Sale and Servicing Agreement



 



EXHIBIT 10.2


EXECUTION COPY


SALE AND SERVICING AGREEMENT



by and among



VOLKSWAGEN AUTO LOAN ENHANCED TRUST 2003-1,



as Issuer



VOLKSWAGEN PUBLIC AUTO LOAN SECURITIZATION, LLC,



as Seller



VW CREDIT, INC.,



as Servicer



and



THE BANK OF NEW YORK,



as Indenture Trustee



Dated as of June 27, 2003



 






 





TABLE OF CONTENTS




	 	 	 	 	 	 
	ARTICLE I      DEFINITIONS AND USAGE
	 	 	1	 
	 	SECTION 1.1     Definitions
	 	 	1	 
	 	SECTION 1.2     Other Interpretive Provisions
	 	 	1	 
	ARTICLE II    CONVEYANCE OF TRANSFERRED ASSETS
	 	 	2	 
	 	SECTION 2.1     Conveyance of Transferred Assets
	 	 	2	 
	 	SECTION 2.2     Representations and Warranties of the Seller as to each Receivable
	 	 	2	 
	 	SECTION 2.3     Repurchase upon Breach
	 	 	2	 
	 	SECTION 2.4     Custody of Receivable Files
	 	 	3	 
	ARTICLE III  ADMINISTRATION AND SERVICING OF RECEIVABLES AND TRUST PROPERTY
	 	 	5	 
	 	SECTION 3.1     Duties of Servicer
	 	 	5	 
	 	SECTION 3.2     Collection of Receivable Payments
	 	 	6	 
	 	SECTION 3.3     Realization Upon Receivables
	 	 	6	 
	 	SECTION 3.4     Maintenance of Security Interests in Financed Vehicles
	 	 	6	 
	 	SECTION 3.5     Covenants of Servicer
	 	 	6	 
	 	SECTION 3.6     Purchase of Receivables Upon Breach
	 	 	7	 
	 	SECTION 3.7     Servicing Fee
	 	 	7	 
	 	SECTION 3.8     Servicer’s Certificate
	 	 	7	 
	 	SECTION 3.9     Annual Officer’s Certificate; Notice of Servicer Replacement Event

	 	 	7	 
	 	SECTION 3.10   Annual Independent Public Accountants’ Report

	 	 	8	 
	 	SECTION 3.11   Servicer Expenses
	 	 	8	 
	ARTICLE IV  DISTRIBUTIONS; ACCOUNTS; STATEMENTS TO THE CERTIFICATEHOLDER AND THE NOTEHOLDERS
	 	 	9	 
	 	SECTION 4.1     Establishment of Accounts
	 	 	9	 
	 	SECTION 4.2     Remittances
	 	 	10	 
	 	SECTION 4.3     Additional Deposits and Payments; Servicer Advances
	 	 	11	 
	 	SECTION 4.4     Distributions
	 	 	11	 
	 	SECTION 4.5     Net Deposits
	 	 	12	 
	 	SECTION 4.6     Statements to Certificateholder and Noteholders
	 	 	13	 
	 	SECTION 4.7     No Duty to Confirm
	 	 	13	 



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TABLE OF CONTENTS

(continued)




	 	 	 	 	 	 	 	 
	ARTICLE V  THE SELLER
	 	 	14	 
	 	SECTION 5.1     Representations and Warranties of Seller
	 	 	14	 
	 	SECTION 5.2     Liability of Seller; Indemnities
	 	 	15	 
	 	SECTION 5.3     Merger or Consolidation of, or Assumption of the
Obligations of, Seller
	 	 	16	 
	 	SECTION 5.4     Limitation on Liability of Seller and Others
	 	 	16	 
	 	SECTION 5.5     Seller May Own Notes
	 	 	17	 
	 	SECTION 5.6     Sarbanes-Oxley Act Requirements
	 	 	17	 
	 	SECTION 5.7     Indebtedness
	 	 	17	 
	ARTICLE VI  THE SERVICER
	 	 	17	 
	 	SECTION 6.1     Representations of Servicer
	 	 	17	 
	 	SECTION 6.2     Indemnities of Servicer
	 	 	19	 
	 	SECTION 6.3     Merger or Consolidation of, or Assumption of the
Obligations of, Servicer 
	 	 	20	 
	 	SECTION 6.4    Limitation on Liability of Servicer and Others
	 	 	20	 
	 	SECTION 6.5    Delegation of Duties
	 	 	21	 
	 	SECTION 6.6    VCI Not to Resign as Servicer
	 	 	21	 
	 	SECTION 6.7    Servicer May Own Securities
	 	 	21	 
	ARTICLE VII   REPLACEMENT OF SERVICER
	 	 	22	 
	 	SECTION 7.1    Replacement of Servicer
	 	 	22	 
	 	SECTION 7.2    Notification to Noteholders
	 	 	23	 
	ARTICLE VIII  OPTIONAL PURCHASE
	 	 	23	 
	 	SECTION 8.1    Optional Purchase of Trust Estate
	 	 	23	 
	ARTICLE IX   MISCELLANEOUS PROVISIONS
	 	 	23	 
	 	SECTION 9.1    Amendment
	 	 	23	 
	 	SECTION 9.2    Protection of Title
	 	 	25	 
	 	SECTION 9.3    Other Liens or Interests
	 	 	26	 
	 	SECTION 9.4    Transfers Intended as Sale; Security Interest
	 	 	26	 
	 	SECTION 9.5    Notices, Etc.
	 	 	27	 
	 	SECTION 9.6    Choice of Law
	 	 	28	 
	 	SECTION 9.7    Headings
	 	 	28	 



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TABLE OF CONTENTS

(continued)




	 	 	 	 	 	 	 	 
	 	SECTION
9.8      Counterparts
	 	 	28	 
	 	SECTION 9.9      Waivers
	 	 	28	 
	 	SECTION 9.10    Entire Agreement
	 	 	28	 
	 	SECTION 9.11    Severability of Provisions
	 	 	28	 
	 	SECTION 9.12    Binding Effect
	 	 	28	 
	 	SECTION 9.13    Acknowledgment and Agreement
	 	 	29	 
	 	SECTION 9.14    No Waiver; Cumulative Remedies
	 	 	29	 
	 	SECTION 9.15    Nonpetition Covenant
	 	 	29	 
	 	SECTION 9.16    Submission to Jurisdiction
	 	 	29	 
	 	SECTION 9.17    Limitation of Liability
	 	 	30	 
	 	SECTION 9.18    Third-Party Beneficiaries
	 	 	30	 
	Schedule
I      Representations and Warranties
	 	 	 	 
	Exhibit   A      Form of Assignment pursuant to Sale and Servicing Agreement
	 	 	 	 
	Appendix A   Definitions
	 	 	 	 




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     SALE AND SERVICING AGREEMENT, dated as of June 27, 2003 (as from time to
time amended, supplemented or otherwise modified and in effect, this
“Agreement”), by and among VOLKSWAGEN AUTO LOAN ENHANCED TRUST 2003-1 (the
“Issuer”), a Delaware statutory trust, VOLKSWAGEN PUBLIC AUTO LOAN
SECURITIZATION, LLC, a Delaware limited liability company, as seller (the
“Seller”), VW CREDIT, INC., a Delaware corporation (“VCI”), as servicer (in
such capacity, the “Servicer”), and THE BANK OF NEW YORK, a New York banking
corporation, as indenture trustee (the “Indenture Trustee”).


     WHEREAS, the Issuer desires to purchase from the Seller a portfolio of
motor vehicle receivables, including retail motor vehicle installment sales
contracts and/or installment loans that are secured by new and used automobiles
and light-duty trucks;


     WHEREAS, the Seller is willing to sell such portfolio of motor vehicle
receivables and related property to the Issuer; and


     WHEREAS, VCI is willing to service such motor vehicle receivables and
related property on behalf of the Issuer;


     NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:


ARTICLE I



DEFINITIONS AND USAGE



     SECTION 1.1    Definitions. Except as otherwise specified herein or as the
context may otherwise require, capitalized terms used but not otherwise defined
herein are defined in Appendix A hereto, which also contains rules as to usage
that are applicable herein.


     SECTION 1.2    Other Interpretive Provisions. For purposes of this
Agreement, unless the context otherwise requires: (a) accounting terms not
otherwise defined in this Agreement, and accounting terms partly defined in
this Agreement to the extent not defined, shall have the respective meanings
given to them under GAAP; (b) terms defined in Article 9 of the UCC as in
effect in the relevant jurisdiction and not otherwise defined in this Agreement
are used as defined in that Article; (c) the words “hereof,” “herein” and
“hereunder” and words of similar import refer to this Agreement as a whole and
not to any particular provision of this Agreement; (d) references to any
Article, Section, Schedule, Appendix or Exhibit are references to Articles,
Sections, Schedules, Appendices and Exhibits in or to this Agreement and
references to any paragraph, subsection, clause or other subdivision within any
Section or definition refer to such paragraph, subsection, clause or other
subdivision of such Section or definition; (e) the term “including” means
“including without limitation”; (f) except as otherwise expressly provided
herein, references to any law or regulation refer to that law or regulation as
amended from time to time and include any successor law or regulation; (g)
references to any Person include that Person’s successors and assigns; and (h)
headings are for purposes of reference only and shall not otherwise affect the
meaning or interpretation of any provision hereof.


 






 


ARTICLE II



CONVEYANCE OF TRANSFERRED ASSETS



     SECTION 2.1    Conveyance of Transferred Assets. In consideration of the
Issuer’s sale and delivery to, or upon the order of, the Seller of all of the
Notes and the Certificate on the Closing Date, the Seller does hereby
irrevocably sell, transfer, assign and otherwise convey to the Issuer without
recourse (subject to the obligations herein) all right, title and interest of
the Seller, whether now owned or hereafter acquired, in and to the Transferred
Assets, described in an Assignment in the form of Exhibit A delivered on the
Closing Date. The transfer, assignment and conveyance made hereunder will not
constitute and is not intended to result in an assumption by the Issuer of any
obligation of the Seller or the applicable Originator to the Obligors, the
Dealers or any other Person in connection with the Receivables and the other
assets and properties conveyed hereunder or any agreement, document or
instrument related thereto.


     SECTION 2.2    Representations and Warranties of the Seller as to each
Receivable. The Seller hereby makes the representations and warranties set
forth on Schedule I as to the Receivables transferred, assigned, set over, sold
and otherwise conveyed to the Issuer under this Agreement on which such
representations and warranties the Issuer relies in acquiring the Receivables.
Such representations and warranties speak, with respect to any Receivable, as
of the Cut-Off Date, but shall survive the Grant of the Receivables by the
Issuer to the Indenture Trustee pursuant to the Indenture. Notwithstanding any
statement to the contrary contained herein or in any other Transaction
Document, the Seller shall not be required to notify any insurer with respect
to any Insurance Policy obtained by an Obligor or to notify any Dealer about
any aspect of the transaction contemplated by the Transaction Documents.


     SECTION 2.3    Repurchase upon Breach. Upon discovery by any party hereto of
a breach of any of the representations and warranties set forth in Section 2.2
at the time such representations and warranties were made which materially and
adversely affects the interests of the Issuer or the Noteholders, the party
discovering such breach shall give prompt written notice thereof to the other
parties hereto; provided that the failure to give such notice shall not affect
any obligation of the Seller hereunder. If the Seller does not correct or cure
such breach prior to the end of the Collection Period which includes the 60th
day (or, if the Seller elects, an earlier date) after the date that the Seller
became aware or was notified of such breach, then the Seller shall purchase any
Receivable materially and adversely affected by such breach from the Issuer on
the Payment Date following the end of such Collection Period. Any such breach
or failure will not be deemed to have a material and adverse effect if such
breach or failure does not affect the ability of the Issuer to receive and
retain timely payment in full on such Receivable. Any such purchase by the
Seller shall be at a price equal to the Repurchase Price. In consideration for
such repurchase, the Seller shall make (or shall cause to be made) a payment to
the Issuer equal to the Repurchase Price by depositing such amount into the
Collection Account prior to 11:00 a.m., New York City time on such Payment
Date. Upon payment of such Repurchase Price by the Seller, the Issuer and the
Indenture Trustee shall release and shall execute and deliver such instruments
of release, transfer or assignment, in each case without recourse or
representation, as shall be reasonably necessary to vest in the Seller or its
designee any Receivable repurchased pursuant hereto. It is understood and
agreed that the right to cause the Seller to purchase (or to enforce the
obligations of VCI under the Purchase Agreement to purchase) any Receivable as


2






 


described above shall constitute the sole remedy respecting such breach
available to the Issuer and the Indenture Trustee. Neither the Owner Trustee
nor the Indenture Trustee will have any duty to conduct an affirmative
investigation as to the occurrence of any condition requiring the repurchase of
any Receivable pursuant to this Section 2.3.


     SECTION 2.4    Custody of Receivable Files.


     (a)    Custody. To assure uniform quality in servicing the Receivables and
to reduce administrative costs, the Issuer, upon the execution and delivery of
this Agreement, hereby revocably appoints the Servicer, and the Servicer hereby
accepts such appointment, to act as the agent of the Issuer and the Indenture
Trustee as custodian of the following documents or instruments, which are
hereby or will hereby be constructively delivered to the Indenture Trustee, as
pledgee of the Issuer pursuant to the Indenture with respect to each Receivable
(but only to the extent applicable to such Receivable and only to the extent
held in tangible paper form) (the “Receivable Files”):



	 	 	 	 	 
	 	 	
(i)
	 	the fully executed original of the retail motor
vehicle installment sales contract or promissory note and
security agreement related to such Receivable, including any
written amendments or extensions thereto;
	 	 	 	 	 
	 	 	
(ii)
	 	the original credit application or a photocopy
thereof to the extent held in paper form;
	 	 	 	 	 
	 	 	
(iii)
	 	the original Certificate of Title or, if not yet
received, evidence that an application therefore has been
submitted with the appropriate authority, a guaranty of title
from a Dealer or such other document (electronic or otherwise,
as used in the applicable jurisdiction) that the Servicer
keeps on file, in accordance with its Customary Servicing
Practices, evidencing the security interest of the applicable
Originator in the Financed Vehicle; and
	 	 	 	 	 
	 	 	
(iv)
	 	any and all other documents that the Servicer or
the Seller keeps on file, in accordance with its Customary
Servicing Practices, relating to a Receivable, an Obligor or a
Financed Vehicle.



