.e., 1.0% of the Aggregate Net Investment Value as of the Initial Cutoff Date)
and (ii) the Note Balance as of the related Distribution Date (after giving
effect to reductions in the Note Balance on such Distribution Date).
So long as all of the Reserve Fund Tests (as described under 'Security for
the Notes--The Reserve Fund--Reserve Fund Tests') are satisfied and there is no
RV Insurer Trigger Event or Downgrade Trigger Event, the Reserve Fund Cash
Requirement is expected to be $17,636,578.71 for each Date relating to the
Revolving Period. (Agreement, Sections 3.03 and 3.04).
Other Reserve Fund Requirements. 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 Noteholders or otherwise from the Reserve Fund, as described
under 'Description of the Notes--Distributions on the Notes--Distributions of
Interest', to the extent that the amount on deposit in the Reserve Fund is
insufficient to make such deposits or payments (a 'Reserve Fund Deficiency'),
the Transferor 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) $8,818,289.36 (i.e., 0.5% of the Aggregate
66
<PAGE>
Net Investment Value as of the Initial Cutoff Date), less all amounts previously
deposited by or on behalf of the Transferor into the Reserve Fund to satisfy a
Reserve Fund Deficiency (the 'Reserve Fund Supplemental Requirement').
In the event (i) a conservator, receiver or bankruptcy trustee is appointed
by the RV Insurer, or if certain other events relating to the bankruptcy or
insolvency of the RV Insurer occur, or (ii) the Residual Value Insurance Policy
has been declared void or unenforceable by a court of competent jurisdiction in
a final judgment as to which the time for noting an appeal has expired and all
appeals have been decided, if one or more policies with substantially similar
aggregate coverage and provisions have not been issued by an insurer acceptable
to each Rating Agency nor has an alternative mechanism been implemented to
support the Residual Values of the Leased Vehicles in accordance with the
procedures required for amendment of the Agreement (as described in 'Additional
Document Provisions--Additional Agreement Provisions--Amendment') (each such
event, an 'RV Insurer Trigger Event'), then, within 60 days of notice thereof,
the Transferor shall be required to deposit into the Reserve Fund an additional
cash amount equal to the difference between (x) the greater of the Initial
Deposit and the amount then on deposit in the Reserve Fund, and (y)
$61,728,025.49 (i.e., 3.5% of the Aggregate Net Investment Value as of the
Initial Cutoff Date) (the 'RV Insurer Reserve Fund Supplemental Requirement').
From such time until one or more policies are issued with substantially similar
aggregate coverage and provisions issued by an insurer acceptable to each Rating
Agency, or an alternative mechanism is implemented to support the Residual
Values of the Leased Vehicles as described above, the Reserve Fund Cash
Requirement shall be $61,728,025.49 (i.e., 3.5% of the Aggregate Net Investment
Value as of the Initial Cutoff Date).
In the event that the RV Insurer's claims paying ability is downgraded to
'Aa3' or lower by Moody's, or below 'AAA' by Standard & Poor's (or, if such
ability is rated by Fitch, below 'AAA' by Fitch) (a 'Downgrade Trigger Event'),
then within 60 days thereof, the Transferor shall either (i) cause one or more
policies to be issued with substantially similar aggregate coverage and
provisions by an insurer acceptable to each Rating Agency, or cause an
alternative mechanism to be implemented to support the Residual Values of the
Leased Vehicles in accordance with the procedures required for amendment of the
Agreement (as described in 'Additional Document Provisions--Additional Agreement
Provisions--Amendment'), or (ii) deposit into the Reserve Fund any amount that
the Rating Agencies may require in order to maintain their then-current ratings
on each Class of Notes (the 'Downgrade Reserve Fund Supplemental Requirement').
For so long as the Transferor elects to comply with the requirements of clause
(ii) rather than clause (i), the Reserve Fund Cash Requirement shall be such
amount as the Rating Agencies may require in order to maintain their
then-current ratings on each Class of Notes and the Rating Agencies may impose
additional conditions to the maintenance of their then-current ratings on each
Class of Notes, including the addition of further triggers for the application
of the Alternate Reserve Fund Formula described below (which tests generally
would be expected to relate to the Residual Values of the Leased Vehicles). If
the Transferor cannot comply with either clause (i) or clause (ii), or
determines in good faith that such compliance would not be commercially
reasonable, then all Excess Collections in respect of any Distribution Date,
after giving effect to all payments required to be made therefrom on such
Distribution Date, will be deposited into the Reserve Fund, rather than being
paid to the Transferor, regardless of the Reserve Fund Cash Requirement, and the
then-current ratings on each Class of Notes may be downgraded. On the
Distribution Date following the date on which the Transferor complies with
clause (i) or clause (ii), monies on deposit in the Reserve Fund in excess of
the Reserve Fund Cash Requirement shall be distributed to the Transferor (or to
the Noteholders to the extent allocable to the Accelerated Principal
Distribution Amount). (Agreement, Sections 1.01 and 3.04).
Payment of the Reserve Fund Supplemental Requirement, the RV Insurer
Reserve Fund Supplemental Requirement and the Downgrade Reserve Fund
Supplemental Requirement will be obligations of the Transferor with respect to
the Reserve Fund. In the event that there is a Reserve Fund Deficiency, an RV
Insurer Trigger Event or a Downgrade Trigger Event, the Reserve Fund
Supplemental Requirement, the RV Insurer Reserve Fund Supplemental Requirement
or the Downgrade Reserve Fund Supplemental Requirement, as the case may be, will
supplement the cash available in the Reserve Fund to the limited extent
described above. There can be no assurance that the Transferor will have
sufficient cash to fund all or a part of any Reserve Fund Deficiency or to meet
its obligation to pay any Reserve Fund Supplemental Requirement, RV Insurer
Reserve Fund Supplemental Requirement or Downgrade Reserve Fund Supplemental
Requirement. However, pursuant to the Support
67
<PAGE>
Agreement, World Omni has agreed under certain circumstances to provide or
arrange for financial assistance in order to ensure that the Transferor
maintains positive partners' capital. The Support Agreement will not constitute
a guarantee by World Omni of any obligations of the Transferor, including
payment of any Reserve Fund Supplemental Requirement, RV Insurer Reserve Fund
Supplemental Requirement or Downgrade Reserve Fund Supplemental Requirement. See
'The Transferor' for further information in this regard.
Reserve Fund Tests. Notwithstanding the foregoing calculations of the
Reserve Fund Cash Requirement and the supplemental requirements discussed above,
in the event that the Charge-off Rate Test or the Delinquency Test
(collectively, the 'Reserve Fund Tests') is not satisfied as of any
Determination Date and no RV Insurer Trigger Event or Downgrade Trigger Event
has occurred and is continuing, 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 Note Balance as of such
Distribution Date (after giving effect to any reduction in the Note 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
satisfied and all other Reserve Fund Tests are satisfied. 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, all Excess Collections (as described
under 'Description of the Notes--Distributions on the Notes--Distribution of
Interest') in respect of each Distribution Date thereafter 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 '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 month of November 1998 in the case of the
December 1998 Determination Date, or the months of November and December 1998 in
the case of the January 1999 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 month of November 1998 in the case of the December 1998
Determination Date, or the months of November and December 1998 in the case of
the January 1999 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. (Agreement, Section 1.01).
The Transferor 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, the Reserve Fund Supplemental Requirement, the RV Insurer
Reserve Fund Supplemental Requirement and/or the Downgrade 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, the Reserve Fund Supplemental Requirement, the RV Insurer Reserve
Fund Supplemental Requirement and/or the Downgrade 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 Transferor to fund all or a portion
of the Initial Deposit (which borrowings would be payable from assets or cash
flow otherwise payable to the Transferor) or to meet the Reserve Fund Cash
Requirement, the Reserve Fund Supplemental Requirement, the RV Insurer Reserve
Fund Supplemental Requirement and/or the Downgrade
68
<PAGE>
Reserve Fund Supplemental Requirement. If each Rating Agency confirms (in
writing or orally) to the Indenture 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 Notes, and the
Transferor's counsel delivers an opinion as and to the extent required, as
described under 'Additional Document Provisions--Additional Agreement
Provisions--Amendment', then such new formula or change will be implemented and,
to the extent necessary, the Agreement will be amended, without the consent of
any Noteholder or Note Owner. (Agreement, Section 9.01).
Withdrawals from the Reserve Fund. On each Deposit Date the Indenture
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 Noteholders and the Transferor as described under 'Security
for the Notes--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 Transferor. Any such amounts received by the Transferor shall be
free of any claim of the Trust, the Indenture Trustee or the Noteholders and
shall not be available to the Indenture Trustee or the Trust for the purpose of
making deposits to the Reserve Fund or making payments to the Noteholders, nor
shall the Transferor be required to refund any amount properly received by it.
(Agreement, Sections 3.03 and 3.04).
THE RESIDUAL VALUE INSURANCE POLICY
On or prior to the Closing Date the RV Insurer will issue the Residual
Value Insurance Policy to the Transferor (with the Origination Trustee, the
Indenture Trustee, the Owner Trustee and ALF L.P. also named as insureds), which
will provide coverage for the Insured Residual Value Loss Amount for any
Collection Period, and will cover only the Leased Vehicles and not any UTI Asset
or Other SUBI Asset. Insured Residual Value Loss Amounts payable under the
Residual Value Insurance Policy will only arise in connection with the
disposition of Leased Vehicles relating to Matured Contracts and in connection
with losses on Contracts terminated on or prior to their Maturity Dates by
agreement between the Servicer and the lessee in connection with the payment of
less than their respective Outstanding Principal Balances pursuant to World
Omni's pro-active termination program, as described under 'Maturity, Prepayment
and Yield Considerations'. The Residual Value Insurance Policy may not be
cancelled by the RV Insurer. The Residual Value Insurance Policy will not have
any deductibles or provide for co-insurance, but the aggregate maximum amount
payable under the Residual Value Insurance Policy with respect to any Leased
Vehicle will be the lesser of $60,000 and its insured residual value.
Additionally, the aggregate maximum amount payable under the Residual Value
Insurance Policy will not exceed the aggregate insured residual values of all
Leased Vehicles. For these purposes, the residual value of a Leased Vehicle
generally will be determined by reference to World Omni's residual value lease
policies communicated to its Dealers, as amended or supplemented from time to
time (which amount generally will be equal to its Residual Value), as adjusted
for extensions of the related Contract.
On the tenth day of each calendar month or if such day is not a Business
Day, the next succeeding Business Day, the Servicer will determine whether, on
the upcoming Distribution Date, there will be any Insured Residual Value Loss
Amount for the related Collection Period. If so, the Servicer will make a claim
for the Insured Residual Value Loss Amount under the Residual Value Insurance
Policy. Pursuant to the Residual Value Insurance Policy, so long as all
conditions precedent to liability set forth therein are satisfied and no
exclusions apply, the RV Insurer will pay any such claim within five days.
Within one Business Day after receipt, the Servicer will deposit the proceeds of
any such claim into the SUBI Collection Account, if the payment relates to the
Revolving Period, so that the proceeds will be available for reinvestment in
Subsequent Contracts and Subsequent Leased Vehicles, and into the Distribution
Account, if the payment relates to the Amortization Period, so that the proceeds
will be available to make the payments described under 'Description of the
Notes--Distributions on the Notes--Distributions of Interest' by the relevant
Distribution Date.
Federal is incorporated under the laws of the State of Indiana and is one
of the Chubb Group of Insurance Companies. Federal is a wholly owned subsidiary
of The Chubb Corporation, a publicly owned holding company incorporated under
the laws of the State of New Jersey. The Residual Value Insurance Policy is an
obligation of Federal and not of The Chubb Corporation or any other affiliate of
Federal. Federal is located at Federal Insurance Company, 15 Mountain View Road,
Warren, New Jersey 07059 and the telephone number is (908) 903-2000.
69
<PAGE>
At December 31, 1997, Federal had total assets of approximately $10.8
billion, total liabilities of approximately $8.3 billion and surplus to
policyholders of approximately $2.5 billion, in each case as reported on a
statutory accounting basis in conformity with accounting practices prescribed or
permitted by the Indiana Insurance Department (which varies from generally
accepted accounting principles in certain respects). As of the date of the
Prospectus, Federal's financial strength ratings were 'Aaa' by Moody's and 'AAA'
by Standard & Poor's.
Federal files annual statements with the insurance department of the State
of Indiana and other states in which it is licensed to write insurance. Copies
of the annual statement of Federal for the year-ended December 31, 1997 are
available upon request from the Indenture Trustee. Audited financial statements
of Federal prepared in accordance with Indiana insurance regulations for the
three years ended December 31, 1997 are included in this Prospectus.
The Servicing Agreement will require that World Omni pay the premiums due
on the Residual Value Insurance Policy and will provide that as long as any
Notes are outstanding, no insured party may terminate or cause the termination
of any Residual Value Insurance Policy unless one or more policies are issued
with substantially similar aggregate coverage and provisions issued by an
insurer acceptable to each Rating Agency, or an alternative mechanism is
implemented to support the Residual Values of the Leased Vehicles in accordance
with the procedures required for amendment of the Agreement (as described in
'Additional Document Provisions--Additional Agreement Provisions--Amendment').
The foregoing obligations of World Omni will survive any termination of World
Omni as Servicer under the Servicing Agreement (Servicing Agreement, Section
9.10). World Omni will be obligated to reimburse Federal for a specified
percentage of claims paid under the Residual Value Insurance Policy, although
the failure to make such reimbursement will not affect Federal's obligation to
pay claims under the Residual Value Insurance Policy.
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 Lexington 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
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 Notes
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--Risks Associated with Vicarious Tort Liability', 'Certain Legal Aspects
of the Origination Trust and the SUBI--The SUBI' 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, under certain limited
circumstances where the lessee does not maintain required insurance, will be
required to make payments in respect of damaged Leased Vehicles. 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 Notes could incur a loss on their investment.
The Servicing Agreement will provide that so long as any Notes are
outstanding, neither the Origination Trustee nor World Omni may terminate or
cause the termination of any Contingent and Excess Liability Insurance Policy
unless, among other things, a replacement insurance policy providing at least
the same amount
70
<PAGE>
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 Indenture Trustee to the effect that the obtaining of any such replacement
insurance will not cause its then-current rating of any Class of Notes 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).
THE CLASS A INTEREST RATE SWAP
GENERAL
On the date of issuance of the Notes, the Trust will enter into the Class A
Interest Rate Swap with the Class A Swap Counterparty. The Class A Interest Rate
Swap will have a Notional Amount as of any Deposit Date or Distribution Date
equal to the Class A Note Balance, as of the close of business on the preceding
Distribution Date after giving effect to distributions on such Distribution
Date; provided, however, with respect to the first Deposit Date and Distribution
Date, the applicable Notional Amount will be equal to the Initial Class A Note
Balance.
Pursuant to the Class A Interest Rate Swap, (x) on each Distribution Date,
a payment will be made by the Trust to the Class A Swap Counterparty (if the
following is a positive number) or (y) on each Deposit Date, a payment will be
made by the Class A Swap Counterparty to the Trust (if the following is a
negative number), of an amount equal to (i) one-twelfth of the product of (A)
the Notional Amount and (B) the Swap Rate (or, with respect to the first Deposit
Date and Distribution Date, an amount specified in the Agreement) minus (ii) the
product of (A) a fraction, the numerator of which is the actual number of days
from and including the prior Distribution Date to but excluding the related
Distribution Date (or, with respect to the first Deposit Date and Distribution
Date, the actual number of days from the date of issuance of the Notes to but
excluding the first Distribution Date) and the denominator of which is 360, (B)
the Notional Amount and (C) One-Month LIBOR with respect to the related
Distribution Date. If such amount is positive with respect to the Class A
Interest Rate Swap, it will be referred to herein as the 'Class A Net Swap
Payment', and if such amount is negative, it will be referred to herein as the
'Class A Net Swap Receipt'. Any Class A Net Swap Receipt in respect of a Deposit
Date will be deposited in the Distribution Account and will be available to make
distributions of interest due on the related Notes on the related Distribution
Date. Any Class A Net Swap Payment in respect of a Distribution Date will be
paid out of certain funds on deposit in the SUBI Collection Account.
The Class A Interest Rate Swap will terminate on the earliest of (a) the
Stated Maturity Date, (b) the Distribution Date on which the Note Balance of
each Class A Note is reduced to zero and (c) the date designated by either the
Indenture Trustee or the Class A Swap Counterparty as an early termination date
with respect to the Class A Interest Rate Swap following a payment default by
the Class A Swap Counterparty or the Trust, respectively, or certain other
customary early termination events, including illegality and certain tax events.
In the event the counterparty rating of the Class A Swap Counterparty is
withdrawn or reduced below AA-by Standard & Poor's or its counterparty rating is
withdrawn or reduced below Aa3 by Moody's (or, if its counterparty rating is
rated by Fitch, at least AA- by Fitch), the Class A Swap Counterparty and the
Trust will, within 30 calendar days after such rating withdrawal or reduction,
use reasonable efforts to (i) obtain a replacement interest rate swap agreement
with terms substantially the same as the Class A Interest Rate Swap or (ii)
establish any other arrangement satisfactory to the Rating Agencies, such that
the ratings of the Class A Notes by the applicable Rating Agency will not be
withdrawn or reduced. In the event that following such 30 calendar days, no such
replacement interest rate swap agreement is obtained or any other such
satisfactory arrangement established within such period, an Early Amortization
Event will occur.
In addition, in the event the Class A Swap Counterparty fails to make any
payment required under the Class A Interest Rate Swap within five calendar days
of the date such payment was due, an Early Amortization Event will occur. See
'Description of the Notes--Early Amortization Events'.
71
<PAGE>
THE CLASS A SWAP COUNTERPARTY
Merrill Lynch Derivative Products AG is a Swiss share company with its
principal place of business located at Stauffacherstrasse 5, CH 8004, Zurich,
Switzerland. It is a subsidiary of Merrill Lynch & Co., Inc. a Delaware
corporation with its principal place of business located at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281. As of the date
of the Prospectus, the Class A Swap Counterparty's counterparty ratings were
'Aaa' by Moody's and 'AAA' by each of Standard & Poor's and Fitch.
ADDITIONAL DOCUMENT PROVISIONS
AMENDMENT OF TRANSACTION DOCUMENTS
The Indenture, the Agreement, the SUBI Supplement, the Servicing Agreement
and the other agreements and instruments relating to the transactions discussed
herein (collectively, the 'Transaction Documents') may be amended by the
respective parties thereto, without the consent of the Noteholders, 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 Indenture which are not
inconsistent with provisions of the Indenture or to add or amend any provision
therein in connection with permitting transfers of the Class B Notes; provided
that any such action will not, in the good faith judgment of the parties,
materially and adversely affect the interests of any Noteholder, and the
Indenture Trustee shall have been furnished with an opinion of counsel to the
effect that such amendment will not adversely and materially affect the legal
interest of any Noteholder. (Indenture, Section 9.02; Agreement, Section 9.01).
See 'Security for the Notes--The Reserve Fund--The Reserve Fund Cash
Requirement'.
The Transaction Documents may also be amended from time to time by the
respective parties thereto, (including with respect to changing the formula for
determining the Reserve Fund Cash Requirement, the Reserve Fund Supplemental
Requirement, the RV Insurer Reserve Fund Supplement Requirement and/or the
Downgrade Reserve Fund Supplemental Requirement, changing the remittance
schedule for collection deposits in the Distribution Account, changing the
definition of 'Permitted Investments', or replacing the Residual Value Insurance
Policy with an alternative mechanism) if (a) the Indenture Trustee has been
furnished with confirmation (written or oral) from each Rating Agency to the
effect that such amendment would not cause its then-current rating on any Class
of Notes to be qualified, reduced or withdrawn or (b) the Indenture Trustee has
received the consent of the holders of Notes evidencing more than 50% of the
Voting Interests of the Class A Notes and the Class B Notes (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 Indenture or of modifying in
any manner the rights of each Class of Noteholders; provided, however, that: (i)
any amendment eliminating the Reserve Fund or the Residual Value Insurance
Policy, reducing the Reserve Fund Cash Requirement to less than the lesser of
(A) $17,636,578.71 and (B) the Note Balance as of the related Distribution Date
(after giving effect to reductions in the Note Balance on such Distribution
Date), or eliminating or reducing the RV Insurer Reserve Fund Supplement
Requirement shall also require an opinion of the Transferor's counsel to the
effect that, after such amendment, for federal income tax purposes the Trust
will not be treated as an association taxable as a corporation, and the Class A
Notes will, and the Class B Notes should, properly be characterized as
indebtedness that is secured by the assets of the Trust; and (ii) (A) 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 Notes or the
applicable Note Rate and (B) no amendment of any type shall reduce the
percentage of the aggregate Voting Interests of the Notes of any Class required
to consent to any such amendment, in each case without the consent of all
Noteholders and Note Owners. (Indenture, Section 9.02; Agreement, Section 9.01).
THE INDENTURE
Events of Default
'Indenture Events of Default' will be any of the following events: (a) the
Trust defaults in the payment of any interest or principal on any Note for a
period of five Business Days after any such payment is due; (b) the Trust
defaults in the observance or performance in any material respect of any other
covenant or agreement made
72
<PAGE>
in the Indenture, or any representation or warranty of the Trust made in the
Indenture was incorrect in any material respect as of the time made, which
default materially and adversely affects the rights of the Noteholders and which
continues uncured for a period of 60 days after written notice shall have been
given to the Trust by the Indenture Trustee or to the Trust and the Indenture
Trustee by the Holders of at least 25% of the aggregate outstanding principal
amount of the Notes; or (c) certain insolvency events with respect to the Trust.
Investors should be aware that the amount of principal or interest required to
be paid to holders of any Class of the Notes prior to the maturity date for that
Class of Notes generally will be limited to amounts available in the
Distribution Account for payment to Noteholders. Therefore, the failure to pay
principal or interest on a Class of Notes generally will not result in the
occurrence of an Indenture Event of Default until the Stated Maturity Date for
such Class of Notes. (Indenture, Section 5.01).
If an Indenture Event of Default occurs and is continuing, then the
Indenture Trustee or Noteholders representing in the aggregate not less than 25%
of the Voting Interests of the outstanding Notes (voting together as a single
class) may declare all the Notes to be immediately due and payable, by a notice
in writing to the Trust (and to the Indenture Trustee if given by Noteholders),
and upon any such declaration the Notes will become immediately due and payable,
except that upon an insolvency event with respect to the Trust, the Notes will
become immediately due and payable automatically without the giving of any
notice.
At any time after such a declaration of acceleration of maturity has been
made and before a judgment or decree for payment of the money due has been
obtained by the Indenture Trustee, Noteholders representing in the aggregate
more than 50% of the Voting Interests of the outstanding Notes (voting together
as a single class) by written notice to the Trust and the Indenture Trustee, may
rescind and annul such declaration and its consequences under certain
circumstances. (Indenture, Section 5.02).
After acceleration of the Notes, the Indenture Trustee may institute a
proceeding to collect amounts due or foreclose on Trust property, exercise
remedies as a secured party, sell the SUBI (in accordance with the procedures
described below) or elect to have the Trust maintain possession of the SUBI and
continue to apply collections as if there had been no declaration of
acceleration. (Indenture, Section 5.04 and 5.05).
The Indenture Trustee will be under no obligation to exercise any of the
rights or powers under the Indenture at the request or direction of any of the
holders of the Notes, if such Noteholders shall not have offered to the
Indenture Trustee reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with such request or
direction. Subject to the provisions for indemnification and certain limitations
contained in the related Indenture, Noteholders representing in the aggregate
more than 50% of the Voting Interests of the outstanding Notes (voting together
as a single class) will have the right to direct the time, method and place of
conducting any proceeding or any remedy available to the Indenture Trustee, and
Noteholders representing in the aggregate more than 50% of the Voting Interests
of the outstanding Notes (voting together as a single class) may, in certain
cases, waive any default with respect thereto, except a default in the payment
of principal or interest or a default in respect of a covenant or provision of
the Indenture that cannot be modified without the waiver or consent of all the
holders of the outstanding Notes. (Indenture, Section 5.14 and 5.15).
No holder of a Note will have the right to institute any proceeding with
respect to the Indenture, unless (i) such holder previously has given to the
Indenture Trustee written notice of a continuing Indenture Event of Default,
(ii) Noteholders representing in the aggregate not less than 25% of the Voting
Interests of the outstanding Notes (voting together as a single class) have made
written request to the Indenture Trustee to institute such proceeding in its own
name as Indenture Trustee, (iii) such holder or holders have offered the
Indenture Trustee reasonable indemnity, (iv) the Indenture Trustee has for 60
days failed to institute such proceeding, and (v) no direction inconsistent with
such written request has been given to the Indenture Trustee during such 60-day
period by more than 50% of the Voting Interests of the outstanding Notes (voting
together as a single class). (Indenture, Section 5.09).
If an Indenture Event of Default occurs, the Indenture Trustee may, and,
upon receipt of written instructions from Noteholders representing in the
aggregate Voting Interests of not less than a majority of interest of the
outstanding Class A Notes (voting together as a single class) or more than 50%
of the Voting Interests of the outstanding Notes (voting together as a single
class), shall (subject to its election to maintain possession of the SUBI as
described above), publish a notice stating that the Indenture Trustee intends to
sell or dispose of the
73
<PAGE>
SUBI 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 Indenture Trustee will sell or otherwise
dispose of the SUBI, 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 Noteholders if
proceeds realized as a result of such sale would not be sufficient to discharge
in full the amounts then due and unpaid upon the Notes for principal and
interest. The net sale or disposition proceeds of the SUBI, the SUBI Certificate
and such other property will be distributed to the Noteholders 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, Class A-3 and Class A-4 Noteholders based on their respective Class
Note Balances until the Class A-1, Class A-2, Class A-3 and Class A-4 Notes have
been paid in full, and second, to the Class B Noteholders. If such proceeds,
together with all amounts on deposit in the Accounts, the Reserve Fund, amounts
otherwise payable to the Transferor in respect of the Transferor Interest,
Insured Residual Value Loss Amounts paid under the Residual Value Insurance
Policy, the Servicing Fee (if World Omni is the Servicer) and, in the case of
the Class A-4 Notes, certain amounts otherwise distributable in respect of the
Class B Notes, are insufficient to pay the Note Balance of a Class of Class A
Notes, any unreimbursed Note Principal Loss Amount in respect of such Class of
Class A Notes and any accrued and unpaid interest thereon in full, the related
Class A Noteholders will suffer a corresponding loss. (Indenture, Section 5.08
and 5.17).
Following an Indenture Event of Default and the sale of the SUBI at the
direction of the Noteholders, so long as the Class A Swap Counterparty has not
breached any of its obligations, it may be entitled to a termination payment.
Such payment shall be pro rata with amounts to be paid to the Class A
Noteholders.
Annual Compliance Statement
The Trust will be required to file annually with the Indenture Trustee a
written statement as to the fulfillment of its obligations under the Indenture.
(Indenture, Section 3.09).
Indenture Trustee's Annual Report
The Indenture Trustee will be required to mail each year to all Noteholders
a brief report relating to its eligibility and qualification to continue as
Indenture Trustee, any amounts advanced by it under the Indenture, the amount,
interest rate and maturity date of certain indebtedness owing by the Trust to
the Indenture Trustee in its individual capacity, the property and funds
physically held by the Indenture Trustee as such and any action taken by it that
materially affects the Notes and that has not been previously reported.
(Indenture, Section 7.03).
Satisfaction and Discharge of Indenture
The Indenture will be discharged with respect to the collateral securing
the Notes upon the delivery to the Indenture Trustee for cancellation of all
Notes or, with certain limitations, upon deposit with Indenture Trustee of funds
sufficient for the payment in full of all such Notes. (Indenture, Section 4.01).
No Petition
The Indenture Trustee (or any co-trustee or separate trustee appointed
pursuant to the Indenture) will agree not to institute, or join in, any
bankruptcy or similar proceeding against the Trust until one year and one day
after the payment of the Notes in full. (Indenture, Section 6.17).
ADDITIONAL AGREEMENT PROVISIONS
Certain provisions of the Agreement are described under 'Description of the
Notes'. The following summarizes certain additional provisions of the Agreement.
No Petition
Each of the Indenture Trustee and the Owner Trustee will agree not to
institute, or join in, any bankruptcy or similar proceeding against the
Transferor, WOLS LLC, ALF L.P., ALF LLC, the Origination Trust or the
Origination Trustee until one year and one day after the later of (i) payment of
the Notes in full and (ii) final
74
<PAGE>
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).
The Owner Trustee
PNC Bank, Delaware will be the Owner Trustee under the Agreement. The
Corporate Trust Office of the Owner Trustee is currently located at 222 Delaware
Avenue, 17th Floor, Wilmington, DE 19801. PNC Bank, Delaware is not affiliated
with World Omni, although it does act as a service provider to World Omni.
The Owner Trustee may resign at any time, in which event the Transferor
will be obligated to appoint a successor Owner Trustee. The Transferor may also
remove the Owner Trustee if the Owner Trustee ceases to be eligible to continue
as such under the Agreement, becomes legally unable to act or becomes insolvent.
In such circumstances, the Transferor will be obligated to appoint a successor
Owner Trustee. Any resignation or removal of the Owner Trustee and appointment
of a successor Owner Trustee will not become effective until acceptance of the
appointment by such successor Owner Trustee. (Agreement, Section 6.10). The
Owner Trustee has indicated that an agreement has been signed whereby Chase
Manhattan Bank Delaware will acquire the corporate trust business of PNC Bank,
Delaware. The Owner Trustee has indicated that the consummation of this
transaction is subject to the satisfaction of a number of conditions precedent,
but the Owner Trustee presently anticipates that the transaction will close
during the fourth quarter of 1998. Any corporation into which PNC Bank, Delaware
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which PNC Bank, Delaware may be a party, or
any corporation to which PNC Bank, Delaware may transfer all or substantially
all of its corporate trust business shall automatically succeed to the rights of
the Owner Trustee under the Agreement, provided that such successor Owner
Trustee satisfies the eligibility requirements (as is the case with Chase
Manhattan Bank Delaware) described in the Agreement. (Agreement, Section 6.06).
THE SUBI TRUST AGREEMENT
The SUBI, the Other SUBIs and the UTI
ALF L.P. is the grantor and (as holder of the UTI) a beneficiary of the
Origination Trust. In its capacity as grantor, ALF 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). ALF L.P. will hold the UTI, which
represents a beneficial interest in all Origination Trust Assets other than the
SUBI Assets and the Other SUBI Assets. (SUBI Trust Agreement, Section 4.01). ALF
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 'Certain Legal Aspects of the
Origination Trust and The SUBI--The SUBI' and as follows 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 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
75
<PAGE>
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
'Certain Legal Aspects of the Origination Trust and The SUBI--The SUBI' for a
discussion of related risks. For purposes of making calculations with respect to
distributions on the Notes, '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 ALF L.P. as Beneficiary and Grantor
ALF 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. ALF LLC, as the general partner of ALF L.P., the grantor, is required
at all times to maintain a minimum net worth of $10 million. To the extent that
ALF 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, ALF 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, Sections 4.03 and 11.10).
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 ALF 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
Indenture Trustee, as pledgee of the SUBI Certificate, on behalf of the
Noteholders may, or at the direction of Noteholders representing in the
aggregate more than 50% of the Voting Interests of the outstanding Notes (voting
together as a single class) will, exercise its powers under the SUBI Trust
Agreement to cause the Origination Trustee to remove or replace the Trust Agent
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 (other than the execution and
authentication of the SUBI Certificate), or of any Contract, Leased Vehicle or
related document, will not be responsible for performing any of the duties of
ALF 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
76
<PAGE>
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 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 ALF 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 ALF LLC. The Origination Trustee has
engaged U.S. Bank as the Trust Agent. Pursuant to the Agency Agreement (which
currently is a part of the SUBI Trust 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).
