As Filed with the Securities and Exchange Commission on August 4, 2000.
REGISTRATION NO. [ ]
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES
ACT OF 1933
-----------------
BMW VEHICLE LEASE TRUST 2000-A
(Issuer with respect to the Notes and the Certificates)
BMW AUTO LEASING LLC
(Originator of the Trust described herein and Transferor of the Vehicle SUBI
Certificate to the Trust)
DELAWARE 7515 51-6518223
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S.
Incorporation or Organization) Classification Code Number) Employer
Identification
Number)
300 CHESTNUT RIDGE ROAD
WOODCLIFF LAKE, NJ 07675
(201) 307-4000
(Address, including Zip Code, and Telephone Number, including Area Code, of
Principal Executive Offices of BMW Auto Leasing LLC, Financial Services Vehicle
Trust and BMW Manufacturing LP)
-----------------
DANIEL J. METTE, ESQ.
WEIL, GOTSHAL & MANGES LLP
767 FIFTH AVENUE
NEW YORK, NEW YORK 10153
(212) 310-8749
(Name, Address, including Zip Code, and Telephone Number, including Area Code,
of Agent for Service)
-----------------
COPIES TO:
DALE W. LUM, ESQ.
BROWN & WOOD LLP
555 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 772-1200
-----------------
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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Backed Notes, Class A-1.................... $1,000,000 100% $1,000,000 $264.00
Asset Backed Notes, Class A-2.................... $1,000,000 100% $1,000,000 $264.00
Asset Backed Notes, Class A-3.................... $1,000,000 100% $1,000,000 $264.00
Asset Backed Notes, Class A-4.................... $1,000,000 100% $1,000,000 $264.00
Asset Backed Notes, Class A-5.................... $1,000,000 100% $1,000,000 $264.00
===================================================================================================================================
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
-----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, 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.
================================================================================
NY2:\923398\11
<PAGE>
Subject to Completion
Preliminary Prospectus dated August [ ], 2000
$[ ]
[BMW LOGO]
ASSET BACKED SENIOR NOTES
BMW VEHICLE LEASE TRUST 2000-A
Issuer
BMW AUTO LEASING LLC
Transferor
BMW FINANCIAL SERVICES NA, LLC
Servicer
The trust's main sources for payment of the senior notes will be lease
payments generated by a portfolio of retail lease contracts and the proceeds
from the sale of the automobiles currently leased under those contracts.
Interest and principal will be payable monthly and the first payment
date is [ ], 2000.
BEFORE YOU DECIDE TO INVEST, READ THIS PROSPECTUS CAREFULLY, ESPECIALLY
THE RISK FACTORS BEGINNING ON PAGE __.
The senior notes are obligations of the trust only. The senior notes
are not obligations of BMW Auto Leasing LLC, BMW Financial Services NA, LLC or
any of their affiliates.
The trust will issue the following classes of senior notes--
<TABLE>
<CAPTION>
Original Final
Principal Interest Rate Scheduled Price to Underwriting Proceeds to
Amount (per annum) Payment Date Public Discount Transferor
------ ----------- ------------ ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Per Class A-1 Note.. $[ ] _____% [ ] __________% ________% ________%
Per Class A-2 Note.. $[ ] _____% [ ] __________% ________% ________%
Per Class A-3 Note.. $[ ] _____% [ ] __________% ________% ________%
Per Class A-4 Note.. $[ ] _____% [ ] __________% ________% ________%
Per Class A-5 Note.. $[ ] _____% [ ] __________% ________% ________%
Total............... $[ ] _____% [ ] __________% ________% ________%
</TABLE>
o The price to the public and proceeds to the transferor do not include
interest accrued from the date the notes will be issued.
o The proceeds to the transferor excludes expenses, estimated at
approximately $[ ].
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS
ILLEGAL FOR ANYONE TO TELL YOU OTHERWISE.
----------------
SALOMON SMITH BARNEY
The date of this prospectus is August [ ], 2000.
--------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the SEC is
effective. This prospectus is not an offer to sell these securities, and it is
not soliciting an offer to buy them, in any state where an offer or sale is not
permitted.
--------------------------------------------------------------------------------
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
CONTENT OF PROSPECTUS
You should rely only on the information contained in this document. We
have not authorized anyone to provide you with different information.
We include cross-references in this prospectus to the captions under
which you can find additional related information. The following table of
contents lists the pages on which these captions are located.
You can find a listing of the pages where capitalized terms used in
this prospectus are defined under "Index of Principal Terms" beginning on page
126.
LIMITATIONS ON OFFERS OR SOLICITATIONS
We do not intend this document to be an offer or solicitation:
o if used in a jurisdiction in which an offer or solicitation is
not authorized;
o if the person making an offer or solicitation is not qualified
to do so; or
o if an offer or solicitation is made to anyone to whom it is
unlawful to make an offer or solicitation.
DEALER PROSPECTUS DELIVERY REQUIREMENTS
For 90 days after the date of this prospectus, all dealers that effect
transactions in the senior notes, whether or not participating in this offering,
may be required to deliver a prospectus. This requirement is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters with
respect to their unsold allotments or subscriptions.
2
<PAGE>
TABLE OF CONTENTS
PAGE
----
Overview of Transaction.................................8
Summary ................................................9
Basic Terms of the Senior Notes.........................9
The Structure of this Transaction......................11
General ...............................................11
Repayment of the Notes.................................11
Optional Redemption of the Notes.......................12
The Property of the Trust..............................12
General ...............................................12
The Program Operating Lease............................12
The Specified Leases and the Specified Vehicles........13
The SUBI Certificates..................................14
Credit Enhancement.....................................14
Subordination of the Subordinated Notes................15
Subordination of the Certificates......................15
The Reserve Fund.......................................15
The Residual Value Surplus Account.....................15
Servicing..............................................16
Tax Status.............................................16
ERISA Considerations...................................16
Senior Note Ratings....................................16
Money Market Investment................................16
Risk Factors...........................................17
You may have difficulty selling your senior
notes or obtaining your desired sales price ...........17
Page continued...
<PAGE>
PAGE
----
You will experience a loss on your
investment if defaults on the specified
leases or residual value losses exceed the
available credit enhancement ..........................17
Your share of possible losses may not be proportionate.18
The timing of principal payments is uncertain..........18
The geographic concentration of the leases,
economic factors and the automobile market
could negatively affect the trust's
assets ................................................19
Turn-in rates may affect losses........................19
Used car market factors could increase risk
of loss for all investors .............................19
Risks Associated with Consumer Protection Laws.........20
Vicarious tort liability may result in a
loss on your investment ...............................21
A bankruptcy of the transferor or the
servicer could delay or limit payments to
you ...................................................21
If ERISA liens are placed on the assets of
the trust, you could suffer a loss on your
investment ............................................22
A change or withdrawal by the rating
agencies of their initial ratings may reduce
the market value of the senior
notes..................................................22
If the trust is required to sell its assets,
you may suffer a loss on your investment ..............23
3
<PAGE>
PAGE
----
The failure to make principal payments on
the notes will generally not result in an
event of default ......................................24
The senior notes are not suitable
investments for all investors .........................24
Overview of the Transaction............................25
The Trust..............................................26
Formation..............................................26
Capitalization.........................................27
The Owner Trustee......................................28
Property of the Trust..................................28
Use of Proceeds........................................29
The Origination Trust..................................29
General ...............................................29
The UTI Beneficiary....................................31
The Origination Trustee................................31
Property of the Origination Trust......................31
Lease Origination and the Titling of Leased Vehicles...31
The SUBIs..............................................32
General ...............................................32
Transfers of the SUBI Certificates.....................33
The Transferor.........................................34
BMW FS ................................................34
BMW FS' Lease Financing Program........................35
General ...............................................35
Underwriting...........................................35
Servicing..............................................37
Physical Damage and Liability Insurance................37
Leased Vehicle Maintenance: Excess Wear and
Use and Excess Mileage ................................37
Page continued...
<PAGE>
PAGE
----
End of Lease Term; Vehicle Disposition.................38
Residuals..............................................39
Calculation of the Securitization Value of
the Specified Leases ..................................40
Historical Data........................................41
Delinquency Experience.................................41
Write-off Experience...................................41
Residual Value Performance.............................41
The Specified Leases...................................42
General ...............................................42
Characteristics........................................43
General ...............................................43
Distribution of Specified Leases by
Lease Rate ............................................45
Distribution of the Specified Vehicles by
Cutoff Date Securitization Value ......................47
Distribution of the Specified Vehicles by
Original Maturity .....................................47
Distribution of the Specified Vehicles by State........48
Distribution of the Specified Vehicles by Model........48
Representations, Warranties and Covenants..............48
Maturity, Payment and Yield Considerations.............51
Note Factors, Certificate Factor and Trading
Information ...........................................57
Description of the Senior Notes........................57
General ...............................................57
Interest ..............................................58
Principal..............................................59
Optional Purchase......................................61
The Indenture Trustee..................................61
4
<PAGE>
PAGE
----
Book-Entry Registration................................61
Additional Information Regarding the Securities........65
Payments on the Securities.............................65
General ...............................................65
Determination of Available Funds.......................66
Deposits to the Distribution Accounts;
Priority of Payments ..................................66
SUBI Collection Account................................66
Reserve Fund...........................................67
Optional Purchase......................................68
Statements to Securityholders..........................68
Definitive Notes.......................................70
Security for the Securities............................71
General ...............................................71
The Program Operating Lease............................71
General ...............................................71
Program Operating Lease Terms..........................71
Program Operating Lease Defaults; Remedies.............72
The Subordinated Notes.................................72
The Certificates.......................................73
The Accounts...........................................73
The SUBI Collection Account............................73
Deposits into the SUBI Collection Account..............73
Withdrawals from the SUBI Collection Account...........74
The Reserve Fund.......................................74
The Residual Value Surplus Account.....................75
The Distribution Accounts..............................76
Maintenance of the Accounts............................76
Permitted Investments..................................76
Page continued...
<PAGE>
PAGE
----
The Contingent and Excess Liability Insurance..........77
Additional Document Provisions.........................78
The Indenture..........................................78
Indenture Defaults.....................................78
Remedies ..............................................78
Certain Covenants......................................81
Replacement of the Indenture Trustee...................81
Duties of Indenture Trustee............................82
Compensation and Indemnity.............................82
Access to Senior Noteholder Lists......................83
Annual Compliance Statement............................83
Satisfaction and Discharge of Indenture................83
The Trust Agreement....................................83
Authority and Duties of the Owner Trustee..............83
Restrictions on Actions by Owner Trustee...............84
Actions by Certificateholders and Owner
Trustee with Respect to Certain Matters ...............84
Resignation and Removal of the Owner Trustee...........85
Termination............................................85
Liabilities and Indemnification........................85
The Subordinated Notes.................................86
The SUBI Trust Agreement...............................86
The SUBIs, Other SUBIs and the UTI.....................86
Origination Trustee Duties and Powers; Fees
and Expenses ..........................................87
Indemnity of Trustee...................................88
Termination............................................88
The Servicing Agreement................................88
General ...............................................88
5
<PAGE>
PAGE
----
Custody of Lease Documents and Certificates of Title...89
Collections............................................89
General ...............................................89
Monthly Remittance Condition...........................90
Net Deposits...........................................90
Sales Proceeds and Termination Proceeds................91
Purchase of Specified Vehicles Before their
Maturity Dates ........................................92
Purchase of Matured Vehicles...........................93
Extensions.............................................93
Notification of Liens and Claims.......................93
Advances ..............................................93
Monthly Payment Advances...............................93
Sales Proceeds Advances................................94
Insurance on the Specified Vehicles....................94
Realization Upon Charged-off Specified Leases..........95
Servicer Records, Determinations and Reports...........95
Evidence as to Compliance..............................95
Servicing Compensation.................................96
Servicer Agent Resignation and Termination.............96
Indemnification by the Servicer........................97
Servicer Defaults......................................97
Termination............................................98
Removal or Replacement of the Servicer.................98
Miscellaneous Provisions...............................99
Amendment Provisions...................................99
General ...............................................99
Page continued...
<PAGE>
PAGE
----
Amendment of the SUBI Trust Agreement and
the Servicing Agreement ...............................99
Amendment of the Trust Agreement......................100
Amendment of the Indenture............................102
Amendment of the Program Operating Lease..............103
Amendment of the SUBI Certificate Transfer Agreement..104
Amendment of the Issuer SUBI Certificate
Transfer Agreement ...................................104
Amendments Generally..................................104
Bankruptcy Provisions.................................104
The UTI Beneficiary and the Origination Trust.........104
The Transferor and the Trust..........................104
Senior Notes or Certificates Owned by the
Trust, Transferor, Servicer or their
Affiliates ...........................................104
Fees and Expenses.....................................105
The Origination Trustee...............................105
The Servicer..........................................105
The Indenture Trustee.................................105
The Owner Trustee and Paying Agent....................105
Governing Law.........................................105
Additional Legal Aspects of the Origination
Trust and the SUBIs ..................................105
The Origination Trust.................................105
General ..............................................105
Structural Considerations.............................106
Allocation of Origination Trust Liabilities...........107
The SUBIs.............................................108
Insolvency-Related Matters............................108
6
<PAGE>
PAGE
----
Additional Legal Aspects of the Specified
Leases and the Specified Vehicles ....................111
Back-up Security Interests............................111
Vicarious Tort Liability..............................113
Repossession of Specified Vehicles....................113
Deficiency Judgments..................................114
Consumer Protection Laws..............................114
Other Limitations.....................................115
Material United States Federal Income Tax Consequences116
Treatment of the Senior Notes as Debt.................117
Possible Alternative Characterization.................117
Interest Income to U.S. Senior Noteholders............118
Sale or Exchange of Notes by U.S. Senior Noteholders..118
Non-U.S. Senior Note Owners...........................118
Information Reporting and Backup Withholding..........120
State and Local Tax Considerations....................121
Certain ERISA Considerations..........................121
Prohibited Transactions...............................121
"Look-through" Rule under the Plan Assets Regulation..122
Treatment of Notes as Debt............................122
Ratings of the Senior Notes...........................123
Underwriting..........................................123
Legal Matters.........................................125
Available Information.................................125
Index of Principal Terms..............................126
ANNEX I Global Clearance, Settlement and Tax
Documentation Procedures ...............................1
7
<PAGE>
OVERVIEW OF TRANSACTION
<TABLE>
------------- ---------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BMW Facility BMW Financial BMW
Partners, LLC Services NA, LLC Centers
------------- ---------------- -------
\ / \ /|\ |
\ / \ Proceeds to | | Leases
\ / \ Purchase Leases | | and
\ / \ and Vehicles | | Vehicles
1% Owned 99%Owned Services | |
\ / Leases \ | |
_\/ \/_ _\/ | \|/
----------------- ---------------------
BMW Mfg. LP <------------------------------------ Financial Services
(UTI Beneficiary) Issue: Vehicle Trust
----------------- o Vehicle SUBI Certificate (FSVT)
| o Lease SUBI Certificate (Origination Trust)
| ---------------------
Sell: |
o Vehicle SUBI Certificate |
o Lease SUBI Certificate |
\|/
----------------
BMW Auto Leasing Pledge of Subordinated Notes
LLC (P&I Pmts)
|---------> (Transferor) ------------------------------------------------------|
| -----------------------\ |
| | /|\ \ \|/
| | | \ ------------
| | | \ Reserve Fund
| | | \ ------------
| | | \ |
o Subordinated Notes | Sell Vehicle | | Leaseback of\ |
o (1.00%) Transferor | SUBI | | Vehicle SUBI \ Pledge of Lease |
Certificate | Certificate | | Certificate / SUBI Certificate |
| | | / |
| | | / |
| \|/ | / |
| ----------------- < ----------------- |
| BMW Vehicle Lease---------------------------> |
|----------- Trust 2000-A Senior Notes Indenture Trustee <-----|
(Trust) and Pledge
----------------- -----------------
| |
| |
Certificates Senior Notes
| |
\|/ \|/
------------------ ------------------
Certificateholders Senior Noteholders
------------------ ------------------
</TABLE>
8
<PAGE>
SUMMARY
This summary highlights selected information from this prospectus and
does not contain all of the information that you need to consider in making your
investment decision. To understand all of the terms of the offering of the
senior notes, you should carefully read this entire prospectus.
This summary provides an overview of some calculations, cash flows and
other information to aid your understanding and is qualified by the full
description of these calculations, cash flows and other information in this
prospectus.
BASIC TERMS OF THE SENIOR NOTES
ISSUER/TRUST: BMW Vehicle Lease Trust 2000-A
TRANSFEROR: BMW Auto Leasing LLC
SERVICER: BMW Financial Services NA, LLC
OWNER TRUSTEE: Wilmington Trust Company, a Delaware banking corporation
INDENTURE
TRUSTEE: The Chase Manhattan Bank, a New York banking corporation
ORIGINATION
TRUST: Financial Services Vehicle Trust
ORIGINATION
TRUSTEE: Chase Manhattan Bank, Delaware
TRUST ASSETS: Beneficial and security interests in leased vehicles and
lease contracts, and related proceeds
Page continued...
<PAGE>
LEASES: Retail closed-end operating leases of automobiles
CUTOFF DATE: Opening of business on [ ], 2000
CREDIT
ENHANCEMENT: A reserve fund, a residual value surplus account, the
subordinated notes and the certificates
NOTES TO BE OFFERED:
Class A-1 notes: $[ ]
Class A-2 notes: $[ ]
Class A-3 notes: $[ ]
Class A-4 notes: $[ ]
Class A-5 notes: $[ ]
INTEREST RATES:
Class A-1 notes: %
Class A-2 notes: %
Class A-3 notes: %
Class A-4 notes: %
Class A-5 notes: %
9
<PAGE>
INTEREST BASIS:
Class A-1
notes: Actual number of days
elapsed and assuming a
360-day year
Other Class A
notes: A 360-day year of twelve
30-day months
PAYMENT
DATES: The first business day after
the [ ]th day of each month
RECORD DATE: Holders of record are
determined one business
day prior to a payment date
FIRST PAYMENT
DATE: [ ], 2000
FINAL SCHEDULED PAYMENT DATES:
Class A-1 notes: [ ]
Class A-2 notes: [ ]
Class A-3 notes: [ ]
Class A-4 notes: [ ]
Class A-5 notes: [ ]
CLEARANCE AND
SETTLEMENT: The Depository Trust
Company, Clearstream and Euroclear
CLOSING DATE: Expected to be [ ] ___, 2000
10
<PAGE>
THE STRUCTURE OF THIS TRANSACTION
GENERAL
Dealers in BMW products, known as BMW Centers, have assigned retail leases and
the related leased vehicles to Financial Services Vehicle Trust. Some of these
leases and the related leased vehicles, all of which were new BMW automobiles at
the time of lease origination, have been allocated to a separate pool of assets.
Beneficial and security interests - but not direct ownership - in the leased
vehicles and leases in that pool will be transferred to the trust. Neither the
trust nor holders of the trust's securities will receive any interest in assets
other than those in that pool. Payment of the senior notes will be backed by
those beneficial and security interests in the leased vehicles and leases in the
pool.
The trust will apply the amount of the net proceeds from the issuance and sale
of the senior notes to purchase those interests in the pool. In addition to the
senior notes, the trust is also issuing $[ ] in aggregate principal amount of
asset backed subordinated notes and $[ ] in aggregate principal amount of asset
backed certificates. The trust is not offering the subordinated notes or the
certificates under this prospectus. The certificates may be sold in one or more
private placements.
The trust will rely upon collections from the pool's lease contracts, sales
proceeds from the disposition of the related leased vehicles and funds on
deposit in specified accounts to make payments on the senior notes. The trust
will be solely liable for payments made on the senior notes.
REPAYMENT OF THE NOTES
The timing of payments of principal on the senior notes is largely dependent on
the timing of collections of cash flows generated by the underlying assets.
Principal will be paid on your senior notes on each payment date in an amount
generally equal to the available principal distribution amount generated by the
underlying pool of leases and proceeds from the sale of the leased vehicles.
Principal payments on the senior notes generally will be made to the holders of
the senior notes sequentially, so that no principal will be paid on any class of
senior notes until each class of senior notes with a lower numerical designation
has been paid in full. For example, no principal will be paid on the Class A-2
senior notes until the Class A-1 senior notes have been paid in full.
Until all principal due on the senior notes is paid, no principal will be paid
on the subordinated notes and the certificates. Principal will then be paid on
the subordinated notes until they have been paid in full, and then on the
certificates.
An exception to the sequential payment rule is that allocable principal from the
sale of the trust's assets following a default under the indenture and the
acceleration of the senior notes or the transferor's insolvency will be paid
first to the Class A-1 senior notes until they have been paid in full, second,
on a pro rata basis, to all other classes of senior notes until they have been
paid in full, and third, ratably, to the subordinated notes (which amounts will
be paid to the reserve fund) and the certificates pro rata until they have been
paid in full.
Any unpaid principal amount of each class of senior notes will be payable in
full on the final scheduled payment dates listed on the cover page of this
prospectus.
11
<PAGE>
BMW Financial Services NA, LLC, also known as BMW FS, will administer the
leases, the disposition of the related leased vehicles when the leases terminate
and the collection of amounts due in respect of the leases. It also will be
entitled to certain lease payments that are not being securitized in this
transaction and that are thus neither the property of the trust, nor in any
other way available to make payments on the senior notes.
For information on the components of the lease payments that the senior notes
will or will not be entitled to and on BMW FS' role in servicing the leases, see
"BMW FS' Lease Financing Program."
For information on the allocation of collection shortfalls, see "Additional
Document Provisions--The Servicing Agreement--Collections--Monthly Payment
Advances".
See "Description of the Senior Notes -- Principal" and "Additional Information
Regarding the Securities -- Payments on the Securities -- Deposits to the
Distribution Accounts; Priority of Payments" for additional detail regarding the
allocation of any principal losses or shortfalls in amounts required to be
distributed to holders of senior notes and the reimbursement of those losses.
OPTIONAL REDEMPTION OF THE NOTES
The transferor has the option to purchase all of the assets of the trust on any
payment date when the combined unpaid principal balance of the senior notes,
subordinated notes and certificates is less than or equal to 10% of the total
initial balance of the senior notes, subordinated notes and certificates. It is
not anticipated that any of the senior notes will be outstanding at the time
that such combined balance declines to that level.
THE PROPERTY OF THE TRUST
GENERAL
The primary property of the trust will be:
o the vehicle SUBI certificate, which is described below,
including the right to receive the amounts realized from sales
of the specified vehicles;
o the program operating lease under which the trust will lease
the vehicle SUBI certificate to the transferor;
o the right under the program operating lease to receive an
amount equal to the payments made in respect of the monthly
payments under the specified vehicle leases;
o the pledge by BMW Auto Leasing LLC of the lease SUBI
certificate to secure the payments due under the program
operating lease; and
o the right to certain amounts deposited in the reserve fund and
the residual value surplus account.
THE PROGRAM OPERATING LEASE
When the senior notes are issued, the trust and the transferor will enter into a
program operating lease, under which the trust will lease the vehicle SUBI
certificate to the transferor, subject to the lien of the indenture. Pursuant to
the program operating lease and a pledge of the lease SUBI certificate, the
transferor will be obligated to make payments during the period that each
underlying specified vehicle is represented by the vehicle SUBI and covered by
the program operating lease.
12
<PAGE>
The transferor will make payments on the program operating lease on each payment
date in an amount generally equal to monthly payments made on or for the
specified leases and specified vehicles during the month immediately before the
month in which the related payment date occurs. These payments consist of:
o the scheduled monthly payment portion of the total monthly payment paid
under each specified lease;
o early termination payments made upon early termination of a specified
lease by the lessee;
o any other proceeds received from the sale or other disposition of
specified vehicles after the scheduled maturity or other termination of
the related specified leases; and
o excess mileage and excess wear and tear payments received upon
termination of a specified lease.
The trust will apply these amounts (minus mileage refund payments made with
respect to specified vehicles) to pay interest on and principal of the senior
notes, the subordinated notes and the certificates in accordance with their
terms.
THE SPECIFIED LEASES AND THE SPECIFIED VEHICLES
The specified vehicles are BMW automobiles titled in the name of the origination
trust. The specified leases are retail closed-end leases of the specified
vehicles. BMW Financial Services NA, LLC originated the specified leases in 16
states and services the specified leases, as well as many other leases in which
the trust does not have an interest. Each specified lease is an operating lease
for accounting purposes and has been written for a "capitalized cost" that
represents the original principal balance of such specified lease (which may
exceed the manufacturer's suggested retail price and may include certain
origination fees), plus a rent charge which is based on an imputed interest rate
or lease rate. Each specified lease provides for equal monthly payments that,
when allocated between principal and the rent charge at the lease rate on a
constant yield basis, will be sufficient to amortize the capitalized cost over
the term of the lease to an amount equal to the residual value of the related
specified vehicle established at the origination of the lease. The amount to
which the capitalized cost of a specified lease and the related specified
vehicle has been amortized at any point in time is referred to herein as its
"outstanding principal balance" and is determined on the basis of the FS
residual values, as described below.
The securitization value of the specified leases will equal the sum of (i) the
present value of the remaining monthly payments payable under the specified
leases and (ii) the present values of the residual values of the related
specified vehicles, each determined using a discount rate equal to the
securitization rate. As part of sales support programs, the specified leases
have been written with contract residuals that are higher than the residual
values determined by BMW FS based on estimated end-of-lease values. Only the
latter residual values are being financed herein, and the outstanding principal
balances and the securitization values stated herein are based on this lower
amount. As of [ ], 2000: o the aggregate outstanding principal balance of the
specified leases and specified vehicles was
$[ ];
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o the aggregate securitization value of the specified leases and
specified vehicles was $[ ];
o the aggregate residual value of the specified vehicles being financed
was $[ ];
o the weighted average original term of the specified leases was
[ ] months;
o the weighted average remaining term to scheduled maturity of the
specified leases was [ ] months; and
o the weighted average lease rate was ___%.
THE SUBI CERTIFICATES
The origination trust will issue two special units of beneficial interest, which
are also called SUBIs:
o a lease SUBI that will constitute a beneficial interest in the
specified leases, and
o a vehicle SUBI that will constitute a beneficial interest in the
related leased vehicles.
The SUBIs relating to the trust thus consists of the lease SUBI and the vehicle
SUBI. The SUBIs will not be offered to you under this prospectus.
A SUBI certificate will be issued for each of the lease SUBI and the vehicle
SUBI. One SUBI certificate will represent an undivided interest in the lease
SUBI and the other SUBI certificate will represent an undivided interest in the
vehicle SUBI. The SUBI certificate for the lease SUBI will be pledged and the
SUBI certificate for the vehicle SUBI will be transferred to the trust at the
time it issues the senior notes. The SUBI certificates will not be offered to
you under this prospectus.
The SUBI certificates will evidence a beneficial interest in the SUBI assets,
not a direct ownership interest in the SUBI assets. The SUBI assets are the
specified leases and specified vehicles. By holding the vehicle SUBI certificate
and the program operating lease, the trust will be entitled to receive an amount
equal to all payments made on or in respect of the SUBI assets.
The SUBI certificates will not evidence an interest in any origination trust
assets other than the SUBI assets, and payments made on or for all other
origination trust assets will not be available to make payments on the senior
notes, subordinated notes or the certificates.
For more information regarding the trust's property, see "The SUBIs" and "The
Specified Leases".
CREDIT ENHANCEMENT
The credit enhancement for the senior notes will consist primarily of the
following:
o subordination of the subordinated notes;
o subordination of the certificates;
o the reserve fund; and
o the residual value surplus account.
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SUBORDINATION OF THE SUBORDINATED NOTES
The subordinated notes will be subordinated to the senior notes to provide
credit enhancement for the senior notes. On each payment date, instead of being
paid to the transferor, in its capacity as subordinated noteholder, all payments
of interest and principal on the subordinated notes will be deposited into the
reserve fund to the extent necessary to cause the amount on deposit therein to
equal the reserve fund requirement.
SUBORDINATION OF THE CERTIFICATES
The certificates will be subordinated to the senior notes to provide additional
credit enhancement for the senior notes.
THE RESERVE FUND
As an additional source of credit enhancement, the servicer will establish a
reserve fund. The reserve fund will be funded as follows:
o on the closing date, the transferor will make an initial deposit to the
reserve fund of $[ ], which is [ ]% of the aggregate initial balance of
the senior notes, subordinated notes and certificates;
o on each payment date, interest and principal, if any, paid on the
subordinated notes will be deposited into the reserve fund to the
extent necessary to cause the amount on deposit therein to equal the
reserve fund requirement, which is [ ]% of the aggregate outstanding
balance of the securities; and
o on each payment date, any excess collections remaining after interest
and principal on the senior notes, subordinated notes and certificates
and various other obligations and expenses of the trust have been paid
will be deposited into the reserve fund.
Deposits will be made to the reserve fund after the closing date only to the
extent needed to maintain a balance in the reserve fund equal to the reserve
fund requirement. Any further excess collections will be paid to the transferor.
Available amounts in the reserve fund on each payment date will be available to
cover shortfalls in distributions of interest and principal on the senior notes
and the certificates.
THE RESIDUAL VALUE SURPLUS ACCOUNT
As an additional source of credit enhancement, a residual value surplus account
will provide funds for the benefit of the senior notes and the certificates in
the event any residual value losses are incurred on the sale of specified
vehicles.
Residual value losses will be any amount by which the net proceeds from the sale
of specified vehicles are less than the residual values established by BMW FS at
the time of origination of the leases based on estimated end-of-lease values.
The residual value surplus account will not be funded with an initial balance,
but on each payment date it will be funded with the amount by which the sales
proceeds for each specified vehicle sold during the related collection period
exceeded the contractual residual value of such leased vehicle.
After all distributions required on a given payment date have been made, any
funds remaining in the residual value surplus account will be paid to the
transferor.
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For more information regarding the residual value surplus account, see "Security
for the Securities--The Accounts--The Residual Value Surplus Account".
SERVICING
BMW Financial Services NA, LLC will service the origination trust assets,
including the SUBI assets.
For more information regarding the servicer, see "Additional Document
Provisions--The Servicing Agreement" and "BMW FS".
TAX STATUS
Weil, Gotshal & Manges LLP, as special tax counsel to the transferor, is of the
opinion that although there is no authority with respect to a transaction
closely comparable to that contemplated herein:
o the senior notes will constitute indebtedness for federal income tax
purposes, and
o the trust will not constitute an association or a publicly traded
partnership taxable as a corporation for federal income tax purposes.
By accepting a senior note, each holder or beneficial owner will be deemed to
have agreed to treat the senior notes as indebtedness. You should consult your
own tax advisor regarding the federal tax consequences of the purchase,
ownership and disposition of the senior notes, and the tax consequences arising
under the laws of any state or other taxing jurisdiction.
For more information, see "Material United States Federal Income Tax
Consequences".
ERISA CONSIDERATIONS
It is expected that the senior notes will be eligible for purchase by employee
benefit plans. However, plans contemplating a purchase of senior notes should
consult their counsel before making a purchase.
For more information, see "Certain ERISA Considerations".
SENIOR NOTE RATINGS
The senior notes will be issued only if the Class A-1 senior notes are rated in
the highest short-term rating category and the other senior notes are rated in
the highest long-term category by at least two nationally recognized rating
agencies. There can be no assurance that a rating will not be lowered or
withdrawn by an assigning rating agency.
MONEY MARKET INVESTMENT
The Class A-1 senior notes have been structured to be eligible securities for
purchase by money market funds under Rule 2a-7 under the Investment Company Act
of 1940. However, money market funds contemplating a purchase of Class A-1
senior notes should consult their counsel before making a purchase.
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<PAGE>
RISK FACTORS
You should consider the following risk factors in deciding whether to purchase
the senior notes:
YOU MAY HAVE DIFFICULTY
SELLING YOUR SENIOR
NOTES OR OBTAINING
YOUR DESIRED SALES PRICE. o The senior notes will not be listed on any
securities exchange. The underwriters intend
to make a secondary market for the senior
notes. The underwriters will do so by
offering to buy the senior notes from
investors that wish to sell. However, the
underwriters will not be obligated to make
offers to buy the senior notes and may stop
making offers at any time. In addition, the
prices offered, if any, may not reflect
prices that other potential purchasers would
be willing to pay, were they to be given the
opportunity. There have been times in the
past where there have been very few buyers
of asset backed securities and thus there
has been a lack of liquidity. There may be a
similar lack of liquidity at times in the
future. As a result, you may not be able to
sell your senior notes when you want to do
so, or you may not be able to obtain the
price that you wish to receive.
YOU WILL EXPERIENCE A
LOSS ON YOUR INVESTMENT
IF DEFAULTS ON THE
SPECIFIED LEASES OR
RESIDUAL VALUE LOSSES
EXCEED THE AVAILABLE
CREDIT ENHANCEMENT. o The trust does not have, nor is it expected
to have, any significant assets or sources
of funds other than the SUBI certificates
and payments under the program operating
lease, together with available funds in the
reserve fund, the residual value surplus
account and the distribution and collection
accounts. The senior notes represent
obligations solely of the trust and will not
be insured or guaranteed by any entity.
Accordingly, you will rely primarily upon
payments on the program operating lease
which are based on collections on the
specified leases and specified vehicles -
together with monies on deposit in the
reserve fund and the residual value surplus
account - for payments on the senior notes.
The reserve fund and the residual value
surplus account, together with the credit
enhancement provided by subordination of the
subordinated notes and the certificates, are
intended to provide protection against
delinquencies on the specified leases and
losses on the specified leases and specified
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<PAGE>
vehicles. However, if the level of
delinquencies and losses exceeds the
available credit enhancement, you will
suffer a loss. You will have no claim to any
amounts properly distributed to others from
time to time.
YOUR SHARE OF POSSIBLE
LOSSES MAY NOT BE
PROPORTIONATE. o Principal payments on the senior notes
generally will be made to the holders of the
senior notes sequentially, so that no
principal will be paid on any class of
senior notes until each class of senior
notes with a lower numerical designation has
been paid in full. Losses in excess of the
available credit enhancement relating to the
specified leases and specified vehicles will
be allocated, after the Class A-1 senior
notes are paid, to each remaining class of
senior notes based on a fraction equal to
the unpaid principal amount of that class
divided by the unpaid principal amount of
all classes. As a result, a class of senior
notes with a later maturity may be allocated
more losses than a class of senior notes
with an earlier maturity as a relative
percentage of their initial principal
amounts.
THE TIMING OF PRINCIPAL
PAYMENTS IS UNCERTAIN. o The amount of distributions of principal on
the senior notes and the time when you
receive those distributions depends on the
rate of payments and losses relating to the
specified leases and the specified vehicles,
which cannot be predicted with certainty.
Those principal payments may be regularly
scheduled payments or unscheduled payments
like those resulting from prepayments or
liquidations of defaulted specified leases.
Additionally, the servicer may be required
to make payments relating to specified
leases and specified vehicles under some
circumstances, and the transferor will have
the right to purchase all assets of the
trust pursuant to a clean-up call. Each of
these payments will have the effect of
shortening the average lives of the senior
notes. You will bear any reinvestment risks
resulting from a faster or slower rate of
payments of the specified leases and the
specified vehicles.
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<PAGE>
THE GEOGRAPHIC
CONCENTRATION OF THE
LEASES, ECONOMIC FACTORS
AND THE AUTOMOBILE
MARKET COULD NEGATIVELY
AFFECT THE TRUST'S ASSETS. o The specified leases were originated in 16
states. Less than ten percent of the total
number of specified leases by outstanding
principal balance were originated in any
states other than California, New York and
New Jersey. Adverse economic conditions in
one of more of these states or in the market
for automobiles may have a disproportionate
impact on the performance of the specified
leases and the specified vehicles. Economic
factors like unemployment, interest rates,
the rate of inflation and consumer
perceptions of the economy may affect the
rate of prepayment and defaults on the
specified leases and the ability to sell or
dispose of the related specified vehicles
for an amount at least equal to their
residual values.
TURN-IN RATES
MAY AFFECT LOSSES. o An increase in the number of user-lessees
who decide not to purchase their vehicles
will expose the trust to possible losses
resulting from the valuation of such
vehicles in the used car market. The level
of turn-ins at lease termination could be
adversely affected by user-lessee views on
vehicle quality, the relative attractiveness
of new models available to the user lessees,
sales and lease incentives offered with
respect to other vehicles (including those
offered by BMW FS), the level of contract
residual values (which are the purchase
option prices) compared to new and used
vehicle prices and economic conditions
generally. If losses resulting from
increased turn-ins exceed the credit
enhancement, you may suffer a loss on your
investment.
USED CAR MARKET FACTORS
COULD INCREASE RISK
OF LOSS FOR ALL INVESTORS. o The used car market could be adversely
affected by factors such as changes in
consumer tastes, discovery of defects,
styling changes, an overabundance of used
cars in the marketplace and economic
conditions generally. Any such adverse
change could result in reduced proceeds upon
the liquidation or other disposition of
Leased Vehicles, and therefore could result
in increased residual value losses. The
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<PAGE>
market for used luxury vehicles may respond
differently to changes in economic
conditions than the market for other used
cars. BMW FS manages the market for used BMW
vehicles through certain programs described
herein, but there can be no assurance that
such efforts will continue to be successful.
o The used car market for any particular model
of vehicle could be adversely affected by
factors not affecting other model types,
such as changes in consumer tastes,
discovery of defects in respect of such
model, or overabundance of that model in the
used car market. Three model types will be
included as SUBI Assets. By number of
vehicles, the 3 Series, the 5 Series and the
7 Series represent approximately [ ]%, [ ]%
and [ ]%, respectively, of the specified
vehicles as of [ ], 2000. Any such adverse
change with respect to a specific model type
could result in reduced proceeds upon the
liquidation or other disposition of
specified vehicles of such model type, and
therefore could result in increased residual
value losses. If such losses exceed the
credit enhancement, you may suffer a loss on
your investment.