     (b)    Safekeeping. The Servicer, in its capacity as custodian, shall hold
the Receivable Files for the benefit of the Issuer and the Indenture Trustee.
In performing its duties as custodian, the Servicer shall act in accordance
with its Customary Servicing Practices. In accordance with its Customary
Servicing Practices, the Servicer will conduct, or cause to be conducted,
periodic reviews of the Receivable Files held by it under this Agreement, and
of the related accounts, records, and computer systems, in such a manner as
would enable the Issuer or the Indenture Trustee to verify the accuracy of the
Servicer’s record keeping. The Servicer will promptly report to the Issuer and
the Indenture Trustee any failure on its part to hold a material portion of the
Receivable Files and maintain its accounts, records, and computer systems as
herein provided and promptly take appropriate action to remedy any such
failure. Nothing herein will be deemed to require an initial review or any
periodic review by the Issuer or the Indenture Trustee of the Receivable Files.



3










 



     (c)   Maintenance of and Access to Records. The Servicer will maintain each
Receivable File in the United States (it being understood that the Receivable
Files, or any part thereof, may be maintained at the offices of any Person to
whom the Servicer has delegated responsibilities in accordance with Section
6.5). The Servicer will make available to the Issuer and the Indenture Trustee
or their duly authorized representatives, attorneys or auditors a list of
locations of the Receivable Files upon request. The Servicer will provide
access to the Receivable Files, and the related accounts records, and computer
systems maintained by the Servicer at such times as the Issuer or the Indenture
Trustee direct, but only upon reasonable notice and during the normal business
hours at the respective offices of the Servicer.


     (d)   Release of Documents. Upon written instructions from the Indenture
Trustee, the Servicer will release or cause to be released any document in the
Receivable Files to the Indenture Trustee, the Indenture Trustee’s agent or the
Indenture Trustee’s designee, as the case may be, at such place or places as
the Indenture Trustee may designate, as soon thereafter as is practicable. Any
document so released will be handled by the Indenture Trustee with due care and
returned to the Servicer for safekeeping as soon as the Indenture Trustee or
its agent or designee, as the case may be, has no further need therefor.


     (e)   Instructions; Authority to Act. All instructions from the Indenture
Trustee will be in writing and signed by an Authorized Officer of the Indenture
Trustee, and the Servicer will be deemed to have received proper instructions
with respect to the Receivable Files upon its receipt of such written
instructions.


     (f)   Custodian’s Indemnification. Subject to Section 6.2, the Servicer as
custodian will indemnify the Issuer and the Indenture Trustee for any and all
liabilities, obligations, losses, compensatory damages, payments, costs, or
expenses of any kind whatsoever that may be imposed on, incurred, or asserted
against the Issuer or the Indenture Trustee as the result of any improper act
or omission in any way relating to the maintenance and custody by the Servicer
as custodian of the Receivable Files; provided, however, that the Servicer will
not be liable (i) to the Issuer for any portion of any such amount resulting
from the willful misconduct, bad faith or negligence of the Indenture Trustee
or the Issuer and (ii) to the Indenture Trustee for any portion of any such
amount resulting from the willful misconduct, bad faith or negligence of the
Indenture Trustee or the Issuer.


     (g)   Effective Period and Termination. The Servicer’s appointment as
custodian will become effective as of the Cut-Off Date and will continue in
full force and effect until terminated pursuant to this Section. If VCI
resigns as Servicer in accordance with the provisions of this Agreement or if
all of the rights and obligations of the Servicer have been terminated under
Section 7.1, the appointment of the Servicer as custodian hereunder may be
terminated by the Indenture Trustee, or by the Noteholders of Notes evidencing
not less than a majority of the Controlling Class, in the same manner as the
Indenture Trustee or such Noteholders may terminate the rights and obligations
of the Servicer under Section 7.1. As soon as practicable after any
termination of such appointment, the Servicer will deliver to the Indenture
Trustee or the Indenture Trustee’s agent the Receivable Files and the related
accounts and records maintained by the Servicer at such place or places as the
Indenture Trustee may reasonably designate.


4






 


ARTICLE III



ADMINISTRATION AND SERVICING OF

RECEIVABLES AND TRUST PROPERTY



     SECTION 3.1   Duties of Servicer.


     (a)   The Servicer is hereby appointed by the Issuer and authorized to act
as agent for the Issuer and in such capacity shall manage, service, administer
and make collections on the Receivables in accordance with its Customary
Servicing Practices, using the degree of skill and attention that the Servicer
exercises with respect to all comparable motor vehicle receivables that it
services for itself or others. The Servicer’s duties will include collection
and posting of all payments, responding to inquiries of Obligors on such
Receivables, investigating delinquencies, sending invoices or payment coupons
to Obligors, reporting tax information to Obligors, accounting for collections
and furnishing monthly and annual statements to the Indenture Trustee with
respect to distributions. The Servicer hereby accepts such appointment and
authorization and agrees to perform the duties of Servicer with respect to the
Receivables set forth herein.


     (b)   Without limiting the generality of the foregoing, the Servicer is
hereby authorized and empowered to execute and deliver, on behalf of itself,
the Issuer, the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholder, or any of them, any and all instruments of satisfaction or
cancellation, or partial or full release or discharge, and all other comparable
instruments, with respect to such Receivables or to the Financed Vehicles
securing such Receivables. If the Servicer commences a legal proceeding to
enforce a Receivable, the Issuer will thereupon be deemed to have automatically
assigned, solely for the purpose of collection, such Receivable to the
Servicer. If in any enforcement suit or legal proceeding it is held that the
Servicer may not enforce a Receivable on the ground that it is not a real party
in interest or a holder entitled to enforce the Receivable, the Issuer will, at
the Servicer’s expense and direction, take steps to enforce the Receivable,
including bringing suit in its name or the names of the Indenture Trustee. The
Issuer will furnish the Servicer with any powers of attorney and other
documents reasonably necessary or appropriate to enable the Servicer to carry
out its servicing and administrative duties hereunder. The Servicer, at its
expense, will obtain on behalf of the Issuer all licenses, if any, required by
the laws of any jurisdiction to be held by the Issuer in connection with
ownership of the Receivables, and will make all filings and pay all fees as may
be required in connection therewith during the term hereof.


     (c)    The Servicer hereby agrees that upon its resignation and the
appointment of a successor Servicer hereunder, the Servicer will terminate its
activities as Servicer hereunder in accordance with Section 7.1, and, in any
case, in a manner which the Indenture Trustee reasonably determines will
facilitate the transition of the performance of such activities to such
successor Servicer, and the Servicer shall cooperate with and assist such
successor Servicer.


     SECTION 3.2   Collection of Receivable Payments. The Servicer will make
reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables as and when the same becomes due in accordance
with its Customary Servicing Practices. Subject to Section 3.5, the Servicer
may grant extensions, rebates, deferrals, amendments, modifications or
adjustments on a Receivable in accordance with its Customary

5






 




Servicing Practices; provided, however, that if the Servicer (i) extends
the date for final payment by the Obligor of any Receivable beyond the last day
of the Collection Period prior to the Class A-4 Final Scheduled Payment Date or
(ii) reduces the Contract Rate or Outstanding Principal Balance with respect to
any Receivable other than as required by applicable law, it will promptly
purchase such Receivable in the manner provided in Section 3.6. The Servicer
may in its discretion waive any late payment charge or any other fees that may
be collected in the ordinary course of servicing a Receivable. Notwithstanding
anything in this Agreement to the contrary, the Servicer may refinance any
Receivable by accepting a new promissory note from the related Obligor and
depositing the full Outstanding Principal Balance of such Receivable into the
Collection Account. The receivable created by such refinancing shall not be
property of the Issuer.


     SECTION 3.3   Realization Upon Receivables. On behalf of the Issuer, the
Servicer will use reasonable efforts, consistent with its Customary Servicing
Practices, to repossess or otherwise convert the ownership of the Financed
Vehicle securing any Receivable as to which the Servicer had determined
eventual payment in full is unlikely unless it determines in its sole
discretion that repossession will not increase the Liquidation Proceeds by an
amount greater than the expense of such repossession. The Servicer will follow
such Customary Servicing Practices as it deems necessary or advisable, which
may include reasonable efforts to realize upon any recourse to any Dealer and
selling the Financed Vehicle at public or private sale. The foregoing will be
subject to the provision that, in any case in which the Financed Vehicle has
suffered damage, the Servicer shall not be required to expend funds in
connection with the repair or the repossession of such Financed Vehicle unless
it determines in its sole discretion that such repair and/or repossession will
increase the Liquidation Proceeds by an amount greater than the amount of such
expenses.


     SECTION 3.4   Maintenance of Security Interests in Financed Vehicles. The
Servicer will, in accordance with its Customary Servicing Practices, take such
steps as are necessary to maintain perfection of the security interest created
by each Receivable in the related Financed Vehicle. The Issuer hereby
authorizes the Servicer to take such steps as are necessary to re-perfect such
security interest on behalf of the Issuer and the Indenture Trustee in the
event of the relocation of a Financed Vehicle or for any other reason.


     SECTION 3.5   Covenants of Servicer. The Servicer will not release the
Financed Vehicle securing each such Receivable from the security interest
granted by such Receivable in whole or in part except in the event of payment
in full by or on behalf of the Obligor thereunder or payment in full less a
deficiency which the Servicer would not attempt to collect in accordance with
its Customary Servicing Practices or in connection with repossession or except
as may be required by an insurer in order to receive proceeds from any
Insurance Policy covering such Financed Vehicle.


     SECTION 3.6   Purchase of Receivables Upon Breach. Upon discovery by any
party hereto of a breach of any of the covenants set forth in Section 3.2, 3.3,
3.4 or 3.5 which materially and adversely affects the interests of the Issuer
or the Noteholders, the party discovering such breach shall give prompt written
notice thereof to the other parties hereto; provided that the failure to give
such notice shall not affect any obligation of the Servicer hereunder. If the
Servicer does not correct or cure such breach prior to the end of the
Collection

6






 




Period which includes the 60th day (or, if the Servicer elects, an earlier
date) after the date that the Servicer became aware or was notified of such
breach, then the Servicer shall purchase any Receivable materially and
adversely affected by such breach from the Issuer on the Payment Date following
the end of such Collection Period. Any such breach or failure will not be
deemed to have a material and adverse effect if such breach or failure does not
affect the ability of the Issuer to receive and retain timely payment in full
on such Receivable. Any such purchase by the Servicer shall be at a price
equal to the Repurchase Price. In consideration for such repurchase, the
Servicer shall make (or shall cause to be made) a payment to the Issuer equal
to the Repurchase Price by depositing such amount into the Collection Account
prior to 11:00 a.m., New York City time on such Payment Date. Upon payment of
such Repurchase Price by the Servicer, the Issuer and the Indenture Trustee
shall release and shall execute and deliver such instruments of release,
transfer or assignment, in each case without recourse or representation, as
shall be reasonably necessary to vest in the Servicer or its designee any
Receivable repurchased pursuant hereto. It is understood and agreed that the
obligation of the Servicer to purchase any Receivable as described above shall
constitute the sole remedy respecting such breach available to the Issuer and
the Indenture Trustee.


     SECTION 3.7   Servicing Fee. On each Payment Date, the Issuer shall pay to
the Servicer the Servicing Fee in accordance with Section 4.4 for the
immediately preceding Collection Period as compensation for its services. In
addition, the Servicer will be entitled to retain all Supplemental Servicing
Fees. The Servicer also will be entitled to receive investment earnings (net
of investment losses and expenses) on funds deposited in the Collection Account
and the Principal Distribution Account during each Collection Period.


     SECTION 3.8   Servicer’s Certificate. On or before the Determination Date
preceding each Payment Date, the Servicer shall deliver to the Indenture
Trustee and each Paying Agent, with a copy to each of the Rating Agencies, a
Servicer’s Certificate containing all information necessary to make the
payments, transfers and distributions pursuant to Sections 4.3 and 4.4 on such
Payment Date, together with the written statements to be furnished by the
Indenture Trustee to the Noteholders pursuant to Section 4.6 hereof and Section
6.6 of the Indenture. At the sole option of the Servicer, each Servicer’s
Certificate may be delivered in electronic or hard copy format.


     SECTION 3.9   Annual Officer’s Certificate; Notice of Servicer Replacement
Event. (a) The Servicer will deliver to the Rating Agencies, the Issuer and
the Indenture Trustee on or before April 30 of each calendar year, beginning
with April 30, 2004, an Officer’s Certificate, dated as of December 31 of the
preceding calendar year, stating that (i) a review of the activities of the
Servicer during the preceding calendar year (or since the Closing Date, in the
case of the first such Officer’s Certificate) and of its performance under this
Agreement was made under the supervision of the officer signing such
certificate and (ii) to the best of such officer’s knowledge, based on such
review, the Servicer has performed in all material respects its obligations
under this Agreement throughout such year (or since the Closing Date, in the
case of the first such Officer’s Certificate), or, if there has been a material
default in the performance of any such obligation, specifying each such default
known to such officer and the nature and status thereof.


     (b)   The Servicer will deliver to the Issuer, the Indenture Trustee and
each Rating Agency promptly after having obtained knowledge thereof written
notice in an Officer’s

7






 




Certificate of any event which with the giving of notice or lapse of time,
or both, would become a Servicer Replacement Event.


