<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 12, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WORLD OMNI 1997-B 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 99.8% SUBI
CERTIFICATE TO THE TRUST)
WORLD OMNI LT
(ISSUER WITH RESPECT TO THE SUBI AND THE 99.8% SUBI CERTIFICATE)
AUTO LEASE FINANCE L.P.
(ORIGINATOR OF WORLD OMNI LT AND TRANSFEROR OF THE SUBI AND THE 99.8% SUBI
CERTIFICATE TO THE TRANSFEROR DESCRIBED HEREIN)
(Exact name of Registrant as specified in its charter)
---------------------
<TABLE>
<C> <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>
<C> <C>
CHARLES A.SWEET, ESQ. STUART M. LITWIN, ESQ.
WILLIAMS & CONNOLLY MAYER, BROWN & PLATT
725 TWELFTH STREET, N.W. 190 SOUTH LASALLE STREET
WASHINGTON,D.C. 20005 CHICAGO, ILLINOIS 60603
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Automobile Lease Asset Backed Notes, Class
A-1........................................ $250,000 100% $250,000 $75.76
- ---------------------------------------------------------------------------------------------------------------------------------
Automobile Lease Asset Backed Notes, Class
A-2........................................ $250,000 100% $250,000 $75.76
- ---------------------------------------------------------------------------------------------------------------------------------
Automobile Lease Asset Backed Notes, Class
A-3........................................ $250,000 100% $250,000 $75.76
- ---------------------------------------------------------------------------------------------------------------------------------
Automobile Lease Asset Backed Notes, Class
A-4........................................ $250,000 100% $250,000 $75.75
- ---------------------------------------------------------------------------------------------------------------------------------
99.8% 1997-B Special Unit of Beneficial
Interest Certificate(2).................... (3) (3) (3) (3)
=================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) The 1997-B 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 99.8%
1997-B Special Unit of Beneficial Interest Certificate (the "SUBI
Certificate") issued by World Omni LT and representing a 99.8% undivided
interest in the SUBI will then be transferred to the Owner Trustee for the
World Omni 1997-B Automobile Lease Securitization Trust issuing 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.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
WORLD OMNI 1997-B AUTOMOBILE LEASE SECURITIZATION TRUST
WORLD OMNI LEASE SECURITIZATION L.P.
AUTO LEASE FINANCE L.P.
WORLD OMNI LT
CROSS REFERENCE SHEET FURNISHED
PURSUANT TO RULE 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM AND CAPTION IN FORM S-1 CAPTION OR LOCATION IN PROSPECTUS
---------------------------- ---------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and Outside Cover Page of
Prospectus.................................................. Forepart of Registration
Statement; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus..... Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information, Risk Factors and Ratio of Earnings to
Fixed Charges............................................... Summary; Risk Factors
4. Use of Proceeds............................................. Use of Proceeds
5. Determination of Offering Price............................. *
6. Dilution.................................................... *
7. Selling Security Holders.................................... *
8. Plan of Distribution........................................ Underwriting
9. Description of Securities to be Registered.................. Summary; The Trust and the SUBI;
The Contracts; Maturity,
Prepayment and Yield
Considerations; Description of
the Notes; Security for the Notes
10. Interests of Named Experts and Counsel...................... *
11. Information With Respect to the Registrant.................. The Trust and the SUBI; The
Origination Trust; The Transferor
12. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities.................................. *
</TABLE>
- ---------------
* Answer negative or item inapplicable.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 12, 1997
PROSPECTUS
$[ ]
WORLD OMNI 1997-B
AUTOMOBILE LEASE SECURITIZATION TRUST
$[ ]
[ ]% AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-1
$[ ]
[ ]% AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-2
$[ ]
[ ]% AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-3
$[ ]
[ ]% AUTOMOBILE LEASE ASSET BACKED NOTES, CLASS A-4
WORLD OMNI LEASE SECURITIZATION L.P.
(TRANSFEROR)
WORLD OMNI FINANCIAL CORP.
(SERVICER)
The Automobile Lease Asset Backed Notes (the "Class A Notes") will be issued
by the World Omni 1997-B Automobile Lease Securitization Trust (the "Trust"), a
[Delaware business] trust formed pursuant to a Securitization Trust Agreement
between World Omni Lease Securitization L.P. (the "Transferor"), [ ], as
owner trustee (the "Owner Trustee") and [ ], as indenture trustee (the
"Indenture Trustee"). The 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 an undivided 99.8% interest in a
Special Unit of Beneficial Interest (the "SUBI"), which, in turn, will evidence
a beneficial interest in certain specified assets of World Omni LT, an Alabama
trust (the "Origination Trust"), monies on deposit in 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 18 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. OR ANY OF THEIR
RESPECTIVE AFFILIATES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
========================================================================================================================
UNDERWRITING
DISCOUNTS AND PROCEEDS TO THE
PRICE TO PUBLIC(1) COMMISSIONS(2) TRANSFEROR(1)(3)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Class A-1 Note.......................................... % % %
- ------------------------------------------------------------------------------------------------------------------------
Per Class A-2 Note.......................................... % % %
- ------------------------------------------------------------------------------------------------------------------------
Per Class A-3 Note.......................................... % % %
- ------------------------------------------------------------------------------------------------------------------------
Per Class A-4 Note.......................................... % % %
- ------------------------------------------------------------------------------------------------------------------------
Total....................................................... $ $ $
========================================================================================================================
</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
$[ ].
---------------------
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 , 1997, against payment in immediately
available funds.
---------------------
[UNDERWRITERS]
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 4
(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
, 1997, 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,
as more fully described under "The Trust and the SUBI -- The SUBI"
(collectively, the "SUBI Assets"). From time to time until principal is first
distributed to the 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 "Notes") and one class of subordinated Notes
(the "Class B Notes"). The Class A Notes will be the only Notes offered hereby.
The initial principal amount of the Class B Notes will be $[ ], 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.
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 fixed per annum interest
rates specified herein and will be distributed to holders of the Class A Notes
on the twenty-fifth day of each month (or, if such day is not a Business Day, on
the next succeeding Business Day), beginning , 1997 (each, a
"Distribution Date"). Principal will be distributed to holders of the Notes to
the extent described herein on each Distribution Date beginning in
1998, or, in certain limited circumstances, earlier, as more fully described
herein. The Final Scheduled Distribution Date will occur in 200 .
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. and Standard
& Poor's Ratings Services 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.
SUCH TRANSACTIONS MAY INCLUDE STABILIZING. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING".
(Cover continued on next page)
ii
<PAGE> 5
(Cover continued from previous page)
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> 6
[OVERVIEW OF TRANSACTION CHART]
iv
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus. See the Index of
Capitalized Terms at page 98 for the location herein of certain capitalized
terms.
OVERVIEW................... Certain motor vehicle dealers ("Dealers") in the
World Omni Financial Corp. ("World Omni") network
of dealers have assigned, and will assign,
closed-end retail automobile and light duty truck
leases to World Omni LT, an Alabama trust (the
"Origination Trust"). The Origination Trust was
created in 1993 to avoid the administrative
difficulty and expense associated with retitling
leased vehicles in the securitization of
automobile and light duty truck leases. The
Origination Trust has issued to Auto Lease
Finance L.P. ("ALFI L.P.") an Undivided Trust
Interest (the "UTI") representing the entire
beneficial interest in the unallocated assets of
the Origination Trust. ALFI L.P. will instruct
the trustee of the Origination Trust to allocate
a separate portfolio of leases and leased
vehicles within the Origination Trust and create
a special unit of beneficial interest (the
"SUBI") which will represent the entire
beneficial interest in such portfolio. Upon its
creation, such portfolio will no longer be a part
of the Origination Trust Assets represented by
the UTI. ALFI L.P. will sell its interest in the
SUBI to World Omni Lease Securitization L.P. (the
"Transferor") and the Transferor will in turn
contribute a 99.8% interest in the SUBI to the
World Omni 1997-B 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. ALFI L.P. has caused
and from time to time in the future may cause
additional special units of beneficial interest
similar to the SUBI ("Other SUBIs") to be created
out of the UTI and sold to the 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 formed pursuant to a
securitization trust agreement dated as of
, 1997 (the "Agreement"), between the
Transferor, [ ] ("[ ]"), as
owner trustee (in such capacity, the "Owner
Trustee") and [ ], as indenture trustee (in
such capacity, the "Indenture Trustee"). The
property of the Trust will consist primarily of
an undivided 99.8% interest (the "SUBI Interest")
in the SUBI, which will evidence a beneficial
interest in certain specified assets of the
Origination Trust (including Insured Residual
Value Loss Amounts paid under the Residual Value
Insurance Policy), and monies on deposit in the
Reserve Fund, the Residual Value Surplus Account
and in certain other accounts established as
described herein.
The Origination Trust was formed by ALFI L.P., as
grantor and initial beneficiary, and VT Inc., as
trustee (the "Origination Trustee"). The sole
general partner of ALFI L.P. is Auto Lease
Finance, Inc., a Delaware corporation ("ALFI")
which is a wholly owned, special purpose
subsidiary of World Omni. ALFI may not transfer
its general
1
<PAGE> 8
partnership interest in ALFI L.P. so long as any
financings involving interests in the Origination
Trust (including the transaction described
herein) are outstanding. The sole limited partner
of ALFI L.P. is World Omni. VT Inc. is an Alabama
corporation and a wholly owned, special 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 certain lease
contracts (the "Initial Contracts") originated by
Dealers located throughout the United States, the
automobiles and light duty trucks relating
thereto (the "Initial Leased Vehicles"), certain
monies due under or payable in respect of the
Initial Contracts and the Initial Leased Vehicles
on or after , 1997 (the "Initial
Cutoff Date"), 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 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 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
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<PAGE> 9
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.
The 0.2% interest in the SUBI not transferred to
the Owner Trustee will be permanently retained by
the Transferor (the "Retained SUBI Interest").
Accordingly, the Transferor will be entitled to
receive 0.2% of all payments made on or in
respect of the SUBI Assets and will share in 0.2%
of all losses and liabilities incurred by the
SUBI Assets. Any payments made in respect of the
Retained SUBI Interest will not be available to
make payments on the 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, Inc., a Delaware
corporation ("WOLSI"), which is a wholly owned,
special purpose subsidiary of World Omni. WOLSI
may not transfer its general partnership interest
in the 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.
The sole limited partner of the Transferor is
World Omni.
WORLD OMNI................. World Omni is a Florida corporation that is a
wholly owned subsidiary of JM Family Enterprises,
Inc., a Delaware corporation ("JMFE"). JMFE also
wholly owns Southeast Toyota Distributors, Inc.
("SET"), which is the exclusive distributor of
Toyota automobiles and light duty trucks in
Florida, Alabama, Georgia, North Carolina and
South Carolina (the "Five State Area"). As more
fully described under "World Omni", World Omni
provides consumer lease and installment contract
financing to retail customers of, and floorplan
and other dealer financing to, Dealers that are
located throughout the United States. World Omni
wholly owns both ALFI and WOLSI.
Pursuant to an amended and restated servicing
agreement dated as of July 1, 1994, as amended,
to be supplemented by a servicing supplement
dated as of , 1997 (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 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
3
<PAGE> 10
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 generally 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 generally 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 be
sold in one or more private placements.
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 Interest (i.e., from a
portion of 99.8% of the payments received on or
in respect of the Contracts and the Leased
Vehicles) and, in certain circumstances, from
Excess Collections, monies on deposit in the
Residual Value Surplus Account, the Servicing Fee
(so long as World Omni is the Servicer),
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
and monies on deposit in the Reserve Fund.
On the date of initial issuance of the Notes (the
"Closing Date"), the Trust will issue $[ ]
aggregate principal amount of Class A-1 Notes
(the "Initial Class A-1 Note Balance"), $[ ]
aggregate principal amount of Class A-2 Notes
(the "Initial Class A-2 Note Balance"), $[ ]
aggregate principal amount of Class A-3 Notes
(the "Initial Class A-3 Note Balance"), $[ ]
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 $[ ] aggregate
principal amount of Class B Notes (the "Initial
Class B Note Balance" and, together with the
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
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<PAGE> 11
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 $[ ] (which amount will equal
[ ]% of 99.8% of the Aggregate Net Investment
Value as of the Initial Cutoff Date) and on any
day will equal the difference between 99.8% of
the Aggregate Net Investment Value, calculated as
described under "Summary -- Security for the
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") may elect to 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
"Description of the Notes -- General" and
"-- Book-Entry Registration".
INTEREST................... On the twenty-fifth day of each month or, if such
day is not a Business Day, on the next succeeding
Business Day, beginning , 1997 (each,
a "Distribution Date"), distributions in respect
of the
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<PAGE> 12
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 for
the related Interest Period 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 [ ]% (the "Class A-1 Note Rate"), (ii)
the Class A-2 Notes, at an annual percentage rate
equal to [ ]% (the "Class A-2 Note Rate"), (iii)
the Class A-3 Notes, at an annual percentage rate
equal to [ ]% (the "Class A-3 Note Rate") and
(iv) the Class A-4 Notes, at an annual percentage
rate equal to [ ]% (the "Class A-4 Note Rate").
Interest in respect of the Class A Notes will
accrue for the period from and including the
Distribution Date in each month to but excluding
the Distribution Date in the immediately
succeeding month (or, in the case of the first
Distribution Date, from and including
, 1997) (each, an "Interest Period"). All such
payments will be calculated on the basis of a
360-day year consisting of twelve 30-day months.
The final scheduled Distribution Date for the Notes
(the "Final Scheduled Distribution Date") will be
the 200 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, 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.
THE REVOLVING PERIOD;
SUBSEQUENT CONTRACTS AND
SUBSEQUENT LEASED
VEHICLES................. No principal will be payable on the Notes until
the 1998 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
, 1998 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
6
<PAGE> 13
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 until such time, if any, as
such Note Principal Loss Amounts are 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 prior to its scheduled
termination date are described under "Description
of the Notes -- Early Amortization Events".
Prior to the twenty-fifth calendar day (i) in each
month (beginning 1997) 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 1997) 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 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". The reinvestment of Principal
Collections (and reimbursement of Loss Amounts)
will be made in the available lease contracts
with the earliest origination dates, except that
certain lease contracts booked from
1997 through 1997 shall be reserved
for allocation to the SUBI and will be used
first, and if allocations are being made in
respect of any one or more previous Other SUBIs
at the same time out of the Origination Trust's
general pool of unreserved lease contracts,
reinvestment will be made first in respect of
such previous Other SUBI(s). For further
information regarding the Subsequent Contracts
and Subsequent Leased Vehicles, see "The
Contracts".
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<PAGE> 14
"Principal Collections" will mean, with respect to
any Collection Period, all Collections allocable
to the principal component of any Contract
(including any payment in respect of the related
Leased Vehicle, but other than any payment as to
which a Loss Amount has been realized and
allocated during any prior Collection Period),
discounted to the extent required below. A
"Collection Period" will be each calendar month
(or, with respect to the first Collection Period,
the month[S]of [AND 1997]).
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 [ ]% (each, a "Discounted Contract")
will be discounted at a rate of [ ]%, thereby
effectively reallocating a portion of the
payments received in respect of the principal
component of the Contracts to Interest
Collections and providing additional credit
enhancement for the benefit of the Noteholders.
"Collections" with respect to any Collection
Period will include all net collections collected
or received in respect of the Contracts and
Leased Vehicles during such Collection Period
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 (including amounts
withdrawn from the Residual Value Surplus Account
to offset certain Residual Value Losses in
respect of Leased Vehicles relating to Matured
Contracts and certain Matured Leased Vehicle
Expenses, but not including any Residual Value
Surplus deposited into the Residual Value Surplus
Account in respect of such Collection Period),
Net Repossessed Vehicle Proceeds and other Net
Liquidation Proceeds and any Undistributed
Transferor Excess Collections in respect of the
immediately preceding Collection Period, less an
amount equal to the sum of (i) Payments Ahead
with respect to one or more future Collection
Periods, (ii) amounts paid to the Servicer in
respect of outstanding Advances and (iii)
Additional Loss Amounts in respect of such
Collection Period. In addition, if such
Collection Period occurs during the Revolving
Period, amounts otherwise payable to the
Noteholders on the related Distribution Date as
reimbursement of Loss Amounts allocable to the
Investor Interest (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.
AMORTIZATION PERIOD;
PRINCIPAL PAYMENTS....... The "Amortization Period" will commence on the
earlier of 1998 (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
8
<PAGE> 15
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 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 Investor Interest 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 an allocable
percentage of Loss Amounts as a distribution of
principal from sources other than Principal
Collections and (ii) principal allocable to the
Class B 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",
"-- 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
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<PAGE> 16
of such Collection Period allocable to the SUBI
Interest multiplied by the Investor Percentage
for such Principal Collections. The "Investor
Percentage" for purposes of the Principal
Allocation will equal the percentage equivalent
of a fraction (not to exceed 100%), the numerator
of which is the Note Balance and the denominator
of which is 99.8% of the Aggregate Net Investment
Value, calculated as described under
"Summary -- Security for the Notes -- The SUBI"
and "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 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 allocable to the SUBI Interest
remains after required distributions have been
made, such excess interest will be deposited into
the Reserve Fund until the amount on deposit
therein equals the Reserve Fund Cash Requirement.
Any remaining excess interest, up to but not
exceeding the product of (i) one-twelfth of
[ ]%, (ii) 99.8% and (iii) the Aggregate Net
Investment Value as of the last day of such
Collection Period (the "Accelerated Principal
Distribution Amount"), will be distributed as an
additional payment of principal to the
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 ALFI 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 Interest will
10
<PAGE> 17
be evidenced by a Certificate (the "SUBI
Certificate") evidencing a 99.8% beneficial
interest in the SUBI Assets that will be issued
by the Origination Trust pursuant to a supplement
to the Origination Trust Agreement dated as of
, 1997 (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
Transferor will permanently hold the Retained
SUBI Interest, representing the 0.2% beneficial
interest in the SUBI Assets not evidenced by the
SUBI Certificate.
The Origination Trust Assets evidenced by the SUBI
will primarily include the Contracts and the
Leased Vehicles. The SUBI will not evidence an
interest in any Origination Trust Assets other
than the SUBI Assets, and payments made on or in
respect of all other Origination Trust Assets
will not be available to make payments on the
Notes. For more information regarding the SUBI,
see "The Trust and the SUBI" and "The Origination
Trust".
B. THE RESIDUAL VALUE
INSURANCE POLICY........ Automobile and light duty truck leasing companies
such as World Omni sometimes obtain residual
value insurance to minimize losses in respect of
the residual values of leased vehicles. Although
many forms of such insurance are available, in
general, claims are made if the proceeds of the
sale of a leased vehicle are less than its
residual value established at the time of
origination of the related closed-end lease
contract.