RISKS ASSOCIATED WITH CONSUMER
PROTECTION LAWS. o 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 upon lessors and servicers of
retail lease contracts such as the leased
contracts. California has enacted
comprehensive vehicle leasing statutes that,
among other things, regulate the disclosures
to be made at the time a vehicle is leased.
These laws apply to the origination trust as
the lessor under the leased contracts and
may also apply to the trust as owner of the
vehicle SUBI certificate. Failure by the
origination trust or the servicer to comply
with such requirements may give rise to
liabilities on the part of the origination
trust, and enforcement of the specified
leases by the origination trust may be
subject to set-off as a result of such
noncompliance. Many states have adopted
lemon laws that provide vehicle users
certain rights in respect of substandard
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<PAGE>
vehicles. A successful claim under a lemon
law could result in, among other things, the
termination of the related specified lease
and/or require the refund of all or a
portion of payments previously paid thereon.
BMW FS will make representations and
warranties that each specified lease
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, BMW FS will
be required to make a reallocation payment
in respect of the related specified lease
and specified vehicle and reallocate the
related specified lease and specified
vehicle out of the SUBI Certificates.
VICARIOUS TORT LIABILITY MAY
RESULT IN A LOSS
ON YOUR INVESTMENT. o Some states allow a party that incurs an
injury involving a leased vehicle to sue the
owner of the vehicle merely because of that
ownership. Most states, however, either
prohibit these vicarious liability suits or
limit the lessor's liability to the amount
of liability insurance that the lessee was
required to carry under applicable law but
failed to maintain. If vicarious liability
imposed on the trust or the origination
trust exceeds the coverage provided by its
primary and excess liability insurance
policies, you could experience delays in
payments due to you or may ultimately suffer
a loss.
For a discussion of the possible liability
of the trust in connection with the use or
operation of the specified leased vehicles,
see "Additional Legal Aspects of the
Specified Leases and the Specified Vehicles
--Vicarious Tort Liability".
A BANKRUPTCY OF THE TRANSFEROR
OR THE SERVICER COULD DELAY
OR LIMIT PAYMENTS TO
YOU. o Following a bankruptcy or insolvency of the
servicer or the transferor, a court could
conclude that the vehicle SUBI certificate
is owned by the servicer or the transferor,
instead of the trust. This conclusion could
be either because the transfer of the
vehicle SUBI certificate from the transferor
to the trust was not a true sale or because
the court concluded that the transferor or
the trust should be treated as the same
entity as the servicer or the transferor for
bankruptcy purposes. If this were to occur,
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<PAGE>
you could experience delays in payments due
to you or may not ultimately receive all
interest and principal due to you as a
result of:
o the automatic stay which prevents a secured
creditor from exercising remedies against a
debtor in bankruptcy without permission from
the court, and
o the fact that neither the trust nor the
indenture trustee has a perfected security
interest in the specified vehicles and may
not have a perfected security interest in
any cash collections of the specified leases
and specified vehicles held by the servicer
at the time that a bankruptcy proceeding
begins.
For a discussion of how a bankruptcy
proceeding of the servicer, the transferor
or certain related entities may affect the
trust and the senior notes, see "Additional
Legal Aspects of the Origination Trust and
the SUBIs--Insolvency-Related Matters".
IF ERISA LIENS ARE PLACED
ON THE ASSETS OF THE TRUST,
YOU COULD SUFFER A LOSS ON
YOUR INVESTMENT. o Liens in favor of the Pension Benefit
Guaranty Corporation could attach to the
specified leases and specified vehicles and
be used to satisfy unpaid ERISA obligations
of any member of a controlled group that
includes BMW Financial Services NA, LLC and
its affiliates. These liens could have
priority over the interest of security
holders in SUBI assets, like the specified
vehicles, that are not covered by a prior
perfected security interest in favor of the
indenture trustee. The transferor believes
that the likelihood of this liability being
asserted against the assets of the trust or,
if so asserted, being successfully pursued,
is remote. However, you cannot be sure the
specified leases and specified vehicles will
not become subject to an ERISA liability.
A CHANGE OR WITHDRAWAL BY
THE RATING AGENCIES OF
THEIR INITIAL RATINGS MAY
REDUCE THE MARKET VALUE
OF THE SENIOR NOTES. o A security rating is not a recommendation by
a rating agency that you buy, sell or hold
securities. Similar ratings on different
types of securities do not necessarily mean
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<PAGE>
the same thing. You are encouraged to
analyze the significance of each rating
independently from any other rating. Any
rating agency may change its rating of the
senior notes after the senior notes are
issued if that rating agency believes that
circumstances have changed. A rating
downgrade may reduce the price that a
subsequent purchaser will be willing to pay
for the senior notes.
IF THE TRUST IS REQUIRED
TO SELL ITS ASSETS, YOU
MAY SUFFER A LOSS ON YOUR
INVESTMENT. o If the transferor becomes bankrupt or
insolvent, the trust will be dissolved and
the indenture trustee will be required to
sell the assets of the trust, including the
SUBI certificates, on commercially
reasonable terms. Because the bankruptcy of
the transferor will also require the
origination trust to be terminated with
respect to holding the SUBI assets, the SUBI
assets will be distributed to the purchaser
of the trust's assets and the specified
vehicles will be retitled at the direction
of that purchaser. The indenture trustee
will distribute the proceeds from the sale
of the trust's assets and monies on deposit
to the extent necessary to cause the amount
on deposit therein to equal the required
amount in the reserve fund and the residual
value surplus account, after the payment of
certain unpaid fees and reimbursement of
outstanding advances made by the servicer to
the trust, first to the senior noteholders
for interest due, second to the reserve fund
for interest due on the subordinated notes,
third to the certificateholders for interest
due, fourth to the Class A-1 Noteholders
until the Class A-1 Notes have been paid in
full, fifth pro rata to each other class of
senior note holders based on their class'
note balances until the senior notes have
been paid in full, and sixth to the
certificateholders and the subordinated
noteholders ratably - with amounts paid on
the subordinated notes being paid to the
reserve fund. If these proceeds and amounts
are not sufficient to pay the senior notes
in full, you would incur a loss on your
investment.
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<PAGE>
THE FAILURE TO MAKE PRINCIPAL
PAYMENTS ON THE NOTES WILL
GENERALLY NOT RESULT IN
AN EVENT OF DEFAULT. o You should be aware that the amount of
principal required to be paid to you prior
to the final scheduled payment date for a
class of senior notes generally will be
limited to amounts available for those
purposes. Therefore, the failure to repay
principal of a class of senior notes
generally will not result in the occurrence
of an event of default under the indenture
until the final scheduled payment date for
the class of notes.
THE SENIOR NOTES ARE NOT
SUITABLE INVESTMENTS
FOR ALL INVESTORS. o The senior notes are not a suitable
investment if you require a regular
predictable schedule of payments. The senior
notes are complex investments that should be
considered only by investors who, either
alone or with their financial, tax and legal
advisors, have the expertise to analyze
prepayment, reinvestment, default and market
risk, the tax consequences of an investment,
and the interaction of these factors.
24
<PAGE>
OVERVIEW OF THE TRANSACTION
Please refer to page 8 for a diagram providing an overview of the
transaction described in this prospectus. You can find a listing of the pages
where capitalized terms used in this prospectus are defined under the caption
"Index of Principal Terms" beginning on page 126.
BMW Centers have assigned, and will assign, automobile leases and the
related vehicles to Financial Services Vehicle Trust, a Delaware business trust
(the "Origination Trust"). The Origination Trust was created in August 1995 to
facilitate the titling of automobiles and sports utility vehicles in connection
with the securitization of automobile and sports utility vehicle leases. The
Origination Trust has issued to BMW Manufacturing LP ("BMW LP" or the "UTI
Beneficiary") a beneficial interest in the undivided trust interest (the "UTI").
The UTI represents the entire beneficial interest in assets of the Origination
Trust that have not been allocated to special units of beneficial interest such
as the ones described in this prospectus. The trustee of the Origination Trust
will be directed by the UTI Beneficiary:
o to establish two special units of beneficial interest (each a
"2000-A SUBI," and collectively, the "SUBIs");
o to allocate a separate portfolio of leases and some related
assets of the Origination Trust (the "Specified Leases") to
one 2000-A SUBI (the "Lease SUBI"); and
o to allocate the vehicles that are leased under the Specified
Leases and some other related assets of the Origination Trust
(the "Specified Vehicles") to the other 2000-A SUBI (the
"Vehicle SUBI").
The SUBIs will represent the entire beneficial interest in the Specified Leases
and Specified Vehicles (collectively, the "SUBI Assets"). Upon creation of each
2000-A SUBI, the related SUBI Assets will no longer be a part of the Origination
Trust Assets represented by the UTI, and the interest in the Origination Trust
Assets represented by the UTI will be reduced accordingly. Each 2000-A SUBI will
evidence an indirect beneficial interest, rather than a direct legal interest,
in the related SUBI Assets. Each 2000-A SUBI will not represent a beneficial
interest in any Origination Trust Assets other than the related SUBI Assets.
Payments made on or in respect of any Origination Trust Assets other than the
SUBI Assets will not be available to make payments on the senior notes, the
subordinated notes or the certificates. The UTI Beneficiary may from time to
time cause special units of beneficial interest other than the SUBIs (each, an
"Other SUBI") to be created out of the UTI. The Trust (and, accordingly, its
securityholders) will have no interest in the UTI, any Other SUBI or any assets
of the Origination Trust Assets evidenced by the UTI or any Other SUBI. See "The
SUBIs" and "The Origination Trust".
BMW LP will sell, transfer and assign its interest in each 2000-A SUBI
to BMW Auto Leasing LLC (the "Transferor"). The Transferor will in turn (a)
transfer and assign the certificate representing its interest in the Vehicle
SUBI (the "Vehicle SUBI Certificate") to BMW Vehicle Lease Trust 2000-A (the
"Trust"), and (b) pledge the certificate representing its interest in the Lease
SUBI (the "Lease SUBI Certificate", and together with the Vehicle SUBI
Certificate, the "SUBI Certificates") to the Trust. The Trust will issue five
classes of senior notes (the "Senior Notes") in an aggregate principal amount of
$[ ] (the "Initial Senior Note Balance"). The Trust will also issue one class of
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asset backed subordinated notes (the "Subordinated Notes,", and together with
the Senior Notes, the "Notes") in an aggregate principal amount of $[ ] (the
"Initial Subordinated Note Balance") and one class of asset backed certificates
(the "Certificates") in an aggregate principal amount of $[ ] (the "Initial
Certificate Balance"). The Trust will pledge the Vehicle SUBI Certificate and
its interest in the Lease SUBI Certificate to the Indenture Trustee as security
for the Senior Notes and the Subordinated Notes. The Senior Notes, the
Subordinated Notes and the Certificates are collectively referred to as the
"Securities" and the holders of Securities are referred to as "Securityholders".
Each Senior Note and each Subordinated Note will represent an obligation of, and
for some non-tax purposes each Certificate will represent a fractional undivided
interest in, the Trust. Payments in respect of the Subordinated Notes and the
Certificates will be subordinated to payments in respect of the Senior Notes to
the extent described in this prospectus. The Subordinated Notes and the
Certificates are not being offered to you in this offering.
On the date of initial issuance of the Securities (the "Closing Date"),
the Trust and the Transferor will enter into a program operating lease (the
"Program Operating Lease") under which the Trust will lease the Vehicle SUBI
Certificate, subject to the lien of the Indenture, to the Transferor in exchange
for the obligation of the Transferor to make certain payments during the period
that each underlying Specified Vehicle is covered by the Program Operating
Lease. The Trust will apply these payments, together with proceeds received from
certain sales of Specified Vehicles, to pay interest on and principal of the
Securities.
As a condition to the issuance of the Senior Notes, at least two
nationally recognized rating agencies (each, a "Rating Agency"), must each rate
the Class A-1 Senior Notes in their highest short-term rating category, and the
remaining classes of Senior Notes in their highest long-term rating category.
See "Risk Factors - A change or withdrawal by the rating agencies of their
initial ratings may reduce the market value of the senior notes" and "Ratings of
the Senior Notes" for further information concerning the ratings assigned to the
Senior Notes, including the limitations of such ratings.
THE TRUST
Formation
The Trust will be formed under the laws of the State of Delaware solely
for the purposes of the transactions described in this prospectus. The Trust
will be governed by a trust agreement, dated as of [ ], 2000 (the "Trust
Agreement"), between the Transferor and Wilmington Trust Company, as Owner
Trustee.
The Trust will issue the Senior Notes under an indenture dated as of [
], 2000 (the "Indenture"), between the Trust and The Chase Manhattan Bank, as
trustee (in that capacity, the "Indenture Trustee"). The Subordinated Notes and
the Certificates will be issued under the Trust Agreement.
The Trust will not engage in any activity other than as duly authorized
in accordance with the terms of the Trust Agreement. On the Closing Date, the
authorized purposes of the Trust will be limited to:
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<PAGE>
o issuing the Securities;
o acquiring the Vehicle SUBI Certificate and the other property
of the Trust with the proceeds from the sale of the
Securities;
o assigning and pledging the property of the Trust to the
Indenture Trustee;
o leasing the Vehicle SUBI Certificate to the Transferor;
o making payments on the Securities;
o entering into and performing its obligations under the
transaction documents to which it is a party; and
o engaging in other transactions, including entering into
agreements, that are necessary, suitable or convenient to
accomplish, or that are incidental to or connected with, any
of the foregoing activities.
Approval of additional Trust activities and purposes may be requested by holders
of at least 75% of the outstanding balance of the Certificates and will require
(a) that each Rating Agency have delivered a letter to the effect that the
activities and purposes would not cause its then-current ratings of the Senior
Notes or the Certificates to be qualified, reduced or withdrawn, and (b)
approval by holders of at least 75% of the outstanding balance of the Senior
Notes, or if the Senior Notes are no longer outstanding, by the Subordinated
Noteholder.
Under an administration agreement, dated as of [ ], 2000 (the "Trust
Administration Agreement"), BMW FS, as administrator (the "Administrator"), will
perform the Trust's administrative obligations under the Trust Agreement and the
Indenture.
The Trust's principal offices will be in Wilmington, Delaware, in care
of the Owner Trustee, at the address listed below under "------The Owner
Trustee".
Capitalization
On the Closing Date, the Trust will be capitalized with $[ ] aggregate
principal amount of Securities. The Trust will sell the Senior Notes and the
Certificates, other than the Transferor Certificate, to third party investors
that are expected to be unaffiliated with the Transferor, the Servicer or their
respective affiliates. In exchange for the transfer of the Vehicle SUBI
Certificate and the pledge of the Lease SUBI Certificate, the Trust will pay the
Transferor the net proceeds from the sale of the Senior Notes and the net
proceeds from the sale of the Certificates, if any, and will issue to the
Transferor the Subordinated Notes and any unsold Certificates and a certificate
(the "Transferor Certificate") with a $[ ] principal balance, which will
approximately equal 1% of the Initial Certificate Balance. The following table
illustrates the capitalization of the Trust as of the Closing Date, as if the
issuance and sale of the Securities had taken place on that date:
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Senior Notes............................................. $[ ]
Subordinated Notes....................................... $[ ]
Certificates............................................. $[ ]
---------------------
Total.................................................$[ ]
=====================
The Owner Trustee
Wilmington Trust Company will be the trustee (the "Owner Trustee")
under the Trust Agreement. Wilmington Trust Company is a Delaware banking
corporation, and its Corporate Trust Office is located at 1100 North Market
Street, Rodney Square North, Wilmington, Delaware 19890. The Transferor, the
Servicer and their affiliates may maintain normal commercial banking
relationships with the Owner Trustee and its affiliates. The fees and expenses
of the Owner Trustee will be paid by the Administrator. See "Additional Document
Provisions--Miscellaneous Provisions--Fees and Expenses".
Property of the Trust
On the Closing Date, the Transferor will transfer the Vehicle SUBI
Certificate to the Trust pursuant to the Issuer SUBI Certificate Transfer
Agreement and will pledge the Lease SUBI Certificate to the Trust pursuant to
the Program Operating Lease. The Trust will then pledge its interest in each
SUBI Certificate to the Indenture Trustee under the Indenture and then, subject
to that pledge, will lease the Vehicle SUBI Certificate to the Transferor
pursuant to the Program Operating Lease. See "The SUBIs--Transfers of the SUBI
Certificates".
After giving effect to the transactions described in this prospectus,
the property of the Trust (the "Trust Estate") will include:
o the Vehicle SUBI Certificate, evidencing a beneficial interest
in the assets allocated to the Vehicle SUBI (the "Vehicle SUBI
Assets"), including the right to payments thereunder from
certain Sales Proceeds on deposit in the SUBI Collection
Account and the Residual Value Surplus Account and investment
earnings, net of losses and investment expenses, on amounts on
deposit in the SUBI Collection Account and the Residual Value
Surplus Account;
o the rights of the Trust under the Program Operating Lease;
o the rights of the Trust as pledgee of the Lease SUBI
Certificate;
o the rights of the Trust as secured party under a back-up
security agreement with respect to the SUBI Certificates and
the undivided interest in the SUBI Assets;
o the rights of the Trust to funds on deposit from time to time
in the Note Distribution Account and any other account or
accounts established pursuant to the Indenture;
o the rights of the Transferor, as transferee, under the SUBI
Certificate Transfer Agreement;
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o the rights of the Trust, as transferee, under the Issuer SUBI
Certificate Transfer Agreement;
o the security interest of the Trust in the Subordinated Notes
and the Reserve Fund (including investment earnings, net of
losses and investment expenses, on amounts on deposit
therein); and
o all proceeds of the foregoing.
The Indenture will require the Trust Estate to be pledged by the Trust to the
Indenture Trustee.
Because each SUBI will represent a beneficial interest in the related
SUBI Assets, Securityholders will be dependent on payments made on the Specified
Leases and proceeds received in connection with the sale or other disposition of
Specified Vehicles for the payment of interest on and principal of the related
Securities. The Trust will not have a direct ownership interest in the Specified
Leases or a direct ownership interest or perfected security interest in the
Specified Vehicles - which will be titled in the name of the Origination Trust
or the Origination Trustee on behalf of the Origination Trust - and it is
therefore possible that a claim or lien in respect of the Specified Vehicles or
the Origination Trust could limit the amounts payable in respect of the SUBI
Certificates to less than the amounts received from the lessees of the Specified
Vehicles (each, a "User-Lessee") or received from the sale or other disposition
of Specified Vehicles. To the extent that a claim or lien were to delay the
disposition of the Specified Vehicles or reduce the amount paid to the holders
of the SUBI Certificates in respect of their beneficial interests in the SUBI
Assets, Senior Noteholders could experience delays in payment or losses on their
investment. See "Risk Factors--A bankruptcy of the transferor or the servicer
could delay or limit payments to you" and "- If ERISA liens are placed on the
assets of the trust, you could suffer a loss on your investment", "The SUBIs",
"Additional Legal Aspects of the Origination Trust and the SUBIs--The SUBIs" and
"Additional Legal Aspects of the Specified Leases and the Specified
Vehicles--Back-up Security Interests".
USE OF PROCEEDS
The net proceeds from the sale of the Senior Notes - the proceeds of
the public offering minus expenses relating thereto - together with the proceeds
from the private placement of the Certificates, if any, and the issuance of the
Subordinated Notes, will be applied by the Trust to acquire the Vehicle SUBI
Certificate and the pledge of the Lease SUBI Certificate from the Transferor.
THE ORIGINATION TRUST
General
The Origination Trust is a Delaware business trust and is governed by
an amended and restated trust agreement, dated as of September 27, 1996 (the
"Origination Trust Agreement"), between the UTI Beneficiary and Chase Manhattan
Bank Delaware, as trustee (the "Origination Trustee"). The assets of the
Origination Trust (the "Origination Trust Assets") consist of:
o closed-end retail lease contracts (the "Leases") of
automobiles, light trucks, sports utility vehicles and
motorcycles (the "Leased Vehicles"), which Leases are or were
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originated by BMW Centers pursuant to dealer agreements
entered into with BMW FS, and all proceeds thereof;
o the Leased Vehicles, together with all accessories, additions
and parts constituting a part thereof and all accessions
thereto and all proceeds thereof; and
o certain payments under the Leases, proceeds from sales of the
Leased Vehicles, and other assets more fully described below.
The primary business purpose of the Origination Trust is to acquire, and serve
as record holder of title to, the Leases and Leased Vehicles, in connection with
asset backed securities issuance transactions.
Under a servicing agreement dated as of August 30, 1995, as amended by
a supplement to be dated as of [ ], 2000 (as amended or supplemented from time
to time, the "Servicing Agreement"), among the Origination Trust, the UTI
Beneficiary, and BMW FS, as servicer (in that capacity, the "Servicer"), BMW FS
will service the Leases, including the Specified Leases and the Leased Vehicles,
including the Specified Vehicles.
Except as otherwise described under "Additional Document
Provisions--The SUBI Trust Agreement," under the Origination Trust Agreement,
the Origination Trust has not and will not:
o issue interests or securities other than the SUBIs, the SUBI
Certificates, Other SUBIs, one or more certificates
representing each Other SUBI (the "Other SUBI Certificates"),
the UTI and one or more certificates representing the UTI (the
"UTI Certificates");
o borrow money, except from BMW FS or the UTI Beneficiary in
connection with funds used to acquire Leases and Leased
Vehicles;
o make loans;
o invest in or underwrite securities;
o offer securities in exchange for Origination Trust Assets,
with the exception of the SUBI Certificates, Other SUBI
Certificates and the UTI Certificates;
o repurchase or otherwise reacquire its securities, other than
for purposes of cancellation, except as permitted by or in
connection with financing or refinancing the acquisition of
Leases and Leased Vehicles or as otherwise permitted by each
such financing or refinancing; or
o grant any security interest in or lien on any Origination
Trust Assets.
For further information regarding the Origination Trust, the servicing of the
Leases and the Leased Vehicles, see "Additional Document Provisions--The SUBI
Trust Agreement" and "--The Servicing Agreement".
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The UTI Beneficiary
BMW LP is the UTI Beneficiary under the Origination Trust Agreement.
The sole general partner of BMW LP is BMW Facility Partners, LLC ("BMW Facility
Partners"), a Delaware limited liability company. BMW FS is the general partner
of the UTI Beneficiary. The UTI Beneficiary was formed as a limited partnership
under the laws of Indiana in September 1992. Currently, its the sole purposes
are being the initial beneficiary of the Origination Trust, holding the UTI and
the UTI Certificate, acquiring interests in the SUBI and Other SUBIs and
engaging in related transactions. The limited liability company agreement of BMW
Facility Partners and the limited partnership agreement of the UTI Beneficiary
limit their respective activities to the foregoing purposes and to any
activities incidental thereto or necessary therefor. The principal office of BMW
LP is located at 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07675 and
its telephone number is (201) 307-4000.
The Origination Trustee
Chase Manhattan Bank (Delaware) is the trustee for the Origination
Trust. Chase Manhattan Bank (Delaware) is a Delaware banking corporation and its
principal offices are located at 1201 Market Street, Wilmington, Delaware 19801.
The Transferor, the Servicer and their affiliates may maintain normal
commercial banking relationships with the Origination Trustee and its
affiliates.
Property of the Origination Trust
The Origination Trust Assets generally consist of:
o Leases originated by BMW Centers and all monies due from
User-Lessees thereunder;
o Leased Vehicles and all proceeds of those Leased Vehicles;
o the rights to proceeds from any physical damage, liability or
other insurance policies, if any, covering the Leases or the
related User-Lessees or the Leased Vehicles, including but not
limited to the Contingent and Excess Liability Insurance; and
o all proceeds of the foregoing.
From time to time after the date of this prospectus, the BMW Centers
will assign additional Leases to the Origination Trust and, as described below,
title the related Leased Vehicles in the name of the Origination Trust or the
Origination Trustee on behalf of the Origination Trust.
Lease Origination and the Titling of Leased Vehicles
All Leases have been underwritten using the underwriting criteria
described under "BMW FS' Lease Financing Program--Underwriting". Under each
Lease, the Origination Trust, or the Origination Trustee on behalf of the
Origination Trust, will be listed as the owner of the related Leased Vehicle on
the Leased Vehicle's certificate of title. Liens will not be placed on the
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certificates of title, nor will new certificates of title be issued, to reflect
the interest of the Trust, as holder of the Vehicle SUBI Certificate, in the
Specified Vehicles.
After the sale of the Vehicle SUBI Certificate to the Trust, the
Servicer will be obligated to repurchase any Specified Vehicles covered by
Specified Leases not meeting certain representations and warranties of the
Transferor by making Reallocation Payments in respect thereof. Those
representations and warranties relate primarily to the origination of the
Specified Leases, and do not typically relate to the creditworthiness of the
related User-Lessees or the collectibility of the Specified Leases. In addition,
the Servicer will be obligated to repurchase any Specified Vehicles by making
Reallocation Payments in the event the User-Lessee moves to a state in which the
Origination Trust is not qualified to do business and the Specified Vehicle is
either required to be retitled or reregistered under the laws of that state or
in the event that certain servicing obligations are not complied with.
All Leased Vehicles owned by the Origination Trust will be held for the
benefit of entities that from time to time hold beneficial interests in the
Origination Trust. Those interests will be evidenced with respect to:
o Leases and Leased Vehicles not allocated to the 2000-A SUBIs
or an Other SUBI, by the UTI,
o the Specified Leases and the Specified Vehicles, by the 2000-A
SUBIs, or
o Leases and Leased Vehicles financed in another transaction, by
an Other SUBI.
Entities holding beneficial interests in the Origination Trust will not have a
direct ownership in the related Leases or a direct ownership or perfected
security interest in the related Leased Vehicles.
The certificates of title for the Specified Vehicles will not reflect
the indirect interest of the Trust in the Specified Vehicles by virtue of its
beneficial interest in the Vehicle SUBI Assets. Therefore, the Trust does not
have a direct perfected lien in the Specified Vehicles, but will have filed a
financing statement to perfect the security interest in the Vehicle SUBI Assets,
but only to the extent that the security interest may be perfected by filing
under the UCC. For further information regarding the titling of the Specified
Vehicles and the interest of the Trust therein, see "Additional Legal Aspects of
the Specified Leases and the Specified Vehicles--Back-up Security Interests".
THE SUBIS
General
Each 2000-A SUBI will be issued by the Origination Trust under a
supplement, dated as of [ ], 2000 (the "SUBI Supplement" and, together with the
Origination Trust Agreement, the "SUBI Trust Agreement"), to the Origination
Trust Agreement. The 2000-A SUBIs will not represent a direct interest in the
related SUBI Assets or an interest in any Origination Trust Assets other than
the related SUBI Assets. The Trust and the Securityholders 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 Origination Trust
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Assets not represented by the SUBIs will not be available to make payments on
the Securities. For further information regarding the Origination Trust, see
"The Origination Trust".
The Lease SUBI Certificate will evidence a beneficial interest in the
assets allocated to the Lease SUBI (the "Lease SUBI Assets"), which will
generally consist of the Specified Leases and all proceeds of or payments on the
Specified Leases received on or after [ ], 2000 (the "Cutoff Date") and all
other related Lease SUBI Assets, including:
o amounts in the SUBI Collection Account received in respect of
the Specified Leases,
o certain monies due under or payable in respect of the
Specified Leases on or after the Cutoff Date, including the
right to receive payments made to BMW FS, the Transferor, the
Origination Trust, the Origination Trustee or the Servicer
under any insurance policies relating to the Specified Leases
or the related User-Lessees, and
o all proceeds of the foregoing.
The Vehicle SUBI Certificate will evidence a beneficial interest in the
Vehicle SUBI Assets, which will generally consist of the Specified Vehicles and
all proceeds of or payments on the Specified Vehicles received on or after the
Cutoff Date and all other related Vehicle SUBI Assets, including:
o amounts in the SUBI Collection Account received in respect of
the sale of the Specified Vehicles and the Residual Value
Surplus Account,
o certain monies payable in respect of the Specified Vehicles on
or after the Cutoff Date, including the right to receive
payments made to BMW FS, the Transferor, the Origination
Trust, the Origination Trustee or the Servicer under any
insurance policies related to the Specified Vehicles, and
o all proceeds of the foregoing.
Transfers of the SUBI Certificates
Simultaneously with the issuance of the SUBI Certificates to BMW LP,
BMW LP will convey the SUBI Certificates to the Transferor pursuant to a
transfer agreement, dated as of [ ], 2000 (the "SUBI Certificate Transfer
Agreement"). BMW LP will covenant to treat the conveyance of the SUBI
Certificates to the Transferor as an absolute sale, transfer and assignment for
all purposes.
Immediately after the transfer of the SUBI Certificates to the Transferor, the
Transferor will:
o transfer to the Trust, without recourse, all of its right,
title and interest in and to the Vehicle SUBI Certificate
under a transfer agreement, dated as of [ ], 2000 (the "Issuer
SUBI Certificate Transfer Agreement");
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o deliver the Vehicle SUBI Certificate to the Trust;
o pledge the Lease SUBI Certificate to the Trust under the
Program Operating Lease as security for the obligations of the
Transferor under the Program Operating Lease; and
o deliver the Lease SUBI Certificate to the Trust to perfect the
pledge.
In exchange, the Trust will pay to the Transferor the net proceeds from the sale
of the Senior Notes and the sale, if any, of the Certificates (other than the
Transferor Certificate) to third party investors, and will issue to the
Transferor the Subordinated Notes, the unsold Certificates and the Transferor
Certificate.
Immediately following the transfer of the Vehicle SUBI Certificate and
the pledge of the Lease SUBI Certificate to the Trust, the Trust will pledge its
interest in the Trust Estate, which includes the Vehicle SUBI Certificate and
the pledge of the Lease SUBI Certificate, to the Indenture Trustee as security
for the Senior Notes. The Trust and the Transferor will then enter into the
Program Operating Lease, under which the Trust will lease the Vehicle SUBI
Certificate to the Transferor, subject to the pledge thereof to the Indenture
Trustee. During the term of the Program Operating Lease, the Transferor, as
lessee of the Vehicle SUBI Certificate, will be required to make Program
Operating Lease Payments to the Trust and will be entitled to receive proceeds
from the Vehicle SUBI Certificate - as well as from the Lease SUBI Certificate -
in respect of the Specified Vehicles to the extent described under "Security for
the Securities--The Program Operating Lease".
THE TRANSFEROR
The Transferor is a limited liability company that was formed under the
laws of Delaware in [ ], 2000. The principal office of the Transferor is located
at 300 Chestnut Ridge Road, Woodcliff Lake, New Jersey 07675 and its telephone
number is (201) 307-4000.
The Transferor was organized solely for the purpose of acquiring
interests in the UTI, the SUBIs and Other SUBIs, causing securities like the
Securities to be issued and engaging in related transactions. The limited
liability company agreement of the Transferor limits its activities to those
purposes and to any activities incidental or necessary thereto.
BMW FS
BMW Financial Services NA, Inc. ("Inc."), the predecessor of BMW
Financial Services NA, LLC ("BMW FS"), was incorporated on April 23, 1984 in the
State of Delaware. Inc. was converted into a limited liability company
organized under the laws of the State of Delaware on May 1, 2000. BMW FS is a
wholly owned subsidiary of BMW of North America, Inc. ("BMW NA"). BMW FS
provides retail and wholesale financing, retail leasing and certain other
financial services to authorized BMW Centers and their customers throughout the
United States. BMW NA is based in Woodcliff Lake, New Jersey and is engaged in
the wholesale distribution of BMW motor vehicles and motorcycles throughout the
United States. BMW NA is an indirectly wholly-owned subsidiary of Bayerishe
Motoren Werke Aktiengesellschaft ("BMW AG"), a German corporation that is an
international manufacturer and distributor of high performance luxury
automobiles, sports utility vehicles and motorcycles.
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The national executive headquarters of BMW FS are located at 300
Chestnut Ridge Road, Woodcliff Lake, New Jersey 07675. Its telephone number is:
(201) 307-4000. Its Customer Service Center is located at 5515 Park Center
Circle, Dublin, Ohio 43017.
BMW FS' LEASE FINANCING PROGRAM
General
BMW FS currently provides financing for over 90% of the motor vehicle
retail lease contracts in respect of BMW products (the "BMW lease contracts")
originated by authorized BMW Centers throughout the United States. BMW FS
finances BMW lease contracts in accordance with its established underwriting
procedures, subject to the terms of its agreement (each, a "Dealer Agreement")
with each BMW Center. Except as otherwise specified, the discussion below
applies to all BMW lease contracts, whether owned by BMW FS or the Origination
Trust.
Each Dealer Agreement, among other things, obligates the related BMW
Center to repurchase any BMW lease contract BMW FS financed for the outstanding
principal balance thereof, if the BMW Center breaches certain representations
and warranties as set forth in the Dealer Agreement. The representations and
warranties typically relate to the origination of the BMW lease contract and the
transfer of the related leased vehicles and not the creditworthiness of the
user-lessee under the BMW lease contract.
BMW FS currently finances BMW lease contracts relating to new and used
vehicles manufactured by BMW AG and Land Rover. See "-- Underwriting".
Underwriting
BMW lease contracts are originated or financed by BMW FS in accordance
with underwriting procedures that are intended to assess the applicant's ability
to pay the amounts due on the contract and the adequacy of the leased vehicle as
collateral. BMW FS utilizes predetermined credit score cutoffs and approval
authority levels as credit controls.
BMW FS requires applicants to complete an application form providing
various items of financial information, credit and employment history and other
personal information. Applications are accepted for new and used vehicles from
approved retailers via U.S. mail, facsimile, personal delivery or InfoBahn - a
BMW intranet system linking BMW Centers, BMW NA and BMW FS. The application is
reviewed for completeness. Independent verification of information in the
application generally is not required. However, BMW FS will seek verification of
some information, such as employment, income and/or residence, under some
circumstances, such as discovery of a discrepancy between information in the
application and information in a credit bureau report.
A credit buyer reviews each application that is not automatically
approved. Credit buyers have credit authority levels of "I" or "II". The credit
buyer's review includes an evaluation of a credit bureau report on the applicant
from an independent credit bureau and the applicant's credit score based on a
credit scoring system or "scorecard" developed for BMW FS. This system, which
has been in use since 1997, calculates a score based on data in a credit
application that, based on past performance of BMW FS' Lease Contract portfolio,
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appear to be indicative of the degree of likelihood that an applicant will make
scheduled payments to BMW FS.
Upon review of the application, the applicant's credit score and credit
bureau report, an assessment is made regarding the relative degree of credit
risk. BMW FS' guidelines provide that an applicant's credit score will be highly
considered by the credit buyer in determining whether to extend credit. Besides
the credit score, BMW FS also considers the applicant's income to debt ratio,
the amount of any down payment applied to reduce the lease's capitalized cost
and other attributes as part of the decision making process. BMW FS' management
sets limits on the approval of applications scoring below the company's minimum
scores. In the case of a complete application scoring above a certain level of
the scoring system, the application may be subject to an automated credit
approval process which does not require the review and approval by a credit
buyer. Applicants that score below a minimum score established by BMW FS
management may not be approved by credit buyers with Level I credit authority.
Such applicants may be approved by a credit buyer with Level II credit authority
(or in some cases only by one of four regional credit managers) based on the
presence of certain factors, such as a guarantee by the BMW Center. A credit
buyer with Level I credit authority may not disapprove without management review
applicants that score above the specified minimum.
In case of a commercial applicant, BMW FS reviews information
concerning bank accounts, credit references and recent financial results of each
business entity. BMW FS requires an individual to guarantee the business'
obligations under the BMW lease contract, otherwise it will obtain a Dun and
Bradstreet report.
BMW FS generally does not provide financing to applicants with previous
bankruptcies. However, BMW FS' guidelines do permit such financing under some
circumstances, such as if the customer has re-established credit for at least 24
months and has had no 30-day delinquencies in that period.
The maximum allowable advance in respect of a lease contract generally
will not exceed (1) with respect to a new vehicle, 100% of the manufacturer's
suggested retail price ("MSRP") for the vehicle, or (2) with respect to a used
vehicle, 100% of the retail price reported for the vehicle that is stated in the
most recent edition of the National Automotive Dealers Association Used Car
Guide or the Kelly Blue Book, plus in each case options, certain
dealer-installed accessories, various taxes and fees incurred in connection with
the sale and, in some cases, insurance policies, extended service contracts (up
to the greater of five percent of MSRP or $1,500) and other items. Regional
credit managers may approve maximum allowable advances up to 105% of the above
amounts, and the national credit manager may approve maximum allowable advances
up to 110% of the above amounts.
Security deposits generally are required in an amount equal to one
month's monthly payment under the BMW lease contract. Security deposits are
waived for lease applicants with existing BMW lease contracts that are at least
halfway through their term. For other applicants, the security deposit may be
waived by marking up the lease rate by .00015%. Security deposits are not
segregated. Upon early termination of a lease, the security deposit may be
applied to unpaid amounts.
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Upon the maturity of a BMW lease contract, the user-lessee has the
option to purchase or re-lease the leased vehicle from BMW FS. The same
underwriting and credit procedures described above apply to any financing
offered to these user-lessees.
Servicing
BMW FS measures delinquency by the number of days elapsed from the date
a payment is due under the BMW lease contract (each, a "Due Date"). BMW FS
considers a payment to be past due or delinquent when a user-lessee fails to
make at least 80% of a scheduled payment by the related Due Date. BMW FS
generally begins collection activities with respect to a delinquent BMW lease
contract through telephone contact. An automated system supports BMW FS'
collection activities to monitor delinquencies and to track the contacts with
the user-lessees.