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, this requirement is subject to the provisions
regarding Capped Origination Trust Administrative Expenses described under
'Description of the Notes--Distributions on the Notes--Distributions of
Interest'.
Indemnity of Origination 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 ALF L.P. and the Origination Trustee shall terminate upon the last to occur
of (i) the payment to ALF L.P. and each permitted purchaser, assignee and
pledgee of any of ALF L.P.'s interests in the Origination Trust (including the
Indenture Trustee, with respect to the SUBI) 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 ALF L.P. or any permitted purchaser,
assignee or pledgee of all net proceeds thereof. (SUBI Trust Agreement, Section
8.01).
77
<PAGE>
No Petition
The Origination Trustee and the Trust Agent will agree not to institute, or
join in, any bankruptcy or similar proceeding against the Transferor, WOLS LLC,
ALF L.P. or ALF LLC 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).
Owner Trustee and Indenture Trustee as Third-Party Beneficiaries
As the holder of the SUBI, the Trust, and as the pledgee of the SUBI, the
Indenture Trustee, will be third-party beneficiaries of the SUBI Trust
Agreement. Therefore, the Owner Trustee on behalf of the Trust or the Indenture
Trustee may, and, upon the direction of Noteholders representing in the
aggregate more than 50% of the Voting Interests of the outstanding Notes (voting
together as a single class), the Indenture Trustee will, exercise any right
conferred by the SUBI Trust Agreement upon a holder or pledgee 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 Indenture
Trustee and the Owner Trustee will be third-party beneficiaries 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 UCC financing statements
reflecting certain interests in the Contracts and the Contract Rights will be
filed, as more fully described 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, Sections 2.01 and 2.07).
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
78
<PAGE>
procedures of institutions which service closed-end automobile and light duty
truck lease contracts and, 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 Class B Stated Maturity
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 'Description of the Notes--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 Transferor (in the event that
World Omni is not acting as the Servicer), the Indenture 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 Transferor, 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
'Certain Legal Aspects of the Origination Trust and the SUBI--The SUBI' and
'Certain Legal Aspects of the Contracts and the Leased Vehicles--Back-up
Security Interests' for a discussion of the risk of liens on certain 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).
79
<PAGE>
Security Deposits
The Origination Trustee's rights related to the Contracts 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 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 and collision 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
80
<PAGE>
under an applicable insurance policy. Proceeds from the sale or other
disposition of repossessed Leased Vehicles will constitute Repossessed Vehicle
Proceeds and will 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
Indenture 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 other off-lease Leased Vehicles. (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 upon presentation of an
officer's certificate by the Servicer. (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
Transferor, the Indenture Trustee, the Owner Trustee, the Origination Trustee
and the Noteholders, including the preparation and delivery to the Indenture
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 Notes--Statements to Noteholders', and an annual officer's
certificate specifying the occurrence and status of any Event of Servicing
Termination. (Servicing Agreement, Sections 3.03, 10.01 and 10.03).
Evidence as to Compliance
The Servicing Agreement will provide that a firm of nationally recognized
independent accountants will furnish to the Indenture Trustee on or before April
30 of each year, beginning April 30, 1999, 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 Indenture
Trustee, on or before April 30 of such year, beginning April 30, 1999, 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).
Copies of such statements and certificates may be obtained by Note Owners
or Class A Noteholders by a request in writing addressed to the Indenture
Trustee at its Corporate Trust Office. (Agreement, Section 3.06).
81
<PAGE>
Compliance with ERISA
On or before each Determination Date, the Servicer shall provide the
Indenture 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 or (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, all
Excess Collections in respect of any Distribution Date, after giving effect to
all payments required to be made therefrom on such Distribution Date, will be
deposited into the Reserve Fund, regardless of the Reserve Fund Cash
Requirement. On the Distribution Date following the date on which the ERISA
Compliance Test is satisfied, monies on deposit in the Reserve Fund in excess of
the Reserve Fund Cash Requirement shall be distributed to the Transferor (or to
the Noteholders to the extent allocable to the Accelerated Principal
Distribution Amount). See 'Security for the Notes--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 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
Indenture 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 Fee paid in connection with an extended Contract, 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, 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 Origination
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 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 Indenture Trustee with respect to distributions and generating
federal income tax information. (Servicing Agreement, Section 2.05).
82
<PAGE>
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 Origination 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 Indenture Trustee for distribution to
Noteholders 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 Indenture Trustee, the
Origination Trustee or holders of Notes evidencing not less than 25% of the
Voting Interests of the Class A Notes and the Class B Notes, 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 Noteholders 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 Indenture Trustee any report required to be delivered to the Origination
Trustee or the Indenture 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 maintain or pay
when due the premium in respect of any Contingent and Excess Liability Insurance
Policy or the Residual Value Insurance Policy; (vi) any failure by the
Transferor to timely deposit into the Reserve Fund an amount equal to the RV
Insurer Reserve Fund Supplemental Requirement after an RV Insurer Trigger Event;
and (vii) 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) for a period of ten Business Days, under clause (ii) for a
period of 90 days, under clause (iii) for a period of 20 Business Days or 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 Indenture Trustee, the
Origination Trustee, the Transferor and the Noteholders prompt notice of such
failure or delay by it, together with a description of its efforts to so perform
its obligations. (Servicing Agreement, Sections 4.01 and 11.01).
83
<PAGE>
Rights Upon Event of Servicing Termination
As long as an Event of Servicing Termination remains unremedied, the
Origination Trustee, upon the direction of the Indenture Trustee or Noteholders
representing in the aggregate more than 50% of the Voting Interests of the
outstanding Notes (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 Indenture Trustee or
such Noteholders 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).
Noteholders representing in the aggregate more than 50% of the Voting
Interests of the outstanding Notes (voting together as a single class), with the
consent of the Origination Trustee and the Indenture 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
Noteholder (in which event the related waiver will require the approval of
holders of all of the Notes). No such waiver will impair the rights of the
Noteholders with respect to subsequent defaults. (Servicing Agreement, Section
4.01).
No Petition
The Servicer will agree not to institute, or join in, any bankruptcy or
similar proceeding against the Transferor, WOLS LLC, ALF L.P., ALF LLC, 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).
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).
Indenture Trustee and Owner Trustee as Third-Party Beneficiaries
As the holder of the SUBI, the Owner Trustee, and as the pledgee of the
SUBI, the Indenture Trustee, will be third-party beneficiaries of the Servicing
Agreement. (Servicing Agreement, Section 12.12).
84
<PAGE>
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--Risks in the Event of an Insolvency of World
Omni; Substantive Consolidation with World Omni'.
QUALIFICATION OF VT INC. AS FIDUCIARY
State laws, including the laws in the Five State Area, differ as to whether
a corporate trustee that leases vehicles in that state, such as VT Inc., must
qualify as a fiduciary. The consequences of the failure to be qualified as a
fiduciary in a State where such qualification is required differ by State, and
could include penalties against VT Inc. and its directors and officers ranging
from fines to the inability of VT Inc. to maintain action in the courts of that
State.
World Omni believes that VT Inc. does not exercise sufficient discretion in
the performance of its duties under the SUBI Trust Agreement or take such other
discretionary actions that it should be considered to be exercising fiduciary
powers within the meaning of any applicable State law. However, no assurance can
be given that World Omni will prevail in this view. Because no State in which
(i) this issue is uncertain, (ii) VT Inc. has not taken the actions necessary to
qualify as a fiduciary and (iii) the consequences of such failure would be
material represents a significant percentage of the value of the SUBI Assets,
World Omni believes that the failure to be qualified as a fiduciary in any State
where such qualification may ultimately be required will not materially and
adversely affect the Noteholders. However, no assurance can be given in this
regard. World Omni, as Servicer, has agreed to indemnify VT Inc., as Origination
Trustee for, among other things, any and all liabilities, losses, damages and
expenses that may be incurred by the Origination Trustee as a result of any act
or omission by the Servicer in connection with its undertakings to identify from
time to time the periodic governmental filings, registrations and approvals
arising with respect to or required of the Origination Trustee or the
Origination Trust.
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. Under the allocation of
Origination Trust liabilities described under 'Additional Document
Provisions--The SUBI Trust Agreement--The SUBI, the Other SUBIs and the UTI',
payments made on or in respect of such other Origination Trust Assets will not
be available to make payments on the Notes or to cover expenses of the
Origination Trust allocable to the SUBI Assets. 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 Notes could incur a loss on their investment.
85
<PAGE>
Similarly, to the extent that a third-party claim that otherwise would be
allocable to an Other SUBI or UTI is satisfied out of the SUBI Assets rather
than Other SUBI Assets or UTI Assets, and the claim exceeds the value of the
portfolio to which it should be allocated, the Origination Trustee will not be
able to reallocate the remaining Origination Trust Assets so that each portfolio
will bear the expense of the claim as nearly as possible if the claim has been
properly allocated. In such circumstances, investors in the Class A Notes could
incur a loss on their investment.
Because the Trust and the Indenture Trustee will not own directly or have a
direct security interest in the Leased Vehicles and certain other SUBI Assets,
and since their respective interests therein generally will be an indirect
beneficial ownership interest and a security interest in such indirect
beneficial ownership interest, perfected liens of third-party creditors of the
Origination Trust in one or more of such SUBI Assets will take priority over the
interests of the Trust and the Indenture Trustee in such SUBI Assets. Therefore,
a general creditor of the Origination Trust may obtain a lien on one or more
such SUBI Assets regardless of whether its claim would be allocated to such SUBI
Assets under the terms of the Origination Trust Agreement. Potentially material
examples of such liens could include tax liens arising against the Transferor 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--Risks Associated with Consumer Protection Laws', '--Risks Associated
with ERISA Liabilities' and '--Risks Associated with Vicarious Tort Liability'
and 'Certain Legal Aspects of the Contracts and the Leased Vehicles--Vicarious
Tort Liability' and '--Consumer Protection Laws' for a further discussion of
these risks.
The Origination Trust Agreement provides 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'.
INSOLVENCY RELATED MATTERS
As described under 'The Origination Trust--Allocation of SUBI Assets' and
'Certain Legal Aspects of the Origination Trust and the SUBI--The SUBI', 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 ALF L.P.,
the Transferor believes that the SUBI Assets would not be treated as part of ALF
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--Risks in the Event
of an Insolvency of World Omni; Substantive Consolidation with World Omni', the
Transferor 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 ALF LLC, ALF L.P., WOLS LLC, the
Transferor, the Origination Trust or the Trust with those of World Omni. If,
however, (i) a court concluded that the assets and liabilities of ALF LLC, ALF
L.P., the Transferor, WOLS LLC, 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 ALF LLC, ALF L.P., the Transferor, WOLS LLC, the
Origination Trust or the Trust or (iii) an attempt were made to litigate any of
the foregoing issues, delays in payments on the Notes and possible reductions in
the amount of such payments could occur.
LEGAL PROCEEDINGS
None of ALF LLC, ALF L.P., the Transferor or WOLS LLC is a party to any
legal proceeding. World Omni is a party to, and is vigorously defending,
numerous legal proceedings, all of which it believes constitute ordinary routine
litigation incidental to the business and activities conducted by World Omni.
The Origination Trustee, on
86
<PAGE>
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. For a description of a pending IRS review,
see 'World Omni--Certain Administrative and Legal Proceedings' and 'Material
Federal Income Tax Considerations--Possible Alternative Treatment of the Class A
Notes.'
CERTAIN LEGAL ASPECTS OF THE
CONTRACTS AND THE LEASED VEHICLES
BACK-UP SECURITY INTERESTS
Absent prior perfection of a security interest by the Trust or the
Indenture Trustee in the SUBI Assets, the holder of a perfected lien in one or
more SUBI Assets would have priority over the respective interests of the
Indenture Trustee and Trust in such SUBI Assets. Therefore, certain actions have
been taken to ensure that the Indenture Trustee will be deemed to have a
perfected security interest in the SUBI Certificate (and the SUBI evidenced
thereby) and in the Contracts and the rights thereunder susceptible of
perfection by the filing of a financing statement under the Uniform Commercial
Code (the 'UCC') in effect in the States of Alabama, Illinois and Florida. In
particular, on or prior to the Closing Date, UCC-1 financing statements will be
filed in the States of Alabama, Florida and Illinois to effect this perfection.
By virtue of its possession of the SUBI Certificate, the Indenture Trustee also
will be deemed to have a perfected security interest therein (and in the SUBI
evidenced thereby). However, no action will be taken to perfect any lien that
the Indenture Trustee may be deemed to have in the Leased Vehicles. 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 Indenture 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 Notes 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'.
The Indenture Trustee's back-up security interest in the Contracts 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 Indenture 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 Indenture Trustee's security interest. The
Contracts will not be stamped to reflect the foregoing back-up security
arrangements.
As noted under 'Certain Legal Aspects of the Origination Trust and the
SUBI--The SUBI', various liens could be imposed upon all or part of the SUBI
Assets that, by operation of law, would take priority over the Indenture
Trustee's interest therein. Such liens could include tax liens arising against
the Transferor 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--Risks Associated with ERISA Liabilities', in
favor of the PBGC. Additionally, any perfected security interest of the
Indenture 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 Transferor prior to any perfection of the
transfer of the assets transferred by the Transferor to the Trust pursuant to
the Agreement, as more fully described under 'Risk Factors--Risks in the Event
of an Insolvency of World Omni; Substantive Consolidation with World Omni'.
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.
87
<PAGE>
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 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--Risks Associated with
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 Indenture Trustee has
a prior perfected security interest therein (such as with respect to the
Contracts) as further described under 'Certain Legal Aspects of the Contracts
and the Leased Vehicles--Back-up Security Interests'. If any such claims were
imposed against the assets of the Origination Trust, investors in the Class A
Notes 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.
88
<PAGE>
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 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, the circumstances under which the lessee may terminate
the lease prior to the end of the lease term, the capitalized cost of the
vehicle and a warning regarding possible charges for early termination. 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
89
<PAGE>
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 Owner Trustee and the Indenture 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 Servicing 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 '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.
MATERIAL INCOME TAX CONSIDERATIONS
FEDERAL TAXATION
General
Set forth below is a discussion representing the opinion of Cadwalader,
Wickersham & Taft, special federal income tax counsel to the Trust, as to
material federal income tax consequences to holders of the Class A Notes who are
original owners and who hold the Class A Notes 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
Noteholders or Note Owners in light of their particular circumstances, nor to
certain types of Class A Noteholders or Note 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 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. Taxpayers and preparers of tax returns (including those
filed by any partnership or other issuer) should be aware that under applicable
Treasury Regulations a provider of advice on specific issues of law is not
considered an income tax return preparer unless the advice is (i) given with
respect to events that have occurred at the time the advice is rendered and is
not given with respect to the consequences of contemplated actions and (ii) is
directly relevant to the determination of an entry on a tax return. Accordingly,
taxpayers should consult their respective tax advisors and tax return preparers
regarding the preparation of any item on a tax return, even where the
anticipated tax treatment has been discussed herein. Prospective investors
should consult their own tax advisors with regard to
90
<PAGE>
the federal income tax consequences of the purchase, ownership or disposition of
the Class A Notes, as well as the tax consequences arising under the laws of any
state, foreign country or other taxing jurisdiction.
Characterization of the Class A Notes as Indebtedness
The Transferor, the Owner Trustee, each Noteholder, and each Note Owner (by
acquiring a beneficial interest in a Class A Note) will express in the Agreement
and in the Indenture their intent that, for federal, state and local income and
franchise tax purposes, the Class A Notes will be indebtedness, secured by the
assets of the Trust. The Transferor and the Owner Trustee, by entering into the
Agreement and the Indenture, and each Noteholder and each Note Owner, by
acquiring a beneficial interest in a Class A Note, will agree to treat the Class
A Notes as indebtedness for federal, state and local income and franchise tax
purposes.
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 Notes are issued is consistent with the treatment of the
Class A Notes as debt 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 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, Cadwalader, Wickersham & Taft
is of the opinion that, for federal income tax purposes the characterization of
the Class A Notes 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 Notes will properly be characterized as
indebtedness that is secured by the Trust assets.
Taxation of Interest and Discount Income
Assuming that the Note 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 Note Owners utilizing the cash
method of accounting and when accrued by Note Owners utilizing the accrual
method of accounting. Interest received on the Class A Notes 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 Notes 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, Class A-3 or
Class A-4 Notes, 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 Notes is sold to the public). The issue price of a
Class A Note is the first price at which a substantial amount of Class A Notes
are sold to the public (excluding bond houses, brokers, underwriters or
wholesalers). If less than a substantial amount of a particular Class of Class A
Notes 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 Trust will treat the issue price of a Class A Note as including the
amount paid by a Class A Noteholder for accrued interest that relates to a
period prior to the issue date of the Class A Note; a Class A Noteholder may,
however, elect to treat such accrued interest as a separate asset received on
the first Distribution Date. The stated redemption price at maturity of a Class
A Note includes the original principal amount of the Class A Note, but generally
will not include distributions of interest if such distributions constitute
'qualified stated interest'. 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, Class A-3 or Class A-4
Notes, 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 Noteholders have
reasonable remedies to compel payment of interest deficiencies (e.g., default
and acceleration rights). Because Class A Noteholders will not be entitled to
penalty payments of interest on interest deficiencies, and Class A Noteholders
will have no default and acceleration rights in the event of interest
shortfalls, interest paid on the Class A Notes may not be treated by the IRS as
qualified stated interest, and, in such event, would be treated as OID. A Class
A Noteholder must include OID income over
91
<PAGE>
the term of the related Class A Note 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 Noteholder's method of accounting.
A holder of a Class A Note 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 Note will be considered to be zero if it is less than a de minimis
amount determined under the Code.
Under the de minimis rule, OID on a Class A Note 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 Note multiplied by the weighted average maturity of the Class A
Note. Noteholders generally must report de minimis OID pro rata as principal
payments are received, and such income will be capital gain if the Class A Note
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 Note issued with OID must include in gross income,
for all days during its taxable year on which it holds such Class A Note, the
sum of the 'daily portions' of such original issue discount. The amount of OID
includible in income by a Noteholder 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, assuming no change in the initial
Note Rate. Adjustments would be made for each accrual period to the extent the
current Note Rate was greater or less than the initial Note Rate.
If a Noteholder purchases a Class A Note issued with OID at an 'acquisition
premium' (i.e., at a price in excess of the adjusted issue price of the Class A
Note, but less than or equal to the 'stated redemption price at maturity'), the
amount includible by such Noteholder 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 Transferor currently intends
to report all stated interest on the Class A Notes as qualified stated interest
and not as OID.
Market Discount. Note Owners should be aware that the resale of a Class A
Note 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 Note 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 Note,
the lesser of such gain or the portion of the market discount that accrued while
the Class A Note was held by such holder will be treated as ordinary interest
income realized at the time of the disposition. A Class A Noteholder 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. A Class A Noteholder who does not make such election may be
required to defer a portion of the deduction for interest on indebtedness
incurred to purchase or carry the Class A Note.
Premium. A Note Owner who purchases a Class A Note for more than its
stated redemption price at maturity will be subject to the premium amortization
rules of the Code, provided that the Class A Note was held as a capital asset.
Under those rules, the Note Owner may elect to amortize such premium on a
constant yield method. Amortizable premium reduces interest income on the
related Class A Note. If the Note Owner does not make such an election, the
premium paid for the Class A Note generally will be included in the tax basis of
the Class A Note in determining the gain or loss on its disposition or upon
receipt of a principal payment.
Each Note 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 Notes
In general, a Note Owner will recognize gain or loss upon the sale,
exchange, redemption or other taxable disposition of a Class A Note 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 Note Owner's tax basis in the Class A Note (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
92
<PAGE>
Class A Note). 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 Note 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 20% for capital assets held for more than one
year. Moreover, capital losses generally may be used only to offset capital
gains.
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 Notes 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 (other than a
partnership that is not treated as a United States person under any applicable
Treasury regulations), (iii) an estate whose income is subject to United States
federal income tax, regardless of its source or (iv) a trust whose
administration is subject to the primary supervision of a United States court
and which has one or more United States persons who have authority to control
all substantial decisions of the trust. Notwithstanding the preceding sentence,
to the extent provided in regulations, certain trusts in existence on August 20,
1996 and treated as United States persons prior to such date that elect to
continue to be so treated also shall be considered U.S. Persons.
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 Notes 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 Notes.
For the Class A Notes to constitute portfolio debt investments exempt from
United States withholding tax, the withholding agent must receive from the Note
Owner an executed IRS Form W-8 signed under penalty of perjury by the Note Owner
stating that the Note Owner is a Foreign Investor and providing such Note
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 Note 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 Note, provided that (i) such gain is not
effectively connected with a trade or business carried on by the Note Owner in
the United States, (ii) in the case of a Note Owner that is an individual, such
Note 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 Note Owner may be subject to a backup withholding at the rate of 31% with
respect to interest paid on the Class A Notes if the Note Owner, upon issuance,
fails to supply the Trustee or his broker with such Note 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 Note Owner is not subject to backup withholding.
Information returns will be sent annually to the IRS and to each Note Owner
setting forth the amount of interest paid on the Class A Notes and the amount of
tax withheld thereon.
93
<PAGE>
NEW WITHHOLDING REGULATIONS
On October 6, 1997, the Treasury Department issued new regulations (the
'New Regulations') which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The New Regulations
attempt to unify certification requirements and modify reliance standards. The
New Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the New Regulations.
POSSIBLE ALTERNATIVE TREATMENT OF THE CLASS A NOTES
Although, as described above, it is the opinion of Cadwalader, Wickersham &
Taft that the Class A Notes will properly be characterized as debt for federal
income tax purposes, such opinion will not be binding on the IRS and thus no
assurance can be given that such a characterization shall prevail. If the IRS
were to contend successfully that the Class A Notes did not represent debt for
federal income tax purposes, certain adverse tax consequences to the Class A
Noteholders could result. For example, income to certain tax-exempt entities
(including pension funds) generally would be 'unrelated business taxable
income', and income to foreign holders generally would be subject to U.S.
withholding tax and reporting requirements. As described under 'World
Omni--Certain Administrative and Legal Proceedings', as part of its regular
examination process of the consolidated Federal income tax returns of JMFE and
its subsidiaries (which include World Omni) for certain prior years, the IRS
currently is reviewing, among other things, certain transactions that were
consummated in prior years that are similar to the transactions described in
this Prospectus. The IRS has proposed treating (a) such transactions as sales
rather than financings for Federal income tax purposes, which would affect World
Omni's depreciation deductions and (b) each of the Origination Trust and
securitization trusts created for such transactions as an association taxable as
a corporation rather than a trust for Federal income tax purposes. In connection
with each transaction, World Omni received an opinion of tax counsel to the
effect that such transactions were properly treated as financings for Federal
income tax purposes and that neither the Origination Trust nor the
securitization trusts created for such transactions would be treated as an
association taxable as a corporation for Federal income tax purposes. While
management believes that any challenge by the IRS, if made, would be
unsuccessful, there can be no assurance of this result. Prospective investors
are advised to consult with their own tax advisors regarding the federal income
tax consequences of the purchase, ownership and disposition of the Class A
Notes.
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 Notes, then a financial organization investing in the
Class A Notes would be subject to Florida corporate income tax on a portion of
its income at a maximum rate of 5.5%, and would be required to file an income
tax return in Florida, even if it has no other Florida contacts. English,
McCaughan & O'Bryan, P.A., special Florida counsel to the Transferor, 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 would not
apply to an investment in the Class A Notes 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 Notes and to their
ability to offset any such Florida tax against any other state tax liabilities
that such investors might have.
94
<PAGE>
ERISA CONSIDERATIONS
Subject to the following discussion, the Class A Notes may be acquired by
pension, profit-sharing or other employee benefit plans, as well as an
individual retirement accounts and Keogh plan (each a 'Benefit Plan'). Section
406 of the Employee Retirement Income Security Act of 1974, as amended
('ERISA'), and Section 4975 of the Code prohibit a Benefit Plan 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 Plan. A
violation of these 'prohibited transaction' rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons or the
fiduciaries of the Benefit Plan. In addition, Title I of ERISA also requires
fiduciaries of a Benefit Plan subject to ERISA to make investments that are
prudent, diversified and in accordance with the governing plan documents.
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Class A Notes if assets of the Trust were deemed to be assets of
the Benefit Plan. Under a regulation issued by the United States Department of
Labor (the 'Regulation'), the assets of the Trust would be treated as plan
assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquired an 'equity interest' in the Trust and none of the
exceptions to plan assets contained in the Regulation was applicable. An equity
interest is defined under the Regulation as an interest other than an instrument
which is treated as indebtedness under applicable local law and which has no
substantial equity features. Although there is little guidance on the subject,
the Transferor believes that, at the time of their issuance, the Class A Notes
should be treated as indebtedness of the Trust without substantial equity
features for purposes of the Regulation. This determination is based in part
upon the traditional debt features of the Class A Notes, including the
reasonable expectation of purchasers of Class A Notes that the Class A Notes
will be repaid when due, as well as the absence of conversion rights, warrants
and other typical equity features. The debt treatment of the Class A Notes for
ERISA purposes could change if the Trust incurred losses.
However, without regard to whether the Class A Notes are treated as an
equity interest for purposes of the Regulation, the acquisition or holding of
Class A Notes by or on behalf of a Benefit Plan could be considered to give rise
to a prohibited transaction if the Trust, the Indenture Trustee, the Owner
Trustee, the Origination Trustee, the Transferor or World Omni is or becomes a
party in interest or a disqualified person with respect to such Benefit Plan.
Certain exemptions from the prohibited transaction rules could be applicable to
the purchase and holding of Class A Notes by a Benefit Plan depending on the
type and circumstances of the plan fiduciary making the decision to acquire such
Class A Notes. Included among these exemptions are: Prohibited Transaction Class
Exemption ('PTCE') 96-23, regarding transactions effected by 'in-house asset
managers'; PTCE 95-60, regarding investments by insurance company general
accounts; PTCE 91-38, regarding investments by bank collective investment funds;
PTCE 90-1, regarding investments by insurance company pooled separate accounts;
and PTCE 84-14, regarding transactions effected by 'qualified professional asset
managers'. By acquiring a Note, each purchaser will be deemed to represent that
either (i) it is not acquiring the Class A Notes with the assets of a Benefit
Plan; or (ii) the acquisition and holding of the Class A Notes will not give
rise to a nonexempt prohibited transaction under Section 406(a) of ERISA or
Section 4975 of the Code.
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 Notes consult with its
counsel regarding whether the assets of the Trust would be considered plan
assets, and the applicability of 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 Notes 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.
95
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated November 6, 1998 (the 'Underwriting Agreement'), the
Underwriters named below (the 'Underwriters'), for whom Merrill Lynch, Pierce,
Fenner & Smith Incorporated is acting as representative (the 'Representative'),
have severally but not jointly agreed to purchase from the Transferor the
following respective principal amounts of Class A-1 Notes, Class A-2 Notes,
Class A-3 Notes and Class A-4 Notes:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF CLASS A-1 NOTES OF CLASS A-2 NOTES OF CLASS A-3 NOTES OF CLASS A-4 NOTES
- ----------- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Credit Suisse First Boston
Corporation......................... 169,850,000 173,800,000 161,950,000 138,796,285
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............. 169,850,000 173,800,000 161,950,000 138,796,285
First Union Capital Markets, a
division of Wheat First Securities,
Inc................................. 30,100,000 30,800,000 28,700,000 24,596,810
NationsBanc Montgomery Securities
LLC................................. 30,100,000 30,800,000 28,700,000 24,596,810
Salomon Smith Barney Inc.............. 30,100,000 30,800,000 28,700,000 24,596,810
------------ ------------ ------------ ------------
Total............................ $430,000,000 $440,000,000 $410,000,000 $351,383,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
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 Notes 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 Underwriting Agreement may be
terminated. The Underwriters have agreed to reimburse the Transferor for certain
of its expenses incurred in connection with the offering of the Class A Notes.
The Transferor has been advised by the Representative that the Underwriters
propose to offer the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes to the public initially at the public offering prices
set forth on the cover page of this Prospectus and to certain dealers at such
prices less a concession of 0.105%, 0.120%, 0.130% and 0.150% of the principal
amount per Class A-1 Note, Class A-2 Note, Class A-3 Note and Class A-4 Note,
respectively, and the Underwriters and such dealers may allow a discount of
0.100%, 0.100%, 0.125 and 0.125% of the principal amount per Class A-1 Note,
Class A-2 Note, Class A-3 Note and Class A-4 Note, 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 Transferor 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 Notes 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 ninth 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 Notes on the date hereof will be required,
by virtue of the fact that the Class A Notes initially will settle nine 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 Notes
who wish to trade Class A Notes 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 Transferor or the Underwriters will promptly deliver, or cause to be
delivered, without charge, a paper copy of the Prospectus.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate
96
<PAGE>
covering transactions involve purchases of the Class A Notes in the open market
after the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the Underwriters to reclaim a selling concession
from a syndicate member when the Class A Notes originally sold by such syndicate
member are purchased in a syndicate covering transactions and penalty bids may
cause the prices of the Class A Notes to be higher than they would otherwise be
in the absence of such transactions. These transactions, if commenced, may be
discontinued at any time.
Neither the Transferor nor any Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the prices of the Class A Notes. In addition,
neither the Transferor nor any Underwriter makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Class A Notes in Canada is being made only on a
private placement basis exempt from the requirement that the Transferor prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of the Class A Notes are effected. Accordingly, any resale
of the Class A Notes 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 Notes.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Class A Notes in Canada who receives a purchase
confirmation will be deemed to represent to the Transferor 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 Notes
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 'Notice to
Canadian Residents--Resale Restrictions'.
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 Notes 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 Notes 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 Transferor. Only one such
report must be filed in respect of Class A Notes acquired on the same date and
under the same prospectus exemption.
97
<PAGE>
RATINGS OF THE CLASS A NOTES
It is a condition of issuance that each of Moody's, Standard & Poor's and
Fitch rates each Class of Class A Notes in its highest rating category. The
ratings of the Class A Notes will be based primarily upon the value of the
Initial Contracts, the Residual Value Insurance Policy (see 'Security for the
Notes--The Reserve Fund--Other Reserve Fund Requirements' for information
regarding the effect of a downgrade by a Rating Agency of the credit rating of
the RV Insurer), the Reserve Fund, the Class A Interest Rate Swap, the Class A
Swap Counterparty (see 'Risk Factors--Risks Associated with the Class A Swap
Counterparty' for information regarding the effect of (i) a downgrade by a
Rating Agency of the credit rating of the Class A Swap Counterparty and (ii) a
payment default by the Class A Swap Counterparty) and the terms of the
Transferor Interest and the Class B Notes. There is no assurance that any such
rating will not be lowered or withdrawn by the assigning Rating Agency if, in
its judgment, future circumstances so warrant. In the event that a rating with
respect to any Class of Class A Notes 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 Notes. Any reduction in the rating
assigned to the Class A Swap Counterparty or the RV Insurer may result in a
reduction in the rating of the Class A Notes.
The ratings of the Class A Notes 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 Notes, 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 Notes addresses the likelihood of the payment of
principal of and interest on such Notes pursuant to their terms.
There can be no assurance as to whether any rating agency other than
Moody's, Standard & Poor's and Fitch will rate the Class A Notes, or, if one
does, what rating will be assigned by such other rating agency. A rating on any
Class of Class A Notes by another rating agency, if assigned at all, may be
lower than the ratings assigned to such Class A Notes by each of Moody's,
Standard & Poor's and Fitch.