On the Closing Date, [ ] (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, the
Servicer and ALFI 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 $[ ] 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 allocable to the SUBI Interest, 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
11
<PAGE> 18
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 allocable to the SUBI
Interest 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 Investor Interest for the
related Collection Period, 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, 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 allocable to the Investor
Interest, 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 $[ ] (the
"Initial Deposit") (which amount will equal
[ ]% of 99.8% of the Aggregate Net
Investment Value as of the Initial Cutoff Date).
On each Distribution Date, the funds in the
Reserve Fund will be supplemented by (i) certain
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
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<PAGE> 19
"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 on
deposit therein 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
$[ ], 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, 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 [ ] lease
contracts. As of the Initial Cutoff Date, the
Lease Rate of the Initial Contracts ranged from
[ ]% to [ ]%, with a weighted average
Lease Rate of [ ]%. The aggregate of the
original principal balances of the Initial
Contracts as of their respective dates of
origination was $[ ]. As of the Initial
Cutoff Date, the aggregate Outstanding Principal
Balance of the Initial Contracts was $[ ],
the aggregate Residual Value of the Initial
Leased Vehicles was $[ ] and the Initial
Contracts had a weighted average original term of
[ ] months and a weighted average remaining
term to scheduled maturity of [ ] 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
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<PAGE> 20
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 its
Outstanding Principal Balance, discounted by
[ ]%, and (ii) all Contracts other than
Discounted Contracts will equal their Outstanding
Principal Balance. As of the Initial Cutoff Date,
the aggregate Discounted Principal Balance of the
Initial Contracts and the Aggregate Net
Investment Value was $[ ].
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 Owner Trustee in the Leased Vehicles by
virtue of its beneficial interest in 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 be deemed to 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 and the Residual Value Surplus
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
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<PAGE> 21
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, to the extent described herein, the Residual
Value Surplus Account, or as a deduction from
Matured Leased Vehicle Proceeds, Repossessed
Vehicle Proceeds or other Liquidation Proceeds,
as appropriate, deposited into the SUBI
Collection Account. For further details regarding
these deposits and reimbursements, see
"Description of the Notes -- The Accounts -- The
SUBI Collection Account" and "-- The Residual
Value Surplus Account".
On the Business Day immediately preceding each
Distribution Date (each, a "Deposit Date"), the
following amounts will be deposited into the SUBI
Collection Account: (i) Advances by the Servicer,
(ii) Reallocation Payments by World Omni
(together with, under certain circumstances
during the Amortization Period, Reallocation
Deposit Amounts) in respect of certain Contracts
as to which an uncured breach of certain
representations and warranties or certain
servicing covenants has occurred and (iii)
certain amounts in respect of the Residual Value
of Leased Vehicles relating to Matured Contracts
withdrawn from the Residual Value Surplus
Account. Thereafter, 99.8% of Interest
Collections (and, with respect to the Deposit
Date in any month following the month during
which the Amortization Period commences, 99.8% of
Principal Collections) on deposit in the SUBI
Collection Account in respect of the related
Collection Period will be allocable to the SUBI
Interest and deposited into the Distribution
Account maintained with the 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. All payments to Noteholders
will be made from the Distribution Account. The
remaining 0.2% of Collections will be distributed
on such Distribution Date to the Transferor in
respect of
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<PAGE> 22
the Retained SUBI Interest, which amounts in no
event will be available to make payments on the
Notes. 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".
On each Deposit Date, if Matured Leased Vehicle
Proceeds received during the related Collection
Period with respect to Leased Vehicles relating
to Matured Contracts that were sold or otherwise
disposed of during such Collection Period, net of
related Matured Leased Vehicle Expenses incurred
during such Collection Period ("Net Matured
Leased Vehicle Proceeds"), exceed the aggregate
Residual Value of the related Leased Vehicles
(the "Residual Value Surplus"), then such excess
will be deposited into the Residual Value Surplus
Account maintained with the Indenture Trustee for
the benefit of the Noteholders. On each Deposit
Date, funds on deposit in the Residual Value
Surplus Account, if any, will be withdrawn and
deposited into the SUBI Collection Account up to
an amount equal to the sum of (a) the aggregate
of the Residual Values of those Leased Vehicles
that were a part of Matured Leased Vehicle
Inventory but that had remained unsold and not
otherwise disposed of for at least two full
Collection Periods as of the last day of the most
recent Collection Period, (b) the amount by which
Net Matured Leased Vehicle Proceeds (after
application of amounts withdrawn pursuant to the
next sentence) for the related Collection Period
are less than the aggregate of the Residual
Values of all Leased Vehicles included in Matured
Leased Vehicle Inventory that were sold or
otherwise disposed of during such Collection
Period and (c) any losses on Contracts terminated
on or prior to their Maturity Dates during the
related Collection Period by agreement between
the Servicer and the lessee in connection with
the payment of less than their respective
Outstanding Principal Balances. Also on each
Deposit Date, funds on deposit in the Residual
Value Surplus Account will be withdrawn and paid
to the Servicer in reimbursement for any Matured
Leased Vehicle Expenses incurred during such
Collection Period, but only to the extent that,
after such reimbursement (but exclusive of any
other reimbursement from any other source), Net
Matured Leased Vehicle Proceeds would be no more
than the aggregate of the Residual Values of all
Leased Vehicles sold or otherwise disposed of
during such Collection Period. For further
information regarding the Residual Value Surplus
Account, see "Description of the Notes -- The
Accounts -- The Residual Value Surplus 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
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<PAGE> 23
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 allocable to
the SUBI Interest (the "Servicing Fee"), payable
on each Distribution Date, equal to one-twelfth
of 1% of 99.8% of the Aggregate Net Investment
Value as of the first day of the related
Collection Period (or, in the case of the first
Distribution Date, one-twelfth of 1% of 99.8% of
the Aggregate Net Investment Value as of the
Initial Cutoff Date). The Servicer also will be
entitled to additional servicing compensation in
the form of, among other things, late fees and
other administrative fees or similar charges
under the Contracts. For further information
regarding Servicer compensation, see "Additional
Document Provisions -- The Servicing Agreement --
Servicing Compensation".
TAX STATUS................. Brown & Wood LLP, special federal income tax
counsel to the 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 application of
the ERISA prohibited transaction exemption
described herein.
RATINGS.................... It is a condition of issuance of the Class A Notes
that each of Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings
Services ("Standard & Poor's" and, together with
Moody's, the "Rating Agencies") rates each Class
of Class A 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 address the likelihood of the payment of
principal of and interest on the Class A Notes
pursuant to their terms. 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".
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<PAGE> 24
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 covered by Excess Collections or otherwise, 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, the Class A-1 Noteholders will be entitled to receive the Class A-1
Allocation Percentage of the Investor Percentage of such Loss Amounts, the Class
A-2 Noteholders will be entitled to receive the Class A-2 Allocation Percentage
of the Investor Percentage of such Loss Amounts, the Class A-3 Noteholders will
be entitled to receive the Class A-3 Allocation Percentage of the Investor
Percentage of such Loss Amounts and the Class A-4 Noteholders will be entitled
to receive the Class A-4 Allocation Percentage of the Investor Percentage of
such Loss Amounts. Such distributions of principal will be made from, to the
extent available: (i) Excess Collections (which may include Undistributed
Transferor Excess Collections in respect of the previous Collection Period);
(ii) amounts on deposit in the Residual Value Surplus Account (which will be
deposited into the Distribution Account, to the extent available, to reduce the
Residual Value Loss Amount); (iii) the Servicing Fee (so long as World Omni is
the Servicer); (iv) Transferor Amounts otherwise payable to the Transferor in
respect of the Transferor Interest; (v) Insured Residual Value Loss Amounts paid
under the Residual Value Insurance Policy; (vi) amounts on deposit in the
Reserve Fund; (vii) amounts otherwise payable as interest to the Class B
Noteholders; and (viii) in the case of the Class A-4 Notes, amounts otherwise
payable as principal to the Class B Noteholders. 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. 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 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
18
<PAGE> 25
Proceeds for such Collection Period, and (c) any losses 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, but only to the extent that
such sum exceeds the amount transferred from the Residual Value Surplus Account
to the SUBI Collection Account on the related Deposit Date.
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
the Investor Percentage of any Residual Value Loss Amount allocable to the SUBI
Interest, to the extent necessary to make up any shortfall in the amount
required to make all payments 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 allocable to the SUBI Interest 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
1998 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 that are allocable to the SUBI Interest
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. 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
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<PAGE> 26
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 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 1994, 1995 and 1996, an average of approximately [ ]% 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 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 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 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. The Investor Percentage of Loss Amounts will be allocated among the
Noteholders on a pro rata basis, based on the Class A-1, Class A-2, Class A-3,
Class A-4 and Class B Allocation Percentages, as the case may be, and then
reimbursed out of available funds in the amounts and order of priority described
in "Description of the Notes -- Distributions on the Notes -- Distributions of
Interest". As a result, Class A-2 Notes may be allocated more Loss Amounts than
the Class A-1 Notes as a
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<PAGE> 27
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 Interest, 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 Noteholders based on their respective Class Note Balances
until the Class A Notes have been paid in full, and second, to the Class B
Noteholders.
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
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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".
RISKS ASSOCIATED WITH ERISA LIABILITIES
The Origination Trust Assets, including the SUBI Assets, could become
subject to liens in favor of the PBGC to satisfy unpaid ERISA obligations of any
member of an "affiliated group" that includes World Omni, SET, JMFE and their
respective affiliates. The ratings of the Class A 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 insur-
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ance coverage exceeds $10 million per claim, with an allowance for multiple
claims in any policy period, in the event that all such insurance coverage were
exhausted and damages were assessed against the Origination Trust, claims could
be imposed against the assets of the Origination Trust, including the Leased
Vehicles. If any such claims are imposed against any SUBI Assets or, in certain
limited circumstances, any Other SUBI Assets or UTI Assets, investors in the
Class A 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 ALFI, ALFI L.P., WOLSI, the Transferor, the
Origination Trust or the Trust with those of World Omni. With respect to WOLSI
and ALFI, these steps include their creation as separate, special purpose
finance subsidiaries of World Omni pursuant to articles of incorporation
containing certain limitations (including the requirement that each must have at
all times at least two "independent directors" and restrictions on the nature of
their respective businesses and on their ability to commence a voluntary case or
proceeding under any Insolvency Law without the affirmative vote of a majority
of their respective directors, including each independent director). With
respect to the Transferor and ALFI L.P., these steps include their creation as
separate, special purpose limited partnerships of which WOLSI and ALFI,
respectively, are the sole general partners, pursuant to limited partnership
agreements containing certain limitations (including restrictions on the nature
of their respective businesses and on their ability to commence a voluntary case
or proceeding under any Insolvency Law without the affirmative vote of all of
the directors of their respective general partners, including each independent
director).
Reallocation Payments made by World Omni in respect of certain Contracts as
to which an uncured breach of certain representations and warranties or certain
servicing covenants has occurred (and, if during the Amortization Period such
payment would cause the 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 and the Indenture
Trustee may, and upon receipt of 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 the Class B Notes (voting together as a single class) will,
attempt to sell the SUBI Interest, the SUBI Certificate and the other property
of the Trust. The consummation of such sale would result in an early termination
of the Trust and a pro rata loss to the Class A-1, Class A-2, Class A-3 and
Class A-4 Noteholders if the Investor Percentage of the net proceeds of such
sale were insufficient to pay in full the Class A-1, Class A-2, Class A-3 and
Class A-4 Note Balances, together with any unreimbursed Class A-1, Class A-2,
Class A-3 and Class A-4 Note Principal Loss Amounts, with accrued and unpaid
interest thereon at the Class A-1, Class A-2, Class A-3, Class A-4 and Class B
Note Rates, respectively.
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On the Closing Date, Williams & Connolly, counsel to ALFI, ALFI L.P., the
Transferor, WOLSI and World Omni, will render an opinion based on a reasoned
analysis of analogous case law (although there is no precedent based on directly
similar facts) that, subject to certain facts, assumptions and qualifications
specified therein, under present reported decisional authority and statutes
applicable to federal bankruptcy cases, if World Omni were to become a debtor in
a case under the Bankruptcy Code, it would not be a proper exercise by a federal
bankruptcy court of its equitable discretion to disregard the independent forms
so as to substantively consolidate the assets and liabilities of ALFI, ALFI
L.P., the Transferor, WOLSI, 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
Retained SUBI 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 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".
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".
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 establish the Trust by
transferring and assigning the 99.8% SUBI Interest, represented by the SUBI
Certificate, to the Owner Trustee 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 99.8% SUBI Interest which evidences a
99.8% beneficial interest in certain specified Origination Trust Assets (i.e.,
the SUBI Assets), (ii) such amounts as from time to time may be held in the
Distribution Account and the Reserve Fund, and investments of such amounts and
(iii) the Owner Trustee's rights as a third-party beneficiary to the Servicing
Agreement and the SUBI Trust Agreement. The Trust also will have a beneficial
interest in such amounts as from time to time may be held in the SUBI Collection
Account and the Residual Value Surplus Account and investments of such amounts.
If the protection provided to the Class A Noteholders by (i) the Investor
Percentage of certain excess Interest Collections; (ii) available monies on
deposit in the Residual Value Surplus Account; (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
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Noteholders is insufficient, the Class A Noteholders ultimately will have to
look to (a) payments made on or in respect of the Contracts and the Leased
Vehicles (including under certain related insurance policies) and (b) the
proceeds of Dealer repurchase obligations, if any, to make distributions on or
in respect of the SUBI Assets allocable to the SUBI Interest to the 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 and
Residual Value Surplus Account (which accounts, 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 Interest,
to the Transferor. Simultaneously therewith, the Origination Trustee will issue
to the Transferor a certificate evidencing the Retained SUBI Interest, which
will represent the 0.2% interest in the SUBI not evidenced by the SUBI
Certificate, the Transferor will transfer and assign the SUBI Certificate to the
Owner Trustee pursuant to the Agreement, and the Owner Trustee will pledge the
SUBI Certificate to the Indenture Trustee pursuant to the Indenture. The
certificate evidencing the Retained SUBI Interest will be permanently retained
by the Transferor and payments made in respect thereof will not be available to
make payments on the Notes.
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
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through Dealers in the World Omni network of dealers since November 1993.
Pursuant to the Servicing Agreement, World Omni will service the lease contracts
included in the Origination Trust Assets, including the Contracts. For further
information regarding the Origination Trust and the servicing of the Origination
Trust Assets, see "Additional Document Provisions -- The SUBI Trust Agreement"
and "-- The Servicing Agreement" and "Certain Legal Aspects of the Origination
Trust and the SUBI -- The Origination Trust".
Except as otherwise described under "Additional Document Provisions -- The
SUBI Trust Agreement", pursuant to the Origination Trust Agreement the
Origination Trust has not and will not (i) issue interests therein or securities
thereof other than the SUBI Interest, the Retained SUBI Interest, the SUBI
Certificate, the certificate representing the Retained SUBI Interest, Other
SUBIs representing divided interests in other 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 five portfolios of Other SUBI Assets and
the remaining portfolio of UTI Assets. ALFI L.P. has pledged (and may in the
future pledge) the UTI as security for obligations to third-party lenders, and
has created and sold and may in the future create and sell or pledge Other SUBIs
in connection with 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 Owner Trustee) 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".
ALFI AND ALFI L.P.
ALFI is a wholly owned, special purpose finance subsidiary of World Omni
and was incorporated under the laws of Delaware in September 1993, solely for
the purpose of acting as general partner of ALFI L.P.
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ALFI 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. ALFI's
articles of incorporation and ALFI L.P.'s limited partnership agreement limit
their respective activities to the foregoing purposes and to any activities
incidental to and necessary for such purposes. ALFI may not transfer its general
partnership interest in ALFI L.P. so long as any financings involving interests
in the Origination Trust (including the transaction described herein) are
outstanding. World Omni is the sole limited partner of ALFI L.P. The principal
office of ALFI L.P. is located at 6150 Omni Park Drive, Mobile, Alabama and its
telephone number is (334) 639-7500.
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 ALFI L.P. (who may
not be ALFI L.P. or any affiliate thereof) will have the option to purchase the
stock of the Origination Trustee for a nominal amount. If ALFI L.P.'s designee
does not timely exercise this option, then the Origination Trustee will appoint
a new trust agent, and that new trust agent (or its designee) will next have the
option to purchase the stock of the Origination Trustee. If none of these
options is timely exercised, 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.
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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.
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 ALFI 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, WOLSI, is a wholly
owned, special purpose finance subsidiary of World Omni and was incorporated
under the laws of Delaware in March 1994. WOLSI may not transfer its general
partnership interest in the 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
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 WOLSI 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 certificate of incorporation of WOLSI limit
their respective activities to the foregoing purposes and to any activities
incidental to and necessary for such purposes.
A support agreement dated as of October 1, 1995, as amended (the "Support
Agreement"), between the 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
$60.0 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 WOLSI may take
any action to enforce the Support Agreement. Although World Omni intends to
comply with all of its obligations under the Support Agreement, because (as
described above) it can only be enforced by the Transferor and WOLSI, there can
be no assurance that the Indenture Trustee or the Noteholders would be able to
enforce the Support Agreement directly against World Omni.
28
<PAGE> 35
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. In January 1993, a predecessor corporation to World Omni
merged with its sister automobile leasing company, World Omni Leasing, Inc., in
connection with which the name World Omni Financial Corp. was retained. WOLSI
and ALFI are wholly owned, special purpose finance subsidiaries of World Omni.
In addition to the lease contract financing described below, World Omni
provides retail installment contract financing to retail customers of certain
automotive dealers and wholesale floorplan financing and capital and mortgage
loans to dealers and customers of Southeast Toyota Distributors, Inc. ("SET"),
World Omni's sister corporation, as well as to other automotive dealers within
and outside the Five State Area.
SET is the exclusive distributor of Toyota cars and light duty trucks,
parts and accessories in the Five State Area. As such, SET is the sole provider
of Toyotas to Dealers in the Five State Area. SET distributes Toyota vehicles
pursuant to a Distributor Agreement, which first was entered into in 1968 and
has been renewed through October 1999, with Toyota Motor Sales, USA, Inc.
("TMS"), a California corporation that is wholly owned by Toyota Motor
Corporation, the largest automotive company in Japan. Lexus cars, parts and
accessories are distributed in the Five State Area directly by TMS and not by
SET. SET's consolidated revenues for the years ended December 31, 1996, December
31, 1995 and December 31, 1994 were approximately $4.2 billion, approximately
$3.8 billion and approximately $3.5 billion, respectively. Since March 1996,
substantially all financial services provided by World Omni to, by and through
SET's Toyota Dealers in the Five State Area have been provided under the name
"Southeast Toyota Finance".