BMW FS assigns collectors to specific user-lessees and attempts to
contact the delinquent user-lessee by telephone or by letter based on the term
of delinquency and the history of the account. Repossession procedures typically
begin when a contract becomes 60 to 90 days delinquent. Repossessions are
carried out pursuant to applicable state law and specific procedures adopted by
BMW FS.
BMW FS' current policy is to generally charge off a BMW lease contract
on the earlier of (a) the date on which the proceeds of sale of the leased
vehicle are applied to the BMW lease contract balance and (b) the 150th day of
delinquency.
Any deficiencies remaining after repossession and sale of the related
leased vehicle or after full charge-off of the related BMW lease contract are
pursued by BMW FS to the extent practicable and legally permitted. user-lessees
are contacted, and when warranted by individual circumstances, repayment
schedules are established and monitored until the deficiencies are either paid
in full or become impractical to pursue.
Physical Damage and Liability Insurance
Each BMW lease contract requires the user-lessee to obtain physical
damage insurance covering loss or damage to the leased vehicle. The Dealer
Agreements include a requirement that the BMW Centers provide BMW FS with
written evidence that physical damage and liability insurance covers the leased
vehicle at least in the amount required by the BMW lease contract at the time
the BMW lease contract is financed by BMW FS. The amounts of insurance required
by the lease contracts are at least equal to the amounts required by applicable
state law. The Origination Trust will be listed as the loss payee. BMW FS tracks
the ongoing status of insurance and attempts to cause the user-lessees to
reinstate such insurance in the event that it is allowed to lapse; nevertheless,
there can be no assurance that each leased vehicle will continue to be covered
by physical damage insurance for the entire term during which the related BMW
lease contract is outstanding. BMW FS generally does not "force place"
insurance.
Leased Vehicle Maintenance: Excess Wear and Use and Excess Mileage
Each BMW lease contract provides that the user-lessee is responsible
for all maintenance, repair, service and operating expenses of the leased
vehicle. In addition, the user-lessee is responsible under the related contract
for all damage to the leased vehicle and for its loss, seizure or theft. At the
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scheduled maturity date of the BMW lease contract, if the user-lessee does not
purchase or re-lease the leased vehicle, the BMW lease contract requires the
user-lessee to pay BMW FS the estimated cost to repair any damage to the vehicle
which is "excessive wear and use" ("Excess Wear and Use Payments"). Excessive
wear and use generally includes, but is not limited to: (a) inoperative
mechanical and electrical parts; (b) damage to the body, lights, trim or paint;
(c) damaged, broken or tinted glass; (d) torn, damaged or stained interior; (e)
damage from flood, water, hail or sand; (f) damage from removal of equipment or
signs placed on the vehicle; (g) missing equipment, parts and accessories; and
(h) damaged, excessively worn or missing tires.
Each BMW lease contract also specifies a selected mileage level per
year, which is one of the factors taken into account by BMW FS in establishing
the residual value for a leased vehicle. The standard lease mileage allotment
for each BMW lease contract is 15,000 miles per year. If the lessee does not
purchase or re-lease the leased vehicle at the end of the lease term, the BMW
lease contract requires the lessee to pay BMW FS an excess mileage charge
generally equal to $0.20 or, in the case of 7 Series vehicles relating to BMW
lease contracts originated after June 1, 2000, $0.25 for each mile the vehicle
has been driven in excess of the selected mileage level ("Excess Mileage
Payments"). BMW FS will increase the mileage allotment either at lease inception
or on the twelve-month anniversary of the lease contract in return for an
increase in monthly payments. Upon return of a vehicle, the user-lessee
generally is entitled to a refund for any unused mileage allotment (the "Unused
Mileage Refunds").
End of Lease Term; Vehicle Disposition
Six months prior to the expiration of the BMW lease contract, BMW FS
sends to the user-lessee new product information and a summary of the
end-of-lease options. BMW FS sends to each user-lessee a package with
information regarding (1) security deposit and disposition fee waiver for
user-lessees wishing to finance a new vehicle under BMW FS' lease program, (2)
an end-of-lease options brochure with details about the vehicle turn-in process
and BMW FS' wear-and-tear guidelines and (3) BMW FS' phone number and a business
reply card so user-lessees can contact BMW FS regarding their end of lease
options. Sixty days prior to lease end, BMW FS will call the user-lessee to
determine if the user-lessee has been in contact with the BMW Center and to
discuss their end-of-lease options. Occasionally, BMW FS will extend a BMW lease
contract up to a maximum of six months. BMW FS only does so if the user-lessee
has ordered another BMW vehicle that has not yet been delivered.
If the user-lessee has decided not to purchase or re-lease the leased
vehicle, an independent inspector will perform a vehicle inspection
approximately 45 days prior to the BMW lease contract's scheduled maturity date.
When the user-lessee delivers the leased vehicle to the BMW Center on the
maturity date, the BMW Center will validate the results of the inspection, as
well as inspect the vehicle for any repaired items or significant new damage.
The BMW Center will calculate any excess mileage charged based on the current
odometer reading. The user-lessee will execute the "Inspection and Odometer
Statement" and will be given a copy by the BMW Center. This will serve as the
user-lessee's receipt regarding his financial responsibilities to BMW FS.
Once the vehicle has been turned in, the related BMW Center may elect
to purchase the vehicle for its pre-owned inventory. BMW FS developed the "Full
Circle" program in 1999 to create a market for off-lease vehicles other than the
38
<PAGE>
auction market. BMW FS has provided incentives for BMW Centers to join the Full
Circle program. BMW Centers that participate in Full Circle are contractually
obligated under agreements with a term of one year (the "Full Circle
Agreements") to purchase all of the leased vehicles they originally leased and
that are returned to them in the year of participation in Full Circle (less an
allowance of up to eight percent of the annual number of the BMW Center's
scheduled lease maturities) at the lower of the contractual residual value and
the four-week rolling average Manheim Marketing Report (MMR) price. MMR is an
impartial pricing report that monitors the pricing of all cars sold at the
Manheim Auctions. Manheim Auctions is the largest, highest volume wholesale
automobile auction company in the world. The BMW Center must notify BMW FS
within 72 hours after the vehicle has been turned in of its purchase decision.
BMW FS must receive the purchase price within 5 business days after the BMW
Center's decision. If the BMW Center elects not to purchase the vehicle, BMW FS
has established standardized pickup procedures to retrieve the vehicle from the
BMW Center as quickly as possible. The vehicle is then delivered to a regional
auction site for disposition. The regional auctions currently used by BMW FS are
"open" auctions, which means that any licensed dealer (not limited to BMW
Centers) may participate. Occasionally, vehicles are sent to a more distant
auction site if a higher auction price can be reasonably obtained for the
vehicle. A BMW FS representative is present at the auction and is responsible
for handling BMW FS' decisions at the auction, including approval of repairs on
the vehicle and acceptance of auction bids. Full Circle Agreements are
terminable by BMW Centers at will, subject to the return of certain rebates
actually paid to the BMW Centers by BMW FS under such Agreements.
The Certified Pre-Owned BMW Vehicle Program ("CPO") was established by
BMW NA in 1996 to create customer and BMW Center demand for off-lease used BMW
vehicles and to enhance the value of off-lease BMW vehicles. To qualify for CPO,
a vehicle must pass an inspection conducted by the related BMW Center based on
standards set by BMW NA. For CPO vehicles, BMW NA provides a limited warranty
for two years or 50,000 miles (whichever comes first) that becomes effective
upon the expiration of the original four year/50,000 mile (whichever comes
first) new car warranty. Each CPO vehicle also is covered by the "BMW Roadside
Assistance Program" which is identical to that offered on new vehicles. CPO is
actively marketed by BMW NA through a separate sales force and is advertised
using both broadcast and print media.
Occasionally, BMW FS offers to user-lessees, whose Lease Contracts are
nearing expiration, incentives to lease new vehicles ("New Lease Incentives").
These incentives may include forgiveness of one or more monthly payments
otherwise payable under the related Lease Contracts. In the event that a Lease
Contract subject to such forgiveness is a Specified Lease, BMW FS has agreed in
the Servicing Agreement to pay to the Trust the Monthly Payments so forgiven.
New Lease Incentives may increase the turn-in rates for the related vehicles,
including Specified Vehicles, and increase the exposure of securityholders to
the risks associated with the market valuation of pre-owned vehicles.
Residuals
BMW FS conducts a broad analysis of different factors that may affect
the residual values of the Leased Vehicles. This process involves an analysis of
all available data such as the Automobile Lease Guide (ALG) and current, actual
39
<PAGE>
vehicle values. ALG is an independent publisher of lease residual value
percentages and is frequently used for comparison purposes by the vehicle
leasing industry. In addition, BMW FS uses a residual value forecasting model
developed by KPMG as one of the factors it considers in setting residual values.
This model incorporates BMW FS' experience in marketing off-lease vehicles.
BMW FS prepares benchmark residual value percentages and distributes
them to BMW Centers every two months. Residual percentages are published for the
standard lease terms: 24, 30, 36, 42, 48, 54 and 60 months. If a term and
corresponding residual value percentage is not published, the residual value is
calculated by extrapolating the appropriate residual value using the published
residual percentages. The residual value set forth in each Lease Contract is
determined by multiplying the MSRP plus eligible factory options and certain
dealer-installed accessories by the applicable lease residual value percentage.
As part of BMW NA sales support programs, BMW FS distributes to BMW
Centers residual percentages for certain vehicles that are higher than those
determined pursuant to the methods described above. Such higher percentages
result in residual values that are higher ("Contract Residual Values") than the
residual values determined pursuant to the above methods (the "FS Residual
Values") and lower monthly payments. All data and statistical information herein
relating to the Residual Values of the Specified Vehicles are based upon the FS
Residual Values of the Specified Vehicles despite the fact that most Specified
Leases are based upon Contract Residual Values. The Original Principal Balances
of the Specified Leases and related Specified Vehicles set forth herein are net
of the excess of the Contract Residual Values, where applicable, over the FS
Residual Values (such excess, the "Support Amounts"), and the Securitization
Values have been and will be calculated by the Servicer based upon FS Residual
Values. The Support Amounts will not be financed in the transaction described
herein, and the Trust will have no right to any Support Amounts actually
collected. However, the user-lessee purchase or re-lease option price for the
Specified Vehicles at the end of the related Specified Leases will be the
Contract Residual Values if applicable.
Calculation of the Securitization Value of the Specified Leases
Under the Servicing Agreement, the Servicer will calculate a
"Securitization Value" for each Specified Lease equal to the sum of (i) the
present value of the remaining Monthly Payments payable under the Specified
Lease and (ii) the present value of the FS Residual Value of the related
Specified Vehicle in each case discounted at an annualized rate equal to the
Securitization Rate. The Securitization Value, which represents the amount of
financing that will be raised against each Specified Vehicle and related
Specified Lease, will at any given time during the term of the Specified Lease
represent the principal amount of Securities that can be amortized by the sum of
the Monthly Payments due in respect of the Specified Vehicle over the remaining
Lease Term, plus the FS Residual Value of the Specified Vehicle. The
"Securitization Rate" will equal the sum of (a) the weighted average interest
rate on the Securities on the Closing Date, (b) the Servicing Fee and (c) [ ]%.
The "Monthly Payment" is the fixed lease payment payable monthly by the
User-Lessee and does not include other amounts payable by the User-Lessee, such
as late charges, returned check fees and similar items (all of which will be
payable to the Servicer as additional servicing compensation).
40
<PAGE>
Historical Data
[to come]
Delinquency Experience
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, AT DECEMBER 31
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
[to come]
Write-off Experience
SIX MONTHS ENDED JUNE 30, AT DECEMBER 31
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
[to come]
Residual Value Performance(1)
SIX MONTHS ENDED JUNE 30, AT DECEMBER 31
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- ----
[to come]
</TABLE>
--------
1 Data presented under this heading are based upon FS Residual Values, not
Contract Residual Values.
41
<PAGE>
THE SPECIFIED LEASES
General
The Specified Leases selected from the Origination Trust's portfolio of
Leases will consist of a pool of [ ] Leased Vehicles for which the related
Leases had an Aggregate Cutoff Date Securitization Value of $[ ]. The Specified
Leases were assigned to the Origination Trust by BMW Centers on or prior to the
Closing Date. The Specified Leases are operating leases under generally accepted
accounting principles and have been selected based upon the criteria specified
in the SUBI Trust Agreement and described under "--Characteristics --General"
and "--Representations, Warranties and Covenants". BMW FS will represent and
warrant that aside from such criteria it used no adverse selection procedures in
selecting the Specified Leases for allocation to the Lease SUBI as SUBI Assets
and that aside from such criteria it is not aware of any bias in the selection
of the Specified Leases that would cause delinquencies or losses on the
Specified Leases to be worse than any other Leases held by the Origination
Trust. However, there can be no assurance as to delinquencies or losses on the
Specified Leases. All Specified Vehicles relating to the Specified Leases will
be titled in the name of the Origination Trust.
Each Specified Lease has been written for a "capitalized cost" that
represents the original principal balance of such specified lease (which may
exceed the manufacturer's suggested retail price and may include certain
origination fees), plus a rent charge which is based on an imputed interest rate
(the "Lease Rate"). Each Specified Lease provides for equal Monthly Payments
that when allocated between principal and the rent charge at the Lease Rate on a
constant yield basis, will be sufficient to amortize the capitalized cost over
the term of the Lease to an amount equal to the Contract Residual Value. The
amount to which the capitalized cost of a specified lease has been amortized at
any point in time is referred to herein as its "outstanding principal balance",
determined on the basis of FS Residual Values.
All of the Specified Leases will be closed-end leases. Under a
"closed-end lease," at the end of its term, if the User-Lessee does not elect to
purchase or re-lease the related leased vehicle by exercise of the purchase or
re-lease option contained in such lease contract, the lessee is required to
return the leased vehicle to or upon the order of BMW FS, at which time the
lessee will then owe only incidental charges for excess mileage, excessive wear
and use and other items as may be due under such lease. In contrast, under an
"open-end lease," the lessee is also obligated to pay at the end of the lease
term any deficit between the fair market value of the leased vehicle at that
time and the residual value established at the time of origination of such
lease.
Each User-Lessee will be permitted to purchase or re-lease the
Specified Vehicle at the end of the term of the related Specified Lease. The
purchase price will be a fixed dollar amount equal to the Contract Residual
Value plus any applicable taxes and all other incidental charges which may be
due under the Specified Lease. In addition, so long as a User-Lessee is not in
default under a Specified Lease, a User-Lessee may terminate the Specified Lease
at any time upon payment in full of a payoff amount (the "Early Termination
Cost"). The Early Termination Cost is the sum of (a) any unpaid Monthly Payments
due; (b) any fees and taxes assessed or billed in connection with the Specified
Lease and any other charges to satisfy the User-Lessee's responsibilities under
the Specified Lease, including repair charges at termination; (c) an early
42
<PAGE>
termination fee of $250; (d) a disposition fee of $350; (e) the "actuarial
payoff"; minus (f) the estimated value of the vehicle as determined by Black
Book Wholesale Average Condition, or if unavailable, the N.A.D.A. Official Used
Car Guide Wholesale Average Condition. The "actuarial payoff" is the total of
the Monthly Payments remaining until the end of the Specified Lease, plus the
Contract Residual Value minus the remaining unearned rent charges (as set forth
in the Specified Lease) based upon the actuarial method.
Each Specified Lease will provide that BMW FS may terminate the
Specified Lease and repossess the related Specified Vehicle following an event
of default by the related User-Lessee (each, a "Lease Default"). Typical Lease
Defaults include, but may not be limited to, failure of the User-Lessee to make
payments when due, certain events of bankruptcy or insolvency of the User-Lessee
or failure to comply with any other term or condition of the Specified Lease.
BMW FS regularly tracks User-Lessees' compliance with their payment and
insurance obligations and monitors User-Lessees for noncompliance as more fully
described under "BMW FS' Lease Financing Program--Physical Damage and Liability
Insurance" and "--Servicing".
If a User-Lessee is in default of a Specified Lease, BMW FS may do any
or all of the following: (i) take any reasonable measures to correct the default
or save BMW FS from loss; (ii) terminate the Specified Lease and the
User-Lessee's rights to use and possess the Specified Vehicle, and if the
User-Lessee does not voluntarily return the Specified Vehicle, take possession
of the Specified Vehicle by any method permitted by law; (iii) determine the
User-Lessee's "Early Termination Liability", which is the sum of the Early
Termination Cost, all collection costs, and to the extent permitted by law,
court costs and reasonable attorney's fees; or (iv) pursue any other remedy
permitted by law. The User-Lessee is also liable for all related expenses, fees,
legal cost and attorney's fees incurred by BMW FS to repossess, store, restore
and/or dispose of the Specified Vehicle.
In the event of termination of a Specified Lease where the related
User-Lessee is in default following a casualty of the related Specified Vehicle,
amounts collected with respect to the Specified Lease and Specified Vehicle,
after deducting costs and other sums retained by the Servicer in connection
therewith, may be less than the Securitization Value of the Specified Lease. In
the event that any of the foregoing shortfalls are not covered from available
monies on deposit in the Residual Value Surplus Account and Reserve Fund and the
subordination of payments otherwise payable to the holders of the Subordinated
Notes and the Certificates to the extent described in this prospectus, investors
in the Senior Notes could suffer a loss on their investment.
Characteristics
General. The Specified Leases were selected by reference to several
criteria, including, that as of the Cutoff Date, each Specified Lease applied to
a Specified Vehicle that:
o was a new BMW automobile at the time of origination of the
Specified Lease;
o has a model year of [ ] or later;
o provides for level payments that fully amortize the adjusted
capitalized cost of the Specified Lease at the related Lease
Rate to the related Contract Residual Value over the lease
43
<PAGE>
term and, in the event of a lessee initiated early
termination, provides for payment of the Early Termination
Cost;
o all were originated in the U.S. on or after [ ], 2000;
o is subject to a Lease with a Maturity Date on or after the [ ]
Payment Date and no later than the [ ] Payment Date; and
o Monthly Payments in respect of which were not more than 29
days past due as of the Cutoff Date.
44
<PAGE>
COMPOSITION OF SPECIFIED LEASES
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------- -----------------------------
<S> <C>
Aggregate Outstanding Principal Balance as of Cutoff Date $[ ]
--------------------------------------------------------------------------------------- -----------------------------
Aggregate Securitization Value as of Cutoff Date $[ ]
--------------------------------------------------------------------------------------- -----------------------------
Number of Specified Leases [ ]
--------------------------------------------------------------------------------------- -----------------------------
Average Outstanding Principal Balance as of Cutoff Date $[ ]
--------------------------------------------------------------------------------------- -----------------------------
Average Securitization Value as of Cutoff Date $[ ]
--------------------------------------------------------------------------------------- -----------------------------
Range of Original Principal Balances of Specified Leases $[ ] to $[ ]
--------------------------------------------------------------------------------------- -----------------------------
Weighted Average Lease Rate (1) [ ]%
--------------------------------------------------------------------------------------- -----------------------------
Range of Lease Rates [ ]% to [ ]%
--------------------------------------------------------------------------------------- -----------------------------
Weighted Average Original Number of Monthly Payments(1) [ ] months
--------------------------------------------------------------------------------------- -----------------------------
Range of Original Number of Monthly Payments [ ] months to [ ] months
--------------------------------------------------------------------------------------- -----------------------------
Weighted Average Remaining Number of Monthly Payments(1) [ ] months
--------------------------------------------------------------------------------------- -----------------------------
Range of Original Number of Monthly Payments [ ] months to [ ] months
--------------------------------------------------------------------------------------- -----------------------------
Average FS Residual Value $[ ]
--------------------------------------------------------------------------------------- -----------------------------
Range of FS Residual Values [ ] months to [ ] months
--------------------------------------------------------------------------------------- -----------------------------
Aggregate of Residual Values as a Percentage of Aggregate Outstanding Principal [ ]%
Balance as of Cutoff Date
---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Weighted by Outstanding Principal Balance as of the Cutoff Date
SPECIFIED LEASES
<TABLE>
<CAPTION>
-------------------------------------- ------------------ ------------------------ --------------------
Average Minimum Maximum
-------------------------------------- ------------------ ------------------------ --------------------
<S> <C> <C> <C>
Original Principal Balance $[ ] $[ ] $[ ]
-------------------------------------- ------------------ ------------------------ --------------------
Securitization Value (1) $[ ] $[ ] $[ ]
-------------------------------------- ------------------ ------------------------ --------------------
FS Residual Value (1) [ ]% [ ]% [ ]%
-------------------------------------- ------------------ ------------------------ --------------------
Lease Rate (1)(2) [ ]% [ ]% [ ]%
-------------------------------------- ------------------ ------------------------ --------------------
Seasoning (months)(1)(2 [ ] [ ] [ ]
-------------------------------------- ------------------ ------------------------ --------------------
Remaining Term (months) (1)(2) [ ] [ ] [ ]
-------------------------------------- ------------------ ------------------------ --------------------
</TABLE>
(1) As of the Cutoff Date.
(2) Weighted by Outstanding Principal Balance as of the Cutoff Date.
Distribution of Specified Leases by Lease Rate
The distribution of the Specified Leases as of the Cutoff Date by Lease
Rate was as follows:
45
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------- --------------------- ------------------------------- ---------------------
Percentage of
Cutoff Date Aggregate Cutoff
Number of Outstanding Principal Balance Date Outstanding
Lease Rate Range Specified Leases Principal Balance
------------------------------------------------- --------------------- ------------------------------- ---------------------
<S> <C> <C> <C>
------------------------------------------------- --------------------- ------------------------------- ---------------------
less than 2.00%
------------------------------------------------- --------------------- ------------------------------- ---------------------
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%
------------------------------------------------- --------------------- ------------------------------- ---------------------
13.00% to 13.99%
------------------------------------------------- --------------------- ------------------------------- ---------------------
Total (1)
------------------------------------------------- --------------------- ------------------------------- ---------------------
</TABLE>
(1) Percentages may not add to 100.00% due to rounding.
46
<PAGE>
Distribution of the Specified Vehicles by Cutoff Date Securitization
Value
As of the Cutoff Date, the distribution of the Specified Vehicles by
Cutoff Date Securitization Value was as follows:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF AGGREGATE
SPECIFIED CUTOFF DATE CUTOFF DATE
CUTOFF DATE SECURITIZATION VALUE ($) VEHICLES SECURITIZATION VALUE ($) SECURITIZATION VALUE
------------------------------------ -------- ------------------------ --------------------
<S> <C> <C> <C>
Total:
-------------------------------------------
</TABLE>
Distribution of the Specified Vehicles by Original Maturity
As of the Cutoff Date, the distribution of the Specified Vehicles by
the term to original maturity was as follows:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF AGGREGATE
SPECIFIED AGGREGATE CUTOFF DATE CUTOFF DATE
TERM OF MATURITY VEHICLES SECURITIZATION VALUE ($) SECURITIZATION VALUE
---------------- -------- ------------------------ --------------------
<S> <C> <C> <C>
Total:
-----------------------------------------
NUMBER OF PERCENTAGE OF AGGREGATE
SPECIFIED AGGREGATE CUTOFF DATE CUTOFF DATE
REMAINING TERM VEHICLES SECURITIZATION VALUE ($) SECURITIZATION VALUE
-------------- -------- ------------------------ --------------------
<S> <C> <C> <C>
Total:
-----------------------------------------
</TABLE>
47
<PAGE>
Distribution of the Specified Vehicles by State
As of the Cutoff Date, the distribution of the Specified Vehicles by
state of origination, based on the state in which the related Specified Vehicle
is titled, was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE CUTOFF DATE AGGREGATE CUTOFF DATE
STATE SPECIFIED VEHICLES SECURITIZATION VALUE ($) SECURITIZATION VALUE
----- ------------------ ------------------------ --------------------
<S> <C> <C> <C>
California
Delaware
Hawaii
Idaho
Illinois
Indiana
Maryland
Massachusetts
Michigan
Nebraska
New Jersey
New Mexico
New York
Pennsylvania
Virginia
Washington
Total:
-----------------------
</TABLE>
Distribution of the Specified Vehicles by Model
As of the Cutoff Date, the distribution of the Specified Vehicles by
model was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF AGGREGATE CUTOFF DATE AGGREGATE CUTOFF DATE
MODEL SPECIFIED VEHICLES SECURITIZATION VALUE ($) SECURITIZATION VALUE (1)
----- ------------------ ------------------------ ------------------------
<S> <C> <C> <C>
3 Series
5 Series
7 Series
Total:
</TABLE>
(1) Percentages may not add to 100.00% due to rounding
Representations, Warranties and Covenants
The Specified Leases and the related Specified Vehicles will be
described in a schedule appearing as an exhibit to the SUBI Trust Agreement,
which will identify each Specified Vehicle by vehicle identification number and
set forth as to each Specified Lease or Specified Vehicle, as the case may be,
among other things:
48
<PAGE>
o the date of origination,
o the Cutoff Date Securitization Value,
o the FS Residual Value,
o the Monthly Payment, and
o the number of months remaining from the Cutoff Date to the month in
which the Maturity Date occurs.
Under the Servicing Agreement, the Servicer will represent and warrant
as to certain characteristics of each Specified Lease and Specified Vehicle as
described in the first paragraph under "--Characteristics --General". The
Servicer will also represent and warrant that each Specified Lease or, to the
extent applicable, the related Specified Vehicle or User-Lessee:
o was originated by BMW FS in the United States for a
User-Lessee with a U.S. address in the ordinary course of BMW
FS' business and in compliance with BMW FS' customary credit
policies and practices;
o is a U.S. dollar-denominated obligation;
o provides for constant Monthly Payments to be made by the
User-Lessee over the Lease Term;
o is a Lease as to which no selection procedure aside from those
specified herein was used that was believed to be adverse to
the holders of interests in the Origination Trust, the SUBIs
or any Other SUBI;
o was created in compliance in all material respects with all
applicable federal and state laws, including consumer credit,
truth in lending, equal credit opportunity and applicable
disclosure laws;
o as of the date assigned to the Origination Trust, (a) is a
legal, valid and binding payment obligation of the
User-Lessee, enforceable against the User-Lessee in accordance
with its terms, as amended, (b) has not been satisfied,
subordinated, rescinded, canceled or terminated, (c) no right
of rescission, setoff, counterclaim or defense has been
asserted or threatened in writing and (d) no written default
notice has been transmitted to BMW FS;
o an executed copy of the documentation associated therewith is
located at one of BMW FS' offices;
o the User-Lessee has obtained physical damage and liability
insurance that names the Origination Trust as loss payee
covering the related Specified Vehicle as required under the
Lease;
49
<PAGE>
o has been validly assigned to the Origination Trust by the
related BMW Center and is owned by the Origination Trust, free
of all liens, encumbrances or rights of others (other than the
holder of any administrative lien);
o 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
Origination Trust and the Origination Trustee in connection
with (i) the origination of such Specified Lease and (ii) the
execution, delivery and performance by the Origination Trust
of the Specified Lease have been duly obtained, effected or
given and are in full force and effect as of the date of the
origination of such Specified Lease;
o the related BMW Center, BMW FS and the Origination Trust have
each satisfied all obligations required to be fulfilled on its
part with respect thereto;
o the related User-Lessee is located in the United States and is
not BMW FS, the Transferor or any of their respective
affiliates;
o the related certificate of title is registered in the name of
the Origination Trust or the Origination Trustee (or a
properly completed application for such certificate of title
has been submitted to the appropriate titling authority);
o is a closed-end lease that required all monthly payments to be
made within 60 months of the date or origination of such
lease;
o is fully assignable and does not require the consent of the
User-Lessee as a condition to any transfer, sale or assignment
of the rights of the originator;
o has not been deferred or otherwise modified except in
accordance with BMW FS' normal credit and collection policies
and practices;
o is not an Other SUBI Asset; and
o to the knowledge of BMW FS, the related User-Lessee is not
currently the subject of a bankruptcy proceeding and the
Specified Lease constitutes "chattel paper" for purposes of
the UCC.
The Servicer will be required to deposit or cause to be deposited into
the SUBI Collection Account an amount equal to the Securitization Value of a
Specified Lease (the "Reallocation Payment") if:
o the Origination Trustee, the Servicer, the Trust or the
Transferor discovers a breach of any representation, warranty
or covenant referred to in the preceding paragraph that
materially and adversely affects the Trust's interests in a
Specified Lease or Specified Vehicle, and
50
<PAGE>
o the breach is not cured in all material respects within 60
days after the Servicer discovers the breach or is given
notice of it.
The Reallocation Payment must be made by the Servicer as of the day on
which the related cure period ended. Upon such payment, the related Specified
Lease and Specified Vehicle shall no longer constitute SUBI Assets. The
foregoing payment obligation will survive any termination of BMW FS as Servicer
under the Servicing Agreement. Under some circumstances, the Servicer will be
required to make Reallocation Payments in respect of some Specified Leases in
the event the User-Lessee moves to a state in which the Origination Trust is not
qualified to do business and the Specified Vehicle is retitled under the laws of
such state.
MATURITY, PAYMENT AND YIELD CONSIDERATIONS
In general, the rate of payment of principal and the yield to maturity
of the Senior Notes will be directly related to the rate at which payments on or
in respect of the Specified Leases and the Specified Vehicles are made. A
prepayment of a Specified Lease may be in the form of:
o payments resulting from a voluntary early termination of the
Specified Lease;
o Termination Proceeds following a default by or bankruptcy of
the related User-Lessee; or
o Reallocation Payments made by the Servicer.
The rate of prepayments on the Specified Leases may be influenced by a
variety of economic, social and other factors, including competing automobile
lessors and the conditions in the used automobile market.
BMW FS does not maintain records of the historical prepayment
experience of its automobile lease portfolio. BMW FS is not aware of any
publicly available industry statistics setting forth termination rates for
automobile leases similar to the Specified Leases. Neither BMW FS nor the Trust
can assure that prepayments on the Specified Leases will conform to any
historical experience, nor can they predict the actual prepayment rates that may
be experienced on the Specified Leases. See "BMW FS' Lease Financing Program -
Historical Data".
In general, prepayments of Specified Leases will shorten the weighted
average lives of the Senior Notes, which is the average amount of time during
which each dollar of the principal balance of a Senior Note is outstanding. As
the rate of payment of principal on the Senior Notes will depend primarily on
the rate of payment - including prepayments - of the Specified Leases, the final
payment of principal of a class of Senior Notes could occur significantly
earlier than the final scheduled payment dates specified on the front cover of
this prospectus for each class of Senior Notes (each, a "Final Scheduled Payment
Date"). If prepayments on Specified Leases cause the principal of the Senior
Notes to be paid earlier than anticipated, the Senior Noteholders will bear the
risk of being unable to reinvest principal payments at interest rates at least
equal to the Interest Rate on the Senior Notes.
The effective yield on, and average lives of, the Senior Notes will
depend on, among other things, the amount of scheduled payments on or in respect
of the Specified Leases and the Specified Vehicles and the rate at which such
51
<PAGE>
payments are made to the Senior Noteholders. The timing of changes in the rate
of payments in respect of the Specified Vehicles also may affect significantly
an investor's actual yield to maturity and the average lives of the Senior
Notes. A substantial increase in the rate of payments on or in respect of the
Specified Leases and Specified Vehicles - including liquidations of the
Specified Leases - may shorten the final maturities of, and may significantly
affect the yields on, the Senior Notes.
An investor's expected yield will be affected by:
o the price paid for the Senior Notes,
o the rate of prepayments of the Specified Leases, and
o the investor's assumed reinvestment rate.
These factors do not operate independently, but are interrelated. For example,
if prepayments on the Specified Leases are slower than anticipated, an
investor's yield may be lower if interest rates are higher than anticipated and
higher if interest rates are lower than anticipated. Conversely, if prepayments
on the Specified Leases are faster than anticipated, an investor's yield may be
higher if interest rates are higher than anticipated and lower if interest rates
are lower than anticipated.
The following information is provided solely to illustrate the effect
of prepayments of the Specified Leases on the unpaid principal amounts of the
Senior Notes and the weighted average life of the Senior Notes under the
assumptions stated below, and is not a prediction of the prepayment rates that
might actually be experienced with respect to the Specified Leases.
Prepayments on automobile leases may be measured by a prepayment
standard or model. The prepayment model used in this prospectus is based on a
Conditional Prepayment Rate. A "Conditional Prepayment Rate" or "CPR" represents
a constant annual rate of prepayment relative to the then outstanding
Securitization Value of a pool of Specified Leases applied monthly during the
indicated portion of the life of a Specified Lease. A [ ]% Prepayment Assumption
assumes a [ ]% CPR for the first month of the life of a Specified Lease and an
additional [ ]%CPR per annum each month thereafter during the life of the
Specified Lease until month [ ]. Beginning in the [ ]th month and in each month
thereafter until the [ ]th month during the life of a Specified Lease, a [ ]%
Prepayment Assumption assumes a [ ]% CPR per annum. Beginning in the [ ]th month
during the life of a Specified Lease, a [ ]% Prepayment Assumption assumes a [
]% CPR and an additional [ ]% CPR per annum each month thereafter until month [
] and each month thereafter during the life of a Specified Lease, a [ ]%
Prepayment Assumption assumes a [ ]% CPR.
The tables below were prepared on the basis of certain assumptions,
including that:
o all Monthly Payments are timely received and no Specified
Lease is ever delinquent;
o no Reallocation Payment is made in respect of any Specified
Lease;
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o there are no losses in respect of the Specified Leases;
o distributions of principal of and interest on the Senior Notes
are made on [ ], [ ], [ ] and [ ] of each year whether or not
the day is a Business Day;
o [all payments in respect of the Subordinated Notes are
deposited to the Reserve Fund;]
o the Servicing Fee is [ ]% per annum;
o all Program Operating Lease Payments are made on a timely
basis;
o no Residual Value Surplus is deposited into the Residual Value
Surplus Account;
o the Reserve Fund is funded with an amount equal to the Initial
Deposit; and
o all prepayments are prepayments in full.
No representation is made as to what the actual levels of losses and
delinquencies on the Specified Leases will be. Because payments on the Specified
Leases will differ from those used in preparing the following tables,
distributions of principal of the Senior Notes may be made earlier or later than
as 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.
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The following tables set forth the percentages of the unpaid principal
balance of the Senior 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 Specified Lease, "50% Prepayment Assumption" assumes that a
Specified Lease will prepay at 50% of the Prepayment Assumption, and so forth.
PERCENTAGE OF CLASS A-1 SENIOR NOTE BALANCE OUTSTANDING
Prepayment Assumption
---------------------
-------------------------------------------------------------
0% 50% 100% 150% 200%
-- --- ---- ---- ----
[to come]
Weighted Average Life to Maturity (years)
[Weighted Average Life to Call (years) ]
------------------------------------------
o The weighted average life of the Class A-1 Senior Notes is
determined by (a) multiplying the amount of each distribution
in reduction of principal balance by the number of years from
the Closing Date to the date indicated, (b) adding the results
and (c) dividing the sum by the aggregate distributions in
reduction of principal balance referred to in clause (a).
o [The weighted average life to call assumes that an Optional
Purchase occurs.]
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PERCENTAGE OF CLASS A-2 SENIOR NOTE BALANCE OUTSTANDING
Prepayment Assumption
-------------------------------------------------------------
0% 50% 100% 150% 200%
-- --- ---- ---- ----
[to come]
Weighted Average Life to Maturity (years)
[Weighted Average Life to Call (years) ]
------------------------------------------
o The weighted average life of the Class A-2 Senior Notes is
determined by (a) multiplying the amount of each distribution
in reduction of principal balance by the number of years from
the Closing Date to the date indicated, (b) adding the results
and (c) dividing the sum by the aggregate distributions in
reduction of principal balance referred to in clause (a).
o [The weighted average life to call assumes that an Optional
Purchase occurs.]
PERCENTAGE OF CLASS A-3 SENIOR NOTE BALANCE OUTSTANDING
Prepayment Assumption
---------------------
---------------------------------------------------------
Payment Date 0% 50% 100% 150% 200%
-- --- ---- ---- ----
[to come]
Weighted Average Life to Maturity
(years)................................
[Weighted Average Life to Call
(years)]...............................
o The weighted average life of the Class A-3 Senior Notes is
determined by (a) multiplying the amount of each distribution
in reduction of principal balance by the number of years from
the Closing Date to the date indicated, (b) adding the results
and (c) dividing the sum by the aggregate distributions in
reduction of principal balance referred to in clause (a).
o [The weighted average life to call assumes that an Optional
Purchase occurs.]
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PERCENTAGE OF CLASS A-4 SENIOR NOTE BALANCE OUTSTANDING
PREPAYMENT ASSUMPTION
---------------------------------------------------------
Payment Date 0% 50% 100% 150% 200%
-- --- ---- ---- ----
[to come]
Weighted Average Life to Maturity
(years)................................
[Weighted Average Life to Call
(years)]...............................
-----------------------------------------
o The weighted average life of the Class A-4 Senior Notes is
determined by (a) multiplying the amount of each distribution
in reduction of principal balance by the number of years from
the Closing Date to the date indicated, (b) adding the results
and (c) dividing the sum by the aggregate distributions in
reduction of principal balance referred to in clause (a).
o [The weighted average life to call assumes that an Optional
Purchase occurs.]
PERCENTAGE OF CLASS A-5 SENIOR NOTE BALANCE OUTSTANDING
PREPAYMENT ASSUMPTION
--------------------------------------------------------
Payment Date 0% 50% 100% 150% 200%
-- --- ---- ---- ----
[to come]
Weighted Average Life to Maturity
(years)................................