LEGAL MATTERS
Certain legal matters with respect to the Class A Notes will be passed upon
for the Transferor by Williams & Connolly, Washington, D.C. Certain other legal
matters will be passed upon for the Transferor 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. Cadwalader, Wickersham & Taft, New York, New York will
act as special federal income tax counsel to the Transferor. Stroock & Stroock &
Lavan LLP, New York, New York will act as counsel for the Underwriters.
EXPERTS
The statutory-basis balance sheets of Federal Insurance Company at December
31, 1997 and 1996, and the related statutory-basis statements of income, surplus
to policyholders, and cash flows for each of the three years in the period ended
December 31, 1997, appearing in this Registration Statement and related
Prospectus have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon (which report expresses an adverse opinion under
generally accepted accounting principles and an unqualified opinion under
accounting practices prescribed or permitted by the Indiana Insurance
Department) appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
98
<PAGE>
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.
ABS....................................................... 44
Accelerated Principal Distribution Amount................. 11
Accounts.................................................. 56
Additional Loss Amounts................................... 76
Additional Loss Contract.................................. 68
Administrative Lien....................................... 29
Administrative Lienholders................................ 29
Advance................................................... 16
Agency Agreement.......................................... 77
Aggregate Net Investment Value............................ 14
Agreement................................................. 1
ALF LLC................................................... 2
ALF L.P................................................... 1
Alternate Reserve Fund Formula............................ 68
Amortization Date......................................... 9
Amortization Period....................................... 9
Backup Security Agreement................................. 58
Benefit Plan.............................................. 95
BONY...................................................... 1
Business Day.............................................. 6
Capped Contingent and Excess Liability Premiums........... 53
Capped Indenture Trustee Administrative Expenses.......... 53
Capped Origination Trust Administrative Expenses.......... 53
Capped Owner Trustee Administrative Expenses.............. 53
Cede...................................................... 5
Cedel..................................................... 5
Cedel Participants........................................ 61
Charged-off Amount........................................ 48
Charged-off Contract...................................... 48
Charge-off Rate........................................... 68
Charge-off Rate Test...................................... 68
Claims.................................................... 77
Class..................................................... 47
Class A Interest Rate Swap................................ ii
Class A Net Swap Payment.................................. 7
Class A Net Swap Receipt.................................. 7
Class A Note Balance...................................... 5
Class A Noteholders....................................... 6
Class A Notes............................................. Cover
Class A Percentage........................................ 10
Class A Swap Counterparty................................. 7
Class A-1 Allocation Percentage........................... 19
Class A-1 Interest Carryover Shortfall.................... 53
Class A-1 Note Factor..................................... 46
Class A-1 Note Principal Loss Amount...................... 51
Class A-1 Note Rate....................................... 6
Class A-1 Noteholders..................................... 6
Class A-1 Notes........................................... ii
Class A-2 Allocation Percentage........................... 19
Class A-2 Interest Carryover Shortfall.................... 53
99
<PAGE>
Class A-2 Note Factor..................................... 46
Class A-2 Note Principal Loss Amount...................... 51
Class A-2 Note Rate....................................... 6
Class A-2 Noteholders..................................... 6
Class A-2 Notes........................................... ii
Class A-3 Allocation Percentage........................... 19
Class A-3 Interest Carryover Shortfall.................... 53
Class A-3 Note Factor..................................... 46
Class A-3 Note Principal Loss Amount...................... 51
Class A-3 Note Rate....................................... 6
Class A-3 Noteholders..................................... 6
Class A-3 Notes........................................... ii
Class A-4 Allocation Percentage........................... 19
Class A-4 Interest Carryover Shortfall.................... 53
Class A-4 Note Factor..................................... 46
Class A-4 Note Principal Loss Amount...................... 51
Class A-4 Note Rate....................................... 6
Class A-4 Noteholders..................................... 6
Class A-4 Notes........................................... ii
Class B Allocation Percentage............................. 53
Class B Interest Carryover Shortfall...................... 53
Class B Note Principal Carryover Shortfall................ 53
Class B Note Principal Loss Amount........................ 51
Class B Note Rate......................................... 51
Class B Noteholders....................................... 10
Class B Notes............................................. ii
Class B Percentage........................................ 10
Class Note Balance........................................ 5
Closing Date.............................................. 4
Code...................................................... 90
Collection Period......................................... 8
Collections............................................... 9
Commission................................................ iii
Contingent and Excess Liability Insurance Policies........ 70
Contracts................................................. 2
Cooperative............................................... 63
Covered Loss Amounts...................................... 53
Current Contracts......................................... 68
Cutoff Dates.............................................. 54
Dealers................................................... 1
Deerfield Office.......................................... 31
Definitive Notes.......................................... 47
Delinquency Rate.......................................... 68
Delinquency Test.......................................... 68
Deposit Date.............................................. 16
Depositaries.............................................. 5
Designated Maturity....................................... 49
Determination Date........................................ 50
Discounted Contract....................................... 8
Discounted Principal Balance.............................. 14
Distribution Account...................................... 56
Distribution Date......................................... ii
Downgrade Reserve Fund Supplemental Requirement........... 67
Downgrade Trigger Event................................... 67
100
<PAGE>
DTC....................................................... 5
DTC Participants.......................................... 61
Early Amortization Event.................................. 58
Early Termination Charge.................................. 38
ERISA..................................................... 17
ERISA Compliance Test..................................... 82
Euroclear................................................. 5
Euroclear Operator........................................ 63
Euroclear Participants.................................... 61
Events of Servicing Termination........................... 83
Excess Collections........................................ 52
Exchange Act.............................................. iii
Extension Fee............................................. 33
Fair, Isaac............................................... 32
Federal................................................... 12
Fitch..................................................... 17
Five State Area........................................... 3
Foreign Investors......................................... 93
Indenture................................................. 47
Indenture Event of Default................................ 59
Indenture Events of Default............................... 72
Indenture Trustee......................................... Cover
Indirect DTC Participants................................. 62
Initial Class A Note Balance.............................. 4
Initial Class A-1 Note Balance............................ 4
Initial Class A-2 Note Balance............................ 4
Initial Class A-3 Note Balance............................ 4
Initial Class A-4 Note Balance............................ 4
Initial Class B Note Balance.............................. 4
Initial Contracts......................................... 2
Initial Cutoff Date....................................... 2
Initial Deposit........................................... 13
Initial Leased Vehicles................................... 2
Initial Note Balance...................................... 4
Insolvency Event.......................................... 24
Insolvency Laws........................................... 24
Insurance Proceeds........................................ 56
Insured Residual Value Loss Amount........................ 12
Interest Collections...................................... 9
Investor Percentage....................................... 10
IRS....................................................... 31
IT........................................................ 26
JMFE...................................................... 3
Lease Rate................................................ 14
Leased Vehicles........................................... 2
Lemon Law................................................. 89
LIBOR Determination Date.................................. 49
Liquidated Contract....................................... 68
Liquidation Expenses...................................... 15
Liquidation Proceeds...................................... 15
Loan Rule................................................. 94
Loss Amounts.............................................. 19
Matured Contract.......................................... 14
Matured Leased Vehicle Expenses........................... 15
101
<PAGE>
Matured Leased Vehicle Inventory.......................... 14
Matured Leased Vehicle Proceeds........................... 15
Maturity Date............................................. 38
Mobile Center............................................. 31
Monthly Payments.......................................... 14
Moody's................................................... 17
Net Liquidation Proceeds.................................. 9
Net Matured Leased Vehicle Proceeds....................... 9
Net Repossessed Vehicle Proceeds.......................... 9
New Regulations........................................... 94
Nonrecoverable Advance.................................... 79
Note Balance.............................................. 5
Note Distribution Amount.................................. 59
Note Owner................................................ 5
Note Principal Loss Amount................................ 53
Note Rates................................................ 51
Noteholders............................................... 10
Notes..................................................... ii
Notional Amount........................................... 6
OID....................................................... 91
One-Month LIBOR........................................... 49
Origination Trust......................................... Cover
Origination Trust Agreement............................... 11
Origination Trust Assets.................................. Cover
Origination Trustee....................................... 1
Other SUBI Assets......................................... 28
Other SUBI Certificates................................... 28
Other SUBI Supplement..................................... 75
Other SUBIs............................................... 1
Outstanding Principal Balance............................. 14
Owner Trustee............................................. Cover
Participants.............................................. 61
Payment Ahead............................................. 15
PBGC...................................................... 23
Permitted Investments..................................... 58
Prepayment................................................ 56
Prepayment Assumption..................................... 44
Principal Allocation...................................... 10
Principal Collections..................................... 8
PTCE...................................................... 95
Rating Agencies........................................... 17
Realized Value............................................ 38
Reallocation Deposit Amount............................... 48
Reallocation Payment...................................... 42
Record Date............................................... 6
Reference Banks........................................... 50
Registration Statement.................................... iii
Regulation................................................ 95
Repossessed Vehicle Expenses.............................. 15
Repossessed Vehicle Proceeds.............................. 15
Representative............................................ 96
Required Amount........................................... 54
Required Deposit Ratings.................................. 57
Reserve Fund.............................................. 66
102
<PAGE>
Reserve Fund Cash Requirement............................. 66
Reserve Fund Deficiency................................... 66
Reserve Fund Supplemental Requirement..................... 67
Reserve Fund Tests........................................ 68
Residual Value............................................ 14
Residual Value Insurance Policy........................... 12
Residual Value Loss Amount................................ 19
Revolving Period.......................................... 7
RV Insurer................................................ 12
RV Insurer Reserve Fund Supplemental Requirement.......... 67
RV Insurer Trigger Event.................................. 67
Schedule of Contacts and Leased Vehicles.................. 40
Securities Act............................................ iii
Security Deposits......................................... 80
Servicer.................................................. 3
Servicer Letter of Credit................................. 57
Servicer's Certificate.................................... 81
Servicing Agreement....................................... 3
Servicing Fee............................................. 16
SET....................................................... 3
Southeast Toyota Finance.................................. 31
St. Louis Center.......................................... 31
Standard & Poor's......................................... 17
Stated Maturity Date...................................... 6
SUBI...................................................... Cover
SUBI Assets............................................... ii
SUBI Certificate.......................................... 11
SUBI Collection Account................................... 56
SUBI Supplement........................................... 11
SUBI Trust Agreement...................................... 11
Subsequent Contracts...................................... 2
Subsequent Cutoff Date.................................... 54
Subsequent Leased Vehicles................................ 2
Support Agreement......................................... 30
Swap Rate................................................. 7
Telerate Page 3750........................................ 50
Terms and Conditions...................................... 63
TMS....................................................... 30
Transaction Documents..................................... 72
Transfer Date............................................. 8
Transferor................................................ Cover
Transferor Amounts........................................ 49
Transferor Certificate.................................... 47
Transferor Interest....................................... ii
Transferor Percentage..................................... 49
Trust..................................................... Cover
Trust Agent............................................... 11
UCC....................................................... 66
Unallocated Principal Collections......................... 49
Uncapped Administrative Expenses.......................... 52
Uncovered Loss Amounts.................................... 53
Underwriters.............................................. 96
Underwriting Agreement.................................... 96
Undistributed Transferor Excess Collections............... 52
103
<PAGE>
U.S. Bank................................................. 2
U.S. Person............................................... 107
UTI....................................................... 1
UTI Assets................................................ 28
UTI Certificates.......................................... 28
Voting Interests.......................................... 54
WOLS LLC.................................................. 3
World Omni................................................ Cover
104
<PAGE>
ANNEX 1
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Class A Notes
(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 Notes 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 U.S. corporate debt obligations. 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 U.S. corporate
debt obligations 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
account of a Cedel Participant or a Euroclear Participant, the purchaser will
send instructions to Cedel or Euroclear through a Cedel Participant or 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's account against delivery of the Global Securities. After
settlement has been completed, the Global
105
<PAGE>
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 the 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 Participant 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 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
106
<PAGE>
(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 Note 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, partnership or other entity organized in or under
the laws of the United States or any state or political subdivision thereof
(other than a partnership that is not treated as a United States person under
any applicable Treasury regulations), (iii) an estate whose income is subject to
United States federal income tax, regardless of its source or (iv) a trust whose
administration is subject to the primary supervision of a United States court
and which has one or more United States persons who have authority to control
all substantial decisions of the trust. Notwithstanding the preceding sentence,
to the extent provided in regulations, certain trusts in existence on August 20,
1996 and treated as United States persons prior to such date that elect to
continue to be so treated also shall be considered U.S. Persons.
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.
107
<PAGE>
INDEX TO FINANCIAL STATEMENTS
OF FEDERAL INSURANCE COMPANY
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors............................................................................. F-1
Financial Statements
Balance Sheets (Statutory Basis) as of December 31, 1997 and 1996........................................ F-2
Statements of Income (Statutory Basis) for Years Ended December 31, 1997, 1996 and 1995.................. F-3
Statements of Surplus to Policyholders (Statutory Basis) for Years Ended December 31, 1997, 1996 and
1995.................................................................................................. F-4
Statements of Cash Flows (Statutory Basis) for Years Ended December 31, 1997, 1996 and 1995 ............. F-5
Notes to Financial Statements............................................................................ F-6
</TABLE>
108
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Federal Insurance Company
We have audited the accompanying statutory-basis balance sheets of Federal
Insurance Company (Company) as of December 31, 1997 and 1996, and the related
statutory-basis statements of income, surplus to policyholders, and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, these financial statements have been prepared in
conformity with accounting practices prescribed or permitted by the Indiana
Insurance Department, the jurisdiction of domicile of the Company, which
practices differ from generally accepted accounting principles. The variances
from such practices and generally accepted accounting principles are also
described in Note 1. The effects on the financial statements of these variances
are not reasonably determinable but are presumed to be material.
In our opinion, because of the effects of the matter described in the preceding
paragraph, the financial statements referred to above do not present fairly, in
conformity with generally accepted accounting principles, the financial position
of Federal Insurance Company at December 31, 1997 and 1996 or the results of its
operations or its cash flows for each of the three years in the period ended
December 31, 1997.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Federal Insurance
Company at December 31, 1997 and 1996 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with accounting practices prescribed or permitted by the Indiana
Insurance Department.
ERNST & YOUNG LLP
New York, New York
February 20, 1998
F-1
<PAGE>
FEDERAL INSURANCE COMPANY
BALANCE SHEETS--STATUTORY BASIS
DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
ADMITTED ASSETS
Invested Assets:
Short Term Investments, at Amortized Cost.......................................... $ 714,065 $ 682,368
Tax Exempt Bonds, at Amortized Cost................................................ 5,221,481 3,969,560
Taxable Bonds, at Amortized Cost................................................... 1,922,965 1,419,181
Equity Securities, at Market....................................................... 465,563 208,469
Investments in Consolidated Subsidiaries........................................... 1,042,295 1,226,495
Investments in Unconsolidated Subsidiaries......................................... 220,182 478,651
Receivable for Securities.......................................................... 29,838 25,038
Other Invested Assets.............................................................. 237,340 209,976
----------- ----------
Total Invested Assets (Note 2).................................................. 9,853,729 8,219,738
Cash................................................................................. 5,310 5,538
Premiums Receivable.................................................................. 625,601 590,599
Interest and Dividends Due and Accrued............................................... 126,395 112,004
Reinsurance Recoverable on Paid Losses............................................... 49,763 49,222
Equities and Deposits in Pools and Associations...................................... 66,276 73,213
Amounts Due from Associated Companies................................................ 51,388 --
Other Assets......................................................................... 174,057 179,287
----------- ----------
10,952,519 9,229,601
Deduct: Non-Admitted Assets.......................................................... 127,261 109,840
----------- ----------
Total Admitted Assets........................................................... $10,825,258 $9,119,761
----------- ----------
----------- ----------
LIABILITIES AND SURPLUS TO POLICYHOLDERS
Outstanding Losses and Loss Expenses (Notes 7 and 8)................................. $ 6,065,735 $4,893,548
Unearned Premiums.................................................................... 1,683,472 1,252,261
Working Funds Due to Manager......................................................... 136,598 136,747
Amounts Due to Associated Companies.................................................. -- 51,293
Federal and Foreign Income Tax (Note 4).............................................. -- 6,899
Provision for Reinsurance............................................................ 45,454 33,093
Accrued Expenses and Other Liabilities............................................... 338,883 282,435
----------- ----------
Total Liabilities............................................................... 8,270,142 6,656,276
----------- ----------
Commitments and Contingent Liabilities (Notes 6 and 8)
Common Capital Stock................................................................. 13,987 13,987
Paid-In Surplus...................................................................... 378,890 472,986
Unassigned Funds..................................................................... 1,972,505 1,649,830
Unrealized Appreciation of Investments............................................... 189,734 326,682
----------- ----------
Total Surplus to Policyholders (Note 9)......................................... 2,555,116 2,463,485
----------- ----------
Total Liabilities and Surplus to Policyholders.................................. $10,825,258 $9,119,761
----------- ----------
----------- ----------
Common Capital Stock:
Shares Authorized............................................................. 3,499,971 3,499,971
Shares Issued and Outstanding................................................. 3,496,678 3,496,678
Par Value Per Share........................................................... $ 4 $ 4
</TABLE>
See accompanying notes.
F-2
<PAGE>
FEDERAL INSURANCE COMPANY
STATEMENTS OF INCOME--STATUTORY BASIS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net Premiums Written.................................................... $3,676,579 $2,582,131 $2,247,891
Increase in Unearned Premiums Net
of Accrued Retrospective Premiums..................................... 428,188 137,785 59,804
---------- ---------- ----------
Premiums Earned (Note 7)........................................... 3,248,391 2,444,346 2,188,087
---------- ---------- ----------
Losses and Loss Expenses (Note 7)....................................... 2,139,189 1,697,816 1,498,753
Underwriting Expenses................................................... 1,120,121 790,017 694,096
Dividends to Policyholders.............................................. 23,089 14,581 11,983
---------- ---------- ----------
3,282,399 2,502,414 2,204,832
---------- ---------- ----------
Underwriting Loss.................................................. (34,008) (58,068) (16,745)
---------- ---------- ----------
Investment Income Before Expenses....................................... 977,002 559,686 488,374
Realized Capital Gains.................................................. 53,132 34,693 54,207
Investment Expenses..................................................... 7,540 5,325 4,772
---------- ---------- ----------
Investment Income.................................................. 1,022,594 589,054 537,809
---------- ---------- ----------
Other Income (Loss) (including gain or loss on
foreign exchange)..................................................... 1,786 (9,617) (6,973)
---------- ---------- ----------
Income Before Federal and Foreign Income Tax............................ 990,372 521,369 514,091
Federal and Foreign Income Tax (Note 4)................................. 164,440 83,186 81,143
---------- ---------- ----------
Net Income.............................................................. $ 825,932 $ 438,183 $ 432,948
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes.
F-3
<PAGE>
FEDERAL INSURANCE COMPANY
STATEMENTS OF SURPLUS TO POLICYHOLDERS--STATUTORY BASIS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Common Stock
Balance, Beginning and End of Year.................................... $ 13,987 $ 13,987 $ 13,987
---------- ---------- ----------
Paid-In Surplus
Balance, Beginning of Year............................................ 472,986 472,986 472,986
Distribution of Bellemead Development
Corporation to Parent.............................................. (94,096) -- --
---------- ---------- ----------
Balance, End of Year.................................................. 378,890 472,986 472,986
---------- ---------- ----------
Unassigned Funds
Balance, Beginning of Year............................................ 1,649,830 1,347,361 1,030,157
Net Income............................................................ 825,932 438,183 432,948
Dividends Declared to Parent.......................................... (280,000) (250,000) (240,000)
Decrease (Increase) in Provision for Reinsurance...................... (12,361) 9,505 7,142
Decrease (Increase) in Non-Admitted Assets............................ (17,421) 71 23,583
Increase (Decrease) in Unassigned Funds of
Consolidated Subsidiaries.......................................... (193,261) 89,809 104,309
Other, Net............................................................ (214) 14,901 (10,778)
---------- ---------- ----------
Balance, End of Year.................................................. 1,972,505 1,649,830 1,347,361
---------- ---------- ----------
Unrealized Appreciation of Investments
Balance, Beginning of Year............................................ 326,682 433,116 359,800
Distribution of Bellemead Development
Corporation to Parent.............................................. (175,664) -- --
Change During the Year................................................ 38,716 (106,434) 73,316
---------- ---------- ----------
Balance, End of Year.................................................. 189,734 326,682 433,116
---------- ---------- ----------
Total Surplus to Policyholders..................................... $2,555,116 $2,463,485 $2,267,450
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes.
F-4
<PAGE>
FEDERAL INSURANCE COMPANY
STATEMENTS OF CASH FLOWS--STATUTORY BASIS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash From Operations
Premiums Collected Net of Reinsurance................................... $3,644,597 $2,527,854 $2,208,727
Losses and Loss Expenses Paid (net of salvage and subrogation).......... 967,543 1,717,314 1,174,235
Underwriting Expenses Paid.............................................. 1,079,486 787,594 675,171
Other Underwriting Income (Expenses).................................... (97,527) 163,458 50,852
---------- ---------- ----------
Cash from Underwriting............................................. 1,500,041 186,404 410,173
Investment Income (net of investment expense)........................... 959,457 542,767 467,142
Other Income (Expenses)................................................. 2,275 11,223 (18,511)
Dividends to Policyholders Paid......................................... (8,862) (10,912) (10,105)
Federal Income Taxes Paid............................................... (181,083) (72,964) (99,528)
---------- ---------- ----------
Net Cash from Operations........................................... 2,271,828 656,518 749,171
---------- ---------- ----------
Cash From Investments
Proceeds from Investments Sold or Matured:
Bonds................................................................. 1,826,979 2,378,073 2,425,520
Equity Securities..................................................... 77,626 155,359 47,286
Other Invested Assets................................................. 72,019 33,972 53,119
Miscellaneous Proceeds................................................ 2,894 15,801 19,386
---------- ---------- ----------
Total Investment Proceeds.......................................... 1,979,518 2,583,205 2,545,311
---------- ---------- ----------
Cost of Investments Acquired: (Long Term Only)
Bonds................................................................. 3,591,204 2,806,024 3,026,615
Equity Securities..................................................... 304,742 196,520 82,286
Other Invested Assets................................................. 55,568 47,323 10,669
Miscellaneous Applications............................................ 314 389 3,765
---------- ---------- ----------
Total Investments Acquired......................................... 3,951,828 3,050,256 3,123,335
---------- ---------- ----------
Net Cash from Investments.......................................... (1,972,310) (467,051) (578,024)
---------- ---------- ----------
Cash From Financing and Miscellaneous Sources
Other Cash Provided..................................................... 14,458 639 12,834
---------- ---------- ----------
Cash Applied:
Dividends to Stockholders Paid........................................ 280,000 250,000 240,000
Other Applications.................................................... 2,507 11,963 23,319
---------- ---------- ----------
Total Cash Applied................................................. 282,507 261,963 263,319
---------- ---------- ----------
Net Cash from Financing and Miscellaneous Sources.................. (268,049) (261,324) (250,485)
---------- ---------- ----------
Net Change in Cash and Short Term Investments........................... 31,469 (71,857) (79,338)
Cash and Short Term Investments:
Beginning of Year..................................................... 687,906 759,763 839,101
---------- ---------- ----------
End of Year........................................................... $ 719,375 $ 687,906 $ 759,763
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes.
F-5
<PAGE>
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Federal Insurance Company (Company) is a wholly-owned property and
casualty insurance subsidiary of The Chubb Corporation (Chubb). The Company is
domiciled in the State of Indiana and underwrites most forms of property and
casualty insurance, principally in the United States. The geographic
distribution of business in the United States is broad with a particularly
strong market presence in the Northeast.
The Company is a member of an affiliated group of U.S. based property and
casualty insurance companies, including several wholly-owned subsidiaries. For
purposes of this report, the affiliated group of companies, including Federal
Insurance Company, is collectively referred to as the Companies.
The financial statements reflect estimates and judgments made by management
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
Certain amounts in the prior year financial statements have been
reclassified to conform with the 1997 presentation.
These financial statements have been prepared in conformity with accounting
practices prescribed or permitted by the Indiana Insurance Department. Such
accounting practices vary in certain respects from generally accepted accounting
principles (GAAP), including:
(i) investments in bonds are reported at amortized cost and are not
classified as held-to-maturity or available for sale; under GAAP, those
bonds classified as available for sale are carried at market value,
(ii) the costs of acquiring new business are charged to operations as
incurred rather than being deferred and amortized over the period in which
the related premiums are earned,
(iii) certain assets designated 'non-admitted' are excluded,
(iv) outstanding losses and loss expenses are reported net of amounts
recoverable from reinsurers; unearned premiums are reported net of the
unearned portion of premiums ceded,
(v) a provision is made for statutory liabilities with respect to
unearned premiums and losses reinsured with non-admitted reinsurers and for
certain overdue amounts from admitted reinsurers to the extent funds are
not held,
(vi) no provision is made for deferred federal income tax, and
(vii) investments in wholly-owned U.S. and foreign property and
casualty insurance subsidiaries, various other subsidiaries which are not
material and, in 1996 and 1995, a wholly-owned non-property and casualty
insurance subsidiary (see Note 1(f)) are included at statutory net asset
value and are not consolidated; dividends declared by such subsidiaries are
included in investment income. Net income of the U.S. property and casualty
insurance subsidiaries is included as a change in unassigned funds. Net
income of the other subsidiaries is included as a change in unrealized
appreciation of investments.
The effects of the foregoing variances from GAAP on the statutory basis
financial statements have not been determined, but are presumed to be material.
(b) Invested assets are carried at values prescribed by the National
Association of Insurance Commissioners (NAIC). Short term investments, which
have an original maturity of one year or less, are carried at amortized cost.
Bonds are generally carried at amortized cost. Premiums and discounts arising
from the purchase of mortgage-backed securities are amortized using the interest
method over the estimated remaining term of the securities, adjusted for
anticipated prepayments. Equity securities are carried at market value.
Investments in unconsolidated subsidiaries and other invested assets are
accounted for on the equity basis.
F-6
<PAGE>
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Realized gains and losses on the sale of investments are determined on the
basis of the cost of the specific investments sold and are credited or charged
to income. Unrealized appreciation or depreciation of equity securities,
unconsolidated subsidiaries and other invested assets are excluded from income
and credited or charged directly to surplus to policyholders.
(c) Premiums are earned on a monthly pro rata basis over the terms of the
policies. Unearned premiums represent the portion of premiums written applicable
to the unexpired terms of policies in force.
(d) Liabilities for outstanding losses and loss expenses include the
accumulation of individual case estimates for claims reported as well as
estimates of unreported claims and claim settlement expenses, less estimates of
anticipated salvage and subrogation recoveries. Estimates are based upon past
claim experience modified for current trends as well as prevailing economic,
legal and social conditions. Such estimates are continually reviewed and
updated. Any resulting adjustments are reflected in current operating results.
(e) The methods and assumptions used to estimate the fair value of
financial instruments are as follows:
(i) The carrying value of short term investments approximates fair
value due to the short maturities of these investments.
(ii) Fair values of bonds with active markets are based on quoted
market prices. For bonds that trade in less active markets, fair values are
obtained from independent pricing services. Fair values of bonds are
principally a function of current interest rates. Care should be used in
evaluating the significance of these estimated market values which can
fluctuate based on such factors as interest rates, inflation, monetary
policy and general economic conditions.
(iii) Fair values of equity securities are based on quoted market
prices.
(f) In 1997, the Company distributed its investment in Bellemead
Development Corporation to Chubb; in connection with the distribution, paid-in
surplus was reduced by $94,096,000 representing the cost of the investment, and
unrealized appreciation of investments was reduced by $175,664,000 representing
the increase in the statutory net asset value of Bellemead Development
Corporation from the date of acquisition through the date of transfer. This
non-cash transaction has been excluded from the statement of cash flows.
2. INVESTED ASSETS
(a) The cost of equity securities, investments in unconsolidated
subsidiaries and other invested assets at December 31, 1997 and 1996 were as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Equity Securities......................................................................... $410,001 $183,461
Unconsolidated Subsidiaries............................................................... 173,362 256,557
Other Invested Assets..................................................................... 191,791 171,857
</TABLE>
(b) The components of unrealized appreciation of investments at December
31, 1997 and 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Gross Unrealized Appreciation............................................................. $256,947 $378,349
Gross Unrealized Depreciation............................................................. 67,213 51,667
-------- --------
$189,734 $326,682
-------- --------
-------- --------
</TABLE>
F-7
<PAGE>
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. INVESTED ASSETS--(CONTINUED)
(c) The amortized cost and estimated market value of bonds were as follows
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
Tax Exempt Bonds............................................. $5,221,481 $326,053 $ 148 $5,547,386
Taxable Foreign Bonds........................................ 150,320 5,524 1,864 153,980
Mortgage-Backed Securities................................... 896,007 22,843 1,510 917,340
Taxable U.S. Government Bonds................................ 286,812 4,470 97 291,185
Taxable Corporate Bonds...................................... 589,826 21,129 1,998 608,957
---------- -------- ------ ----------
Total Bonds................................................ $7,144,446 $380,019 $5,617 $7,518,848
---------- -------- ------ ----------
---------- -------- ------ ----------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
Tax Exempt Bonds............................................. $3,969,560 $203,905 $ 1,860 $4,171,605
Taxable Foreign Bonds........................................ 114,334 3,921 332 117,923
Mortgage-Backed Securities................................... 711,638 10,415 4,886 717,167
Taxable U.S. Government Bonds................................ 380,154 982 3,479 377,657
Taxable Corporate Bonds...................................... 213,055 5,238 977 217,316
---------- -------- ------- ----------
Total Bonds................................................ $5,388,741 $224,461 $11,534 $5,601,668
---------- -------- ------- ----------
---------- -------- ------- ----------
</TABLE>
(d) The amortized cost and estimated market value of bonds at December 31,
1997 by contractual maturity were as follows (in thousands):
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
---- -----
<S> <C> <C>
Due in One Year or Less..................................................... $ 123,395 $ 124,380
Due after One Year through Five Years....................................... 962,548 988,779
Due after Five Years through Ten Years...................................... 2,277,937 2,409,492
Due after Ten Years......................................................... 2,884,559 3,078,857
Mortgage-Backed Securities.................................................. 896,007 917,340
---------- ----------
Total Bonds............................................................... $7,144,446 $7,518,848
---------- ----------
---------- ----------
</TABLE>
Actual maturities could differ from contractual maturities because
borrowers may have the right to call or prepay obligations.
3. RELATED PARTY TRANSACTIONS
During 1997, 1996 and 1995, Chubb & Son Inc. (C&S), a subsidiary of Chubb,
had agreements with the Companies pursuant to which the Companies participated
in the U.S. insurance business written through C&S. C&S arranged for the
exchange of reinsurance between the Companies (See Note 7).
The terms of the agreements included that C&S be reimbursed for all
expenses incurred on behalf of the Companies. Such expenses are included
primarily in underwriting expenses.
On December 31, 1997, the agreements with C&S were terminated. Effective
January 1, 1998, new agreements were entered into substituting Federal, through
its Chubb & Son division, in place of C&S.
F-8
<PAGE>
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. RELATED PARTY TRANSACTIONS--(CONTINUED)
Investment income includes dividends from subsidiaries of $507,370,000,
$177,225,000 and $122,000,000 in 1997, 1996 and 1995, respectively.
4. FEDERAL AND FOREIGN INCOME TAX
The Company is a member of an affiliated group which files a consolidated
federal income tax return. Intercompany tax transactions and allocations are
governed by an intercompany tax allocation agreement between Chubb and the
Companies. Under the written agreement, which is in accordance with Section
1552(a)(1) of the Internal Revenue Code, each of the Companies with taxable
income is allocated a current tax provision based on the ratio of its taxable
income to the total taxable income of those Companies having taxable income.