World Omni (either directly or through the Origination Trust and certain
special purpose finance subsidiaries of World Omni) owns and leases vehicles
primarily through more than 1000 Dealers located throughout the United States.
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 Mobile, Alabama (the "Mobile Center")
and St. Louis, Missouri (the "St. Louis Center"), or to Southeast Toyota
Finance's offices in Deerfield Beach, Florida (the "Deerfield Office"), as
applicable. At the Mobile Center, 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 Mobile
Center and the St. Louis Center, which handle collection activities, operational
accounting, insurance verification and dealer and customer inquiries for World
Omni. In addition, the Mobile Center and the Deerfield Office verify that all
documents supplied by a Dealer with respect to a lease contract conform with
World Omni's requirements.
World Omni initiated operations in 1982, and as of December 31, 1996,
December 31, 1995 and December 31, 1994, World Omni and its affiliates had
approximately 232,000, 156,900 and 115,900 retail
29
<PAGE> 36
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 $4.6
billion, $2.8 billion and $1.8 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 $3.3 billion, $2.0 billion and $1.2
billion, respectively. For the years ended December 31, 1996, December 31, 1995
and December 31, 1994, World Omni's consolidated gross revenues were
approximately $275 million, approximately $228 million and approximately $199
million, respectively.
The principal executive offices of World Omni are located at 120 Northwest
12th Avenue, Deerfield Beach, Florida 33442 and its telephone number is (954)
429-2200.
LEASE CONTRACT UNDERWRITING PROCEDURES
World Omni has underwritten retail motor vehicle lease contracts since
February 1983. The Initial Contracts were, and the Subsequent Contracts will be,
underwritten by the Origination Trust, in each case through World Omni's
purchase offices.
The World Omni underwriting standards are intended to evaluate a
prospective lessee's credit standing and repayment ability. Generally, a
prospective lessee is required by the Dealer to complete a credit application on
a form prepared or approved by World Omni. As part of the description of the
applicant's financial condition, the applicant is required to provide current
information enumerating, among other things, employment history, residential
status 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 is an adaptation of a system developed
by Fair, Isaac & Company ("Fair, Isaac"), a lending and leasing consulting firm,
specifically for World Omni based upon an analysis of the historical performance
of the retail automobile and light duty truck lease and installment sale
contract portfolios of World Omni. To determine the appropriate characteristics
for credit scoring, Fair, Isaac reviewed a random sample of 10,000 retail lease
contracts and 10,000 retail installment sale contracts from World Omni's
portfolio. Fair, Isaac then compiled a list of ten to twelve characteristics
that cumulatively carried the most weight in predicting historical performance
and assigned point values and weighting to each of these characteristics. The
weighting system is particularly significant because the weightings are beyond
the control of a dealer and cannot be manipulated. Fair, Isaac determined that
the most accurate 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 developed by
Fair, Isaac, World Omni implemented an updated scorecard system in February
1997, which 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 are primarily weighted to 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
30
<PAGE> 37
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 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 years ended December 31, 1996, December 31, 1995 and December 31,
1994, World Omni, either directly or through the Origination Trust or certain
special purpose finance subsidiaries of World Omni, on average, booked
approximately 70%, approximately 71% and approximately 75%, 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 scorecard. See "The Contracts -- Characteristics of the
Contracts" for further information on the identity and characteristics of the
Contracts.
After an application has been approved by a World Omni purchase office and
the prospective lessee has agreed to the terms of the related lease contract,
including an assignment of the lease contract from the Dealer to World Omni (or,
at the direction of World Omni, an assignee thereof), 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 which 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 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>
31
<PAGE> 38
Occasionally, situations occur in the collection process when a lessee has
become delinquent and is willing but unable to bring the related account current
(i.e., a skipped payment). In this situation, at the discretion of collection
department management, but subject to extensive guidelines, the lease contract
may be extended, provided that the lessee pays an extension fee (each, an
"Extension Fee") equal to the lesser of (i) the product of 1.15% multiplied by
the outstanding principal balance of such lease contract, and (ii) one-half of
the related monthly contract payment. In circumstances deemed appropriate by
collection department management, World Omni may reduce or waive the payment by
the lessee of an Extension Fee. However, the Servicing Agreement will require
that all Extension Fees relating to the Contracts be deposited into the SUBI
Collection Account and that a Contract may not be extended more than five times.
Moreover, no extensions of a Contract may be made for more than five months in
the aggregate or to a date later than the last day of the month immediately
preceding the month in which the Final Scheduled Distribution Date occurs, as
described under "Additional Document Provisions -- The Servicing
Agreement -- Collections".
World Omni disposes of off-lease vehicles through several outlets,
including a Toyota "certified" program, in which vehicles are inspected and
given body work, repairs and maintenance as needed, certified as meeting the
program standards, and then sold to automobile dealers primarily in World Omni's
dealer network for retail sale; large regional automobile auctions which are
utilized for off-lease vehicle sales in addition to liquidation of repossessed
vehicles; and negotiated sales of groups of vehicles to rental companies, 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, 1992 through December 31,
1996 and as of and for the six month period ended June 30, 1997.
As shown on these tables, World Omni's delinquency rates during 1993 and
1994 were generally consistent, decreasing from 1992 largely due to improved
credit quality resulting from stricter underwriting standards (including the
implementation of a new computerized credit evaluation system and the effects of
the implementation of the Fair, Issac credit scoring system in the fourth
quarter of 1990), an improved collection system and the implementation of
centralized collection efforts through the Mobile Center. Delinquencies 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. The
new collection system is now fully operational.
Net Repossession Losses as a percentage of the Average Net Receivables
Outstanding decreased in 1993 and 1994 versus 1992 primarily as a result of a
decreasing number of repossessions as a result of improved credit quality for
the reasons mentioned previously. General economic trends were also positive
during this period as was the used car market in general.
Total Net Repossession Losses increased in 1995 and 1996 compared to 1994
primarily as a result of the increasing number of lease contracts outstanding
and the higher Average Net Repossession Loss per Liquidated Lease Contract. The
higher Average Net Repossession Loss per Liquidated Lease Contract in 1995 as
well as in 1996 was generally due to higher average amounts being financed and
generally higher residual values. The higher average loss per Liquidated Lease
Contract as well as a somewhat higher repossession frequency percentage in 1996
resulted in higher Net Repossession Losses as a percentage of Average Net
Receivables. 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.
World Omni's total losses and average loss per vehicle realized on the
disposition of vehicles in connection with leases that reached scheduled
termination substantially decreased from 1992 to 1994. Management attributes
this decrease primarily to an improved used car market during the same period
and World Omni's pro-active lease termination programs implemented in 1990.
32
<PAGE> 39
Residual value losses and the number of vehicles returned to and sold by
World Omni increased in 1995 and 1996. 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. In addition, there was some
weakening in the used car market relative to the prior three years. There are no
short term leases included in the Initial Contracts nor will any be included in
the Subsequent Contracts.
The new and used car market has experienced growth over the last five
years, showing some weakness towards the end of 1996. This overall growth in the
new and used car market may not continue, which could negatively affect World
Omni's returns and losses in the future. World Omni believes that the number of
vehicles returned and losses relating to residual value will continue to trend
upward in the future. As a result, losses on returned and sold vehicles may
increase and the Full Termination Ratio may increase. Based upon prior
experience, however, World Omni does not believe that World Omni's loss
experience or these 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. There is no assurance
that World Omni's delinquency, repossession and loss experience with respect to
its retail automobile and light duty truck lease contracts and the related
leased vehicles in the future, or the experience with respect to the Contracts
and the Leased Vehicles, will be similar to that set forth below.
RETAIL VEHICLE LEASE CONTRACT DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, ---------------------------------------------------------
1997 1996 1995 1994
----------- ----------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Dollar Amount of Lease
Contracts(1)........ $4,641,992 $2,798,830 $1,823,823
Ending Number of Lease
Contracts........... 231,942 156,741 114,298
Number and Percentage
of Lease............ 3,294 1.42% 1,745 1.12% 1,114 0.97%
Contracts
Delinquent(2)(3)(4)
31-60 Days............
61-90 Days............ 297 0.13 118 0.08 38 0.03
91 Days or More....... 64 0.03 18 0.01 7 0.01
Total......... 3,655 1.58 1,881 1.21% 1,159 1.01%
<CAPTION>
AT DECEMBER 31,
-----------------------------------
1993 1992
----------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Dollar Amount of Lease
Contracts(1)........ $1,039,888 $624,017
Ending Number of Lease
Contracts........... 71,198 48,646
Number and Percentage
of Lease............ 625 0.88% 756 1.55%
Contracts
Delinquent(2)(3)(4)
31-60 Days............
61-90 Days............ 27 0.04 16 0.03
91 Days or More....... 3 0.00 2 0.00
Total......... 655 0.92% 774 1.58%
</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, 1997 approximately
[ ] 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.
33
<PAGE> 40
RETAIL VEHICLE LEASE CONTRACT REPOSSESSION AND LOSS EXPERIENCE
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, ------------------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ---------- ---------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Dollar Amount of Lease
Contracts(1)....................... $4,641,992 $2,798,830 $1,823,823 $1,039,888 $624,017
Ending Number of Lease Contracts..... 231,942 156,471 114,298 71,198 48,646
Average Lease Contracts
Outstanding........................ 194,492 133,069 93,023 58,605 46,013
Repossessions:
Number of Repossessions............ 4,297 2,519 1,776 1,287 1,916
Number of Repossessions as a
Percentage of:
Lease Contracts Outstanding........ 1.85% 1.61% 1.55% 1.81% 3.94%
Average Lease Contracts
Outstanding...................... 2.21% 1.89% 1.91% 2.20% 4.16%
Losses:
Average Net Receivables
Outstanding...................... $3,718,336 $2,243,790 $1,426,382 $ 817,452 $548,852
Net Repossession Losses(2)......... $ 23,196 $ 11,347 $ 6,283 $ 3,811 $ 5,759
Average Net Repossession Loss per
Liquidated Lease
Contract(1)(3)................... $ 5,398 $ 4,505 $ 3,538 $ 2,961 $ 3,006
Net Repossession Losses as a
Percentage of Average Net
Receivables............... 0.62% 0.51% 0.44% 0.47% 1.05%
</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.
RESIDUAL VALUE LOSS EXPERIENCE(1)
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT JUNE 30, ------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ------ ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Total Number of Leased Vehicles
Scheduled to Terminate.......... 36,413 25,677 14,775 17,218 15,155
Number of Leased Vehicles Returned
to and Sold by World Omni....... 5,018 4,611 779 2,050 2,142
Full Termination Ratio(2)......... 13.8% 18.0%(3) 5.3% 11.9% 14.1%
Total Losses/(Gains) on
Vehicles that Reached
Scheduled Term(4)..... $3,700(5) $ 1,893 $ (168) $ 503 $ 894
Average Loss/(Gain)(4)(6)......... $ 737 $ 411 $ (216) $ 245 $ 417
</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, as such information is not readily available.
(5) Does not include losses related to World Omni's incentive programs of
approximately $222,303.
(6) Dollars not in thousands.
34
<PAGE> 41
THE CONTRACTS
GENERAL
The Initial Contracts will consist of a pool of [ ] closed-end retail
lease contracts, having an aggregate Outstanding Principal Balance as of the
Initial Cutoff Date of $[ ], 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 were
originated after the Initial Cutoff Date that also meet the foregoing criteria.
Principal Collections (and reimbursements of Loss Amounts) will first be
reinvested in the eligible lease contract with the earliest origination date,
then with the eligible lease contract with the next earliest origination date
and so forth, except that (i) certain leases booked from , 1997
through , 1997 have been reserved for allocation to the SUBI, so
that reinvestment of Principal Collections and reimbursement of Loss Amounts
will first be made in such leases to the extent available, (ii) certain leases
have been, and may in the future be, allocated to (or reserved for allocation
to) Other SUBIs and therefore not be available for reinvestment of such amounts
from the SUBI, and (iii) to the extent that reinvestment of such amounts from
the SUBI and any one or more previous Other SUBIs are at any time being made out
of the Origination Trust's general pool of available lease contracts that have
not been so reserved, such reinvestment will first be made with respect to such
previous Other SUBI(s). World Omni will represent and warrant that, except as
otherwise described in the immediately preceding sentence, no adverse selection
procedures were employed or will be employed in selecting the Initial Contracts
or the Subsequent Contracts for inclusion in the SUBI Assets and that it is not
aware of any bias in the selection of such Contracts that would cause the
delinquencies or losses on such Contracts to be worse than other retail
closed-end automobile and light duty truck lease contracts held in the
Origination Trust's portfolio; however, there can be no assurance that the
delinquencies or losses on the Contracts will not be worse. Subsequent Contracts
may be originated by World Omni using different underwriting criteria than those
which were applied to the Initial Contracts. For this reason, the
characteristics of the Subsequent Contracts may vary from those of the Initial
Contracts.
Each Contract will have been written for an original term of not more than
60 months, for a "capitalized cost" (which may exceed the manufacturer's
suggested retail price), plus an implicit Lease Rate. The Initial Contracts
were, and the Subsequent Contracts will be, written on a constant yield basis
and provide for equal Monthly Payments such that at the end of the lease term
the capitalized cost has been amortized to an amount equal to the Residual Value
of the related Leased Vehicle.
At the times of origination of the related Contracts, the related Leased
Vehicles were, in the case of the Initial Contracts, or will be, in the case of
the Subsequent Contracts, new vehicles, dealer demonstrator vehicles driven
fewer than 6,000 miles or manufacturers' program vehicles. Manufacturers'
program vehicles are vehicles which have been sold directly by manufacturers to
rental car companies and returned to the manufacturer for resale, generally
after a period of eight to twelve months. Such vehicles generally are then
resold to dealers through an automobile auction.
All of the Contracts will be closed-end leases. Under a "closed-end lease",
at the end of its term, if the lessee does not elect to purchase the related
leased vehicle by exercise of the purchase option contained in such lease
contract, the lessee is required to return the leased vehicle to or upon the
order of the lessor, at which time the lessee will then owe only incidental
charges for excess mileage, excessive wear and use and
35
<PAGE> 42
other items as may be due under such lease. In contrast, under an "open-end
lease", the lessee is also obligated to pay at the end of the lease term any
deficit between the fair market value of the leased vehicle at that time and the
residual value established at the time of origination of such lease.
Each lessee will be permitted to purchase the Leased Vehicle at the end of
the term of the related Contract. The purchase price will be a fixed dollar
amount equal to the Residual Value plus any applicable taxes and all other
incidental charges which may be due under the Contract. In addition, each
Contract will allow the related lessee voluntarily to terminate such Contract by
paying certain miscellaneous charges and a termination amount more fully
described below. In most instances, the Contracts are not expected to run to
their full terms, as more fully described under "Risk Factors -- Maturity and
Prepayment 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. World Omni (or, with respect to insurance, its third-party
contracted agents) regularly tracks lessees' compliance with their payment and
insurance obligations and monitors the related leases for noncompliance as more
fully described under "World Omni -- Insurance" and "-- Collection, Repossession
and Disposition Procedures".
In the forms of contract used by the Dealers to evidence the Contracts,
upon early termination where the lessee is not in default and does not exercise
its option to purchase the Leased Vehicle, the amount owed by the lessee (the
"Early Termination Charge") will be determined by adding (i) the future Monthly
Payments and any incidental charges owing under the Contract, less unearned
lease charges, (ii) the Residual Value and (iii) a $250 processing fee,
subtracting the "Realized Value" (as described below), from the sale or other
disposition of the related Leased Vehicle and applying the Security Deposit to
reduce any deficiency. In calculating the amount of unearned lease charges under
clause (i) above, the Contracts will provide that the constant yield method will
be used, in which lease charges are earned on a daily basis through the payment
date immediately following the date of early termination. If, instead, there is
an early termination and the lessee is in default, the amount owed by a lessee
in default will be determined by adding (i) the Early Termination Charge, (ii)
payments accrued under the Contract through the date of termination, (iii)
collection, repossession, storage, preparation and sale expenses, (iv)
attorneys' fees and disbursements incurred after default (not exceeding 15% of
the amount owed by the lessee) and (v) simple interest at a 15% annual rate.
The "Realized Value" of a Leased Vehicle is the actual wholesale price or
the wholesale price otherwise determined by World Omni in a commercially
reasonable manner. However, each Contract provides that the lessee has the right
to obtain from an independent third party acceptable to the lessor a
professional appraisal of the wholesale value of the Leased Vehicle that could
be realized at sale. This appraised value then would be used as the wholesale
value for purposes of calculating sums due from the lessee. Although World Omni
cannot predict whether any lessee will challenge the wholesale sale price
determined by World Omni, management of World Omni is unaware of any successful
such challenge by any lessee under its retail closed-end automobile and light
duty truck lease contracts. See "Maturity, Prepayment and Yield Considerations"
for further information relating to the relationship between payments on the
Contracts and the effective yield on the 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
36
<PAGE> 43
in amounts otherwise expected to be received in respect of the SUBI Interest. In
the event that any of the foregoing shortfalls are not covered from the Investor
Percentage of certain excess Interest Collections, available monies on deposit
in the Residual Value Surplus Account, 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.
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 , 1998 in the case of the
Subsequent Contracts; (iii) has a Maturity Date on or after , 1999
and no later than , 2002 in the case of the Initial Contracts, and
no later than , 2003 in the case of the Subsequent Contracts; (iv)
fully amortizes to an amount equal to the Residual Value of the related Leased
Vehicle based on a fixed Lease Rate calculated on a constant yield basis and
provides for level payments over its term (except for payment of the Residual
Value); (v) was not more than 60 days past due as of the Initial Cutoff Date or
the related Subsequent Cutoff Date, as the case may be; and (vi) has never been
extended for more than five months in the aggregate. (SUBI Trust Agreement,
Section 10.01). Appearing below is some additional information regarding the
characteristics of the Initial Contracts:
INITIAL CONTRACTS
<TABLE>
<CAPTION>
AVERAGE MINIMUM MAXIMUM
---------- ---------- ----------
<S> <C> <C> <C>
Original Principal Balance................. $ $ $
Outstanding Principal Balance(1)........... $ $ $
Residual Value............................. $ $ $
Lease Rate(1).............................. %(2) % %
Seasoning (months)(1)...................... (2)
Remaining Term (months)(1)................. (2)
</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.................................................. %
United States manufacturers..............................
Other Japanese manufacturers.............................
Other foreign manufacturers..............................
--------- -------
Total.......................................... 100.00%
========= =======
</TABLE>
37
<PAGE> 44
Distribution of the Initial Contracts by Lease Rate
The distribution of the Initial Contracts as of the Initial Cutoff Date by
Lease Rate was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
INITIAL AGGREGATE
PERCENTAGE OF CUTOFF DATE INITIAL CUTOFF DATE
NUMBER OF NUMBER OF OUTSTANDING OUTSTANDING PRINCIPAL
LEASE RATE RANGE INITIAL CONTRACTS INITIAL CONTRACTS PRINCIPAL BALANCE BALANCE
- ---------------- ----------------- ----------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
2.00% to 2.99%.................. % $ %
3.00% to 3.99%..................