[Weighted Average Life to Call
(years)]...............................
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o The weighted average life of the Class A-5 Senior Notes is
determined by (a) multiplying the amount of each distribution
in reduction of principal balance by the number of years from
the Closing Date to the date indicated, (b) adding the results
and (c) dividing the sum by the aggregate distributions in
reduction of principal balance referred to in clause (a).
o [The weighted average life to call assumes that an Optional
Purchase occurs.]
NOTE FACTORS, CERTIFICATE FACTOR AND TRADING INFORMATION
The "Class Note Factor" for each Class of the Senior Notes will be a
seven-digit decimal that the Servicer will compute for each Payment Date, which
will represent the remaining outstanding principal balance of that Class of
Senior Notes as of that Payment Date, after giving effect to payments made on
the Payment Date, expressed as a fraction of the initial outstanding principal
balance of that Class of Senior Notes. The Note Factor for each Class of Senior
Notes will initially be 1.0000000, and will thereafter decline to reflect
reductions in the Senior Note Balance of that Class of Senior Notes. A
Noteholder's portion of the principal balance of a particular Class of Senior
Notes , will be the product of (a) the original denomination of that Class of
Senior Notes and (b) the applicable Class Note Factor.
The "Certificate Factor" for the Certificates will be a seven-digit
decimal that the Servicer will compute for each Payment Date, which will
represent the remaining outstanding principal balance of the Certificates as of
that Payment Date, after giving effect to payments made on the Payment Date,
expressed as a fraction of the initial outstanding principal balance of the
Certificates. The Certificate Factor will initially be 1.0000000, and will
thereafter decline to reflect reductions on the Certificate Balance.
On each Payment Date, the Indenture Trustee will provide to Cede & Co.
("Cede") as the nominee of The Depository Trust Company ("DTC") (unless
Definitive Notes are issued under the limited circumstances described herein),
unaudited reports concerning payments received on or in respect of the Specified
Leases and the Specified Vehicles, the Note Factors, the Certificate Factor and
various other items of information. Senior Note Owners may obtain copies of the
reports upon a request in writing to the Indenture Trustee at its Corporate
Trust Office. In addition, Senior Noteholders will be furnished information for
tax reporting purposes during each calendar year, not later than the latest date
permitted by law. For further details concerning information furnished to Senior
Noteholders, Senior Note Owners and Certificateholders, see "Additional
Information Regarding the Securities--Statements to Securityholders" and
"Description of the Senior Notes-- Book-Entry Registration".
DESCRIPTION OF THE SENIOR NOTES
General
The Senior Notes will be issued under the Indenture. The Indenture,
together with the SUBI Trust Agreement, the Servicing Agreement, the Trust
Administration Agreement, the Trust Agreement, the Program Operating Lease, the
SUBI Certificate Transfer Agreement, and the Issuer SUBI Certificate Transfer
Agreement, are called the "Basic Documents". The following summaries of the
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material provisions of the Basic Documents and the summaries of material
provisions included under "The SUBIs", "The Origination Trust", "The Specified
Leases--Characteristics", "--General" and "--Representations, Warranties and
Covenants", "Security for the Securities" 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 those documents. Where particular
provisions of or terms used in a Basic Document are referred to, the actual
provisions, including definitions of terms, are incorporated by reference as
part of those summaries. Copies of the Basic Documents may be obtained by
request to the Transferor at the address set forth under "The Transferor".
The Senior Notes will be issued in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof in book-entry form. The Senior
Notes initially will be represented by certificates registered in the name of
Cede, the nominee of DTC. No Senior Note Owner will be entitled to receive a
certificate representing that owner's Senior Note, except as set forth below.
Unless and until Senior Notes are issued in fully registered certificated form
(the "Definitive Notes") under the limited circumstances described below, all
references herein to distributions, notices, reports and statements to Senior
Noteholders will refer to the same actions made with respect to DTC or Cede, as
the case may be, for the benefit of Senior Note Owners in accordance with DTC
procedures. See "--Book-Entry Registration" and "Additional Information
Regarding the Securities--Definitive Notes".
Distributions in respect of the Subordinated Notes and the Certificates
will be subordinated to distributions in respect of the Senior Notes to the
extent described under "Additional Information Regarding the
Securities--Payments on the Securities".
Interest
Interest on the unpaid principal balance of the Senior Notes will be
paid in monthly installments on the first Business Day after the [ ]th day of
each month, beginning [ ], 2000 (each, a "Payment Date") to holders of record of
the Senior Notes (the "Senior Noteholders") as of the day immediately preceding
the Payment Date (each such date, a "Record Date"), with the final interest
payment due on the earlier of (a) the Payment Date on which the principal
balance of the related class of Senior Notes is reduced to zero or (b) the
related Final Scheduled Payment Date. A "Business Day" will be any day other
than a Saturday, a Sunday or a day on which banking institutions in the states
of Delaware, Ohio, New Jersey or New York are authorized or obligated by law,
executive order or government decree to be closed.
Interest will accrue on each class of Senior Notes at the interest rate
specified for each class on the front cover of this prospectus (each, an
"Interest Rate"), from and including the Closing Date, or from and including the
[ ]th day of the month in which the preceding Payment Date occurred to and
including the [ ]th day of the month in which the Payment Date occurs (each, an
"Accrual Period") at the applicable Interest Rate until the principal amount of
the Senior Notes has been paid in full. Interest on the Class A-1 Senior Notes
will be calculated on the basis of the actual number of days elapsed, but
assuming a 360-day year. Interest on the other classes of Senior Notes will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
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As more fully described under "Additional Information Regarding the
Securities--Payments on the Securities", interest payments on the Senior Notes
on a Payment Date generally will be made from the sum of:
o Available Funds remaining after the Servicer has been paid the
Payment Date Advance Reimbursement, the Servicing Fee and the
Mileage Refund Reimbursement, and
o the Reserve Fund Draw Amount, if any.
Principal
Securityholders are entitled to receive on each Payment Date an amount
(the "Principal Distribution Amount") equal to the greater of (a) the sum of (1)
the Optimal Principal Distribution Amount and (2) any Principal Carryover
Shortfall as of the preceding Payment Date, and (b) if the amount on deposit in
the Reserve Fund after giving effect to all deposits and withdrawals referenced
in clause (a) of the definition of the Reserve Fund Draw Amount as more fully
described under "Security for the Securities--The Accounts--The Reserve Fund",
exceeds the unpaid principal amount of the Securities, the unpaid principal
amount of the Securities (the "Securities Balance"). Notwithstanding the
foregoing, the Principal Distribution Amount for each class of Securities shall
not exceed the Securities Balance of such class of Securities.
The funds available to make principal distributions on a Payment Date
(the "Available Principal Distribution Amount") will equal the sum of (a) the
amount of Available Funds remaining after the Servicer has been paid the Payment
Date Advance Reimbursement and the Servicing Fee, and after accrued interest has
been paid on the Securities and (b) the Reserve Fund Draw Amount remaining after
accrued interest has been paid on the Securities. Principal payments will be
made to Securityholders in the priority set forth below on each Payment Date in
an amount equal to the lesser of (a) the Principal Distribution Amount and (b)
the Available Principal Distribution Amount (the "Monthly Principal
Distributable Amount").
"Principal Carryover Shortfall" will mean, as of the close of any
Payment Date, the sum of the excess, if any, of the then Principal Distribution
Amount over the Monthly Principal Distributable Amount.
On each Payment Date, unless the maturity of the Senior Notes has been
accelerated following an Indenture Default, principal payments shall be made
sequentially so that no principal will be paid on any class of Senior Notes
until each class of Senior Notes with a lower numerical designation shall have
been paid in full. Thus no principal will be paid on the Class A-2 Senior Notes
until the principal on the Class A-1 Senior Notes shall have been paid in full.
No principal will be paid on the Class A-3 Senior Notes until the principal on
the Class A-2 Senior Notes shall have been paid in full. No principal will be
paid on the Class A-4 Senior Notes until the principal on the Class A-3 Senior
Notes shall have been paid in full. No principal will be paid on the Class A-5
Senior Notes until the principal on the Class A-4 Senior Notes shall have been
paid in full. Until all principal due to the Senior Notes is paid, no principal
will be paid to the Subordinated Notes and the Certificates. Any remaining
principal payment will then be paid first to the Subordinated Notes until they
have been paid in full - which amounts will be deposited into the Reserve Fund
until the Reserve Fund is fully funded - and then to the Certificates.
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<PAGE>
On any Payment Date, (a) the "Senior Note Balance" and the "Certificate
Balance" will equal the Initial Senior Note Balance or the Initial Certificate
Balance, as the case may be, reduced by all payments of principal made on or
prior to the Payment Date on the Senior Notes or the Certificates, as the case
may be, and (b) the "Subordinated Note Balance" will equal the Initial
Subordinated Note Balance, reduced by all payments of principal made on or prior
to the Payment Date, whether paid to the Subordinated Noteholder or deposited in
the Reserve Fund.
On each Payment Date after the maturity of the Senior Notes has been
accelerated following an Indenture Default, principal will be allocated, first,
to the Class A-1 Senior Notes, second, pro rata among all other outstanding
classes of Senior Notes, and third, to the Subordinated Notes and the
Certificates pro rata. See "Additional Information Regarding the
Securities--Payments on the Securities" and "Additional Document Provisions--The
Indenture--Indenture Defaults".
The "Optimal Principal Distributable Amount" for any Payment Date and
the related Collection Period will equal the sum of the following amounts:
o for each Specified Vehicle for which the related Specified
Lease did not terminate during that Collection Period, the
difference between the Securitization Value of the Specified
Lease at the beginning and at the end of that Collection
Period;
o for each Specified Vehicle for which the related Specified
Lease reached its Maturity Date during that Collection Period,
the Securitization Value of the Specified Lease as of the
Maturity Date;
o for each Specified Lease terminated by the User-Lessee during
that Collection Period pursuant to the exercise of the early
termination option, the Securitization Value of such Specified
Lease as of the effective date of termination;
o for each Specified Vehicle purchased by the Servicer before
its Maturity Date, the Securitization Value of the related
Specified Lease as of the date of the purchase; and
o for each Specified Lease that became a Default Termination
Lease during that Collection Period, the Securitization Value
of the Specified Lease as of the date the Specified Lease
became a Default Termination Lease.
A "Default Termination Lease" will mean a Specified Lease terminated by
(a) the Servicer following a default by or bankruptcy of the related
User-Lessee; (b) the Servicer because the related Specified Vehicle has been
lost, stolen or damaged beyond economic repair or (c) the User-Lessee.
The principal amount of each class of Senior Notes, to the extent not
paid, will be due on the related Final Scheduled Payment Date. The actual date
on which a class of Senior Note is paid may be earlier than its Final Scheduled
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Payment Date based on a variety of factors, including the factors described
under "Risk Factors--The timing of principal payments is uncertain" and
"Maturity, Payment and Yield Considerations".
Optional Purchase
The Senior Notes may be redeemed in whole, but not in part, on any
Payment Date when an Optional Purchase can be exercised. The redemption price
for each class of Senior Notes will equal the Senior Note Balance for such class
plus accrued interest thereon at the applicable Interest Rate through the
related Accrual Period. See "Additional Information Regarding the
Securities--Optional Purchase".
The Indenture Trustee
The Chase Manhattan Bank will be the Indenture Trustee under the
Indenture. The Indenture Trustee is a New York banking corporation and its
Corporate Trust Office is located at 450 West 33rd Street, 14th Floor, New York,
New York 10001. The fees and expenses of the Indenture Trustee will be paid by
the Servicer or the Administrator. See "Additional Document
Provisions--Miscellaneous Provisions--Fees and Expenses". The Transferor, the
Servicer and their respective affiliates may maintain normal commercial banking
relationships with the Indenture Trustee and its affiliates.
Book-Entry Registration
The Senior Notes will be issued in book-entry form. DTC will act as
securities depository for the Senior Notes. The Senior Notes will be issued as
fully registered securities registered in the name of Cede, the nominee of DTC.
An investor acquiring an interest in the Senior Notes (each, a "Senior Note
Owner") may hold its interest through DTC in the United States, or Clearstream
Luxembourg ("Clearstream") or the Euroclear system ("Euroclear") in Europe,
which in turn hold through DTC. One fully registered Senior Note will be issued
with respect to each $200 million in principal amount of Senior Notes or such
smaller amount as necessary. It is anticipated that the only Senior Noteholder
will be Cede, the nominee of DTC. Senior Note Owners will not be recognized by
the Indenture Trustee as "Senior Noteholders", as that term will be used in the
Indenture, and Senior Note Owners will only be permitted to exercise the rights
of Senior Noteholders indirectly through DTC and its Participants, as further
described below.
DTC was created to hold securities for its participating members (the
"Participants") and to facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical movement
of certificates. DTC is:
o a limited-purpose trust company organized under the laws of
the State of New York,
o a "banking organization" within the meaning of the New York
Banking Law,
o a member of the Federal Reserve System,
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o a "clearing corporation" within the meaning of the Uniform
Commercial Code (the "UCC") in effect in the State of New
York, and
o a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act").
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations. 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 Participant, either directly or indirectly (the
"Indirect Participants"). Transfers between Participants in DTC will occur in
accordance with DTC rules. The rules applicable to DTC and its Participants are
on file with the SEC.
Clearstream and the Euroclear will hold omnibus positions on behalf of
their Participants through customers' securities accounts in the Depositaries
which will in turn will hold such positions in customers' securities accounts in
DTC through Citibank, N.A. or Morgan Guaranty Trust Company of New York, the
relevant depositaries (collectively, the "Depositaries") of Clearstream or
Euroclear, respectively, and each a participating member of DTC. Transfers
between Participants in Clearstream ("Clearstream 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 Clearstream
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of Clearstream or Euroclear by its
Depositary. However, each such cross-market transaction will require delivery of
instructions to Clearstream or Euroclear by the counterparty in such system in
accordance with its rules and procedures and within its established deadlines
(European time). Clearstream 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 of delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Clearstream Participants and
Euroclear Participants may not deliver instructions directly to the related
Depositaries.
Because of time-zone differences, credits of securities received in
Clearstream 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 Clearstream Participants or Euroclear Participants on such business
day. Cash received in Clearstream or Euroclear as a result of sales of Senior
Notes by or through a Clearstream 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 Clearstream or Euroclear cash account only as of the
business day following settlement in DTC.
Senior Note Owners that are not Participants or Indirect Participants
but desire to purchase, sell or otherwise transfer ownership of, or an interest
in, Senior Notes may do so only through Participants and Indirect Participants.
Participants will receive a credit for the Senior Notes on DTC's records. The
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ownership interest of each Senior Note Owner will in turn be recorded on the
respective records of Participants and Indirect Participants. Senior Note Owners
will not receive written confirmation from DTC of their purchase of Senior
Notes, but Senior Note Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the Participant or Indirect Participant through which the Senior
Note Owner entered into the transaction. Transfers of ownership interests in the
Senior Notes will be accomplished by entries made on the books of Participants
acting on behalf of Senior Note Owners.
To facilitate subsequent transfers, all Senior Notes deposited by
Participants with DTC will be registered in the name of Cede, the nominee of
DTC. The deposit of Senior Notes with DTC and their registration in the name of
Cede will not change the beneficial ownership of the Senior Notes. DTC will have
no knowledge of the actual Senior Note Owners and its records will reflect only
the Participants to whose accounts those Senior Notes are credited, which may or
may not be the Senior Note Owners. Participants and Indirect Participants will
remain responsible for keeping account of their holdings on behalf of their
customers.
Conveyance of notices and other communications by DTC to Participants,
by Participants to Indirect Participants and by Participants and Indirect
Participants to Senior 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.
DTC's practice is to credit Participants' accounts on each Payment Date
in accordance with their respective holdings of Senior Notes shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
that Payment Date. Payments by Participants and Indirect Participants to Senior
Note Owners will be governed by standing instructions and customary practices,
as is the case with securities held for the accounts of customers in bearer form
or registered in "street name". These payments will be the responsibility of the
Participants and not of DTC, the Indenture Trustee 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 Senior Notes to DTC will be the
responsibility of the Indenture Trustee, disbursement of the payments to
Participants will be the responsibility of DTC and disbursement of the payments
to Senior Note Owners will be the responsibility of Participants and Indirect
Participants. As a result, under the book-entry format, Senior Note Owners may
experience some delay in their receipt of payments. DTC will forward the
payments to its Participants, which will then forward them to Indirect
Participants or Senior Note Owners.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Senior Note
Owner to pledge Senior Notes to persons or entities that do not participate in
the DTC system, or otherwise take actions with respect to the Senior Notes, may
be limited due to the lack of a physical certificate for the Senior Notes.
Neither DTC nor Cede will consent or vote with respect to the Senior
Notes. Under its usual procedures, DTC will mail an omnibus proxy to the
Indenture Trustee as soon as possible after each applicable record date for such
a consent or vote. The omnibus proxy will assign Cede's consenting or voting
rights to those Participants who have Notes credited to their accounts with the
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Participants on that record date. These Participants will be identified in a
listing attached to the omnibus proxy.
Clearstream is incorporated under the laws of Luxembourg as a
professional depository. Clearstream holds securities for Clearstream
Participants and facilitates the clearance and settlement of securities
transactions between Clearstream Participants through electronic book-entry
changes in accounts of Clearstream Participants, thereby eliminating the need
for physical movement of certificates. Transactions may be settled in
Clearstream in any of 34 currencies, including United States dollars.
Clearstream provides to Clearsteam Participants, among other things, services
for safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Clearstream interfaces
with domestic markets in several countries. As a professional depositary,
Clearstream is subject to regulation by the Luxembourg Monetary Institute.
Clearstream Participants are recognized financial institutions around the world,
including underwriters, securities brokers and dealers, banks, trust companies,
clearing corporation and certain other organizations. Indirect access to
Clearstream is also available to others, such as banks, brokers, dealers and
trust companies that clear through or maintain a custodial relationship with a
Clearstream Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for Euroclear
Participants and to clear and settle transactions between Euroclear Participants
through simultaneous electronic book-entry delivery against payment, thereby
eliminating the need for physical movement of certificates and any risk from
lack of simultaneous transfers of securities and cash. Transactions may now be
settled in any of 34 currencies, including United States dollars. The Euroclear
System includes various other services, including securities lending and
borrowing, and interfaces with domestic markets in more than 25 countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator"), under contract
with Euroclear Clearance System S.C., a Belgian cooperative corporation (the
"Cooperative"). All operations are conducted by the Euroclear Operator, and all
Euroclear securities, clearance accounts, and Euroclear cash accounts, are
accounts with the Euroclear Operator, not the Cooperative. The Cooperative Board
establishes policy for the Euroclear System. Euroclear Participants include
banks, including central banks, securities brokers and dealers and other
professional financial intermediaries. Indirect access to the Euroclear System
is also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
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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 Senior Notes held through Clearstream or
Euroclear will be credited to the cash accounts of Clearstream 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 United States Federal Income Tax Consequences--Treatment of the Senior
Notes as Debt" herein and "Global Clearance, Settlement and Tax Documentation
Procedures--Certain U.S. Federal Income Tax Documentation Requirements" in Annex
I hereto. Clearstream or the Euroclear Operator, as the case may be, will take
any other action permitted to be taken by a Senior Noteholder on behalf of a
Clearstream 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, Clearstream and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Senior Notes among Participants
of DTC, Clearstream and Euroclear, they are under no obligation to perform or
continue to perform such procedures and the procedures may be discontinued at
any time.
None of the Servicer, the Transferor, the Administrator or 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 Senior
Notes held by Cede, DTC, Clearstream or Euroclear, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
ADDITIONAL INFORMATION REGARDING THE SECURITIES
Payments on the Securities
General
As more fully described under "Summary--The Property of the
Trust--Credit Enhancement" and "--The SUBI Certificates", the SUBI Certificate
will evidence a beneficial interest in the related SUBI Assets, which comprise
Specified Vehicles and Specified Leases having an aggregate Cutoff Date
Securitization Value of $[ ].
On the [ ] calendar day of each month in which a Payment Date occurs
or, if such day is not a Business Day, the immediately succeeding Business Day
(each, a "Determination Date"), the Servicer will inform the Indenture Trustee
and the Owner Trustee of, among other things, the amount of (a) Collections, (b)
Advances to be made by the Servicer and (c) the Servicing Fee payable to the
Servicer, in each case with respect to the month immediately preceding the month
in which the Payment Date occurs (the "Collection Period"). On or before each
Determination Date, the Servicer will also determine the Optimal Principal
Distributable Amount and, based on Available Funds and other amounts available
for distribution on the related Payment Date as described below, the amount to
be distributed to the Securityholders.
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The Indenture Trustee and the Owner Trustee will make distributions to
the Securityholders out of amounts on deposit in the related Distribution
Accounts. The amount to be distributed to the Servicer and the Securityholders
will be determined in the manner described below.
Determination of Available Funds
The amount of funds available for distribution on a Payment Date will
generally equal the sum of Available Funds and the Reserve Fund Draw Amount.
"Available Funds" for a Payment Date and the related Collection Period
will equal the sum of the following amounts: (a) Collections, (b) Advances
required to be made by the Servicer, (c) the Residual Value Surplus Draw Amount
and (d) in the case of an Optional Purchase, the Optional Purchase Price.
The "Available Funds Shortfall Amount" for a Payment Date and the
related Collection Period will equal the amount by which Available Funds is less
than the amount necessary to make the distributions in clauses (c) through (g)
of the first paragraph under "--Deposits to the Distribution Accounts; Priority
of Payments", except that the Optimal Principal Distributable Amount rather than
the Monthly Principal Distributable Amount will be used for purposes of clause
(g).
Deposits to the Distribution Accounts; Priority of Payments
SUBI Collection Account. On each Payment Date, the Servicer will
allocate amounts on deposit in the SUBI Collection Account with respect to the
related Collection Period as described below and will instruct the Origination
Trustee, to cause the following deposits and distributions to be made in the
following amounts and order of priority:
(a) to the Servicer, the Payment Date Advance Reimbursement;
(b) to the Servicer, the Servicing Fee, together with any unpaid
servicing fees in respect of one or more prior collection
periods;
(c) to the Servicer, an amount equal to Mileage Refund Payments
made by the Servicer during the related Collection Period (the
"Mileage Refund Reimbursement");
(d) to the Note Distribution Account, to pay interest due on the
related class of the outstanding Senior Notes on that Payment
Date, and, to the extent permitted under applicable law,
interest on any overdue interest at the Interest Rate;
(e) to the Reserve Fund, an amount equal to the interest due on
the outstanding Subordinated Notes on that Payment Date, and,
to the extent permitted under applicable law, interest on any
overdue interest at the Subordinated Note Rate to the extent
necessary to cause the amount therein to equal the Reserve
Fund Requirement;
(f) to the Certificate Distribution Account, an amount equal to
the interest accrued on the Certificates with respect to that
Payment Date, and, to the extent permitted under applicable
law, interest on any overdue interest at the Certificate Rate;
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(g) to the related Distribution Account or, in the case of the
Subordinated Notes, to the Reserve Fund, to the extent
necessary to cause the amount therein to equal the Reserve
Fund Requirement, the Monthly Principal Distributable Amount,
which will be allocated to pay principal on the Senior Notes,
the Subordinated Notes and the Certificates in the amounts and
order of priority described under "Description of the Senior
Notes--Principal"; and
(h) to the Transferor, all remaining amounts (the "Excess
Amounts").
Reserve Fund. On each Payment Date, after taking into account amounts
available to be distributed to Securityholders from the SUBI Collection Account,
the Servicer will allocate the Reserve Fund Draw Amount on deposit in the
Reserve Fund with respect to the related Collection Period and will instruct the
Indenture Trustee to make the following deposits and distributions in the
following amounts and order of priority:
(a) to the Note Distribution Account, to pay any remaining
interest due on the outstanding Senior Notes on that Payment
Date, and, to the extent permitted under applicable law,
interest on any overdue interest at the applicable Interest
Rate;
(b) to the Reserve Fund, to the extent necessary to cause the
amount therein to equal the Reserve Fund Requirement, an
amount equal to any remaining interest due on the outstanding
Subordinated Notes on that Payment Date, and, to the extent
permitted under applicable law, interest on any overdue
interest at the Subordinated Note Rate;
(c) to the Certificate Distribution Account, an amount equal to
any remaining interest accrued on the Certificates with
respect to that Payment Date, and, to the extent permitted
under applicable law, interest on any overdue interest at the
Certificate Rate; and
(d) to the related Distribution Account - or, in the case of the
Subordinated Notes, to the Reserve Fund, to the extent
necessary to cause the amount therein to equal the Reserve
Fund Requirement, and thereafter, in the event of any
remaining shortfall in amounts required to pay the Monthly
Principal Distributable Amount with respect to the
Certificates, to the Certificate Distribution Account - the
remaining Monthly Principal Distributable Amount, which will
be allocated to pay principal on the Securities in the amounts
and order of priority described under "Description of the
Senior Notes--Principal".
On each Payment Date, if, after the giving effect to the distributions
set forth above, the amount on deposit in the Reserve Fund exceeds the Reserve
Fund Requirement, any such excess (a) up to the amounts deposited into the
Reserve Fund on or before that Payment Date in respect of the Subordinated Notes
will be released to the Subordinated Noteholder and (b) any additional excess
shall be released to the Transferor.
The "Payment Date Advance Reimbursement" for a Payment Date will equal
the sum of all outstanding Sales Proceeds Advances and Monthly Payment Advances
that have been outstanding as of the end of that Collection Period for at least
90 days.
Amounts deposited in the Reserve Fund in accordance with clause (e) in
the first paragraph under "--Deposits to the Distribution Accounts; Priority of
Payments" and clause (b) in the second paragraph under "--Deposits to the
Distribution Accounts; Priority of Payments-Reserve Fund" will be deemed to have
been
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distributed to the Subordinated Noteholder as payments in respect of interest,
including overdue interest, and the Subordinated Noteholder will not be
entitled to any further interest on such amounts after the related Payment Date.
Amounts deposited in the Reserve Fund in accordance with clause (g) in
the first paragraph under "--Deposits to the Distribution Accounts; Priority of
Payments" and clause (d) in the second paragraph under "--Deposits to the
Distribution Accounts; Priority of Payments-Reserve Fund" will be deemed to have
been distributed to the Subordinated Noteholder as payments in respect of
principal, including overdue principal, and the Subordinated Noteholder will not
be entitled to any further interest on such amounts after the related Payment
Date.
The final distribution to any Senior Noteholder will be made only upon
surrender and cancellation of the certificate representing its Senior Notes at
an office or agency of the Trust specified in the notice of termination. Any
funds remaining in the Trust, after the related Trustee has taken certain
measures to locate the related Senior Noteholders and those measures have
failed, will be distributed to the Transferor.
Amounts properly distributed to any Securityholder or the Servicer will
not have to be refunded.
Optional Purchase
In order to avoid excessive administrative expenses, the Transferor
will be permitted at its option to purchase from the Trust the Vehicle SUBI
Certificate, and to terminate the pledge of the Lease SUBI Certificate, on any
Payment Date if, either before or after giving effect to any payment of
principal required to be made on that Payment Date, the Securities Balance is
less than or equal to 10% of the sum of the Initial Senior Note Balance, the
Initial Certificate Balance and the Initial Subordinated Note Balance
(collectively, the "Initial Securities Balance"). The exercise of that option by
the Transferor is referred to in this prospectus as an "Optional Purchase". The
purchase price for the Vehicle SUBI Certificate and the termination of the
pledge of the Lease SUBI will equal the Securities Balance, together with
accrued interest thereon to the date fixed for redemption (the "Optional
Purchase Price"), which will be deposited by the Transferor into the SUBI
Collection Account on the Deposit Date related to the Payment Date fixed for
redemption. In connection with an Optional Purchase, the Senior Notes will be
redeemed on that Payment Date in whole, but not in part, for the Redemption
Price. The "Redemption Price" for a class of Senior Notes will equal the Senior
Note Balance for the related class, plus accrued and unpaid interest thereon at
the related Interest Rate, to but not including the Payment Date fixed for
redemption. The Administrator or the Trust will provide at least 45 days' prior
notice of the redemption of the Senior Notes to the Indenture Trustee, which
will provide at least 30 days' notice to the Senior Noteholders. On the Payment
Date fixed for redemption, the Senior Notes will be due and payable at the
Redemption Price, and no interest will accrue on the Senior Notes after the
Payment Date.
Statements to Securityholders
On each Payment Date, the Indenture Trustee or the Owner Trustee, as
the case may be, will include with each distribution to each Senior Noteholder
of record, or as of the close of business on the related Record Date - which, in
the case of the Senior Notes, shall be Cede as the nominee of DTC unless
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Definitive Notes are issued under the limited circumstances described in this
prospectus - and each Rating Agency, a statement, setting forth with respect to
that Payment Date or the related Deposit Date or Collection Period, as the case
may be, among other things, the following:
(a) the amount of Collections allocable to each SUBI Certificate
for that Collection Period;
(b) the amount being distributed to the Senior Noteholders (the
"Senior Note Distribution Amount");
(c) the amount of interest accrued with respect to each class of
Senior Notes of the Subordinated Notes and the Certificates;
(d) the amount of the Senior Note Distribution Amount allocable to
interest on and principal of each class of the Senior Notes,
the Subordinated Notes Distribution Amount and the Certificate
Distribution Amount, and any Principal Carryover Shortfall for
each class of the Senior Notes, the Subordinated Notes and the
Certificates, respectively;
(e) the amount of Available Funds for that Collection Period;
(f) the amount of Sales Proceeds Advances and Monthly Payment
Advances included in Available Funds;
(g) the amount of Residual Value Losses and Residual Value Surplus
for that Collection Period and the Residual Value Surplus Draw
Amount, if any, included in Available Funds;
(h) the Reserve Fund Draw Amount, if any, the balance on deposit
in the Reserve Fund on that Payment Date after giving effect
to withdrawals therefrom and deposits thereto in respect of
that Payment Date and the change in that balance from the
immediately preceding Payment Date;
(i) the aggregate outstanding principal balance of the Senior
Notes, the Subordinated Notes and the Certificates after all
distributions have been made;
(j) the Note Factor for the Senior Notes after giving effect to
the distribution of the Senior Note Distribution Amount and
the Certificate Factor for the Certificates after giving
effect to the distribution of the Certificate Distribution
Amount;
(k) the Payment Date Advance Reimbursement; and
(l) the Servicing Fee and the Mileage Refund Reimbursement.
Each amount set forth pursuant to clauses (b), (c), (h) and (k) above
will be expressed in the aggregate and as a dollar amount per $1,000 of original
principal balance of a Senior Note, Subordinated Note or Certificate, as
applicable. Copies of the statements may be obtained by Senior Noteholders or
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Senior 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, the Indenture Trustee - during the term of
the Indenture - will mail to each person who at any time during that calendar
year was a Senior Noteholder a statement containing that information as is
reasonably necessary to permit the Noteholder to prepare its state and federal
income taxes.
Definitive Notes
Definitive Notes will be issued in fully registered, certificated form
to Senior Note Owners rather than to DTC only if:
o DTC is no longer willing or able to discharge its
responsibilities as depository with respect to the Senior
Notes, and neither the Indenture Trustee nor the Transferor is
able to locate a qualified successor,
o the Transferor, at its option, elects to terminate the
book-entry system through DTC, or
o after an Indenture Default, Senior Note Owners representing in
the aggregate not less than 51% of the aggregate principal
amount of the Senior Notes advise the Indenture Trustee
through DTC and its Participants in writing that the
continuation of a book-entry system through DTC or its
successor is no longer in the best interest of Senior 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 Senior
Note Owners, through Participants, of the availability through DTC of Definitive
Notes. Upon surrender by DTC of the certificates representing all Senior Notes
and the receipt of instructions for re-registration, the Indenture Trustee will
issue Definitive Notes to Senior Note Owners, who thereupon will become Senior
Noteholders for all purposes of the Indenture.
Payments on the Definitive Notes will be made by the Indenture Trustee
or the Owner Trustee, as the case may be, directly to the holders of the
Definitive Notes in accordance with the procedures set forth in this prospectus
and to be set forth in the Indenture. Interest and principal payments on the
Securities on each Payment Date will be made to the holders in whose names the
related Definitive Notes were registered at the close of business on the Record
Date with respect to that Payment Date. Payments will be made by check mailed to
the address of such holders as they appear on the Note Register. However, the
final payment on any Definitive Notes, or if Definitive Notes have not been
issued, certificates registered in the name of Cede representing the Senior
Notes, will be made only upon presentation and surrender of the Definitive Notes
at the office or agency specified in the notice of final payment to Senior
Noteholders. The Indenture Trustee or the Owner Trustee, as the case may be, or
a paying agent will provide that notice to the registered Senior Noteholders not
more than 30 days or less than 15 days prior to the date on which the final
payment is expected to occur.
Definitive Notes will be transferable and exchangeable at the offices
of the Indenture Trustee or the Owner Trustee or the Note Registrar to be set
forth in the Indenture. No service charge will be imposed for any registration
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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.
SECURITY FOR THE SECURITIES
General
The property of the Trust - the Trust Estate - will consist of:
o the right to receive payments under the Program Operating
Lease under which the Trust will lease to the Transferor the
Vehicle SUBI Certificate, which is more fully described under
"The SUBIs--General";
o the pledge by the Transferor of the Lease SUBI Certificate as
security for such payments; o the right to receive the amounts
realized from the sale or other disposition of Specified
Vehicles;
o certain rights to payment from the Reserve Fund and the
Residual Value Surplus Account; and
o the other property and assets described under "The
Trust--Property of the Trust", including available amounts on
deposit in the Reserve Fund.
The Program Operating Lease
General
Immediately following the sale, transfer and assignment of the Vehicle
SUBI Certificate to the Trust and the pledge to the Indenture Trustee of the
Trust's interest therein as described in "The SUBIs--Transfers of the SUBI
Certificates", the Trust and the Transferor will enter into the Program
Operating Lease pursuant to which the Trust will lease the Vehicle SUBI
Certificate to the Transferor during the term of the Program Operating Lease. As
lessee, the Transferor will be entitled to receive all proceeds from the Vehicle
SUBI Certificate in respect of the Specified Vehicles during the term of the
Program Operating Lease and will be required to make Program Operating Lease
Payments to the Trust.
Program Operating Lease Terms
Under the Program Operating Lease, the Transferor will make payments to
the Trust in the amount of all Monthly Payments, Excess Mileage Payments, Excess
Wear and Use Payments, and all Early Termination Costs paid by the User-Lessees
during the related Collection Period (the "Program Operating Lease Payments").
The termination date of the Program Operating Lease (the "Program
Operating Lease Termination Date") will be 60 days after the latest Maturity
Date of any Specified Lease as of the Cutoff Date. Notwithstanding the Program
Operating Lease Termination Date, the Program Operating Lease will expire with
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respect to each Specified Lease and the related Specified Vehicle on the
earliest to occur of:
o the related Maturity Date;
o the date that the User-Lessee terminates the Specified Lease;
o the date that the Specified Lease becomes a Default
Termination Lease; or
o the date the Servicer is required to purchase that Specified
Lease and Specified Vehicle pursuant to certain provisions of
the Servicing Agreement.
Program Operating Lease Defaults; Remedies
Defaults under the Program Operating Lease (each, a "Program Operating
Lease Default") will include, among other things, the failure by the Transferor
to make timely Program Operating Lease Payments to the Trust, breach of a
material representation or warranty, failure to observe or perform certain
covenants and the occurrence of an Indenture Default. Upon the occurrence of a
Program Operating Lease Default, the Indenture Trustee, as assignee of the
Trust's rights under the Program Operating Lease pursuant to the pledge of the
Trust Estate, will be entitled to terminate the Program Operating Lease and to
foreclose on the pledge of the Lease SUBI Certificate. Upon that termination,
the Trust will directly receive all distributions with respect to, or will have
the right to sell, the SUBI Certificates and to apply the funds on deposit in
the Accounts to pay interest on and principal of the Securities. Each Program
Operating Lease Default will constitute an Indenture Default, which will permit
the Senior Noteholders to accelerate the maturity of the Senior Notes and, in
some circumstances, cause the sale of the Trust Estate. See "Additional Document
Provisions--The Indenture--Indenture Defaults". If the maturity of the Senior
Notes has been accelerated following a Program Operating Lease Default, the
Indenture Trustee, as assignee of the Trust, will be entitled to demand that the
Transferor pay all previously due but as yet unpaid Program Operating Lease
Payments plus, as liquidated damages, an amount equal to the sum of:
o any interest due and unpaid on the Securities,
o the unpaid principal balance of the Securities, and
o any other amounts payable by the Transferor under the Basic
Documents.
Upon payment of such amounts, the Transferor will be entitled to receive the
SUBI Certificates.
The Subordinated Notes
Interest will accrue on the unpaid principal amount of the Subordinated
Notes during each Accrual Period at a rate per annum (the "Subordinated Note
Rate") equal to %. Interest on the Subordinated Notes will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Payments of interest
on and principal of the Subordinated Notes will be subordinated to payments on
the Senior Notes to the extent described herein.
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To secure payments of principal and interest on the other Securities,
the Transferor will pledge all of its right, title and interest in the
Subordinated Notes to the Trust and deliver them to the Indenture Trustee as a
portion of the Trust Estate. On each Payment Date, payments in respect of the
Subordinated Notes will be deposited into the Reserve Fund. If, on any Payment
Date, after the application of amounts required to be paid on that Payment Date,
the amount on deposit therein exceeds the Reserve Fund Requirement, (a) any such
excess up to the amounts deposited into the Reserve Fund on or before that
Payment Date in respect of the Subordinated Notes will be released to the
Transferor as the Subordinated Noteholder and (b) any additional excess shall be
released to the Transferor.