The provision for federal and foreign income tax gives effect to
differences between income for statutory reporting purposes and taxable income.
The principal differences are (i) interest income on tax exempt bonds and (ii)
the accelerated recognition of taxable income through the discounting of
outstanding losses and loss expenses and the reduction of unearned premium
reserves for tax purposes.
5. EMPLOYEE BENEFITS
The employees of C&S are afforded benefits under retirement and other
postretirement benefit programs. The Company contributes its proportionate share
towards the cost of these programs.
The Company participates in a non-contributory, defined benefit pension and
retirement plan covering employees of C&S. The benefits are generally based on
an employee's years of service and average compensation during the last five
years of employment.
Vested benefits are fully funded. The employers' policy is to make annual
contributions that meet the minimum funding requirements of the Employee
Retirement Income Security Act of 1974. Each participating affiliate is charged
for its allocable share of such contributions.
No pension expense was allocated to the Company in 1997. Pension costs
allocated to the Company in 1996 and 1995 were $4,077,000 and $7,886,000,
respectively.
As of January 1, 1997, the most recent actuarial valuation date, the plan's
total accumulated benefit obligation was $281,561,798, based on an assumed
interest rate of 7.75%, including vested benefits of $262,361,598; the fair
value of plan assets was $410,535,285.
C&S provides certain other postretirement benefits, principally health care
and life insurance, to retired employees and their beneficiaries and covered
dependents. Substantially all employees may become eligible for these benefits
upon retirement if they meet minimum age and years of service requirements.
These benefits are not funded in advance. Benefits are paid as covered
expenses are incurred. Health care coverage is contributory. Retiree
contributions vary based upon a retiree's age, type of coverage and years of
service. Life insurance coverage is non-contributory.
The Company accrues the expected cost of providing postretirement benefits
to retirees and other fully eligible or vested plan participants and their
beneficiaries and covered dependents. The Companies elected to amortize the
transition obligation, which represents their unfunded and unrecognized
accumulated postretirement benefit obligation as of January 1, 1993, over 20
years. The unamortized transition obligation of C&S was $32,086,000 and
$34,225,000 at December 31, 1997 and 1996, respectively. Net postretirement
benefit costs include the expected cost of such benefits for newly vested
employees, interest cost, gains and losses arising from differences in actuarial
assumptions and actual experience and amortization of the transition obligation.
Net postretirement benefit costs allocated to the Company for the years ended
December 31, 1997, 1996 and 1995 and the postretirement benefit liability at
December 31, 1997 and 1996 were not significant.
F-9
<PAGE>
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. EMPLOYEE BENEFITS--(CONTINUED)
The estimated amount of the postretirement benefit obligation of C&S for
active nonvested employees as of December 31, 1997 and 1996 was $53,950,000 and
$53,349,000, respectively.
The weighted average discount rate used in determining the actuarial
present value of the accumulated postretirement benefit obligation at December
31, 1997 and 1996 was 7.5% and 7.75%, respectively. At December 31, 1997, the
weighted average health care cost trend rate used to measure the accumulated
postretirement cost for medical benefits was 11.3% for 1998 and was assumed to
decrease gradually to 6.0% for the year 2005 and remain at that level
thereafter.
6. LEASES
The Companies occupy office facilities under lease agreements which expire
at various dates through 2019; such leases are generally renewed or replaced by
other leases. In addition, the Companies lease data processing, office and
transportation equipment. Leases are the obligation of the Company. The Company
contributes its proportionate share of the rental cost under such leases.
Most leases contain renewal options for increments ranging from three to
five years; certain lease agreements provide for rent increases based on
price-level factors. All leases are operating leases.
At December 31, 1997, future minimum rental payments required under
non-cancellable operating leases were as follows (in thousands):
Years ending December 31:
1998.................................................... $ 55,769
1999.................................................... 58,245
2000.................................................... 58,872
2001.................................................... 51,583
2002.................................................... 45,211
After 2002.............................................. 315,731
--------
$585,411
--------
--------
7. REINSURANCE
The Company participates in pooling arrangements with affiliated insurers
whereby these companies assume and cede reinsurance with each other. These
arrangements vary as a function of the line of business and location of the
risk. A substantial amount of the reinsurance of the Company is effected under
these pooling arrangements. Effective January 1, 1997, the Company's pro rata
participation in the pooled property and casualty business increased.
In the ordinary course of business, the Company assumes and cedes
reinsurance with other insurance companies and is a member of various pools and
associations. These arrangements provide greater diversification of business and
minimize the maximum net loss potential arising from large risks. A large
portion of the reinsurance is effected under contracts known as treaties and in
some instances by negotiation on individual risks. Certain of these arrangements
consist of excess of loss and catastrophe contracts which protect against losses
over stipulated amounts arising from any one occurrence or event. Ceded
reinsurance contracts do not relieve the Company of its obligation to the
policyholders.
F-10
<PAGE>
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. REINSURANCE--(CONTINUED)
The effect of reinsurance on premiums earned for the years ended December
31, 1997, 1996 and 1995 was as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Direct............................................. $ 2,932,452 $ 2,868,065 $ 2,846,006
Assumed............................................ 1,436,560 1,158,882 1,078,779
Ceded.............................................. (1,120,621) (1,582,601) (1,736,698)
----------- ----------- -----------
Net................................................ $ 3,248,391 $ 2,444,346 $ 2,188,087
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
For many years, a portion of the U. S. insurance business written by the
Company was reinsured on a quota share basis with a subsidiary of Royal & Sun
Alliance Insurance Group plc. Effective January 1, 1997, the reinsurance
agreement with Royal & Sun Alliance was terminated. The ceded reinsurance
premiums earned of the Company included $266,796,000 and $366,066,000 in 1996
and 1995, respectively, from such reinsurance.
Reinsurance recoveries which have been deducted from losses and loss
expenses were $711,805,000, $1,048,760,000 and $1,118,230,000 in 1997, 1996 and
1995, respectively.
8. OUTSTANDING LOSSES AND LOSS EXPENSES
The process of establishing loss reserves is an imprecise science and
reflects significant judgmental factors. In many liability cases, significant
periods of time, ranging up to several years or more, may elapse between the
occurrence of an insured loss, the reporting of the loss and the settlement of
the loss.
Judicial decisions and legislative actions continue to broaden liability
and policy definitions and to increase the severity of claim payments. As a
result of this and other societal and economic developments, the uncertainties
inherent in estimating ultimate claim costs on the basis of past experience have
increased significantly, further complicating the already complex loss reserving
process.
The uncertainties relating to asbestos and toxic waste claims on insurance
policies written many years ago are exacerbated by judicial and legislative
interpretations of coverage that in some cases have tended to erode the clear
and express intent of such policies and in other cases have expanded theories of
liability. The industry is engaged in extensive litigation over these coverage
and liability issues and is thus confronted with a continuing uncertainty in its
efforts to quantify these exposures.
In 1993, Pacific Indemnity Company (Pacific Indemnity), a wholly-owned
property and casualty insurance subsidiary of the Company, entered into a global
settlement agreement with Continental Casualty Company (a subsidiary of CNA
Financial Corporation), Fibreboard Corporation, and attorneys representing
claimants against Fibreboard for all future asbestos-related bodily injury
claims against Fibreboard. This agreement is subject to final appellate court
approval. The settlement relates to an insurance policy issued to Fibreboard
Corporation by Pacific Indemnity. The Pacific Indemnity policy was 100%
reinsured by the Company. Pursuant to the global settlement agreement, a
$1,525,000,000 trust fund will be established to pay future claims, which are
claims that were not filed in court before August 27, 1993. The Company, as
reinsurer of the Pacific Indemnity policy, will contribute $538,172,000 to the
trust fund and Continental Casualty will contribute the remaining amount. In
December 1993, upon execution of the global settlement agreement, the Company
and Continental Casualty paid their respective shares into an escrow account.
The Company's share is included in its short term investments. Upon final court
approval of the settlement, the amount in the escrow account, including interest
earned thereon, will be transferred to the trust fund. All of the parties have
agreed to use their best efforts to seek final court approval of the global
settlement agreement.
Pacific Indemnity and Continental Casualty reached a separate agreement for
the handling of all asbestos-related bodily injury claims pending on August 26,
1993 against Fibreboard. As reinsurer of Pacific Indemnity, the Company's
obligation under this agreement with respect to such pending claims is
approximately
F-11
<PAGE>
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. OUTSTANDING LOSSES AND LOSS EXPENSES--(CONTINUED)
$635,000,000, all of which has been paid. The agreement further provides that
the total responsibility of Pacific Indemnity and Continental Casualty with
respect to pending and future asbestos-related bodily injury claims against
Fibreboard will be shared on an approximate 35% and 65% basis, respectively.
Pacific Indemnity, Continental Casualty and Fibreboard entered into a
trilateral agreement to settle all present and future asbestos-related bodily
injury claims resulting from insurance policies that were, or may have been,
issued to Fibreboard by the two insurers. The trilateral agreement will be
triggered if the global settlement agreement is ultimately disapproved. The
Company's obligation, as reinsurer of Pacific Indemnity, under the trilateral
agreement is therefore similar to, and not duplicative of, that under those
agreements described above.
The trilateral agreement reaffirms portions of an agreement reached in
March 1992 between Pacific Indemnity and Fibreboard. Among other matters, that
1992 agreement eliminates any Pacific Indemnity liability to Fibreboard for
asbestos-related property damage claims.
In July 1995, the United States District Court of the Eastern District of
Texas approved the global settlement agreement and the trilateral agreement. The
judgments approving these agreements were appealed to the United States Court of
Appeals for the Fifth Circuit. In July 1996, the Fifth Circuit Court affirmed
the 1995 judgments of the District Court. The objectors to the global agreement
appealed to the United States Supreme Court. In June 1997, the United States
Supreme Court set aside the ruling by the Fifth Circuit Court that had approved
the global agreement and ordered the Fifth Circuit Court to reconsider its
approval in light of a June 1997 ruling by the Supreme Court rejecting an
unrelated settlement that included several former asbestos manufacturers.
In January 1998, the Fifth Circuit Court again affirmed the global
settlement agreement, ruling that it was legally distinct from the other
settlement. It is expected that objectors to the settlement will petition the
Supreme Court to review the decision. The Supreme Court would then have to
decide whether to take the appeal.
The trilateral agreement, however, was never appealed to the United States
Supreme Court and is now final. As a result, management continues to believe
that the uncertainty of the Company's exposure, as reinsurer of Pacific
Indemnity, with respect to asbestos-related bodily injury claims against
Fibreboard has been eliminated.
Since 1993, a California Court of Appeal has agreed, in response to a
request by Pacific Indemnity, Continental Casualty and Fibreboard, to delay its
decisions regarding asbestos-related insurance coverage issues that are
currently before it and involve the three parties exclusively, while the
approval of the global settlement is pending in court. Continental Casualty and
Pacific Indemnity have dismissed disputes against each other which involved
Fibreboard and were in litigation.
The Company has additional potential asbestos exposure, primarily on
insureds for which excess liability coverages were written. Such exposure has
increased due to the erosion of much of the underlying limits. The number of
claims against such insureds and the value of such claims have increased in
recent years due in part to the non-viability of other defendants.
The remaining asbestos exposures are mostly peripheral defendants,
including a mix of manufacturers and distributors of certain products that
contain asbestos as well as premises owners. Generally, these insureds are named
defendants on a regional rather than a nationwide basis. Notices of new asbestos
claims and new exposures on existing claims continue to be received as more
peripheral parties are drawn into litigation to replace the now defunct mines
and bankrupt manufacturers.
Legal guidelines regarding coverage for asbestos claims have begun to
articulate more consistent standards regarding the extent of the insurers'
coverage obligation and the method of allocation of costs among insurers.
However, the universe of potential claims is still unknown. Therefore,
uncertainty remains as to the Company's ultimate liability for asbestos-related
claims.
Hazardous waste sites are another significant potential exposure. Under the
federal 'Superfund' law and similar state statutes, when potentially responsible
parties (PRPs) fail to handle the clean-up, regulators have the
F-12
<PAGE>
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. OUTSTANDING LOSSES AND LOSS EXPENSES--(CONTINUED)
work done and then attempt to establish legal liability against the PRPs. The
PRPs disposed of toxic materials at a waste dump site or transported the
materials to the site. Insurance policies issued to PRPs were not intended to
cover the clean-up costs of pollution and, in many cases, did not intend to
cover the pollution itself. As the costs of environmental clean-up have become
substantial, PRPs and others have increasingly filed claims with their insurance
carriers. Litigation against insurers extends to issues of liability, coverage
and other policy provisions. There is great uncertainty involved in estimating
the Company's liabilities related to these claims. First, the underlying
liabilities of the claimants are extremely difficult to estimate. At any given
clean-up site, the allocation of remediation costs among governmental
authorities and the PRPs varies greatly. Second, different courts have addressed
liability and coverage issues regarding pollution claims and have reached
inconsistent conclusions in their interpretation of several issues. These
significant uncertainties are not likely to be resolved in the near future.
Uncertainties also remain as to the Superfund law itself. Superfund's
taxing authority expired on December 31, 1995. It is currently not possible to
predict the direction that any reforms may take, when they may occur or the
effect that any changes may have on the insurance industry.
Reserves for asbestos and toxic waste claims cannot be estimated with
traditional loss reserving techniques. Case reserves and expense reserves for
costs of related litigation have been established where sufficient information
has been developed to indicate the involvement of a specific insurance policy.
In addition, incurred but not reported reserves have been established to cover
additional exposures on both known and unasserted claims. These reserves are
continually reviewed and updated.
A reconciliation of the beginning and ending liability for outstanding
losses and loss expenses, net of reinsurance recoverable, and a reconciliation
of the net liability to the corresponding liability on a gross basis is as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Gross liability, beginning of year...................................... $8,020,224 $7,896,430 $7,483,942
Reinsurance recoverable, beginning of year.............................. 3,126,676 2,992,274 2,908,174
---------- ---------- ----------
Net liability, beginning of year........................................ 4,893,548 4,904,156 4,575,768
---------- ---------- ----------
Net incurred claims and claim expenses related to:
Current year.......................................................... 2,167,893 1,678,276 1,450,452
Prior years........................................................... (28,704) 19,540 48,301
---------- ---------- ----------
2,139,189 1,697,816 1,498,753
---------- ---------- ----------
Net payments for claims and claim expenses related to:
Current year.......................................................... 640,581 489,074 375,139
Prior years........................................................... 326,421 1,219,350 795,226
---------- ---------- ----------
967,002 1,708,424 1,170,365
---------- ---------- ----------
Net liability, end of year.............................................. 6,065,735 4,893,548 4,904,156
Reinsurance recoverable, end of year.................................... 2,578,451 3,126,676 2,992,274
---------- ---------- ----------
Gross liability, end of year.......................................... $8,644,186 $8,020,224 $7,896,430
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-13
<PAGE>
FEDERAL INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
8. OUTSTANDING LOSSES AND LOSS EXPENSES--(CONTINUED)
A reconciliation of the beginning and ending gross and net liability for
outstanding losses and loss expenses related to asbestos and toxic waste claims
for 1997, 1996 and 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Gross of reinsurance:
Liability, beginning of year............................................ $1,086,500 $1,437,764 $1,348,131
Incurred losses and loss adjustment expenses............................ 159,562 219,231 263,919
Calendar year payments for losses and loss adjustment expenses.......... 73,311 570,495 174,286
---------- ---------- ----------
Liability, end of year.................................................. $1,172,751 $1,086,500 $1,437,764
---------- ---------- ----------
---------- ---------- ----------
Net of reinsurance:
Liability, beginning of year............................................ $ 908,189 $1,289,883 $1,225,501
Incurred losses and loss adjustment expenses............................ 127,837 153,614 204,727
Calendar year payments for losses and loss adjustment expenses.......... (367) 535,308 140,345
---------- ---------- ----------
Liability, end of year.................................................. $1,036,393 $ 908,189 $1,289,883
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
In 1997, 1996 and 1995, increases in outstanding losses and loss expenses
relating to asbestos and toxic waste claims were substantially offset by
favorable claim severity trends for certain liability classes.
Management believes that the aggregate outstanding loss and loss expense
reserves of the Company at December 31, 1997 were adequate to cover claims for
losses which had occurred, including both those known and those yet to be
reported. In establishing such reserves, management considers facts currently
known and the present state of the law and coverage litigation. However, given
the expansion of coverage and liability by the courts and the legislatures in
the past and the possibilities of similar interpretations in the future,
particularly as they relate to asbestos and toxic waste claims, as well as the
uncertainty in determining what scientific standards will be deemed acceptable
for measuring hazardous waste site clean-up, additional increases in loss
reserves may emerge which would adversely affect results in future periods. The
amount cannot reasonably be estimated at the present time.
9. DIVIDEND RESTRICTIONS
Indiana Insurance laws restrict the Company as to the amount of shareholder
dividends it may pay without prior approval. The restrictions are generally
based on net investment income and on statutory surplus. Dividends in excess of
such thresholds are considered 'extraordinary' and require prior approval.
F-14
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 TRANSFEROR 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 THE TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE TRANSFEROR SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information.......................... iii
Overview of Transaction........................ iv
Summary........................................ 1
Risk Factors................................... 19
The Trust and the SUBI......................... 26
The Origination Trust.......................... 27
Use of Proceeds................................ 30
The Transferor................................. 30
World Omni..................................... 30
The Contracts.................................. 37
Maturity, Prepayment and Yield
Considerations............................... 42
Class A Note Factors and Trading Information;
Reports to Class A Noteholders............... 46
Description of the Notes....................... 47
Security for the Notes......................... 66
The Class A Interest Rate Swap................. 71
Additional Document Provisions................. 72
Certain Legal Aspects of the Origination Trust
and the SUBI................................. 85
Certain Legal Aspects of the Contracts and the
Leased Vehicles.............................. 87
Material Income Tax Considerations............. 90
ERISA Considerations........................... 95
Underwriting................................... 96
Notice to Canadian Residents................... 97
Ratings of the Class A Notes................... 98
Legal Matters.................................. 98
Experts........................................ 98
Index of Capitalized Terms..................... 99
Global Clearance, Settlement and Tax
Documentation Procedures Terms............... 105
Index to Financial Statements of Federal
Insurance Company............................ 108
------------------------
UNTIL FEBRUARY 4, 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THE CLASS A
NOTES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION 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 TRANSFEROR OR THE UNDERWRITERS WILL PROMPTLY DELIVER, OR CAUSE
TO BE DELIVERED, WITHOUT CHARGE, A PAPER COPY OF THE PROSPECTUS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WORLD OMNI
1998-A AUTOMOBILE LEASE
SECURITIZATION TRUST
$1,631,383,000
$430,000,000
FLOATING RATE AUTOMOBILE LEASE
ASSET BACKED NOTES,
CLASS A-1
$440,000,000
FLOATING RATE AUTOMOBILE LEASE
ASSET BACKED NOTES,
CLASS A-2
$410,000,000
FLOATING RATE AUTOMOBILE LEASE
ASSET BACKED NOTES,
CLASS A-3
$351,383,000
FLOATING RATE AUTOMOBILE LEASE
ASSET BACKED NOTES,
CLASS A-4
WORLD OMNI LEASE
SECURITIZATION L.P.
(TRANSFEROR)
WORLD OMNI FINANCIAL CORP.
(SERVICER)
---------------------------
PROSPECTUS
---------------------------
JOINT BOOK RUNNERS
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
CO-MANAGERS
FIRST UNION CAPITAL MARKETS
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY
November 6, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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 Notes being
registered herein are estimated as follows:
SEC registration fee....................................... $ 453,542
Legal fees and expenses.................................... 250,000
Accounting fees and expenses............................... 60,000
Blue sky fees and expenses................................. 25,000
Rating agency fees......................................... 250,000
Trustee fees and expenses.................................. 25,000
Printing................................................... 100,000
Miscellaneous.............................................. 10,458
-----------
Total.................................................... $ 1,174,000*
-----------
-----------
- ------------------
* Does not include premium for Residual Value Insurance Policy, which will be
paid by the Servicer.
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 'Transferor'), the Transferor will, to the
fullest extent permitted by law, indemnify World Omni Lease Securitization LLC,
the general partner of the Transferor, and its managers, officers, members,
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 Transferor or in furtherance of the interests of the Transferor, if the acts
were not fraudulent or in bad faith and did not constitute willful or wanton
misconduct or gross negligence.
Pursuant to Section 4.08 of the Agreement of Limited Partnership of Auto
Lease Finance L.P. ('ALF L.P.'), ALF L.P. will, to the fullest extent permitted
by law, indemnify Auto Lease Finance LLC, the general partner of ALF L.P., and
its managers, officers, members, 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 ALF L.P. or in furtherance of the interests of
ALF L.P., 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 by the Transferor under certain
circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement**
3.1 -- Certificate of Formation of World Omni Lease Securitization LLC*
3.2 -- Limited Liability Company Agreement of World Omni Lease Securitization LLC, dated as of September 18,
1998*
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 Registration Statement on Form S-1, File No.
33-85036 (the '1994-B Registration Statement')
3.4 -- Assignment of General Partnership Interest and Amendment to Amended and Restated Limited Partnership
Agreement of World Omni Lease Securitization, L.P. among World Omni Lease Securitization, Inc., World
Omni Lease Securitization LLC and World Omni Financial Corp., dated as of September 23, 1998*
3.5 -- Certificate of Formation of Auto Lease Finance LLC*
3.6 -- Limited Liability Company Agreement of Auto Lease Finance LLC, dated as of September 23, 1998*
3.7 -- Amended and Restated Agreement of Limited Partnership of Auto Lease Finance L.P. 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)
3.8 -- Assignment of General Partnership Interest and Amendment to Amended and Restated Limited Partnership
Agreement of Auto Lease Finance L.P. among Auto Lease Finance Inc., Auto Lease Finance LLC and World
Omni Financial Corp., dated as of September 23, 1998*
3.9 -- Form of Securitization Trust Agreement among World Omni Lease Securitization L.P., PNC Bank,
Delaware, as Owner Trustee and The Bank of New York, as Indenture Trustee (including form of
Transferor Certificate)*
4.1 -- Form of Indenture between World Omni 1998-A Automobile Lease Securitization Trust and The Bank of New
York, as Indenture Trustee (including forms of Class A Notes)*
5.1 -- Opinion of McDermott, Will & Emery with respect to legality*
8.1 -- Opinion of Cadwalader, Wickersham & Taft 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 U.S. 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 -- Amendment No. 1 to Second Amended and Restated Trust Agreement among Auto Lease Finance L.P., VT Inc.
and U.S. 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)
10.3 -- Amendment No. 2 to the Second Amended and Restated Trust Agreement among Auto Lease Finance L.P., VT
Inc. and U.S. Bank National Association (as successor to Bank of America Illinois), dated as of
September 23, 1998*
10.4 -- Form of Supplement 1998-A to Trust Agreement among Auto Lease Finance L.P., VT Inc. and U.S. Bank
National Association (as successor to Bank of America Illinois) (including form of SUBI Certificate)*
10.5 -- 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)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.6 -- Amendment No. 1 to Second Amended and Restated Servicing Agreement between VT Inc. and World Omni
Financial Corp., dated as of September 23, 1998*
10.7 -- Form of Supplement 1998-A to Servicing Agreement between VT Inc. and World Omni Financial Corp.*
10.8 -- 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)
10.9 -- 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'))
10.10 -- Support Agreement between World Omni Financial Corp. and World Omni Lease Securitization L.P., dated
as of October 1, 1995 (incorporated by reference from Exhibit 10.11 to the 1996-A Registration
Statement)
10.11 -- Amendment No. 1 to Support Agreement between World Omni Financial Corp. and World Omni Lease
Securitization L.P., dated as of May 1, 1996 (incorporated by reference from Exhibit 10.12 to
Registration Statement on Form S-1, File No. 333-11449)
10.12 -- Amendment No. 2 to Support Agreement, dated as of October 1, 1996 between World Omni Financial Corp.,
and World Omni Lease Securitization L.P., dated as of October 1, 1996 (incorporated by reference from
Exhibit 10.10 to Registration Statement on Form S-1, File No. 333-21917 (the '1997-A Registration
Statement'))
10.13 -- Amendment No. 3 to Support Agreement between World Omni Financial Corp. and World Omni Lease
Securitization L.P., dated as of April 1, 1997 (incorporated by reference from Exhibit 10.11 to the
1997-A Registration Statement)
10.14 -- Amendment No. 4 to Support Agreement between World Omni Financial Corp. and World Omni Lease
Securitization L.P., dated as of October 1, 1997*
10.15 -- Amendment No. 5 to Support Agreement between World Omni Financial Corp. and World Omni Lease
Securitization L.P., dated as of September 23, 1998*
10.16 -- Form of Amendment No. 6 to Support Agreement between World Omni Financial Corp. and World Omni Lease
Securitization L.P.*
10.17 -- Form of Residual Value Insurance Policy**
10.18 -- Form of Class A Interest Rate Swap**
23.1 -- Consent of McDermott, Will & Emery (included as part of Exhibit 5.1)*
23.2 -- Consent of Cadwalader, Wickersham & Taft (included as a 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.*
23.6 -- Consent of Ernst & Young LLP**
24.1 -- Power of Attorney (included on page II-5 of Registration Statement)*
25.1 -- Form T-1 of The Bank of New York*
</TABLE>
- ------------------
* Previously filed.
** Filed herewith.
(b) Financial Statement Schedules:
Not applicable.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake as follows:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the 'Act');
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the 'Calculation
of Registration Fee' table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(b) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) 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.
(e) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of any
registrant pursuant to the foregoing provisions, or otherwise, each
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 a
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, each
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.
(f) 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 each 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.
(g) 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-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, EACH REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE 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 6TH DAY OF NOVEMBER, 1998.
WORLD OMNI LEASE SECURITIZATION L.P.,
on behalf of itself and as originator
of the World Omni 1998-A Automobile Lease
Securitization Trust
By: WORLD OMNI LEASE SECURITIZATION LLC
as General Partner
By: /s/ A. TUCKER ALLEN
--------------------------------------
A. Tucker Allen
Vice President and Corporate
Treasurer
AUTO LEASE FINANCE L.P., on behalf of
itself and as originator of World Omni LT
By: AUTO LEASE FINANCE LLC
as General Partner
By: /s/ A. TUCKER ALLEN
--------------------------------------
A. Tucker Allen
Vice President and Corporate
Treasurer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS AMENDMENT NO. 2 TO THE 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 Corporate November 6, 1998
- ------------------------------------ Treasurer of the General Partner of each of
A. Tucker Allen World Omni Lease Securitization L.P. and Auto
Lease Finance L.P. (Principal Financial and
Accounting Officer)
* Director of the General Partner of each of World November 6, 1998
- ------------------------------------ Omni Lease Securitization L.P. and Auto Lease
Colin W. Brown Finance L.P.
* Director of the General Partner of each of World November 6, 1998
- ------------------------------------ Omni Lease Securitization L.P. and Auto Lease
Jeffrey B. Shapiro Finance L.P
* Director of the General Partner of each of World November 6, 1998
- ------------------------------------ Omni Lease Securitization L.P. and Auto Lease
Christopher C. Wheeler Finance L.P.
*By: /s/ A. TUCKER ALLEN
-------------------------------
A. Tucker Allen
Attorney in Fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ------------------------------------------------------------------------------------------------ ----------
<S> <C> <C> <C>
1.1 -- Form of Underwriting Agreement**
3.1 -- Certificate of Formation of World Omni Lease Securitization LLC*
3.2 -- Limited Liability Company Agreement of World Omni Lease Securitization LLC, dated as of
September 18, 1998*
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 Registration
Statement on Form S-1, File No. 33-85036 (the '1994-B Registration Statement')
3.4 -- Assignment of General Partnership Interest and Amendment to Amended and Restated Limited
Partnership Agreement of World Omni Lease Securitization, L.P. among World Omni Lease
Securitization, Inc., World Omni Lease Securitization LLC and World Omni Financial Corp.,
dated as of September 23, 1998*
3.5 -- Certificate of Formation of Auto Lease Finance LLC*
3.6 -- Limited Liability Company Agreement of Auto Lease Finance LLC, dated as of September 23,
1998*
3.7 -- Amended and Restated Agreement of Limited Partnership of Auto Lease Finance L.P. 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)
3.8 -- Assignment of General Partnership Interest and Amendment to Amended and Restated Limited
Partnership Agreement of Auto Lease Finance L.P. among Auto Lease Finance Inc., Auto Lease
Finance LLC and World Omni Financial Corp., dated as of September 23, 1998*
3.9 -- Form of Securitization Trust Agreement among World Omni Lease Securitization L.P., PNC
Bank, Delaware, as Owner Trustee and The Bank of New York, as Indenture Trustee (including
form of Transferor Certificate)*
4.1 -- Form of Indenture between World Omni 1998-A Automobile Lease Securitization Trust and The
Bank of New York, as Indenture Trustee (including forms of Class A Notes)*
5.1 -- Opinion of McDermott, Will & Emery with respect to legality*
8.1 -- Opinion of Cadwalader, Wickersham & Taft 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
U.S. 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 -- Amendment No. 1 to Second Amended and Restated Trust Agreement among Auto Lease Finance
L.P., VT Inc. and U.S. 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)
10.3 -- Amendment No. 2 to the Second Amended and Restated Trust Agreement among Auto Lease
Finance L.P., VT Inc. and U.S. Bank National Association (as successor to Bank of America
Illinois), dated as of September 23, 1998*
10.4 -- Form of Supplement 1998-A to Trust Agreement among Auto Lease Finance L.P., VT Inc. and
U.S. Bank National Association (as successor to Bank of America Illinois) (including form
of SUBI Certificate)*
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ------------------------------------------------------------------------------------------------ ----------
<S> <C> <C> <C>
10.5 -- 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)
10.6 -- Amendment No. 1 to Second Amended and Restated Servicing Agreement between VT Inc. and
World Omni Financial Corp., dated as of September 23, 1998*
10.7 -- Form of Supplement 1998-A to Servicing Agreement between VT Inc. and World Omni Financial
Corp.*
10.8 -- 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)
10.9 -- 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'))
10.10 -- Support Agreement between World Omni Financial Corp. and World Omni Lease Securitization
L.P., dated as of October 1, 1995 (incorporated by reference from Exhibit 10.11 to the
1996-A Registration Statement)
10.11 -- Amendment No. 1 to Support Agreement between World Omni Financial Corp. and World Omni
Lease Securitization L.P., dated as of May 1, 1996 (incorporated by reference from Exhibit
10.12 to Registration Statement on Form S-1, File No. 333-11449)
10.12 -- Amendment No. 2 to Support Agreement, dated as of October 1, 1996 between World Omni
Financial Corp., and World Omni Lease Securitization L.P., dated as of October 1, 1996
(incorporated by reference from Exhibit 10.10 to Registration Statement on Form S-1, File
No. 333-21917 (the '1997-A Registration Statement'))
10.13 -- Amendment No. 3 to Support Agreement between World Omni Financial Corp. and World Omni
Lease Securitization L.P., dated as of April 1, 1997 (incorporated by reference from
Exhibit 10.11 to the 1997-A Registration Statement)
10.14 -- Amendment No. 4 to Support Agreement between World Omni Financial Corp. and World Omni
Lease Securitization L.P., dated as of October 1, 1997*
10.15 -- Amendment No. 5 to Support Agreement between World Omni Financial Corp. and World Omni
Lease Securitization L.P., dated as of September 23, 1998*
10.16 -- Form of Amendment No. 6 to Support Agreement between World Omni Financial Corp. and World
Omni Lease Securitization L.P.*
10.17 -- Form of Residual Value Insurance Policy**
10.18 -- Form of Class A Interest Rate Swap**
23.1 -- Consent of McDermott, Will & Emery (included as part of Exhibit 5.1)*
23.2 -- Consent of Cadwalader, Wickersham & Taft (included as a 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.*
23.6 -- Consent of Ernst & Young LLP**
24.1 -- Power of Attorney (included on page II-5 of Registration Statement)*
25.1 -- Form T-1 of The Bank of New York*
</TABLE>
- ------------------
* Previously filed.