     SECTION 3.10   Annual Independent Public Accountants’ Report. The Servicer
shall cause a firm of independent certified public accountants, who may also
render other services to the Servicer or to its Affiliates, to deliver to the
Issuer, the Indenture Trustee and the Rating Agencies on or before April 30, of
each year, beginning April 30, 2004, a report addressed to the board of
directors of the Servicer, to the effect that such firm has examined the
financial statements of the Servicer or, if applicable, the parent corporation
of the Servicer, and issued its report thereon and that such examination: (a)
was made in accordance with generally accepted auditing standards, (b) included
tests relating to motor vehicle receivables serviced for others in accordance
with the Uniform Single Attestation Program for Mortgage Bankers, to the extent
the procedures in such program are applicable to the servicing obligations set
forth in this Agreement, and (c) except as described in the report, disclosed
no exceptions or errors in the records relating to the motor vehicle
receivables serviced for others that, in the firm’s opinion, paragraph four of
such Uniform Single Attestation Program for Mortgage Bankers requires such firm
to report. The report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.


     SECTION 3.11   Servicer Expenses. The Servicer shall pay all expenses
(other than expenses described in the definition of Liquidation Proceeds)
incurred by it in connection with its activities hereunder, including fees,
expenses, indemnities and disbursements of the Indenture Trustee, the Owner
Trustee (as more fully described in Sections 8.1 and 8.2 of the Trust
Agreement), independent accountants, taxes imposed on the Servicer and expenses
incurred in connection with distributions and reports to the Noteholders and
the Certificateholder.


ARTICLE IV



DISTRIBUTIONS; ACCOUNTS;

STATEMENTS TO THE CERTIFICATEHOLDER

AND THE NOTEHOLDERS



     SECTION 4.1   Establishment of Accounts. (a) The Servicer shall cause to be
established:



	 	(i)	 	For the benefit of the Noteholders, in the name
of the Indenture Trustee, an Eligible Account (the “Collection
Account”), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the
Noteholders, which Eligible Account shall be established by
and maintained with the Indenture Trustee or its designee.
	 
	 	(ii)	 	For the benefit of the Noteholders, in the name
of the Indenture Trustee, an Eligible Account (the “Principal
Distribution Account”), bearing a designation clearly
indicating that the funds deposited therein are held for the
benefit of the Noteholders, which Eligible Account shall be
established by and maintained with the Indenture Trustee or
its designee.



8






 





	 	(iii)	 	For the benefit of the Noteholders, in the name
of the Indenture Trustee, an Eligible Account (the “Reserve
Account”), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the
Noteholders, which Eligible Account shall be established by
and maintained with the Indenture Trustee or its designee.



     (b)    Funds on deposit in the Collection Account, the Reserve Account and
the Principal Distribution Account (collectively, the “Trust Accounts”) shall
be invested by the Indenture Trustee in Permitted Investments selected in
writing by the Servicer and of which the Servicer provides notification
(pursuant to standing instructions or otherwise); provided that it is
understood and agreed that neither the Servicer, the Indenture Trustee nor the
Issuer shall be liable for any loss arising from such investment in Permitted
Investments. All such Permitted Investments shall be held by or on behalf of
the Indenture Trustee as secured party for the benefit of the Noteholders;
provided that on each Payment Date all interest and other investment income
(net of losses and investment expenses) on funds on deposit in the Collection
Account and the Principal Distribution Account shall be distributed to the
Servicer and shall not be available to pay the distributions provided for in
Section 4.4. All investments of funds on deposit in the Trust Accounts shall
mature so that such funds will be available on the next Payment Date. No
Permitted Investment shall be sold or otherwise disposed of prior to its
scheduled maturity unless a default occurs with respect to such Permitted
Investment and the Servicer directs the Indenture Trustee in writing to dispose
of such Permitted Investment.


     (c)    The Indenture Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Trust Accounts and in all
proceeds thereof and all such funds, investments and proceeds shall be part of
the Trust Estate. Except as otherwise provided herein, the Trust Accounts
shall be under the sole dominion and control of the Indenture Trustee for the
benefit of the Noteholders. If, at any time, any Trust Account ceases to be an
Eligible Account, the Servicer shall promptly notify the Indenture Trustee in
writing (unless such Trust Account is an account with the Indenture Trustee)
and within 10 Business Days (or such longer period as to which each Rating
Agency may consent) after becoming aware of the fact, establish a new Trust
Account as an Eligible Account and shall direct the Indenture Trustee to
transfer any cash and/or any investments to such new Trust Account.


     (d)   With respect to the Trust Account Property, the parties hereto agree
that:



	 	(i)	 	 any Trust Account Property that is held in
deposit accounts shall be held solely in Eligible Accounts
and, except as otherwise provided herein, each such Eligible
Account shall be subject to the exclusive custody and control
of the Indenture Trustee, and, except as otherwise provided in
the Transaction Documents, the Indenture Trustee or its
designee shall have sole signature authority with respect
thereto;
	 
	 	(ii)	 	any Trust Account Property that constitutes
Physical Property shall be delivered to the Indenture Trustee
or its designee, in accordance with paragraph (a) of the
definition of “Delivery” and shall be held, pending maturity
or disposition, solely by the Indenture Trustee or any such
designee;



9






 





	 	(iii)	 	any Trust Account Property that is an
“uncertificated security” under Article 8 of the UCC and that
is not governed by clause (ii) above shall be delivered to the
Indenture Trustee or its designee in accordance with paragraph
(c) of the definition of “Delivery” and shall be maintained by
the Indenture Trustee or such designee, pending maturity or
disposition, through continued registration of the Indenture
Trustee’s (or its designee’s) ownership of such security; and
	 
	 	(iv)	 	any Trust Account Property that is a book-entry
security held through the Federal Reserve System pursuant to
Federal book-entry regulations shall be delivered in
accordance with paragraph (b) of the definition of “Delivery”
and shall be maintained by the Indenture Trustee or its
designee or a financial intermediary (as such term is defined
in Section 8-313(4) of the UCC) acting solely for the
Indenture Trustee or such designee, pending maturity or
disposition, through continued book-entry registration of such
Trust Account Property as described in such paragraph.



     SECTION 4.2   Remittances. The Servicer shall deposit an amount equal to
all Collections into the Collection Account within two Business Days after
receipt; provided, however, that if the Monthly Remittance Condition is
satisfied, then the Servicer shall not be required to deposit into the
Collection Account an amount equal to the Collections received during any
Collection Period until 11:00 a.m., New York City time, on the following
Payment Date. The “Monthly Remittance Condition” shall be deemed to be
satisfied if (i) VCI is the Servicer, (ii) no Servicer Replacement Event has
occurred and is continuing and (iii)(x) Volkswagen AG has a short-term debt
rating of at least “P-1” from Moody’s and “A-1” from Standard & Poor’s, (y)
both Moody’s and Standard & Poor’s are then rating a debt issuance of
Volkswagen of America, Inc. or VCI (and, in the case of VCI, such debt issuance
is guaranteed by Volkswagen AG) and (z) VCI remains a direct or indirect
wholly-owned subsidiary of Volkswagen AG. Notwithstanding the foregoing, the
Servicer may remit Collections to the Collection Account on any other alternate
remittance schedule (but not later than the related Payment Date) if the Rating
Agency Condition is satisfied with respect to such alternate remittance
schedule. Pending deposit into the Collection Account, Collections may be
commingled and used by the Servicer at its own risk and are not required to be
segregated from its own funds.


     SECTION 4.3   Additional Deposits and Payments; Servicer Advances. (a) On
each Payment Date, the Servicer and the Seller will deposit into the Collection
Account the aggregate Repurchase Price with respect to Repurchased Receivables
purchased by the Servicer or the Seller, respectively, on such Payment Date and
the Servicer will deposit into the Collection Account all amounts, if any, to
be paid under Section 8.1 in connection with the Optional Purchase. All such
deposits with respect to a Payment Date will be made, in immediately available
funds by 11:00 a.m., New York City time, on such Payment Date related to such
Collection Period.


10






 


     (b)   The Indenture Trustee will, on each Payment Date, withdraw from the
Reserve Account the Reserve Account Excess Amount, if any, for such Payment
Date and deposit such amounts in the Collection Account.


     (c)   On each Payment Date, the Servicer shall deposit into the Collection
Account prior to 11:00 a.m., New York City time, an advance in an amount equal
to the lesser of (a) any shortfall in the amounts available to make the
payments in clauses first through fourth of Section 4.4 and (b) the aggregate
scheduled monthly payments due on Receivables but not received during and prior
to the related Collection Period (an “Advance”); provided, however, that the
Servicer will not be obligated to make an Advance if the Servicer reasonably
determines in its sole discretion that such Advance is not likely to be repaid
from future cash flows from the Receivables. No Advances will be made with
respect to Defaulted Receivables.


     (d)     The Indenture Trustee will, on the Payment Date relating to each
Collection Period, withdraw from the Reserve Account the Reserve Account Draw
Amount and deposit such amounts in the Collection Account.


     (e)   On the Closing Date the Seller will deposit, or cause to be deposited
from proceeds of the sale of the Notes, into the Reserve Account an amount
equal to the Initial Reserve Account Deposit Amount.


     SECTION 4.4   Distributions.


     (a)     Prior to any acceleration of the Notes pursuant to Section 5.2 of the
Indenture, on each Payment Date, the Indenture Trustee (based on information
contained in, and as directed by, the Servicer’s Certificate delivered on or
before the related Determination Date pursuant to Section 3.8) shall make the
following deposits and distributions, to the extent of Available Funds,
Advances made on such Payment Date pursuant to Section 4.3(c) and the Reserve
Account Draw Amount, on deposit in the Collection Account for such Payment
Date, in the following order of priority:



	 	(1)	 	first, to the Servicer (or any predecessor
Servicer, if applicable) for reimbursement of all outstanding
Advances;
	 
	 	(2)	 	second, to the Servicer, the Servicing Fee and
all unpaid Servicing Fees with respect to prior periods;
	 
	 	(3)	 	third, to the Class A Noteholders, the Class A
Accrued Note Interest for the related Interest Period;
provided that if there are not sufficient funds available to
pay the entire amount of the Class A Accrued Note Interest,
the amounts available will be applied to the payment of such
interest on the Notes on a pro rata basis;
	 
	 	(4)	 	fourth, to the Principal Distribution Account for
distribution to the Noteholders pursuant to Section 8.2 of the
Indenture, the Principal Distribution Amount for such Payment
Date;



11






 







	 	(5)	 	fifth, to the Reserve Account, any additional
amounts required to increase the amount in the Reserve Account
up to the Specified Reserve Account Balance;
	 
	 	(6)	 	sixth, to the Owner Trustee and the Indenture
Trustee, fees and expenses (including indemnification amounts)
permitted under the Trust Agreement and the Indenture, as
applicable, which have not been previously paid; and
	 
	 	(7)	 	seventh, to or at the direction of the
Certificateholder, any funds remaining.



Notwithstanding any other provision of this Section 4.4, following the
occurrence and during the continuation of an Event of Default which has
resulted in an acceleration of the Notes, the Indenture Trustee shall apply all
amounts on deposit in the Collection Account pursuant to Section 5.4(b) of the
Indenture.


     (b)   After the payment in full of the Notes and all other amounts payable
under Section 4.4(a), all Collections shall be paid to or in accordance with
the instructions provided from time to time by the Certificateholder.


     SECTION 4.5   Net Deposits. If the Monthly Remittance Condition is
satisfied, the Servicer shall be permitted to deposit into the Collection
Account only the net amount distributable to Persons other than the Servicer
and its Affiliates on the Payment Date. The Servicer shall, however, account
as if all of the deposits and distributions described herein were made
individually.


     SECTION 4.6   Statements to Certificateholder and Noteholders. On or before
each Determination Date, the Servicer shall provide to the Indenture Trustee
(with a copy to each Rating Agency and the Issuer) for the Indenture Trustee to
forward, on the applicable Payment Date, to each Noteholder of record as of the
most recent Record Date, a statement setting forth for the Collection Period
and Payment Date relating to such Determination Date the following information
(to the extent applicable):


     (a)   the aggregate amount being paid on such Payment Date in respect of
interest on and principal of each Class of Notes;


     (b)   the Class A-1 Note Balance, the Class A-2 Note Balance, the Class A-3
Note Balance, the Class A-4 Note Balance and the Class B Note Balance, in each
case after giving effect to payments on such Payment Date;


     (c)     (i) the amount on deposit in the Reserve Account and the Specified
Reserve Account Balance, each as of the beginning and end of the related
Collection Period, (ii) the amount deposited in the Reserve Account in respect
of such Payment Date, if any, (iii) the Reserve Account Draw Amount and the
Reserve Account Excess Amount, if any, to be withdrawn from the Reserve Account
on such Payment Date, (iv) the balance on deposit in the Reserve Account on
such Payment Date after giving effect to withdrawals therefrom and deposits
thereto in respect of such Payment Date and (v) the change in such balance from
the immediately preceding Payment Date;


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      (d)   the Principal Distribution Amount for such Payment Date;


     (e)   the Net Pool Balance and the Note Factor as of the close of business
on the last day of the preceding Collection Period;


     (f)   the amount of the Servicing Fee to be paid to the Servicer with
respect to the related Collection Period and the amount of any unpaid Servicing
Fees;


     (g)   the amount of the Class A Noteholders’ Interest Carryover Shortfall,
if any, on such Payment Date and the change in such amounts from the preceding
Payment Date;


     (h)   the aggregate Repurchase Price with respect to Repurchased Receivables
paid by (i) the Servicer and (ii) the Seller with respect to the related
Collection Period;


     (i)     the amount of Advances, if any, on such Payment Date; and


     (j)   the amount of Collections for the related Collection Period.