4.00% to 4.99%..................
5.00% to 5.99%..................
6.00% to 6.99%..................
7.00% to 7.99%..................
8.00% to 8.99%..................
9.00% to 9.99%..................
10.00% to 10.99%..................
11.00% to 11.99%..................
12.00% to 12.99%..................
------- ------- ---------- -------
Total................... 100.00% $ 100.00%
======= ======= ========== =======
</TABLE>
Distribution of the Initial Contracts by Maturity
The distribution of the Initial Contracts as of the Initial Cutoff Date by
year of maturity was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
INITIAL AGGREGATE
PERCENTAGE OF CUTOFF DATE INITIAL CUTOFF DATE
NUMBER OF NUMBER OF OUTSTANDING OUTSTANDING PRINCIPAL
YEAR OF MATURITY INITIAL CONTRACTS INITIAL CONTRACTS PRINCIPAL BALANCE BALANCE
- ---------------- ----------------- ----------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
1999.............................. % $ %
2000..............................
2001..............................
2002..............................
------- ------- ---------- -------
Total................... 100.00% $ 100.00%
======= ======= ========== =======
</TABLE>
Distribution of the Initial Contracts by State
The distribution of the Initial Contracts as of the Initial Cutoff Date by
State of origination, broken out for States representing 5% or more of the
number of Initial Contracts, was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
INITIAL AGGREGATE
PERCENTAGE OF CUTOFF DATE INITIAL CUTOFF DATE
NUMBER OF NUMBER OF OUTSTANDING OUTSTANDING PRINCIPAL
STATE INITIAL CONTRACTS INITIAL CONTRACTS PRINCIPAL BALANCE BALANCE
- ----- ----------------- ----------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Alabama........................... % $ %
Florida...........................
Georgia...........................
North Carolina....................
South Carolina....................
All other states..................
------- ------- ---------- -------
Total................... 100.00% $ 100.00%
======= ======= ========== =======
</TABLE>
38
<PAGE> 45
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, among other
things, its: (i) date of origination; (ii) Maturity Date; (iii) Monthly Payment;
(iv) original Outstanding Principal Balance; (v) Outstanding Principal Balance
and Discounted Principal Balance as of the related Cutoff Date; and (vi)
Residual Value. (Servicing Agreement, Sections 1.01 and 10.01). In the Servicing
Agreement, representations and warranties will be made with respect to each
Contract and Leased Vehicle to the effect described in the text of the first
paragraph under "The Contracts -- Characteristics of the Contracts -- General",
and certain other representations and warranties will be made, including, among
other things, that each such Contract and, to the extent applicable, the related
Leased Vehicle or lessee: (a) was originated by a Dealer located in the United
States in the ordinary course of its business and in compliance with World
Omni's normal credit and collection policies and practices; (b) is owned by the
Origination Trustee, on behalf of the Origination Trust, free of all liens,
encumbrances or rights of others (other than the Administrative Lien); (c) was
originated in compliance with, and complies with, all material applicable legal
requirements; (d) all material consents, licenses, approvals or authorizations
of, or registrations or declarations with, any governmental authority required
to be obtained, effected or given by the originator of such Contract and the
Origination Trustee in connection with (i) the origination of such Contract,
(ii) the execution, delivery and performance by such originator of the Contract
and (iii) the acquisition by the Origination Trust of such Contract and Leased
Vehicle, have been duly obtained, effected or given and are in full force and
effect as of such date of creation or acquisition; (e) is the legal, valid and
binding obligation of the lessee; (f) to the knowledge of the Servicer, is not
subject to any right of rescission, setoff, counterclaim or any other defense of
the related lessee to pay the Outstanding Principal Balance due under such
Contract and no such right of rescission, offset, defense or counterclaim has
been asserted or threatened; (g) the related Dealer, the Servicer and the
Origination Trustee have each satisfied all obligations required to be fulfilled
on its part with respect thereto; (h) is payable solely in United States dollars
in the United States; (i) the lessee thereunder is located in the United States
and is not (i) ALFI, ALFI L.P., WOLSI, the 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) $[ ] 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
39
<PAGE> 46
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 (i.e., for a
Discounted Contract, its Outstanding Principal Balance discounted by [ ]%,
and for each other Contract, its Outstanding Principal Balance), (ii) the
weighted average remaining term of the Contracts (including the Subsequent
Contracts) is not greater than [ ] 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 [ ]%. (Servicing
Agreement, Section 8.02).
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 1994, 1995, 1996 and the six months ended June 30, 1997 an average of
approximately [ ]% of the number of retail automobile and light duty truck
lease contracts in its portfolio (including those owned by the Origination
Trustee on behalf of the Origination Trust and by certain special purpose
finance subsidiaries of World Omni) that were scheduled to mature during such
period were terminated prior to maturity, either because of voluntary
prepayments or repossession of the leased vehicles due to default by the lessees
under the related lease contracts. World Omni is not aware of any publicly
available industry statistics that set forth termination rates for retail
closed-end automobile and light duty truck lease contracts similar to the
Contracts.
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 through December 31, 1996 the losses relating to these
incentives have been immaterial. There can be no assurance as to the amount of
any losses that may arise from these incentives in the future. However, all such
losses relating to the Contracts will constitute Residual Value Loss Amounts
and, therefore, will be covered by the Residual Value Insurance Policy.
40
<PAGE> 47
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 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
Investor Interest 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
41
<PAGE> 48
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. The Investor Percentage of Loss Amounts will be
allocated among the Noteholders on a pro rata basis, based on the Class A-1,
Class A-2, Class A-3, Class A-4 and Class B Allocation Percentages, as the case
may be, and then reimbursed out of available funds in the amounts and order of
priority described in "Description of the Notes -- Distributions on the Notes --
Distributions of Interest". In addition, the Investor Percentage of the net
proceeds of any sale or other disposition of the SUBI Interest, the SUBI
Certificate and other property of the Trust, which may occur under certain
circumstances involving an Insolvency Event with respect to the 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 Noteholders based on their respective
Class Note Balances until the Class A Notes have been paid in full, and second,
to the Class B Noteholders.
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) [ ]% ABS for the first six
months of the life of the Contract, (ii) [ ]% ABS for the seventh through
twelfth month of the life of the Contract, (iii) [ ]% ABS for the thirteenth
through eighteenth month of the life of the Contract, (iv) [ ]% ABS for the
nineteenth through twenty-fourth month of the life of the Contract and (v)
[ ]% ABS following the twenty-fourth month of the life of the Contract until
the original Outstanding Principal Balance of the Contract has been paid in
full. Neither ABS nor the Prepayment Assumption purports to be a historical
description of prepayment experience or a prediction of the anticipated rate of
prepayment of lease contracts, including the Contracts. There can be no
assurance that the Contracts will prepay at the indicated levels of the
Prepayment Assumption or at any other rate.
The tables below were prepared on the basis of certain assumptions,
including that: (i) all Collections (including Monthly Payments and net sale
proceeds in respect of the Leased Vehicles relating to Matured Contracts) are
timely received, and that no Contracts are ever delinquent; (ii) no Reallocation
Payment or Reallocation Deposit Amount is made in respect of any Contract; (iii)
there are no Loss Amounts; (iv) the 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 99.8% of the Aggregate Net Investment Value;
(vii) all prepayments are full Prepayments; (viii) the Revolving Period ends on
, 1998; (ix) the Initial Contracts have assumed Lease Rates of
[ ]% and were originated four months prior to the Initial Cutoff Date; and (x)
all Principal Collections in respect of each Collection Period during the
Revolving Period are reinvested, on a Transfer Date that is the fifteenth day of
the following calendar month, in Subsequent Contracts that have stated terms of
three years, Lease Rates of [ ]% and Residual Values equal to [ ]% of the
original Outstanding Principal Balances thereof, were originated on the Initial
Cutoff Date and that otherwise have terms that are substantially similar to
those of the Initial Contracts.
No representation is made as to what the actual levels of losses and
delinquencies on the Contracts will be. Since the tables below were prepared on
the basis of the foregoing assumptions, there will be discrepancies between the
characteristics of the Contracts that actually will be allocated as SUBI Assets
in respect of Principal Collections made during the Revolving Period and Loss
Amounts with respect to the Revolving Period that otherwise would be reimbursed
to the Noteholders, and the characteristics of the Contracts
42
<PAGE> 49
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.
PERCENTAGE OF INITIAL CLASS A PRINCIPAL BALANCE REMAINING
AND WEIGHTED AVERAGE LIFE OF CLASS A-1 NOTES
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
-----------------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1997............................................... % % % % %
1998...............................................
1998...............................................
1999...............................................
1999...............................................
2000...............................................
2000...............................................
2001...............................................
2001...............................................
----- ----- ----- ----- -----
Weighted Average Life (Years)(1)...................
===== ===== ===== ===== =====
</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 ASSUMPTION
-----------------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1997............................................... % % % % %
1998...............................................
1998...............................................
1999...............................................
1999...............................................
2000...............................................
2000...............................................
2001...............................................
2001...............................................
----- ----- ----- ----- -----
Weighted Average Life (Years)(1)...................
===== ===== ===== ===== =====
</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.
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<PAGE> 50
PERCENTAGE OF INITIAL CLASS A PRINCIPAL BALANCE REMAINING
AND WEIGHTED AVERAGE LIFE OF CLASS A-3 NOTES
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION
--------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1997........................................................ % % % % %
1998........................................................
1998........................................................
1999........................................................
1999........................................................
2000........................................................
2000........................................................
2001........................................................
2001........................................................
---- ---- ---- ---- ----
Weighted Average Life (Years)(1)............................
==== ==== ==== ==== ====
</TABLE>
- ---------------
(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 ASSUMPTION
--------------------------------
DISTRIBUTION DATE 0% 50% 100% 150% 200%
- ----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1997........................................................ % % % % %
1998........................................................
1998........................................................
1999........................................................
1999........................................................
2000........................................................
2000........................................................
2001........................................................
2001........................................................
---- ---- ---- ---- ----
Weighted Average Life (Years)(1)............................
==== ==== ==== ==== ====
</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
44
<PAGE> 51
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, [ ], 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 "-- Book-Entry Registration".
DESCRIPTION OF THE NOTES
The Notes will be issued pursuant to 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" and " -- 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. (Agreement, Section 4.09). 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 principal 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 allocable to the SUBI Interest and
Accelerated Principal Distribution Amounts allocable to Notes of the related
Class, amounts on deposit in the Residual Value Surplus Account, 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 --
45
<PAGE> 52
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 allocable to the SUBI Interest
and Accelerated Principal Distribution Amounts are distributed to the
Noteholders and as Note Principal Loss Amounts are incurred and not reimbursed.
The Aggregate Net Investment Value can change daily as principal is paid on or
in respect of the Contracts and the Leased Vehicles, as Reallocation Payments in
respect of certain Contracts as to which an uncured breach of certain
representations and warranties or certain servicing covenants has occurred are
paid by World Omni during the Amortization Period, together with, under certain
circumstances, Reallocation Deposit Amounts, as liquidation losses and other
losses in respect of the Contracts and Leased Vehicles are incurred and as
Leased Vehicles in Matured Leased Vehicle Inventory are sold or otherwise
disposed of.
TRANSFER OF THE SUBI INTEREST
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 Owner
Trustee, without recourse, all of its right, title and interest in and to the
SUBI Interest represented by the SUBI Certificate. The Owner Trustee will,
concurrently with such delivery, transfer and assignment, deliver the Notes and
the Transferor Certificate 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
Owner Trustee, it had good title to, and was the sole legal and beneficial owner
of the SUBI Certificate, free and clear of liens and claims. (Agreement, Section
5.01).
REALLOCATION PAYMENTS AND REALLOCATION DEPOSIT AMOUNTS
As more fully described under "The Contracts -- Representations, Warranties
and Covenants" and "Additional Document Provisions -- The Servicing
Agreement -- Collections", under certain circumstances World Omni will be
required to make Reallocation Payments in respect of certain Contracts (and the
related Leased Vehicles) discovered not to be in compliance with World Omni's
representations or warranties or Contracts as to which certain servicing
procedures have not been followed, in either case that materially and adversely
affects 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).
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<PAGE> 53
CALCULATION OF INVESTOR PERCENTAGE AND TRANSFEROR PERCENTAGE
Pursuant to the Servicing Agreement, to the extent allocable to the SUBI
Interest, 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, in each case that are
allocable to the SUBI Interest, the percentage equivalent of a fraction (not to
exceed 100%) the numerator of which is the 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 99.8% of the
Aggregate Net Investment Value on the last day of the immediately preceding
Collection Period (or, in the case of the first Collection Period, as of the
Initial Cutoff Date) and (ii) Principal Collections during the Amortization
Period, the percentage equivalent of a fraction (not to exceed 100%) the
numerator of which is the Note Balance and the denominator of which is 99.8% of
the Aggregate Net Investment Value, in each case as of the last day of the last
Collection Period preceding (a) the Amortization Date or (b) the date on which
an Early Amortization Event occurs. The "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
allocable to the SUBI Interest 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 allocable to the SUBI Interest 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 allocable to the SUBI Interest 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 that are allocable to the SUBI Interest, 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
Adminis-
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<PAGE> 54
trative 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).
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
allocable to the SUBI Interest, 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 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, Section 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 allocable to the SUBI Interest,
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 (viii), 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 (ix) through (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 Early Amortization Event involving an
Insolvency Event 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
Interest, to the Indenture Trustee and the Owner Trustee the Investor
Percentage of Capped Trust Administrative Expenses.
(ii) to 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, for the related Interest Period, calculated
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<PAGE> 55
on the basis of a 360-day year consisting of twelve 30-day months, together
with any unpaid Class A-1, Class A-2, Class A-3 or Class A-4 Interest
Carryover Shortfall, as applicable;
(iii) to the Class B Noteholders, interest at a specified rate per
annum not expected to exceed [ ]% (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, for the related Interest Period, calculated on the basis of a
360-day year consisting of twelve 30-day months, together with any unpaid
Class B Interest Carryover Shortfall;
(iv) to the Servicer, reimbursement of the Investor Percentage of
Capped Contingent and Excess Liability Premiums;
(v) to the Origination Trustee, the Investor Percentage of Capped
Origination Trust Administrative Expenses;
(vi) in circumstances other than as set forth in clause (i) above, to
the Indenture Trustee and Owner Trustee, the Investor Percentage of Capped
Trust Administrative Expenses;
(vii) in the event that World Omni is not the Servicer, to such other
Servicer, the Investor Percentage of (a) the Servicing Fee and (b) any
unpaid Servicing Fees payable in respect of compensation to such other
Servicer with respect to one or more prior Collection Periods;
(viii) to the Reserve Fund, until the amount on deposit therein equals
the Reserve Fund Cash Requirement;
(ix) to each Class of Class A Noteholders, an amount equal to the
Class A-1, Class A-2 or Class A-3 or Class A-4 Allocation Percentage, as
applicable, multiplied by the Investor Percentage of all Loss Amounts
incurred during the related Collection Period and allocable to the SUBI
Interest;
(x) to each Class of Class A Noteholders, the aggregate of the amounts
allocable to such Class pursuant to clause (ix) 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);
(xi) 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;
(xii) to the Class B Noteholders, an amount equal to the Class B
Allocation Percentage multiplied by the Investor Percentage of all Loss
Amounts incurred during the related Collection Period and allocable to the
SUBI Interest;
(xiii) to the Class B Noteholders, the aggregate of the amounts
allocable pursuant to clause (xii) 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;
(xiv) 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;
(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 Trust or the Origination Trust in
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<PAGE> 56
excess of the Capped Administrative Expenses that have been paid but have
not yet been reimbursed (the "Uncapped Administrative Expenses").
Notwithstanding the foregoing, as more fully described under "Description
of the 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 (ix), (x), (xii) and (xiii) 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 allocated to the Investor
Interest 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
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-3 Noteholders until the Class A-2 Notes have been paid in
full, third, to the Class A-3 Noteholders until the Class A-4 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, Section 3.03).
In the event on any Distribution Date there remains any shortfall in
amounts required to be distributed to the Class A-1 Noteholders, Class A-2
Noteholders, Class A-3 Noteholders and Class A-4 Noteholders under clauses (ii),
(ix), (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 allocable to the SUBI Interest for the related
Collection Period, 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 (viii) 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 (viii) above).
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<PAGE> 57
"Interest Collections" with respect to any Collection Period will be
calculated as described under "Summary -- The Revolving Period; Subsequent
Contracts and Subsequent Leased Vehicles". (SUBI Trust Agreement, Section
10.01).
"Capped Origination Trust Administrative Expenses" will equal the amounts
sufficient to pay specified administrative costs and expenses of the Origination
Trust that are allocable to the SUBI Interest up to but not exceeding $[ ] in
any calendar year. (SUBI Trust Agreement, Section 10.01). "Capped Trust
Administrative Expenses" will equal the amounts sufficient to pay specified
administrative costs and expenses associated with the Notes such as the
Indenture Trustee's and Owner Trustee's compensation, the reasonable fees and
disbursements of the Transferor's accountants and attorneys, up to but not
exceeding $[ ] in any calendar year (or $[ ] in a calendar
year in which an Early Amortization Event occurs with respect to which the
Indenture Trustee sells or otherwise disposes of the SUBI Interest). (Agreement,
Section 1.01).
"Capped Contingent and Excess Liability Premiums" will equal the amounts
sufficient to pay the premiums then due on the portion of the Contingent and
Excess Liability Insurance Policies allocable to the SUBI Interest, up to but
not exceeding $[ ] in any calendar year.
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 allocable to the SUBI Interest, Insured Residual Value Loss
Amounts paid under the Residual Value Insurance Policy, the Required Amount, the
Transferor Amounts, the Servicing Fee (so long as World Omni is the Servicer)
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 allocable to the SUBI Interest for such Distribution Date
that is instead applied to the distribution of principal to the Class A
Noteholders, pursuant to clauses (ix) through (xi) above. The Class B Percentage
of the Investor Percentage of Principal Collections allocable to the SUBI
Interest will be applied for such purposes only to the extent that the other
amounts available therefor are insufficient.
The "Class B Allocation Percentage" with respect to any Distribution Date
will mean the Class B Note Balance as a percentage of the Note Balance,
calculated as of the last day of the related Collection Period.
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
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beneficially owned by ALFI, ALFI L.P., the Transferor, WOLSI, 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 (viii) above) and (ii) the amount, if any, by
which (a) the full amount distributable on the related Distribution Date
pursuant to clauses (i) through (vii) and (ix) through (xvi) above exceeds (b)
the sum of (1) the Investor Percentage of Interest Collections allocable to the
SUBI Interest for the related Collection Period, (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 1998 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 1997) 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).