** Filed herewith.
(b) Financial Statement Schedules:
Not applicable.
Exhibit 1.1
Execution Copy
WORLD OMNI 1998-A AUTOMOBILE LEASE SECURITIZATION TRUST
$430,000,000
Floating Rate Automobile Lease Asset Backed Notes, Class A-1
$440,000,000
Floating Rate Automobile Lease Asset Backed Notes, Class A-2
$410,000,000
Floating Rate Automobile Lease Asset Backed Notes, Class A-3
$351,383,000
Floating Rate Automobile Lease Asset Backed Notes, Class A-4
UNDERWRITING AGREEMENT
November 6, 1998
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
As Representative of the
Several Underwriters
World Financial Center
North Tower
New York, New York 10281-1201
Dear Sirs:
1. Introductory. World Omni Lease Securitization L.P., a Delaware
limited partnership (the "Transferor"), Auto Lease Finance L.P., a Delaware
limited partnership ("ALF L.P."), and World Omni Financial Corp., a Florida
corporation ("World Omni"), hereby confirm their respective agreements with you
and each of the other underwriters named in Schedule I hereto (the
"Underwriters"), for whom you are acting as representative (the
"Representative"), with respect to the sale by the Transferor to the
Underwriters of $430,000,000 aggregate principal amount of Floating Rate
Automobile Lease Asset Backed Notes, Class A-1 (the "Class A-1 Notes"),
$440,000,000 aggregate principal amount of Floating Rate Automobile Lease Asset
Backed Notes, Class A-2 (the "Class A-2 Notes"), $410,000,000 aggregate
principal amount of Floating Rate Automobile Lease Asset Backed Notes, Class A-3
(the "Class A-3 Notes") and $351,383,000 aggregate principal amount of Floating
Rate Automobile Lease Asset Backed Notes, Class A-4 (the "Class A-4 Notes" and,
together with the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes,
<PAGE>
the "Class A Notes") of the World Omni 1998-A Automobile Lease Securitization
Trust (the "Trust") under the terms and conditions herein contained. The Class
A-1 Notes will bear an annual percentage rate equal to One-Month LIBOR (as
defined in the Prospectus) plus 0.35%. The Class A-2 Notes will bear an annual
percentage rate equal to One-Month LIBOR (as defined in the Prospectus) plus
0.40%. The Class A-3 Notes will bear an annual percentage rate equal to
One-Month LIBOR (as defined in the Prospectus) plus 0.45%. The Class A-4 Notes
will bear an annual percentage rate equal to One-Month LIBOR (as defined in the
Prospectus) plus 0.55%. The sole general partner of the Transferor is World Omni
Lease Securitization LLC (as successor by merger to World Omni Lease
Securitization, Inc.) ("WOLS LLC" or the "WOLS LP General Partner"), a Delaware
limited liability company and a wholly owned, special purpose finance subsidiary
of World Omni, and the sole limited partner of the Transferor is World Omni (in
such capacity, the "WOLS LP Limited Partner"). The sole general partner of ALF
L.P. is Auto Lease Finance LLC (as successor by merger to Auto Lease Finance,
Inc.) ("ALF LLC" or the "ALF L.P. General Partner"), a Delaware limited
liability company and a wholly owned, special purpose finance subsidiary of
World Omni, and the sole limited partner of ALF L.P. is World Omni (in such
capacity, the "ALF L.P. Limited Partner").
Simultaneously with the issuance of the Class A Notes, the Transferor
will cause the Trust to issue $95,592,000 aggregate principal amount of
Automobile Lease Asset Backed Notes, Class B (the "Class B Notes" and, together
with the Class A Notes, the "Notes"). The Notes will be issued pursuant to an
indenture, dated as of October 1, 1998 (the "Indenture"), between the Trust and
The Bank of New York, as indenture trustee (in such capacity, the "Indenture
Trustee"). The Transferor will own the undivided equity interest in the Trust
(the "Transferor Interest"). The Transferor or an affiliate thereof will
initially own the Class B Notes. The Transferor Interest will be evidenced by a
certificate (the "Transferor Certificate") issued pursuant to a securitization
trust agreement, dated as of October 1, 1998 (the "Securitization Trust
Agreement"), among the Transferor, PNC Bank, Delaware ("PNC Bank"), as owner
trustee (in such capacity, the "Owner Trustee") and the Indenture Trustee. The
Class B Notes will be subordinated to the Class A Notes, and the Transferor
Certificate will be subordinated to the Notes, in each case to the extent
described in the Securitization Trust Agreement and the Indenture. Capitalized
terms used herein that are not otherwise defined shall have the meanings
ascribed thereto in the Indenture.
The property of the Trust will consist primarily of 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 business trust
(the "Origination Trust"), payments to the Trust by Merrill Lynch Derivative
Products AG (the "Class A Swap Counterparty") pursuant to the interest rate swap
agreement (the "Class A Interest Rate Swap") between the Swap Counterparty and
the Owner Trustee dated November 19, 1998 and monies on deposit in the Reserve
Fund and in certain other accounts (collectively, the "SUBI Assets"). The assets
of the Origination Trust (the "Origination Trust Assets") will consist primarily
of retail closed-end lease contracts assigned to the Origination Trust by motor
vehicle dealers in the World Omni network of dealers, the automobiles and light
duty trucks relating thereto and the proceeds thereof, and payments made under
certain insurance policies relating to such lease contracts, the related lessees
or such leased vehicles, including payments made under a residual value
insurance policy, dated as of October 1, 1998 (the "Residual Value Insurance
2
<PAGE>
Policy") issued by Federal Insurance Company, a wholly owned subsidiary of The
Chubb Corporation (the "Insurer") in respect of the Leased Vehicles. 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.
The Owner Trustee and the Trust will pledge the SUBI and the other property of
the Trust to the Indenture Trustee to secure the Notes pursuant to the
Indenture.
The SUBI will be evidenced by a certificate (the "SUBI Certificate")
issued to ALF L.P. by the Origination Trust pursuant to a trust agreement as
amended and restated as of July 1, 1994, as amended by Amendment No. 1 thereto
dated as of November 1, 1994, and as supplemented by a supplement dated as of
October 1, 1998 (collectively, the "SUBI Trust Agreement"), in each case among
ALF L.P., as initial grantor and initial beneficiary, VT Inc., as trustee (the
"Origination Trustee"), and (for certain limited purposes only) U.S. Bank
National Association, as trust agent (in such capacity, the "Trust Agent"). The
SUBI Certificate will be sold by ALF L.P. to the Transferor pursuant to the SUBI
certificate purchase and sale agreement, dated as of October 1, 1998 (the
"Certificate Purchase and Sale Agreement"), between the Transferor and ALF L.P.
The Origination Trust Assets (including the SUBI Assets) will be serviced by
World Omni pursuant to a second amended and restated servicing agreement dated
as of July 1, 1994, as amended and as supplemented by a servicing supplement
dated as of October 1, 1998 (collectively, the "Servicing Agreement"), in each
case between the Origination Trustee and World Omni. The Securitization Trust
Agreement, the SUBI Trust Agreement, the Certificate Purchase and Sale
Agreement, the Indenture, the Servicing Agreement, the Class A Interest Rate
Swap, the backup security agreement, dated as of October 1, 1998 (the "Backup
Security Agreement"), among World Omni, ALF L.P., the Origination Trustee, the
Transferor, the Owner Trustee and the Indenture Trustee, the support agreement,
dated as of October 1, 1995, as amended (the "Support Agreement"), by World Omni
in favor of the Transferor, the Amended and Restated Intercreditor Agreement,
dated as of December 31, 1997, among World Omni, ALF L.P., the Transferor, the
Indenture Trustee, the Origination Trustee, the Trust Agent, the Owner Trustee
and the other parties named in Appendix A thereto, together with an accession
agreement thereto (collectively, the "Intercreditor Agreement"), between the
Indenture Trustee and the Transferor, and the Reimbursement and Indemnification
Agreement, dated as of October 1, 1998, between World Omni and the Insurer, are
referred to herein collectively as the "Basic Documents".
2. Representations and Warranties of the Transferor, ALF L.P. and World
Omni.
(a) Each of the Transferor, ALF L.P. and World Omni, jointly and
severally, represents and warrants to, and agrees with, each of the Underwriters
that:
(i) A registration statement on Form S-1 (No. 333-63367),
including a form of prospectus, relating to the registration of the
Class A Notes has been filed with the Securities and Exchange
Commission (the "Commission") and, the offering thereof from time to
time in accordance with Rule 415 of the rules and regulations of the
Commission, either (1) has been declared effective under the Securities
Act of 1933, as amended (the "Act"), and is not proposed to be amended
or (2) is proposed to be amended by amendment or post-effective
3
<PAGE>
amendment. If the Transferor or ALF L.P. does not propose to amend such
registration statement and if any post-effective amendment to such
registration statement has been filed with the Commission prior to the
execution and delivery of this Agreement, the most recent such
post-effective amendment has been declared effective by the Commission.
For purposes of this Agreement, "Effective Time" means if the
Transferor and ALF L.P. have advised the Representative that they (1)
do not propose to amend such registration statement, the date and time
as of which such registration statement, or the most recent
post-effective amendment thereto (if any) filed prior to the execution
and delivery of this Agreement, was declared effective by the
Commission or (2) propose to file an amendment or post-effective
amendment to such registration statement, the date and time as of which
such registration statement, as amended by such amendment or
post-effective amendment, as the case may be, is declared effective by
the Commission. "Effective Date" means the date of the Effective Time.
Such registration statement, as amended at the Effective Time,
including all information, if any, deemed to be a part of such
registration statement as of the Effective Time pursuant to Rule
430A(b) under the Act, and including the exhibits thereto, is
hereinafter referred to as the "Registration Statement", and the form
of prospectus relating to the Class A Notes, in the form transmitted to
the Commission for filing pursuant to and in accordance with Rule
424(b) under the Act ("Rule 424(b)"), or (if no such filing is
required) as included in the Registration Statement, is hereinafter
referred to as the "Prospectus". The Prospectus delivered to you for
use in connection with the offering of the Class A Notes will be
identical to the electronically transmitted copies thereof filed with
the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system, except to the extent permitted by
Regulation S-T.
(ii) If the Effective Time is prior to the execution and
delivery of this Agreement: (A) on the Effective Date, the Registration
Statement conformed, and on the date of this Agreement the Registration
Statement will conform in all material respects with the requirements
of the Act and the rules and regulations of the Commission promulgated
under the Act (the "Rules and Regulations") and at such times did not
include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and (B) on the date of this
Agreement, at the time of the filing of the Prospectus pursuant to Rule
424(b) and at the Closing Date (as such term is defined in Section 3
hereof), the Prospectus will conform in all material respects to the
requirements of the Act and the Rules and Regulations and does not
include, or will not include, any untrue statement of a material fact,
nor does the Prospectus omit, nor will it omit, any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If the
Effective Time is subsequent to the execution and delivery of this
Agreement: (A) on the Effective Date, the Registration Statement and
the Prospectus will conform in all material respects to the
requirements of the Act and the Rules and Regulations and the
Registration Statement will not include any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and
(B) on the Effective Date, at the time of the filing of the Prospectus
pursuant to Rule 424(b), if required, and at the Closing Date, the
4
<PAGE>
Prospectus will not include any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. The two immediately preceding sentences do
not apply to statements in or omissions from the Registration Statement
or Prospectus based upon written information furnished to the
Transferor and ALF L.P. by any Underwriter through the Representative
specifically for use therein. The Prospectus delivered to you for use
in connection with the offering of the Class A Notes will be identical
to the electronically transmitted copies thereof filed with the
Commission pursuant to the EDGAR system, except to the extent permitted
by Regulation S-T.
(iii) The Basic Documents, the SUBI Certificate and the
Residual Value Insurance Policy conform in all material respects to the
descriptions thereof and the statements in relation thereto contained
in the Prospectus; the SUBI Certificate has been duly and validly
authorized and, when executed, issued, authenticated and delivered in
accordance with the SUBI Trust Agreement, will be duly and validly
issued and outstanding and entitled to the benefits of the SUBI Trust
Agreement.
(iv) The Notes and the Transferor Certificate conform in all
material respects to the description thereof and the statements in
relation thereto contained in the Prospectus; the Notes and the
Transferor Certificate have been duly and validly authorized and, when
executed, issued, authenticated and delivered in accordance with the
Indenture and the Securitization Trust Agreement, respectively, and, in
the case of the Class A Notes, when delivered to the Underwriters,
against payment of the consideration specified herein, will be duly and
validly issued and outstanding and entitled to the benefits of the
Indenture.
(v) None of the Transferor, World Omni, WOLS LLC, ALF LLC, ALF
L.P., the Origination Trust or the Trust is now or, as a result of the
transactions contemplated by this Agreement, will become, an
"investment company", nor is any of them "controlled" by an "investment
company" as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act").
(vi) Each of the Contracts and Leased Vehicles allocated as a
SUBI Asset on the Closing Date or on the related Transfer Date will
meet the eligibility criteria for selection described in the SUBI Trust
Agreement.
(vii) Each Initial Contract is, and each Subsequent Contract
will be, in substantially one of the forms attached as an Exhibit to
the SUBI Trust Agreement and constitutes or will constitute on the
related Transfer Date the legal, valid, binding and enforceable
agreement of the parties thereto; and each Contract complies or will
comply on the Closing Date or on the related Transfer Date in all
material respects as to content and form with all applicable state and
federal laws, including without limitation, consumer protection laws.
5
<PAGE>
(viii) At or prior to the Closing Date, the Origination
Trustee will have allocated Contracts and Leased Vehicles as SUBI
Assets that have an Aggregate Net Investment Value as of the Initial
Cutoff Date equal to $1,202,622,476.
(b) The Transferor and World Omni, as the WOLS LP Limited Partner, as
the ALF L.P. Limited Partner and on behalf of WOLS LLC as the WOLS LP General
Partner and on behalf of ALF LLC as the ALF L.P. General Partner, jointly and
severally represent and warrant to, and agree with, each of the Underwriters
that:
(i) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise set forth therein, (A) there has been no material adverse
change or development resulting in a prospective material adverse
change in the condition, financial or otherwise, or business prospects,
of the Transferor, the WOLS LP General Partner, ALF L.P. or the ALF
L.P. General Partner, whether or not arising in the ordinary course of
business and (B) there have been no transactions entered into by the
Transferor, the WOLS LP General Partner, ALF L.P. or the ALF L.P.
General Partner, other than those in the ordinary course of their
respective businesses, that are material with respect to the
Transferor, the WOLS LP General Partner, ALF L.P. or the ALF L.P.
General Partner.
(ii) Each of the Transferor and ALF L.P. has been duly formed
and is validly existing as a limited partnership under the Delaware
Revised Uniform Limited Partnership Act, 6 Del. C. ? 17-101 et seq.
(the "Delaware Act"), and all filings required at the date hereof under
the Delaware Act with respect to the due formation and valid existence
of the Transferor and ALF L.P. as a limited partnership have been made;
each of the Transferor and ALF L.P. has all requisite power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus or in the World Omni Lease
Securitization L.P. Amended and Restated Limited Partnership Agreement,
dated as of July 1, 1994, as amended by that certain Assignment of
General Partnership Interest and Amendment to Amended and Restated
Agreement of Limited Partnership dated as of September 23, 1998 (the
"WOLS LLC Partnership Agreement"), between the WOLS LP General Partner
and the WOLS LP Limited Partner or the Auto Lease Finance L.P. Amended
and Restated Limited Partnership Agreement, dated as of July 1, 1994 as
amended by that certain Assignment of General Partnership Interest and
Amendment to Amended and Restated Agreement of Limited Partnership
dated as of September 23, 1998 (the "ALF LLC Partnership Agreement"
and, together with the WOLS LLC Partnership Agreement, the "Partnership
Agreements"), between the ALF L.P. General Partner and the ALF L.P.
Limited Partner, as the case may be, and to enter into and to perform
its obligations under the related Partnership Agreement, this
Agreement, each Basic Document to which the Transferor or ALF L.P. is a
party or by which it may be bound, the Notes and the Transferor
Certificate; each of the Transferor and ALF L.P. is duly qualified or
registered as a foreign partnership to transact business and is in good
standing in each jurisdiction in which such qualification or
registration is required, whether by reason of the ownership of
property or the conduct of business, except where the failure to so
qualify would not have a material adverse effect on its condition,
financial or otherwise, or business prospects.
6
<PAGE>
(iii) The WOLS LP General Partner is the sole general partner
of the Transferor and the WOLS LP Limited Partner is the sole limited
partner of the Transferor and, at the Closing Date, each of the WOLS LP
General Partner and the WOLS LP Limited Partner will own its respective
partnership interest in the Transferor (each of which is a
nontransferable interest to the extent provided under the WOLS LLC
Partnership Agreement) free and clear of any lien, mortgage, pledge,
charge, encumbrance, adverse claim or other security interest
(collectively, "Liens") except as permitted by the Basic Documents.
(iv) The ALF L.P. General Partner is the sole general partner
of ALF L.P. and the ALF L.P. Limited Partner is the sole limited
partner of ALF L.P. and, at the Closing Date, each of the ALF L.P.
General Partner and the ALF L.P. Limited Partner will own its
respective partnership interests in ALF L.P. (each of which is a
nontransferable interest to the extent provided under the ALF LLC
Partnership Agreement) free and clear of any Lien except as permitted
by the Basic Documents.
(v) None of the Transferor, the WOLS LP General Partner, ALF
L.P. or the ALF L.P. General Partner is in violation of its
organizational or charter documents, limited liability company
agreement or the related Partnership Agreement, as the case may be, or
in default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which it
is a party or by which it may be bound, or to which any of its
properties or assets is subject; the execution, delivery and
performance by each of the Transferor, the WOLS LP General Partner, ALF
L.P. and the ALF L.P. General Partner, as the case may be, of this
Agreement, the related Partnership Agreement, each Basic Document to
which it is a party, the Notes and the Transferor Certificate, the
consummation of the transactions contemplated herein and therein and
compliance by it with its obligations hereunder and thereunder have
been duly and validly authorized by all necessary action (corporate or
otherwise) and will not conflict with or constitute a breach of or
default under, or result in the creation or imposition of any Lien
(except as permitted by the Basic Documents) upon any of its property
or assets pursuant to any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it may be a party,
by which it may be bound or to which any of its properties or assets is
subject, nor will such action result in any violation of the provisions
of its charter or organizational documents, bylaws or the related
Partnership Agreement, or any applicable law, administrative regulation
or administrative or court decree.
(vi) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending
or, to the knowledge of any of the Transferor, the WOLS LP General
Partner, the WOLS LP Limited Partner, ALF L.P., the ALF L.P. General
Partner, the ALF L.P. Limited Partner and World Omni, threatened,
against or affecting the Transferor, the WOLS LP General Partner, ALF
L.P. or the ALF L.P. General Partner that is required to be disclosed
in the Registration Statement and that is not disclosed or that might
7
<PAGE>
result in any material adverse change in its condition, financial or
otherwise, or in its earnings, business affairs or business prospects
or that might materially and adversely affect its properties or assets
or that might materially and adversely affect the consummation of this
Agreement, either Partnership Agreement or any Basic Document to which
any of such entities is a party or by which it may be bound; all
pending legal or governmental proceedings to which the Transferor, the
WOLS LP General Partner, ALF L.P. or the ALF L.P. General Partner is a
party or of which any of their respective properties or assets is the
subject that are not described in the Registration Statement, including
ordinary routine litigation incidental to their respective businesses,
are, considered in the aggregate, not material; and there are no
contracts or documents of the Transferor, the WOLS LP General Partner,
the WOLS LP Limited Partner, ALF L.P., the ALF L.P. General Partner or
the ALF L.P. Limited Partner that are required to be filed as exhibits
to the Registration Statement by the Act or by the Rules and
Regulations that have not been so filed.
(vii) Except such as may be required by the Act, the Rules and
Regulations or state securities laws, no authorization, approval or
consent of any court, governmental authority or agency or any other
Person is necessary in connection with (A) the issuance of the SUBI
Certificate, (B) the issuance of the Notes and the Transferor
Certificate or the offering and sale of the Notes, (C) the execution,
delivery and performance by the Transferor or ALF L.P. of this
Agreement, any Basic Document to which it is a party, the Notes or the
Transferor Certificate or (D) the consummation by the Transferor or ALF
L.P. of the transactions contemplated hereby or thereby, except such
authorizations, approvals or consents as will have been obtained and
are in full force and effect as of the Closing Date.
(viii) Each of the Transferor, the WOLS LP General Partner,
ALF L.P. and the ALF L.P. General Partner possesses all material
certificates, authorities, licenses and permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies as
are necessary to conduct the business now operated by it, and none of
such entities has received notice of any proceedings relating to the
revocation or modification of any such certificate, authority, license
or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely
affect its condition, financial or otherwise.
(ix) This Agreement has been duly executed and delivered by
the WOLS LP General Partner for the Transferor and by the ALF L.P.
General Partner for ALF L.P.
(x) As of the Closing Date, each of the Basic Documents to
which any of the Transferor, the WOLS LP General Partner, ALF L.P. or
the ALF L.P. General Partner is a party and the WOLS LLC Partnership
Agreement or the ALF LLC Partnership Agreement, as the case may be, has
been duly executed and delivered by each such entity, and, assuming the
due authorization, execution and delivery thereof by the other parties
thereto, will constitute the legal, valid and binding agreement of the
Transferor, the WOLS LP General Partner, ALF L.P. or the ALF L.P.
8
<PAGE>
General Partner, as the case may be, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar
laws affecting enforcement of creditors' rights generally and by
general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(xi) The Transferor will use the proceeds of the Class A Notes
as described in the Prospectus under the caption "Use of Proceeds".
(xii) As of the Closing Date, the representations and
warranties of each of the Transferor, the WOLS LP General Partner, ALF
L.P. and the ALF L.P. General Partner in the related Partnership
Agreement and in each Basic Document to which it is a party and in
Officer's Certificates of any of the Transferor, the WOLS LP General
Partner, ALF L.P. and the ALF L.P. General Partner delivered on the
Closing Date or on each Transfer Date, as the case may be, will be true
and correct, and each Underwriter may rely on such representations and
warranties as if they were set forth herein in full.
(xiii) None of the Transferor, the WOLS LP General Partner,
the WOLS LP Limited Partner, ALF L.P., the ALF L.P. General Partner or
the ALF L.P. Limited Partner conducts business or has affiliates who
conduct business in Cuba or with the government of Cuba within the
meaning of Section 517.075 of the Florida Securities and Investors
Protection Act or Regulation Section 3E-900.001 promulgated thereunder.
(c) World Omni, on its own behalf and on behalf of ALF LLC, WOLS LLC
and the Origination Trustee, each to the extent indicated below, represents and
warrants to, and agrees with, each of the Underwriters that:
(i) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise set forth therein, (A) there has been no material adverse
change or development resulting in a prospective material adverse
change in the condition, financial or otherwise, or in the earnings or
business affairs of the Origination Trustee (in its capacity as trustee
of the Origination Trust) or World Omni and its subsidiaries considered
as one enterprise, whether or not arising in the ordinary course of
business and (B) there have been no transactions entered into by the
Origination Trustee (in its capacity as trustee of the Origination
Trust), World Omni or any other subsidiary of World Omni, other than
those in the ordinary course of business, that are material with
respect to the condition, financial or otherwise, or the earnings or
business affairs of the Origination Trustee (in its capacity as trustee
of the Origination Trust) or World Omni and its subsidiaries considered
as one enterprise.
(ii) World Omni has been duly incorporated, is current in the
payment of taxes to the State of Florida and fees to the Florida
Department of State and its status is "active"; World Omni has
corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectus and to enter
into and to perform its obligations under this Agreement, the
Partnership Agreements and each Basic Document to which World Omni is a
9
<PAGE>
party or by which it may be bound; and World Omni is duly qualified as
a foreign corporation to transact business and is in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify would not have a
material adverse effect on its condition, financial or otherwise, or
its earnings, business affairs or business prospects or its ability to
perform its obligations under each Basic Document to which it is a
party or by which it may be bound.
(iii) Each of WOLS LLC and ALF LLC has been duly incorporated
and is validly existing as a limited liability company in good standing
under the laws of the State of Delaware, in each case with power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and to
perform its obligations under each Basic Document to which it is a
party or by which it may be bound; each of WOLS LLC and ALF LLC is duly
qualified as a foreign limited liability company to transact business
and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure to so qualify would not have a material adverse effect on its
condition, financial or otherwise, or its earnings or business affairs;
all of the issued and outstanding membership interests of each of WOLS
LLC and ALF LLC is owned by World Omni, free and clear of Liens and
neither WOLS LLC nor ALF LLC has any subsidiaries. Each of WOLS LLC and
ALF LLC is current in the payment of any taxes required to be paid by
each of WOLS LLC and ALF LLC.
(iv) The Origination Trust has been qualified as a business
trust under applicable Alabama law and all filings required to be made
in respect of the Origination Trust's status as a business trust under
the laws of each state in which such filings are required have been
made and are in full force and effect on the Closing Date, except where
the failure so to file would not have a material adverse effect on its
condition, financial or otherwise, or its earnings, business affairs or
business prospects or its ability to perform its obligations under each
Basic Document to which it is a party or by which it may be bound.
(v) World Omni is not in violation of its organizational or
charter documents, bylaws or either Partnership Agreement, or in
default in the performance or observance of any material obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to which it
is a party or by which it may be bound, or to which any of its property
or assets is subject; the execution, delivery and performance by World
Omni of this Agreement, each Partnership Agreement and each Basic
Document to which it is a party and the consummation of the
transactions contemplated herein and therein and compliance by it with
its obligations hereunder and thereunder have been duly and validly
authorized by all necessary action (corporate or otherwise) and will
not conflict with or constitute a breach of, or default under, or
result in the creation or imposition of any Lien (except as permitted
by the Basic Documents) upon any of its properties or assets pursuant
10
<PAGE>
to, any material contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which it is a party or by which it may be
bound, or to which any of its properties or assets is subject, nor will
such action result in any violation of the provisions of its charter or
organizational documents, bylaws or each Partnership Agreement, as the
case may be, or any applicable law, administrative regulation or
administrative or court decree.
(vi) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of World Omni, threatened against or affecting
World Omni or the Origination Trustee (in its capacity as trustee of
the Origination Trust), that is required to be disclosed in the
Registration Statement and that is not disclosed or that might result
in any material adverse change in its condition, financial or
otherwise, or in its earnings, business affairs or business prospects
or that might materially and adversely affect its properties or assets
or that might materially and adversely affect the consummation of this
Agreement, either Partnership Agreement or any Basic Document to which
it is a party or by which it may be bound; and all pending legal or
governmental proceedings to which World Omni or the Origination Trustee
(in its capacity as trustee of the Origination Trust) is a party or of
which any of their respective properties or assets is the subject that
are not described in the Prospectus, including ordinary routine
litigation incidental to their respective businesses, are, considered
in the aggregate, not material.
(vii) No authorization, approval or consent of any court,
governmental authority or agency or any other Person is necessary in
connection with the execution, delivery and performance by World Omni,
ALF LLC, WOLS LLC or the Origination Trustee (in its capacity as
trustee of the Origination Trust) of this Agreement, each applicable
Partnership Agreement or any Basic Document to which any of them is a
party or the consummation by any of them of the transactions
contemplated hereby or thereby, except such authorizations, approvals
or consents as will have been obtained and are in full force and effect
as of the Closing Date.
(viii) Each of World Omni and the Origination Trustee (in its
capacity as trustee of the Origination Trust) possesses all material
certificates, authorities, licenses or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies as
are necessary to conduct the business now operated by it, and neither
of such entities has received any notice of proceedings relating to the
revocation or modification of any such certificate, authority, license
or permit that, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely
affect its condition, financial or otherwise, or its earnings, business
affairs or business prospects or its ability to perform its obligations
under each Basic Document to which it is a party or by which it may be
bound.
(ix) This Agreement has been duly executed and delivered by
World Omni.
(x) As of the Closing Date, each Basic Document to which World
Omni is a party and each Partnership Agreement has been duly executed
and delivered by World Omni and, assuming the due authorization,
11
<PAGE>
execution and delivery thereof by the other parties thereto, will
constitute the legal, valid and binding agreement of World Omni,
enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting enforcement of
creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(xi) At the time of execution and delivery of the 1998-A SUBI
Supplement on the Closing Date, the Origination Trustee on behalf of
the Origination Trust will have good and marketable title to the
Initial Contracts, the related Contract Rights, the Initial Leased
Vehicles and other rights relating to the Initial Contracts and the
Initial Leased Vehicles being allocated as SUBI Assets pursuant
thereto, free and clear of Liens (except as permitted by the Basic
Documents and other than the administrative lien in favor of Bank of
America Trust Company of Florida, N.A. or AL Holding Corp. (the
"Administrative Lien")) and will not have assigned to any Person any of
its right, title or interest in any such Contracts, Contract Rights,
Leased Vehicles or other rights, or shall have obtained the release of
any such prior assignment.
(xii) On each Transfer Date the Origination Trustee on behalf
of the Origination Trust will have good and marketable title to the
related Subsequent Contracts, the related Contract Rights, the related
Subsequent Leased Vehicles and other rights relating to such Subsequent
Contracts and Subsequent Leased Vehicles being allocated as SUBI Assets
pursuant thereto, free and clear of Liens (other than the
Administrative Lien), and will not have assigned to any Person any of
its right, title or interest in any such Subsequent Contracts, Contract
Rights, Subsequent Leased Vehicles or other rights, or shall have
obtained the release of any such prior assignment.
(xiii) As of the Closing Date, the representations and
warranties of World Omni in the Partnership Agreements and in each
Basic Document to which it is a party and in Officer's Certificates of
World Omni delivered on the Closing Date or on each Transfer Date, as
the case may be, will be true and correct, and each Underwriter may
rely on such representations and warranties as if they were set forth
herein in full.
(xiv) At or prior to the Closing Date, World Omni, as Servicer
under the Servicing Agreement, has made the appropriate allocation of
assets within the estate of the Origination Trust to the SUBI Assets
required by the SUBI Trust Agreement.
(xv) As of the Closing Date, the Origination Trustee has not
assigned to any Person any of its right, title or interest in any of
the Contracts, Contract Rights, Leased Vehicles or other related rights
constituting the SUBI Assets, or has obtained the release of each such
prior assignment.
(xvi) On each Transfer Date the Origination Trustee will not
have assigned to any Person any of its right, title or interest in any
of the related Subsequent Contracts, Contract Rights, Subsequent Leased
Vehicles or other related rights constituting the SUBI Assets, or shall
have obtained the release of each such prior assignment.
12
<PAGE>
(d) Any Officer's Certificate signed by any officer of the Transferor,
World Omni, WOLS LLC, ALF LLC or ALF L.P. and delivered to the Representative or
counsel for the Underwriters shall be deemed a representation and warranty of
the Transferor, World Omni, WOLS LLC, ALF LLC or ALF L.P., as the case may be,
to each Underwriter as to the matters covered thereby.