The Certificates
Payments on the Certificates will be subordinated to payments on the
Senior Notes and the Subordinated Notes to the extent described in this
prospectus. The right of the holder of the Transferor Certificate to receive
distributions of principal and interest will rank pari passu with the rights of
the holders of the other Certificates.
Interest on the Certificates will accrue during each Accrual Period at
a rate per annum (the "Certificate Rate") equal to % until the principal amount
of the Certificates has been paid in full. Interest on the Certificates will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Interest payments on the Certificates on a Payment Date generally will be made
from the sum of (1) Available Funds remaining after the Servicer has been paid
the Payment Date Advance Reimbursement and the Servicing Fee and all amounts
allocated to payment of interest on the Senior Notes have been paid and (2) the
Reserve Fund Draw Amount, if any, remaining after all amounts allocated to
payment of interest on the Senior Notes have been paid.
Principal payments will be made to Certificateholders (the
"Certificateholders") as described under "Description of the Senior
Notes--Principal". If not paid in full prior to the Final Scheduled Payment
Date, the remaining Certificate Balance, if any, will be payable on that Payment
Date.
The Certificates will be subject to prepayment in whole, but not in
part, on any Payment Date relating to an Optional Purchase. In the event of an
Optional Purchase, the Certificateholders will receive an amount in respect of
the Certificates equal to the Certificate Balance, together with accrued
interest thereon at the Certificate Rate.
The Accounts
The SUBI Collection Account
On or prior to the Closing Date, the Origination Trustee will establish
a trust account for the benefit of the holders of interests in the SUBI, into
which collections on or in respect of the Specified Leases and the Specified
Vehicles will generally be deposited (the "SUBI Collection Account").
Deposits into the SUBI Collection Account. As more fully described
under "Additional Document Provisions--The Servicing Agreement--Collections",
Collections and other amounts received on or in respect of the SUBI Assets
generally will be deposited by the Servicer into the SUBI Collection Account
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within two days after processing, unless the Monthly Remittance Condition is
satisfied. If the Monthly Remittance Condition is satisfied, such amounts
received in respect of a Collection Period will be deposited into the SUBI
Collection Account on the Business Day immediately preceding the related Payment
Date (each, a "Deposit Date"). In addition, on each Deposit Date, the following
additional amounts, if any, in respect of the related Collection Period and
Payment Date will be deposited into the SUBI Collection Account: Advances made
by the Servicer, the Residual Value Surplus Draw Amount and, in the case of an
Optional Purchase, the Optional Purchase Price. See "Additional Document
Provisions--The Servicing Agreement--Collections".
Withdrawals from the SUBI Collection Account. On each Deposit Date, the
Servicer shall cause the Origination Trustee to withdraw from the SUBI
Collection Account and deposit in the Residual Surplus Value Account, the amount
of Residual Value Surplus for each Specified Vehicle sold during the related
Collection Period. On each Payment Date, the Origination Trustee shall transmit
or shall cause to be transmitted all Available Funds for the related Collection
Period in the amounts, in the priority, and to such accounts as set forth under
"Additional Information Regarding the Securities--Payments on the
Securities--Deposits to the Distribution Accounts; Priority of Payments".
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 Origination Trustee shall remit to the
Servicer without interest and before to any other distribution from the SUBI
Collection Account on that date, monies from the SUBI Collection Account
representing unreimbursed Disposition Expenses.
The Reserve Fund
On or before the Closing Date, the Owner Trustee will establish a trust
account in the name of the Indenture Trustee for the benefit of the
Securityholders (the "Reserve Fund"). The Reserve Fund will be established to
provide additional security for payments on the Senior Notes. On each Payment
Date, amounts on deposit in the Reserve Fund, together with Available Funds,
will be available to make the distributions described under "Additional
Information Regarding the Securities--Payments on the Securities--Deposits to
the Distribution Accounts; Priority of Payments".
The Reserve Fund initially will be funded by the Transferor with a
deposit of $[ ] (the "Initial Deposit"), and the amounts on deposit in the
Reserve Fund will be pledged to the Trust. As described under "--The
Subordinated Notes", all payments, to the extent necessary to cause the amount
therein to equal the Reserve Fund Requirement, made on the Subordinated Notes
will be deposited in the Reserve Fund. On each Payment Date, monies on deposit
in the Reserve Fund will be supplemented by the deposit of:
o payments of interest on and principal of the Subordinated
Notes,
o any Excess Amounts, and
o income received on the investment of funds on deposit in the
SUBI Collection Account, the Residual Value Surplus Account
and the Reserve Fund.
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On each Payment Date, a withdrawal will be made from the Reserve Fund
in an amount (the "Reserve Fund Draw Amount") equal to the sum of (a) the lesser
of (1) the Available Funds Shortfall Amount, calculated as described under
"Additional Information Regarding the Securities--Payments on the
Securities--Determination of Available Funds" for that Payment Date, and (2) the
amount on deposit in the Reserve Fund after giving effect to all deposits
thereto on the related Deposit Date or that Payment Date; and (b) in the event
the amount on deposit in the Reserve Fund, after giving effect to all
withdrawals therefrom and deposits thereto made on or in respect of that Payment
Date exceeds the unpaid principal balance of the Securities, the Securities
Balance.
On any Payment Date on which the amount on deposit in the Reserve Fund,
after giving effect to all withdrawals therefrom and deposits thereto in respect
of that Payment Date, exceeds the Reserve Fund Requirement, any such excess (a)
up to the amounts deposited into the Reserve Fund on or before that Payment Date
in respect of the Subordinated Notes will be released to the holder of the
Subordinated Notes (in that capacity, the "Subordinated Noteholder") and (b) any
additional excess will be released to the Transferor.
On any Payment Date, the "Reserve Fund Requirement" will equal:
o [ ]% of the current Securities Balance, or
o on any Payment Date occurring on or after the earlier to occur
of the date on which the last remaining Specified Lease
terminates or the date on which the Program Operating Lease is
terminated following a Program Operating Lease Default, zero.
The Residual Value Surplus Account
On or before the Closing Date, the Origination Trustee will cause a
trust account to be established in the name of the Origination Trustee for the
benefit of the holders of interests in the SUBIs, 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").
The Residual Value Surplus Account will not be funded with any money on
the Closing Date. On each Deposit Date, the Servicer will cause the Origination
Trustee to transfer to the Residual Value Surplus Account from the SUBI
Collection Account the amount, if any, of Residual Value Surplus for each
Matured Vehicle sold during that Collection Period.
On each Deposit Date, a withdrawal of an amount equal to the lesser of
(a) the sum of all Residual Value Losses and any unreimbursed Disposition
Expenses relating to Specified Vehicles that were sold by the Servicer during
the related Collection Period and (b) the amount on deposit in the Residual
Value Surplus Account (the "Residual Value Surplus Draw Amount") will be made
from the Residual Value Surplus Account for deposit into the SUBI Collection
Account. On each Payment Date, after giving effect to the withdrawal of the
Residual Value Surplus Draw Amount, if any, from the Residual Value Surplus
Account described in the immediately preceding paragraph on the related Deposit
Date, any amounts remaining on deposit in the Residual Value Surplus Account
will be paid to the Transferor.
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The Distribution Accounts
On or before the Closing Date, (a) the Indenture Trustee will establish
a trust account in the name of the Indenture Trustee on behalf of the Senior
Noteholders, into which amounts released from the SUBI Collection Account and,
when necessary, from the Reserve Fund, for distribution to the Senior
Noteholders will be deposited and from which all distributions to the Senior
Noteholders will be made (the "Note Distribution Account") and (b) the Owner
Trustee will establish a trust account in the name of the Owner Trustee on
behalf of the Certificateholders, into which amounts released from the SUBI
Collection Account and, when necessary, from the Reserve Fund, for distribution
to the Certificateholders will be deposited and from which all distributions to
the Certificateholders will be made (the "Certificate Distribution Account" and,
together with the Note Distribution Account, the "Distribution Accounts"). For
further information regarding these deposits and payments, see "--The SUBI
Collection Account" and "--The Reserve Fund".
On or before each Payment Date, (a) the Origination Trustee shall
deposit or cause to be deposited from the SUBI Collection Account and (b) the
Indenture Trustee shall deposit from the Reserve Fund, if necessary,
respectively, the amounts allocable to the Senior Noteholders and the
Certificateholders, as set forth in "Additional Information Regarding the
Securities--Payments on the Securities--Deposits to the Distribution Accounts;
Priority of Payments" for the related Payment Date in the Note Distribution
Account and the Certificate Distribution Account, respectively. On each Payment
Date, the Indenture Trustee and the Owner Trustee will distribute to the Senior
Noteholders and the Certificateholders the allocated amounts for the related
Collection Period to the Senior Noteholders and the Certificateholders,
respectively.
Maintenance of the Accounts
The Note Distribution Account and the Reserve Fund, and the SUBI
Collection Account and the Residual Value Surplus Account will be maintained
with the Indenture Trustee, so long as either (a) the short-term unsecured debt
obligations of the Indenture Trustee is rated in the highest short-term rating
category by each Rating Agency or (b) the Indenture Trustee is a depository
institution or trust company having a long-term unsecured debt rating acceptable
to each Rating Agency and corporate trust powers and the related Account is
maintained in the corporate trust department of the Indenture Trustee (the
"Required Deposit Rating"). Each of the foregoing accounts will be segregated
trust accounts. If the Indenture Trustee at any time does not have the Required
Deposit Rating, the Servicer shall, with the assistance of the Indenture
Trustee, as necessary, cause the related Account to be moved to a depository
institution or trust company organized under the laws of the United States or
any State that has the Required Deposit Rating.
On the Payment Date on which all Securities have been paid in full and
following payment of any remaining obligations of the Transferor under the Basic
Documents, any amounts remaining on deposit in the Accounts - after giving
effect to all withdrawals therefrom and deposits thereto in respect of that
Payment Date - will be paid to the Transferor.
Permitted Investments
When funds are deposited in (a) the SUBI Collection Account and the
Residual Value Surplus Account and (b) the Reserve Fund, they will be invested
at the direction of the Servicer and the Administrator, respectively, in one or
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more Permitted Investments maturing no later than the Deposit Date immediately
succeeding the date of that investment. Notwithstanding the foregoing,
investments on which the entity at which the related Account is located is the
User-Lessee may mature on the related Deposit Date.
On each Payment Date, all net income or other gain from the investment
of funds on deposit in the Residual Value Surplus Account, the Reserve Fund and
the SUBI Collection Account in respect of the related Collection Period will be
deposited in the Reserve Fund to the extent necessary to cause the amount
therein to equal the Reserve Fund Requirement. "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 Senior Notes and the Certificates.
The Contingent and Excess Liability Insurance
In addition to the personal property and liability insurance coverage
required to be obtained and maintained by the User-Lessee pursuant to the
Specified Leases, and as additional protection in the event the User-Lessee
fails to maintain the required insurance, BMW FS maintains contingent liability
insurance for the benefit of, among others, BMW FS, the Origination Trust, the
UTI Beneficiary, the Transferor and the Trust, which provides coverage for
liability caused by any Specified Vehicle owned by the Origination Trust. BMW FS
also maintains substantial amounts of excess insurance coverage as to which the
Origination Trustee is an additional named insured (together with the
aforementioned primary contingent liability insurance policy, the "Contingent
and Excess Liability Insurance"). Claims could be imposed against the assets of
the Origination Trust if such coverage were exhausted and damages were assessed
against the Origination Trust. In that event, investors in the Senior Notes
could incur a loss on their investment. See "Risk Factors--Vicarious tort
liability may result in a loss on your investment", "Additional Legal Aspects of
the Origination Trust and the SUBIs--The SUBIs" and "Additional Legal Aspects of
the Specified Leases and the Specified Vehicles--Vicarious Tort Liability" for a
discussion of related risks.
With respect to damage to the Specified Vehicles, a User-Lessee is
required by the related Specified Lease to maintain comprehensive and collision
insurance. [As more fully described under "Additional Document Provisions--The
Servicing Agreement--Insurance on the Specified Vehicles", the Servicer will be
required to monitor the maintenance of required User-Lessee insurance.] In the
event that the foregoing insurance coverage was exhausted and no third-party
reimbursement for that damage was available, investors in the Senior Notes could
incur a loss on their investment.
The Servicing Agreement will provide that for so long as any Senior
Notes or Certificates are outstanding, neither the Origination Trustee nor BMW
FS may terminate or cause the termination of any Contingent and Excess Liability
Insurance policy unless each Rating Agency has delivered a letter to the effect
that such termination or any replacement insurance would not cause its
then-current ratings of the Senior Notes or the Certificates to be qualified,
reduced or withdrawn. These obligations of BMW FS will survive any termination
of BMW FS as Servicer under the Servicing Agreement.
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ADDITIONAL DOCUMENT PROVISIONS
The Indenture
Indenture Defaults. The following events (each an "Indenture Default")
will be events of default under the Indenture:
o a default for 5 days or more in the payment of interest on the
Senior Notes;
o a default in the payment of principal of a class of Senior
Notes on the related Final Scheduled Payment Date or on a
Payment Date fixed for redemption of the Senior Notes;
o the occurrence of a Program Operating Lease Default;
o a default in the observance or performance in any material
respect of any covenant or agreement, or any representation or
warranty made in the Indenture or in any certificate or
writing delivered under the Indenture proves to have been
incorrect in any material respect at the time made, and the
continuation of that default for a period of 30 days after
notice thereof is given to the Trust by the Indenture Trustee
or to the Trust and the Indenture Trustee by the holders of
not less than 50% of the aggregate principal balance of the
Senior Notes; or
o certain events of bankruptcy, insolvency, receivership or
liquidation of the Trust.
Senior Noteholders holding at least a majority of the aggregate
principal balance of the Senior Notes may waive any past default or Indenture
Default prior to the declaration of the acceleration of the maturity of the
Senior Notes, except a default in the payment of principal of or interest on any
of the Senior Notes, or in respect of any covenant or provision in the Indenture
that cannot be modified or amended without unanimous consent of the Senior
Noteholders.
Remedies
If an Indenture Default occurs and is continuing, the Indenture Trustee
or the holders of a majority of the aggregate principal balance of the Senior
Notes may declare the principal of the Senior Notes to be immediately due and
payable. This declaration may be rescinded by the holders of a majority of the
aggregate principal balance of the Senior Notes before a judgment or decree for
payment of the amount due has been obtained by the Indenture Trustee if
o the Trust has deposited with the Indenture Trustee an amount
sufficient to pay (1) all interest on and principal of the
Senior Notes as if the Indenture Default giving rise to that
declaration had not occurred and (2) all amounts advanced by
the Indenture Trustee and its costs and expenses, and
o all Indenture Defaults - other than the nonpayment of
principal of the Senior Notes that has become due solely due
to that acceleration - have been cured or waived.
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If the Senior Notes have been declared due and payable following an
Indenture Default, the Indenture Trustee may institute proceedings to collect
amounts due, exercise remedies as a secured party, including foreclosure or sale
of the Trust Estate, or elect to maintain the Trust Estate and continue to apply
proceeds from the Trust Estate as if there had been no declaration of
acceleration. The Indenture Trustee may not, however, unless it is required to
sell the Trust Estate under the Trust Agreement as a result of the bankruptcy or
insolvency of the Transferor, sell the Trust Estate following an Indenture
Default - other than the occurrence of an Indenture Default described in the
first two bullet points in the definition thereof - unless
o 100% of the Senior Noteholders consent thereto,
o the proceeds of that sale are sufficient to pay in full the
principal of and the accrued interest on all outstanding
Securities, or
o the Indenture Trustee determines that the Trust Estate would
not be sufficient on an ongoing basis to make all payments on
the Senior Notes as such payments would have become due if
such obligations had not been declared due and payable, and
the Indenture Trustee obtains the consent of holders of 66
2/3% of the aggregate principal balance of the Senior Notes.
The Indenture Trustee may, but is not required to, obtain and rely upon an
opinion of an independent accountant or investment banking firm as to the
sufficiency of the Trust Estate to pay interest on and principal of the Senior
Notes on an ongoing basis. Any sale of the Trust Estate, other than a sale
resulting from the bankruptcy, insolvency or termination of the Transferor, is
subject to the requirement that an opinion of counsel be delivered to the effect
that such sale will not cause the Origination Trust or the Trust to be
classified as an association, or a publicly traded partnership, taxable as a
corporation for federal income tax purposes.
In the event of a sale of the Trust Estate, either as a result of the
bankruptcy or insolvency of the Transferor or following the occurrence of an
Indenture Default under the circumstances described in the prior paragraph, at
the direction of the Indenture Trustee or the Senior Noteholders, the proceeds
of such sale, including available monies on deposit in the Reserve Fund and the
Residual Value Surplus Account, will be distributed first, to the Indenture
Trustee for amounts due as compensation or indemnity payments pursuant to the
terms of the Indenture; second, to the Servicer for reimbursement of all
outstanding Advances; third, to the Servicer for amounts due in respect of
unpaid Servicing Fees; fourth, to the Senior Noteholders to pay due and unpaid
interest - including any overdue interest and, to the extent permitted under
applicable law, interest on any overdue interest at the related Interest Rate;
fifth, to the Reserve Fund for the payment of due and unpaid interest -
including any overdue interest and, to the extent permitted under applicable
law, interest on any overdue interest at the Subordinated Note Rate - on the
Subordinated Notes; sixth, to the Certificate Distribution Account for the
payment of due and unpaid interest - including any overdue interest and, to the
extent permitted under applicable law, interest on any overdue interest at the
Certificate Rate - on the Certificates; seventh, to the holders of the Class A-1
Senior Notes to pay due and unpaid principal on the Class A-1 Senior Notes,
eighth, to the holders of all other classes of Senior Notes to pay due and
unpaid principal on those classes of Senior Notes, which shall be allocated to
such classes of Senior Notes on a pro rata basis; ninth, ratably to the
Subordinated Noteholder for amounts due and unpaid in accordance with the terms
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of the Subordinated Notes, which amounts shall be deposited into the Reserve
Fund, and the Certificateholders for amounts due and unpaid in accordance with
the terms of the Certificates; tenth, to the Transferor, in its capacity as
Subordinated Noteholder, up to the amount deposited into the Reserve Fund in
respect of the Subordinated Notes on or before the date of the preceding
distributions; and eleventh, any remaining amounts shall be paid to the
Transferor.
Subject to the provisions of the Indenture relating to the duties of
the Indenture Trustee, if an Indenture Default occurs and is continuing, 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 Senior
Noteholders if the Indenture Trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities that might be
incurred by it in complying with that request. Subject to such provisions for
indemnification and some limitations contained in the Indenture, the holders of
at least a majority of the aggregate principal balance of the Senior Notes will
have the right to direct the time, method and place of conducting any proceeding
or any remedy available to the Indenture Trustee or exercising any trust power
conferred on the Indenture Trustee. In addition, the holders of at least a
majority of the aggregate principal balance of the Senior Notes may, in some
cases, waive any default with respect to the Indenture, 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 holders of outstanding Senior Notes.
No Senior Noteholder will have the right to institute any proceeding
with respect to the Indenture unless:
o that Senior Noteholder previously has given the Indenture
Trustee written notice of a continuing Indenture Default,
o Senior Noteholders holding not less than 25% of the aggregate
principal balance of the Senior Notes have made written
request of the Indenture Trustee to institute that proceeding
in its own name as Indenture Trustee,
o the Senior Noteholder has offered the Indenture Trustee
reasonable indemnity,
o the Indenture Trustee has for 60 days failed to institute that
proceeding, and
o no direction inconsistent with that written request has been
given to the Indenture Trustee during that 60 day period by
Senior Noteholders holding a majority of the aggregate
principal balance of the Senior Notes.
Neither the Indenture Trustee nor the Owner Trustee in their respective
individual capacities, nor any holder of a Subordinated Note or a Certificate,
nor any of their respective owners, beneficiaries, agents, officers, directors,
employees, successors or assigns will, in the absence of an express agreement to
the contrary, be personally liable for the payment of interest on or principal
of the Senior Notes or for the agreements of the Trust or the Trustee, in its
capacity as trustee, contained in the Indenture.
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Certain Covenants
Under the Indenture, the Trust will covenant that it will not
o sell, transfer, exchange or otherwise dispose of any of its
assets, except as expressly permitted by the Indenture, the
Program Operating Lease and the other Basic Documents,
o claim any credit on or make any deduction from the principal
and interest payable in respect of the Senior Notes - other
than amounts withheld under the Code or applicable state law -
or assert any claim against any present or former Senior
Noteholder because of the payment of taxes levied or assessed
upon the Trust, or
o permit (1) the validity or effectiveness of the Indenture to
be impaired, (2) any person to be released from any covenants
or obligations with respect to the Senior Notes under the
Indenture except as may be expressly permitted thereby or (3)
any lien, charge, excise, claim, security interest, mortgage
or other encumbrance to be created on or extend to or
otherwise arise upon or burden the Trust's assets or any part
thereof, or any interest therein or the proceeds therefrom.
The Trust may not engage in any activities other than financing, acquiring,
owning, leasing - subject to the lien of the Indenture - pledging and managing
the SUBI Certificates as contemplated by the Indenture and the other Basic
Documents. The Trust will not incur, assume or guarantee any indebtedness other
than indebtedness incurred pursuant to the Securities or otherwise in accordance
with the Basic Documents.
Replacement of the Indenture Trustee
Senior Noteholders holding at least a majority of the aggregate
principal balance of the Senior Notes may remove the Indenture Trustee without
cause by so notifying the Indenture Trustee and the Trust, and following that
removal may appoint a successor Indenture Trustee. Any successor Indenture
Trustee must at all times satisfy all applicable requirements of the Trust
Indenture Act of 1939, and in addition, have a combined capital and surplus of
at least $50,000,000 and a long-term debt rating of "A" or better by each Rating
Agency or be otherwise acceptable to each Rating Agency. Each Rating Agency must
confirm that the appointment of the successor Indenture Trustee would not cause
the then-current ratings on the Senior Notes and the Certificates to be
qualified, reduced or withdrawn.
The Indenture Trustee may resign at any time by so notifying the Trust,
the Servicer and each Rating Agency. The Trust will be required to remove the
Indenture Trustee if the Indenture Trustee:
o ceases to be eligible to continue as the Indenture Trustee,
o is adjudged to be bankrupt or insolvent, or
o otherwise becomes incapable of acting.
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Upon the resignation or removal of the Indenture Trustee, or the failure of the
Senior Noteholders to appoint a successor Indenture Trustee following the
removal without cause of the Indenture Trustee, the Trust will be required
promptly to appoint a successor Indenture Trustee.
Duties of Indenture Trustee
Except during the continuance of an Indenture Default, the Indenture
Trustee will
o perform such duties and only such duties as are specifically
set forth in the Indenture,
o rely, as to the truth of the statements and the correctness of
the opinions expressed therein, on certificates or opinions
furnished to the Indenture Trustee that conform to the
requirements of the Indenture, and
o examine any such certificates and opinions that are
specifically required to be furnished to the Indenture Trustee
by the Indenture to determine whether or not they conform to
the requirements of the Indenture.
Upon the continuance of an Indenture Default, the Indenture Trustee will be
required to exercise the rights and powers vested in it by the Indenture and use
the same degree of care and skill in the exercise thereof as a prudent person
would exercise or use under the circumstances in the conduct of that person's
own affairs.
Compensation and Indemnity
The Administrator will
o pay the Indenture Trustee from time to time reasonable
compensation for its services,
o reimburse the Indenture Trustee for all reasonable expenses,
advances and disbursements reasonably incurred by it in
connection with the performance of its duties as Indenture
Trustee, and
o indemnify the Indenture Trustee for, and hold it harmless
against, any loss, liability or expense, including reasonable
attorneys' fees and expenses, incurred by it in connection
with the performance of its duties as Indenture Trustee.
The Indenture Trustee will not be indemnified by the Administrator against any
loss, liability or expense incurred by it through its own willful misconduct,
negligence or bad faith, except that the Indenture Trustee will not be liable
o for any error of judgment made by it in good faith, unless it
is proved that the Indenture Trustee was negligent in
ascertaining the pertinent facts,
o with respect to any action it takes or omits to take in good
faith in accordance with a direction received by it from the
Senior Noteholders in accordance with the terms of the
Indenture, and
o for interest on any money received by it except as the
Indenture Trustee and the Trust may agree in writing.
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The Indenture Trustee will not be deemed to have knowledge of any event unless
an officer of the Indenture Trustee has actual knowledge of the event or has
received written notice of the event in accordance with the provisions of the
Indenture.
Access to Senior Noteholder Lists
If Definitive Notes are issued in the limited circumstances set forth
in "Additional Information Regarding the Securities--Definitive Notes", or the
Indenture Trustee is not the Senior Note Registrar, the Trust will furnish or
cause to be furnished to the Indenture Trustee a list of the names and addresses
of the Senior Noteholders (a) as of each Record Date, within five days
thereafter and (b) as of not more than ten days before the time that list is
furnished, within 30 days after receipt by the Trust of a written request for
the list.
Annual Compliance Statement
The Trust will be required to file an annual written statement with the
Indenture Trustee certifying the fulfillment of its obligations under the
Indenture.
Satisfaction and Discharge of Indenture
The Indenture will be discharged with respect to the collateral
securing the Senior Notes upon the delivery to the Indenture Trustee for
cancellation of all of the Senior Notes or, with some limitations - including
receipt of certain opinions with respect to tax matters - upon deposit with the
Indenture Trustee of funds sufficient for the payment in full of all of the
Senior Notes, including interest, and any fees due and payable to the Owner
Trustee or the Indenture Trustee.
The Trust Agreement
Authority and Duties of the Owner Trustee
The Owner Trustee will administer the Trust in the interest of the
Certificateholders, subject to the lien of the Indenture and the obligations of
the Trust with respect to the Notes, in accordance with the Trust Agreement and
the other Basic Documents.
Subject to the rights of the Indenture Trustee under the Indenture, the
Transferor, as holder of the Transferor Certificate, may, by written
instruction, direct the Owner Trustee in the administration of the Trust;
provided that such instruction shall not, as evidenced by an opinion of counsel,
materially adversely affect any Senior Noteholder or Certificateholder. The
Owner Trustee will not be required to follow any such instruction if it
reasonably determines or is advised by counsel that so doing is likely to result
in liability to the Owner Trustee, contrary to the terms of the Trust Agreement
or any other Basic Document or any obligation of the Owner Trustee or the Trust,
or unlawful.
The Owner Trustee will not be required to perform any of the
obligations of the Trust under the Trust Agreement or the other Basic Documents
that are required to be performed by
o the Servicer under the Servicing Agreement or the SUBI Trust
Agreement;
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o the Administrator under the Trust Agreement, the Trust
Administration Agreement or the Indenture;
o the Transferor under the SUBI Certificate Transfer Agreement
or the Program Operating Lease; or
o the Indenture Trustee under the Indenture.
Restrictions on Actions by Owner Trustee
The Owner Trustee may not:
o initiate or settle any claim or lawsuit involving the Trust,
unless brought by the Servicer to collect amounts owed under a
Specified Lease;
o amend the Indenture by a supplemental indenture where Senior
Noteholder consent is required;
o appoint any successor indenture trustee or owner trustee;
o amend the Indenture by supplemental indenture where Senior
Noteholder consent is not required if such amendment
materially adversely affects the Certificateholders; or
o amend any Basic Document other than the Trust Agreement if
such amendment materially adversely affects the
Certificateholders;
unless (1) the Owner Trustee provides 30 days' written notice thereof to the
Certificateholders and each Rating Agency and (2) Certificateholders holding at
least 25% of the aggregate principal balance of the Certificates do not object
in writing to any such proposed amendment within 30 days of that notice.
Actions by Certificateholders and Owner Trustee with Respect to Certain
Matters
The Owner Trustee may not, except upon the occurrence of an Servicer
Default subsequent to the payment in full of the Senior Notes and in accordance
with the written directions of Certificateholders holding 66 2/3% of the
aggregate principal balance of the Certificates, remove the Servicer with
respect to the SUBI Assets or appoint a successor Servicer with respect thereto.
However, the Owner Trustee will not be required to follow any directions of the
Certificateholders if doing so would be contrary to any obligation of the Owner
Trustee or the Trust. The Owner Trustee may not sell the Vehicle SUBI
Certificate or assign its interest in the Lease SUBI Certificate except in the
event of the bankruptcy or dissolution of the Trust or the Transferor, or upon
an Indenture Default - and in any event unless the Owner Trustee has properly
foreclosed on the Lease SUBI. Upon any such sale of the Vehicle SUBI Certificate
or the assignment of the Lease SUBI Certificate, the applicable Vehicle SUBI
Assets and Lease SUBI Assets will be distributed to the purchaser thereof and
will no longer constitute Origination Trust Assets, and the Specified Vehicles
may be retitled as directed by that purchaser.
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The right of the Transferor or the Certificateholders to take any
action affecting the Trust Estate will be subject to the rights of the Indenture
Trustee under the Indenture.
Resignation and Removal of the Owner Trustee
The Owner Trustee may resign at any time upon written notice to the
Administrator, the Servicer, the Transferor, the Indenture Trustee and the
Certificateholders, whereupon the Transferor will be obligated to appoint a
successor Owner Trustee. The Transferor or Certificateholders holding at least a
majority of the aggregate principal balance of the Certificates may remove the
Owner Trustee if the Owner Trustee becomes insolvent, ceases to be eligible or
becomes legally unable to act. Upon removal of the Owner Trustee, the Transferor
will appoint a successor Owner Trustee. The Transferor will be required to
deliver written notice to each Rating Agency of any resignation or removal of
the Owner Trustee.
The Owner Trustee and any successor thereto must at all times:
o be able to exercise corporate trust powers;
o be subject to supervision or examination by federal or state
authorities;
o have a combined capital and surplus of at least $50 million;
and
o have a long-term debt rating of "A" or better by each Rating
Agency or be otherwise acceptable to each Rating Agency.
Each Rating Agency must also receive prior written notice of the appointment of
the successor Owner Trustee would not cause the then-current ratings of the
Senior Notes or the Certificates to be qualified, reduced or withdrawn. Any
co-trustee or separate trustee appointed for the purpose of meeting applicable
state requirements will not be required to meet these eligibility requirements.
Termination
The Trust Agreement will terminate upon (a) the final distribution of
all funds or other property or proceeds of the Trust Estate in accordance with
the terms of the Indenture and the final distribution on the Subordinated Notes
and the Certificates pursuant to the Trust Agreement, (b) the occurrence of
certain events of bankruptcy, insolvency, receivership or liquidation with
respect to the Transferor or (c) an Optional Purchase by the Transferor. Upon
termination of the Trust Agreement pursuant to clause (b) above, the Owner
Trustee will direct the Indenture Trustee to sell the Trust Estate, other than
amounts on deposit in the Distribution Accounts, in a commercially reasonable
manner and on commercially reasonable terms. The Indenture Trustee will apply
the proceeds of that sale to pay amounts owed to the Indenture Trustee and
interest on and principal of the Securities in accordance with the terms of the
Indenture. See "--The Indenture--Remedies".
Liabilities and Indemnification
The Transferor will indemnify the Owner Trustee for any expenses
incurred by the Owner Trustee in the performance of its duties under the Trust
Agreement. The Transferor will not be entitled to make any claim upon the Trust
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Estate for the payment of any such liabilities or indemnified expenses. The
Transferor will not indemnify the Owner Trustee for expenses resulting from the
willful misconduct, bad faith or negligence of the Owner Trustee, or for the
inaccuracy of any representation or warranty of the Owner Trustee in the Trust
Agreement. The Owner Trustee will not be liable for:
o any error in judgment of an officer of the Owner Trustee,
o any action taken or omitted to be taken in accordance with the
instructions of any Certificateholder, the Indenture Trustee,
the Transferor or the Servicer,
o the interest on or principal of the Securities, or
o the default or misconduct of the Administrator, the Servicer,
the Transferor or the Indenture Trustee.
The Subordinated Notes
The Subordinated Notes will be issued to the Transferor pursuant to the
Trust Agreement, pledged by the Transferor to the Trust and held by the
Indenture Trustee during the term of the Indenture as part of the Trust Estate
pledged to the Indenture Trustee. The Subordinated Notes will be subordinated in
right of payment to the Senior Notes to the extent described herein. See
"Additional Information Regarding the Securities--Payments on the Securities"
and "Security for the Securities--The Subordinated Notes". If a default occurs
with respect to the Trust's obligations under the Subordinated Notes while the
Senior Notes are outstanding, the Subordinated Noteholder will not be permitted
to declare the principal balance of the Subordinated Notes to be immediately due
and payable.
The SUBI Trust Agreement
The SUBIs, Other SUBIs and the UTI
The UTI Beneficiary is the initial beneficiary of the Origination
Trust. The UTI Beneficiary may from time to time assign, transfer, grant and
convey, or cause to be assigned, transferred, granted and conveyed, to the
Origination Trustee, in trust, Origination Trust Assets. The UTI Beneficiary
will hold the UTI, which represents a beneficial interest in all Origination
Trust Assets except for (a) any Origination Trust Assets allocated to Other
SUBIs ("Other SUBI Assets") and (b) the SUBI Assets (those Origination Trust
Assets to be referred to as the "UTI Assets"). The UTI Beneficiary may in the
future pledge the UTI as security for obligations to third-party lenders and may
in the future create and sell or pledge Other SUBIs in connection with
financings similar to the transaction described in this prospectus. Each holder
or pledgee of the UTI will be required to expressly waive any claim to the
Origination Trust Assets other than the UTI Assets and to fully subordinate any
such claims to those other Origination Trust Assets in the event that the waiver
is not given full effect. Each holder or pledgee of any Other SUBI will be
required to expressly waive any claim to the Origination Trust Assets, except
for the related Other SUBI Assets, and to fully subordinate those claims to the
Origination Trust Assets or any other SUBI in the event that waiver is not given
effect. Except under the limited circumstances described under "Additional Legal
Aspects of the Origination Trust and the SUBIs--The SUBIs" and "--The SUBIs,
Other SUBIs and the UTI", the SUBI Assets will not be available to make payments
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in respect of, or pay expenses relating to, the UTI or any Other SUBI. Any Other
SUBI Assets evidenced by any Other SUBIs will not be available to make payments
in respect of, or pay expenses relating to, the SUBIs, 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 or Other
SUBIs to which it relates. The SUBI Supplement will amend the Origination Trust
Agreement only as it relates to the SUBIs and no Other SUBI Supplement will
amend the Origination Trust Agreement as it relates to the SUBIs.
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 in or to the SUBI Assets.
Liabilities of the Origination Trust will be respectively allocated to the SUBI
Assets, the UTI Assets and Other SUBI Assets if incurred in each case with
respect thereto, or will be allocated pro rata among all Origination Trust
Assets if incurred with respect to the Origination Trust Assets generally.
Origination Trustee Duties and Powers; Fees and Expenses
The Origination Trustee may be replaced by the UTI Beneficiary, if it
ceases to be qualified in accordance with the terms of the SUBI Trust Agreement,
or if certain representations and warranties made by the Origination Trustee
therein prove to have been materially incorrect when made or in the event of
certain events of bankruptcy or insolvency of the Origination Trustee.
The Origination Trustee will make no representations as to the validity
or sufficiency of the SUBIs or the SUBI Certificates - other than the execution
and authentication of the SUBI Certificates - or of any Specified Lease,
Specified Vehicle or related document, will not be responsible for performing
any of the duties of the UTI Beneficiary 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 SUBIs, any Other SUBI and the UTI.
The Origination Trustee will not independently verify the Specified Leases or
the Specified Vehicles. The duties of the Origination Trustee will generally be
limited to the acceptance of assignments of Leases, the titling of Leased
Vehicles in the name of the Origination Trust or the Origination Trustee on
behalf of the Origination Trust, the creation of the SUBIs, Other SUBIs and the
UTI, the creation of the SUBI Collection Account and the Residual Value Surplus
Account 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 the Origination Trustee will only be required to
examine them to determine whether they conform to the requirements of the SUBI
Trust Agreement.
The Origination Trustee will be under no obligation to exercise any of
the rights or powers vested in it by the SUBI Trust Agreement, to make any
investigation of any matters arising thereunder or to institute, conduct or
defend any litigation thereunder or in relation thereto at the request, order or
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direction of the UTI Beneficiary, the Servicer or the holders of a majority in
interest in the SUBIs, unless such party or parties have offered to the
Origination Trustee reasonable security or indemnity against any costs, expenses
or liabilities that may be incurred therein or thereby. The reasonable expenses
of every such exercise of rights or powers or examination will be paid by the
party or parties requesting such exercise or examination or, if paid by the
Origination Trustee, will be a reimbursable expense of the Origination Trustee.
The Origination Trustee may enter into one or more agreements with such
person or persons, including without limitation any affiliate of the Origination
Trustee, as are by experience and expertise qualified to act in a trustee
capacity and otherwise acceptable to the UTI Beneficiary.
Indemnity of Trustee
The Origination Trustee will be indemnified and held harmless out of
and to the extent of the Origination Trust Assets with respect to any loss,
liability, claim, damage or reasonable expense, including reasonable fees and
expenses of counsel and reasonable expenses of litigation (collectively, a
"Loss"), arising out of or incurred in connection with (a) any of the
Origination Trust Assets, including without limitation any Loss relating to
Leases or Leased Vehicles, any personal injury or property damage claims arising
with respect to any such Leased Vehicle or any Loss relating to any tax arising
with respect to any Origination Trust Asset, or (b) the Origination Trustee's
acceptance or performance of the trusts and duties contained in the SUBI Trust
Agreement. Notwithstanding the foregoing, the Origination Trustee will not be
indemnified or held harmless out of the Origination Trust Assets as to such a
Loss:
o for which BMW FS shall be liable under the Servicing
Agreement,
o incurred by reason of the Origination Trustee's willful
misfeasance, bad faith or negligence, or
o incurred by reason of the Origination Trustee's breach of its
respective representations and warranties made in the SUBI
Trust Agreement or the Servicing Agreement.