"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
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Investor Percentage of all Principal Collections collected or received in
respect of the related Collection Period allocable to the Investor Interest as
principal first to the Class A-1 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 allocable to the SUBI
Interest that were not reinvested in Subsequent Contracts and Subsequent Leased
Vehicles as of the end of the Revolving Period and (ii) any Unallocated
Principal Collections on deposit in the Distribution Account at the time the
Amortization Period commences. The aggregate distributions of principal to the
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;
Agreement, Section 3.03).
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, 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. The Investor Percentage of Loss Amounts will be allocated among
Noteholders on a pro rata basis, based on the Class A-1 Allocation Percentage,
the Class A-2 Allocation Percentage, the Class A-3 Allocation Percentage, the
Class A-4 Allocation Percentage and the Class B Allocation Percentage, as the
case may be, and then reimbursed out of available funds in the amounts and order
of priority described in "Description of the Notes -- Distributions on the
Notes -- Distributions of Interest". 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 Interest, 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 on a pro rata basis, first, 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 Notes have been paid in full,
and second, to the Class B Noteholders.
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 and allocable to the SUBI Interest 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 and allocable to the SUBI
Interest, (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 allocable to the SUBI Interest. However, 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.
THE ACCOUNTS
The Distribution Account
On or prior to the Closing Date, the Transferor will establish a trust
account with the Indenture Trustee for the exclusive benefit of the Noteholders,
from which all payments with respect to the Notes will be made
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(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. On each Deposit Date, all
Principal Collections and Interest Collections with respect to the related
Collection Period allocable to the SUBI Interest will be remitted to the
Distribution Account. Such deposits will be made from, among other sources, (i)
monies on deposit in the SUBI Collection Account or the Reserve Fund and (ii)
the Transferor in the case of exercise of its right to purchase the SUBI
Interest 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 Indenture Trustee will establish a
trust account for the benefit of the Noteholders into which collections on or in
respect of the Contracts and the Leased Vehicles generally will be deposited
(the "SUBI Collection Account"). (SUBI Trust Agreement, Section 12.01).
Deposits into the SUBI Collection Account. Deposits into the SUBI
Collection Account will include, but will not be limited to, the following
payments made in respect of the SUBI Assets: (i) Monthly Payments; (ii) early
payments of the Outstanding Principal Balance of a Contract, including an amount
equal to the Residual Value of the related Leased Vehicle (each, a
"Prepayment"); (iii) Matured Leased Vehicle Proceeds, Repossessed Vehicle
Proceeds and other Liquidation Proceeds, 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; (ix) Insured Residual Value Loss Amounts paid
under the Residual Value Insurance Policy with respect to the Revolving Period;
and (x) certain amounts in respect of certain shortfalls in the Residual Values
of Leased Vehicles relating to Matured Contracts, as described under
"Description of the Notes -- The Accounts -- The Residual Value Surplus
Account". (Servicing Agreement, Sections 2.02, 8.02, 9.02 and 9.04; SUBI Trust
Agreement, Section 12.01).
"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
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
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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 Interest, 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 in respect of the SUBI Interest
on deposit in the SUBI Collection Account in respect of the related Collection
Period (including that portion of Payments Ahead representing Monthly Payments
due in such Collection Period) will be deposited into the Distribution Account.
During the Revolving Period, however, Principal Collections will be retained in
the SUBI Collection Account for reinvestment in Subsequent Contracts and
Subsequent Leased Vehicles as described under "Description of the 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 (after reimbursements thereof from the Residual
Value Surplus Account, if any), Repossessed Vehicle Expenses and other
Liquidation Expenses; (ii) delinquent Monthly Payments with respect to which the
Servicer has made an unreimbursed Advance; and (iii) an amount equal to any
unreimbursed Advances that the Servicer has concluded are Nonrecoverable
Advances. (Servicing Agreement, Section 9.02). For further information regarding
Nonrecoverable Advances, see "Additional Document Provisions -- The Servicing
Agreement -- Advances".
The Residual Value Surplus Account
On or prior to the Closing Date, the Indenture Trustee will establish a
trust account for the benefit of the Noteholders into which all Residual Value
Surplus with respect to a Collection Period will be deposited on the related
Deposit Date (the "Residual Value Surplus Account" and, together with the
Distribution Account, the SUBI Collection Account and the Reserve Fund, the
"Accounts"). (SUBI Trust Agreement, Section 12.03).
On each Deposit Date, funds on deposit in the Residual Value Surplus
Account shall be withdrawn by the Indenture Trustee and deposited into the SUBI
Collection Account up to an amount equal to the sum of (a) the aggregate of the
Residual Values of Leased Vehicles that were a part of Matured Leased Vehicle
Inventory but had not been sold or otherwise disposed of for at least two full
Collection Periods as of the end of the related Collection Period, (b) the
amount by which Net Matured Leased Vehicle Proceeds (after application of
amounts withdrawn pursuant to the next sentence) for the related Collection
Period are less than the aggregate of the Residual Values of Leased Vehicles
that were a part of Matured Leased Vehicle Inventory but were sold or otherwise
disposed of during such Collection Period and (c) any losses 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. In the event that the
Servicer supplies the Origination Trustee and the Indenture Trustee with an
officer's certificate setting forth the basis for such withdrawal, funds on
deposit in the Residual Value Surplus Account will be withdrawn and paid to the
Servicer in reimbursement for any Matured Leased Vehicle Expenses incurred
during such Collection Period, but only to the extent that, after reimbursement
of such Matured Leased Vehicle Expenses (exclusive of any other reimbursement
thereof), Net Matured Leased
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Vehicle Proceeds would be no more than the aggregate of the Residual Values of
Leased Vehicles sold or otherwise disposed of from Matured Leased Vehicle
Inventory during such Collection Period.
Maintenance of the Accounts
The 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 (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, the Reserve Fund or the Residual
Value Surplus Account or (ii) on the Business Day immediately preceding the
Distribution Date immediately succeeding the date of such investment in the case
of amounts on deposit in the Distribution Account. Notwithstanding the
foregoing, (a) investments on which the entity at which the related Account is
located is the obligor may mature on the related Deposit Date or Distribution
Date, as the case may be, and (b) investments during the Revolving Period of
Principal Collections on deposit in the SUBI Collection Account may mature on
such dates as in the Servicer's discretion will maintain sufficient cash to
acquire Subsequent Contracts and Subsequent Leased Vehicles on the related
Transfer Dates.
All income or other gain from the foregoing investments generally shall be
retained in the related Account with such gain in respect of funds in the SUBI
Collection Account and the Distribution Account generally being treated as
Interest Collections received in respect of the related Collection Period. Any
loss resulting from such investments shall be charged to the related Account.
(SUBI Trust Agreement, Sections 11.01 and 12.01; Agreement, Section 3.01;
Servicing Agreement, Section 9.02). "Permitted Investments" will be specified in
the SUBI Trust Agreement and will be limited to investments that meet the
criteria of each Rating Agency from time to time as being consistent with its
then-current rating of each Class of 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 1998 and the Amortization Period will
begin on , 1998 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 Interest 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),
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the SUBI Trust Agreement or the Servicing Agreement, which failure
materially and adversely affects the rights of holders of the SUBI Interest
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
Interest 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 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
Agreement, the SUBI Trust Agreement or the Servicing Agreement on the SUBI
Assets, which lien or encumbrance is not released within 60 days of its
creation;
(vi) transfer of, or imposition of a lien or encumbrance on, the
Retained SUBI Interest held by the Transferor except as permitted by the
Agreement, which, in the case of the imposition of a lien or encumbrance,
is not released within 30 days of its creation;
(vii) the 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;
(viii) if on the twenty-fifth day of any month (beginning
1997) 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;
(ix) an Event of Servicing Termination or an Event of Default under
the Indenture (an "Indenture Event of Default") occurs;
(x) if on any Distribution Date the aggregate amount withdrawn from
the Reserve Fund and deposited into the Distribution Account on or prior to
such Distribution Date (without giving effect to any deposits into the
Reserve Fund) exceeds $[ ] (i.e., [ ]% multiplied by 99.8% of the
Aggregate Net Investment Value as of the Initial Cutoff Date); or
(xi) 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").
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.
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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 allocable to the SUBI Interest 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
A-1 Note Factor, the Class A-2 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 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 amount of Transferor Amounts, 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;
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(xvi) the amounts of Advances made in respect of such Collection
Period and the amount of unreimbursed Advances on such Distribution Date;
(xvii) the balance on deposit in the Residual Value Surplus Account on
the related Deposit Date, after giving effect to the change in such balance
from the immediately preceding Deposit Date, and the aggregate amount of
Residual Value Surplus deposited into or withdrawn from the Residual Value
Surplus Account on the related Deposit Date;
(xviii) certain information used in determining compliance with the
Charge-off Test Rate and the Delinquency Test; and
(xix) the Insured Residual Value Loss Amount, if any, 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 maturity, sale or other liquidation, as the case may be, of the
last outstanding Contract and Leased Vehicle evidenced by the SUBI and the
distribution of all proceeds thereof, together with all amounts on deposit in
the Accounts and the Reserve Fund, in the manner to be prescribed in the
Agreement, (ii) the day following the Distribution Date on which the 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 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 Investor Noteholders or the Servicer, and (ii) 99.8% of the Aggregate Net
Investment Value as of the last day of the preceding Collection Period. If the
Transferor purchases the assets of the Trust and Notes are to be redeemed, 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 10.01).
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 United Way. (Agreement, Section 7.01).
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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.
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
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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 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 28 currencies, including United States dollars. Cedel
provides to Cedel Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Cedel interfaces with domestic markets in
several countries. As a professional depositary, Cedel is subject to regulation
by the Luxembourg Monetary Institute. Cedel Participants are recognized
financial institutions around the world, including underwriters, securities
brokers and dealers,
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banks, trust companies, clearing corporations and certain other organizations.
Indirect access to Cedel is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for Euroclear Participants
and to clear and settle transactions between Euroclear Participants through
simultaneous electronic book-entry delivery against payment, thereby eliminating
the need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may now be settled
in any of 32 currencies, including United States dollars. The Euroclear System
includes various other services, including securities lending and borrowing, and
interfaces with domestic markets in several countries generally similar to the
arrangements for cross-market transfers with DTC described above. Euroclear is
operated by the Brussels, Belgium office of Morgan Guaranty Trust Company of New
York (the "Euroclear Operator"), under contract with Euroclear Clearance System
S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are
conducted by the Euroclear Operator, and all Euroclear securities clearance
accounts and Euroclear cash accounts are accounts with the Euroclear Operator,
not the Cooperative. The Cooperative establishes policy for the Euroclear System
on behalf of Euroclear Participants. Euroclear Participants include banks
(including central banks), securities brokers and dealers and other professional
financial intermediaries. Indirect access to the Euroclear System is also
available to other firms that clear through or maintain a custodial relationship
with a Euroclear Participant, either directly or indirectly.
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 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
Early Amortization Event, Note Owners representing in the aggregate not less
than a majority in interest of the Voting Interests of the Class A Notes (voting
together as a
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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. (Agreement, Section 4.11).
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 Agreement. 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. (Agreement,
Section 3.03). 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. (Agreement, Section 7.01).
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. (Agreement,
Section 4.07).
THE INDENTURE TRUSTEE
[ ] will be the Indenture Trustee under the Indenture. The Corporate
Trust Office of the Indenture Trustee is located at [ ]. [ ] 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. 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 those laws, and
subject to supervision or examination by federal or state laws, with a combined
capital and surplus of at least $50,000,000 and a long-term deposit rating no
lower than Baa3 by Moody's, or must be otherwise acceptable to each Rating
Agency. As co-trustee or separate trustee need not meet these eligibility
requirements. (Indenture, Sections 6.06 and [ ]).
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,
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 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
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illegal, would subject it to personal liability or would be unduly prejudicial
to the rights of other Noteholders. (Indenture, Section [ ]).
A Noteholder may institute proceedings under the Agreement, but only if
such holder previously has given to the Indenture Trustee written notice of
default and unless the 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, 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 30 days has
neglected or refused to institute any such proceeding. (Agreement, Section
9.03). 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 [ ]).
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 holders of Notes evidencing not less than 25% of the
Voting Interests of any Class of 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 Agreement. (Agreement, Section 4.06). See
"Description of the Notes -- Book-Entry Registration" and "-- Definitive Notes".
The Agreement will not provide for the holding of any annual or other
meetings of Noteholders.
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 Interest 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 monies on deposit in the SUBI Collection Account and
the Residual Value Surplus Account, the Contingent and Excess Liability
Insurance Policies and the Residual Value Insurance Policy described below and
its rights as 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 Servicer will establish a trust
account with the Indenture Trustee for the exclusive 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
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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) $[ ] (i.e.,
[ ]% of 99.8% 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 $[ ] for each Distribution Date relating to
the Revolving Period.
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) $[ ] (i.e., [ ]% of 99.8% of the Aggregate 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) $[ ]
(i.e., [ ]% of 99.8% 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
$[ ] (i.e., [ ]% of 99.8% of the Aggregate Net Investment Value as of
the Initial Cutoff Date).
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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 (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).
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 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
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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 months of and 1997 in
the case of the 1997 Determination Date) is greater than [ ]%. The
"Delinquency Test" will not be satisfied if, with respect to any Determination
Date the average of the Delinquency Rates for the three immediately preceding
calendar months (or the months of and 1997 in the case of
the 1997 Determination Date) is greater than [ ]%. The "Charge-off
Rate" with respect to any calendar month will be the Discounted Principal
Balance of all Contracts that became Charged-off Contracts during such month,
less all Net Repossessed Vehicle Proceeds and other Net Liquidation Proceeds
collected during such month with respect to Charged-off Contracts, all divided
by the average of the Aggregate Net Investment Value as of the last day of such
month and the preceding month. Such result will then be multiplied by twelve to
produce an annualized rate. The "Delinquency Rate" for any calendar month will
be the number of Current Contracts that are 61 days or more delinquent, whether
or not the related Leased Vehicles have been repossessed (or repossession
proceedings in respect thereof have been initiated), but which have not yet been
sold or otherwise disposed of, divided by the aggregate number of Current
Contracts, in each case as of the last day of such month. (Agreement, Section
1.01).
"Current Contracts" will be all Contracts other than Charged-off,
Liquidated, Matured and Additional Loss Contracts. A "Liquidated Contract" will
be a Contract that has been the subject of a Prepayment in full or otherwise has
been paid in full. An "Additional Loss Contract" will be a Contract that has
been sold or otherwise disposed of by the Servicer, acting on behalf of the
Origination Trust, to pay an Additional Loss Amount.
The 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 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).
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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, the Servicer and ALFI 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. 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
$[ ] 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 fifteenth day of each calendar month, 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.
[ADD DESCRIPTION OF RV INSURER]
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
the RV Insurer for a specified percentage of claims paid under the Residual
Value Insurance Policy, although the failure to make such reimbursement will not
affect the RV Insurer'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
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excess insurance coverage for which the Origination Trustee is an additional
named insured (together with the aforementioned primary contingent liability
insurance policy, the "Contingent and Excess Liability Insurance Policies").
These insurance policies collectively provide insurance coverage in excess of
$10 million per accident, and permit multiple claims in any policy period. To
the extent that such coverage were exhausted and damages were assessed against
the Origination Trust, claims could be imposed against the assets of the
Origination Trust. In such event, investors in the Class A 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 will be required to
police the maintenance of lessee-required insurance and, under certain
circumstances, will be required to make payments in respect thereof. In the
event that all of the foregoing insurance coverage were exhausted and no
third-party reimbursement for such damage to a Leased Vehicle were available,
investors in the Class A 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 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).
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 9.01). 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, the manner in which the Reserve
Fund or Residual Value Surplus Account is funded, the need for the Residual
Value Surplus Account, changing the remittance schedule for collection deposits
in the Distribution Account, changing the definition of "Permitted Investments",
or replacing the Residual Value Insurance Policy with an alternative mechanism)
if (a) the
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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 not less than a majority in interest 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) $[ ] 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 [ ]).
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 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 90 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) an Insolvency Event with
respect to the Trust or the Transferor. Investors should be aware that the
amount of principal and 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 maturity date for such Class of Notes. (Indenture, Section
[ ]).
If an Indenture Event of Default occurs and is continuing, then the
Indenture Trustee or Noteholders representing not less than 25% of the then
aggregate outstanding principal amount of the Notes 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, 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 more than 50% of the
then aggregate outstanding principal amount of 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 [ ]).
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 Interest or elect to have the Trust
maintain possession of the SUBI Interest and continue to apply collections as if
there had been no declaration of acceleration. (Indenture, Section [ ]).
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If an Indenture Event of Default occurs and is continuing with respect to
the Notes, the Indenture Trustee will be under no obligation to exercise any of
the rights or powers under the Indenture at the request or direction of any of
the holders of the Notes, if the Indenture Trustee believes it will not be
adequately indemnified 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, the holders of a majority in principal amount 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 the holders of a majority in principal amount of
Notes then outstanding 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 [ ]).
No holder of a Note will have the right to institute any proceeding with
respect to the Indenture, unless (i) such holder previously has given to the
Indenture Trustee written notice of a continuing Event of Default, (ii) the
holders of not less than 25% in principal amount of the outstanding Notes of
such series 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 satisfactory 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 the holders of a majority in principal
amount of such outstanding Notes. (Indenture, Section [ ]).
Neither the Indenture Trustee in its individual capacity nor the Transferor
nor any of their respective owners, beneficiaries, agents, officers, directors,
employees, affiliates, successors or assigns will be personally liable for the
payment of the principal of or interest on the Notes or for the agreements of
the Trust contained in the Indenture. (Indenture, Section [ ]).
If an Indenture Event of Default occurs, the Indenture Trustee may, and
upon receipt of written instructions from holders of Notes evidencing Voting
Interests of not less than a majority of interest of the Class A Notes (voting
together as a single class) or a majority of interest of the Class A Notes and
Class B Notes (voting together as a single class) shall, publish a notice
stating that the Indenture Trustee intends to sell or dispose of the SUBI
Interest and the SUBI Certificate and the other property of the Trust in a
commercially reasonable manner. Following such publication, unless otherwise
prohibited by applicable law, the Indenture Trustee will sell or otherwise
dispose of the SUBI Interest, the SUBI Certificate and such other property in a
commercially reasonable manner and on commercially reasonable terms; provided
that such sale shall not be made without the consent of all the Noteholders if a
net loss would be realized as a result of such sale. The net sale or disposition
proceeds of the SUBI Interest, the SUBI Certificate and such other property will
be deposited into the SUBI Collection Account and treated as Collections on or
in respect of the SUBI Assets. The interest portion of the Investor Percentage
of such proceeds will be distributed to the 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. (Agreement, Section 8.02).