3. Purchase, Sale and Delivery of the Class A Notes. On the basis of
and in reliance on the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the
Transferor agrees to sell to each Underwriter, severally and not jointly, and
each Underwriter, severally and not jointly, agrees to purchase from the
Transferor the aggregate principal amount of each Class of Class A Notes set
forth in Schedule I opposite the name of such Underwriter, at a purchase price
equal to the following percentages of the aggregate initial principal balances
thereof, (i) in the case of the Class A-1 Notes, 99.810%, (ii) in the case of
the Class A-2 Notes, 99.795%, (iii) in the case of the Class A-3 Notes, 99.785%
and (iv) in the case of the Class A-4 Notes, 99.765%.
Each Class of Class A Notes will initially be represented by one or
more notes registered in the name of Cede & Co., as the nominee of The
Depository Trust Company ("DTC"). The interests of beneficial owners of each
Class of Class A Notes will be represented by book entries on the records of DTC
and participating members thereof. Definitive instruments evidencing the Class A
Notes will be available only under the limited circumstances specified in the
Indenture.
The Transferor will deliver the Class A Notes to the Representative for
the respective accounts of the Underwriters, against payment of the purchase
price therefor in immediately available funds payable to the order of the
Transferor, at the office of Williams & Connolly, 725 Twelfth Street, N.W.,
Washington, D.C. 20005-5901 (or at such other location as agreed upon among the
Transferor, ALF L.P., World Omni and the Representative) at 10:00 A.M., New York
time, on November 19, 1998, or at such other time not later than five full
business days thereafter, as the Transferor, ALF L.P., World Omni and the
Representative determine, such time being herein referred to as the "Closing
Date". The instruments evidencing the Notes and the Transferor Certificate will
be made available for inspection at the above offices of Williams & Connolly (or
at such other location agreed upon among the Transferor, ALF L.P., World Omni
and the Representative) at least 24 hours prior to the Closing Date.
Pursuant to Rule 15c6-1(d) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Transferor, ALF L.P., World Omni and the
Underwriters have agreed that the Closing Date will be not less than nine
business days following the date hereof. The Transferor, ALF L.P., World Omni
and the Underwriters further agree that upon receipt by an investor who has
received an electronic Prospectus or a request by such investor's representative
(whether such request is delivered to an Underwriter, the Transferor or ALF
L.P.) during the period during which there is an obligation to deliver a
Prospectus, the Underwriters will promptly deliver or cause to be delivered
without charge, a paper copy of the Prospectus.
13
<PAGE>
4. Certain Agreements of the Underwriters.
(a) It is understood that the Underwriters propose to offer the Class A
Notes for sale to the public as set forth in the Prospectus.
(b) The Underwriters covenant and agree that prior to the date which is
one year and one day after the last date upon which (i) each Class of Notes has
been paid in full, and (ii) all obligations due under any other Securitized
Financing have been paid in full, the Underwriters will not institute against,
or join any other Person in instituting against, ALF L.P. any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding or other
proceeding under any federal or state bankruptcy or similar law. The foregoing
shall not limit the right of any Underwriter to file any claim in or otherwise
take actions with respect to any such proceeding instituted by any Person not
under such a constraint.
(c) Until the Representative informs the Transferor in writing that all
of the Class A Notes have been sold by the Underwriters, each Underwriter
covenants and agrees to provide to the Transferor each day, with respect to
sales of the Class A Notes made by such Underwriter on such date at any price
other than the public offering price set forth on the cover page of the
Prospectus, the information in writing (which may be in the form of a telecopy)
necessary to enable the Transferor to prepare and file or transmit for filing
with the Commission the information requested by the Commission to be filed with
respect to the distribution of the Class A Notes.
5. Certain Agreements of the Transferor, ALF L.P. and World Omni. Each
of the Transferor, ALF L.P. and World Omni jointly and severally covenants and
agrees with each of the Underwriters that:
(a) If the Effective Time is prior to the execution and
delivery of this Agreement, the Transferor and ALF L.P. will file the
Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by the
Representative, subparagraph (4)) of Rule 424(b), not later than the
second business day following the execution and delivery of this
Agreement. The Transferor and ALF L.P. will advise the Representative
promptly of any such filing pursuant to Rule 424(b).
(b) The Transferor and ALF L.P. will advise the Representative
promptly of any proposal to amend or supplement the registration
statement as filed or the related prospectus or the Registration
Statement or the Prospectus and will not effect any such amendment or
supplement without the consent of the Representative. The Transferor
and ALF L.P. will advise the Representative promptly of the
effectiveness of the Registration Statement (if the Effective Time is
subsequent to the execution and delivery of this Agreement), of any
amendment or supplement of the Registration Statement or the Prospectus
and of the institution by the Commission of any stop order proceedings
in respect of the Registration Statement. The Transferor and ALF L.P.
14
<PAGE>
will use their best efforts to prevent the issuance of any such stop
order and to obtain as soon as possible its lifting, if issued. The
Transferor and ALF L.P. will comply with the Act, the Exchange Act, the
Trust Indenture Act of 1939, as amended and the rules and regulations
contemplated thereunder so as to permit the completion of the
distribution of the Class A Notes as contemplated in this Agreement and
in the Prospectus. The Transferor and ALF L.P. will file with the
Commission all documents required to be filed pursuant to the Exchange
Act within the time periods specified in the Exchange Act or the rules
and regulations promulgated thereunder.
(c) If, at any time when a prospectus relating to the Class A
Notes is required to be delivered under the Act, any event occurs as a
result of which the Prospectus as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading,
or if it is necessary at any time to amend or supplement the Prospectus
to comply with the Act, the Transferor and ALF L.P. promptly will
prepare and file, or cause to be prepared and filed, with the
Commission an amendment or supplement that will correct such statement
or omission or effect such compliance. Neither the consent of the
Representative to, nor the delivery by any Underwriter of, any such
amendment or supplement shall constitute a waiver of any of the
conditions set forth in Section 6 hereof.
(d) As soon as practicable, but not later than the
Availability Date (as defined below), the Transferor and ALF L.P. will
cause the Indenture Trustee to make generally available to the Class A
Noteholders an earnings statement covering a period of at least 12
months beginning after the Effective Date that will satisfy the
provisions of Section 11(a) of the Act. For the purpose of the
preceding sentence, "Availability Date" means the 45th day after the
end of the fourth fiscal quarter following the fiscal quarter that
includes the Effective Date, except that, if such fourth fiscal quarter
is the last quarter of the fiscal year of the Transferor and ALF L.P.,
"Availability Date" means the 90th day after the end of such fourth
fiscal quarter.
(e) The Transferor and ALF L.P. will furnish to the
Representative copies of the registration statement as originally filed
with the Commission and each amendment thereto (in each case at least
one of which will be signed and will include all exhibits), each
related preliminary prospectus, the Prospectus and all amendments and
supplements to such documents, in each case as soon as available and in
such quantities as the Representative may reasonably request.
(f) The Transferor and ALF L.P. will arrange for the
qualification of the Class A Notes for sale under the laws of such
jurisdictions in the United States as the Representative may designate
and will continue such qualifications in effect so long as required for
the distribution of the Class A Notes, provided that neither the
Transferor nor ALF L.P. shall be obligated to qualify to do business
nor become subject to service of process generally, but only to the
extent required for such qualification, in any jurisdiction in which it
is not currently so qualified.
15
<PAGE>
(g) So long as any Notes are outstanding, the Transferor, ALF
L.P. or World Omni, as the case may be, will make good faith efforts to
deliver or cause to be delivered to the Representative, as soon as each
becomes available, copies of (i) each report relating to the Notes
delivered to Noteholders pursuant to Section 3.06 of the Securitization
Trust Agreement, (ii) the annual statement as to compliance and the
annual statement of a firm of independent public accountants furnished
pursuant to Sections 3.02, 3.03 or 10.02 of the Servicing Agreement,
(iii) each certificate or notice delivered by the Servicer pursuant to
Section 10.03 of the Servicing Agreement, (iv) each periodic report
required to be filed by the Transferor or ALF L.P. with the Commission
pursuant to the Exchange Act, or any order of the Commission thereunder
and (v) such other information concerning the Transferor, World Omni,
ALF LLC, WOLS LLC, ALF L.P., the Origination Trustee (in its capacity
as trustee of the Origination Trust), the Origination Trust, the Trust,
the Notes or the Transferor Certificate as the Representative may
reasonably request from time to time.
(h) The Transferor, ALF L.P. and World Omni will pay all
expenses incident to the performance of their respective obligations
under this Agreement, including without limitation, (i) expenses
incident to the word processing, printing and reproduction of the
registration statement as originally filed with the Commission and each
amendment thereto, preliminary prospectuses and the Prospectus
(including any amendments and supplements thereto), (ii) the fees and
disbursements of the Origination Trustee, the Owner Trustee, the
Indenture Trustee, the Trust Agent, the Insurer and their respective
counsel, (iii) the fees and disbursements of counsel and the
independent public accountants of the Transferor, ALF L.P. and World
Omni, (iv) the fees charged by each of Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's") and Fitch IBCA, Inc. ("Fitch"
and, together with Moody's and Standard & Poor's, the "Rating
Agencies") in connection with the rating of each Class of Notes, (v)
the fees of DTC in connection with the book-entry registration of the
Class A Notes and (vi) expenses (including reasonable fees and
disbursements of counsel) incurred by the Underwriters pursuant to
Section 5(f) hereof in connection with the qualification of the Class A
Notes for sale under the laws of such jurisdictions in the United
States as the Representative may designate. If this Agreement is
terminated by the Representative in accordance with the provisions of
Section 6 or clause (i) or clause (ii) of Section 10 hereof, the
Transferor, ALF L.P. and World Omni shall reimburse the Underwriters
for all of their out-of-pocket expenses, including the reasonable fees
and disbursements of counsel to the Underwriters.
(i) For a period of 45 days from the date hereof, none of the
Transferor, ALF L.P., World Omni or any of their respective affiliates
will, without the prior written consent of the Representative, directly
or indirectly, offer, sell or contract to sell or announce the offering
of, in a public or private transaction, any other collateralized
securities (other than the Class B Notes) similar to the Class A Notes.
16
<PAGE>
(j) So long as any Class A Notes are outstanding, the
Transferor, ALF L.P. and World Omni will cause to be delivered to the
Representative a reliance letter relating to each Opinion of Counsel
delivered to the Owner Trustee, the Indenture Trustee, the Origination
Trustee or any Rating Agency by counsel to the Transferor, ALF L.P. or
World Omni relating to the transactions contemplated by this Agreement
or the Basic Documents.
(k) To the extent, if any, that the rating provided with
respect to any Class of Class A Notes by any Rating Agency or the
Insurer is conditional upon the furnishing of documents or the taking
of any other actions by the Transferor, ALF L.P. or World Omni, the
Transferor, ALF L.P. or World Omni, as the case may be, shall furnish
such documents and take any such other actions.
6. Conditions of the Obligations of the Underwriters. The obligation of
the several Underwriters to purchase and pay for the Class A Notes will be
subject to the accuracy of the respective representations and warranties on the
part of the Transferor, ALF L.P. and World Omni herein, to the accuracy of the
statements of the respective officers of the Transferor, ALF L.P. and World Omni
made pursuant to the provisions hereof, to the performance by the Transferor,
ALF L.P. and World Omni of their respective obligations hereunder and to the
following additional conditions precedent:
(a) On (i) the date of this Agreement, the Representative, ALF L.P. and
the Transferor shall have received a letter or letters, dated the date of
delivery thereof (which, if the Effective Time is prior to the execution and
delivery of this Agreement, shall be on or prior to the date of this Agreement
or, if the Effective Time is subsequent to the execution and delivery of this
Agreement, shall be prior to the filing of the amendment or post-effective
amendment to the registration statement to be filed shortly prior to the
Effective Time), of Arthur Andersen LLP ("Arthur Andersen") confirming that they
are independent public accountants within the meaning of the Act and the Rules
and Regulations, substantially in the form of the draft or drafts to which the
Representative has previously agreed and otherwise in form and in substance
satisfactory to the Representative and counsel for the Underwriters and (ii) on
the Closing Date, the Representative, ALF L.P. and the Transferor shall have
received a letter or letters, dated as of the Closing Date, from Arthur
Andersen, updating each letter delivered pursuant to clause (i) above, in form
and substance satisfactory to the Representative and counsel for the
Underwriters.
(b) If the Effective Time has not occurred prior to the date of this
Agreement, the Effective Time shall be the date of execution and delivery of
this Agreement, or the next business day after the date of this Agreement or
such later date as shall have been consented to by the Representative. If the
Effective Time is prior to the execution and delivery of this Agreement, the
Prospectus shall have been filed with the Commission in accordance with the
Rules and Regulations and Section 5(a) hereof. Prior to the Closing Date, no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or,
to the knowledge of the Transferor, ALF L.P., World Omni or the Representative,
shall be contemplated by the Commission.
17
<PAGE>
(c) The Representative shall have received certificates of the
President, any Vice President or the Treasurer or any Assistant Treasurer of (i)
the WOLS LP General Partner on behalf of the Transferor, (ii) the ALF L.P.
General Partner on behalf of ALF L.P. and (iii) World Omni, each dated the
Closing Date, in which such officer shall state, in the case of (A) the
Transferor and ALF L.P., that (1) the representations and warranties of the
Transferor or ALF L.P., as the case may be, in each Basic Document to which it
is a party and in this Agreement are true and correct, (2) to the best knowledge
of such officer after reasonable investigation, the Transferor or ALF L.P., as
the case may be, has complied with all agreements and satisfied all conditions
on its part to be performed or satisfied hereunder at or prior to the Closing
Date, no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted or are
contemplated by the Commission and (3) subsequent to the date of this Agreement,
there has been no material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Transferor or ALF L.P., as the case may be, except as set forth in or
contemplated by the Prospectus and (B) World Omni, that (1) the representations
and warranties of World Omni in each Basic Document to which it is a party and
in this Agreement are true and correct, (2) to the best knowledge of such
officer after reasonable investigation, World Omni has complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
hereunder and (3) subsequent to the date of this Agreement, there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of World Omni except as set
forth in or contemplated by the Prospectus.
(d) The Representative shall have received a certificate, dated the
Closing Date, of a Vice President or another duly authorized officer of the
Insurer, satisfactory in form and substance to the Representative and counsel to
the Underwriters, substantially to the effect that, among other things, (i) the
information provided by the Insurer for use in the Registration Statement and
the Prospectus is true and correct in all material respects and (ii) since the
date of the financial statements of the Insurer included in the Prospectus,
there has been no change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Insurer that would have
a material adverse effect on the ability of the Insurer to meet its obligations
under the Residual Value Insurance Policy.
(e) The Representative shall have received:
(1) The favorable opinions of (A) Williams & Connolly, counsel
to the Transferor, ALF L.P. and World Omni, (B) Hand Arendall, L.L.C.,
special Alabama counsel to the Transferor, ALF L.P. and World Omni, (C)
English, McCaughan & O'Bryan, P.A., special Florida counsel to the
Transferor, ALF L.P. and World Omni, (D) McDermott, Will & Emery,
special Illinois and New York counsel to the Transferor, ALF L.P. and
World Omni, (E) Richards, Layton & Finger, special Delaware counsel to
the Transferor, ALF L.P. and World Omni, (F) Burbage & Weddell L.L.C.,
special Georgia counsel to the Transferor, ALF L.P. and World Omni and
(G) Smith Helms Mulliss & Moore, special North Carolina counsel to the
Transferor, ALF L.P. and World Omni, in each case dated the Closing
Date and satisfactory in form and substance to the Representative and
counsel for the Underwriters, and, in the aggregate substantially to
the effect that:
18
<PAGE>
(i) World Omni has been incorporated under the
Florida General Corporation Act, is current in the payment of
fees due to the Florida Department of State and its status is
active; World Omni has corporate power and authority to own,
lease and operate its properties, to conduct its business as
presently conducted and to enter into and perform its
obligations under this Agreement, each Partnership Agreement
and each Basic Document to which it is a party; to the best of
their knowledge, World Omni is duly qualified as a foreign
corporation to transact business and is in good standing in
Alabama, Georgia, North Carolina and South Carolina; and, to
the best of their knowledge, all of the issued and outstanding
membership interest of WOLS LLC and ALF LLC is owned by World
Omni, free and clear of Liens.
(ii) Each of WOLS LLC and ALF LLC has been duly
incorporated and is validly existing as a limited liability
company in good standing under the laws of the State of
Delaware, with power and authority to own, lease and operate
its properties, to conduct its business as described in the
Registration Statement and to enter into and perform its
obligations under the related Partnership Agreement and each
Basic Document to which it is a party; to the best of such
counsel's knowledge and information, each of WOLS LLC and ALF
LLC is duly qualified as a foreign limited liability company
to transact business in Florida and Alabama; and the shares of
issued and outstanding member interest of each of WOLS LLC and
ALF LLC have been duly authorized and validly issued and are
fully paid and non-assessable.
(iii) Each of the Transferor and ALF L.P. is duly
qualified and registered as a foreign partnership to transact
business and is in good standing in Alabama and Florida.
(iv) This Agreement has been duly authorized,
executed and delivered by WOLS LLC, as the WOLS LP General
Partner, ALF LLC, as the ALF L.P. General Partner and World
Omni.
(v) The Origination Trust has been qualified as
a business trust under applicable Alabama law and what is
commonly known as a business trust under Chapter 609 of the
Florida Statutes, and all filings required to be made in
respect of the Origination Trust's status as a business trust
under the laws of the States of Alabama and Florida have been
made and are in full force and effect on the Closing Date.
(vi)(a) The Notes are in due and proper form, all
conditions precedent provided for in the Indenture relating to
the issuance, authentication and delivery of the Notes have
been complied with and the Notes have been duly and validly
authorized and, when executed, issued, authenticated and
delivered pursuant to the Indenture, and, in the case of the
Class A Notes, when delivered to the Underwriters against
payment of the consideration set forth in this Agreement, will
be duly and validly issued and outstanding and entitled to the
benefits of the Indenture.
19
<PAGE>
(b) The Transferor Certificate is in due and proper
form, all conditions precedent provided for in the
Securitization Trust Agreement relating to the issuance,
authentication and delivery of the Transferor Certificate have
been complied with and the Transferor Certificate has been
duly and validly authorized and, when executed, issued,
authenticated and delivered pursuant to the Securitization
Trust Agreement, will be duly and validly issued and
outstanding and entitled to the benefits of the Securitization
Trust Agreement.
(vii) Each Partnership Agreement and each Basic
Document to which the Transferor, WOLS LLC, ALF LLC, ALF L.P.
and World Omni is a party has been duly authorized, executed
and delivered by the Transferor, WOLS LLC, ALF LLC, ALF L.P.
and World Omni, as the case may be, and, assuming the due
authorization, execution and delivery thereof by the other
parties thereto, will constitute the legal, valid and binding
agreement of such entity enforceable against such entity in
accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting enforcement of
creditors' rights generally and by general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law). (In rendering
such opinion as to the enforceability of a Basic Document,
counsel shall state that in the event of a conflict of law
arising under such Basic Document, the governing law of such
Basic Document will apply without regard to any otherwise
applicable principles of conflicts of laws in the related
state).
(viii) To the best knowledge and information of
such counsel, (A) there are no legal or governmental
proceedings pending or threatened that are required to be
disclosed in the Registration Statement other than those
disclosed therein and (B) all pending legal or governmental
proceedings to which the Transferor, WOLS LLC, ALF LLC, ALF
L.P., the Origination Trustee (in its capacity as trustee of
the Origination Trust) or World Omni is a party or to which
any of their respective properties or assets is subject that
are not described in the Registration Statement, including
ordinary routine litigation incidental to the business of such
entity, are, considered in the aggregate with respect to the
Transferor, WOLS LLC, ALF LLC, ALF L.P., the Origination
Trustee (in its capacity as trustee of the Origination Trust)
or World Omni as the case may be, not material.
(ix) The statements in the Prospectus under the
captions "Summary", "Risk Factors", "Description of the
Notes", "Security for the Notes", "Security for the Notes--The
Residual Value Insurance Policy", "Additional Document
20
<PAGE>
Provisions" and "The Class A Interest Rate Swap", insofar as
such statements purport to summarize certain terms or
provisions of the SUBI, the Notes and the Transferor
Certificate, the Basic Documents, the Residual Value Insurance
Policy, the Contingent and Excess Liability Insurance Policies
and the Class A Interest Rate Swap, provide a fair summary of
such provisions, and the statements in the Prospectus under
"The Origination Trust--Allocation of Origination Trust
Liabilities", "Risk Factors--Risks Associated With Consumer
Protection Laws", "--Risks Associated With ERISA Liabilities",
"--Risks Associated With Vicarious Tort Liability" and
"--Risks in the Event of an Insolvency of World Omni;
Substantive Consolidation with World Omni", "Additional
Document Provisions", "Certain Legal Aspects of the
Origination Trust and the SUBI", "Certain Legal Aspects of the
Contracts and the Leased Vehicles" and "ERISA Considerations",
to the extent that they constitute matters of law, summaries
of legal matters, documents or proceedings or legal
conclusions relating to U.S. federal law or the laws of the
States of Florida, Georgia or North Carolina have been
prepared or reviewed by such counsel and are correct in all
material respects.
(x) To the best knowledge and information of
such counsel, (A) there are no contracts, indentures,
mortgages, loan agreements, notes, leases or other instruments
required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those
described or referred to therein or filed as exhibits thereto,
(B) the descriptions thereof or references thereto are correct
and (C) no default exists in the due performance or observance
of any material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument so described,
referred to or filed.
(xi) No authorization, approval, consent or
order of any court or governmental authority or agency is
required in connection with the issuance of the SUBI
Certificate, the Notes or the Transferor Certificate, the
offering of the Notes or the sale of the Class A Notes to the
Underwriters, except those authorizations, approvals, consents
and orders which have previously been obtained and are in full
force and effect as of the Closing Date; provided, that such
counsel need express no opinion as to state securities laws.
(xii) None of (A) the execution, delivery and
performance by the Transferor, ALF L.P. or World Omni of this
Agreement or by the Transferor, WOLS LLC, ALF LLC, ALF L.P. or
World Omni of any applicable Partnership Agreement or any
Basic Document to which such entity is a party, (B) the
consummation of the transactions contemplated herein or
therein by any such entity or (C) the fulfillment of the terms
hereof or thereof by any such entity will conflict with,
result in a breach of or constitute a default under, or with
the giving of notice or the passage of time or both, would
constitute a default under or result in the creation or
imposition of any Lien (except as permitted by the Basic
21
<PAGE>
Documents) upon any property or assets of such entity pursuant
to the terms of (i) the organizational, charter or partnership
documents or bylaws of such entity, (ii) to the best knowledge
and information of such counsel and except as otherwise
provided in the Basic Documents, any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to
which such entity is a party or by which it may be bound, or
to which any of the properties or assets of such entity is
subject or (iii) any applicable law, statute or regulation or,
to the best knowledge and information of such counsel, any
judgment, order or decree applicable to such entity of any
court, regulatory body or other governmental instrumentality
having jurisdiction over such entity except, in the case of
clauses (ii) and (iii) above, for defaults, breaches or
violations that do not, in the aggregate, have a material
adverse effect on such entity.
(xiii) None of the Transferor, WOLS LLC, ALF LLC,
ALF L.P., World Omni, the Origination Trust or the Trust is an
"investment company" or is "controlled" by an "investment
company" as such terms are defined in the Investment Company
Act.
(xiv) The Registration Statement has become
effective under the Act, and, to the best knowledge and
information of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or
are pending or contemplated under the Act, and the
Registration Statement and the Prospectus, and each amendment
or supplement thereto, as of their respective effective or
issue dates, complied as to form in all material respects with
the requirements of the Act, the Trust Indenture Act of 1939,
as amended, and the Rules and Regulations. Such counsel has no
reason to believe that either the Registration Statement, at
the Effective Time, or any such amendment or supplement, as of
its effective date, contained any untrue statement of a
material fact or omitted to state any material fact required
to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus, at the date of
this Agreement (or any such amendment or supplement, as of its
respective date) or at the Closing Date included or includes
an untrue statement of a material fact or omitted or omits to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; it being understood that
such counsel need express no opinion as to the financial
statements or other financial or statistical data contained in
the Registration Statement or the Prospectus.
(xv) Neither the SUBI Trust Agreement nor the
Securitization Trust Agreement is required to be qualified
under the Trust Indenture Act of 1939, as amended.
22
<PAGE>
(xvi) The Indenture and the Backup Security
Agreement create a valid first priority perfected security
interest in favor of the Indenture Trustee, for the benefit of
the Noteholders, in the SUBI Collection Account, the
Distribution Account, the Reserve Fund and the proceeds
thereof (including Permitted Investments) for so long as they
are held in such accounts.
(xvii) The transfer of the SUBI Certificate by ALF
L.P. to the Transferor constitutes a sale of the SUBI
Certificate and the SUBI Assets evidenced thereby. The
transfer of the SUBI Certificate by the Transferor to the
Trust (A) constitutes a sale of the SUBI Certificate and the
SUBI Assets evidenced thereby or (B) if such transfer does not
constitute a sale, then the Securitization Trust Agreement,
the Indenture and the delivery to and possession by the
Indenture Trustee of the SUBI Certificate creates a valid
first priority perfected security interest for the benefit of
the Noteholders in the SUBI Certificate.
(xviii) Each of the Transferor, WOLS LLC, ALF LLC,
ALF L.P., World Omni and the Origination Trustee (in its
capacity as trustee of the Origination Trust) possesses such
certificates, authorities, licenses, permits and other
governmental authorizations issued by Alabama and Florida, in
the case of the Transferor, WOLS LLC, ALF LLC, ALF L.P. and
World Omni, and by the States of Alabama, Florida, Georgia and
North Carolina, in the case of the Origination Trustee (on
behalf of the Origination Trust), materially necessary to
conduct the business now operated by it, and none of such
entities has received any notice of proceedings relating to
the revocation or modification of any such certificate,
authority, license or permit that, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding,
would materially and adversely affect the condition, financial
or otherwise, or the earnings, business affairs or business
prospects of such entity.
(xix) The choice of law provisions contained in
each dealer agreement between World Omni and a dealer that
originates lease contracts comprising Origination Trust Assets
are valid and enforceable under the laws of Alabama, Georgia
and North Carolina.
(xx) The assignment provisions contained in each
dealer agreement between World Omni and a dealer that
originates lease contracts comprising Origination Trust Assets
are valid and enforceable under the laws of the State in which
such dealer originates such lease contracts.
(xxi) Assuming the chief executive office of the
Origination Trustee is located in the State of Illinois and
the timely filing of an appropriate UCC Financing Statement
with the Secretary of the State of Illinois, the grant by the
Origination Trustee to the Indenture Trustee of a security
interest in the 1998-A Leases pursuant to the Backup Security
Agreement will create a valid, first priority perfected
security interest in the 1998-A Leases.
23
<PAGE>
(2) The favorable opinion of Hand Arendall, L.L.C., special
Alabama counsel to the Transferor, ALF L.P. and World Omni, dated the
Closing Date and satisfactory in form and substance to the
Representative and counsel to the Underwriters, and substantially to
the effect that:
(i) The SUBI Certificate has been duly and
validly authorized and, when executed, issued, authenticated
and delivered pursuant to the SUBI Trust Agreement, will be
duly and validly issued and outstanding and entitled to the
benefits of the SUBI Trust Agreement.
(ii) The lease contracts originated in Alabama
are "true leases" for purposes of Alabama law.
(iii) Assuming the chief executive office of the
Origination Trustee is located in the State of Alabama and the
timely filing of an appropriate UCC Financing Statement with
the Secretary of the State of Alabama, the grant by the
Origination Trustee to the Indenture Trustee of a security
interest in the 1998-A Leases pursuant to the Backup Security
Agreement will create a valid, first priority perfected
security interest in the 1998-A Leases.
(3) The favorable opinion of Richards, Layton & Finger,
special Delaware counsel to the Transferor, ALF L.P. and World Omni,
dated the Closing Date and satisfactory in form and substance to the
Representative and counsel to the Underwriters, to the effect that:
(i) Each of the Transferor and ALF L.P. has
been duly formed and is validly existing in good standing as a
limited partnership under the Delaware Act with all requisite
power under the Delaware Act and the related Partnership
Agreement to enter into and perform its obligations under this
Agreement, the related Partnership Agreement and each Basic
Document to which it is a party.
(ii) The execution and delivery of and
performance under the related Partnership Agreement and each
Basic Document to which the Transferor or ALF L.P. is a party
(A) have been duly authorized by all requisite partnership
action on the part of the Transferor or ALF L.P., (B) are
permitted under the Delaware Act and the related Partnership
Agreement and (C) will not violate any Delaware statute or
regulation; provided that such counsel need express no opinion
regarding state securities laws.
(iii) No consent, approval, authorization or
order of, or registration or filing or declaration with, any
Delaware court or governmental agency or body is required in
connection with either the Transferor's or ALF L.P.'s
execution or delivery of or performance under the related
Partnership Agreement and each Basic Document to which it is a
party.
24
<PAGE>
(4) The favorable opinion of English, McCaughan & O'Bryan,
P.A., special Florida counsel to the Transferor, ALF L.P. and World
Omni, dated the Closing Date and satisfactory in form and substance to
the Representative and counsel for the Underwriters, and substantially
to the effect that:
(i) The Class A Notes will constitute
"indebtedness" for purposes of Florida income tax law, and the
Class B Notes should constitute "indebtedness" for purposes of
Florida income tax law.
(ii) The loan rule promulgated under the Florida
Corporate Income Tax Code and included in the Florida
Administrative Code relating to interest on loans by
"financial organizations" (as such term is defined therein),
should not apply to an investment in the Notes by such a
financial organization.
(iii) The statements in the Prospectus under
"Material Income Tax Considerations--Florida Income Taxation",
to the extent that they constitute matters of law, summaries
of legal matters, documents or proceedings or legal
conclusions, have been reviewed by such counsel and are
correct in all material respects.
(iv) The lease contracts originated in Florida
are "true leases" for purposes of Florida law.
(v) Assuming that all other elements necessary
to render a lease contract legal, valid, binding and
enforceable were present in connection with the execution,
delivery and performance of each lease contract, and assuming
that no action was taken in connection with the execution,
delivery and performance of each lease contract that would
give rise to a defense to the legality, validity, binding
effect and enforceability of such lease contract, nothing in
the forms of such lease contracts, as attached as an Exhibit
to the Servicing Agreement, would render such lease contract
other than legal, valid, binding and enforceable; assuming the
validity, binding effect and enforceability in all other
respects, such forms of lease contracts are in sufficient
compliance with applicable federal and Florida state consumer
protection laws so as not to be rendered void or voidable at
the election of the related lessee.
(5) The favorable opinion of Cadwalader, Wickersham & Taft,
special federal income tax counsel to the Transferor and ALF L.P.,
dated the Closing Date and satisfactory in form and substance to the
Representative and counsel to the Underwriters, to the effect that (i)
the Class A Notes will constitute "indebtedness" for federal income tax
purposes and (ii) the statements in the Prospectus under the captions
"Summary--Tax Status" and "Material Income Tax Considerations--Federal
Taxation", to the extent that they constitute matters of law, summaries
of legal matters or legal conclusions, have been reviewed by such
counsel and are correct in all material respects.
25
<PAGE>
(6) Reliance letters relating to each legal opinion relating
to the transactions contemplated by this Agreement and the Basic
Documents rendered by counsel to the Transferor, ALF L.P. or World Omni
to the Owner Trustee, the Indenture Trustee, the Origination Trustee or
any Rating Agency.
(7) The favorable opinion of McGuire, Woods, Battle & Boothe,
counsel to the Indenture Trustee, dated the Closing Date and
satisfactory in form and substance to the Representative and counsel to
the Underwriters, to the effect that:
(i) The Indenture Trustee has been duly
incorporated and is validly existing as a banking corporation,
in good standing under the laws of the State of New York with
full power and authority (corporate and other) to own its
properties and conduct its business, as presently conducted by
it, and to enter into and perform its obligations as Indenture
Trustee under each Basic Document to which the Indenture
Trustee is a party.