Each amount set forth pursuant to paragraph (a) or (g) above relating to the
Notes shall be expressed as a dollar amount per $1,000 of the initial principal
balance of the Notes (or Class thereof).


     SECTION 4.7   No Duty to Confirm. The Indenture Trustee shall have no duty
or obligation to verify or confirm the accuracy of any of the information or
numbers set forth in the Servicer’s Certificate delivered by the Servicer to
the Indenture Trustee, and the Indenture Trustee shall be fully protected in
relying upon such Servicer’s Certificate.


ARTICLE V


THE SELLER



     SECTION 5.1   Representations and Warranties of Seller. The Seller makes
the following representations and warranties as of the Closing Date which the
Issuer will be deemed to have relied in acquiring the Transferred Assets. The
representations and warranties speak as of the execution and delivery of this
Agreement and will survive the conveyance of the Transferred Assets to the
Issuer and the pledge thereof by the Issuer to the Indenture Trustee pursuant
to the Indenture:


     (a)   Existence and Power. The Seller is a Delaware limited liability
company validly existing and in good standing under the laws of the State of
Delaware and has, in all material respects, all power and authority required to
carry on its business as it is now conducted. The Seller has obtained all
necessary licenses and approvals in each jurisdiction where the failure to do
so would materially and adversely affect the ability of the Seller to perform
its obligations under the Transaction Documents or affect the enforceability or
collectibility of the Receivables or any other part of the Transferred Assets.


13






 


     (b)   Authorization and No Contravention. The execution, delivery and
performance by the Seller of each Transaction Document to which it is a party
(i) have been duly authorized by all necessary action on the part of the Seller
and (ii) do not contravene or constitute a default under (A) any applicable
law, rule or regulation, (B) its organizational documents or (C) any material
agreement, contract, order or other instrument to which it is a party or its
property is subject (other than violations which do not affect the legality,
validity or enforceability of any of such agreements and which, individually or
in the aggregate, would not materially and adversely affect the transactions
contemplated by, or the Seller’s ability to perform its obligations under, the
Transaction Documents).


     (c)   No Consent Required. No approval or authorization by, or filing with,
any Governmental Authority is required in connection with the execution,
delivery and performance by the Seller of any Transaction Document other than
(i) UCC filings, (ii) approvals and authorizations that have previously been
obtained and filings that have previously been made and (iii) approvals,
authorizations or filings which, if not obtained or made, would not have a
material adverse effect on the enforceability or collectibility of the
Receivables or any other part of the Transferred Assets or would not materially
and adversely affect the ability of the Seller to perform its obligations under
the Transaction Documents.


     (d)   Binding Effect. Each Transaction Document to which the Seller is a
party constitutes the legal, valid and binding obligation of the Seller
enforceable against the Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship or other similar laws
affecting creditors’ rights generally and, if applicable, the rights of
creditors of limited liability companies from time to time in effect or by
general principles of equity.


     (e)     Lien Filings. The Seller is not aware of any material judgment, ERISA
or tax lien filings against the Seller.


     (f)   No Proceedings. There are no actions, suits or proceedings pending
or, to the knowledge of the Seller, threatened against the Seller before or by
any Governmental Authority that (i) assert the invalidity or unenforceability
of this Agreement or any of the other Transaction Documents, (ii) seeking to
prevent the issuance of the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the other Transaction
Documents, (iii) seeking any determination or ruling that would materially and
adversely affect the performance by the Seller of its obligations under this
Agreement or any of the other Transaction Documents or the collectibility or
enforceability of the Receivables, or (iv) relating to the Seller that would
materially and adversely affect the federal or Applicable Tax State income,
excise, franchise or similar tax attributes of the Notes.


     SECTION 5.2   Liability of Seller; Indemnities. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement, and hereby agrees to the
following:


     (a)   The Seller shall indemnify, defend, and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Noteholders and the Certificateholder
from and against any

14






 



loss, liability or expense incurred by reason of the Seller’s violation of
federal or State securities laws in connection with the registration or the
sale of the Notes.


     (b)   The Seller will pay any and all taxes levied or assessed upon the
Issuer or upon all or any part of the Trust Estate.


     (c)   Indemnification under this Section 5.2 will survive the resignation or
removal of the Owner Trustee or the Indenture Trustee and the termination of
this Agreement and will include, without limitation, reasonable fees and
expenses of counsel and expenses of litigation. If the Seller has made any
indemnity payments pursuant to this Section 5.2 and the Person to or on behalf
of whom such payments are made thereafter collects any of such amounts from
others, such Person will promptly repay such amounts to the Seller, without
interest.


     (d)   The Seller’s obligations under this Section 5.2 are obligations solely
of the Seller and will not constitute a claim against the Seller to the extent
that the Seller does not have funds sufficient to make payment of such
obligations. In furtherance of and not in derogation of the foregoing, the
Issuer, the Servicer, the Indenture Trustee and the Owner Trustee, by entering
into or accepting this Agreement, acknowledge and agree that they have no
right, title or interest in or to the Other Assets of the Seller. To the
extent that, notwithstanding the agreements and provisions contained in the
preceding sentence, the Issuer, the Servicer, the Indenture Trustee or the
Owner Trustee either (i) asserts an interest or claim to, or benefit from,
Other Assets, or (ii) is deemed to have any such interest, claim to, or benefit
in or from Other Assets, whether by operation of law, legal process, pursuant
to applicable provisions of insolvency laws or otherwise (including by virtue
of Section 1111(b) of the Bankruptcy Code or any successor provision having
similar effect under the Bankruptcy Code), then the Issuer, the Servicer, the
Indenture Trustee or the Owner Trustee further acknowledges and agrees that any
such interest, claim or benefit in or from Other Assets is and will be
expressly subordinated to the indefeasible payment in full, which, under the
terms of the relevant documents relating to the securitization or conveyance of
such Other Assets, are entitled to be paid from, entitled to the benefits of,
or otherwise secured by such Other Assets (whether or not any such entitlement
or security interest is legally perfected or otherwise entitled to a priority
of distributions or application under applicable law, including insolvency
laws, and whether or not asserted against the Seller), including the payment of
post-petition interest on such other obligations and liabilities. This
subordination agreement will be deemed a subordination agreement within the
meaning of Section 510(a) of the Bankruptcy Code. The Issuer, the Servicer,
the Indenture Trustee and the Owner Trustee each further acknowledges and
agrees that no adequate remedy at law exists for a breach of this Section
5.2(d) and the terms of this Section 5.2(d) may be enforced by an action for
specific performance. The provisions of this Section 5.2(d) will be for the
third party benefit of those entitled to rely thereon and will survive the
termination of this Agreement.


     SECTION 5.3   Merger or Consolidation of, or Assumption of the Obligations
of, Seller. Any Person (i) into which the Seller may be merged or
consolidated, (ii) resulting from any merger, conversion, or consolidation to
which the Seller is a party, (iii) succeeding to the business of the Seller, or
(iv) more than 50% of the voting stock or voting power and 50% or more of the
economic equity of which is owned directly or indirectly by Volkswagen AG,
which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Seller under this Agreement, will be the
successor to the Seller under this

15






 



Agreement without the execution or filing of any document or any further
act on the part of any of the parties to this Agreement. Notwithstanding the
foregoing, if the Seller enters into any of the foregoing transactions and is
not the surviving entity, (x) the Seller shall deliver to the Indenture Trustee
an Officer’s Certificate and an Opinion of Counsel each stating that such
merger, conversion, consolidation or succession and such agreement of
assumption comply with this Section 5.3 and that all conditions precedent, if
any, provided for in this Agreement relating to such transaction have been
complied with and (y) the Seller will deliver to the Indenture Trustee an
Opinion of Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Issuer and the Indenture Trustee, respectively, in the
Receivables, and reciting the details of such filings, or (B) stating that, in
the opinion of such counsel, no such action is necessary to preserve and
protect such interest. The Seller will provide notice of any merger,
conversion, consolidation, or succession pursuant to this Section 5.3 to the
Rating Agencies. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance with clauses
(x) and (y) of this Section 5.3 will be conditions to the consummation of any
of the transactions referred to in clauses (i), (ii) or (iii) of this Section
5.3 in which the Seller is not the surviving entity.


     SECTION 5.4   Limitation on Liability of Seller and Others. The Seller and
any officer or employee or agent of the Seller may rely in good faith on the
advice of counsel or on any document of any kind, prima facie properly executed
and submitted by any Person respecting any matters arising hereunder. The
Seller will not be under any obligation to appear in, prosecute, or defend any
legal action that is not incidental to its obligations under this Agreement,
and that in its opinion may involve it in any expense or liability.


     SECTION 5.5   Seller May Own Notes. The Seller, and any Affiliate of the
Seller, may in its individual or any other capacity become the owner or pledgee
of Notes with the same rights as it would have if it were not the Seller or an
Affiliate thereof, except as otherwise expressly provided herein or in the
other Transaction Documents. Except as set forth herein or in the other
Transaction Documents, Notes so owned by the Seller or any such Affiliate will
have an equal and proportionate benefit under the provisions of this Agreement
and the other Transaction Documents, without preference, priority, or
distinction as among all of the Notes. Notes owned by the Issuer, Seller,
Servicer, Administrator or any of their respective Affiliates shall be
disregarded with respect to the determination of any request, demand,
authorization, direction, notice, consent, vote or waiver hereunder or under
any other Transaction Document.


     SECTION 5.6   Sarbanes-Oxley Act Requirements. To the extent any documents
are required to be filed or any certification is required to be made with
respect to the Issuer or the Notes pursuant to the Sarbanes-Oxley Act, the
Seller shall prepare and execute any such document or certification and is
authorized to file such document or certification on behalf of the Issuer.


     SECTION 5.7   Indebtedness. The Seller shall not incur any indebtedness,
assume any indebtedness or guaranty any indebtedness other than in accordance
with the Transaction Documents unless (a) such indebtedness is incurred in
connection with the issuance of securities and the Rating Agency Condition has
been satisfied with respect thereto and (b) (i) any future

16






 



indebtedness shall be fully subordinated and nonrecourse against the
assets of the Seller other than assets pledged to secure such indebtedness,
(ii) such indebtedness does not constitute a claim against the Seller in the
event the assets pledged to secure such indebtedness are insufficient to pay
such indebtedness, (iii) holders of such indebtedness agree that they have no
rights in any assets of the Seller other than the assets pledged to secure such
indebtedness, and (iv) to the extent that any holder of such indebtedness is
deemed to have any interest in any assets of the Seller other than the assets
pledged to secure such indebtedness, holders of such indebtedness agree that
their interest is subordinate to claims or rights of holders of other
indebtedness issued by the Seller, and that such agreement constitutes a
subordination agreement for purposes of Section 510(a) of the Bankruptcy Code.


ARTICLE VI


THE SERVICER



     SECTION 6.1   Representations of Servicer. The Servicer makes the following
representations and warranties as of the Closing Date on which the Issuer will
be deemed to have relied in acquiring the Transferred Assets. The
representations and warranties speak as of the execution and delivery of this
Agreement and will survive the conveyance of the Transferred Assets to the
Issuer and the pledge thereof by the Issuer to the Indenture Trustee pursuant
to the Indenture:


     (a)   Existence and Power. The Servicer is a Delaware corporation validly
existing and in good standing under the laws of the State of Delaware and has,
in all material respects, all power and authority to carry on its business as
it is now conducted. The Servicer has obtained all necessary licenses and
approvals in each jurisdiction where the failure to do so would materially and
adversely affect the ability of the Servicer to perform its obligations under
the Transaction Documents or affect the enforceability or collectibility of the
Receivables or any other part of the Transferred Assets.


     (b)   Authorization and No Contravention. The execution, delivery and
performance by the Servicer of the Transaction Documents to which it is a party
(i) have been duly authorized by all necessary action on the part of the
Servicer and (ii) do not contravene or constitute a default under (A) any
applicable law, rule or regulation, (B) its organizational documents or (C) any
material agreement, contract, order or other instrument to which it is a party
or its property is subject (other than violations which do not affect the
legality, validity or enforceability of any of such agreements and which,
individually or in the aggregate, would not materially and adversely affect the
transactions contemplated by, or the Servicer’s ability to perform its
obligations under, the Transaction Documents).


     (c)   No Consent Required. No approval or authorization by, or filing with,
any Governmental Authority is required in connection with the execution,
delivery and performance by the Servicer of any Transaction Document other than
(i) UCC filings, (ii) approvals and authorizations that have previously been
obtained and filings that have previously been made and (iii) approvals,
authorizations or filings which, if not obtained or made, would not have a
material adverse effect on the enforceability or collectibility of the
Receivables or would not

17






 



materially and adversely affect the ability of the Servicer to perform its
obligations under the Transaction Documents.


     (d)   Binding Effect. Each Transaction Document to which the Servicer is a
party constitutes the legal, valid and binding obligation of the Servicer
enforceable against the Servicer in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship or other similar laws
affecting creditors’ rights generally and, if applicable, the rights of
creditors of limited liability companies from time to time in effect or by
general principles of equity.


     (e)   No Proceedings. There are no actions, suits or proceedings pending
or, to the knowledge of the Servicer, threatened against the Servicer before or
by any Governmental Authority that (i) assert the invalidity or
unenforceability of this Agreement or any of the other Transaction Documents,
(ii) seeking to prevent the issuance of the Notes or the consummation of any of
the transactions contemplated by this Agreement or any of the other Transaction
Documents, (iii) seeking any determination or ruling that would materially and
adversely affect the performance by the Servicer of its obligations under this
Agreement or any of the other Transaction Documents, or (iv) relating to the
Servicer that would materially and adversely affect the federal or Applicable
Tax State income, excise, franchise or similar tax attributes of the Notes.