If such proceeds, together with all amounts on deposit in the Accounts, the
Reserve Fund and the Residual Value Surplus Account, amounts otherwise payable
to the 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 [ ]).
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 [ ]).
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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 under the related Indenture, 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 related Notes and
that has not been previously reported. (Indenture, Section [ ]).
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
[ ]).
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, WOLSI, ALFI L.P., ALFI, the Origination Trust or the Origination
Trustee until one year and one day after the later of (i) payment of the Notes
in full and (ii) final payment of all other financings involving interests in
the Origination Trust (including the transaction described herein and all other
transactions involving the UTI and each Other SUBI). (Agreement, Section 6.16).
The Owner Trustee
[ ] will be the Owner Trustee under the Agreement. The Corporate
Trust Office of the Owner Trustee is located at [ ]. [ ] 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).
Governing Law
The Agreement will be governed by the laws of the State of Illinois.
THE SUBI TRUST AGREEMENT
The SUBI, the Other SUBIs and the UTI
ALFI L.P. is the grantor and (as holder of the UTI) a beneficiary of the
Origination Trust. In its capacity as grantor, ALFI L.P. will from time to time
assign, transfer, grant and convey (or cause to be assigned, transferred,
granted and conveyed) to the Origination Trustee in trust the Origination Trust
Assets. (SUBI Trust Agreement, Section 2.01). ALFI L.P. will hold the UTI, which
represents a beneficial interest in all Origination Trust Assets other than the
SUBI Assets and the Other SUBI Assets. (SUBI Trust Agreement, Section 4.01).
ALFI L.P. has pledged (and may in the future pledge) the UTI as security for
obligations to third-party lenders, and has created and sold (and may in the
future create and sell or pledge) Other SUBIs in
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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 "Additional
Document Provisions -- The SUBI Trust Agreement -- The SUBI, The Other SUBIs and
the UTI", 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 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 ALFI L.P. as Beneficiary and Grantor
ALFI L.P., as grantor, will be liable for all debts and obligations arising
with respect to the Origination Trust Assets or the operation of the Origination
Trust; provided, however, that its liability with respect to any pledge of the
UTI and any assignee or pledgee of a SUBI or SUBI Certificate or Other SUBI or
Other SUBI Certificate shall be as set forth in the financing documents relating
thereto. ALFI, as the general partner of ALFI L.P., the grantor, is required at
all times to maintain a minimum net worth of $10 million. To the extent that
ALFI L.P. shall have paid or suffered any liability or expense with respect to
the Origination Trust Assets or the operation of the Origination Trust, ALFI
L.P. shall be indemnified, defended and held harmless out of the assets of the
Origination Trust against any such liability or expense (including reasonable
attorneys' fees and expenses). (SUBI Trust Agreement, 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)
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applications for certificates of title as are necessary and appropriate so as to
cause the Origination Trustee to be recorded as the holder of legal title of
record to the Leased Vehicles. (SUBI Trust Agreement, Section 5.01). In carrying
out the foregoing duties, the Origination Trustee will be required to exercise
the same degree of care and skill as a prudent person would exercise or use
under the circumstances in the conduct of such person's own affairs. (SUBI Trust
Agreement, Section 5.02).
The Origination Trustee may be replaced by ALFI L.P. only if it ceases to
be qualified in accordance with the terms of the SUBI Trust Agreement and shall
be removed if certain representations and warranties made by the Origination
Trustee therein prove to have been materially incorrect when made, or in certain
events of bankruptcy or insolvency. (SUBI Trust Agreement, Section 6.03). The
Indenture Trustee, as pledgee of the SUBI Certificate, on behalf of the
Noteholders may, or at the direction of holders of Notes evidencing not less
than a majority in interest of the Voting Interests of the Class A Notes and the
Class B Notes, voting together as a single class, will, exercise its powers
under the Indenture to cause the Owner Trustee to cause the Trust Agent to be
removed or replaced for a material breach of its obligations. (SUBI Trust
Agreement, Sections 5.03 and 10.02).
The Origination Trustee will make no representations as to the validity or
sufficiency of the SUBI, the SUBI Certificate or the Retained SUBI Interest
(other than the execution and authentication of the SUBI Certificate and the
certificate evidencing the Retained SUBI Interest), or of any Contract, Leased
Vehicle or related document, will not be responsible for performing any of the
duties of ALFI L.P. or the Servicer and will not be accountable for the use or
application by any owners of beneficial interests in the Origination Trust
Assets of any funds paid in respect of the Origination Trust Assets, or the
investment of any of such monies before such monies are deposited into the
accounts relating to the SUBI, the Other SUBIs and the UTI. The Origination
Trustee will not independently verify the Contracts or the Leased Vehicles.
(SUBI Trust Agreement, Section 5.04). The duties of the Origination Trustee will
generally be limited to the acceptance of assignments of lease contracts, the
titling of the related leased vehicles in the name of the Origination Trustee,
the creation of the SUBI, the Other SUBIs and the UTI, the maintenance of the
SUBI Collection Account, the Residual Value Surplus Account and accounts
relating to the Other SUBIs and the UTI and the receipt of the various
certificates, reports or other instruments required to be furnished to the
Origination Trustee under the SUBI Trust Agreement, in which case it will only
be required to examine them to determine whether they conform to the
requirements of the SUBI Trust Agreement. (SUBI Trust Agreement, Section 5.01).
The Origination Trustee will be under no obligation to exercise any of the
rights or powers vested in it by the SUBI Trust Agreement or to make any
investigation of matters arising thereunder or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of ALFI L.P., the Servicer or by the holders of a majority in interest
in the SUBI, unless such party or parties have offered to the Origination
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby. The reasonable expenses of
every such exercise of rights or powers or examination shall be paid by the
party or parties requesting such exercise or examination or, if paid by the
Origination Trustee, shall be a reimbursable expense of the Origination Trustee.
(SUBI Trust Agreement, Sections 5.03 and 6.08).
The Origination Trustee may enter from time to time into one or more agency
agreements (each, an "Agency Agreement") with such person or persons, including
without limitation any affiliate of the Origination Trustee (each, a "Trust
Agent"), as are by experience and expertise qualified to act in a trustee
capacity and otherwise acceptable to ALFI. The Origination Trustee has engaged
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 allocable to the SUBI Interest, 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".
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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 ALFI L.P. and the Origination Trustee shall terminate upon the last to occur
of (i) the payment to ALFI L.P. and each permitted purchaser, assignee and
pledgee of any of ALFI L.P.'s interests in the Origination Trust (including the
Indenture Trustee, with respect to the SUBI Interest) of all amounts and
obligations required to be paid to them, and the expiration or termination of
all financings secured by the Origination Trust Assets by their respective terms
and (ii) the maturity or liquidation and the disposition of all Origination
Trust Assets and the disposition to or upon the order of ALFI L.P. or any
permitted purchaser, assignee or pledgee of all net proceeds thereof. (SUBI
Trust Agreement, Section 8.01).
No Petition
The Origination Trustee and the Trust Agent will agree not to institute, or
join in, any bankruptcy or similar proceeding against the Transferor, WOLSI,
ALFI L.P. or ALFI until one year and one day after final payment of all
financings involving interests in the Origination Trust. (SUBI Trust Agreement,
Section 6.09). Each pledgee or assignee of any UTI or other SUBI must give a
similar non-petition covenant. (SUBI Trust Agreement, Sections 4.01 and 4.02).
Governing Law
The SUBI Trust Agreement will be governed by the laws of the State of
Alabama. (SUBI Trust Agreement, Sections 9.02 and 13.02).
Owner Trustee and Indenture Trustee as Third-Party Beneficiaries
As the holder of the SUBI Interest, the Owner Trustee, and as the pledgee
of the SUBI Interest, the Indenture Trustee, will be third-party beneficiaries
of the SUBI Trust Agreement. Therefore, the Owner Trustee or the Indenture
Trustee may, and, upon the direction of Noteholders representing at least a
majority in interest of the Voting Interests of the Class A Notes and the Class
B 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).
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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 "protective" 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 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 Final Scheduled
Distribution Date occurs. The amount of any Extension Fee received by the
Servicer in connection with the extension of a Contract will be deposited into
the SUBI Collection Account. In the event that the Servicer extends a Contract
in contravention of the foregoing, the Servicing Agreement will require the
Servicer to deposit into the SUBI Collection Account an amount equal to the
Reallocation Payment in respect of such Contract on the Deposit Date relating to
the Collection Period in which such extension was granted, at which time such
Contracts and the related Leased
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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 SUBI Assets and
other Origination Trust Assets.
Advances
On each Deposit Date, the Servicer will be obligated to make, by deposit
into the SUBI Collection Account, an advance in an amount equal to the aggregate
Monthly Payments due but not received during the related Collection Period with
respect to Contracts that are 31 days or more past due as of the end of the
related Collection Period, and the Servicer may (but shall not be required to)
make such an advance with respect to Contracts that are one or more days, but
less than 31 days, past due as of the end of the related Collection Period
(collectively, an "Advance"). (Servicing Agreement, Section 9.04).
Notwithstanding the foregoing, the Servicer will not be required to make an
Advance to the extent that such Advance would constitute a Nonrecoverable
Advance. (Servicing Agreement, Section 9.04). A "Nonrecoverable Advance" will be
any Advance that, in the reasonable judgment of the Servicer, may not be
ultimately recoverable by the Servicer from Net Liquidation Proceeds or
otherwise. (Servicing Agreement, Section 6.01). In making Advances, the Servicer
will assist in maintaining a regular flow of scheduled principal and interest
payments on the Contracts, rather than to guarantee or insure against losses.
Accordingly, all Advances shall be reimbursable to the Servicer, without
interest, if and when a payment relating to a Contract with respect to which an
Advance has previously been made is subsequently received. In addition, the
Servicer will be reimbursed for all Nonrecoverable Advances from collections on
or in respect of the Contracts and Leased Vehicles in general. (Servicing
Agreement, Section 9.02).
Security Deposits
The 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.
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Insurance on Leased Vehicles
Each lessee is required to maintain in full force and effect during the
term of a Contract a comprehensive collision and physical damage insurance
policy covering the actual cash value of the related Leased Vehicle and naming
the Origination Trustee, on behalf of the Origination Trust, as loss payee. Each
lessee also is required to maintain bodily injury and property damage liability
insurance in amounts equal to the greater of the amount prescribed by applicable
state law or industry standards as set forth in the Contract and naming the
Origination Trustee, on behalf of the Origination Trust, as an additional
insured. (Servicing Agreement, Section 2.11). Since lessees may choose their own
insurers to provide the required coverage, the specific terms and conditions of
their policies vary. If a lessee fails to obtain or maintain the required
insurance, the related Contract will be in default. It is the practice of World
Omni not to obtain insurance on behalf of and at the expense of the related
lessee but rather to repossess the related Leased Vehicle. In the event that a
required insurance policy has lapsed, has not been maintained in full force and
effect or the Servicer has failed to maintain the right to receive the proceeds
thereof for damage to or destruction of the related Leased Vehicle, the
Servicing Agreement will require World Omni to pay promptly into the SUBI
Collection Account all such amounts as would otherwise have been recoverable as
Insurance Proceeds. This obligation will survive any termination of World Omni
as Servicer under the Servicing Agreement. (Servicing Agreement, Section 2.11).
World Omni does not require lessees to carry credit disability, credit life
or credit health insurance or other similar insurance coverage which provides
for payments to be made on the Contracts on behalf of such lessees in the event
of disability or death. To the extent that such insurance coverage is obtained
on behalf of a lessee, payments received in respect of such coverage may be
applied to payments on the related Contract to the extent that the lessee's
beneficiary chooses to do so.
Realization Upon Charged-off Contracts
The Servicer will use commercially reasonable efforts to repossess and
liquidate the Leased Vehicle relating to a Contract that comes into and
continues in default and for which no satisfactory arrangements can be made for
collection of delinquent payments. Such liquidation may be through repossession
of such Leased Vehicle and disposition at a public or private sale, or the
Servicer may take any other action permitted by applicable law. The Servicer may
enforce all rights under any such Contract, sell the Leased Vehicle in
accordance with the Contract and commence and prosecute any proceedings in
connection with the Contract. In connection with any such repossession, the
Servicer will follow such practices and procedures as it deems necessary or
advisable and as are normal and usual for responsible holders of closed-end
automobile and light duty truck lease contracts and, to the extent more
exacting, the practices and procedures used by the Servicer in respect of any
such lease contracts serviced by it for its own account, and in any event in
compliance with all applicable laws. The Servicer will be required to repair the
Leased Vehicle if it reasonably determines that such repairs will increase the
related Net Repossessed Vehicle Proceeds. The Servicer will be responsible for
all costs and expenses incurred in connection with the sale or other disposition
of Leased Vehicles related to Charged-off Contracts and other Contracts as to
which a lessee has defaulted and the related Leased Vehicles, but will be
entitled to reimbursement to the extent that such costs constitute Repossessed
Vehicle Expenses or other Liquidation Expenses or expenses recoverable under an
applicable insurance policy. Proceeds from the sale or other disposition of
repossessed Leased Vehicles will constitute Repossessed Vehicle Proceeds and
will 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
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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 or the Residual Value Surplus
Account upon presentation of an officer's certificate by the Servicer. Any
Residual Value Surplus for a Collection Period will be deposited into the
Residual Value Surplus Account. (SUBI Trust Agreement, Section 10.01; Servicing
Agreement, Section 9.02).
Records, Servicer Determinations and Reports
The Servicer will retain or cause to be retained all data (including,
without limitation, computerized records, operating software and related
documentation) relating directly to or maintained in connection with the
servicing of the Contracts. Upon the occurrence and continuance of an Event of
Servicing Termination and termination of the Servicer's obligations under the
Servicing Agreement, the Servicer will use commercially reasonable efforts to
effect the orderly and efficient transfer of the servicing of the Contracts to a
successor servicer. (Servicing Agreement, Sections 2.03 and 9.03).
The Servicer will perform certain monitoring and reporting functions on
behalf of the Transferor, the Indenture Trustee, the Owner Trustee, the
Origination Trustee and Noteholders, including the preparation and delivery to
the Indenture Trustee, the Owner 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, Section 10.01).
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, 1998, 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, 1998, 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).
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
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not be sufficient to cover any current liability and (iii) is contemplating
benefit improvements with respect to any plans then maintained or the
establishment of any new ERISA plans, either of which would cause it to maintain
an ERISA plan with unfunded current liability (the "ERISA Compliance Test"). In
the event that the Servicer does not timely make the foregoing certifications,
or any such certification is incorrect, 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 portion of the Servicing
Fee allocable to the SUBI Interest will be 99.8% thereof. The Servicing Fee will
be calculated and paid based upon a 360-day year consisting of twelve 30-day
months. So long as World Omni is the Servicer, it may, by notice to the
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 allocable to the SUBI Interest, and will not be entitled to
reimbursement of such expenses except to the extent any such expenses constitute
Liquidation Expenses in respect of a Contract or Leased Vehicle or reasonable
issuance expenses under an applicable insurance policy, or to the extent that
Uncapped Administrative Expenses are reimbursed out of Interest Collections.
(Servicing Agreement, Sections 2.05 and 9.06).
The Servicing Fee will compensate the Servicer for performing the functions
of a third party servicer of the Contracts as an agent for the 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).
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
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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).
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 holders of
Notes evidencing not less than a majority in interest of the Voting Interests of
the Class A Notes and the Class B 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
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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).
The holders of Notes evidencing not less than a majority in interest of the
Voting Interests of the Class A Notes and the Class B 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; Agreement, Sections 8.02 and 9.03).
No Petition
The Servicer will agree not to institute, or join in, any bankruptcy or
similar proceeding against the Transferor, WOLSI, ALFI L.P., ALFI, 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).
Governing Law
The Servicing Agreement will be governed by the laws of the State of
Alabama.
Indenture Trustee and Owner Trustee as Third-Party Beneficiaries
As the holder of the SUBI Interest, the Owner Trustee, and as the pledgee
of the SUBI Interest, the Indenture Trustee, will be third-party beneficiaries
of the Servicing Agreement. (Servicing Agreement, Section 12.12).
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
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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".
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.
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 Owner Trustee 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 Owner Trustee 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
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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 ALFI L.P.,
the Transferor believes that the SUBI Assets would not be treated as part of
ALFI L.P.'s bankruptcy estate and that, even if they were so treated, the
subordination by holders and pledgees of the UTI and Other SUBIs should be
enforceable. In addition, as described under "Risk Factors -- 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 ALFI, ALFI L.P., WOLSI, 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 ALFI, ALFI
L.P., the Transferor, WOLSI, the Origination Trust or the Trust should be
consolidated with those of World Omni in the event of the application of
applicable Insolvency Laws to World Omni, (ii) a filing were made under any
Insolvency Law by or against ALFI, ALFI L.P., the Transferor, WOLSI, the
Origination Trust or the Trust or (iii) an attempt were made to litigate any of
the foregoing issues, delays in payments on the Notes and possible reductions in
the amount of such payments could occur.
LEGAL PROCEEDINGS
None of ALFI, ALFI L.P., the Transferor or WOLSI is a party to any legal
proceeding. World Omni is a party to, and is vigorously defending, numerous
legal proceedings, all of which it believes constitute ordinary routine
litigation incidental to the business and activities conducted by World Omni.
The Origination Trustee, on behalf of the Origination Trust, has been named as a
defendant in various cases which it believes constitute ordinary routine
litigation incidental to the business and activities conducted by the
Origination Trustee as an assignee of lease contracts and leased vehicles.
CERTAIN LEGAL ASPECTS OF THE
CONTRACTS AND THE LEASED VEHICLES
BACK-UP SECURITY INTERESTS
Absent prior perfection of a security interest by the Owner Trustee 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 Owner Trustee 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
Interest 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, "protective" 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 Interest evidenced thereby). However,
no action will be taken to perfect the lien that the Indenture Trustee would be
deemed to have in the Leased Vehicles in the event of such a recharacterization.
Therefore, to the extent that a valid lien is imposed by a third party against a
Leased Vehicle, the interest of the lienholder will be superior to the
unperfected beneficial interest of the Indenture Trustee in such Leased Vehicle.
Although the Servicing Agreement will
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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.
In Alabama and Georgia, a victim of such an accident has no such cause of
action against the owner of a leased vehicle arising from the negligent
operation of such leased vehicle unless the owner has negligently entrusted or
negligently continues to entrust the vehicle to an inappropriate lessee.
In Florida, under Section 324.021(9)(b), Florida Statutes, the owner of a
motor vehicle that is subject to a lease having an initial term of at least one
year is exempt from liability arising out of an accident in which the leased
vehicle is involved if the lessee is required under the lease to maintain
certain specified levels of insurance and such insurance is in effect. In 1991,
in a case involving finance leases, the Florida Supreme Court ruled that this
statute is constitutional and that a Florida owner/lessor that complies with the
statute will not be deemed the owner of the leased vehicle for purposes of
financial responsibility for liability or tort claims arising out of the
negligent operation of the leased vehicle or the negligent acts of the operator.