Termination
The Origination Trust will dissolve and the obligations and
responsibilities of the UTI Beneficiary and the Origination Trustee will
terminate upon the later to occur of the full payment of all amounts owed under
the Origination Trust Agreement, the Trust Agreement and the Indenture or under
any financing in connection with an Other SUBI.
The Servicing Agreement
General
Under the Servicing Agreement, the Servicer will perform on behalf of
the Origination Trust all of the obligations of BMW FS under the Specified
Leases, including, but not limited to, collecting and processing payments,
responding to inquiries of User-Lessees, investigating delinquencies, sending
payment statements, paying costs of the sale or other disposition of Matured
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Vehicles or Default Vehicles, overseeing the Specified Leases, commencing legal
proceedings to enforce Specified Leases and servicing the Specified Leases,
including accounting for collections, furnishing monthly and annual statements
to the Origination Trustee with respect to distributions and generating federal
income tax information. In this regard, the Servicer will make reasonable
efforts to collect all amounts due on or in respect of the Specified Leases and,
in a manner consistent with the Servicing Agreement, will be obligated to
service the Specified Leases generally in accordance with the customary and
usual procedures of institutions that service automobile leases and, to the
extent more exacting, the procedures used by the Servicer in respect of
automobile leases serviced by it for its own account. See "BMW FS' Lease
Financing Program".
The Servicing Agreement will require the Servicer to obtain all
licenses and make all filings required to be held or filed by the Origination
Trust in connection with the ownership of the Specified Leases and the Specified
Vehicles and take all necessary steps to maintain evidence of the Origination
Trust's ownership on the certificates of title to the Specified Vehicles.
The Servicer will be required to repurchase any Specified Leases by
making Reallocation Payments if the User-Lessee moves to a state in which the
Origination Trust is not qualified to do business and the related Specified
Vehicle is retitled under the laws of that state.
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 qualifications to act as a business trust and
other periodic regulatory filings, registrations or approvals arising with
respect to or required of the Origination Trustee or the Origination Trust.
Custody of Lease Documents and Certificates of Title
To reduce administrative costs and ensure uniform quality in the
servicing of the Specified Leases and BMW FS' own portfolio of leases, the
Origination Trustee will appoint the Servicer as its agent, bailee and custodian
of the Specified Leases, the certificates of title relating to the Specified
Vehicles, the insurance policies and insurance records and other documents
related to the Specified Leases and the related User-Lessees and Specified
Vehicles. Such documents will not be physically segregated from other leases,
certificates of title, insurance policies and insurance records or other
documents related to other leases and vehicles owned or serviced by the
Servicer, including Leases and Leased Vehicles which are not part of the SUBI
Assets. The accounting records and computer systems of BMW FS will reflect the
allocation of the Specified Leases and Specified Vehicles to the SUBIs, and the
interest of the holders of the SUBI Certificates therein. UCC financing
statements reflecting certain interests in the Specified Leases will be filed as
described under "Additional Legal Aspects of the Specified Leases and the
Specified Vehicles--Back-up Security Interests".
Collections
General. Under the Servicing Agreement, except as otherwise permitted
under the Monthly Remittance Condition and described under "--Monthly Remittance
Condition", the Servicer will deposit Collections received into the SUBI
Collection Account within two Business Days of processing. "Collections" with
respect to any Collection Period will include all net collections collected or
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received in respect of the SUBI Assets during the Collection Period that are
allocable to the Program Operating Lease or the Securities, including:
o Monthly Payments made by User-Lessees, net of Daily Advance
Reimbursements;
o Reallocation Payments made by the Servicer;
o Sales Proceeds other than Residual Value Surplus, Termination
Proceeds and Insurance Proceeds;
o Excess Mileage Payments;
o Excess Wear and Use Payments paid by the User-Lessee at the
scheduled maturity date of the Specified Lease;
o post-liquidation recoveries;
o Early Termination Costs; and
o payments by the Servicer of the Securitization Value of
certain Specified Leases before the Maturity Dates of such
Specified Leases and certain Matured Vehicles, as described in
this prospectus under "--Purchase of Specified Vehicles Before
their Maturity Dates" and "--Purchase of Matured Vehicles".
Monthly Remittance Condition. The Servicing Agreement will require the
Servicer to make all deposits of Collections received on or in respect of the
Specified Leases and the Specified Vehicles to be deposited into the SUBI
Collection Account on the second Business Day following processing thereof.
However, so long as the Monthly Remittance Condition is satisfied, the Servicer
may retain such amounts received during a Monthly Period until the second day
following that Monthly Period. The "Monthly Remittance Condition" will be
satisfied if (a)(1) the short-term debt of BMW US Capital Corp. is rated in the
highest rating category, or is otherwise acceptable to, each Rating Agency and
(2) no Servicer Default has occurred or (b)(1) the Servicer obtains a letter of
credit, surety bond or insurance policy under which demands for payment may be
made to secure timely remittance of monthly collections to the SUBI Collection
Account and (2) the Trustees are provided with confirmation from each Rating
Agency to the effect that the use of such alternative remittance schedule will
not result in the qualification, reduction or withdrawal of its then-current
rating on the Senior Notes or the Certificates. Pending deposit into the SUBI
Collection Account, Collections may be used by the Servicer at its own risk and
for its own benefit and will not be segregated from its own funds.
Net Deposits. For so long as BMW FS is the Servicer, the Servicer will
be permitted to deposit into the SUBI Collection Account only the net amount
distributable to the Trust, as holder of the Vehicle SUBI Certificate, on the
related Deposit Date. The Servicer will, however, account to the Trust, the
Trustees and the Senior Noteholders and Certificateholders as if all of the
deposits and distributions described herein were made individually. This
provision has been established for the administrative convenience of the parties
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involved and will not affect amounts required to be deposited into the Accounts
for the benefit of the Securityholders.
Sales Proceeds and Termination Proceeds
Under the Servicing Agreement, the Servicer, on behalf of the Trust,
will sell or otherwise dispose of Specified Vehicles.
o related to Specified Leases that have reached their respective
Maturity Dates or the User-Lessee has terminated the Specified
Lease (a "Matured Vehicle"),
o related to Default Termination Leases (each, a "Defaulted
Vehicle"), and
o under the circumstances described under "--Purchase of
Specified Vehicles Before their Maturity Dates".
In connection with the sale or other disposition of a Matured Vehicle or a
Defaulted Vehicle, within two Business Days of processing, the Servicer will
deposit into the SUBI Collection Account all Sales Proceeds from Specified
Vehicles received during the related Collection Period. On each Deposit Date,
the Servicer will cause the Origination Trustee, to transfer any Residual Value
Surplus to the Residual Value Surplus Account and any Retained Support Amounts
to the UTI Beneficiary. Any payment received from the related User-Lessee in
respect of the Early Termination Cost of the related Specified Vehicle will be
deposited into the SUBI Collection Account.
"Disposition Expenses" will mean expenses and other amounts reasonably
incurred by the Servicer in connection with the sale or other disposition of a
Matured Vehicle or a Defaulted Vehicle, including but not limited to sales
commissions, and expenses incurred in connection with making claims under any
Contingent and Excess Liability Insurance or other applicable insurance
policies. Disposition Expenses will be reimbursable to the Servicer:
o as a deduction from Sales Proceeds and Termination Proceeds,
and
o in the case of Disposition Expenses relating to the sale of
Leased Vehicles, from amounts on deposit in the Residual Value
Surplus Account.
"Residual Value Losses" in respect of a Collection Period will mean the
amount by which the Sales Proceeds from the sale of Specified Vehicles,
excluding any Insurance Proceeds, during that Collection Period are less than
the aggregate Securitization Values of the related Specified Leases.
"Residual Value Surplus" will mean the amount, if any, by which the
Sales Proceeds of any Matured Vehicle, excluding any amounts paid by a
User-Lessee, exceed the Contract Residual Value of the related Specified Lease
as of the effective date of termination of that Specified Lease.
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"Retained Support Amounts" will mean the amount, if any, by which the
Sales Proceeds of any Matured Vehicle, exceed the Securitization Value of the
related Specified Lease, minus the Residual Value Surplus.
"Sales Proceeds" with respect to any Matured Vehicle or Defaulted
Vehicle will mean all proceeds received from the sale, auction or other
disposition of that Leased Vehicle, including any applicable Insurance Proceeds,
less all applicable Disposition Expenses and, in the case of a Matured Vehicle,
any outstanding Sales Proceeds Advances and, in the case of a Defaulted Vehicle,
any security deposit.
"Termination Proceeds" with respect to any Defaulted Vehicle will mean
an amount equal to the sum of (1) any payment received from the related
User-Lessee in respect of the Early Termination Cost of the Leased Vehicle and
(2) the Sales Proceeds.
Purchase of Specified Vehicles Before their Maturity Dates
The Servicer will be required to purchase or cause to be purchased a
Specified Vehicle before the Maturity Date of the related Specified Lease and
remit to the SUBI Collection Account an amount equal to the Securitization Value
of that Specified Lease as of the effective date of termination if:
o the Servicer agrees with the User-Lessee to a change in the
lease rates applicable to that Specified Vehicle and that
change results in a change in the Residual Value and/or the
Lease Term;
o that Specified Lease becomes a Default Termination Lease and
the Servicer (1) releases the User-Lessee from its obligation
to pay the Early Termination Costs of that Specified Vehicle
or (2) neither demands that the User-Lessee pay such amount
nor offers a termination or default settlement to the
User-Lessee for that Specified Vehicle; or
o that Specified Lease becomes a Default Termination Lease and
that Specified Lease has been amended to eliminate the
User-Lessee's pay the Early Termination Costs.
The Servicer will be required to purchase a Specified Vehicle before
the Maturity Date of the related Specified Lease and remit to the SUBI
Collection Account a Reallocation Payment calculated as of the effective date of
repurchase if the related User-Lessee moves to a state in which the Origination
Trust is not doing business and the related Specified Vehicle is either required
to be retitled or reregistered under the laws of that state or in the event that
certain servicing obligations are not complied with.
"Insurance Proceeds" will include recoveries under any insurance policy
or rights thereunder or proceeds therefrom, including any self-insurance [and
also including the Contingent and Excess Liability Insurance], and any vehicle
liability insurance policy required to be obtained and maintained by the
Servicer or the related User-Lessees pursuant to the Specified Leases, and
amounts paid by any insurer under any other insurance policy relating to the
Specified Leases or the related User-Lessees or Specified Vehicles.
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Purchase of Matured Vehicles
The Servicer may purchase a Matured Vehicle at any time. With respect
to the related Specified Vehicle, in the event that no Sales Proceeds Advance
has been made, the purchase price will equal the Securitization Value of that
Specified Lease as of the date of expiration, and a Sales Proceeds Advance has
been made, no additional amounts need be remitted by the Servicer; however, the
Servicer will relinquish all rights to reimbursement of that Sales Proceeds
Advance.
Extensions
The Servicing Agreement will provide that no extensions of a Specified
Lease may be granted, except that for operational and administrative purposes,
the Servicer may, on behalf of the Trust, extend up to six months the Maturity
Date of a Specified Lease or accelerate the Maturity Date of a Specified Lease.
If any such extension of a Maturity Date exceeds six months, the Servicer will
be required to repurchase the Specified Lease by making a Reallocation Payment.
Notification of Liens and Claims
The Servicer will be required to notify as soon as practicable the
Transferor - in the event that BMW FS is not acting as the Servicer, the
Indenture Trustee and the Origination Trustee of all liens or claims of any kind
of a third party that would materially and adversely affect the interests of,
among others, the Transferor or the Origination Trust in any Specified Lease or
Specified Vehicle. When the Servicer becomes aware of any such lien or claim
with respect to any Specified Lease or Specified Vehicle, it will take whatever
action it deems reasonably necessary to cause that lien or claim to be removed.
Advances
On each Deposit Date, the Servicer will be obligated to make, by
deposit into the SUBI Collection Account, a Monthly Payment Advance in respect
of the unpaid Monthly Payment of certain Specified Vehicles and a Sales Proceeds
Advance in respect of the Securitization Value of Specified Leases relating to
certain Matured Vehicles. An "Advance" refers to either a Monthly Payment
Advance or a Sales Proceeds Advance. The Servicer will be required to make an
Advance only to the extent that it determines that such Advance will be
recoverable from future payments or collections on the related Specified Lease
or Specified Vehicle or otherwise. In making Advances, the Servicer will assist
in maintaining a regular flow of scheduled payments on the Specified Leases and,
accordingly, in respect of the Program Operating Lease and the Senior Notes,
rather than guarantee or insure against losses. Accordingly, all Advances will
be reimbursable to the Servicer, without interest, as described in this
prospectus.
Monthly Payment Advances. If a User-Lessee does not make a Monthly
Payment billed to the User-Lessee for the related Collection Period, the
Servicer will advance the Monthly Payment due by the User-Lessee (a "Monthly
Payment Advance").
The Servicer will be entitled to reimbursement of all Monthly Payment
Advances. The Servicer will offset, on an ongoing basis, from amounts collected
or received in respect of the SUBI Assets, an amount to repay Monthly Payment
Advances where a Monthly Payment Advance amount has been recovered in a
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subsequent payment made by the related User-Lessee of the Total Monthly Payment
due, or the Monthly Payment Advance has been outstanding for at least 90 days
after the due date of the invoice in respect of which such Monthly Payment
Advance was made (collectively, "Daily Advance Reimbursement").
Sales Proceeds Advances. If, during a Collection Period, the Servicer
has not sold a Specified Vehicle that became a Matured Vehicle during that
Collection Period, on the related Deposit Date the Servicer may, at its option
advance the Securitization Value of the related Specified Lease to the Trust
(each, a "Sales Proceeds Advance").
After the Servicer makes a Sales Proceeds Advance for a Matured
Vehicle, the Trust will have no claim against or interest in that Matured
Vehicle or any Sales Proceeds resulting from its sale or other disposition
except with respect to Residual Value Surplus. If the Servicer sells a Matured
Vehicle after making a Sales Proceeds Advance, the Trust will retain the Sales
Proceeds Advance and the Servicer will retain the Sales Proceeds up to the
Securitization Value of the related Specified Lease, and will deposit the
Residual Value Surplus into the SUBI Collection Account, which will be
transferred on the related Deposit Date to the Residual Value Surplus Account.
If the Servicer has not sold a Matured Vehicle within 90 days after it
has made a Sales Proceeds Advance, it will be reimbursed for that Sales Proceeds
Advance from the SUBI Collection Account. Within [60 days] of receiving that
reimbursement, if the related Specified Vehicle has not been sold, the Servicer
shall cause that Specified Vehicle to be sold at auction and shall remit the
proceeds associated with the disposition of that Specified Vehicle to the SUBI
Collection Account.
Insurance on the Specified Vehicles
Each Specified Lease will indicate that the related User-Lessee will be
required to maintain in full force and effect during the related Lease Term a
comprehensive collision, public liability, property damage and physical damage
insurance policy covering the actual cash value of the related Specified Vehicle
and naming BMW FS as loss payee and as additional insured. Because User-Lessees
may choose their own insurers to provide the required coverage, the actual terms
and conditions of their policies may vary. If a User-Lessee fails to obtain or
maintain the required insurance, the related Specified Lease will be in default
and the Servicer may either obtain insurance on behalf of, and at the expense
of, the Lessee or deem the related Lease in default. In that event, it is the
practice of the Servicer to repossess the related Specified Vehicle.
BMW FS does not require User-Lessees to carry credit disability, credit
life or credit health insurance or other similar insurance coverage that
provides for payments to be made on the Specified Leases on behalf of the
User-Lessees in the event of disability or death. To the extent that this type
of insurance coverage is obtained on behalf of a User-Lessee, payments received
in respect of the coverage may be applied to payments on the related Specified
Lease only to the extent that the User-Lessee's beneficiary chooses to do so.
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Realization Upon Charged-off Specified Leases
The Servicer will use commercially reasonable efforts to repossess and
liquidate Defaulted Vehicles. Such liquidation may be effected through
repossession of that Defaulted Vehicles and their disposition through sale, or
the Servicer may take any other action permitted by applicable law. The Servicer
may enforce all rights of BMW FS under the related Default Termination Lease,
sell that Defaulted Vehicle in accordance with such Default Termination Lease
and commence and pursue any proceedings in connection with such Default
Termination Lease. 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 in the servicing of closed-end retail automobile leases,
and in each case in compliance with applicable law, and to the extent more
exacting, the practices and procedure used by the Servicer in respect of any
leases serviced by it for its own account. The Servicer will be responsible for
all costs and expenses incurred in connection with the sale or other disposition
of Defaulted Vehicles, but will be entitled to reimbursement to the extent such
costs constitute Disposition Expenses or are expenses recoverable under an
applicable insurance policy. Proceeds from the sale or other disposition of
repossessed Specified Vehicles will constitute Termination Proceeds and will be
deposited into the SUBI Collection Account. To the extent not otherwise covered
by Sales Proceeds or Termination Proceeds, the Servicer will be entitled to
reimbursement of all Disposition Expenses from amounts on deposit in the
Residual Value Surplus Account upon presentation to the Indenture Trustee of an
officer's certificate of the Servicer. Collections in respect of a Collection
Period will include all Sales Proceeds and Termination Proceeds collected during
that Collection Period.
Servicer Records, 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 Specified Leases. Upon the occurrence and continuance of a
Servicer Default 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 Specified
Leases to a successor servicer.
The Servicer will perform some monitoring and reporting functions on
behalf of the Transferor, the Trust, the Trustees and the Senior Noteholders,
including the preparation and delivery to the Indenture Trustee, the Origination
Trustee and each Rating Agency, on or before each Determination Date, of a
quarterly certificate setting forth all information necessary to make all
distributions required in respect of the related Collection Period, and the
preparation and delivery of quarterly statements setting forth the information
described under "Additional Information Regarding the Securities--Statements to
Securityholders", and an annual officer's certificate specifying the occurrence
and status of any Servicer Default.
Evidence as to Compliance
Under the Servicing Agreement, on or before [April 30] of each year,
beginning [April 30, 2001], a firm of nationally recognized independent
accountants will furnish the Trust with a statement as to compliance by the
Servicer during the preceding 12 months ended December 31 - or since the Closing
Date in the case of the first such statement.
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The Servicing Agreement will also provide for the delivery to the
Trust, on or before [April 30] of each year, beginning [April 30, 2001], of a
certificate, signed by an officer of the Servicer, stating that there has been
no Servicer Default during the preceding 12 months ended December 31 - or since
the Closing Date in the case of the first such certificate - or, if there has
been any Servicer Default, describing each such default.
Copies of such statements and certificates may be obtained by Senior
Noteholders or Senior Note Owners by a request in writing addressed to the
Indenture Trustee or the Owner Trustee, as the case may be, at the related
Corporate Trust Office.
Servicing Compensation
The Servicer will be entitled to compensation for the performance of
its servicing and administrative obligations with respect to the SUBI Assets
under the Servicing Agreement. The Servicer will be entitled to receive a fee in
respect of the SUBI Assets allocable to the SUBI equal to, for each month in the
related Collection Period (each, a "Collection Period"), one-twelfth of the
product of (a) 1.00% and (b) the aggregate Securitization Value of all Specified
Leases as of the first day of that Collection Period (the "Servicing Fee"). The
Servicing Fee will be payable on each Payment Date in respect of the related
Collection Period and will be calculated and paid based upon a 360-day year
consisting of twelve 30-day months.
The Servicer will also be entitled to additional compensation in the
form of expense reimbursement, administrative fees, disposition fees or similar
charges paid with respect to the Specified Leases, including any late payment
fees now or later in effect, and investment earnings on amounts in The SUBI
Collection Account. The Servicer will pay all expenses incurred by it in
connection with its servicing and administration activities under the Servicing
Agreement and will not be entitled to reimbursement of such expenses, except to
the extent such expenses constitute Disposition Expenses.
The Servicing Fee will compensate the Servicer for performing the
functions of a third party servicer of the Specified Leases as an agent for the
Origination Trust under the Servicing Agreement, including collecting and
processing payments, responding to inquiries of User-Lessees, investigating
delinquencies, sending payment statements, paying costs of the sale or other
disposition of Matured Vehicles and Defaulted Vehicles, overseeing the SUBI
Assets and administering the Specified Leases, including making Advances,
accounting for collections, furnishing monthly and annual statements to the
Origination Trustee with respect to distributions and generating federal income
tax information.
Servicer Agent Resignation and Termination
The Servicer may not resign from its obligations and duties under the
Servicing Agreement unless it determines that its duties thereunder are no
longer permissible by reason of a change in applicable law or regulations. No
such resignation will become effective until a successor servicer has assumed
the Servicer's obligations under the Servicing Agreement. The Servicer may not
assign the Servicing Agreement or any of its rights, powers, duties or
obligations thereunder except as otherwise provided therein or except in
connection with a consolidation, merger, conveyance, transfer or lease made in
compliance with the Servicing Agreement.
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The rights and obligations of the Servicer under the Servicing
Agreement may be terminated following the occurrence and continuance of an
Servicer Default, as described under "--Servicer Defaults".
Indemnification by the Servicer
The Servicer will indemnify the Trustees and their respective agents
for any loss, liability, claim, damage or expense 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 but only to the extent
such liability arose out of the Servicer's negligence, willful misconduct, bad
faith or recklessness.
Servicer Defaults
The following are among the events that would constitute "Servicer
Defaults" under the Servicing Agreement:
(a) any failure by the Servicer to deliver to (1) the Origination
Trustee for distribution to holders of interests in the UTI,
the SUBIs or any Other SUBI, (2) the Indenture Trustee for
distribution to the Noteholders or (3) the Owner Trustee for
distribution to the Certificateholders, any required payment,
which failure continues unremedied for five Business Days
after discovery thereof by an officer of the Servicer or
receipt by the Servicer of notice thereof from the Indenture
Trustee, the Trustee or Senior Noteholders or
Certificateholders evidencing not less than 50% of the
aggregate principal balance of the Securities, voting together
as a single class;
(b) any failure by the Servicer to duly 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
UTI, the SUBIs or any Other SUBI or the Senior Noteholders or
Certificateholders, and which continues unremedied for 90 days
after written notice thereof is given as described in clause
(a) above;
(c) any failure by the Servicer to deliver to the Origination
Trustee any report required to be delivered to the Origination
Trustee or the Trust pursuant to the Servicing Agreement
within 30 Business Days after the date that report is due;
(d) any failure to deliver to the Indenture Trustee any report
required to be delivered to the Indenture Trustee or the Trust
pursuant to the Basic Documents, which failure continues for
30 Business Days after discovery of that failure by an officer
of the Servicer or receipt by the Servicer of written notice
thereof from the Indenture Trustee;
(e) any representation, warranty or statement of the Servicer made
in the Servicing Agreement, any other Basic Document 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 when made, which failure materially and
adversely affects the rights of holders of interests in the
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UTI, the SUBIs or any Other SUBI or the Senior Noteholders or
the Certificateholders, and which failure continues unremedied
for 30 days after written notice thereof is given as described
in clause (a) above;
(f) any failure by the Servicer to maintain or pay when due any
premium in respect of any Contingent and Excess Liability
Insurance Policy; and
(g) the occurrence of certain events of bankruptcy, insolvency,
receivership or liquidation in respect of the Servicer;
provided, however, that the occurrence of any event set forth
in clauses (a) through (f) with respect to either 2000-A SUBI
will be an Servicer Default only with respect to the SUBIs and
will not be an Servicer Default with respect to the UTI or any
Other SUBI.
Notwithstanding the foregoing, a delay in or failure of performance referred to
under clause (b) for a period of 120 days, under clause (c) for a period of 45
Business Days or under clause (e) for a period of 60 days, will not constitute
an Servicer Default if that failure or delay was caused by force majeure or
other similar occurrence. Upon the occurrence of any such event, the Servicer
will 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 will provide to the Indenture Trustee, the
Origination Trustee, the Transferor and the Securityholders prompt notice of
such failure or delay by it, together with a description of its efforts to so
perform its obligations.
Upon the occurrence of any Servicer Default, the sole remedy available
to the holders of the UTI, the SUBIs and any Other SUBIs will be to remove the
Servicer and appoint a successor Servicer. However, if the commencement of a
bankruptcy or similar case or proceeding were the only default, the Servicer or
its trustee-in-bankruptcy might have the power to prevent that removal. See
"--Removal or Replacement of the Servicer".
Termination
The Servicing Agreement will terminate upon the earlier to occur of (a)
the dissolution of the Origination Trust or (b) the discharge of the Servicer in
accordance with the terms of the Servicing Agreement, which will effect a
termination only with respect to the SUBI Assets and not with respect to any
other Origination Trust Assets.
Removal or Replacement of the Servicer
Upon the occurrence of an Servicer Default, the Origination Trustee
may, to the extent such Servicer Default relates to the SUBI Assets, upon the
direction of the holder and pledge of the SUBI Certificates, terminate all of
the rights and obligations of the Servicer under the Servicing Agreement with
respect to the SUBI Assets. For purposes of the immediately preceding sentence,
the holder and pledgee of the SUBI Certificates will be the Indenture Trustee
acting at the direction of Senior Noteholders holding not less than 66 2/3% of
the aggregate principal balance of the Senior Notes, so long as any Senior Notes
are outstanding. In each case, the Origination Trustee will effect that
termination by delivering notice thereof to the Servicer, with a copy to each
Rating Agency or any other securities based on any Other SUBIs affected by that
Servicer Default.
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Upon the termination or resignation of the Servicer, the Servicer
subject to that termination or removal will continue to perform its functions as
Servicer, in the case of (a) termination, until the earlier of the date
specified in the termination notice or, if no such date is specified therein,
the date of the Servicer's receipt of such notice, and (b) resignation, until
the later of (1) 45 days after the delivery to the Origination Trustee of the
written resignation notice or (2) the date upon which the resigning Servicer
becomes unable to act as Servicer, as specified in the resignation notice and
accompanying opinion of counsel.
In the event of a termination of the Servicer as a result of an
Servicer Default with respect to the SUBI Assets only, the Origination Trustee,
acting at the direction of the holder and pledgee of the SUBI Certificates -
which holder for this purpose will be the Indenture Trustee, acting at the
direction of Senior Noteholders holding not less than 66 2/3% of the aggregate
principal balance of the Senior Notes - will appoint a successor Servicer. The
Origination Trustee will have the right to approve that successor Servicer, and
that approval may not be unreasonably withheld. If a successor Servicer is not
appointed by the effective date of the predecessor Servicer's resignation or
termination, then the Origination Trustee will act as successor Servicer. If the
Origination Trustee is legally unable to act as Servicer, then the Origination
Trustee will be required to appoint, or petition a court of competent
jurisdiction to appoint, any established entity the regular business of which
includes the servicing of truck, tractor and trailer leases as the successor
Servicer.
Upon appointment of a successor Servicer, the successor Servicer will
assume all of the rights and obligations of the Servicer under the Servicing
Agreement; provided, however, that no successor Servicer will have any
responsibilities with respect to making Advances. Any compensation payable to a
successor Servicer may not be in excess of that permitted the predecessor
Servicer unless the holders of the UTI, the SUBIs and any Other SUBIs, as the
case may be, bear such excess costs exclusively. If a bankruptcy trustee or
similar official has been appointed for the Servicer, that trustee or official
may have the power to prevent the Indenture Trustee, the Owner Trustee, the
Senior Noteholders or the Certificateholders from effecting that transfer of
servicing. The predecessor Servicer will have the right to be reimbursed for any
outstanding Advances made with respect to the SUBI Assets to the extent funds
are available therefore in respect of the Advances made.
Miscellaneous Provisions
Amendment Provisions
General. For so long as any Senior Notes are outstanding, the Trust's
rights in the SUBI Certificates will be subject to the lien of the Indenture.
The Indenture Trustee will be the holder of the SUBI Certificates for purposes
of determining whether any proposed amendment to the SUBI Trust Agreement, the
Servicing Agreement or the Trust Agreement will materially adversely affect the
interests of the holders of the SUBI Certificates.
Amendment of the SUBI Trust Agreement and the Servicing Agreement. Each
of the SUBI Trust Agreement and the Servicing Agreement may be amended without
the consent of the holders of the Senior Notes, the Certificateholders, the SUBI
Certificates, the UTI Certificates or any Other SUBI Certificates, as the case
may be; provided, that any such action will not, in the good faith judgment of
the parties thereto, materially and adversely affect the interest of any of such
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holders. Each of the SUBI Trust Agreement Supplement and the Servicing Agreement
Supplement may also be amended from time to time as it relates to either 2000-A
SUBI, by the parties thereto, including to change the manner in which the
Residual Value Surplus Account or the Reserve Fund is funded, including the
elimination of the Residual Value Surplus Account or the Reserve Fund, or to
change the remittance schedule for depositing Collections and other amounts into
the SUBI Collection Account,
o upon confirmation from each Rating Agency to the effect that
such amendment would not cause its then-current rating on any
class of the Senior Notes or Certificates to be qualified,
reduced or withdrawn, or
o upon receipt of the consent of Senior Noteholders holding at
least a majority of the aggregate principal balance of the
Senior Notes and, to the extent affected thereby, the consent
of Certificateholders holding at least a majority of the
aggregate principal balance of the Certificates,
for the purpose of adding any provision to, or changing in any manner or
eliminating any provision of, the agreements or modifying in any manner the
rights of the Senior Notes or Certificates; provided, however, that
o no such amendment may increase or reduce in any manner the
amount of, or accelerate or delay the timing of, collections
of payments in respect of the SUBI or the SUBI Certificates,
distributions required to be made on the Senior Notes or the
Certificates or any Interest Rate or the Certificate Rate, and
o no amendment of any type shall reduce the percentage of the
aggregate principal amount of the Senior Notes and the
Certificates required to consent to any such amendment, in
each case without the consent of all the holders or 100% of
all outstanding Senior Notes or Certificates, as the case may
be and an opinion of counsel as to certain tax matters is
delivered.
To the extent that any such amendment also relates to or affects the UTI or any
Other SUBI, such amendment will require the consent of the holders affected
thereby. Notwithstanding the foregoing, the SUBI Trust Agreement and the
Servicing Agreement may be amended at any time by the parties thereto to the
extent reasonably necessary to assure that none of the Origination Trust, the
Trust or the Transferor will be classified as an association, or a publicly
traded partnership, taxable as a corporation for federal income tax purposes.
Amendment of the Trust Agreement. The Trust Agreement may be amended by
the Transferor and the Owner Trustee without the consent of any of the Senior
Noteholders or Certificateholders to cure any ambiguity, correct or supplement
any of its provisions that may be inconsistent with any other provision in the
Trust Agreement, add any other provisions with respect to matters or questions
arising under the Trust Agreement that are not inconsistent with the provisions
of the Trust Agreement or add or amend any provision in the agreement in
connection with permitting transfers of the Subordinated Notes or the
Certificates; provided, however, that this action shall not materially adversely
affect the interests of the holders of the SUBI Certificates - which, so long as
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any Senior Notes are outstanding, shall include the Indenture Trustee - or any
the Senior Notes or Certificates.
The Trust Agreement may also be amended from time to time by the
Transferor and the Owner Trustee,
o with prior written notice to each Rating Agency and
confirmation from each Rating Agency that such amendment would
not cause the then-current ratings assigned to each class of
Senior Notes and the Certificates to be qualified, reduced or
withdrawn,
o with the consent of the Senior Noteholders holding at least a
majority of the aggregate principal balance of the Senior
Notes and
o to the extent affected thereby, the consent of the holders of
the Subordinated Notes holding at least a majority of the
aggregate principal balance of the Subordinated Notes, and
Certificateholders holding at least a majority of the
aggregate principal balance of the Certificates,
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of the Trust Agreement or of modifying in any
manner the rights of the Senior Noteholders, the Certificateholders or the
holders of the Subordinated Notes. No such amendment shall, however,
o increase or reduce in any manner the amount of, or accelerate
or delay the timing of, distributions that are required to be
made on the Notes or the Certificates, or
o reduce the percentage of the Senior Noteholders, holders of
the Subordinated Notes or Certificateholders required to
consent to any such amendment,
without the consent of the holders of 100% of all outstanding Certificates other
than the Transferor Certificate, and provided, further that an opinion of
counsel shall be furnished to the Indenture Trustee and the Owner Trustee to the
effect that such amendment shall not (1) affect the treatment of the Senior
Notes as debt for federal income tax purposes, (2) be deemed to cause a taxable
exchange of the Senior Notes for federal income tax purposes or (3) cause the
Trust or the SUBI Certificates to be classified as an association, or a publicly
traded partnership, taxable as a corporation for federal income tax purposes.
Notwithstanding the foregoing, the Trust Agreement may be amended at any time by
the parties thereto to the extent reasonably necessary to assure that none of
the Origination Trust, the Trust or the Transferor will be classified as an
association, or a publicly traded partnership, taxable as a corporation for
federal income tax purposes.
The Trust Agreement may also be amended from time to time to approve
additional Trust activities and purposes upon the request of holders of at least
75% of the outstanding balance of the Certificates provided; however, that any
such amendment will also require
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o that each Rating Agency have delivered a letter to the effect
that the activities and purposes would not cause its
then-current ratings of the Senior Notes or the Certificates
to be qualified, reduced or withdrawn, and
o approval by holders of at least 75% of the outstanding balance
of the Senior Notes, or if the Senior Notes are no longer
outstanding, by the Subordinated Noteholder.
See "The Trust--Formation".
The Trust Agreement will require the Owner Trustee to give the
Certificateholders 30 days' written notice of any proposed amendment to the
Indenture which would materially adversely affect the Certificateholders if the
consent of the Senior Noteholders is not required or any other amendment or
supplement to any other Basic Document unless the Owner Trustee is furnished
with an opinion of counsel that such amendment would not materially adversely
affect the Certificateholders. The Trust Agreement provides that the Owner
Trustee will not enter into such amendment unless Certificateholders holding 25%
or more of the aggregate principal balance of the Certificates consent in
writing.
Amendment of the Indenture. Without the consent of the Senior
Noteholders but with prior notice to each Rating Agency, the Owner Trustee, on
behalf of the Trust, and the Indenture Trustee, upon request by the Trust, may
execute a supplemental indenture for the purpose of adding to the covenants of
the Trust, curing any ambiguity, correcting or supplementing any provision that
may be inconsistent with any other provision or adding any other provision with
respect to matters or questions arising under the Indenture that will not be
inconsistent with other provisions of the Indenture.
Without the consent of the holder of each outstanding Senior Note
affected thereby, no supplemental indenture may:
o change the Final Scheduled Payment Date of, or Interest Rate
on, reduce the principal amount thereof, or the Redemption
Price with respect thereto or change any place of payment
where, or the coin or currency in which, any class of Senior
Notes or the interest thereon is payable:
o impair any right to institute suit for the enforcement of
certain provisions of the Indenture regarding payment:
o reduce the percentage of the aggregate principal balance of
the Senior Notes the consent of the holders of which is
required for any supplemental indenture or for any waiver of
compliance with certain provisions of the Indenture or of
certain defaults thereunder and their consequences as provided
for therein:
o modify or alter the provisions of the Indenture regarding the
voting of Senior Notes held by the Transferor, the Servicer or
any of their respective affiliates or any User-Lessee on the
Senior Notes:
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o reduce the percentage of the aggregate principal balance of
Senior Notes the consent of the holders of which is required
to direct the Indenture Trustee to sell or liquidate the Trust
Estate, if the proceeds of that sale would be insufficient to
pay the aggregate principal balance and accrued but unpaid
interest on the Senior Notes;
o decrease the percentage of the aggregate principal balance of
Senior Notes required to amend the sections of the Indenture
that specify the applicable percentage of the aggregate
principal balance of Senior Notes necessary to amend the
Indenture or the other Basic Documents; or
o permit the creation of any lien ranking prior to or on a
parity with the lien of the Indenture with respect to any of
the collateral for the Senior Notes or, except as otherwise
permitted by or contemplated in the Indenture, terminate the
lien of the Indenture on any such collateral or deprive the
holder of any Senior Note of the security afforded by the lien
of the Indenture.
The Trust and the Indenture Trustee may also enter into supplemental
indentures, with the consent of holders of at least a majority of the aggregate
principal balance of the Senior Notes, and with written notice to each Rating
Agency, for the purpose of adding any provision to, changing in any manner or
eliminating any provision of the Indenture or for the purpose of modifying in
any manner the rights of the Senior Noteholders; provided, that
o such action will not, (1) materially adversely affect the
interests of any Senior Noteholder and (2) as confirmed by
each Rating Agency, cause the then-current rating of any class
of Senior Notes or the Certificates to be qualified, reduced
or withdrawn, and
o an opinion of counsel as to certain tax matters is delivered.
Amendment of the Program Operating Lease. The Program Operating Lease
may be amended without the consent of the Senior Noteholders or the
Certificateholders; provided, however, that
o such amendment may not materially adversely affect the
interests of the Senior Noteholders or the Certificateholders,
unless 100% of the Senior Noteholders and Certificateholders
materially adversely affected consent thereto,
o as confirmed by each Rating Agency, that amendment will not
cause the then-current rating assigned to any Senior Notes or
the Certificates to be qualified, withdrawn or reduced, and
o an opinion of counsel as to certain tax matters is delivered.
Notwithstanding the foregoing, the Program Operating Lease may be amended at any
time by the parties thereto to the extent reasonably necessary to ensure that
none of Origination Trust, the Trust or the Transferor will be classified as an
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association, or a publicly traded partnership, taxable as a corporation for
federal income tax purposes.