     SECTION 6.2   Indemnities of Servicer. The Servicer will be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement, and hereby agrees to the
following:


     (a)   The Servicer will defend, indemnify and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Noteholders, the Certificateholder
and the Seller from and against any and all costs, expenses, losses, damages,
claims and liabilities, arising out of or resulting from the use, ownership or
operation by the Servicer or any Affiliate thereof of a Financed Vehicle.


     (b)   The Servicer will indemnify, defend and hold harmless the Issuer, the
Owner Trustee and the Indenture Trustee from and against any taxes that may at
any time be asserted against any such Person with respect to the transactions
contemplated herein or in the other Transaction Documents, if any, including,
without limitation, any sales, gross receipts, general corporation, tangible
personal property, privilege, or license taxes (but, in the case of the Issuer,
not including any taxes asserted with respect to, and as of the date of, the
conveyance of the Receivables to the Issuer or the issuance and original sales
of the Notes, or asserted with respect to ownership of the Receivables, or
federal or other Applicable Tax State income taxes arising out of the
transactions contemplated by this Agreement and the other Transaction
Documents) and costs and expenses in defending against the same. For the
avoidance of doubt, the Servicer will not indemnify for any costs, expenses,
losses, claims, damages or liabilities due to the credit risk of the Obligor
and for which reimbursement would constitute recourse for uncollectible
Receivables.


     (c)     The Servicer will indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Indenture Trustee, the Noteholders, the Certificateholder
and the Seller from and

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against any and all costs, expenses, losses, claims, damages, and
liabilities to the extent that such cost, expense, loss, claim, damage, or
liability arose out of, or was imposed upon any such Person through, the
negligence, willful misfeasance, or bad faith (other than errors in judgment)
of the Servicer in the performance of its duties under this Agreement or any
other Transaction Document to which it is a party, or by reason of its failure
to perform its obligations or of reckless disregard of its obligations and
duties under this Agreement or any other Transaction Document to which it is a
party.


     (d)   The Servicer will compensate and indemnify the Owner Trustee to the
extent and subject to the conditions set forth in Sections 8.1 and 8.2 of the
Trust Agreement. The Servicer will compensate and indemnify the Indenture
Trustee to the extent and subject to the conditions set forth in Section 6.7 of
the Indenture, except to the extent that any cost, expense, loss, claim, damage
or liability arises out of or is incurred in connection with the performance by
the Indenture Trustee of the duties of a successor Servicer hereunder.


     (e)     Indemnification under this Section 6.2 by VCI (or any successor
thereto pursuant to Section 7.1) as Servicer, with respect to the period such
Person was the Servicer, will survive the termination of such Person as
Servicer or a resignation by such Person as Servicer as well as the termination
of this Agreement and the Trust Agreement or the resignation or removal of the
Owner Trustee or the Indenture Trustee and will include reasonable fees and
expenses of counsel and expenses of litigation. If the Servicer has made any
indemnity payments pursuant to this Section 6.2 and the Person to or on behalf
of whom such payments are made thereafter collects any of such amounts from
others, such Person will promptly repay such amounts to the Servicer, without
interest.


     SECTION 6.3   Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (i) into which the Servicer may be merged or
consolidated, (ii) resulting from any merger, conversion, or consolidation to
which the Servicer is a party, (iii) succeeding to the business of the
Servicer, or (iv) of which Volkswagen AG owns, directly or indirectly, more
than 50% of the voting stock or voting power and 50% or more of the economic
equity, which Person in any of the foregoing cases executes an agreement of
assumption to perform every obligation of the Servicer under this Agreement,
will be the successor to the Servicer under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties to this Agreement. Notwithstanding the foregoing, if the Servicer
enters into any of the foregoing transactions and is not the surviving entity,
(x) the Servicer shall deliver to the Indenture Trustee an Officer’s
Certificate and an Opinion of Counsel each stating that such merger,
conversion, consolidation, or succession and such agreement of assumption
comply with this Section 6.3 and that all conditions precedent provided for in
this Agreement relating to such transaction have been complied with and (y) the
Servicer will deliver to the Indenture Trustee an Opinion of Counsel either (A)
stating that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and filed
that are necessary fully to preserve and protect the interest of the Issuer and
the Indenture Trustee, respectively, in the Receivables, and reciting the
details of such filings, or (B) stating that, in the opinion of such counsel,
no such action is necessary to preserve and protect such interests. The
Servicer will provide notice of any merger, conversion, consolidation or
succession pursuant to this Section 6.3 to the Rating Agencies.
Notwithstanding anything herein to the contrary, the execution of the foregoing
agreement of assumption and compliance with

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clauses (x) and (y) of this Section 6.3 will be conditions to the
consummation of any of the transactions referred to in clauses (i), (ii) or
(iii) of this Section 6.3 in which the Servicer is not the surviving entity.



     SECTION 6.4   Limitation on Liability of Servicer and Others. (a) Neither
the Servicer nor any of the directors or officers or employees or agents of the
Servicer will be under any liability to the Issuer, the Indenture Trustee, the
Owner Trustee, the Noteholders or the Certificateholder, except as provided
under this Agreement, for any action taken or for refraining from the taking of
any action pursuant to this Agreement or for errors in judgment; provided,
however, that this provision will not protect the Servicer or any such Person
against any liability that would otherwise be imposed by reason of willful
misfeasance or bad faith in the performance of duties or by reason of its
failure to perform its obligations or of reckless disregard of obligations and
duties under this Agreement, or by reason of negligence in the performance of
its duties under this Agreement (except for errors in judgment). The Servicer
and any director, officer or employee or agent of the Servicer may rely in good
faith on any Opinion of Counsel or on any Officer’s Certificate of the Seller
or certificate of auditors believed to be genuine and to have been signed by
the proper party in respect of any matters arising under this Agreement.



     (b)     Except as provided in this Agreement, the Servicer will not be under
any obligation to appear in, prosecute, or defend any legal action that is not
incidental to its duties to service the Receivables in accordance with this
Agreement, and that in its opinion may involve it in any expense or liability;
provided, however, that the Servicer may undertake any reasonable action that
it may deem necessary or desirable in respect of this Agreement and the rights
and duties of the parties to this Agreement and the interests of the
Noteholders and the Certificateholder under this Agreement. In such event, the
legal expenses and costs of such action and any liability resulting therefrom
will be expenses, costs and liabilities of the Servicer.



     SECTION 6.5   Delegation of Duties. The Servicer may, at any time without
notice or consent, delegate (a) any or all of its duties (including, without
limitation, its duties as custodian) under the Transaction Documents to any of
its Affiliates or (b) specific duties to sub-contractors who are in the
business of performing such duties; provided that no such delegation shall
relieve the Servicer of its responsibility with respect to such duties and the
Servicer shall remain obligated and liable to the Issuer and the Indenture
Trustee for its duties hereunder as if the Servicer alone were performing such
duties.



     SECTION 6.6   VCI Not to Resign as Servicer. Subject to the provisions of
Sections 6.3 and 6.5, VCI will not resign from the obligations and duties
hereby imposed on it as Servicer under this Agreement except upon determination
that the performance of its duties under this Agreement is no longer
permissible under applicable law. Notice of any such determination permitting
the resignation of VCI will be communicated to the Issuer and the Indenture
Trustee at the earliest practicable time (and, if such communication is not in
writing, will be confirmed in writing at the earliest practicable time) and any
such determination will be evidenced by an Opinion of Counsel to such effect
delivered to the Issuer and the Indenture Trustee concurrently with or promptly
after such notice. No such resignation will become effective until a successor
Servicer has assumed the responsibilities and obligations of VCI as Servicer.



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     SECTION 6.7   Servicer May Own Securities. The Servicer, and any Affiliate
of the Servicer, may, in its individual or any other capacity, become the owner
or pledgee of Notes with the same rights as it would have if it were not the
Servicer or an Affiliate thereof, except as otherwise expressly provided herein
or in the other Transaction Documents. Except as set forth herein or in the
other Transaction Documents, Securities so owned by or pledged to the Notes or
such Affiliate will have an equal and proportionate benefit under the
provisions of this Agreement, without preference, priority or distinction as
among all of the Notes.


ARTICLE VII



REPLACEMENT OF SERVICER



     SECTION 7.1   Replacement of Servicer.


     (a)   If a Servicer Replacement Event shall have occurred and be continuing,
the Indenture Trustee shall, at the direction of 66-2/3% of the Controlling
Class, by notice given to the Servicer, the Owner Trustee, the Issuer, the
Administrator, the Noteholders and each Rating Agency, terminate the rights and
obligations of the Servicer under this Agreement with respect to the
Receivables. In the event the Servicer is removed or resigns as Servicer with
respect to servicing the Receivables, the Indenture Trustee shall appoint a
successor Servicer. Upon the Servicer’s receipt of notice of termination the
predecessor Servicer will continue to perform its functions as Servicer under
this Agreement only until the date specified in such termination notice or, if
no such date is specified in such termination notice, until receipt of such
notice. If a successor Servicer has not been appointed at the time when the
predecessor Servicer ceases to act as Servicer in accordance with this Section,
the Indenture Trustee without further action will automatically be appointed
the successor Servicer. Notwithstanding the above, the Indenture Trustee, if
it is legally unable or is unwilling to so act, will appoint, or petition a
court of competent jurisdiction to appoint a successor Servicer. Any successor
Servicer shall be an established institution having a net worth of not less
than $100,000,000 and whose regular business includes the servicing of
comparable motor vehicle receivables having an aggregate outstanding principal
amount of not less than $50,000,000.


     (b)   Noteholders holding not less than a majority of the Controlling Class
may waive any Servicer Replacement Event.


     (c)     If replaced, the Servicer agrees that it will use commercially
reasonable efforts to effect the orderly and efficient transfer of the
servicing of the Receivables to a successor Servicer. All reasonable costs and
expenses incurred in connection with transferring the Receivable Files to the
successor Servicer will be paid by the predecessor Servicer upon presentation
of reasonable documentation of such costs and expenses.


     (d)   Upon the effectiveness of the assumption by the successor Servicer of
its duties pursuant to this Section 7.1, the successor Servicer shall be the
successor in all respects to the Servicer in its capacity as Servicer under
this Agreement with respect to the Receivables, and shall be subject to all the
responsibilities, duties and liabilities relating thereto, except with respect
to the obligations of the predecessor Servicer that survive its termination as
Servicer, including indemnification obligations as set forth in Section 6.2(e).
In such event, the Indenture

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Trustee and the Owner Trustee are hereby authorized and empowered to
execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such termination and replacement of the Servicer, whether to
complete the transfer and endorsement of the Receivables and related documents,
or otherwise. No Servicer shall resign or be relieved of its duties under this
Agreement, as Servicer of the Receivables, until a newly appointed Servicer for
the Receivables shall have assumed the responsibilities and obligations of the
resigning or terminated Servicer under this Agreement.


     (e)     In connection with such appointment, the Indenture Trustee may make
such arrangements for the compensation of the successor Servicer out of
Available Funds as it and such successor Servicer will agree; provided,
however, that no such compensation will be in excess of the amount paid to the
predecessor Servicer under this Agreement.


     (f)   The predecessor Servicer shall be entitled to receive reimbursement
for any outstanding Advances made with respect to the Receivables to the extent
funds are available therefore in accordance with Section 4.4.


     SECTION 7.2   Notification to Noteholders. Upon any termination of, or
appointment of a successor to, the Servicer pursuant to this Article VII, the
Indenture Trustee will give prompt written notice thereof to the Owner Trustee,
the Issuer, the Administrator, each Rating Agency and to the Noteholders at
their respective addresses of record.


ARTICLE VIII



OPTIONAL PURCHASE



     SECTION 8.1   Optional Purchase of Trust Estate. If VCI is the Servicer,
then VCI shall have the right at its option (the “Optional Purchase”) to
purchase the Trust Estate from the Issuer on any Payment Date if, either before
or after giving effect to any payment of principal required to be made on such
Payment Date, the aggregate Net Pool Balance is less than or equal to 10% of
the initial Net Pool Balance. The purchase price for the Trust Estate shall
equal the unpaid principal amount of the Notes plus accrued and unpaid interest
thereon at the applicable Interest Rate up to but excluding the Redemption Date
(the “Optional Purchase Price”), which amount shall be deposited by the
Servicer into the Collection Account on the Redemption Date. If VCI, as
Servicer, exercises the Optional Purchase, the Notes shall be redeemed and in
each case in whole but not in part on the related Payment Date for the
Redemption Price.


ARTICLE IX



MISCELLANEOUS PROVISIONS



     SECTION 9.1   Amendment.


     (a)   Any term or provision of this Agreement may be amended by the Seller
and the Servicer without the consent of the Indenture Trustee, any Noteholder,
the Issuer or the Owner Trustee; provided that such amendment shall not, as
evidenced by an Opinion of Counsel

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delivered to the Indenture Trustee and the Owner Trustee materially and
adversely affect the interests of the Noteholders, the Indenture Trustee or the
Owner Trustee.


     (b)   Any term or provision of this Agreement may be amended by the Seller
and the Servicer but without the consent of the Indenture Trustee, any
Noteholder, the Issuer, the Owner Trustee or any other Person to add, modify or
eliminate any provisions as may be necessary or advisable in order to enable
the Seller, the Servicer or any of their Affiliates to comply with or obtain
more favorable treatment under any law or regulation or any accounting rule or
principle, it being a condition to any such amendment that the Rating Agency
Condition shall have been satisfied.