(ii) Each Basic Document to which the Indenture
Trustee is a party has been duly authorized, executed and
delivered by the Indenture Trustee and, assuming the due
authorization, execution and delivery thereof by the other
parties thereto, will constitute a legal, valid and binding
obligation of the Indenture Trustee enforceable in accordance
with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization
or other similar laws affecting enforcement of creditors'
rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(iii) The Notes have been duly authenticated and
delivered by the Indenture Trustee.
(iv) Neither the execution nor delivery by the
Indenture Trustee of each Basic Document to which it is a
party nor the consummation of any of the transactions by the
Indenture Trustee contemplated thereby require the consent or
approval of, the giving of notice to, the registration with or
the taking of any other action with respect to, any
governmental authority or agency under any existing federal or
state law governing the banking or trust powers of the
Indenture Trustee.
(v) The execution and delivery of each Basic
Document to which the Indenture Trustee is a party and the
performance by the Indenture Trustee of its terms do not
conflict with or result in a violation of (A) any federal or
state law or regulation governing the banking or trust powers
of the Indenture Trustee, (B) the Articles of Association or
By-Laws of the Indenture Trustee or (C) to the best knowledge
of such counsel, any indenture, lease or material agreement to
which the Indenture Trustee is a party or to which its assets
are subject.
26
<PAGE>
(8) The favorable opinion of Dorsey & Whitney, counsel to the
Origination Trustee and the Trust Agent, dated the Closing Date and
satisfactory in form and substance to the Representative and counsel
for the Underwriters, to the effect that:
(i) The Origination Trustee has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Alabama with corporate
power and authority to own, lease and operate its properties,
to conduct its business as described in the Registration
Statement and to enter into and perform its obligations under
each Basic Document to which it is a party; to the best of
their knowledge and information, the Origination Trustee is
duly qualified as a foreign corporation to transact business
and is in good standing in Georgia, Florida, North Carolina
and Illinois; and the shares of issued and outstanding capital
stock of the Origination Trustee have been duly authorized and
validly issued, are fully paid and non-assessable and are
owned by U.S. Bank, free and clear of any Liens. The Trust
Agent has been duly incorporated and is validly existing as a
national banking association, in good standing under the laws
of the United States of America, with full power and authority
(corporate and other) to own its properties and conduct its
business, as presently conducted by it, and to enter into and
perform its obligations as Trust Agent under each Basic
Document to which the Trust Agent is a party.
(ii) Each Basic Document to which the
Origination Trustee or the Trust Agent is a party has been
duly authorized, executed and delivered by the Origination
Trustee or the Trust Agent, as applicable, and, assuming the
due authorization, execution and delivery thereof by the other
parties thereto, will constitute legal, valid and binding
obligations of the Origination Trustee or the Trust Agent, as
applicable, enforceable in accordance with their respective
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting enforcement of creditors' rights
generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law).
(iii) The SUBI Certificate has been duly
executed, authenticated and delivered by the Origination
Trustee.
(iv) Neither the execution nor delivery by the
Origination Trustee or the Trust Agent of each Basic Document
to which it is a party nor the consummation of any of the
transactions by the Origination Trustee or the Trust Agent
contemplated thereby require the consent or approval of, the
giving of notice to, the registration with or the taking of
any other action with respect to, any Person or entity,
including any governmental authority or agency under any
existing federal or state law.
27
<PAGE>
(v) The execution and delivery of each Basic
Document to which the Origination Trustee is a party and the
performance by the Origination Trustee of their respective
terms do not conflict with or result in a violation of its
articles of incorporation or bylaws of the Origination Trustee
or, to the best of such counsel's knowledge, any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument to which it is a party, by which it may be bound or
to which any of its property or assets is subject.
(vi) The execution and delivery of each Basic
Document to which the Trust Agent is a party and the
performance by the Trust Agent of its terms do not conflict
with or result in a violation of (A) any federal or state law
or regulation governing the banking or trust powers of the
Trust Agent, (B) the Articles of Association or By-Laws of the
Trust Agent or (C) to the best knowledge of such counsel, any
indenture, lease or material agreement to which the Trust
Agent is a party or to which its assets are subject.
(9) The favorable opinions of Baker & Daniels and Holland &
Knight counsel of the Insurer, dated the Closing Date and satisfactory
in form and substance to the Representative and counsel to the
Underwriters, substantially in the form of the draft opinion previously
delivered to the Representative, to the effect that, among other
things, (i) the Insurer has been duly incorporated and is in good
standing in the jurisdiction of its incorporation, (ii) the Insurer has
the corporate power and authority to issue, execute, deliver and
perform its obligations under the Residual Value Insurance Policy,
(iii) no consent, approval, authorization or order of, or registration
or filing or declaration with, any entity is required in connection
with the issuance of the Residual Value Insurance Policy, (iv) the
Residual Value Insurance Policy is enforceable in accordance with its
terms and (v) the Residual Value Insurance Policy is not required to be
registered under the Act.
(10) The favorable opinion of The Bayard Firm, special counsel
to the Owner Trustee, dated the Closing Date and satisfactory in form
and substance to the Representative and counsel to the Underwriters, to
the effect that:
(i) PNC Bank has been incorporated and is
validly existing as a Delaware banking corporation, in good
standing under the laws of the State of Delaware and is
authorized thereunder and pursuant thereto to transact the
business of banking, to exercise fiduciary power and to enter
into and perform its obligations as Owner Trustee under each
Basic Document to which PNC Bank is a party.
(ii) Each Basic Document to which PNC Bank is a
party has been duly authorized, executed and delivered by PNC
Bank and, assuming the due authorization, execution and
delivery thereof by the other parties thereto, will constitute
a legal, valid and binding obligation of PNC Bank enforceable
in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting enforcement of
creditors' rights generally and by general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
28
<PAGE>
(iii) Each Note has been duly executed and
delivered by the Owner Trustee. The Transferor Certificate has
been duly executed, authenticated and delivered by the Owner
Trustee.
(iv) Neither the execution nor delivery by PNC
Bank of each Basic Document to which it is a party nor the
consummation of any of the transactions by PNC Bank
contemplated thereby require the consent or approval of, the
giving of notice to, the registration with or the taking of
any other action with respect to, any Person or entity,
including any governmental authority or agency under any
existing federal or state law.
(v) The execution and delivery of each Basic
Document to which PNC Bank is a party and the performance by
PNC Bank of its terms do not conflict with or result in a
violation of (A) any federal or state law or regulation
governing the banking or trust powers of PNC Bank, (B) the
Articles of Association or By-Laws of PNC Bank or (C) to the
best knowledge of such counsel, any indenture, lease or
material agreement to which PNC Bank is a party or to which
its assets are subject.
(11) The favorable opinion of Stroock & Stroock & Lavan LLP,
counsel for the Underwriters, dated the Closing Date, with respect to
the existence of the Transferor, ALF L.P. and World Omni, the validity
of the Notes and the Transferor Certificate and such other related
matters as the Representative shall request. In rendering such opinion,
Stroock & Stroock & Lavan LLP may rely on the opinions of (i) Hand
Arendall, L.L.C., as to all matters of Alabama law, (ii) Richards,
Layton & Finger and The Bayard Firm, special counsel to the Owner
Trustee, as to all matters of Delaware law, (iii) English, McCaughan &
O'Bryan, P.A., as to all matters of Florida law and (iv) McDermott,
Will & Emery and/or Dorsey & Whitney, as to all matters of Illinois
law, which opinions shall be satisfactory in form and substance to the
Representative and counsel for the Underwriters.
(f) The Insurer shall have issued the Residual Value Insurance Policy.
(g) On or prior to the Closing Date, the Representative shall have
received an officer's certificate from an officer of the Insurer stating that
although the information in the Prospectus under "Security for the Notes--The
Residual Value Insurance Policy" is limited and does not purport to provide the
scope of disclosure required to be included in a prospectus with respect to a
registrant under the Act in connection with the public offering of securities of
such registrant, such officer has no reason to believe that the information in
the Prospectus under "Security for the Notes--The Residual Value Insurance
Policy" contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
29
<PAGE>
(h) Each Class of Class A Notes shall be rated in the highest rating
category by each of Moody's, Standard & Poor's and Fitch and the Class B Notes
shall be rated by at least two of Moody's, Standard & Poor's and Fitch, at least
A3 by Moody's, at least A- by Standard & Poor's and at least A by Fitch.
(i) On or prior to the Closing Date, all of the conditions precedent to
the execution of the Class A Interest Rate Swap have been satisfied and each of
the opinions delivered in connection with the Class A Interest Rate Swap have
been addressed to the Underwritiers and delivered to the Representative.
(j) On or prior to the Closing Date, counsel for the Underwriters shall
have been furnished with such documents and opinions as they may reasonably
require for the purpose of enabling them to pass upon the issuance of the Notes
and the Transferor Certificate and sale of the Class A Notes as herein
contemplated and related proceedings, or in order to evidence the accuracy of
any of the representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the parties to the
Basic Documents in connection with the issuance of the Notes and the Transferor
Certificate and sale of the Class A Notes as herein contemplated shall be
satisfactory in form and substance to the Representative and counsel for the
Underwriters.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, this Agreement may be terminated
by the Representative by notice to the Transferor, ALF L.P. and World Omni at
any time at or prior to the Closing Date, and such termination shall be without
liability of any party to any other party except as provided in Section 5(h)
hereof.
7. Indemnification and Contribution.
(a) Each of the Transferor and World Omni agrees, jointly and
severally, to indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the Act as
follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the
information deemed to be part of the Registration Statement pursuant to
Rule 430A(b) of the Rules and Regulations, if applicable, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading;
30
<PAGE>
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the written consent of the Transferor and
World Omni; and
(iii) against any and all expense whatsoever, as incurred
(including, subject to Section 7(c) hereof, the fees and disbursements
of counsel chosen by the Representative), reasonably incurred in
investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under clause
(i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Transferor by
any Underwriter through the Representative expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto).
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Transferor and World Omni, each of their respective directors, each of their
respective officers who signed the Registration Statement and each person, if
any, who controls each of the Transferor and World Omni, respectively, within
the meaning of Section 15 of the Act, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or any preliminary prospectus or the
Prospectus (or any amendment or supplement thereto), in reliance upon and in
conformity with written information furnished to the Transferor by such
Underwriter directly or through the Representative expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the Prospectus (or any amendment or supplement thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it with
respect to which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve it from any liability which it may have
other than on account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of such action. In no event shall
an indemnifying party be liable for the fees and expenses of more than one
counsel (in addition to any local counsel) separate from their own counsel for
all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances.
31
<PAGE>
8. Contribution. If the indemnification provided for in Section 7
hereof is unavailable or insufficient to hold harmless an indemnified party
under subsection (a) or (b) thereof, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of the loss, liability, claim, damage or expense referred to in subsection (a)
or (b) of Section 7 (i) in such proportion as is appropriate to reflect the
relative benefits received by the Transferor and World Omni on the one hand and
the Underwriters on the other from the offering of the Class A Notes or (ii) if
the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Transferor
and World Omni on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative benefits received by the Transferor and World Omni on the one hand and
the Underwriters on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses) received by
the Transferor bear to the total underwriting discounts and commissions received
by the Underwriters. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Transferor, World Omni or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The amount paid by an
indemnified party as a result of the loss, liability, claim, damage or expense
referred to in the first sentence of this Section shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim which is the
subject of this Section. Notwithstanding the provisions of this Section, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Class A Notes underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Notwithstanding the other
provisions of this Section, each person, if any, who controls an Underwriter
within the meaning of Section 15 of the Act shall have the same rights to
contribution as such Underwriter and each director of the Transferor and World
Omni, each officer of the Transferor who signed the Registration Statement and
each person, if any, who controls either the Transferor or World Omni within the
meaning of Section 15 of the Act shall have the same rights to contribution as
the Transferor or World Omni, as the case may be. The Underwriters' respective
obligations to contribute pursuant to this Section are several in proportion to
the principal amount of the Class A Notes set forth opposite their respective
names in Schedule I hereto and not joint.
32
<PAGE>
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Transferor, ALF L.P. and World Omni or their respective officers and of the
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of any Underwriter, the Transferor, ALF
L.P., World Omni or any of their respective representatives, officers or
directors or any controlling Person, and will survive delivery of and payment
for the Class A Notes. If for any reason the purchase of the Class A Notes by
the Underwriters is not consummated, the Transferor, ALF L.P. and World Omni
shall remain responsible for the expenses to be paid or reimbursed by them
pursuant to Section 5(h) hereof and the respective obligations of the
Transferor, World Omni, ALF L.P. and the Underwriters pursuant to Section 7
hereof shall remain in effect. If the purchase of the Class A Notes by the
Underwriters is not consummated for any reason other than solely because of the
occurrence of any event specified in clause (iii), (iv) or (v) of Section 10
hereof, the Transferor, ALF L.P. and World Omni will reimburse the Underwriters
for all out-of-pocket expenses (including the reasonable fees and disbursements
of counsel) reasonably incurred by them in connection with the offering of the
Class A Notes.
10. Termination of Agreement. The Representative may terminate this
Agreement, by notice to the Transferor, ALF L.P. and World Omni, at any time
prior to or at the Closing Date (i) if there has been, since the date of this
Agreement or since the respective dates as of which information is given in the
Registration Statement, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Transferor, World Omni, ALF L.P., the Origination Trust or the Insurer, whether
or not arising in the ordinary course of business; (ii) if there has occurred
any downgrading in the rating of the debt securities of the Transferor, ALF
L.P., World Omni or the Insurer by any "nationally recognized statistical rating
organization" (as such term is defined for purposes of Rule 436(g) under the
Act), or any public announcement that any such organization has under
surveillance or review its rating of any debt securities of the Transferor, ALF
L.P., World Omni or the Insurer (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating); (iii) if there has occurred any material adverse
change in the financial markets in the United States or any outbreak of
hostilities or other calamity or crisis, the effect of which is such as to make
it, in the judgment of the Representative, impracticable to market any Class of
Notes or to enforce contracts for the sale of any Class of Notes; (iv) if
trading generally on either the American Stock Exchange or the New York Stock
Exchange has been suspended, or minimum or maximum prices for trading have been
fixed or maximum ranges for prices for securities have been required, by either
of said Exchanges or by order of the Commission or any other governmental
authority; or (v) if a banking moratorium has been declared by either federal,
New York, Delaware, Florida, Illinois or Alabama authorities.
11. Default By One or More of the Underwriters. If one or more of the
Underwriters shall fail at the Closing Date to purchase the Class A Notes which
it or they are obligated to purchase under this Agreement (the "Defaulted
Securities"), the Representative shall have the right, but not the obligation,
within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Representative shall not
have completed such arrangements within such 24-hour period, then:
33
<PAGE>
(a) if the aggregate principal amount of Defaulted Securities
does not exceed 10% of the total aggregate principal amount of the
Class A Notes, the non-defaulting Underwriters shall be obligated to
purchase the full amount thereof in such proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
(b) if the aggregate principal amount of Defaulted Securities
exceeds 10% of the total aggregate principal amount of the Class A
Notes, this Agreement shall terminate without liability on the part of
any non-defaulting Underwriter.
No action pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination
of this Agreement, either the Representative or ALF L.P. and the Transferor
shall have the right to postpone the Closing Time for a period not exceeding
seven days in order to effect any required changes in the Registration Statement
or Prospectus or in any other documents or arrangement.
12. Notices. All communications hereunder will be in writing and, if
sent to (i) the Underwriters, shall be directed to the Representative and will
be mailed, delivered or sent by facsimile and confirmed to it at Merrill Lynch &
Co., North Tower, World Financial Center, New York, New York 10281-1201,
Attention: Geoffrey R. Witt, Managing Director (facsimile number (212)
449-9015); (ii) the Transferor, will be mailed, delivered or sent by facsimile
and confirmed to it at World Omni Lease Securitization L.P., c/o World Omni
Lease Securitization LLC, 120 N.W. 12th Avenue, Deerfield Beach, Florida 33442,
Attention: A. Tucker Allen, Vice President and Corporate Treasurer (facsimile
number (954) 429-2685); (iii) ALF L.P., will be mailed, delivered or sent by
facsimile and confirmed to it at Auto Lease Finance L.P., c/o Auto Lease Finance
LLC, 120 N.W. 12th Avenue, Deerfield Beach, Florida 33442, Attention: A. Tucker
Allen, Vice President and Corporate Treasurer (facsimile number (954) 429-2685);
or (iv) World Omni, will be mailed, delivered or sent by facsimile and confirmed
to it at World Omni Financial Corp., 120 N.W. 12th Avenue, Deerfield Beach,
Florida 33442, Attention: A. Tucker Allen, Vice President and Corporate
Treasurer (facsimile number (954) 429-2685).
13. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling Persons referred to in Sections 7 and 8 hereof,
and no other Person will have any right or obligation hereunder.
14. Severability of Provisions. Any covenant, provision, agreement or
term of this Agreement that is prohibited or is held to be void or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof.
34
<PAGE>
15. Miscellaneous. This Agreement constitutes the entire agreement and
understanding of the parties hereto with respect to the matters and transactions
contemplated hereby and supersedes all prior agreements and understandings
whatsoever relating to such matters and transactions. Neither this Agreement nor
any term hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the party against whom enforcement of
the change, waiver, discharge or termination is sought. The headings in this
Agreement are for the purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
17. Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York without regard to any
otherwise applicable principles of conflicts of laws.
35
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us one of the counterparts duplicate
hereof, whereupon it will become a binding agreement between the Transferor, ALF
L.P. and World Omni and the Underwriters in accordance with its terms.
Very truly yours,
WORLD OMNI LEASE SECURITIZATION L.P.
By: WORLD OMNI LEASE SECURITIZATION LLC,
its General Partner
By: __________________________
Patrick C. Ossenbeck
Assistant Treasurer
AUTO LEASE FINANCE L.P.
By: AUTO LEASE FINANCE LLC,
its General Partner
By: ___________________________
Patrick C. Ossenbeck
Assistant Treasurer
WORLD OMNI FINANCIAL CORP.
By: ___________________________
Patrick C. Ossenbeck
Assistant Treasurer
CONFIRMED AND ACCEPTED, as of the date first above written.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: ___________________________
Name:
Title:
For itself and as Representative of the other Underwriters named in Schedule I
hereto.
36
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount Principal Amount Principal Amount Principal Amount
Name of Underwriter of Class A-1 of Class A-2 of Class A-3 of Class A-4
- ------------------- Notes Notes Notes Notes
----- ----- ----- -----
<S> <C> <C> <C> <C>
Credit Suisse First Boston Corporation ............. $169,850,000 $173,800,000 $161,950,000 $138,796,285
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................... $169,850,000 $173,800,000 $161,950,000 $138,796,285
First Union Capital Markets, a division
of Wheat First Securities, Inc. .................. $ 30,100,000 $ 30,800,000 $ 28,700,000 $ 24,596,810
NationsBanc Montgomery Securities LLC .............. $ 30,100,000 $ 30,800,000 $ 28,700,000 $ 24,596,810
Salomon Smith Barney Inc. .......................... $ 30,100,000 $ 30,800,000 $ 28,700,000 $ 24,596,810
Total ....................................... $430,000,000 $440,000,000 $410,000,000 $351,383,000
</TABLE>
Exhibit 10.17
DECLARATIONS
AUTO RESIDUAL VALUE INSURANCE POLICY
1. INSURED: Policy Number: XXXXXXXX
World Omni Financial Corp. as
Servicer (and any successor FEDERAL INSURANCE COMPANY
servicer), World Omni Lease Incorporated under the laws of
Securitization L.P., VT Inc. Indiana, a stock insurance company,
as Origination Trustee of herein called the Company
World Omni LT, and The Bank
of New York, as Trustee for
the World Omni 1998-A Automobile
Lease Securitization Trust, Auto
Lease Finance L.P.
- --------------------------------------------------------------------------------
2. ADDRESS OF INSURED: 120 N.W. 12th Avenue
Deerfield Beach, Florida 33442
3. POLICY PERIOD: From ________ 1998 to _________ 2003
4. LIMIT OF LIABILITY: The maximum Limit of Liability for
any one Leased Vehicle is the lesser
of (a) $60,000 or (b) the Residual
Value of such Leased Vehicle.
5. POLICY PREMIUM: [__]% of the Total Residual Values
F E D E R A L I N S U R A N C E C O M P A N Y
- --------------------------- ---------------------------------------
Date Authorized Representative
- --------------------------------------------------------------------------------
Auto Residual Value Insurance Policy Page 1 of 8
<PAGE>
In consideration of the payment of the premium charged and subject to the
Declarations, conditions, provisions and other terms of this Policy, the Company
agrees as follows:
SECTION 1 - INSURING CLAUSE
The Company shall indemnify the Insured for Insured Residual Value Loss Amount.
No amount shall be payable by the Company hereunder, except in accordance with
Section 3.03 of the Securitization Trust Agreement.
SECTION 2 - DEFINITIONS
When used with respect to insurance under this contract:
A. Approved Residual Value Publication means either:
(a) World Omni National VT Accounts Residual Lease Guide/Dealer Bulletins;
(b) World Omni/Southeast Toyota Finance Residual Lease Guide/Dealer
Bulletins; or
(c) other Lease Guides and Dealer Bulletins published by World Omni
Financial Corp. and furnished to originating dealers.
B. Lease Agreement means the closed-end motor vehicle lease agreement for a
Leased Vehicle.
C. Insured means the entities named in Item 1 of the Declarations and its duly
authorized agents as notified to the Company.
D. Insured Residual Value Loss Amount shall have the meaning as defined in
Section 1.01 of the Securitization Trust Agreement.
E. Leased Vehicle shall mean an automobile or light duty truck which is the
subject of a retail closed-end lease contract included in the World Omni
1998-A Automobile Lease Securitization Trust, and scheduled and on file
with the Company in accordance with Section 3.A of this Policy.
F. Matured Vehicle means any Leased Vehicle returned to the servicer in
accordance with the terms of the related Lease Agreement.
G. Proof of Loss Documentation shall mean the schedule attached to this Policy
as Exhibit 1 which outlines the information that may be requested by the
Company from the Insured in the event of a claim.
H. Residual Value shall mean the residual value of a Leased Vehicle as stated
in the Lease Agreement for such Leased Vehicle. The Residual Value shall be
calculated utilizing the Approved Residual Value Publication. The Residual
Value of a Leased Vehicle shall be adjusted as provided in the Approved
Residual Value Publication for additions and deductions due to the presence
or absence of optional equipment. In the event a claim is made for under
this Policy, all Residual Value calculations are subject to audit by the
Company.
- --------------------------------------------------------------------------------
Auto Residual Value Insurance Policy Page 2 of 8
<PAGE>
I. Revolving Period shall have the meaning as defined in the Supplement to the
Trust Agreement.
J. Securitization Trust Agreement means the "Securitization Trust Agreement"
dated as of ______ between WORLD OMNI LEASE SECURITIZATION L.P. and THE
BANK OF NEW YORK AS INDENTURE TRUSTEE, attached hereto and made part of
this Policy.
K. Supplement to the Trust Agreement means the "SUPPLEMENT 1998-A TO THE TRUST
AGREEMENT" dated as of _______ between AUTO LEASE FINANCE L.P. and
___________as Trustee of WORLD OMNI L.T.
L. Termination Report means a monthly list of each Leased Vehicle for which
the Lease Agreement terminated in the prior month. Such report shall be
submitted within 30 days after the end of each month and include the
following as respects each Leased Vehicle:
1. make, model, and Vehicle Identification Number;
2. Residual Value;
3. Manufacturer's Suggested Retail Price and Capitalized Cost;
4. Lease Origination Date and Lease Termination Date;
5. date Lease Agreement was terminated; and
6. such other information as may be reasonably requested by the Company.
M. Total Residual Values means the sum of the Residual Values for all Leased
Vehicles.
N. Vehicle Schedule means a schedule of all Leased Vehicles. The Insured must
provide the Vehicle Schedule at the inception date of the Policy, and
thereafter within thirty days after each month of the Revolving Period.
Such schedule shall list the following as respects each Leased Vehicle:
1. make, model, and Vehicle Identification Number;
2. Residual Value;
3. Manufacturer's Suggested Retail Price and Capitalized Cost;
4. Lease Origination Date and Lease Termination Date;
5. amount of Premium due; and
6. such other information as may be reasonably requested by the Company.
SECTION 3 - CONDITIONS PRECEDENT TO LIABILITY
The Company shall not be liable for any Insured Residual Value Loss Amount with
respect to any Leased Vehicle, unless the following conditions have been
fulfilled:
A. VEHICLE SCHEDULE AND PREMIUM PAYMENT
At inception of this Policy and within thirty (30) days of the end of each
month during the Revolving Period, the Insured shall furnish to the Company
a Vehicle Schedule and shall tender the appropriate premium therefor.
The Insured shall pay a premium for each Leased Vehicle in the amount of
[__]% of the Residual Value of such Leased Vehicle on the date which the
Vehicle Schedule listing such Leased Vehicle is submitted to the Company.
- --------------------------------------------------------------------------------
Auto Residual Value Insurance Policy Page 3 of 8
<PAGE>
B. TERMINATION REPORT
On a monthly basis through out the Policy Period, the Insured shall furnish
to the Company a Termination Report.
C. AMENDMENTS
Any amendment to any of the documents (on file with the Company) which
would have a material impact the on the insurance provided hereunder, must
be submitted to and approved by the Company prior to use. Such approval
shall not be unreasonably withheld.
D. DISPOSITION OF MATURED VEHICLES
All Matured Vehicles shall be sold as soon as practicable after such
Matured Vehicle has been returned to the servicer, at the Insured's expense
and in accordance with the policies and procedures on file with the
Company.
SECTION 4 - EXCLUSIONS
This Policy does not directly or indirectly cover loss caused by or attributable
to:
A. physical or mechanical damage, destruction or disappearance of any Leased
Vehicle;
B. fraudulent, dishonest, criminal, or malicious acts of the Insured, the
lessee, or any agent, servant, or employee of either;
C. the inability of the Insured to obtain possession of any Leased Vehicle on
or after the Lease Termination Date (subject to any rights of the obligor
to extend the Lease Agreement as permitted therein, or purchase of the
Leased Vehicle);
D. any vehicle which is not produced by the original manufacturer to U.S.
specifications and standards; or
E. commercial use of any vehicle as a taxi cab, public omnibus, livery,
sightseeing conveyance, or for any carrying of goods or passengers for
hire.
SECTION 5 - GENERAL POLICY PROVISIONS
A. PAYMENT OF LOSS
The Insured shall be entitled to make a claim for payment under this Policy
provided that such claim is made in accordance with Section 3.03(e) of the
Securitization Trust Agreement.
The Company shall pay to the Insured the Insured Residual Value Loss Amount
within five (5) calendar days after the Insured provides written provides
written notice of claim as described in Section 5.B of this Policy. In the
event the Company asserts a basis for not paying a claim hereunder, the
Company shall, notwithstanding any other provision of this Policy, pay such
claim and thereafter assert its rights for non-payment of a claim under
Section 5.M hereunder.
- --------------------------------------------------------------------------------
Auto Residual Value Insurance Policy Page 4 of 8
<PAGE>
B. NOTICE OF LOSS
In the event of a claim under this policy, the Insured shall give written
notice of claim to the Company as soon as practicable, and make available
copies of all readily available documentation the Insured has on file. Such
written notice of claim must state the underlying numbers and calculations
used as the basis for determining such claim, in accordance with the
definition of Insured Residual Value Loss Amount. The Insured shall give
the Company full cooperation and such information as it may reasonably
require. At the Company's request, the Insured shall submit Proof of Loss
Documentation to the Company as soon as practicable but not later than
thirty (30) days after requested.
Notice to the Company under this Policy shall be given in writing addressed
to:
<TABLE>
<S> <C>
Notice of Claim: All Other Notices:
Home Office Claims Department Manager, Department of Financial Institutions
Chubb Group of Insurance Companies Chubb Group of Insurance Companies
15 Mountain View Road 15 Mountain View Road
Warren, NJ 07059 Warren, NJ 07059
</TABLE>
Such notice shall be effective on the date of receipt by the Company at
such address.
C. LIMIT OF LIABILITY
The maximum Limit of Liability for any Leased Vehicle is the lesser of (a)
$60,000 or (b) the Residual Value of such Leased Vehicle.
D. TERMINATION
This Policy may not be canceled by the Company.
This Policy shall terminate at the earliest of the following:
(i) the expiration of the Policy Period as stated in the Declarations;
or
(ii) the termination of the Trust in accordance with section 7.01 of
the Securitization Trust Agreement.
The premium for this Policy is non-refundable and fully earned at the
inception date of this Policy.
E. PREMIUM
The Insured shall pay the Company a policy premium in the amount of [__]%
of the Total Residual Values. Premium shall be paid as each Leased Vehicle
is reported in accordance with Section 3.A of this Policy. Premium due or
received by the Company shall be non-refundable and fully earned.
F. EXAMINATION OF RECORDS
The Insured shall, by mutual agreement with the Company as to time and
place, and as often as may be reasonably required during the term of this
Policy and up to one year following the date the last Leased Vehicle
reached its lease termination date, produce for examination by the Company
or its duly authorized representatives, all books and records, inventories
and accounts relating to this Policy.
- --------------------------------------------------------------------------------
Auto Residual Value Insurance Policy Page 5 of 8
<PAGE>
G. INSPECTION
The Company or its designee or representative, shall have the right, but
not the obligation to inspect the Leased Vehicles at any time; and the
Company, insofar as it is within the Insured's power, shall cooperate with
the Company in any such inspection. However, under no circumstances shall
the Company or its designee or representative, have the right to inspect a
Leased Vehicle which is in the possession of an obligor.
H. ASSIGNMENT
This Policy shall not be assigned or transferred by the Insured without the
prior written consent of the Company, provided, however, such prior written
consent shall not be required in connection with any financing by the
Insured of the Leased Vehicles.
I. SUBROGATION
In the event of any payment under this Policy, the Company shall be
subrogated to all the Insured's rights of recovery therefore against any
person or entity other than the entity named in Item 1 of the Declarations
or any Additional Insured named in a written endorsement to the Policy and
the Insured shall execute and deliver all instruments and papers and do
whatever else is necessary to secure such rights. The Insured shall do
nothing to prejudice such rights.
J. MISREPRESENTATION
No misrepresentations or breach of warranty made by the Insured on its
behalf in the negotiation of this Policy, affects the Company's obligation
under this Policy, unless the Company relies on it, and it is either (i)
material or made with intent to deceive, or (ii) the facts misrepresented
or falsely warranted materially contribute to the Insured Residual Value
Loss Amount.
No failure of a condition under Section 3 of this Policy, and no breach of
a warranty affect the Company's obligation under this Policy unless it
exists at the time of a claim being made for Insured Residual Value Loss
Amount, and either (i) materially increases the risk at the time of a claim
being made for the Insured Residual Value Loss Amount or (ii) materially
contributes to the Insured Residual Value Loss Amount. The provisions of
this condition do not apply to failure to tender payment of Premium.
K. ACTION AGAINST THE COMPANY
No actions shall lie against the Company unless, as a condition precedent
thereto, there shall have been full compliance by the Insured with all the
terms of this Policy.
L. ARBITRATION
It is hereby understood and agreed that all disputes or differences which
may arise under or in connection with this Policy, whether arising before
or after termination of this Policy, including any determination of the
amount of the Insured Residual Value Loss Amount, shall be submitted to the
American Arbitration Association under and in accordance with its then
prevailing commercial arbitration rules. The arbitrators shall be chosen in
the manner and within the time frames provided by such rules. If permitted
under such rules, the arbitrators shall be three disinterested individuals
having knowledge of the legal, corporate management, or insurance issues
relevant to the matters in dispute.