Amendment of the SUBI Certificate Transfer Agreement. The SUBI
Certificate Transfer Agreement may be amended from time to time by the parties
thereto.
Amendment of the Issuer SUBI Certificate Transfer Agreement. The Issuer
SUBI Certificate Transfer Agreement may be amended from time to time by the
parties thereto.
Amendments Generally. Each amendment described above shall be deemed
not to materially and adversely affect the interests of any holder of Senior
Notes, if the Rating Agencies confirm the amendment will not result in the
withdrawal, qualification or reduction of the then-current rating of any class
of Senior Notes.
Bankruptcy Provisions
The UTI Beneficiary and the Origination Trust. The Trustees, the UTI
Beneficiary, any Paying Agent, the Transferor, BMW FS, the Servicer, each holder
of an interest in the SUBI, any Other SUBI or the UTI, and each Securityholder,
by accepting the related Security, including each Senior Noteholder, by
accepting a beneficial interest in the related Senior Notes (collectively, the
"Non-Petition Parties"), will covenant that for a period of one year and one day
after payment in full of all amounts due to each holder or pledgee of an
interest in the UTI, the SUBIs or any Other SUBI, they will not institute, or
join in instituting, any bankruptcy, reorganization, insolvency or liquidation
proceeding or other similar proceeding against the UTI Beneficiary or the
Origination Trust. Notwithstanding the foregoing, each Securityholder, the
Indenture Trustee and the Owner Trustee may institute or join any such
proceeding if 100% of the holders of the SUBI and any Other SUBIs consent,
excluding the UTI Beneficiary, the Transferor and any of their respective
affiliates. Each pledgee of the UTI, the SUBIs or any Other SUBI must give a
similar non-petition covenant.
The Transferor and the Trust. Each of the Servicer, the Transferor, the
Owner Trustee, the Indenture Trustee and each Securityholder, by accepting the
related Security, including each Senior Noteholder, by accepting a beneficial
interest in the related Senior Notes, will covenant not to institute or join in
instituting any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other similar proceeding against the Transferor or
the Trust for a period of one year and one day after the Senior Notes and the
Certificates have been paid in full; provided, however, that 100% of the Senior
Noteholders, or, if no Senior Notes are then outstanding, the Subordinated
Noteholder, or, if no Notes are then outstanding, 100% of the
Certificateholders, in each case excluding the Transferor and any of its
affiliates, may at any time institute or join in instituting any bankruptcy,
reorganization, insolvency or liquidation proceeding against the Transferor or
the Trust.
Senior Notes or Certificates Owned by the Trust, Transferor, Servicer
or their Affiliates
Any Senior Notes or Certificates owned by the Trust, the Transferor,
the Servicer or any of their respective affiliates will be entitled to benefits
under the Indenture or the Trust Agreement, as the case may be, equally and
proportionately to the benefits afforded other owners of the Senior Notes or
Certificates, respectively, except that such Senior Notes or Certificates will
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be deemed not to be outstanding for the purpose of determining whether the
requisite percentage of Senior Noteholders or Certificateholders, as the case
may be, have given any request, demand, authorization, direction, notice,
consent or other action under the Basic Documents.
Fees and Expenses
The Origination Trustee. The Origination Trustee will be entitled to
reasonable compensation for its services with respect to the SUBI Assets, which
will be paid by the Servicer, the amount of which will be agreed upon from time
to time by the Origination Trustee and the Servicer.
The Servicer. As more fully described under "--The Servicing
Agreement--Servicing Compensation", as compensation for the servicing of the
SUBI Assets and administering the distribution of funds in respect thereof, the
Servicer will be entitled to receive the Servicing Fee on each Payment Date,
together with reimbursement of fees and expenses and any late payment fees now
or later in effect or similar charges paid with respect to the Specified Leases.
The Servicer will pay all expenses incurred by it in the performance of
its duties under the Servicing Agreement, including fees and disbursements of
independent accountants, taxes imposed on the Servicer and expenses incurred in
connection with distributions and reports to the Trustees. The Servicer will pay
the fees and expenses of the Trustees.
The Indenture Trustee. As more fully described under "Additional
Document Provisions--The Indenture--Compensation and Indemnity", the
Administrator will pay the Indenture Trustee compensation for its services and
reimburse it for its reasonable expenses relating thereto.
The Owner Trustee and Paying Agent. The Administrator will pay the
Owner Trustee and each Paying Agent such fees as have been agreed upon among the
Transferor, the Administrator and the Owner Trustee or the Paying Agent, and
will reimburse the Owner Trustee and each Paying Agent for their reasonable
expenses. The Administrator will not be entitled to be reimbursed from the Trust
Estate for the payment of such expenses.
Governing Law. The SUBI Trust Agreement and the Trust Agreement will be
governed by the laws of the State of Delaware. The Servicing Agreement, the
Indenture, the SUBI Certificate Transfer Agreement, the Issuer SUBI Certificate
Transfer Agreement and the Program Operating Lease will be governed by the laws
of the State of New York.
ADDITIONAL LEGAL ASPECTS OF THE ORIGINATION TRUST AND THE SUBIS
The Origination Trust
General
The Origination Trust is a business trust under Delaware law. In a
business trust, the trust property is managed for the profit of the
beneficiaries, as opposed to a common law "asset preservation" trust, where the
trustee is charged with the mere maintenance of trust property. The principal
requirement for the formation of a business trust in Delaware is the execution
of a trust agreement and the filing of a Certificate of Trust with the Secretary
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of State of the State of Delaware. The Origination Trust has been so formed. The
Origination Trust has also made trust filings or obtained certificates of
authority to transact business in some states where, in the judgment of the
Servicer, such action may be required.
Because the Origination Trust has been registered as a business trust
for Delaware and other state law purposes, it, like a corporation, may be
eligible to be a debtor in its own right under the United States Bankruptcy Code
(the "Bankruptcy Code"), as further described under "--Insolvency-Related
Matters". To the extent that the Origination Trust may be eligible for relief
under the Bankruptcy Code or similar applicable state laws (the "Insolvency
Laws"), the Origination Trustee is not authorized to commence a case or
proceeding thereunder. Each of the Origination Trustee, the UTI Beneficiary and
the holders from time to time of the UTI, the SUBIs and any Other SUBI have
agreed not to institute a case or proceeding against the Origination Trust under
any Insolvency Law for a period of one year and one day after payment in full of
all distributions to holders of the UTI, the SUBIs and any Other SUBI under the
Origination Trust Agreement. See "Additional Document Provisions--Miscellaneous
Provisions--Bankruptcy Provisions".
Notwithstanding the foregoing, claims against Origination Trust Assets could
have priority over the beneficial interest in those assets represented by the
SUBIs. Additionally, 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.
Structural Considerations
Unlike many structured financings in which the holders of the related
securities have a direct ownership interest or a perfected security interest in
the underlying assets being securitized, the Trust will not directly own the
SUBI Assets. Instead, the Origination Trust will own the Origination Trust
Assets, including the SUBI Assets, and the Origination Trust will take actions
with respect thereto in the name of the Origination Trust on behalf of and as
directed by the beneficiaries of the Origination Trust (i.e., the holders of the
UTI Certificate, the SUBI Certificates and all Other SUBI Certificates). The
primary asset of the Trust will be the SUBI Certificates evidencing a 100%
beneficial interest in the SUBI Assets, and the Owner Trustee will take action
with respect thereto in the name of the Trust and on behalf of the
Securityholders and the Transferor. Beneficial Interests in the Specified Leases
and the Specified Vehicles represented by the SUBI Certificates, rather than
direct legal ownership. are transferred under this structure in order to avoid
the administrative difficulty and expense of retitling the Specified Vehicles in
the name of the transferee. The Servicer and/or the Origination Trustee will
segregate the SUBI Assets from the other Origination Trust Assets on the books
and records each maintains for such assets. Neither the Servicer nor any holders
of other beneficial interests in the Origination Trust will have rights in the
SUBI Assets and, except under the limited circumstances described under
"--Allocation of Origination Trust Liabilities", payments made on any
Origination Trust Assets other than the SUBI Assets will be unavailable to make
payments on the Securities or to cover expenses of the Origination Trust
allocable to the SUBI Assets.
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Allocation of Origination Trust Liabilities
The Origination Trust Assets are comprised of several portfolios of
Other SUBI Assets, together with the SUBI Assets and the UTI Assets. The UTI
Beneficiary may in the future pledge the UTI as security for obligations to
third-party lenders, 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. Pursuant to the Origination Trust Agreement, as among the
beneficiaries of the Origination Trust, an Origination Trust liability relating
to a particular portfolio of Origination Trust Assets will be allocated to and
charged against the portfolio of Origination Trust Assets to which it belongs.
Origination Trust liabilities incurred with respect to the Origination Trust
Assets generally will be borne pro rata among all portfolios of Origination
Trust Assets. The Origination Trustee and the beneficiaries of the Origination
Trust, including the Trust, will be bound by that allocation. In particular, the
Origination Trust Agreement will require the holders from time to time of the
UTI Certificates and any Other SUBI Certificates to waive any claim they might
otherwise have with respect to the SUBI Assets and to fully subordinate any
claims to the SUBI Assets in the event that such waiver is not given effect.
Similarly, by virtue of holding Senior Notes or a beneficial interest therein,
Senior Noteholders, and Note Owners will be deemed to have waived any claim they
might otherwise have with respect to the UTI Assets or any Other SUBI Assets.
See "Additional Document Provisions--The SUBI Trust Agreement--The SUBIs, Other
SUBIs and the UTI".
The Origination Trust Assets are located in several states, the tax
laws of which vary. Additionally, the Origination Trust may in the future own
Leases and Leased Vehicles located in states other than the states in which it
conducts business as of the date of this prospectus. In the event any state or
locality imposes a tax on the Origination Trust at the entity level, the UTI
Beneficiary have agreed to indemnify the holders of the SUBI Certificates, and
each Other SUBI Certificate for the full amount of such taxes. Should the UTI
Beneficiary fail to fulfill their respective indemnification obligations,
amounts otherwise distributable to them as holders of the UTI Certificates will
be applied to satisfy such obligations. However, it is possible that Senior
Noteholders could incur a loss on their investment in the event the UTI
Beneficiary did not have sufficient assets available, including distributions in
respect of the UTI, to satisfy such state or local tax liabilities.
The Origination Trust Agreement provides for the UTI Beneficiary to be
liable as if the Origination Trust were a partnership and the UTI Beneficiary
were general partners of the partnership to the extent necessary after giving
effect to the payment of liabilities allocated severally to the holders of the
SUBI Certificates and any Other SUBI Certificates. However, it is possible that
the Senior Noteholders and Certificateholders could incur a loss on their
investment to the extent any such claim were allocable to the Trust as the
holder of the Vehicle SUBI Certificate or the pledgee of the Lease SUBI
Certificate, either because a lien arose in connection with the SUBI Assets or
in the event the UTI Beneficiary did not have sufficient assets available,
including distributions in respect of the UTI, to satisfy such claimant or
creditor in full.
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The SUBIs
The SUBIs will evidence a beneficial interest in the related SUBI
Assets. The SUBIs will represent neither a direct legal interest in the related
SUBI Assets, nor an interest in any Origination Trust Assets other than the
related SUBI Assets. Under the allocation of Origination Trust liabilities
described under "Additional Document Provisions--The SUBI Trust Agreement--The
SUBIs, 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 Senior
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 Specified
Lease or a Specified Vehicle will be borne by the holders of the related SUBI,
including the Trust. If any such liability arises from a Lease or Leased Vehicle
that is an Other SUBI Asset or an UTI Asset, the SUBI Assets will not be subject
to such liability.
Because the Trust's primary asset will be the Vehicle SUBI Certificate
and its rights as a pledgee of the Lease SUBI Certificate, the Trust, and,
accordingly, the Indenture Trustee, will have an indirect beneficial ownership
interest, rather than a security interest, in the SUBI Assets allocable to the
related SUBI. Except as otherwise described below or under "Additional Legal
Aspects of the Specified Leases and the Specified Vehicles", generally the Trust
will not have a perfected security interest in the SUBI Assets, and in no
circumstances will the Trust have a direct ownership or perfected security
interest in any Specified Vehicle.
The Trust will generally be deemed to own the Vehicle SUBI Certificate
and, through such ownership, to have an indirect beneficial ownership interest
in the Specified Vehicles. If a court of competent jurisdiction were to
recharacterize the sale of the Vehicle SUBI Certificate to the Trust, the Trust,
or, during the term of the Indenture, the Indenture Trustee, could instead be
deemed to have a perfected security interest in the Vehicle SUBI Certificate,
and certain rights susceptible of perfection under the UCC, but in no event
would the Trust or the Indenture Trustee be deemed to have a perfected security
interest in the Specified Vehicles.
Because the Trust will not directly own the SUBI Assets, and because
its interest therein will generally be an indirect beneficial ownership
interest, perfected liens of third-party creditors of the Origination Trust in
SUBI Assets will take priority over the interests of the Trust and the Indenture
Trustee in the SUBI Assets. Therefore, a general creditor of the Origination
Trust may obtain a lien on one or more SUBI Assets, regardless of whether its
claim would be allocated to such SUBI Assets under the terms of the Origination
Trust Agreement. Such liens could include liens arising under various federal
and state criminal statutes, certain liens in favor of the Pension Benefit
Guaranty Corporation and judgment liens resulting from successful claims against
the Origination Trust arising from the operation of the Specified Vehicles. See
"Risk Factors--If ERISA liens are placed on the assets of the trust, you could
suffer a loss on your investment" and "--Vicarious tort liability may result in
a loss on your investment" and "Additional Legal Aspects of the Specified Leases
and the Specified Vehicles--Vicarious Tort Liability" for a further discussion
of these risks.
Insolvency-Related Matters
As described under "Additional Document Provisions--The SUBI Trust
Agreement--The SUBIs, Other SUBIs and the UTI" and "--The SUBIs", each holder or
pledgee of the UTI Certificates and any Other SUBI Certificate will be required
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to expressly disclaim any interest in the SUBI Assets and to fully subordinate
any claims to the SUBI Assets in the event that disclaimer is not given effect.
Although no assurances can be given, in the unlikely event of the bankruptcy of
BMW LP, the Transferor believes that the SUBI Assets would not be treated as
part of BMW LP's bankruptcy estate and that, even if they were so treated, the
subordination by the holders and pledgees of the UTI Certificates and any Other
SUBI Certificate would be enforceable. In addition, as described under "Risk
Factors--A bankruptcy of the transferor or the servicer could delay or limit
payments to you", each of BMW LP, the Origination Trust, or the Origination
Trustee when acting on its behalf, and the Transferor has taken steps in
structuring the transactions described herein and has undertaken to act
throughout the life of such transactions in a manner intended to ensure that in
the event a voluntary or involuntary case is commenced by or against BMW FS
under the Insolvency Laws, the separate legal existence of each of BMW FS, on
the one hand, and the Origination Trust, BMW LP and the Transferor, on the other
hand, will be maintained such that none of the respective assets and liabilities
of the Origination Trust, BMW LP or the Transferor should be consolidated with
those of BMW FS.
With respect to BMW Auto Leasing LLC, these steps include its creation
as a separate limited liability company under a limited liability company
agreement containing certain limitations, including, the requirement that it
must have at all times a managing member that is a corporation with at least one
independent director, and restrictions on the nature of their businesses and
operations and on their ability to commence a voluntary case or proceeding under
any Insolvency Law without the unanimous affirmative vote of all members,
including each independent member. With respect to BMW LP, these steps include
its creation as a separate, special purpose limited partnership, pursuant to a
limited partnership agreement containing certain limitations (including,
restrictions on the nature of its businesses and on its ability to commence a
voluntary case or proceeding under any Insolvency Law without the unanimous
affirmative vote of all members of its general partners, [including each
independent director] of the managing member).
There can be no assurance, however, that the limitations on the
activities of BMW LP, the Origination Trust and the Transferor, as well as the
restrictions on their abilities to obtain relief under Insolvency Laws or lack
of eligibility thereunder, as described above, would prevent a court from
concluding that their assets and liabilities should be consolidated with those
of BMW FS, if BMW FS becomes the subject of a case or proceeding under any
Insolvency Law. On the Closing Date, Weil, Gotshal & Manges LLP, as special
counsel to the Transferor, will deliver an opinion based on a reasoned analysis
of analogous case law - although there is no precedent based on directly similar
facts - to the effect that, subject to certain facts, assumptions and
qualifications specified in the opinion, under present reported decisional
authority and applicable statutes to federal bankruptcy cases, if BMW FS were to
become a debtor in a case under the Bankruptcy Code, it would not be a proper
exercise by a court of its equitable discretion (a) to disregard the separate
legal existence of any of the Origination Trust, BMW LP or the Transferor from
that of BMW FS and (b) to order the substantive consolidation of the assets and
liabilities of any of the Origination Trust, BMW LP or the Transferor with the
assets and liabilities of BMW FS. Among other things, that opinion will assume
that each of the Origination Trust, or the Origination Trustee when acting on
its behalf, BMW LP and the Transferor will follow certain procedures in the
conduct of its affairs, including maintaining separate records and books of
account from those of BMW FS, not commingling its respective assets with those
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of BMW FS, doing business in a separate office from BMW FS and not holding
itself out as having agreed to pay, or being liable for, the debts of BMW FS. In
addition, that opinion will assume that except as expressly provided by the
Origination Trust Agreement and the Servicing Agreement - each of which contains
terms and conditions consistent with those that would be arrived at on an arm's
length basis between unaffiliated entities in the belief of the parties thereto
- BMW FS generally will not guarantee the obligations of the Origination Trust,
BMW LP or the Transferor to third parties, and will not conduct the day-to-day
business or activities of any thereof, other than in its capacity as Servicer
acting under and in accordance with the Servicing Agreement. Each of BMW FS, the
Origination Trust, BMW LP and the Transferor intends to follow and has
represented that it will follow these and other procedures related to
maintaining the separate identities and legal existences of each of the
Origination Trust, BMW LP and the Transferor. Such a legal opinion, however,
will not be binding on any court.
If a case or proceeding under any Insolvency Law were to be commenced
by or against any of BMW FS, the Origination Trust, BMW LP or the Transferor, if
a court were to order the substantive consolidation of the assets and
liabilities of any of such entities with those of BMW FS or if an attempt were
made to litigate any of the foregoing issues, delays in distributions on the
SUBI Certificates, and possible reductions in the amount of such distributions,
to the Trust - either directly or, if the Program Operating Lease remains in
effect, indirectly to the extent resulting in delayed or reduced Program
Operating Lease Payments from the Transferor to the Trust - and therefore to the
Senior Noteholders, could occur. In addition, the SUBI Trust Agreement provides
that if the Transferor becomes bankrupt or insolvent or the Trust is dissolved -
which could occur as a result of the bankruptcy of the Transferor - the SUBI
will be terminated and the SUBI Trust Agreement will terminate with respect to
the SUBI. In each case, the Origination Trustee will be required to distribute
the SUBI Assets to the holders of the SUBI Certificates. Because the Trust has
pledged its rights in and to the SUBI Certificates to the Indenture Trustee,
such distribution would be made to the Indenture Trustee, which would be
responsible for retitling the Specified Vehicles. The cost of that retitling
would reduce amounts payable from the SUBI Assets that are available for
payments of interest on and principal of the Senior Notes, and in that event,
the Senior Noteholders could suffer a loss on their investment.
BMW LP will treat its conveyance of the SUBI Certificates to the
Transferor as an absolute sale, transfer and assignment of all of its interest
therein for all purposes. However, if a case or proceeding under any Insolvency
Law were commenced by or against BMW LP, and BMW LP as debtor-in-possession or a
creditor, receiver or bankruptcy trustee of BMW LP were to take the position
that the sale, transfer and assignment of the SUBI Certificates by BMW LP to the
Transferor should instead be treated as a pledge of the SUBI Certificates to
secure a borrowing by BMW LP, delays in payments of proceeds of the SUBI
Certificates to the Trust, and therefore to the Senior Noteholders, could occur
or, should the court rule in favor of that position, reductions in the amount of
such payments could result. On the Closing Date, Weil, Gotshal & Manges LLP, as
special counsel to the Transferor, will deliver an opinion to the effect that,
subject to certain facts, assumptions and qualifications specified therein:
o In the event that BMW LP were to become a debtor in a case
under the Bankruptcy Code subsequent to the sale, transfer and
assignment of the SUBI Certificates to the Transferor, the
sale, transfer and assignment of the SUBI Certificates from
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BMW LP would be characterized as an absolute sale, transfer
and assignment of the SUBI Certificates from BMW LP to the
Transferor, and the SUBI Certificates and the proceeds thereof
would not be property of BMW LP's bankruptcy estate.
As indicated above, however, such a legal opinion is not binding on any court.
As a precautionary measure, the Transferor will take the actions
requisite to obtaining a security interest in the SUBI Certificates as against
BMW LP which the Transferor will assign to the Trust and the Trust will assign
to the Indenture Trustee. The Indenture Trustee will perfect its security
interest in each SUBI Certificate, which will each be a "certificated security"
under the UCC, by possession. Accordingly, if the conveyance of the SUBI
Certificates by BMW LP to the Transferor were not respected as an absolute sale,
transfer and assignment, the Transferor, and ultimately the Trust and the
Indenture Trustee as successors in interest, should be treated as a secured
creditor of BMW LP, although a case or proceeding under any Insolvency Law with
respect to BMW LP could result in delays or reductions in distributions on the
SUBI Certificates as indicated above, notwithstanding such perfected security
interest.
In the event that the Servicer were to become subject to a case under
the Bankruptcy Code, some payments made within one year of the commencement of
such case, including Advances and Reallocation Payments, may be recoverable by
the Servicer as debtor-in-possession or by a creditor or a trustee in bankruptcy
as a preferential transfer from the Servicer. See "Risk Factors--A bankruptcy of
the transferor or the servicer could delay or limit payments to you".
ADDITIONAL LEGAL ASPECTS OF THE SPECIFIED LEASES AND THE SPECIFIED VEHICLES
Back-up Security Interests
Because the Trust will own the Vehicle SUBI Certificate, the Trust will
have an indirect beneficial interest, rather than a security interest, in the
Vehicle SUBI Assets. The Trust also will be a pledgee of the Lease SUBI
Certificate held by the Transferor which in turn will have an indirect
beneficial interest, rather than a security interest, in the Lease SUBI Assets.
Except as otherwise described below, the Owner Trustee generally will not have a
perfected security interest in the property of the Trust or the SUBI Assets and
in no circumstances will the Owner Trustee have a perfected security interest in
any Specified Vehicle.
As described under "Additional Legal Aspects of the Origination Trust
and the SUBIs", the Indenture Trustee will have a security interest in the SUBI
Certificates perfected by possession.
The SUBI Assets will consist principally of the Specified Leases and
the related Specified Vehicles, subject to the rights of the User-Lessees under
the Specified Leases. To the extent that the pledge of the Lease SUBI
Certificate was to be viewed as representing a transfer of the assets of the
Origination Trust, the Specified Leases would be "chattel paper" as defined in
the UCC. Pursuant to the UCC, a non-possessory security interest in chattel
paper may be perfected by filing a UCC-1 financing statement with the
appropriate filing office in the state where the debtor has its chief executive
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office. Accordingly, as a precaution, UCC-1 financing statements relating to the
Specified Leases will be filed naming:
o the Origination Trust as debtor and the Indenture Trustee as
assignee secured party;
o BMW LP as debtor and the Indenture Trustee as assignee secured
party;
o the Transferor as debtor and the Indenture Trustee as assignee
secured party; and
o the Trust as debtor and the Indenture Trustee as secured
party.
Perfection and the effect of perfection or non-perfection of a security interest
in the Specified Vehicles are governed by the certificate of title statutes of
the states in which such Specified Vehicles are located. Because of the
administrative burden and expense of perfecting an interest in automobiles under
the certificate of title statutes in the states in which the Specified Leases
were originated, the Indenture Trustee's interest in the Specified Vehicles will
be unperfected, and if the transfer of the Vehicle SUBI Certificate were to be
viewed as a transfer of the Vehicle SUBI Assets, the Indenture Trustee would
only have a perfected security interest in the Specified Leases. The Indenture
Trustee's security interest in the Specified Leases could be subordinate to the
interests of some other parties who take possession of the Specified Leases.
Specifically, the Trust's security interest in a Specified Lease could be
subordinate to the rights of a purchaser of that Specified Lease who takes
possession thereof without knowledge or actual notice of the Trust's security
interest. The Specified Leases will not be stamped to indicate the precautionary
security arrangements. However, the Servicing Agreement requires the Servicer to
retain custody of the Specified Leases. To the extent that a valid lien is
imposed by a third party against a Specified Vehicle, the interest of the
lienholder will be superior to the unperfected beneficial interest of the Trust
in that Specified Vehicle. Although the Servicing Agreement will require the
Servicer to contest all such liens and cause the removal of any liens that may
be imposed, if any such liens are imposed against the Specified Vehicles,
investors in the Senior 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 "--Custody of Lease Documents and Certificates of Title" and
"Additional Legal Aspects of the Origination Trust and the SUBIs--The SUBIs".
As noted under "Additional Legal Aspects of the Origination Trust and
the SUBIs--The SUBIs", various liens could be imposed upon all or part of the
SUBI Assets that, by operation of law, would take priority over the Trust's
interest therein. Such liens would include mechanic's, repairmen's, garagemen's
and motor vehicle accident liens and some liens for personal property taxes, in
each case arising with respect to a particular Specified Vehicle, liens arising
under various state and federal criminal statutes and some liens more fully
described under "Risk Factors--If ERISA liens are placed on the assets of the
trust, you could suffer a loss on your investment" in favor of the Pension
Benefit Guaranty Corporation. Additionally, any perfected security interest of
the Trust 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 sold, transferred and assigned by the Transferor to the Trust pursuant to
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the Agreement, as more fully described under "Risk Factors-- A bankruptcy of the
transferor or the servicer could delay or limit payments to you".
Vicarious Tort Liability
Although the Origination Trust will own the Specified Vehicles, they
will be operated by the related User-Lessees and their invitees. State laws
differ as to whether anyone suffering injury to person or property involving a
vehicle may bring an action against the owner of that vehicle merely by virtue
of such ownership.
Following an accident involving a Specified Vehicle, under certain
circumstances the Origination Trust may be the subject of an action for damages
as a result of its ownership of that Specified 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. The laws of many states
either do not permit such suits or provide that BMW FS' liability is capped at
the amount of any liability insurance that the lessee was required but failed to
maintain. However, in some states, such as New York, liability is joint and
several and there does not appear to be a limit on an owner's liability.
Although the Origination Trust's insurance coverage is substantial, in
the event that all applicable insurance coverage were to be exhausted and
damages were to be assessed against the Origination Trust, claims could be
imposed against the assets of the Origination Trust, including the Specified
Vehicles. However, such claims would not take priority over any SUBI Assets to
the extent that the Trust had a prior perfected security interest therein, such
as would be the case, in certain limited circumstances, with respect to the
Specified Leases, as further described under "--Back-up Security Interests". If
any such claims were imposed against the assets of the Origination Trust,
investors in the Senior Notes could incur a loss on their investment.
The Origination Trust is a party to and is vigorously defending
numerous legal proceedings, all of which are believed to constitute ordinary
routine litigation incidental to the ownership of leased vehicles and the
business and the activities of the Origination Trust.
Repossession of Specified Vehicles
In the event that a default by a User-Lessee has not been cured within
a certain period of time after being sent notice of that default, the Servicer
will ordinarily repossess the related Specified Vehicle. Some jurisdictions
require that a lessee be notified of the default and be given a time period
within which to cure that 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 a 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, but only if the repossession
can be accomplished peacefully. If a breach of the peace cannot be avoided,
judicial action will be required.
After the Servicer has repossessed a Specified Vehicle, it may provide
the related User-Lessee with a period of time within which to cure the default
under the related Specified Lease. If, by the end of that period, the default
has not been cured, the Servicer will attempt to sell that Specified Vehicle.
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The Termination Proceeds therefrom may be less than the remaining amounts due
under that Specified Lease at the time of default.
Deficiency Judgments
The proceeds of sale of a Specified 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 Specified Lease. If the proceeds from the sale
do not equal the Securitization Value of the related Specified Vehicle, the
Servicer may seek a deficiency judgment for the amount of the shortfall.
However, some states impose prohibitions or limitations on a secured party's
ability to seek a deficiency judgment. In these states a deficiency judgment may
be prohibited or reduced in amount if the User-Lessee was not given proper
notice of the resale or if the terms of resale were not commercially reasonable.
Even if a deficiency judgment is obtained, there is no guaranty that the full
amount of the judgment could be collected. Because a deficiency judgment is a
personal judgment against a defaulting User-Lessee who generally has few assets
to satisfy a judgment, the practical use of a deficiency judgment is often
limited. Therefore, in many cases, it may not be useful to seek a deficiency
judgment and even if obtained, a deficiency judgment may be settled at a
significant discount.
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, among other things, all amounts
due at the time of origination of the lease, a description of the lessee's
liability at the end of the lease term, the amount of any periodic payments, the
circumstances under which the lessee may terminate the lease prior to the end of
the lease term and the capitalized cost of the vehicle and a warning regarding
possible charges for early termination. Each of the Trust States has adopted
Article 2A of the uniform commercial code which provides protection to lessees
through certain implied warranties and the right to cancel a lease contract
relating to defective goods. In addition, California has enacted comprehensive
vehicle leasing statues that, among other things, regulate the disclosures to be
made at the time a vehicle is leased. The various federal and state consumer
protection laws would apply to the Origination Trust as a "co-lessor" of the
Specified Leases and may also apply to the Trust as holder of a beneficial
interest in the Specified Leases. 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 Titling Trustee, including liabilities for statutory
damages and attorney's fees. In addition, claims by the Servicer, the
Origination Trust and the Titling 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.
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Many states 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 Specified 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 Specified Vehicle, there can be
no assurance any such claim would be successful. To the extent a lessee is able
to compel the Origination Trust to terminate the related Specified Lease, such
Specified Lease will be deemed to be a Liquidated Contract and amounts received
thereafter on such Contract will be deemed to be Liquidation Proceeds. As noted
below, BMW FS will represent and warrant to the Trustee as of the Cutoff Date
that none of the Specified Vehicles is out of compliance with any law, including
any Lemon Law. Nevertheless, there can be no assurance that one or more
Specified Vehicles will not become subject to return (and the related Specified
Lease terminated) in the future under a Lemon Law.
Representations and warranties will be made in the SUBI Trust Agreement
that each Specified Lease complies with all requirements of law in all material
respects. If any such representation and warranty proves to be incorrect with
respect to a Specified Lease, and is not timely cured, the Servicer will be
required under the Servicing Agreement to deposit an amount equal to the
Reallocation Payment in respect of that Specified Lease into the SUBI Collection
Account. See "Additional Document Provisions--The SUBI Trust Agreement--The
SUBIs, Other SUBIs and the UTI" and "The Specified Leases--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 BMW FS to enforce the obligation of the
Servicer to enforce the rights of the Origination Trust under the Specified
Leases. For example, if a User-Lessee commences bankruptcy proceedings, the
receipt of that User-Lessee's payments due under the related Specified Lease is
likely to be delayed. In addition, a User-Lessee who commences bankruptcy
proceedings might be able to assign the related Specified Lease to another party
even though that Specified Lease prohibits assignment.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain of the material federal
income tax consequences of the ownership and disposition of the Senior Notes and
is based on the Internal Revenue Code of 1986, as amended (the "Code"), the
Treasury Regulations promulgated and proposed thereunder (the "Regulations"),
judicial decisions and published administrative rulings and pronouncements of
the Internal Revenue Service (the "Service"), all as in effect on the date
hereof. Legislative, judicial or administrative changes or interpretations
hereafter enacted or promulgated could alter or modify the analysis and
conclusions set forth below, possibly on a retroactive basis. This summary does
not purport to address the federal income tax consequences either to special
classes of taxpayers (such as S corporations, banks, thrifts, other financial
institutions, insurance companies, mutual funds, small business investment
companies, real estate investment trusts, regulated investment companies,
broker-dealers, tax-exempt organizations and persons that hold the securities
described herein as part of a straddle, hedging or conversion transaction) or to
a person or entity holding an interest in a holder (e.g., as a stockholder,
partner, or holder of an interest as a beneficiary). This summary (a) assumes
that the Senior Notes will be held by the holders thereof as capital assets as
defined in the Code and (b) except as indicated (and other than for purposes of
the discussion under "--Treatment of the Senior Notes as Debt" and "--Possible
Alternative Characterization" below), describes the consequences of Senior Notes
that are properly characterized as debt for federal income tax purposes. The
discussion is generally limited to initial purchasers of the Senior Notes. No
information is provided herein with respect to any foreign, state or local tax
consequences of the ownership and disposition of the Senior Notes or any federal
alternative minimum tax or estate and gift tax considerations. Except for
"--Non-U.S. Senior Note Owners" and "--Information Reporting and Backup
Withholding" below, the following discussion applies only to a U.S. Senior
Noteholder (defined below).
PROSPECTIVE INVESTORS ARE THEREFORE URGED TO CONSULT THEIR OWN TAX
ADVISORS WITH REGARD TO UNITED STATES FEDERAL TAX CONSEQUENCES OF PURCHASING,
HOLDING AND DISPOSING OF THE SENIOR NOTES IN THEIR OWN PARTICULAR CIRCUMSTANCES,
AS WELL AS THE TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, FOREIGN
COUNTRY OR OTHER JURISDICTION TO WHICH THEY MAY BE SUBJECT.
For purposes of this discussion, "U.S. Person" means a citizen or
resident of the United States, a corporation or partnership organized in or
under the laws of the United States, any state thereof, or any political
subdivision of either (including the District of Columbia), an estate, the
income of which is includible in gross income for U.S. federal income tax
purposes regardless of its source or a trust with respect to which a court in
the U.S. is able to exercise primary authority over its administration and one
or more U.S. persons have the authority to control all of its substantial
decisions. The term "U.S. Senior Noteholder" means any U.S. Person and any other
person to the extent that the income attributable to its interest in a Senior
Note is effectively connected with that person's conduct of a U.S. trade or
business. A "Non-U.S. Senior Note Owner" means a person other than a U.S. Senior
Noteholder and persons subject to rules applicable to former citizens and
residents of the United States.
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Treatment of the Senior Notes as Debt
The Trust and Senior Noteholders express in the Indenture the intent
that, for United States federal, state and local income, franchise and other tax
purposes, the Senior Notes will be indebtedness secured by the assets of the
Trust. The Trust, by entering into the Indenture, and each Senior Noteholder, by
the acceptance of a Senior Note or a beneficial interest therein, agree to treat
the Senior Notes as indebtedness for all such tax purposes.
The determination of whether the economic substance of a transfer of an
interest in property is a loan secured by the transferred property has been made
by the Service and the courts on the basis of 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 an analysis of such factors and although no transaction
closely comparable to that contemplated herein has been the subject of any
Regulations, revenue ruling or judicial decision, it is the opinion of Weil,
Gotshal & Manges LLP ("Tax Counsel") that, under current law, assuming due
execution of and compliance with the Indenture, and subject to the assumptions
set forth herein for federal income tax purposes the Senior Notes when issued
will not constitute an ownership interest in the Trust's assets, but properly
will be characterized as debt secured by the Trust's assets. In the further
opinion of Tax Counsel, the Trust will not constitute an association or
publicly-traded partnership taxable as a corporation for federal income tax
purposes.
Possible Alternative Characterization
Although as described above, it is the opinion of Tax Counsel that the
Senior Notes properly will be characterized as debt for federal income tax
purposes, no ruling will be sought from the Service on the characterization of
the Senior Notes for federal income tax purposes and the opinion of Tax Counsel
will not be binding on the Service. Thus, no assurance can be given that such a
characterization will prevail. Were the Service to contend successfully that the
Senior Notes were not debt obligations for federal income tax purposes, the
Trust would be classified for federal income tax purposes as a partnership.
If the Notes (whether some or all the classes of Notes) were treated as
equity interests in a partnership, the Trust would likely be treated as a
"publicly traded partnership." A publicly traded partnership is taxed in the
same manner as a corporation unless at least 90% of its gross income consists of
specified types of "qualifying income." The Trust is not expected to qualify for
the "qualifying income" exception.
If the Trust was treated as a publicly traded partnership taxable as a
corporation, the Trust would be subject to United States federal income taxes
(and state and local taxes) at corporate tax rates on its net income.
Distributions on the Senior Notes might not be deductible in computing the
Trust's taxable income, and distributions to the Senior Noteholders would
probably be treated as dividends to the extent paid out of after-tax earnings.
Such an entity-level tax could result in reduced distributions to Senior
Noteholders, or the Senior Noteholders could be liable for a share of such tax.
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Because the Trust will treat the Senior Notes as indebtedness for
federal income tax purposes, it will not comply with the tax reporting
requirements applicable to the possible alternative characterizations of the
Notes discussed above.
Except where indicated to the contrary, the following discussion
assumes that the Notes are debt for federal income tax purposes.
Interest Income to U.S. Senior Noteholders
Interest on a Senior Note should be taxable to a U.S. Senior Noteholder
as ordinary income at the time it accrues or is received in accordance with such
Senior Noteholder's method of accounting for federal income tax purposes.
It is anticipated that the Senior Notes will be issued at par value (or
at an insubstantial discount from par value) and that, except as indicated, no
original issue discount ("OID") will arise with respect to the Senior Notes.
Under the OID regulations, a holder of Senior Note issued with more than a de
minimis amount of OID must include such OID in income on a constant yield basis.