     (c)     This Agreement (including Appendix A) may also be amended from time to
time by Seller, Servicer and the Indenture Trustee, with the consent of the
Noteholders evidencing not less than a majority of the aggregate outstanding
principal amount of the Outstanding Notes, voting as a single class, for the
purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement or of modifying in any manner the
rights of the Noteholders; provided that no such amendment shall (i) reduce the
interest rate or principal amount of any Note, change the timing of
distributions on any Note or delay the Final Scheduled Payment Date of any Note
without the consent of the Holder of such Note, (ii) reduce the percentage of
the aggregate outstanding principal amount of the Outstanding Notes, the
Holders of which are required to consent to any matter without the consent of
the Holders of at least the percentage of the aggregate outstanding principal
amount of the Outstanding Notes which were required to consent to such matter
before giving effect to such amendment; provided, further, that the Indenture
Trustee may not agree to any amendment to this Agreement if such amendment
failed to comply with the requirements of Section 9.2 of the Indenture. It
will not be necessary for the consent of Noteholders to approve the particular
form of any proposed amendment or consent, but it will be sufficient if such
consent approves the substance thereof. The manner of obtaining such consents
(and any other consents of Noteholders provided for in this Agreement) and of
evidencing the authorization of the execution thereof by Noteholders will be
subject to such reasonable requirements as the Indenture Trustee may prescribe,
including the establishment of record dates pursuant to the Note Depository
Agreement.


     (d)   Prior to the execution of any such amendment, the Servicer shall
provide written notification of the substance of such amendment to each Rating
Agency; and promptly after the execution of any such amendment or consent, the
Servicer shall furnish a copy of such amendment or consent to each Rating
Agency and the Indenture Trustee.


     (e)   Prior to the execution of any amendment to this Agreement, the Seller,
the Owner Trustee and the Indenture Trustee shall be entitled to receive and
conclusively rely upon an Opinion of Counsel stating that the execution of such
amendment is authorized or permitted by this Agreement and that all conditions
precedent to the execution and delivery of such amendment have been satisfied.
The Owner Trustee and the Indenture Trustee may, but shall not be obligated to,
enter into or execute on behalf of the Issuer any such amendment which
adversely affects the Owner Trustee’s or the Indenture Trustee’s, as
applicable, own rights, duties or immunities under this Agreement.


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     SECTION 9.2   Protection of Title.


     (a)   The Seller shall authorize and file such financing statements and
cause to be authorized and filed such continuation and other statements, all in
such manner and in such places as may be required by law fully to preserve,
maintain and protect the interest of the Issuer and the Indenture Trustee under
this Agreement in the Receivables. The Seller shall deliver (or cause to be
delivered) to the Issuer file-stamped copies of, or filing receipts for, any
document filed as provided above, as soon as available following such filing.


     (b)     Neither the Seller nor the Servicer shall change its name, identity,
organizational structure or jurisdiction of organization in any manner that
would make any financing statement or continuation statement filed by the
Seller in accordance with paragraph (a) above “seriously misleading” within the
meaning of Sections 9-506, 9-507 or 9-508 of the UCC, unless it shall have
given the Issuer and the Indenture Trustee at least five days’ prior written
notice thereof and, to the extent necessary, has promptly filed amendments to
previously filed financing statements or continuation statements described in
paragraph (a) above.


     (c)     The Seller shall give the Issuer and the Indenture Trustee at least
five days’ prior written notice of any change of location of the Seller for
purposes of Section 9-307 of the UCC and shall have taken all action prior to
making such change (or shall have made arrangements to take such action
substantially simultaneously with such change, if it is not possible to take
such action in advance) reasonably necessary or advisable to amend all
previously filed financing statements or continuation statements described in
paragraph (a) above.


     (d)   The Servicer shall maintain (or shall cause its Sub-Servicer to
maintain) accounts and records as to each Receivable accurately and in
sufficient detail to permit (i) the reader thereof to know at any time the
status of such Receivable, including payments and recoveries made and payments
owing (and the nature of each) and (ii) reconciliation between payments or
recoveries on (or with respect to) each Receivable and the amounts from time to
time deposited in the Collection Account in respect of such Receivable.


     (e)   The Servicer shall maintain (or shall cause its Sub-Servicer to
maintain) its computer systems so that, from time to time after the conveyance
under this Agreement of the Receivables, the master computer records (including
any backup archives) that refer to a Receivable shall indicate clearly the
interest of the Issuer in such Receivable and that such Receivable is owned by
the Issuer and has been pledged to the Indenture Trustee pursuant to the
Indenture. Indication of the Issuer’s interest in a Receivable shall not be
deleted from or modified on such computer systems until, and only until, the
related Receivable shall have been paid in full or repurchased.


     (f)   If at any time the Servicer shall propose to sell, grant a security
interest in or otherwise transfer any interest in motor vehicle receivables to
any prospective purchaser, lender or other transferee, the Servicer shall give
to such prospective purchaser, lender or other transferee computer tapes,
records or printouts (including any restored from backup archives) that, if
they shall refer in any manner whatsoever to any Receivable, shall indicate
clearly that such Receivable has been sold and is owned by the Issuer and has
been pledged to the Indenture Trustee.


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     (g)   The Servicer, upon receipt of reasonable prior notice, shall permit
the Indenture Trustee, the Owner Trustee and their respective agents at any
time during normal business hours to inspect, audit and, to the extent
permitted by applicable law, make copies of and abstracts from Servicer’s (or
any Sub-Servicer’s) records regarding any Receivable.


     (h)   Upon request, the Servicer shall furnish to the Issuer or to the
Indenture Trustee, within thirty Business Days, a list of all Receivables (by
contract number and name of Obligor) then owned by the Issuer, together with a
reconciliation of such list to each of the Servicer’s Certificates furnished
before such request indicating removal of Receivables from the Issuer.


     SECTION 9.3   Other Liens or Interests. Except for the conveyances and
grants of security interests pursuant to this Agreement and the other
Transaction Documents, the Seller shall not sell, pledge, assign or transfer
the Receivables or other property transferred to the Issuer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien (other than
Permitted Liens) on any interest therein, and the Seller shall defend the
right, title and interest of the Issuer in, to and under such Receivables and
other property transferred to the Issuer against all claims of third parties
claiming through or under the Seller.


     SECTION 9.4   Transfers Intended as Sale; Security Interest.


     (a)     Each of the parties hereto expressly intends and agrees that the
transfers contemplated and effected under this Agreement are complete and
absolute sales and transfers rather than pledges or assignments of only a
security interest and shall be given effect as such for all purposes. It is
further the intention of the parties hereto that the Receivables and related
Transferred Assets shall not be part of the Seller’s estate in the event of a
bankruptcy or insolvency of the Seller. The sales and transfers by the Seller
of Receivables and related Transferred Assets hereunder are and shall be
without recourse to, or representation or warranty (express or implied) by, the
Seller, except as otherwise specifically provided herein. The limited rights
of recourse specified herein against the Seller are intended to provide a
remedy for breach of representations and warranties relating to the condition
of the property sold, rather than to the collectibility of the Receivables.


     (b)     Notwithstanding the foregoing, in the event that the Receivables and
other Transferred Assets are held to be property of the Seller, or if for any
reason this Agreement is held or deemed to create indebtedness or a security
interest in the Receivables and other Transferred Assets, then it is intended
that:



	 	(i)	 	This Agreement shall be deemed to be a security
agreement within the meaning of Articles 8 and 9 of the New
York Uniform Commercial Code and the Uniform Commercial Code
of any other applicable jurisdiction;
	 
	 	(ii)	 	The conveyance provided for in Section 2.1 shall
be deemed to be a grant by the Seller, and the Seller hereby
grants, to the Issuer of a security interest in all of its
right (including the power to convey title thereto), title and
interest, whether now owned or hereafter acquired, in and to
the Receivables and other Transferred Assets, to secure such
indebtedness and the performance of the obligations of the
Seller hereunder;



25






 





	 	(iii)	 	The possession by the Issuer, or the Servicer as
the Issuer’s agent, of the Receivables Files and any other
property as constitute instruments, money, negotiable
documents or chattel paper shall be deemed to be “possession
by the secured party” or possession by the purchaser or a
person designated by such purchaser, for purposes of
perfecting the security interest pursuant to the New York
Uniform Commercial Code and the Uniform Commercial Code of any
other applicable jurisdiction; and
	 
	 	(iv)	 	Notifications to persons holding such property,
and acknowledgments, receipts or confirmations from persons
holding such property, shall be deemed to be notifications to,
or acknowledgments, receipts or confirmations from, bailees or
agents (as applicable) of the Issuer for the purpose of
perfecting such security interest under applicable law.



     SECTION 9.5   Notices, Etc. All demands, notices and communications
hereunder shall be in writing and shall be delivered or mailed by registered or
certified first-class United States mail, postage prepaid, hand delivery or
prepaid courier service and addressed in each case as follows: (i) if to the
Issuer, c/o Deutsche Bank Trust Company Americas, 60 Wall Street, 26th Floor,
Mail Stop NYC60-2606, New York, NY 10005, Attention: Corporate Trust and Agency
Services, with a copy to the Administrator, at 3800 Hamlin Road, Auburn Hills,
MI 48326 (telecopier no. (248) 754-5360), Attention: General Counsel, with a
copy to VW Credit, Inc., at 3800 Hamlin Road, Auburn Hills, MI 48326
(telecopier no. (248) 754-5360), Attention: Treasurer, with a copy to the
Indenture Trustee, at 101 Barclay Street, Floor 8 West, New York, NY 10286
(telecopier no. (212) 815-2493), Attention: Asset Backed Securities Unit; (ii)
if to the Indenture Trustee, at 101 Barclay Street, Floor 8 West, New York, NY
10286 (telecopier no. (212) 815-2493), Attention: Asset Backed Securities Unit;
(iii) if to the Seller, at 3800 Hamlin Road, Auburn Hills, MI 48326 (telecopier
no. (248) 754-5360), Attention: Treasurer; (iv) if to the Servicer, at 3800
Hamlin Road, Auburn Hills, MI 48326 (telecopier no. (248) 754-5360), Attention:
Treasurer, with a copy to VW Credit, Inc., at 3800 Hamlin Road, Auburn Hills,
MI 48326 (telecopier no. (248) 754-5360), Attention: Treasurer; (v) if to VCI,
at 3800 Hamlin Road, Auburn Hills, MI 48326 (telecopier no. (248) 754-5360),
Attention: Treasurer, with a copy to VW Credit, Inc., at 3800 Hamlin Road,
Auburn Hills, MI 48326 (telecopier no. (248) 754-5360), Attention: Treasurer;
(vi) if to Moody’s, to Moody’s Investors Service, Inc., 99 Church Street, New
York, NY 10007 (telecopier no. (212) 298-7139), Attention: ABS Monitoring
Group; (vii) if to S&P, to Standard & Poor’s Ratings Services, 55 Water Street,
New York, NY 10041 (telecopier no. (212) 438-2664), Attention: Asset Backed
Surveillance Group; or (viii) at such other address as shall be designated by
any of the foregoing in a written notice to the other parties hereto. Any
notice required or permitted to be mailed to a Noteholder shall be given by
first class mail, postage prepaid, at the address of such Noteholder as shown
in the Note Register. Delivery shall occur only upon receipt or reported
tender of such communication by an officer of the recipient entitled to receive
such notices located at the address of such recipient for notices hereunder;
provided, however, that any notice to a Noteholder mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Noteholder shall receive such notice.


     SECTION 9.6   Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL, SUBSTANTIVE

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LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE RULES THEREOF
RELATING TO CONFLICTS OF LAW AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.


     SECTION 9.7   Headings. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction or effect of this Agreement.


     SECTION 9.8   Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all of such counterparts shall together constitute but one and the same
instrument.


     SECTION 9.9   Waivers. No failure or delay on the part of the Servicer, the
Seller, the Issuer or the Indenture Trustee in exercising any power or right
hereunder (to the extent such Person has any power or right hereunder) shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power or right preclude any other or further exercise thereof or the
exercise of any other power or right. No notice to or demand on any party
hereto in any case shall entitle it to any notice or demand in similar or other
circumstances. No waiver or approval by any party hereto under this Agreement
shall, except as may otherwise be stated in such waiver or approval, be
applicable to subsequent transactions. No waiver or approval under this
Agreement shall require any similar or dissimilar waiver or approval thereafter
to be granted hereunder.


     SECTION 9.10   Entire Agreement. The Transaction Documents contain a final
and complete integration of all prior expressions by the parties hereto with
respect to the subject matter thereof and shall constitute the entire agreement
among the parties hereto with respect to the subject matter thereof,
superseding all prior oral or written understandings. There are no unwritten
agreements among the parties.


     SECTION 9.11   Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.


     SECTION 9.12   Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall
remain in full force and effect until such time as the parties hereto shall
agree.


     SECTION 9.13   Acknowledgment and Agreement. By execution below, the Seller
expressly acknowledges and consents to the pledge, assignment and grant of a
security interest in the Receivables and the other Transferred Assets by the
Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of
the Noteholders. In addition, the Seller hereby acknowledges


27






 




and agrees that for so long as the Notes are outstanding, the Indenture
Trustee will have the right to exercise all powers, privileges and claims of
the Issuer under this Agreement.


     SECTION 9.14   No Waiver; Cumulative Remedies. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law.


     SECTION 9.15   Nonpetition Covenant. Each party hereto agrees that, prior
to the date which is one year and one day after payment in full of all
obligations of each Bankruptcy Remote Party in respect of all securities issued
by any Bankruptcy Remote Party (i) such party shall not authorize any
Bankruptcy Remote Party to commence a voluntary winding-up or other voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to such Bankruptcy Remote Party or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect in any jurisdiction
or seeking the appointment of an administrator, a trustee, receiver,
liquidator, custodian or other similar official with respect to such Bankruptcy
Remote Party or any substantial part of its property or to consent to any such
relief or to the appointment of or taking possession by any such official in an
involuntary case or other proceeding commenced against such Bankruptcy Remote
Party, or to make a general assignment for the benefit of, its creditors
generally, any party hereto or any other creditor of such Bankruptcy Remote
Party, and (ii) none of the parties hereto shall commence or join with any
other Person in commencing any proceeding against such Bankruptcy Remote Party
under any bankruptcy, reorganization, liquidation or insolvency law or statute
now or hereafter in effect in any jurisdiction. This Section shall survive the
termination of this Agreement.