Any party may commence such arbitration proceeding in New York, New York;
Atlanta, Georgia; Chicago, Illinois; or Denver, Colorado. The arbitrators
shall give due consideration to the general principles of Delaware law in
the construction and interpretation of the provisions of this policy;
provided, however, that the terms, conditions, provisions and exclusions of
this Policy are to be construed in an evenhanded fashion as between the
parties,
- --------------------------------------------------------------------------------
Auto Residual Value Insurance Policy Page 6 of 8
<PAGE>
including without limitation, where the language of this Policy is
alleged to be ambiguous or otherwise unclear, the issue shall be resolved
in the manner most consistent with the relevant terms, conditions,
provisions or exclusions of the Policy (without regard to the authorship of
the language, the doctrine of reasonable expectation in favor of either
party or parties and in accordance with the intent of the parties.)
The written decision of the arbitrators shall be provided to both parties
and shall be binding on them. The arbitrators' award shall not include
punitive damages, attorney fees or other costs.
Each party shall equally bear the expenses of arbitration.
M. CONFORMITY WITH STATUTE
Where the terms of this Policy and forms attached thereto are in conflict
with the statutes wherein this Policy is issued, such are hereby amended to
conform to those statutes. This Policy shall be deemed to be issued under,
and shall be governed by and construed under, the laws of the State of
Florida.
N. DECLARATIONS
By acceptance of this Policy, the Insured agrees that the statements in the
Declarations are the agreements and representations, and that this Policy
supersedes all agreements existing between the Insured and the Company
relating to this insurance.
O. BANKRUPTCY
Bankruptcy or insolvency of the Insured or the Insured's estate shall not
relieve the Company of any of its obligations hereunder. If, however, the
Insured be adjudged bankrupt or insolvent within the Policy term, this
Policy shall cover the Insured's legal representatives for the unexpired
portion of such term.
P. WAIVER
No waiver or modification of this Policy shall be effective unless it be in
writing and signed by a duly authorized officer of the Company and World
Omni Financial Corp. as Servicer. The failure of the Company to enforce any
provision of this Policy shall not constitute a waiver by the Company of
any such provision. The past waiver of a provision by the Company shall not
constitute a course of conduct or a waiver in the future of that same
provision.
Q. SERVICE OF SUIT
Subject to Section 5.M of this Policy, it is agreed that in the event of
failure of the Company to pay any amount claimed to be due hereunder, the
Company, at the request of the Insured, will submit to the jurisdiction of
a court of competent jurisdiction within the United States. Nothing in this
condition constitutes or should be understood to constitute a waiver of the
Company's right to commence an action in any court of competent
jurisdiction in the United States, to remove an action to a United States
District Court or to seek a transfer of a case to another court as
permitted by the laws of the United States or of any stated in the United
States. It is further agreed that service of process in such suite may be
made upon Counsel, General Counsel Department, Federal Insurance Company,
15 Mountain View Road, Warren, New Jersey 07059, or his or her
representative, and that in any suit instituted against the Company upon
this Policy, the Company will abide by the final decision of such court or
of any appellate court in the event of any appeal.
- --------------------------------------------------------------------------------
Auto Residual Value Insurance Policy Page 7 of 8
<PAGE>
Further, pursuant to any statute of any state, territory, or districts of
the United States which makes provision therefor, the Company hereby
designates the Superintendent, Commissioner, or Director of Insurance, or
other officer specified for that purpose in the statute, or his or her
successor or successors in office as its true and lawful attorney upon whom
may be served any lawful process in any action, suit, or proceeding
instituted by or on behalf of the Company or any beneficiary hereunder
arising out of this Policy of insurance, and hereby designates the above
named Counsel as the person to whom the said officer is authorized to mail
such process or a true copy thereof.
R. TITLES OF PARAGRAPHS
The titles of the various paragraphs of this Policy and endorsements, if
any attached to this Policy are inserted solely for convenience or
reference and are not to be deemed in any way to limit or affect the
provisions to which they relate.
IN WITNESS WHEREOF, the Company has caused this Policy to be signed by a duly
authorized representative of the Company.
- --------------------------------------------------------------------------------
Auto Residual Value Insurance Policy Page 8 of 8
<PAGE>
Exhibit 1
PROOF OF LOSS DOCUMENTATION
1. Detailed calculation of Insured Residual Value Loss Amount including:
a. Investor Percentage with respect of Loss Amounts for the related
Collection Period;
b. The portion of the Residual Value Loss Amount incurred during such
Collection Period that is allocable to the 1998-A SUBI Interest;
and
c. The Shortfall, if any, described in clause (ii) of Section 3.03(e)
of the Securitization Trust Agreement.
2. Detailed Calculation of Residual Value Loss Amount including:
a. The amount transferred to the 1998-A SUBI Collection Account from
the Residual Value Surplus account on the related Deposit Date
pursuant to clauses (i) and (ii) of Section 12.03(b) of the 1998-A
SUBI Supplement
b. The sum of:
(i) the Residual Values of all 1998-A Leased Vehicles included in
Matured Leased Vehicle Inventory as of the last day of the
related Collection Period but which as of such day had
remained unsold and not otherwise disposed of by the Service
for at least two full Collection Periods;
(ii) any excess of the sum of the booked Residual Values of all
Matured Vehicles sold or otherwise disposed of from Matured
Leased Vehicle Inventory during the related Collection Period
over Net Matured Vehicle Proceeds; and
(iii) the Early Termination Amount (i.e. the sum of the remaining
Discounted Principal Balances, as of the end of the related
Collection Period, of Early Termination Contracts that became
Early Termination Contracts during the related Collection
Period, such Discounted Principal Balance calculated without
reference to payments made in the form of non-cash items).
c. The excess of 2.b. over 2.a.
d. Individual Leased Vehicle Detail for 2.b.(i) as follows:
(i) Vehicle Identification Number
(ii) Vehicle Year
(iii) Vehicle Make
(iv) Vehicle Model
(v) Original Equipment Cost
(vi) Original Residual Value
(vii) Lease Termination Date
(viii) Days Not Sold, beginning on the date when the Vehicle became
a Matured Vehicle
- --------------------------------------------------------------------------------
Auto Residual Value Insurance Policy
<PAGE>
e. Individual Leased Vehicle Detail for 2.b.(ii) as follows:
(i) Vehicle Identification Number
(ii) Vehicle Year
(iii) Vehicle Make
(iv) Vehicle Model
(v) Original Equipment Cost
(vi) Original Residual Value
(vii) Lease Termination Date
(viii) Vehicle Proceeds
(ix) Total Loss
f. Individual Leased Vehicle Detail for 2.b.(iii) as follows:
(i) Vehicle Identification Number
(ii) Vehicle Year
(iii) Vehicle Make
(iv) Vehicle Model
(v) Original Equipment Cost
(vi) Original Residual Value
(vii) Lease Termination Date
(viii) Pay off Amount
(ix) Total Loss
- --------------------------------------------------------------------------------
Auto Residual Value Insurance Policy
Exhibit 10.18
FORM OF
SCHEDULE
to the
Master Agreement
dated as of November ____, 1998
between
MERRILL LYNCH DERIVATIVE PRODUCTS AG
("Party A")
and
PNC BANK, DELAWARE, AS OWNER TRUSTEE,
for the Exclusive Benefit of the Class A Noteholders of the
World Omni 1998-A Automobile Lease Securitization Trust ("Party B"),
under the Securitization Trust Agreement
dated as of [________ __,] 1998, as amended, between
World Omni Lease Securitization L.P., as Transferor,
PNC Bank, Delaware, as Owner Trustee, and
The Bank of New York, as Indenture Trustee
Part 1
Termination Provisions
In this Agreement:-
(a) "Specified Entity" will not apply to Party A and will not apply to Party B.
(b) "Specified Transaction" will have the meaning specified in Section 14 of
this Agreement.
(c) All of the Events of Default specified in Section 5(a), including, but not
limited to, the "Cross Default" provisions of Section 5(a)(vi), will apply to
Party A.
"Specified Indebtedness" will have the meaning specified in Section 14
of this Agreement unless another meaning is specified here: No change
from Section 14.
"Threshold Amount" means, in respect of Party A, U.S. $35,000,000 or
its equivalent in other currencies.
Only the following Events of Default will apply to Party B:-
Section 5(a)(i), "Failure to Pay or Deliver"; and
Section 5(a)(vii), "Bankruptcy".
<PAGE>
Notwithstanding any other provision of this Agreement, no Event of Default or
Potential Event of Default will arise under Section 5(a)(i) with respect to
Party B unless and until Party B fails to pay any amount then due and owing to
Party A under this Agreement on or before the third Distribution Date following
the Distribution Date on which such amount was originally due. If on any
Distribution Date (a "Current Distribution Date"), any amount is due and owing
to Party A with respect to a prior Distribution Date or Distribution Dates
(including any interest accrued thereon)(collectively, a "Prior Amount"), such
Prior Amount shall not be considered in determining the amount of any net
payment due from one party to the other party under Section 2(c) with respect to
such Current Distribution Date (a "Section 2(c) Amount"), nor set off against or
recouped from any Section 2(c) Amount due from Party A to Party B on such
Current Distribution Date. If, on any Distribution Date, the funds (the
"Available Funds") that are available in the Distribution Account to pay any and
all amounts then due and owing to Party A under this Agreement and any and all
amounts then due and owing to the Class A Noteholders under the Indenture are
insufficient to pay such amounts in full on such Distribution Date, the
Available Funds shall be allocated among and paid to Party A and the Class A
Noteholders on a pro rata basis based on such amounts on such Distribution Date.
(d) All of the Termination Events specified in Section 5(b), including, but not
limited to, the "Credit Event Upon Merger" provisions of Section 5(b)(iv) and
the "Additional Termination Event" provisions of Section 5(b)(v), will apply to
Party A.
Only the following Termination Events will apply to Party B:-
Section 5(b)(i), "Illegality"; and
Section 5(b)(ii), "Tax Event".
(e) The "Automatic Early Termination" provision of Section 6(a) will apply to
Party A and will not apply to Party B.
(f) Payments on Early Termination. For the purpose of Section 6(e) of this
Agreement, the Second Method and Market Quotation will apply. After the
occurrence of an Event of Default or a Termination Event with respect to Party A
or Party B, if the designation of an Early Termination Date would (but for the
immediately following sentence of this Part 1(f)) result in a payment being owed
to Party A under Section 6(e) (a "Party A Early Termination Payment"), then no
Early Termination Date may be designated under this Agreement for a period of at
least 30 calendar days, which period shall commence on the date that the
Defaulting Party or an Affected Party receives notice that such period has
commenced; provided, however, that during any such 30-day period, the parties
shall be required to cooperate in good faith, and each party shall be required
to use reasonable commercial efforts (which will not require either such party
to incur a loss, excluding immaterial incidental expenses), to find a
replacement counterparty to assume Party A's position hereunder on the same
terms as this Agreement mutatis mutandis, or else with such amendments to the
terms of this Agreement as have been approved by the parties and each of the
Rating Agencies (a "Replacement Transaction") and to cause any such replacement
counterparty that does assume Party A's position hereunder to pay Party A the
fair market value of Party A's position hereunder. Notwithstanding any other
provision of this Agreement, Party B shall have no obligation to make any Party
A Early Termination Payment following an Early Termination Date except as
follows:
-2-
<PAGE>
(i) after an Indenture Event of Default occurs and a sale or
disposition of the SUBI has been completed, (x) if no Event of Default
has occurred with respect to Party A under this Agreement, Party A
shall have a right to receive the Party A Early Termination Payment, if
any, on a pari passu basis with all distributions to be made to the
Class A Noteholders under the Indenture, or (y) if an Event of Default
has occurred with respect to Party A under this Agreement, Party A
shall have a right to receive the Party A Early Termination Payment, if
any, only after all distributions provided for in the Indenture to
Class A Noteholders and the Class B Noteholders have been made in full;
or
(ii) in any other circumstance, only to the extent that, from time to
time, funds are available to make some or all of the Party A Early
Termination Payment, if any, out of any amounts that otherwise would be
distributable to the Transferor on each Distribution Date pursuant to
Section 3.03(c) of the Securitization Trust Agreement.
(g) "Termination Currency" means United States Dollars.
(h) If the counterparty rating of Party A from Standard & Poor's, a division of
The McGraw Hill Companies, Inc., or any successor rating agency thereto ("S&P"),
is withdrawn, suspended or falls to or below "AA-", or if the counterparty
rating of Party A from Moody's Investors Service, Inc. or any successor rating
agency thereto ("Moody's") is withdrawn, suspended or falls to or below "Aa3",
or if the counterparty rating of Party A from Fitch IBCA, Inc. or any successor
rating agency thereto ("Fitch") is withdrawn, suspended or falls to or below
"AA-", then Party A shall, within 30 days, either
(i) execute a collateral agreement with Party B and a third-party
collateral agent providing for the collateralization of Party A's
obligations under all Transactions as measured by the estimated
Settlement Amount, such amount to be established by the Calculation
Agent weekly and on demand, collateral to be marked-to-market weekly
(provided that the collateral, collateral levels, collateral agent and
terms of such collateral agreement must all be satisfactory to Party B
and each of the Rating Agencies) (a "Collateral Agreement"), or
(ii) procure a Replacement Transaction; provided, however, that during
such period, Party A and Party B shall be required to cooperate in good
faith, and each party shall be required to use reasonable commercial
efforts (which will not require either such party to incur a loss,
excluding immaterial incidental expenses), to procure a Replacement
Transaction, and provided further that Party A shall be required to
accept any Replacement Transaction offered by Party B, unless within
two Local Business Days after any such offer is made, Party A procures
its own Replacement Transaction.
-3-
<PAGE>
(i) Additional Termination Event will apply to this Agreement. An Additional
Termination Event shall occur if (x) the counterparty rating of Party A from S&P
is withdrawn, suspended or falls to or below "AA-", or the counterparty rating
of Party A from Moody's is withdrawn, suspended or falls to or below "Aa3", or
the counterparty rating of Party A from Fitch is withdrawn, suspended or falls
to or below "AA-", and (y) Party A has not, within 30 days, executed a
Collateral Agreement or procured a Replacement Transaction (pursuant to Part
1(h)(ii)). For the purpose of the foregoing Termination Event, the "Affected
Party" shall be Party A.
(i) After the occurrence of an Event of Default (other than one under clause
(i), (vii) or (viii) of Section 5(a)) or a Termination Event (other than one
under Section 5(b)(i)) with respect to Party A, no Early Termination Date shall
be declared by Party B without the prior approval of all of the Class A
Noteholders.
(j) Section 5(a)(i) of this Agreement is amended by deleting the words "third
Local Business Day" and inserting the words "fifth calendar day".
(k) Section 6(b)(ii) of this Agreement is hereby amended by adding at the end of
the first paragraph the following:
, provided that the party seeking to make the transfer to avoid a
Termination Event shall deliver to Party B (in the case of transfers by
Party A) and to Party A (in the case of transfers by Party B) written
confirmation from each Rating Agency that such transfer will not result
in the then current rating of the Class A Notes being withdrawn or
lowered.
Part 2
Tax Representations
(a) Payer Representations. For the purpose of Section 3(e) of this Agreement,
Party A will make the following representation and Party B will make the
following representation:-
It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, of any Relevant Jurisdiction to
make any deduction or withholding for or on account of any Tax from any payment
(other than interest under Section 2(e), 6(d)(ii) or 6(e) of this Agreement) to
be made by it to the other party under this Agreement. In making this
representation, it may rely on (i) the accuracy of any representation made by
the other party pursuant to Section 3(f) of this Agreement, (ii) the
satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this
Agreement and the accuracy and effectiveness of any document provided by the
other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement, and
(iii) the satisfaction of the agreement of the other party contained in Section
4(d) of this Agreement, provided that it shall not be a breach of this
representation where reliance is placed on clause (ii) and the other party does
not deliver a form or document under Section 4(a)(iii) by reason of material
prejudice to its legal or commercial position.
-4-
<PAGE>
(b) Payee Representations. For the purpose of Section 3(f) of this Agreement,
Party A makes the following representation, and Party B makes no
representation:-
Each payment to be received by it in connection with this Agreement
will be effectively connected with its conduct of a trade or business in the
Specified Jurisdiction.
If such representation applies, then:
"Specified Jurisdiction" means with respect to Party A, the United
States of America.
Part 3
Documents to be Delivered
For the purpose of Section 4(a) of this Agreement, each party agrees to deliver
the following documents as applicable:-
(a) Tax forms, documents or certificates to be delivered are:-
Party Required to deliver Document Form/Document/Certificate Date by which to
be Delivered
Party A
A duly completed and executed Form 4224 (or any successor thereto) in duplicate.
To be delivered (i) before the first payment date under this Agreement, (ii)
before the first payment date in any successive taxable year of Party A, (iii)
promptly upon reasonable demand by Party B, or (iv) promptly upon learning that
any such form previously delivered by Party A has become obsolete or incorrect.
Party A/Party B.
Any document required or reasonably requested to allow the other party to make
payments under this Agreement without any deduction or withholding for or on
account of any Tax or with such deduction or withholding at a reduced rate.
Promptly upon the earlier of (i) reasonable demand by the other party and (ii)
learning that the form or document is required.
(b) Other Documents to be delivered are:-
Party Required to deliver Document Form/Document/Certificate Date by which to
be Delivered Covered by Section 3(d) Representation
Party A
Annual audited financial statements prepared in accordance with generally
accepted accounting principles in the country in which the party is organized.
Promptly after request.
Yes.
-5-
<PAGE>
Party A
Quarterly unaudited financial statements prepared in accordance with generally
accepted accounting principles in the country in which the party is organized.
Promptly after request.
Yes.
Party B
All statements sent to Class A Noteholders by the Indenture Trustee Promptly
following delivery thereof by the Indenture Trustee.
Yes.
Party A/Party B
Certificate or other documents evidencing the authority of the party entering
into this Agreement or a Confirmation, as the case may be. At or promptly
following the execution of this Agreement, and, if a Confirmation so requires it
on or before the date set forth therein.
Yes.
Party A
Opinion of counsel substantially in the form of Exhibit [_] hereto. At or
promptly following the execution of this Agreement, and, if a Confirmation so
requires it, on or before the date specified therein.
No.
Party B
Opinion of counsel substantially in the form of Exhibit [_] hereto. At or
promptly following the execution of this Agreement, and, if a Confirmation so
requires it, on or before the date specified therein.
No.
Part 4
Miscellaneous
(a) Addresses for Notices: For the purpose of Section 12(e) of this Agreement:-
Address for notices or communications to Party A:-
Merrill Lynch Derivative Products AG
Stauffacherstrasse 5, 1st Floor
8004 Zurich, Switzerland
Attention: Manager
Facsimile No: 011-411-297-7859
Telephone No: 011-411-297-7800
(For all purposes)
-6-
<PAGE>
With a copy to:
Merrill Lynch & Co., Inc.
Office of General Counsel
250 Vesey Street
New York, NY 10281
Attention: Laurence D. Dobosh
(For purposes of notices under Sections 5, 6, 7 and 12(b))
Address for notices or communications to Party B:-
Address: ____________________________________________________________________
Attention: ___________________________________________________________
Telex No.: ___________________ Answerback: _________________
Facsimile No.: ___________________ Telephone No: _________________
(b) Process Agent. For the purpose of Section 13(c):-
Party A appoints as its Process Agent:
Merrill Lynch & Co., Inc.
Office of General Counsel
World Financial Center
250 Vesey Street
New York, NY 10281
Attention: Laurence D. Dobosh
Party B appoints as its Process Agent: Not Applicable.
(c) Offices. The Provisions of Section 10(a) will apply to this Agreement.
(d) Multibranch Party. For the purpose of Section 10:
Party A is not a Multibranch Party.
Party B is not a Multibranch Party.
-7-
<PAGE>
(e) Calculation Agent. The Calculation Agent shall be Party B. Party A agrees
that Party B shall delegate all obligations in respect thereof as Calculation
Agent to World Omni Financial Corp. All determinations and calculations by the
Calculation Agent shall (a) be made in good faith and in the exercise of its
commercially reasonable judgment and (b) be determined, where applicable, on the
basis of then prevailing market rates or prices provided however, that all
determinations shall be subject to agreement by Party A and Party B. If Party A
and Party B are unable to agree on any calculations made hereunder, another
mutually acceptable Calculation Agent will be appointed. Subject to the
foregoing, all determinations shall be binding and conclusive in the absence of
manifest error.
(f) Credit Support Document. Details of any Credit Support Document:-
Party A:- Not Applicable
Party B:- Not Applicable.
(g) Credit Support Provider.
Credit Support Provider means in relation to Party A, Not Applicable.
Credit Support Provider means in relation to Party B, Not Applicable.
(h) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law doctrine.
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) of this Agreement
will apply to all Transactions under this Agreement.
(j) "Affiliate" will have the meaning specified in Section 14 of this Agreement.
(k) Scope of Obligations of Trustee. The parties hereto agree that:
(i) This Agreement is executed and delivered by PNC Bank, Delaware not
individually or personally but solely in its capacity as Owner Trustee,
for the exclusive benefit of the Class A Noteholders of the World Omni
1998-A Automobile Lease Securitization Trust and in the exercise of the
powers and authority conferred and vested in the Trustee under the
Securitization Trust Agreement;
(ii) Each of the representations, undertakings and agreements herein
made on the part of the Trust is made and intended not as personal
representation, undertaking or agreement by the Trustee but is made and
intended for the purpose of binding only the Trust.
-8-
<PAGE>
(l) No Bankruptcy Petition. Prior to the date that is one year and one day after
the date upon which the Trust created under the Securitization Trust Agreement
is terminated in accordance with the terms thereof, Party A shall not institute
against, or join any other person in instituting against, the trust created
thereby, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any federal or state bankruptcy or
similar law.
(m) Except as otherwise expressly provided in this Agreement, the obligations of
Party B to Party A under this Agreement shall rank pari passu with the
obligations of Party B to the Class A Noteholders.
Part 5
Other Provisions
(a) If, prior to the occurrence of an Event of Default with respect to Party B,
the Class A Notes shall be rated Baa1 or below by Moody's or BBB+ or below by
S&P, then all rights and obligations of Party A under this Agreement and all
Transactions hereunder may be assigned and delegated to Merrill Lynch Capital
Services, Inc. ("MLCS"), and Party B expressly and irrevocably consents to any
such assignment and assumption; provided, however, that it shall be a
precondition to any such assignment and assumption that Party A shall deliver to
Party B written confirmation from each Rating Agency that such transfer will not
result in the then current rating of the Class A Notes being withdrawn or
lowered. As of and from such assignment, MLCS shall succeed to all rights and
obligations of Party A under this Agreement and all Transactions hereunder.
(b) Party B acknowledges and agrees that (i) Party A is acting solely in the
capacity of an arm's-length contractual counterparty, with respect to this
Agreement and any Transaction hereunder, (ii) Party A is not acting as a
financial advisor or fiduciary of Party B (or in any similar capacity) with
respect to this Agreement and any Transaction hereunder and (iii) any advice
given by Party A under or in connection with this Agreement or any Transaction
is and will be merely incidental to the provision of Party A's services
hereunder and does not and will not serve as a primary basis of any investment
decision by Party B. Party B represents to Party A (which representation shall
be deemed to be repeated by Party B on each date on which a Transaction is
entered into) that its decision to enter into such Transaction has been based
solely on the independent evaluation of Party B and its representatives.
(c) Amendments. Section 9(b) of this Agreement is hereby amended by adding the
following after the word "system" in the last line thereof:
, provided however, that all such amendments, modifications or waivers
shall require the written affirmation of each Rating Agency that such
amendment, modification or waiver shall not adversely affect the then
current rating of the Class A Notes.
-9-
<PAGE>
(d) Local Business Days. For all purposes of this Agreement, Local Business Day
shall mean any day other than Saturday, Sunday or a day on which banking
institutions in (i) New York, New York, (ii) Chicago, Illinois, (iii)
Wilmington, Delaware, (iv) Deerfield Beach, Florida, or (v) Mobile, Alabama, are
authorized or obligated by law, executive order or government decree to be
closed.
(e) Transfer. Section 7 of this Agreement is hereby amended by:
(i) adding the phrase "(which consent may not be unreasonably
withheld)" after the word "party" and before the comma on the third
line thereof; and
(ii) adding at the end thereof:
Any party making any such transfer shall deliver to the other
party written confirmation from each Rating Agency that such
transfer will not result in the then current rating of the
Class A Notes being withdrawn or lowered.
(f) Additional Definitions. Unless otherwise defined below or in the
Confirmation, capitalized terms used in this Schedule or in the Confirmation
shall have the meanings set forth in the Securitization Trust Agreement dated as
of [________ __,] 1998, as amended, between World Omni Lease Securitization
L.P., as Transferor, and PNC Bank, Delaware, as Owner Trustee.
"Class A Notes" shall mean the World Omni 1998-A Automobile Lease
Securitization Trust Class A Floating Rate Automobile Lease Asset Backed Notes.
"Class A Noteholders" shall mean holders of the Class A Notes.
"Class B Notes" shall mean the World Omni 1998-A Automobile Lease
Securitization Trust Class B Floating Rate Automobile Lease Asset Backed Notes.
"Class B Noteholders" means holders of the Class B Notes.
"Distribution Account" shall have the meaning assigned to such term in
the Securitization Trust Agreement.
"Distribution Date" shall have the meaning assigned to such term in the
Securitization Trust Agreement.
"Indenture" shall mean that certain dated as of [___________ __,] 1998,
between the World Omni 1998-A Automobile Lease Securitization Trust and The Bank
of New York, as Indenture Trustee.
"Indenture Event of Default" shall have the meaning assigned to the
term "Event of Default" in the Indenture.
"Rating Agency" shall mean each of S&P, Moody's and Fitch.
"Securitization Trust Agreement" shall mean that certain Securitization
Trust Agreement dated as of [________ __,] 1998, as amended, between World Omni
Lease Securitization L.P., as Transferor, PNC Bank, Delaware, as Owner Trustee,
and The Bank of New York, as Indenture Trustee.
"SUBI" shall have the meaning assigned to such term in the
Securitization Trust Agreement.
"Transferor" shall have the meaning assigned to such term in the
Securitization Trust Agreement.
-10-
<PAGE>
CONFIRMATION
DATE: November __, 1998
TO: PNC Bank, Delaware, as Owner Trustee,
for the Exclusive Benefit of the Class A Noteholders of the
World Omni 1998-A Automobile Lease Securitization Trust, under
the Securitization Trust Agreement dated as of [________ __,]
1998, as amended, between
World Omni Lease Securitization L.P., as Transferor, PNC Bank,
Delaware, as Owner Trustee, and The Bank of New York, as
Indenture Trustee
Attention:
FROM: Merrill Lynch Derivative Products AG
SUBJECT:
The purpose of this communication is to set forth the terms and
conditions of the interest rate swap transaction entered into on the Trade Date
referred to below (the "Transaction"), between Merrill Lynch Derivative Products
AG ("Party A") and PNC Bank, Delaware, as Owner Trustee, for the Exclusive
Benefit of the Class A Noteholders of the World Omni 1998-A Automobile Lease
Securitization Trust ("Party B"), under the Securitization Trust Agreement dated
as of [________ __,] 1998, as amended (the "Securitization Trust Agreement"),
between World Omni Lease Securitization L.P., as Transferor, PNC Bank, Delaware,
as Owner Trustee, and The Bank of New York, as Indenture Trustee. This
communication constitutes a "Confirmation" as referred to in the Master
Agreement specified below.
1. This Confirmation supplements, forms a part of and is subject to the
Master Agreement, dated as of November __, 1998, and Schedule thereto between
Party A and Party B (as supplemented, the "Master Agreement"). All provisions
contained in or incorporated by reference to, such Master Agreement shall govern
this Confirmation except as expressly modified below. To the extent not defined
in the Master Agreement, the capitalized terms used herein (including, but not
limited to "Class A Note Balance", "Initial Class A Note Balance", "Distribution
Date", "Class A Note" and "Class A-4 Stated Maturity Date") have the meanings
ascribed to such terms in the Securitization Trust Agreement or, if not defined
therein, in that certain Indenture dated as of [___________ __,] 1998, between
the World Omni 1998-A Automobile Lease Securitization Trust and The Bank of New
York, as Indenture Trustee.
2. This confirmation incorporates the definitions and provisions
contained in the 1991 ISDA Definitions (as supplemented by the 1998 Supplement)
, as published by the International Swaps and Derivatives Association, Inc. (the
"Definitions"). In the event of any inconsistency between those Definitions and
this Confirmation, this Confirmation will govern.
-11-
<PAGE>
3. References in this Confirmation to a "Transaction" shall be deemed
to be references to a "Swap Transaction" for the purposes of interpreting the
Definitions, and references in the Definitions to a "Swap Transaction" shall be
deemed to be references to a "Transaction" for the purposes of interpreting this
Confirmation.
4. The terms of the particular Transaction to which this communication
relates are as follows:
Notional Amount: The Class A Note Balance as of the
immediately preceding Distribution
Date (after giving effect to
reductions in such Class A Note
Balance as of such immediately
preceding Distribution Date) or, in
the case of the first Distribution
Date, the Initial Class A Note
Balance.
Trade Date:
Effective Date:
Termination Date: The first Business Day following the
later of (x) the date on which the
Class A Note Balance is reduced to
zero and (y) the Class A-4 Stated
Maturity Date.
Fixed Amounts:
Fixed Rate Payer: Party B
Fixed Rate Payer
Payment Dates: Each Distribution Date on the Class A
Notes. Each payment by the Fixed Rate
Payer shall be made no later than
10:00 am New York, New York time on
such date.
Fixed Rate:
Fixed Rate Day Count
Fraction: 30/360
Floating Amounts:
Floating Rate Payer: Party A
Floating Rate Payer
Payment Dates: Each Distribution Date on the Class A
Notes. Each payment by the Floating
Rate Payer shall be made no later than
10:00 am New York, New York time on
such date.
-12-
<PAGE>
Floating Rate for initial
Calculation Period:
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: One Month
Spread: [Plus/Minus %] [None]
Floating Rate Day Count
Fraction: Actual/360
Reset Dates: Each Distribution Date on the Class
A Notes
Business Days: New York, New York, Chicago, Illinois,
Wilmington, Delaware, Deerfield Beach,
Florida and Mobile, Alabama
Account Details
Payments to Party A:
Payments to Party B:
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the
-13-
<PAGE>
material terms of the Swap Transaction to which this Confirmation relates and
indicates agreement to those terms.
Yours sincerely,
MERRILL LYNCH DERIVATIVE
PRODUCTS AG
By:______________________
Name:
Title:
Confirmed as of the date first above written:
PNC BANK, DELAWARE, AS OWNER TRUSTEE, for the Exclusive Benefit of the Class A
Noteholders of the World Omni 1998-A Automobile Lease Securitization Trust,
under the Securitization Trust Agreement dated as of [________ __,] 1998, as
amended, between World Omni Lease Securitization L.P., as Transferor, PNC Bank,
Delaware, as Owner Trustee, and The Bank of New York, as Indenture Trustee
By:______________________
Name:
Title:
Exhibit 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 20, 1998, with respect to the statutory-basis
financial statements of Federal Insurance Company included in Amendment No. 2 to
the Registration Statement (Form S-1 No. 333-63367) and related Prospectus of
World Omni 1998-A Automobile Lease Securitization Trust for the registration of
its Automobile Lease Asset Backed Notes.
ERNST & YOUNG LLP
New York, New York
November 6, 1998