It is possible, moreover, that under the Regulations, interest payable on the
Senior Notes, as well as any discount from par value, will constitute OID
because late payment or nonpayment of interest would not be regarded as subject
to penalties or to reasonable remedies to compel payment. Were the Senior Notes
treated as being issued with OID, the principal consequence would be that Senior
Noteholders using the cash basis method of accounting would be required to
report interest income from the Senior Notes on an accrual basis. In any event,
a purchaser who buys a Senior Note for more or less than its issue price will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
Sale or Exchange of Notes by U.S. Senior Noteholders
If a Senior Note is sold or exchanged, the seller will recognize gain
or loss equal to the difference between the amount realized upon the sale or
exchange and its adjusted basis in the Senior Note. The adjusted basis of a
Senior Note will equal its cost, increased by any unpaid OID and market discount
includible in income with respect to the Senior Note prior to its sale, and
reduced by any principal payments previously received with respect to the Senior
Note and any bond premium amortization previously applied to offset interest
income. Except to the extent of any accrued market discount not previously
included in income, the gain or loss recognized on the sale or exchange of a
Senior Note will generally be capital gain or loss if the Note was held as a
capital asset and will be long-term capital gain loss if the Senior Note was
held by the U.S. Senior Noteholder for the requisite holding period at the time
of the disposition.
Non-U.S. Senior Note Owners
As described above, Tax Counsel will render its opinion that the Senior
Notes will properly be classified as debt for federal income tax purposes. If
the Senior Notes are so treated:
(a) Interest paid to a nonresident alien or foreign corporation or
partnership would be exempt from U.S. withholding taxes (including backup
withholding taxes), provided the holder complies with applicable identification
requirements (and neither actually or constructively owns 10% or more of the
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voting stock of the Transferor nor is a controlled foreign corporation with
respect to the Transferor nor is an individual who ceased being a U.S. citizen
or long-term resident for tax avoidance purposes). Applicable indemnification
requirements will be satisfied if there is delivered to a securities clearing
organization (or bank or other financial institution that holds Notes on behalf
of the customer in the ordinary course of its trade or business), (i) IRS Form
W-8BEN signed under penalties of perjury by the beneficial owner of the Notes
stating that the holder is not a U.S. person and providing such holder's name
and address, (ii) IRS Form 1001 signed by the beneficial owner of the Notes or
such owner's agent claiming exemption from withholding under an applicable tax
treaty or (iii) IRS Form 4224 signed by the beneficial owner of the Notes or
such owner's agent claiming exception from withholding of tax on income
connected with the conduct of a trade or business in the United States; provided
that in any such case (x) the applicable form is delivered pursuant to
applicable procedures and is properly transmitted to the United States entity
otherwise required to withhold tax and (y) none of the entities receiving the
form has actual knowledge that the holder is a U.S. person or that any
certification on the form is false;
(b) a holder of a Senior Note who 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 Senior Note provided that
(i) such gain is not effectively connected to a trade or business carried on by
the holder in the United States, (ii) in the case of a holder that is an
individual, such holder neither is present in the United States for 183 days or
more during the taxable year in which such sale, exchange or redemption occurs,
nor ceased being a U.S. citizen or long-term resident for tax avoidance purposes
and (iii) in the case of gain representing accrued interest, the conditions
described in clause (a) are satisfied; and
(c) a Senior Note held by an individual who at the time of death is a
nonresident alien will not be subject to United States federal estate tax as a
result of such individual's death if, immediately before his death (i) the
individual did not actually or constructively own 10% or more of the voting
stock of the Transferor, (ii) the holding of such Senior Note was not
effectively connected with the conduct by the decedent of a trade or business in
the United States and (iii) the individual did not cease being a U.S. citizen or
long-term resident for tax avoidance purposes.
The Service recently issued final regulations (the "New Regulations")
which would provide alternative methods of satisfying the certification
requirement described above. The New Regulations would require, in the case of
Senior Notes held by a foreign partnership, that (x) the certification described
in clause (a) above be provided by the partners rather than by the foreign
partnership and (y) the partnership provide certain information. A look-through
rule would apply in the case of tiered partnerships. NON-U.S. SENIOR NOTE OWNERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF THE
CERTIFICATION REQUIREMENTS IN THE NEW REGULATIONS.
If the Service were to contend successfully that some or all of the
Senior Notes were equity interests in a partnership (not taxable as a
corporation), a holder of such a Senior Note that is a nonresident alien or
foreign corporation might be required to file a U.S. individual or corporate
income tax return and pay tax on its share of partnership income at regular U.S.
rates, including in the case of a corporation the branch profits tax (and would
be subject to withholding tax on its share of partnership income). In addition,
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if the Senior Notes are equity interests in a partnership, an individual holder
that is a nonresident alien at death may be required to include the value of the
Senior Notes in such holder's gross estate (unless otherwise provided in an
applicable treaty). If some or all of the Senior Notes are recharacterized as
equity interests in a "publicly traded partnership" taxable as a corporation, to
the extent distributions of such Senior Notes were treated as dividends, a
nonresident alien individual or foreign corporation generally would be taxed on
the gross amount of such dividends (and subject to withholding) at a rate of 30%
unless such rate were reduced by an applicable treaty. In addition, an
individual holder that is a nonresident alien at death would be required to
include the value of such Senior Note in such holder's gross estate (unless
otherwise provided in an applicable treaty).
Information Reporting and Backup Withholding
Backup withholding of U.S. federal income tax at a rate of 31 percent
may apply to payments made in respect of a Senior Note to a registered owner who
is not an "exempt recipient" and who fails to provide certain identifying
information (such as the registered owner's taxpayer identification number) in
the manner required. Generally, individuals are not exempt recipients whereas
corporations and certain other entities are exempt recipients. Payments made in
respect of a U.S. Senior Noteholder must be reported to the Service, unless the
U.S. Senior Noteholder is an exempt recipient or otherwise establishes an
exemption. Compliance with the identification procedures (described in the
preceding section) would establish an exemption from backup withholding for a
Non-U.S. Senior Note Owner who is not an exempt recipient.
In addition, upon the sale of a Senior Note to (or through) a "broker,"
the broker must withhold 31 percent of the entire purchase price, unless either
(i) the broker determines that the seller is a corporation or other exempt
recipient or (ii) the seller provides certain identifying information in the
required manner, and in the case of a Non-U.S. Senior Note Owner certifies that
the seller is a Non-U.S. Senior Note Owner (and certain other conditions are
met). Such a sale must also be reported by the broker to the Service, unless
either (i) the broker determines that the seller is an exempt recipient or (ii)
the seller certifies its non-U.S. status (and certain other conditions are met).
Certification of the registered owner's non-U.S. status normally would be made
on Form W-8BEN under penalties of perjury, although in certain cases it may be
possible to submit other documentary evidence. As defined by Treasury
regulations, the term "broker" includes all persons who stand ready to effect
sales made by others in the ordinary course of a trade or business, as well as
brokers and dealers registered as such under the laws of the United States or a
state. These requirements generally will apply to a U.S. office of a broker, and
the information reporting requirements generally will apply to a foreign office
of a U.S. broker as well as to a foreign office of a foreign broker (i) that is
a controlled foreign corporation within the meaning of section 957(a) of the
Code or (ii) 50 percent or more of whose gross income from all sources for the
three year period ending with the close of its taxable year preceding the
payment (or for such part of the period that the foreign broker has been in
existence) was effectively connected with the conduct of a trade or business
within the United States.
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Any amounts withheld under the backup withholding rules from a payment
to a Senior Noteholder would be allowed as a refund or a credit against such
Senior Noteholder's U.S. federal income tax, provided that the required
information is furnished to the Service.
Recently issued final Treasury regulations will revise some of the
foregoing information reporting and backup withholding procedures generally
beginning January 1, 2001. Senior Noteholders should consult their tax advisers
concerning the impact to them, if any, of such revised procedures.
State and Local Tax Considerations
Potential Senior Noteholders should consider the state and local income
tax consequences of the purchase, ownership and disposition of the Senior Notes.
State and local income tax laws may differ substantially from the corresponding
federal law, and this discussion does not purport to describe any aspect of the
income tax laws of any state or locality. Therefore, potential Noteholders
should consult their own tax advisors with respect to the various state and
local tax consequences of an investment in the Senior Notes.
CERTAIN ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit pension, profit-sharing
and other employee benefit plans, as well as individual retirement accounts and
certain types of Keogh Plans (each 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. Title I
of ERISA also requires that fiduciaries of a Benefit Plan subject to ERISA make
investments that are prudent, diversified (except if prudent not to do so) and
in accordance with governing plan documents. Under ERISA, any person who
exercises any authority or control with respect to the management or disposition
of the assets of a Benefit Plan is considered to be a fiduciary of such Benefit
Plan (subject to certain exceptions not here relevant). A violation of these
"prohibited transaction" rules and fiduciary requirements may result in
liability under ERISA and the Code for such persons.
Prohibited Transactions
The prohibited transaction provisions of ERISA and Section 4975 of the
United States Internal Revenue Code ("Prohibited Transactions") generally
restrict a broad range of transactions directly or indirectly involving any
Benefit Plan or any entity which may be deemed to hold assets of any such
Benefit Plans (collectively, "Plans"), and any "party in interest" or
"disqualified person" (as those terms are defined in ERISA or Section 4975 of
the Code, respectively) with respect to such Plans. In particular, a sale or
exchange of property or an extension of credit between a Plan and a party in
interest or disqualified person with respect to such Plan might constitute a
Prohibited Transaction unless an exemption applies. In the case of indebtedness,
the prohibited transaction provisions continually apply throughout the term of
such indebtedness (and not only on the date of the initial borrowing). An excise
tax is imposed under Section 4975 of the Code upon any disqualified person which
engages in a non-exempt Prohibited Transaction, and penalties or other
liabilities may be imposed under ERISA upon any fiduciary which causes a Plan to
engage in a transaction that the fiduciary knows or should know constitutes a
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Prohibited Transaction or upon certain other persons who were involved in the
Prohibited Transaction.
"Look-through" Rule under the Plan Assets Regulation
The United States Department of Labor (the "DOL") has issued a
regulation (the "Plan Assets Regulation") describing what constitutes the assets
of a Plan when the Plan acquires an equity interest in another entity. Under a
"look-through" rule set forth in the Plan Assets Regulation, the underlying
assets owned by an entity (such as an Issuer) in which a Plan has an equity
interest might be treated as if they were plan assets of such Plan. However, the
"look-through" rule does not, by its terms, apply to an entity in which a Plan
only owns debt of such entity and not an equity interest. The Plan Assets
Regulation provides that an instrument constituting debt under applicable local
law and lacking substantial equity features is not treated as an equity interest
for purposes of such Regulation.
Treatment of Notes as Debt
The Senior Notes generally are expected to provide for a fixed
principal amount and a rate of interest. Moreover, the Senior Notes are not
expected, by their terms, to specifically provide for payments other than
payments designated as principal or interest to Noteholders. In those
situations, the terms of the Senior Notes do not appear to include any
substantial equity features for purposes of the Plan Assets Regulation. However,
it is possible that the aggregate beneficial interest in an Issuer might have a
nominal value in relation to the principal amount of Senior Notes issued by the
Issuer and, notwithstanding the terms of the Senior Notes, the Senior Notes
might be treated as possessing substantial equity features. If a series of
Senior Notes is treated as equity interests for purposes of the Plan Assets
Regulation, the assets of the Issuer might be treated as "plan assets" of Plans
that acquire or hold such Senior Notes unless an exception to the look-through
rule under the Plan Assets Regulation applies. Although there is no guidance
under ERISA on how this definition applies generally, and in particular to a
security such as the Senior Notes, the Issuer believes that the Senior Notes
should be treated as indebtedness without substantial equity features for
purposes of the Regulation. This determination is based upon the traditional
debt features of the Senior Notes, including the reasonable expectation that the
Senior 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
Senior Notes for ERISA purposes could change if the Issuer incurred losses.
However, without regard to whether the Senior Notes are treated as an
equity interest for purposes of the Regulation, the acquisition or holding of
the Senior Notes by or on behalf of a Plan could be considered to give rise to a
Prohibited Transaction if the Issuer, the Cash Manager or the Trustee is or
becomes a party in interest or a disqualified person with respect to such Plan.
Certain exemptions from the prohibited transaction rules could be applicable to
the purchase and holding of the Senior Notes by a Plan depending on the type and
circumstances of the plan fiduciary making the decision to acquire such Senior
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;
PTCE 84-14, regarding transactions effected by "qualified professional asset
managers"; and PTCE 75-1 regarding transactions effected by broker-dealers. By
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acquiring a Senior Note, each purchaser will be deemed to represent that (A)
either (i) it is not acquiring the Senior Notes with the assets of a Plan; or
(ii) the acquisition and holding of the Senior Notes will not give rise to a
nonexempt prohibited transaction under Section 406 of ERISA or Section 4975 of
the Code and (B) it will not transfer any Senior Notes to a Plan unless the
acquisition and holding of such Senior Notes by the transferee does not result
in a prohibited transaction by reason of one of the above PTCEs.
In the event that the Issuer becomes 50% owned by a disqualified person
or party in interest with respect to a Plan, the Issuer itself, as an entity
owned by party in interest, may be deemed a party in interest with respect to a
Plan and a Prohibited Transaction may be deemed to occur by reason of the
extension of credit by a particular Plan to a party in interest, among other
things. The Issuer can make no assurances that equity interests in the Issuer
will not be purchased by a party in interest to any particular Plan.
Employee benefit plans that are governmental plans (as defined in
Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33) of
ERISA) are not subject to ERISA requirements; however, governmental plans may be
subject to comparable state law restrictions.
RATINGS OF THE SENIOR NOTES
The Senior Notes will be issued only if the Class A-1 Notes are rated
in the highest short-term rating category and the other Senior Notes are rated
in the highest long-term category by each Rating Agency. The ratings of the
Senior Notes will be based primarily upon the value of the Specified Leases, the
Reserve Fund, the Residual Value Surplus Account and the terms of the
Subordinated Notes and the Certificates. There can be 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 the Senior Notes is qualified, reduced or withdrawn, no person or entity will
be obligated to provide any additional credit enhancement with respect to the
Senior Notes.
The rating of the Senior 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 Senior Notes, inasmuch as such a rating does not
comment as to market price or suitability for a particular investor. The ratings
of the Senior Notes address the likelihood of the payment of principal of and
interest on the Senior Notes pursuant to their terms.
There can be no assurance as to whether any agency other than the
assigning Rating Agency will rate the Senior Notes or, if one does, what rating
will be assigned by such other rating agency. A rating on the Senior Notes by
another rating agency, if assigned at all, may be lower than the ratings
assigned to the Senior Notes by the assigning Rating Agency.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement relating to the Senior Notes (the "Underwriting Agreement"), the
Transferor has agreed to sell to the underwriters named below (the
"Underwriters"), for whom Salomon Smith Barney Inc. is acting as representative
(the "Representative"), and the Underwriters have agreed to purchase, severally
but not jointly, the following principal amounts of the Senior Notes.
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<TABLE>
<CAPTION>
CLASS A-1 CLASS A-2 CLASS A-3 CLASS A-4 CLASS A-5
UNDERWRITER SENIOR NOTES SENIOR NOTES SENIOR NOTES SENIOR NOTES SENIOR NOTES
----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Salomon Smith Barney Inc.
[ ]
[ ] ------------ ------------ ------------ ------------ -----------
Total................................. [ ] [ ] [ ] [ ] [ ]
</TABLE>
The Underwriting Agreement provides, subject to conditions precedent,
that the Underwriters will be obligated to purchase all the Senior Notes if any
are purchased. The Underwriting Agreement provides that if there is an event of
default by an Underwriter, in some circumstances the purchase commitments of the
non-defaulting Underwriters may be increased or the Underwriting Agreement may
be terminated. The Underwriters have agreed to reimburse the Transferor for some
of its expenses incurred in connection with the offering of the Senior Notes.
The Transferor has been advised by the Representative that the
Underwriters propose initially to offer the Senior Notes to the public at the
respective offering prices set forth on the cover hereof and to certain dealers
at such prices less a selling concession not to exceed the percentage of the
principal amount of the Senior Notes set forth below, and that the Underwriters
may allow and such dealers may reallow a reallowance discount not to exceed the
percentage of the principal amount of the Senior Notes set forth below.
<TABLE>
<CAPTION>
CLASS OF SENIOR NOTES SELLING CONCESSION REALLOWANCE DISCOUNT
--------------------- ------------------ --------------------
<S> <C> <C>
Class A-1..................................... % %
Class A-2..................................... % %
Class A-3..................................... % %
Class A-4..................................... % %
Class A-5..................................... % %
</TABLE>
The Transferor and BMW FS have jointly and severally agreed to
indemnify the Underwriters against certain liabilities, including civil
liabilities under the Securities Act of 1933, or contribute to payments which
the Underwriters may be required to make in respect thereof.
Upon receipt of a request by an investor who has received an electronic
Prospectus from the Transferor, its affiliates or an Underwriter, or of 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.
Until the distribution of the Senior Notes is completed, the rules of
the SEC may limit the ability of the Underwriters and certain selling group
members to bid for and purchase Senior Notes. As an exception to these rules,
the Underwriters are permitted to engage in certain transactions that stabilize
the price of the Senior Notes. Such transactions may consist of bids and
purchases for the purpose of pegging, fixing or maintaining the price of such
classes of Senior Notes.
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Neither the Transferor nor the Underwriters 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 Senior Notes. In addition, neither
the Transferor nor the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Transferor has been advised by the Underwriters that they presently
intend to make a market in the Senior Notes; however, they are not obligated to
do so, any market-making may be discontinued at any time, and there can be no
assurance that an active public market for the Senior Notes will develop.
LEGAL MATTERS
Weil, Gotshal & Manges LLP will pass on the legality of the Senior
Notes for the Transferor. The Transferor is also being advised on various other
legal matters, including federal income tax matters relating to the Senior
Notes, by Weil, Gotshal & Manges LLP. Richards, Layton & Finger P.A.,
Wilmington, Delaware, will act as Delaware counsel to the Transferor. Various
legal matters with respect to insolvency issues relating to the Senior Notes
will be passed upon for the Transferor by Weil, Gotshal & Manges LLP. Brown &
Wood LLP, San Francisco, California will act as counsel for the Underwriters.
AVAILABLE INFORMATION
The Transferor, as originator of the Trust, BMW FS, as originator of
the Origination Trust, the Origination Trust, as issuer of the SUBIs, and the
Trust, as issuer of the Notes, have filed with the SEC a Registration Statement
on Form S-1 (together with all amendment and exhibits thereto, the "Registration
Statement"), of which this prospectus is a part, under the Securities Act of
1933, with respect to the Senior Notes being offered by this prospectus. This
prospectus does not contain all of the information set forth in the Registration
Statement, some parts of which have been omitted in accordance with the rules
and regulations of the SEC. For further information, reference is made to the
Registration Statement, which is available for inspection without charge at the
public reference facilities of the SEC at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the regional offices of the SEC 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 SEC at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The SEC
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC at
http://www.sec.gov. The Servicer, on behalf of the Trust, will also file or
cause to be filed with the SEC such periodic reports as are required under the
Exchange Act, and the rules and regulations of the SEC thereunder.
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INDEX OF PRINCIPAL TERMS
Set forth below is a list of capitalized terms used in this Offering Circular
and the pages on which the definitions of those terms may be found.
Term Page(s)
---- -------
0% Prepayment Assumption...........................54
2000-A SUBI........................................25
50% Prepayment Assumption..........................54
Accrual Period.....................................58
Administrator......................................27
Advance............................................93
Available Funds....................................66
Available Funds Shortfall Amount...................66
Available Principal Distribution Amount............59
Bankruptcy Code...................................106
Basic Documents....................................57
Benefit Plan......................................121
BMW AG.............................................34
BMW Facility Partners..............................31
BMW FS.............................................34
BMW lease contracts................................35
BMW LP.............................................25
BMW NA.............................................34
Business Day.......................................58
Cede...............................................57
Certificate Balance................................60
Certificate Distribution Account...................76
Certificate Factor.................................57
Certificate Rate...................................73
Certificateholders.................................73
Certificates.......................................26
Class Note Factor..................................57
Clearstream........................................61
Clearstream Participants...........................62
Closing Date.......................................26
Code..............................................116
Collection Period..............................65, 96
Collections........................................89
Conditional Prepayment Rate........................52
Contingent and Excess Liability Insurance..........77
Contract Residual Values...........................40
Cooperative........................................64
CPO................................................39
Page coninued...
<PAGE>
Term Page(s)
---- -------
CPR................................................52
Cutoff Date........................................33
Daily Advance Reimbursement........................94
Dealer Agreement...................................35
Default Termination Lease..........................60
Defaulted Vehicle..................................91
Definitive Notes...................................58
Deposit Date.......................................74
Depositaries.......................................62
Determination Date.................................65
Disposition Expenses...............................91
Distribution Accounts..............................76
DOL...............................................122
DTC................................................57
Due Date...........................................37
Early Termination Cost.............................42
Early Termination Liability........................43
ERISA.............................................121
Euroclear..........................................61
Euroclear Operator.................................64
Euroclear Participants.............................62
Excess Amounts.....................................67
Excess Mileage Payments............................38
Excess Wear and Use Payments.......................38
Final Scheduled Payment Date.......................51
FS Residual Values.................................40
Inc................................................34
Indenture..........................................26
Indenture Default..................................78
Indenture Trustee..................................26
Indirect Participants..............................62
Initial Certificate Balance........................26
Initial Deposit....................................74
Initial Securities Balance.........................68
Initial Senior Note Balance........................25
Initial Subordinated Note Balance..................26
Insolvency Laws...................................106
Insurance Proceeds.................................92
Interest Rate......................................58
Issuer SUBI Certificate Transfer Agreement.........33
Lease Default......................................43
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Lease Rate.........................................42
Lease SUBI.........................................25
Lease SUBI Assets..................................33
Lease SUBI Certificate.............................25
Leased Vehicles....................................29
Leases.............................................29
Lemon Law.........................................115
Loss...............................................88
Matured Vehicle....................................91
Mileage Refund Reimbursement.......................66
Monthly Payment....................................40
Monthly Payment Advance............................93
Monthly Principal Distributable Amount.............59
Monthly Remittance Condition.......................90
MSRP...............................................36
New Lease Incentives...............................39
New Regulations...................................119
Non-Petition Parties..............................104
Non-U.S. Senior Note Owner........................116
Note Distribution Account..........................76
Notes..............................................26
OID...............................................118
Optimal Principal Distributable Amount.............60
Optional Purchase..................................68
Optional Purchase Price............................68
Origination Trust..................................25
Origination Trust Agreement........................29
Origination Trust Assets...........................29
Origination Trustee................................29
Other SUBI.........................................25
Other SUBI Assets..................................86
Other SUBI Certificates............................30
Other SUBI Supplement..............................87
Outstanding Principal Balance......................42
Owner Trustee......................................28
Participants.......................................61
Payment Date.......................................58
Payment Date Advance Reimbursement.................67
Permitted Investments..............................77
Plan Assets Regulation............................122
Plans.............................................121
Principal Carryover Shortfall......................59
Principal Distribution Amount......................59
Page continued...
<PAGE>
Program Operating Lease............................26
Program Operating Lease Default....................72
Program Operating Lease Payments...................71
Program Operating Lease Termination Date...........71
Prohibited Transactions...........................121
PTCE..............................................122
Rating Agency......................................26
Reallocation Payment...............................50
Record Date........................................58
Redemption Price...................................68
Registration Statement............................125
Regulations.......................................116
Representative....................................123
Required Deposit Rating............................76
Reserve Fund.......................................74
Reserve Fund Draw Amount...........................75
Reserve Fund Requirement...........................75
Residual Value Losses..............................91
Residual Value Surplus.............................91
Residual Value Surplus Account.....................75
Residual Value Surplus Draw Amount.................75
Retained Support Amounts...........................92
Sales Proceeds.....................................92
Sales Proceeds Advance.............................94
Securities.........................................26
Securities Balance.................................59
Securitization Rate................................40
Securitization Value...............................40
Securityholders....................................26
Senior Note Balance................................60
Senior Note Distribution Amount....................69
Senior Note Owner..................................61
Senior Noteholders.............................58, 61
Senior Notes.......................................25
Service...........................................116
Servicer...........................................30
Servicer Defaults..................................97
Servicing Agreement................................30
Servicing Fee......................................96
Specified Leases...................................25
Specified Vehicles.................................25
SUBI Assets........................................25
SUBI Certificate Transfer Agreement................33
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SUBI Certificates..................................25
SUBI Collection Account............................73
SUBI Supplement....................................32
SUBI Trust Agreement...............................32
SUBIs..............................................25
Subordinated Note Balance..........................60
Subordinated Note Rate.............................72
Subordinated Noteholder............................75
Subordinated Notes.................................26
Support Amounts....................................40
Tax Counsel.......................................117
Termination Proceeds...............................92
Terms and Conditions...............................64
Transferor.........................................25
Transferor Certificate.............................27
Trust..............................................25
Trust Administration Agreement.....................27
Trust Agreement....................................26
Trust Estate.......................................28
U.S. Person.......................................116
U.S. Senior Noteholder............................116
UCC................................................62
Underwriters......................................123
Underwriting Agreement............................123
Unused Mileage Refunds.............................38
User-Lessee........................................29
UTI................................................25
UTI Assets.........................................86
UTI Beneficiary....................................25
UTI Certificates...................................30
Vehicle SUBI.......................................25
Vehicle SUBI Assets................................28
Vehicle SUBI Certificate...........................25
128
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ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in some limited circumstances, the globally offered Senior 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,
Clearstream 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 Clearstream 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, including 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 Clearstream or Euroclear and DTC
Participants holding Senior Notes will be effected on a delivery-against-payment
basis through the respective Depositaries of Clearstream and Euroclear, in that
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, Clearstream and Euroclear
will hold positions on behalf of their participants through their respective
Depositaries, which in turn will hold such positions in accounts as DTC
Participants.
Investors electing to hold their Global Securities through DTC will
follow the settlement practices applicable to U.S. corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold their Global Securities through Clearstream
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.
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<PAGE>
Trading between DTC Participants. Secondary market trading between DTC
Participants will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Clearstream and/or Euroclear Participants. Secondary
market trading between Clearstream Participants or Euroclear Participants will
be settled using the procedures applicable to conventional eurobonds in same-day
funds.
Trading between DTC seller and Clearstream or Euroclear Purchaser. When
Global Securities are to be transferred from the account of a DTC Participant to
the account of a Clearstream Participant or a Euroclear Participant, the
purchaser will send instructions to Clearstream or Euroclear through a
Clearstream Participant or Euroclear Participant at least one business day prior
to settlement. Clearstream or Euroclear will instruct the respective Depositary,
as the case may be, to receive the Global Securities against payment. Payment
will include interest accrued on the Global Securities from and including the
last coupon payment date to and excluding the settlement date, on the basis of
actual days elapsed and a 360-day year. Payment will then be made by the
respective Depositary to the DTC Participant's account against delivery of the
Global Securities. After settlement has been completed, the Global Securities
will be credited to the respective clearing system and by the clearing system,
in accordance with its usual procedures, to the Clearstream 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 Clearstream or
Euroclear cash debit will be valued instead as of the actual settlement date.
Clearstream 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 preposition
funds for settlement, either from cash on hand or existing lines of credit, as
they would for any settlement occurring within Clearstream or Euroclear. Under
this approach, they may take on credit exposure to Clearstream or Euroclear
until the Global Securities are credited to their accounts one day later.
As an alternative, if Clearstream or Euroclear has extended a line of
credit to them, Clearstream Participants or Euroclear Participants can elect not
to pre-position funds and allow that credit line to be drawn upon to finance the
settlement. Under this procedure, Clearstream 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 Clearstream 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 Clearstream Participants or
Euroclear Participants. The sale proceeds will be available to the DTC seller on
2
<PAGE>
the settlement date. Thus, to the DTC Participant a cross-market transaction
will settle no differently than a trade between two DTC Participants.
Trading between Clearstream or Euroclear seller and DTC purchaser. Due
to time zone differences in their favor, Clearstream 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 Clearstream or Euroclear through a Clearstream Participant or
Euroclear Participant at least one business day prior to settlement. In these
cases, Clearstream or Euroclear will instruct the respective Depositaries, as
appropriate, to deliver the Global Securities 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 Clearstream Participant or Euroclear
Participant the following day, and receipt of the cash proceeds in the
Clearstream 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 Clearstream Participant or Euroclear
Participant have a line of credit with its respective clearing system and elect
to be in debt 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 Clearstream Participant's
or Euroclear Participant's account would instead be value as of the actual
settlement date.
Finally, day traders that use Clearstream or Euroclear and that
purchase Global Securities from DTC Participants for delivery to Clearstream
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:
o borrowing through Clearstream or Euroclear for one day - until
the purchase side of the day trade is reflected in their
Clearstream or Euroclear accounts - in accordance with the
clearing system's customary procedures;
o 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 Clearstream or Euroclear account in order
to settle the sale side of the trade; or
o 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 Clearstream Participant or Euroclear
Participant.
3
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding through Clearstream 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:
o 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 that
beneficial owner and the U.S. entity required to withhold tax
complies with applicable certification requirements, and
o that 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 Certificate of Foreign Status on Form W-8. 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 that
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 a certificate of Exemption from Withholding of Tax on
Income Effectively Connected with the Conduct of a Trade or Business in the
United States on Form 4224.
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 an Ownership, Exemption or Reduced Rate Certificate on Form 1001. 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 Senior 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 a Payer's Request for
Taxpayer Identification Number and Certification on Form W-9.
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.
4
<PAGE>
The term "U.S. Person" means:
o a citizen or resident of the United States,
o a corporation, partnership or other entity organized in or
under the laws of the United States or any state or political
subdivision thereof (other than a partnership that is not
treated as a United States person under any applicable
Treasury regulations),
o an estate whose income is subject to United States federal
income tax, regardless of its source, or
o a trust whose administration is subject to the primary
supervision of a United States court and which has one or more
United States persons who have authority to control all
substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in regulations,
some trusts in existence on August 20, 1996 and treated as United States persons
prior to such date that elect to continue to be so treated also shall be
considered U.S. Persons.
This summary does not deal with all aspects of U.S. Federal income tax
withholding that may be relevant to foreign holders of the Global Securities.
Investors are advised to consult their own tax advisors for specific tax advice
concerning their holding and disposing of the Global Securities.
5
<PAGE>
$[ ]
BMW VEHICLE LEASE TRUST 2000-A
BMW AUTO LEASING LLC
Transferor
BMW FINANCIAL SERVICES NA, LLC
Servicer
ASSET BACKED SENIOR NOTES:
$[ ] _____% Class A-1 Notes
$[ ] _____% Class A-2 Notes
$[ ] _____% Class A-3 Notes
$[ ] _____% Class A-4 Notes
$[ ] _____% Class A-5 Notes
--------------
PROSPECTUS
--------------
SALOMON SMITH BARNEY INC.
You should rely only the information contained in this prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the Senior Notes in any state where the offer is not
permitted.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses in connection with the offering of the Senior Notes being
registered hereby are estimated as follows:
SEC registration fee...........................$[ ]*
Legal fees and expenses........................ [ ]
Accounting fees and expenses................... [ ]
Rating agency fees............................. [ ]
Trustee's fees and expenses.................... [ ]
Printing....................................... [ ]
Miscellaneous.................................. [ ]
--------
Total....................................... $[ ]
=======
* to be completed upon amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 18-108 of the Limited Liability Company Act of Delaware
empowers a limited liability company, subject to such standards and
restrictions, if any, as are set forth in its limited liability company
agreement, to indemnify and hold harmless any member or manager or other person
from and against any and all claims and demands whatsoever. The Limited
Liability Company Agreement, as amended ("LLC Agreement"), of BMW Auto Leasing
LLC (the "Transferor") provides that the Transferor shall defend, indemnify and
save harmless each of its members from and against all claims, losses, damages,
costs, expense, demands, liabilities, obligations, liens, encumbrances, rights
of action or attorneys' fees sustained by reason of any act performed, or
omitted to be performed, in good faith and without gross negligence or willful
misconduct, within the scope of its authority expressly conferred by the LLC
Agreement, to the fullest extent permitted by applicable law in effect on the
date of the LLC Agreement and to such greater extent as applicable law may
thereafter from time to time permit. Such indemnity shall not be construed to
limit or diminish the coverage of each member under any insurance obtained by
the Transferor and payment shall not be a condition precedent to any
indemnification provided in the LLC Agreement.
Reference is also made to the form of Underwriting Agreement filed as
Exhibit 1.1 hereto among the Transferor, BMW Financial Services, NA, LLC,
Salomon Smith Barney Inc. and the other underwriters named therein (see Exhibit
1.1), which provides for indemnification by the Transferor in certain
circumstances.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
a. Exhibits:
1.1 Form of Underwriting Agreement*
3.1 Certificate of Formation of BMW Auto Leasing LLC*
3.2 Amended and Restated Limited Liability Company Agreement of
BMW Auto Leasing LLC dated as of [ ], 2000 between BMW
Financial Services NA, LLC and [ ]*
4.1 Form of Indenture between BMW Vehicle Lease Trust 2000-A and [
], as Indenture Trustee (including forms of Senior Notes)*
5.1 Opinion of Weil, Gotshal & Manges LLP with respect to
legality*
8.1 Opinion of Weil, Gotshal & Manges LLP with respect to federal
income tax matters*
10.1 Amended and Restated Trust Agreement among BMW Financial
Services NA, LLC, BMW Manufacturing LP and Chase Manhattan
Bank, Delaware*
10.2 Form of Supplement 2000-A to Amended and Restated Trust
Agreement among BMW Financial Services NA, LLC, BMW
Manufacturing LP and Chase Manhattan Bank, Delaware (including
form of the SUBI Certificates)*
10.3 Servicing Agreement between BMW Financial Services NA, LLC and
Financial Services Vehicle Trust., dated as of August 30,
1995*
10.4 Form of Supplement 2000-A to Servicing Agreement between BMW
Financial Services NA, LLC and Financial Services Vehicle
Trust*
10.5 Form of SUBI Certificate Transfer Agreement between BMW
Manufacturing LP and BMW Auto Leasing LLC* 10.6 Form of Issuer
SUBI Certificate Transfer Agreement between BMW Auto Leasing
LLC and BMW Vehicle Lease Trust 2000-A*
10.7 Form of Trust Agreement between BMW Auto Leasing LLC and [ ],
as Owner Trustee*
10.8 Form of Program Operating Lease between BMW Vehicle Lease
Trust 2000-A and BMW Auto Leasing LLC*
23.1 Consent of Weil, Gotshal & Manges LLP (included in Exhibits
5.1, 8.1 and 8.2)
23.3 Consent of [Delaware Counsel]*
25.1 Statement of Eligibility and Qualification of the Indenture
Trustee on Form T-1*
----------
* To be filed by amendment.
b. Financial Statement Schedules:
Not applicable.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
Each undersigned Registrant hereby undertakes as follows:
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.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than payment by the Registrant
of expenses incurred or paid by a director, officer or controlling person of
such Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Act will be deemed to be part of this registration statement as of the
time it was declared effective.
For purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus will be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time will be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
registrant BMW Vehicle Lease Trust 2000-A 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 Woodcliff Lake, State of New Jersey, on the 2nd
day of August 2000.
BMW VEHICLE LEASE TRUST 2000-A, a Delaware business trust
By: BMW AUTO LEASING LLC, a Delaware limited liability
company, solely as originator of BMW Vehicle Lease Trust
2000-A
By: BMW FINANCIAL SERVICES NA, LLC, a Delaware limited
liability company, its managing member
By:/s/ Stefan Krause
--------------------------------------
Stefan Krause
President
By: /s/ Norbert Mayer
--------------------------------------
Norbert Mayer
Treasurer
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
registrant BMW Auto Leasing LLC 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 Woodcliff Lake, State of New Jersey, on the 2nd day
of August 2000.
BMW AUTO LEASING LLC, a Delaware limited liability company
By: BMW FINANCIAL SERVICES NA, LLC, a Delaware limited
liability company, its managing member
By:/s/ Stefan Krause
--------------------------------------
Stefan Krause
President
By: /s/ Norbert Mayer
--------------------------------------
Norbert Mayer
Treasurer
II-5
<PAGE>
SIGNATURES
Know all men by these presents, that each person whose signature
appears below constitutes and appoints Norbert Mayer as his true and lawful
attorney-in-fact and agent, with full powers of substitution, for him and in his
name, place and stead, in any and all capacities, to sign and file this
Registration Statement and any and all amendments, including post-effective
amendments to this Registration Statement, with the Securities and Exchange
Commission granting to said attorney-in-fact power and authority 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 by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title
<S> <C> <C>
/s/ Stefan Krause President of the Managing Member of August 2, 2000
------------------------------ BMW AUTO LEASING LLC
Stefan Krause (Principal Executive Officer)
Vice President of Finance of the August 2, 2000
/s/ John M. Christman Managing Member of BMW AUTO LEASING LLC
------------------------------ (Principal Financial
John M. Christman and Accounting Officer)
/s/ Norbert Mayer Treasurer of the Managing Member of August 2, 2000
------------------------------ BMW AUTO LEASING LLC
Norbert Mayer
/s/ Dr. Werner Adelberger Director of the Sole Member of the August 2, 2000
------------------------------ Managing Member of BMW AUTO LEASING LLC
Dr. Werner Adelberger
/s/ Thomas F.G. Purves Director of the Sole Member of the August 2, 2000
------------------------------ Managing Member of BMW AUTO LEASING LLC
Thomas F.G. Purves
</TABLE>
II-6