     SECTION 9.16   Submission to Jurisdiction. Each of the parties hereto
hereby irrevocably and unconditionally:


     (a)     submits for itself and its property in any legal action or proceeding
relating to this Agreement or any documents executed and delivered in
connection herewith, or for recognition and enforcement of any judgment in
respect thereof, to the nonexclusive general jurisdiction of the courts of the
State of New York, the courts of the United States of America for the Southern
District of New York and appellate courts from any thereof;


     (b)   consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;


     (c)     agrees that service of process in any such action or proceeding may be
effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Person at its
address determined in accordance with Section 9.5; and


     (d)   agrees that nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the right to sue in
any other jurisdiction.


     SECTION 9.17   Limitation of Liability.


     (a)     Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by Deutsche Bank Trust Company
Delaware, not in its individual

28






 



capacity but solely as Owner Trustee, and in no event shall it have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or under the Notes or any of the other
Transaction Documents or in any of the certificates, notices or agreements
delivered pursuant thereto, as to all of which recourse shall be had solely to
the assets of the Issuer. Under no circumstances shall the Owner Trustee be
personally liable for the payment of any indebtedness or expense of the Issuer
or be liable for the breach or failure of any obligations, representation,
warranty or covenant made or undertaken by the Issuer under the Transaction
Documents. For the purposes of this Agreement, in the performance of its
duties or obligations hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.


     (b)   Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by The Bank of New York, not in its
individual capacity but solely as Indenture Trustee, and in no event shall it
have any liability for the representations, warranties, covenants, agreements
or other obligations of the Issuer under the Notes or any of the other
Transaction Documents or in any of the certificates, notices or agreements
delivered pursuant thereto, as to all of which recourse shall be had solely to
the assets of the Issuer. Under no circumstances shall the Indenture Trustee
be personally liable for the payment of any indebtedness or expense of the
Issuer or be liable for the breach or failure of any obligations,
representation, warranty or covenant made or undertaken by the Issuer under the
Transaction Documents. For the purposes of this Agreement, in the performance
of its duties or obligations hereunder, the Indenture Trustee shall be subject
to, and entitled to the benefits of, the terms and provisions of Article VI of
the Indenture.


     SECTION 9.18   Third-Party Beneficiaries. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, the Noteholders and the
Certificateholder and their respective successors and permitted assigns and the
Owner Trustee shall be an express third party beneficiary hereof and may
enforce the provisions hereof as if it were a party hereto. Except as
otherwise provided in this Section, no other Person will have any right
hereunder.


29






 


     IN WITNESS WHEREOF, the parties have caused this Sale and Servicing
Agreement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.



	 	 	 	 	 	 
	 	 	
VOLKSWAGEN PUBLIC AUTO LOAN

SECURITIZATION, LLC, as Seller
	 	 	 	 	 	 
	 	 	 	By:	 	Peter Schupp
	 	 	 	 	 	

	 	 	 	Name: Peter Schupp
	 	 	 	Title: President
	 
	 	 	 	By:	 	LeSha A. Thorpe
	 	 	 	 	 	

	 	 	 	Name: LeSha A. Thorpe
	 	 	 	Title: Assistant Treasurer
	 
	 	 	VW CREDIT, INC., as Servicer
	 
	 	 	 	By:	 	/s/ Kevin Kelly
	 	 	 	 	 	

	 	 	 	Name: Kevin Kelly
	 	 	 	Title: President
	 
	 	 	 	By:	 	Allen L. Strang
	 	 	 	 	 	

	 	 	 	Name: Allen L. Strang
	 	 	 	Title: Secretary



2003-1 Sale & Servicing
Agreement


S-1






 




	 	 	 	 	 
	 	 	
VOLKSWAGEN AUTO LOAN ENHANCED TRUST

2003-1, as Issuer
	 	 	 	 	 
	 	 	By:	 	Deutsche Bank Trust Company Delaware, 
not in its individual capacity but 
solely as Owner Trustee
	 	 	 	 	 
	 	 	By:	 	/s/ Eileen M. Hughes


	 	 	 	 	Name: Eileen M. Hughes

Title: Vice President



2003-1 Sale & Servicing
Agreement


S-2






 




	 	 	 	 	 	 	 
	 	 	 	 	
THE BANK OF NEW YORK, not in its individual

capacity but solely as Indenture Trustee
	 	 	 	 	 	 	 
	 	 	 	 	By:	 	/s/ John Bobko
	 	 	 	 	 	 	

	 	 	 	 	 	 	Name: John Bobko
	 	 	 	 	 	 	Title: Assistant Vice President



2003-1 Sale & Servicing
Agreement


S-3






 



SCHEDULE I


REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE RECEIVABLES




	(a)	 	Characteristics of Receivables. Each Receivable:




		
	 	     (i)   has been fully and properly executed by the Obligor
thereto;
	 
	 	     (ii)   has either (A) been originated by a Dealer in the
ordinary course of such Dealer’s business to finance the retail
sale by a Dealer of the related Financed Vehicle and has been
purchased by the applicable Originator in the ordinary course of
its respective business or (B) has been originated or acquired
directly by the applicable Originator in accordance with its
customary practices;
	 
	 	     (iii)   as of the Closing Date is secured by a first priority
validly perfected security interest in the Financed Vehicle in
favor of the applicable Originator, as secured party, or all
necessary actions have been commenced that would result in a first
priority security interest in the Financed Vehicle in favor of the
applicable Originator, as secured party, which security interest,
in either case, is assignable and has been so assigned (x) by VW
Bank to VCI, if such Receivable was originated by VW Bank, (y) by
VCI to the Seller and (z) by the Seller to the Issuer;
	 
	 	     (iv)   contains customary and enforceable provisions such that
the rights and remedies of the holder thereof are adequate for
realization against the collateral of the benefits of the security;
	 
	 	     (v)   provides, at origination, for level monthly payments which
fully amortize the initial Outstanding Principal Balance over the
original term; provided that the amount of the first or last
payment may be different but in no event more than three times the
level monthly payment;
	 
	 	     (vi)   provides for interest at the Contract Rate specified in
the Schedule of Receivables; and
	 
	 	     (vii)   was originated in the United States.




	(b)	 	Individual Characteristics. Each Receivable has the following individual
characteristics as of the Cut-Off Date:




		
	 	     (i)   each Receivable is secured by a new or used automobile or
light-duty truck;
	 
	 	     (ii)   each Receivable has a Contract Rate of no less than
0.000% and not more than 20.481%;



Schedule I to the
Sale and
Servicing Agreement


I-1






 





		
	 	     (iii)   each Receivable had an original term to maturity of not
more than 72 months and not less than 12 months and each Receivable
has a remaining term to maturity, as of the Cut-Off Date, of 4
months or more;




		
	 	     (iv)   each Receivable had an original Outstanding Principal
Balance less than or equal to $125,000;




		
	 	     (v)   each Receivable has an Outstanding Principal Balance as of
the Cut-Off Date of greater than or equal to $2,000;




		
	 	     (vi)   no Receivable has a scheduled maturity date later than
April 20, 2009;




		
	 	     (vii)   no Receivable was more than 30 days past due as of the
Cut-Off Date;




		
	 	     (viii)   as of the Cut-off Date, no Receivable was noted in the
records of VCI or the Servicer as being the subject of any pending
bankruptcy or insolvency proceeding;




		
	 	     (ix)   no Receivable is subject to a force-placed Insurance
Policy on the related Financed Vehicle;





		
	 	     (x)   each Receivable is a Simple Interest Receivable;





		
	 	     (xi)   each of the Receivables were selected using selection
procedures that were not known or intended by VCI or the Servicer
to be adverse to the Issuer; and




		
	 	     (xii)   the Dealer of the Financed Vehicle has no participation
in, or other right to receive, any proceeds of such Receivable.




	(c)	 	Schedule of Receivables. The information with respect to a Receivable
transferred on the Closing Date set forth in the Schedule of Receivables
was true and correct in all material respects as of the Cut-Off Date.
	 
	(d)	 	Compliance with Law. The Receivable complied at the time it was
originated or made, in all material respects with all requirements of
applicable federal, state and local laws, and regulations thereunder,
including, to the extent applicable, usury laws, the Federal Truth in
Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting
Act, the Federal Trade Commission Act, the Fair Debt Collection Practices
Act, the Fair Credit Billing Act, the Magnuson-Moss Warranty Act, Federal
Reserve Board Regulations B and Z, the Soldiers’ and Sailors’ Civil Relief
Act of 1940, state adaptations of the National Consumer Act and of the
Uniform Consumer Credit Code and any other consumer credit, equal
opportunity and disclosure laws applicable to that Receivable.
	 
	(e)	 	Binding Obligation. The Receivable constitutes the legal, valid and
binding payment obligation in writing of the Obligor, enforceable in all
respects by the holder thereof in



Schedule I to the
Sale and
Servicing Agreement

I-2






 





	 	 	accordance with its terms, subject, as to enforcement, to applicable
bankruptcy, insolvency, reorganization, liquidation or other similar laws
and equitable principles relating to or affecting the enforcement of
creditors’ rights generally.
	 
	(f)	 	Receivable in Force. The Receivable has not been satisfied, subordinated
or rescinded nor has the related Financed Vehicle been released from the
lien granted by the Receivable in whole or in part.
	 
	(g)	 	No Waiver. As of the Cut-Off Date, no provision of a Receivable has been
waived.
	 
	(h)	 	No Default. Except for payment delinquencies continuing for a period of
not more than 30 days as of the Cut-Off Date, the records of the Servicer
did not disclose that any default, breach, violation or event permitting
acceleration under the terms of the Receivable existed as of the Cut-Off
Date or that any continuing condition that with notice or lapse of time,
or both, would constitute a default, breach, violation or event permitting
acceleration under the terms of the Receivable had arisen as of the
Cut-Off Date.
	 
	(i)	 	Insurance. The Receivable requires the Obligor thereunder to insure the
Financed Vehicle under a physical damage insurance policy.
	 
	(j)	 	No Government Obligor. The Obligor on the Receivable is not the United
States of America or any state thereof or any local government, or any
agency, department, political subdivision or instrumentality of the United
States of America or any state thereof or any local government.
	 
	(k)	 	Assignment. No Receivable has been originated in, or is subject to the
laws of, any jurisdiction under which the sale, transfer, assignment,
conveyance or pledge of such Receivable would be unlawful, void, or
voidable. The Seller has not entered into any agreement with any Obligor
that prohibits, restricts or conditions the assignment of the related
Receivable.
	 
	(l)	 	Good Title. It is the intention of the Seller that the sale, transfer,
assignment and conveyance herein contemplated constitute an absolute sale,
transfer, assignment and conveyance of the Receivables and that the
Receivables not be part of the Seller’s estate in the event of the filing
of a bankruptcy petition by or against the Seller under any bankruptcy
law. No Receivable has been sold, transferred, assigned, conveyed or
pledged to any Person other than pursuant to the Transaction Documents.
As of the Closing Date, and immediately prior to the sale and transfer
herein contemplated, the Seller had good and marketable title to
Receivable free and clear of all Liens, and, immediately upon the sale and
transfer thereof, the Issuer will have good and marketable title to each
Receivable, free and clear of all Liens (other than Permitted Liens).
	 
	(m)	 	Filings. All filings (including, without limitation, UCC filings)
necessary in any jurisdiction to give the Issuer a first priority, validly
perfected ownership interest in the Receivables (other than the Related
Security with respect thereto), and to give the Indenture Trustee a first
priority perfected security interest therein, will be made within ten days
of the Closing Date.



Schedule I to the
Sale and
Servicing Agreement


I-3






 





	(n)	 	Priority. The Receivable is not pledged, assigned, sold, subject to a
security interest, or otherwise conveyed other than pursuant to the
Transaction Documents. The Seller has not authorized the filing of and is
not aware of any financing statements against VCI or the Seller that
include a description of collateral covering the Receivables other than
any financing statement relating to security interests granted under the
Transaction Documents or that have been terminated. The Sale and
Servicing Agreement creates a valid and continuing security interest in
the Receivable (other than the Related Security with respect thereto) in
favor of the Issuer which security interest is prior to all other Liens
(other than Permitted Liens) and is enforceable as such against all other
creditors of and purchasers and assignees from the Seller.
	 
	(o)	 	Characterization of Receivables. Each Receivable constitutes either
“tangible chattel paper”, an “account”, a “promissory note” or a “payment
intangible”, each as defined in the UCC.
	 
	(p)	 	One Original. There is only one original executed copy of each
Receivable in existence. The Servicer (or its agent) has possession of
such original. If such original has been marked, then such original does
not have any marks or notations indicating that it has been pledged,
assigned or otherwise conveyed to any Person other than to a party to the
Transaction Documents.
	 
	(q)	 	No Defenses. The Seller has no knowledge either of any facts which would
give rise to any right of rescission, set-off, counterclaim or defense, or
of the same being asserted or threatened, with respect to any Receivable.
	 
	(r)	 	No Repossession. As of the Cut-Off Date, no Financed Vehicle shall have
been repossessed.



Schedule I to the
Sale and
Servicing Agreement


I-4






 






EXHIBIT A


ASSIGNMENT PURSUANT TO SALE AND SERVICING AGREEMENT



     For value received, in accordance with the Sale and Servicing Agreement
(the “Agreement”), dated as of June 27, 2003, between Volkswagen Auto Loan
Enhanced Trust 2003-1, a Delaware statutory trust (the “Issuer”), Volkswagen
Public Auto Loan Securitization, LLC, a Delaware limited liability company (the
“Seller”), VW Credit, Inc., a Delaware corporation (“VCI”), and The Bank of New
York, a New York banking corporation (the “Indenture Trustee”), on the terms
and subject to the conditions set forth in the Agreement, the Seller agrees to
transfer, assign, set over, sell and otherwise convey to the Issuer on June 27,
2003, all of its right, title and interest in, to and under the Receivables set
forth on the schedule of Receivables delivered by the Seller to the Issuer on
the date hereof (such schedule, the “Schedule of Receivables”), and the
Collections after the Cut-Off Date and the Related Security relating thereto,
which sale shall be effective as of the Cut-Off Date.


