Subi Agreement

An equipment finance company (the Company) establishes a trust (trust) under a trust agreement (the “Trust Agreement”) for the purpose of acquiring equipment (the “Equipment”), including the Certificate of Ownership of Motor Vehicles (the “Motor Vehicles”). The purpose of using the title trust is to avoid the administrative burden and costs typically associated with syndicating motor vehicle leasing. The structure is not only deliberately limited to motor vehicles, but also includes general equipment to maximize the flexibility of the company. Equipment is subject to equipment plans executed in accordance with structured leases such as real-motivation leases or tax reasons (equipment plans included in the lease agreement are referred to as “leases”) with third-party leases (the “rental companies”). The equipment is purchased directly by the Trust. In addition to the SUBI SUPPLEMENT and the SUBI Servicing Supplement, the funder will also be a party to various securitization documents which may include a combination of trust agreement, transfer agreement, pooling and management contract, sale-leaseback agreement and fiduciary contract. In addition, titling trusts may include “Like-Kind Exchange”1 programs using, for federal income tax purposes, the proceeds from the sale of vehicles that come from leasing to acquire new rental vehicles, as if the new vehicles were replaced by the old vehicles. Similar exchange programs allow lenders to defer payment of taxes on the proceeds of the sale of vehicles that come from leasing. They provide significant savings, either for lenders who regularly purchase new rental vehicles or for investors who acquire tax advantages for the securitisation of car leasing. The same sustainable financing mechanism is available to investors. The economic interest of non-securitized vehicles and leases is an uninvided fiduciary interest (UTI) which constitutes the right to obtain all proceeds from the assets of a securities trust that are not otherwise allocated to one or more entities of specific economic interest (SUBI) and that are mortgaged to Commercial Paper Conduits to provide storage financing for leases and vehicles. For the securitisation of vehicle rental contracts, special units of economic interest (SUBI) are created and sold, which are of economic interest for these vehicles and leases – the remaining assets are always represented by the ICU. Although several States require the use of a co-mandatary, all States, for the most part, now allow the above concepts.

Similarly, licensing problems have been identified by the State and the experience gained in obtaining the licences and qualifications required for a titling trust. While problems will inevitably arise in the context of setting up a Titling Trust, especially when it comes to legal or tax issues of the state or when the sponsoring funder is a deposit-taking institution, potential funders should be comforted by the fact that they are not taking new paths. . . .

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