In 1992, the Florida Supreme Court held that this statute is applicable to true
leases as well as finance leases. In March 1996, the Florida Supreme Court
strictly interpreted the requirements of Section 324.021(9)(b), ruling that the
existence of a lessor's blanket contingent liability insurance policy did not
satisfy the statutory requirement that the lessee have insurance in effect at
the time of the accident and denying the lessor the liability exemption provided
in the statute. However, effective with respect to actions brought on or after
June 1, 1996, the statute was amended to provide that a lessor's blanket
contingent liability insurance policy with certain required policy limits will
be deemed to satisfy the statute's requirements for the liability exemption. The
Origination Trust's insurance coverage meets these requirements.
In North Carolina, a lessor of a motor vehicle generally is not responsible
to injured parties for a lessee's negligent use of the leased vehicle when all
control has been relinquished to the lessee, unless the lessor knew or in the
exercise of reasonable care should have known that the leased vehicle was
defective or unsafe at the
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time of delivery to the lessee and the defect or unsafe condition caused injury,
or if the lessor negligently entrusted the vehicle to an incompetent lessee.
As more fully described under "Risk Factors -- 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 would be the case, in
certain limited circumstances, 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.
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.
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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 and the circumstances under which the lessee may
terminate the lease prior to the end of the lease term, and (beginning in
October 1997) 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 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 SUBI Trust Agreement
that each Contract complies with all requirements of law in all material
respects. If any such representation and warranty proves to be incorrect with
respect to any Contract, and is not timely cured, World Omni will be required
under the
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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 Brown & Wood
LLP, 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 Internal Revenue Service ("IRS") on any of the issues
discussed below. Moreover, there can be no assurance that if such a ruling were
sought, the IRS would rule favorably. 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 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
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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, Brown & Wood LLP 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). 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 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.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Class A Note and its issue price. 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.
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, bonuses,
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 issue price of a Class A Note also includes
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. 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."
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
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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.
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 taxpayer may elect to include
market discount currently in gross income in taxable years to which it is
attributable, computed using either a ratable accrual or a yield to maturity
method.
Premium. A 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. 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.
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 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 18 months and 28% for capital assets held for more than 12 months
and not more than 18 months. Moreover, capital losses generally may be used only
to offset capital gains.
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Federal Income Tax Consequences to Foreign Investors
The following information describes the United States federal income tax
treatment of investors that are not United States persons ("Foreign Investors")
if the Class A 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, (iii) an estate or
trust the income of which is includible in gross income for United States
federal income tax purposes, regardless of its source or (iv) for trusts whose
taxable years begin after December 31, 1996, a trust whose administration is
subject to the primary supervision of a United States court and which has one or
more United States fiduciaries who have authority to control all substantial
decisions of the trust.
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.
Possible Alternative Treatment of the Class A Notes
Although, as described above, it is the opinion of Brown & Wood LLP 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, the Trust generally would be required to pay corporate
income tax on its taxable income (thus reducing the cash available to make
payments on the Class A Notes). In addition, 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 part of its regular
examination process, the IRS currently
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is reviewing transactions consummated in prior years that are similar to the
transaction described in this Prospectus. While World Omni strongly 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.
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.
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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.
In addition, the DOL has granted to World Omni and its affiliates,
including the Transferor, an administrative exemption (Prohibited Transaction
Exemption 96-12; Exemption Application No. D-09840, et al., 61 Fed. Reg.
10025-31 (March 12, 1996)) (the "Exemption") from certain of the prohibited
transaction rules of ERISA. The Exemption applies to the initial purchase, the
holding and the subsequent resale by Benefit Plans of certificates similar to
the Class A Notes, provided that certain specified conditions (certain of which
are specified below) are met. The Transferor believes all conditions of the
Exemption other than those within the control of the investors have been or will
be met.
For the Exemption to apply to the acquisition by a Benefit Plan of Class A
Notes, the Class A Notes would be required to be offered and sold initially to
the public (including Benefit Plans) pursuant to an underwriting arrangement
with one or more underwriters which have received one of a group of
administrative exemptions from certain of the prohibited transaction rules of
ERISA. Such exemptions apply with respect to the initial purchase, the holding
and the subsequent resale by Benefit Plans of certificates representing
interests in asset backed pass-through trusts that consist of certain
receivables, loans and other obligations that meet the conditions and
requirements of such exemption. The DOL has granted such an administrative
exemption to the managing Underwriter (Prohibited Transaction Exemption
[ ]; Exemption Application No. [ ] 55 Fed. Reg. [ ]
(199 ), as amended.
Among the other conditions that are required to be satisfied for the
Exemption to apply to the acquisition by a Benefit Plan of the Class A Notes are
the following (each of which the Transferor believes has been or will be met in
connection with the Class A Notes):
(i) The acquisition of the Class A Notes by a Benefit Plan is on terms
(including the price for the Class A Notes) that are at least as favorable
to the Benefit Plan as they would be in an arm's length transaction with an
unrelated party.
(ii) The rights and interests evidenced by the Class A Notes acquired
by the Benefit Plan are not subordinated to the rights and interests
evidenced by any other Class of Notes, and the rights and interests
evidenced by the SUBI Interest are not subordinated to the rights and
interests evidenced by Other SUBI Certificates or UTI Certificates.
(iii) The Class A Notes acquired by the Benefit Plan have received a
rating at the time of such acquisition that is in one of the three highest
generic rating categories from Standard & Poor's, Moody's, Duff & Phelps
Credit Rating Co. ("Duff & Phelps") or Fitch Investors Service, Inc.
("Fitch").
(iv) The sum of all payments made to the Underwriters in connection
with the distribution of the Class A Notes represents not more than
reasonable compensation for underwriting the Class A Notes. The sum of all
payments made to and retained by the Transferor pursuant to the sale of the
SUBI Interest to the Trust represents not more than the fair market value
of the interest in the Contracts and Leased Vehicles represented thereby.
The sum of all payments made to and retained by the Servicer with
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regard to the SUBI Assets represents not more than reasonable compensation
for the Servicer's services under the Servicing Agreement and reimbursement
of the Servicer's reasonable expenses in connection therewith.
(v) The Revolving Period ends no more than 15 consecutive months from
the Closing Date and (A) all Subsequent Contracts meet the same terms and
conditions for eligibility as the Initial Contracts, and (B) the addition
of Subsequent Contracts does not result in the reduction of the ratings on
the Class A Certificates received from any of Moody's, Standard & Poor's,
Duff & Phelps or Fitch.
(vi) After the Revolving Period ends, the average Lease Rate for the
Contracts included in the SUBI Assets shall not be more than 200 basis
points greater than the average Lease Rate for the Initial Contracts.
(vii) Principal Collections that are reinvested in Subsequent
Contracts during the Revolving Period are first invested in an eligible
lease contract with the earliest origination date, then in an eligible
lease contract with the next earliest origination date and so forth,
beginning with the lease contracts that have been reserved specifically for
such purpose at the time of the initial allocation of lease contracts to
the SUBI, but excluding those specific lease contracts reserved for
allocation to or allocated to Other SUBIs.
In addition, it is a condition that the Benefit Plan investing in the Class
A Notes be an "accredited investor" as defined in Rule 501(a)(1) of Regulation D
of the Commission under the Securities Act.
The Exemption does not apply to Benefit Plans sponsored by the Transferor,
the Underwriters, the Trustee, the Servicer, any lessee with respect to
Contracts allocated to the SUBI Assets constituting more than 5% of the
aggregate unamortized principal balance of the SUBI Assets, or any affiliate of
such parties (the "Restricted Group"). As of the date hereof, no lessee with
respect to the Contracts allocated to the SUBI Assets constitutes more than 5%
of the aggregate unamortized principal balance of the Trust (i.e., more than 5%
of 99.8% of the Aggregate Net Investment Value as of the Initial Cutoff Date).
Moreover, the Exemption provides relief for sales, exchanges or transfers
between a Benefit Plan and the underwriter or sponsor with discretionary
investment authority over such Benefit Plan's assets, from certain
self-dealing/conflict of interest prohibited transactions, only if, among other
requirements, (i) a Benefit Plan's investment in the Class A Notes does not
exceed 25% of all of the Class A Notes outstanding at the time of the
acquisition, and (ii) immediately after the acquisition, no more than 25% of the
assets of a Benefit Plan with respect to which the person who has discretionary
authority or renders investment advice are invested in Class A Notes
representing an interest in a trust containing assets sold or serviced by the
same entity.
Due to the complexities of these rules and the penalties imposed upon
persons involved in prohibited transactions, it is important that the fiduciary
of a Benefit Plan considering the purchase of Class A Notes consult with its
counsel regarding whether the assets of the Trust would be considered plan
assets, and the applicability of Exemption and the prohibited transaction
provisions of ERISA and the Code to such investment. Moreover, each Benefit Plan
fiduciary should determine whether, under the general fiduciary standards of
investment prudence and diversification, an investment in the Class A 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.
The Class B Notes and the Certificates may not be purchased or held with
plan assets of any Benefit Plan.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated , 1997 (the "Underwriting Agreement"), the
Underwriters named below (the "Underwriters"), for whom [ ] 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 PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF AMOUNT OF
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4
UNDERWRITER NOTES NOTES NOTES NOTES
- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$ $ $
-------- -------- -------- --------
Total............................... $ $ $
======== ======== ======== ========
$
========
</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 [ ]%, [ ]%, [ ]% and [ ]% 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 [
]%, [ ]%, [ ]% and [ ]% of such 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 fourth business day following the
date hereof. Under Rule 15c6-1 of the Commission under the Exchange Act, trades
in the secondary market generally are required to settle in three business days,
unless the parties to any such trade expressly agree otherwise. Accordingly,
purchasers who wish to trade Class A Notes on the date hereof will be required,
by virtue of the fact that the Class A Notes initially will settle four business
days after the date hereof, to specify an alternate settlement cycle at the time
of any such trade to prevent a failed settlement. Purchasers of Class A 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.
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<PAGE> 102
Until the distribution of the Class A Notes is complete, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase the Class A Notes. As an exception to these
rules, the Underwriters are permitted to engage in certain transactions that
stabilize the price of the Class A Notes. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Class A Notes.
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
96
<PAGE> 103
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.
RATINGS OF THE CLASS A NOTES
It is a condition of issuance that each of Moody's and Standard & Poor's
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, the Reserve Fund 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, 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.
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 and Standard & Poor's 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 and Standard &
Poor's.
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. Brown & Wood LLP, New York, New York will act as
special federal income tax counsel to the Transferor. Mayer, Brown & Platt,
Chicago, Illinois will act as counsel for the Underwriters.
97
<PAGE> 104
INDEX OF CAPITALIZED TERMS
Set forth below is a list of the capitalized terms used in this Prospectus
and the pages on which the definitions of such terms may be found.
<TABLE>
<CAPTION>
TERM PAGE
- ---- -------
<S> <C>
Accelerated Principal Distribution Amount................... 10
Accounts.................................................... 53
Additional Loss Contract.................................... 67
Administrative Lien......................................... 27
Administrative Lienholders.................................. 27
Advance..................................................... 16
Agency Agreement............................................ 75
Aggregate Net Investment Value.............................. 13
Agreement................................................... 1
ALFI........................................................ 1
ALFI L.P.................................................... 1
Alternate Reserve Fund Formula.............................. 66
Amortization Date........................................... 8
Capped Contingent and Excess Liability Premiums............. 51
Capped Origination Trust Administrative Expenses............ 51
Capped Trust Administrative Expenses........................ 51
Cede........................................................ 5
Cedel....................................................... 5
Cedel Participants.......................................... 60
Charge-off Rate............................................. 67
Charged-off Amount.......................................... 47
Charged-off Contract........................................ 47
Claims...................................................... 75
Class....................................................... 45
Class A Noteholders......................................... 6
Class A Notes............................................... 3
Class A Percentage.......................................... 9
Class A-1 Allocation Percentage............................. 18
Class A-1 Interest Carryover Shortfall...................... 51
Class A-1 Note Principal Loss Amount........................ 49
Class A-1 Note Rate......................................... 6
Class A-1 Noteholders....................................... 6
Class A-2 Allocation Percentage............................. 18
Class A-2 Interest Carryover Shortfall...................... 51
Class A-1 Notes............................................. 3
Class A-2 Note Principal Loss Amount........................ 49
Class A-2 Note Rate......................................... 6
Class A-2 Noteholders....................................... 6
Class A-2 Notes............................................. 3
Class A-3 Allocation Percentage............................. 18
Class A-3 Interest Carryover Shortfall...................... 51
Class A-3 Note Principal Loss Amount........................ 49
Class A-3 Note Rate......................................... 6
Class A-3 Noteholders....................................... 6
Class A-3 Notes............................................. 3
</TABLE>
98
<PAGE> 105
<TABLE>
<CAPTION>
TERM PAGE
- ---- -------
<S> <C>
Class A-4 Allocation Percentage............................. 18
Class A-4 Interest Carryover Shortfall...................... 18
Class A-4 Note Principal Loss Amount........................ 49
Class A-4 Note Rate......................................... 6
Class A-4 Noteholders....................................... 6
Class A-4 Notes............................................. 3
Class B Allocation Percentage............................... 51
Class B Note Principal Carryover Shortfall.................. 51
Class B Note Principal Loss Amount.......................... 49
Class B Note Rate........................................... 49
Class B Noteholders......................................... 9
Class B Notes............................................... 3
Class B Percentage.......................................... 9
Closing Date................................................ 4
Collection Period........................................... 7
Collections................................................. 52
Commission.................................................. 11
Contingent and Excess Liability Insurance Policies.......... 68
Contracts................................................... 35
Cooperative................................................. 62
Current Contracts........................................... 62
Cutoff Dates................................................ 52
Dealers..................................................... 1
Deerfield Office............................................ 29
Definitive Notes............................................ 62
Delinquency Rate............................................ 67
Deposit Date................................................ 15
Determination Date.......................................... 48
Discounted Contract......................................... 8
Discounted Principal Balance................................ 14
Distribution Account........................................ 53
Distribution Date........................................... 5
Downgrade Reserve Fund Supplemental Requirement............. 66
Downgrade Trigger Event..................................... 66
DTC......................................................... 5
DTC Participants............................................ 60
Early Amortization Event.................................... 56
Early Termination Charge.................................... 36
ERISA....................................................... 17
ERISA Compliance Test....................................... 80
Euroclear................................................... 5
Euroclear Operator.......................................... 62
Euroclear Participants...................................... 60
Excess Collections.......................................... 50
Exchange Act................................................ iii
Extension Fee............................................... 32
Fair, Isaac................................................. 30
Final Scheduled Distribution Date........................... 6
Five State Area............................................. 3
Global Securities........................................... 104
Indenture Event of Default.................................. 57
</TABLE>
99
<PAGE> 106
<TABLE>
<CAPTION>
TERM PAGE
- ---- -------
<S> <C>
Indenture Events of Default................................. 70
Indenture Trustee........................................... 63
Indirect DTC Participants................................... 60
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............................................. 12
Initial Leased Vehicles..................................... 2
Initial Note Balance........................................ 4
Insolvency Event............................................ 23
Insolvency Laws............................................. 23
Insurance Proceeds.......................................... 54
Insured Residual Value Loss Amount.......................... 11
Interest Collections........................................ 51
Interest Period............................................. 6
Investor Percentage......................................... 9
JMFE........................................................ 3
Lease Rate.................................................. 13
Leased Vehicles............................................. 14
Lemon Law................................................... 21
Liquidated Contract......................................... 67
Liquidation Expenses........................................ 15
Liquidation Proceeds........................................ 15
Loss Amounts................................................ 18
Matured Contract............................................ 15
Matured Leased Vehicle Expenses............................. 15
Matured Leased Vehicle Inventory............................ 14
Matured Leased Vehicle Proceeds............................. 15
Maturity Date............................................... 36
Mobile Center............................................... 29
Monthly Payments............................................ 13
Moody's..................................................... 17
Net Liquidation Proceeds.................................... 8
Net Matured Leased Vehicle Proceeds......................... 7
Net Repossessed Vehicle Proceeds............................ 8
Note Distribution Amount.................................... 58
Note Owner.................................................. 5
Note Principal Loss Amount.................................. 51
Note Rates.................................................. 49
Noteholders................................................. 9
Notes....................................................... 3
Origination Trust........................................... 1
Origination Trust Agreement................................. 10
Origination Trust Assets.................................... 27
Origination Trustee......................................... 1
Other SUBI Assets........................................... 26
</TABLE>
100
<PAGE> 107
<TABLE>
<CAPTION>
TERM PAGE
- ---- -------
<S> <C>
Other SUBI Certificates..................................... 26
Other SUBI Supplement....................................... 73
Other SUBIs................................................. 1
Owner Trustee............................................... 1
Participants................................................ 60
Payment Ahead............................................... 14
PBGC........................................................ 83
Permitted Investments....................................... 56
Prepayment.................................................. 54
Prepayment Assumption....................................... 41
Principal Allocation........................................ 9
Principal Collections....................................... 7
Rating Agencies............................................. 17
Realized Value.............................................. 36
Reallocation Deposit Amount................................. 46
Reallocation Payment........................................ 40
Record Date................................................. 6
Registration Statement...................................... ii
Repossessed Vehicle Expenses................................ 15
Repossessed Vehicle Proceeds................................ 15
Required Amount............................................. 52
Required Deposit Ratings.................................... 56
Reserve Fund................................................ 64
Reserve Fund Cash Requirement............................... 65
Reserve Fund Deficiency..................................... 65
Reserve Fund Supplemental Requirement....................... 65
Reserve Fund Tests.......................................... 66
Residual Value.............................................. 13
Residual Value Insurance Policy............................. 11
Residual Value Loss Amount.................................. 18
Residual Value Surplus...................................... 16
Retained SUBI Interest...................................... 3
Revolving Period............................................ 6
RV Insurer Reserve Fund Supplemental Requirement............ 69
RV Insurer Trigger.......................................... 81
Schedule of Contracts and Leased Vehicles................... 39
Securities Act.............................................. ii
Security Deposits........................................... 77
Servicer.................................................... 3
Servicer Letter of Credit................................... 54
Servicing Agreement......................................... 3
Servicing Fee............................................... 17
SET......................................................... 3
Standard & Poor's........................................... 17
SUBI........................................................ 1
SUBI Assets................................................. 2
SUBI Certificate............................................ 10
SUBI Collection Account..................................... 54
SUBI Interest............................................... 1
SUBI Supplement............................................. 11
SUBI Trust Agreement........................................ 11
</TABLE>
101
<PAGE> 108
<TABLE>
<CAPTION>
TERM PAGE
- ---- -------
<S> <C>
Subsequent Contracts........................................ 2
Subsequent Cutoff Date...................................... 52
Subsequent Leased Vehicles.................................. 6
Support Agreement........................................... 28
Terms and Conditions........................................ 62
TMS......................................................... 29
Transfer Date............................................... 7
Transferor.................................................. 1
Transferor Amounts.......................................... 47
Transferor Interest......................................... 4
Transferor Percentage....................................... 47
Trust....................................................... 1
Trust Agent................................................. 10
UCC......................................................... 4
Unallocated Principal Collections........................... 48
Uncapped Administrative Expenses............................ 50
Underwriters................................................ 95
Underwriting Agreement...................................... 95
Undistributed Transferor Excess Collections................. 50
UTI......................................................... 1
UTI Assets.................................................. 26
UTI Certificates............................................ 26
WOLSI....................................................... 3
World Omni.................................................. 3
</TABLE>
102
<PAGE> 109
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 conventional eurobonds, except that there
will be no temporary global security and no "lock-up" or restricted period.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Cedel or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no "lock-up" or restricted period. Global Securities will be credited to the
securities custody accounts on the settlement date against payment in the
same-day funds.
Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to book-entry
securities in same-day funds.
Trading between Cedel and/or Euroclear Participants. Secondary market
trading between Cedel Participants or Euroclear Participants will be settled
using the procedures applicable to conventional eurobonds in same-day funds.
Trading between DTC seller and Cedel or Euroclear Purchaser. When Global
Securities are to be transferred from the account of a DTC Participant to the
accounts of a Cedel Participant or a Euroclear
103
<PAGE> 110
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 account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedel Participant's or Euroclear
Participant's account. The Global Securities credit will appear the next day
(European time) and the cash debit will be back-valued to, and the interest on
the Global Securities will accrue from, the value date (which would be the
preceding day when settlement occurred in New York). If settlement is not
completed on the intended value date (i.e., the trade fails), the Cedel or
Euroclear cash debit will be valued instead as of the actual settlement date.
Cedel Participants and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedel or Euroclear. Under this approach,
they may take on credit exposure to Cedel or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedel or Euroclear has extended a line of credit to
them, Cedel Participants or Euroclear Participants can elect not to pre-position
funds and allow that credit line to be drawn upon to finance settlement. Under
this procedure, Cedel Participants or Euroclear Participants purchasing Global
Securities would incur overdraft charges for one day, assuming they cleared the
overdraft when the Global Securities were credited to their accounts. However,
interest on the Global Securities would accrue from the value date. Therefore,
in many cases the investment income on the Global Securities earned during that
one-day period may substantially reduce or offset the amount of such overdraft
charges, although this result will depend on each Cedel Participant's or
Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
the respective Depositary for the benefit of Cedel Participants or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participants a cross-market transaction will
settle no differently than a trade between two DTC Participants.
Trading between Cedel or Euroclear seller and DTC purchaser. Due to time
zone differences in their favor, Cedel Participants and Euroclear Participants
may employ their customary procedures for transactions in which Global
Securities are to be transferred by the respective clearing systems, through the
respective Depositaries, to a DTC Participant. The seller will send instructions
to Cedel or Euroclear through a Cedel Participant or Euroclear Participant at
least one business day prior to settlement. In these cases, Cedel or Euroclear
will instruct the respective Depositaries, as appropriate, to deliver the bonds
to the DTC Participant's account against payment. Payment will include interest
accrued on the Global Securities from and including the last coupon payment date
to and excluding the settlement date on the basis of actual days elapsed and a
360 day year. The payment will then be reflected in the account of the Cedel
Participant or Euroclear Participant the following day, and receipt of the cash
proceeds in the Cedel Participant's or Euroclear Participant's account would be
back-valued to the value date (which would be the preceding day, when settlement
occurred in New York). Should the Cedel Participant or Euroclear Participant
have a line of credit with its respective clearing system and elect to be in
debit in anticipation of receipt of the sale proceeds in its account, the
back-valuation will extinguish any overdraft charges incurred over that one-day
period. If settlement is not completed on the intended value date (i.e., the
trade fails), receipt of the cash proceeds in the Cedel Participant's or
Euroclear Participant's account would instead be value as of the actual
settlement date.
104
<PAGE> 111
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
(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 or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate, the
income of which is includible in gross income for United States tax purposes,
regardless of its
105
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source, or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States trustees have authority to control all substantial decisions of the
trust. 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.
106
<PAGE> 113
======================================================
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 ANY 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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................... iii
Overview of Transaction.................... iv
Summary.................................... 1
Risk Factors............................... 18
The Trust and the SUBI..................... 24
The Origination Trust...................... 25
Use of Proceeds............................ 28
The Transferor............................. 28
World Omni................................. 29
The Contracts.............................. 35
Maturity, Prepayment and Yield
Considerations........................... 40
Class A Note Factors and Trading
Information; Reports to Class A
Noteholders.............................. 44
Description of the Notes................... 45
Security for the Notes..................... 64
Additional Document Provisions............. 69
Certain Legal Aspects of the Origination
Trust and the SUBI....................... 82
Certain Legal Aspects of the Contracts and
the Leased Vehicles...................... 84
Material Income Tax Considerations......... 88
ERISA Considerations....................... 92
Underwriting............................... 95
Notice to Canadian Residents............... 96
Ratings of the Class A Notes............... 97
Legal Matters.............................. 97
Index of Capitalized Terms................. 98
Global Clearance, Settlement and Tax
Documentation Procedures................. 103
</TABLE>
UNTIL , 1997, ALL DEALERS EFFECTING 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 OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. UPON RECEIPT OF A REQUEST BY AN INVESTOR WHO
HAS RECEIVED AN ELECTRONIC PROSPECTUS OR A REQUEST BY SUCH INVESTOR'S
REPRESENTATIVE WITHIN THE PERIOD DURING WHICH THERE IS A PROSPECTUS DELIVERY
OBLIGATION, THE TRANSFEROR OR THE UNDERWRITERS WILL PROMPTLY DELIVER, OR CAUSE
TO BE DELIVERED, WITHOUT CHARGE, A PAPER COPY OF THE PROSPECTUS.
======================================================
======================================================
WORLD OMNI
1997-B AUTOMOBILE LEASE
SECURITIZATION TRUST
$
$
[ ]% AUTOMOBILE LEASE
ASSET BACKED NOTES,
CLASS A-1
$
[ ]% AUTOMOBILE LEASE
ASSET BACKED NOTES,
CLASS A-2
$
[ ]% AUTOMOBILE LEASE
ASSET BACKED NOTES,
CLASS A-3
$
[ ]% AUTOMOBILE LEASE
ASSET BACKED NOTES,
CLASS A-4
WORLD OMNI LEASE
SECURITIZATION L.P.
(TRANSFEROR)
WORLD OMNI FINANCIAL CORP.
(SERVICER)
-------------------------
PROSPECTUS
-------------------------
[UNDERWRITERS]
, 1997
======================================================
<PAGE> 114
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:
<TABLE>
<S> <C>
SEC registration fee........................................ $ *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue sky fees and expenses.................................. *
Rating agency fees.......................................... *
Trustee fees and expenses................................... *
Printing.................................................... *
Miscellaneous............................................... *
----
Total............................................. $ *
====
</TABLE>
- ---------------
* To be completed by amendment.
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,
Inc., the general partner of the Transferor, and its directors, officers,
shareholders, agents, affiliates and employees acting within the scope of their
authority against their losses and expenses sustained by reason of their acts on
behalf of the 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. ("ALFI L.P."), ALFI L.P. will, to the fullest extent
permitted by law, indemnify Auto Lease Finance, Inc., the general partner of
ALFI L.P., and its directors, officers, shareholders, agents, affiliates and
employees acting within the scope of their authority against their losses and
expenses sustained by reason of their acts on behalf of ALFI L.P. or in
furtherance of the interests of ALFI 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> 115
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a.) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement
3.1 -- Articles of Incorporation of World Omni Lease
Securitization, Inc. (incorporated by reference from Exhibit
3.1 to Registration Statement on Form S-1, File No. 33-85036
(the "1994-B Registration Statement"))
3.2 -- Bylaws of World Omni Lease Securitization, Inc.
(incorporated by reference from Exhibit 3.2 to the 1994-B
Registration Statement)
3.3 -- Amended and Restated Agreement of Limited Partnership of
World Omni Lease Securitization L.P. between World Omni
Lease Securitization, Inc. and World Omni Financial Corp.,
dated as of July 1, 1994 (incorporated by reference from
Exhibit 3.3 to the 1994-B Registration Statement)
3.4 -- Articles of Incorporation of Auto Lease Finance Inc.
(incorporated by reference from Exhibit 10.5 to the 1994-B
Registration Statement)
3.5 -- Bylaws of Auto Lease Finance, Inc. (incorporated by
reference from Exhibit 10.6 to the 1994-B Registration
Statement)
3.6 -- 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)
3.7 -- Form of Securitization Trust Agreement between World Omni
Lease Securitization L.P., [ ], as Owner Trustee and
[ ], as Indenture Trustee (including form of
Transferor Certificate)*
4.1 -- Form of Indenture between World Omni Lease Securitization
L.P., [ ], as Owner Trustee and [ ], as
Indenture Trustee (including forms of Class A Notes)*
5.1 -- Opinion of McDermott, Will & Emery with respect to legality*
8.1 -- Opinion of Brown & Wood LLP with respect to federal income
tax matters*
8.2 -- Opinion of English, McCaughan & O'Bryan, P.A. with respect
to certain Florida tax matters*
10.1 -- Second Amended and Restated Trust Agreement among Auto Lease
Finance L.P., VT Inc. and First Bank National Association
(as successor to Bank of America Illinois), dated as of July
1, 1994 (incorporated by reference from Exhibit 10.1 to the
1994-B Registration Statement)
10.2 -- Form of Supplement 1997-B to Trust Agreement among Auto
Lease Finance L.P., VT Inc. and First Bank National
Association (as successor to Bank of America Illinois)
(including form of the SUBI Certificate)*
10.3 -- Second Amended and Restated Servicing Agreement between VT
Inc. and World Omni Financial Corp., dated as of July 1,
1994 (incorporated by reference from Exhibit 10.3 to the
1994-B Registration Statement)
10.4 -- Form of Supplement 1997-B to Servicing Agreement between VT
Inc. and World Omni Financial Corp.*
10.5 -- Amendment No. 1 to Second Amended and Restated Trust
Agreement among Auto Lease Finance L.P., VT Inc. and First
Bank National Association (as successor to Bank of America
Illinois), dated as of November 1, 1994 (incorporated by
reference from Exhibit 10.8 to the 1994-B Registration
Statement)
10.6 -- 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)
</TABLE>
II-2
<PAGE> 116
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.7
-- 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"))
10.8 -- Support Agreement, dated as of October 1, 1995 between World
Omni Financial Corp. and World Omni Lease Securitization
L.P. (incorporated by reference from Exhibit 10.11 to the
1996-A Registration Statement)
10.9 -- 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 (the "1996-B Registration Statement"))
10.10 -- 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"))
10.11 -- Amendment No. 3 to Support Agreement between World Omni
Financial Corp. and World Omni Lease Securitization L.P.
dated as of April 1, 1997*
10.12 -- Form of Residual Value Insurance Policy*
23.1 -- Consent of McDermott, Will & Emery*
23.2 -- Consent of Brown & Wood LLP*
23.3 -- Consent of English, McCaughan & O'Bryan, P.A.*
23.4 -- Consent of Williams & Connolly*
23.5 -- Consent of Hand Arendall, L.L.C.*
24.1 -- Power of Attorney**
25.1 -- Form T-1 of [INDENTURE TRUSTEE]*
</TABLE>
- ---------------------
* To be filed by amendment.
** Included on page II-6.
(b) Financial Statement Schedules:
Not applicable.
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
II-3
<PAGE> 117
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.
Provided, however, that the paragraphs (a)(i) and (a)(ii) do not apply
if the registration statement is on Form S-3, Form S-8, or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by any registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference
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> 118
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each registrant
has duly caused this 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 12th day of September, 1997.
WORLD OMNI LEASE SECURITIZATION L.P.,
on behalf of itself and as originator of
the World Omni 1997-B Automobile Lease
Securitization Trust
By: WORLD OMNI LEASE SECURITIZATION, INC.,
as General Partner
By: /s/ A. TUCKER ALLEN
---------------------------------------
Name: A. Tucker Allen
Title: Vice President and Corporate
Treasurer
(Principal Financial and
Accounting Officer)
AUTO LEASE FINANCE L.P., on behalf of
itself and as originator of World Omni LT
By: AUTO LEASE FINANCE, INC.,
as General Partner
By: /s/ A. TUCKER ALLEN
---------------------------------------
Name: A. Tucker Allen
Title: Vice President and Corporate
Treasurer
(Principal Financial and
Accounting Officer)
II-5
<PAGE> 119
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
A. Tucker Allen, Patrick C. Ossenbeck and Jeffrey L. Hayman, and each of them,
his true and lawful attorney-in-fact and agent, with full power of substitution,
for him and in his name, place and stead, in any and all capacities, to sign and
file any and all amendments, including post-effective amendments, to this
Registration Statement, or any filing under Rule 462 related thereto, with the
Securities and Exchange Commission, granting the power to perform any other act
on behalf of the undersigned required to be done in connection therewith.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this 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 September 12, 1997
- ----------------------------------------------------- and Corporate Treasurer
A. Tucker Allen of the General Partner of
each of World Omni Lease
Securitization L.P. and
Auto Lease Finance L.P.
(Principal Financial and
Accounting Officer)
/s/ COLIN W. BROWN Director of the General September 12, 1997
- ----------------------------------------------------- Partner of each of World
Colin W. Brown Omni Lease Securitization
L.P. and Auto Lease
Finance L.P.
/s/ JEFFREY B. SHAPIRO Director of the General September 12, 1997
- ----------------------------------------------------- Partner of each of World
Jeffrey B. Shapiro Omni Lease Securitization
L.P. and Auto Lease
Finance L.P.
/s/ CHRISTOPHER C. WHEELER Director of the General September 12, 1997
- ----------------------------------------------------- Partner of each of World
Christopher C. Wheeler Omni Lease Securitization
L.P. and Auto Lease
Finance L.P.
/s/ DARYL P. SMITH Director and President of September 12, 1997
- ----------------------------------------------------- the General Partner of
Daryl P. Smith each of World Omni Lease
Securitization L.P. and
Auto Lease Finance L.P.
(Principal Executive
Officer)
</TABLE>
II-6
<PAGE> 120
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement*.............................
3.1 -- Articles of Incorporation of World Omni Lease
Securitization, Inc. (incorporated by reference from Exhibit
3.1 to Registration Statement on Form S-1, File No. 33-85036
(the "1994-B Registration Statement"))......................
3.2 -- Bylaws of World Omni Lease Securitization, Inc.
(incorporated by reference from Exhibit 3.2 to the 1994-B
Registration Statement).....................................
3.3 -- Amended and Restated Agreement of Limited Partnership of
World Omni Lease Securitization L.P. between World Omni
Lease Securitization, Inc. and World Omni Financial Corp.,
dated as of July 1, 1994 (incorporated by reference from
Exhibit 3.3 to the 1994-B Registration Statement)...........
3.4 -- Articles of Incorporation of Auto Lease Finance Inc.
(incorporated by reference from Exhibit 10.5 to the 1994-B
Registration Statement).....................................
3.5 -- Bylaws of Auto Lease Finance, Inc. (incorporated by
reference from Exhibit 10.6 to the 1994-B Registration
Statement)..................................................
3.6 -- 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).....................................
3.7 -- Form of Securitization Trust Agreement between World Omni
Lease Securitization L.P., [ ], as Owner Trustee
and [ ], as Indenture Trustee (including form of
Transferor Certificate)*....................................
4.1 -- Form of Indenture between World Omni 1997-B Automobile Lease
Securitization Trust and [ ], as Indenture Trustee
(including forms of Class A Notes)*.........................
5.1 -- Opinion of McDermott, Will & Emery with respect to
legality*...................................................
8.1 -- Opinion of Brown & Wood LLP with respect to federal income
tax matters*................................................
8.2 -- Opinion of English, McCaughan & O'Bryan, P.A. with respect
to certain Florida tax matters*.............................
10.1 -- Second Amended and Restated Trust Agreement among Auto Lease
Finance L.P., VT Inc. and First Bank National Association
(as successor to Bank of America Illinois), dated as of July
1, 1994 (incorporated by reference from Exhibit 10.1 to the
1994-B Registration Statement)..............................
10.2 -- Form of Supplement 1997-B to Trust Agreement among Auto
Lease Finance L.P., VT Inc. and First Bank National
Association (as successor to Bank of America Illinois)
(including form of the SUBI Certificate)*...................
10.3 -- Second Amended and Restated Servicing Agreement between VT
Inc. and World Omni Financial Corp., dated as of July 1,
1994 (incorporated by reference from Exhibit 10.3 to the
1994-B Registration Statement)..............................
10.4 -- Form of Supplement 1997-B to Servicing Agreement between VT
Inc. and World Omni Financial Corp.*........................
10.5 -- Amendment No. 1 to Second Amended and Restated Trust
Agreement among Auto Lease Finance L.P., VT Inc. and First
Bank National Association (as successor to Bank of America
Illinois), dated as of November 1, 1994 (incorporated by
reference from Exhibit 10.8 to the 1994-B Registration
Statement)..................................................
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ------------
<C> <C> <S> <C>
10.6 -- 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)...................................................
10.7 -- 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"))...........................
10.8 -- Support Agreement, dated as of October 1, 1995 between World
Omni Financial Corp. and World Omni Lease Securitization
L.P. (incorporated by reference from Exhibit 10.11 to the
1996-A Registration Statement)..............................
10.9 -- 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 (the "1996-B Registration Statement"))........
10.10 -- Amendment No. 2 to Support Agreement 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"))........
10.11 -- Amendment No. 3 to Support Agreement between World Omni
Financial Corp. and World Omni Lease Securitization L.P.,
dated as of , 1997*.............................
10.12 -- Form of Residual Value Insurance Policy*....................
23.1 -- Consent of McDermott, Will & Emery*.........................
23.2 -- Consent of Brown & Wood LLP*................................
23.3 -- Consent of English, McCaughan & O'Bryan, P.A.*..............
23.4 -- Consent of Williams & Connolly*.............................
23.5 -- Consent of Hand Arendall, L.L.C.*...........................
24.1 -- Power of Attorney**.........................................
25.1 -- Form T-1 of [INDENTURE TRUSTEE]*............................
</TABLE>
- ---------------
* To be filed by amendment.
** Included on page II-6.