     The foregoing sale does not constitute and is not intended to result in
any assumption by the Issuer of any obligation of the undersigned to the
Obligors, insurers or any other Person in connection with the Receivables, any
insurance policies or any agreement or instrument relating to any of them.


     This assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the
Agreement and is governed by the Agreement.


     Capitalized terms used herein and not otherwise defined shall have the
meaning assigned to them in the Agreement.


     IN WITNESS HEREOF, the undersigned has caused this assignment to be duly
executed as of June 27, 2003.



	 	 	 	 	 	 	 
	 	 	 	 	
VOLKSWAGEN PUBLIC AUTO LOAN

SECURITIZATION, LLC

	 	 	 	 	 	 	 
	 	 	 	 	By:	 	

	 	 	 	 	Name:
	 	 	 	 	Title:
	 	 	 	 	 	 	 
	 	 	 	 	By:	 	

	 	 	 	 	Name:
	 	 	 	 	Title:



Exhibit A to the
Sale and
Servicing Agreement


A-1






 



APPENDIX A



DEFINITIONS



     The following terms have the meanings set forth, or referred to, below:


     “Act” has the meaning set forth in Section 11.3(a) of the Indenture.


     “Adjusted Pool Balance” means, as of any Payment Date, an amount equal to
(a) the Net Pool Balance at the end of the Collection Period preceding such
Payment Date (or, in the case of the first Payment Date, the Net Pool Balance
as of the Cut-Off Date) minus (b) the Yield Supplement Overcollateralization
Amount for such Payment Date.


     “Administration Agreement” means the Administration Agreement, dated as of
the Closing Date, among the Administrator, the Issuer and the Indenture
Trustee, as the same may be amended and supplemented from time to time.


     “Administrator” means VCI, or any successor Administrator under the
Administration Agreement.


     “Advance” has the meaning set forth in Section 4.3(c) of the Sale and
Servicing Agreement.


     “Affiliate” means, for any specified Person, any other Person which,
directly or indirectly, controls, is controlled by or is under common control
with such specified Person and “affiliated” has a meaning correlative to the
foregoing. For purposes of this definition, “control” means the power,
directly or indirectly, to cause the direction of the management and policies
of a Person.


     “Applicable Tax State” means, as of any date, each State as to which any
of the following is then applicable: (a) a State in which the Owner Trustee
maintains its Corporate Trust Office, (b) a State in which the Owner Trustee
maintains its principal executive offices, and (c) the State of Michigan or the
State of Illinois.


     “Authenticating Agent” means any Person authorized by the Indenture
Trustee to act on behalf of the Indenture Trustee to authenticate and deliver
the Notes.


     “Authorized Newspaper” means a newspaper of general circulation in The
City of New York, printed in the English language and customarily published on
each Business Day, whether or not published on Saturdays, Sundays and holidays.


     “Authorized Officer” means (a) with respect to the Issuer, (i) any officer
of the Owner Trustee who is authorized to act for the Owner Trustee in matters
relating to the Issuer and who is identified on the list of Authorized Officers
delivered by the Owner Trustee to the Indenture Trustee on the Closing Date or
(ii) so long as the Administration Agreement is in effect, any officer of the
Administrator who is authorized to act for the Administrator in matters
relating to the Issuer pursuant to the Administration Agreement and who is
identified on the list of


 






 



Authorized Officers delivered by the Administrator to the Owner Trustee
and the Indenture Trustee on the Closing Date (as such list may be modified or
supplemented from time to time thereafter) and (b) with respect to the Owner
Trustee, the Indenture Trustee and the Servicer, any officer of the Owner
Trustee, the Indenture Trustee or the Servicer, as applicable, who is
authorized to act for the Owner Trustee, the Indenture Trustee or the Servicer,
as applicable, in matters relating to the Owner Trustee, the Indenture Trustee
or the Servicer and who is identified on the list of Authorized Officers
delivered by each of the Owner Trustee, the Indenture Trustee and the Servicer
to the Indenture Trustee on the Closing Date (as such list may be modified or
supplemented from time to time thereafter).


     “Available Funds” means, for any Payment Date and the related Collection
Period, an amount equal to the sum of the following amounts: (i) all
Collections received by the Servicer during such Collection Period, (ii) the
sum of the Repurchase Prices with respect to each Receivable that is to become
a Repurchased Receivable on such Payment Date and (iii) the Reserve Account
Excess Amount for such Payment Date.


     “Available Funds Shortfall Amount” means, as of any Payment Date, the
amount by which the amounts required to be paid pursuant to clauses first
through fourth of Section 4.4(a) of the Sale and Servicing Agreement exceeds
the sum of (i) Available Funds for such Payment Date and (ii) Advances made by
the Servicer on such Payment Date.


     “Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. 101
et seq., as amended.


     “Bankruptcy Event” means, for any Person, that such Person makes a general
assignment for the benefit of creditors or any proceeding is instituted by or
against such Person seeking to adjudicate it bankrupt or insolvent, or seeking
the liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee or other
similar official for it or any substantial part of its property and, in the
case of any proceeding instituted against such Person, such proceeding remains
unstayed for more than 90 days.


     “Bankruptcy Remote Party” means each of the Seller, the Issuer, any other
trust created by the Seller or any limited liability company wholly-owned by
the Seller.


     “Benefit Plan” means (i) any “employee benefit plan” whether or not
subject to ERISA, (ii) a “plan” described by Section 4975(e)(1) of the Code or
(iii) any entity deemed to hold the assets of any of the foregoing by reason of
an employee benefit plan’s or other plan’s investment in such entity.


     “Book-Entry Notes” means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10 of the Indenture.


     “Business Day” means any day other than a Saturday, a Sunday or a day on
which banking institutions in the states of Delaware, Michigan or New York, or
in the state in which

3






 



the Corporate Trust Office of the Indenture Trustee is located, are
authorized or obligated by law, executive order or government decree to be
closed.


     “Certificate” means a certificate evidencing the beneficial interest of
the Certificateholder in the Issuer, substantially in the form of Exhibit A to
the Trust Agreement.


     “Certificate of Title” means, with respect to any Financed Vehicle, the
certificate of title or other documentary evidence of ownership of such
Financed Vehicle as issued by the department, agency or official of the
jurisdiction (whether in paper or electronic form) in which such Financed
Vehicle is titled responsible for accepting applications for, and maintaining
records regarding, certificates of title and liens thereon.


     “Certificate of Trust” means the certificate of trust for the Issuer filed
by the Owner Trustee pursuant to the Statutory Trust Statute.


     “Certificateholder” means initially, the Seller, and any other Holder of
the Certificate.


     “Class” means a group of Notes whose form is identical except for
variation in denomination, principal amount or owner, and references to “each
Class” thus mean each of the Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class A-4 Notes and the Class B Notes.


     “Class A Accrued Note Interest” means, with respect to any Payment Date,
the sum of the Class A Noteholders’ Monthly Accrued Interest for such Payment
Date and the Class A Noteholders’ Interest Carryover Shortfall for such Payment
Date.


     “Class A Note” means a Class A-1 Note, Class A-2 Note, Class A-3 Note or
Class A-4 Note, in each case substantially in the form of Exhibit A to the
Indenture.


     “Class A Noteholder” means, as the context requires, all of the Class A-1
Noteholders, the Class A-2 Noteholders, the Class A-3 Noteholders and the Class
A-4 Noteholders, or any of the Class A-1 Noteholders, the Class A-2
Noteholders, the Class A-3 Noteholders or the Class A-4 Noteholders.


     “Class A Noteholders’ Interest Carryover Shortfall” means, with respect to
any Payment Date, the excess of the Class A Noteholders’ Monthly Accrued
Interest for the preceding Payment Date and any outstanding Class A
Noteholders’ Interest Carryover Shortfall on such preceding Payment Date, over
the amount in respect of interest that is actually paid to Noteholders of Class
A Notes on such preceding Payment Date, plus interest on the amount of interest
due but not paid to Noteholders of Class A Notes on the preceding Payment Date,
to the extent permitted by law, at the respective Interest Rates borne by such
Class A Notes for the related Interest Period.


     “Class A Noteholders’ Monthly Accrued Interest” means, with respect to any
Payment Date, the aggregate interest accrued for the related Interest Period on
the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4
Notes at the respective Interest Rate for such Class on the Note Balance of the
Notes of each such Class on the immediately preceding Payment Date or the
Closing Date, as the case may be, after giving effect to all payments
of

4






 



principal to the Noteholders of the Notes of such Class on or prior to
such preceding Payment Date.


     “Class A-1 Final Scheduled Payment Date” means July 20, 2004.


     “Class A-1 Interest Rate” means 1.005% per annum (computed on the basis of
the actual number of days elapsed during the applicable Interest Period, but
assuming a 360-day year).


     “Class A-1 Note Balance” means, at any time, the Initial Class A-1 Note
Balance reduced by all payments of principal made prior to such time on the
Class A-1 Notes.


     “Class A-1 Noteholder” means the Person in whose name a Class A-1 Note is
registered on the Note Register.


     “Class A-1 Notes” means the Class of auto loan asset backed notes
designated as Class A-1 Notes, issued in accordance with the Indenture.


     “Class A-2 Final Scheduled Payment Date” means December 20, 2005.


     “Class A-2 Interest Rate” means 1.110% per annum (computed on the basis of
a 360-day year of twelve 30-day months).


     “Class A-2 Note Balance” means, at any time, the Initial Class A-2 Note
Balance reduced by all payments of principal made prior to such time on the
Class A-2 Notes.


     “Class A-2 Noteholder” means the Person in whose name a Class A-2 Note is
registered on the Note Register.


     “Class A-2 Notes” means the Class of auto loan asset backed notes
designated as Class A-2 Notes, issued in accordance with the Indenture.


     “Class A-3 Final Scheduled Payment Date” means May 21, 2007.


     “Class A-3 Interest Rate” means 1.490% per annum (computed on the basis of
a 360-day year of twelve 30-day months).


     “Class A-3 Note Balance” means, at any time, the Initial Class A-3 Note
Balance reduced by all payments of principal made prior to such time on the
Class A-3 Notes.


     “Class A-3 Noteholder” means the Person in whose name a Class A-3 Note is
registered on the Note Register.


     “Class A-3 Notes” means the Class of auto loan asset backed notes
designated as Class A-3 Notes, issued in accordance with the Indenture.


     “Class A-4 Final Scheduled Payment Date” means January 20, 2010.


     “Class A-4 Interest Rate” means 1.930% per annum (computed on the basis of
a 360-day year of twelve 30-day months).


5






 


     “Class A-4 Note Balance” means, at any time, the Initial Class A-4 Note
Balance reduced by all payments of principal made prior to such time on the
Class A-4 Notes.


     “Class A-4 Noteholder” means the Person in whose name a Class A-4 Note is
registered on the Note Register.


     “Class A-4 Notes” means the Class of auto loan asset backed notes
designated as Class A-4 Notes, issued in accordance with the Indenture.


     “Class B Final Scheduled Payment Date” means January 20, 2010.


     “Class B Interest Rate” means 0.00% per annum (computed on the basis of a
360-day year of twelve 30-day months).


     “Class B Note Balance” means, at any time, the Initial Class B Note
Balance reduced by all payments of principal made prior to such time on the
Class B Notes.


     “Class B Noteholder” means the Person in whose name a Class B Note is
registered on the Note Register.


     “Class B Notes” means the Class of auto loan asset backed notes designated
as Class B Notes, issued in accordance with the Indenture.


     “Clearing Agency” means an organization registered as a “clearing agency”
pursuant to Section 17A of the Exchange Act and shall initially be DTC.


     “Clearing Agency Participant” means a broker, dealer, bank or other
financial institution or other Person for which from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with
the Clearing Agency.


     “Closing Date” means June 27, 2003.


     “Code” means the Internal Revenue Code of 1986, as amended, modified or
supplemented from time to time, and any successor law thereto.


     “Collateral” has the meaning set forth in the Granting Clause of the
Indenture.


     “Collection Account” means the trust account established and maintained
pursuant to Section 4.1 of the Sale and Servicing Agreement.


     “Collection Period” means the period commencing on the first day of each
fiscal month of the Servicer and ending on the last day of such fiscal month
(or, in the case of the initial Collection Period, the period commencing on the
close of business on the Cut-Off Date and ending on June 28, 2003). As used
herein, the “related” Collection Period with respect to a Payment Date shall be
deemed to be the Collection Period which precedes such Payment Date.


     “Collections” means, with respect to any Receivable and to the extent
received by the Servicer after the Cut-Off Date, (i) any monthly payment by or
on behalf of the Obligor

6






 



thereunder, (ii) any full or partial prepayment of such Receivable, (iii)
all Liquidation Proceeds and (iv) any other amounts received by the Servicer
which, in accordance with the Customary Servicing Practices, would customarily
be applied to the payment of accrued interest or to reduce the Outstanding
Principal Balance of such Receivable; provided, however, that the term
“Collections” in no event will include (1) for any Payment Date, any amounts in
respect of any Receivable the Repurchase Price of which has been included in
the Available Funds on such Payment Date or a prior Payment Date, (2) any
Supplemental Servicing Fees or (3) rebates of premiums with respect to the
cancellation or termination of any Insurance Policy, extended warranty or
service contract.


     “Commission” means the U.S. Securities and Exchange Commission.


     “Contract Rate” means, with respect to a Receivable, the rate per annum at
which interest accrues under the retail motor vehicle installment sales
contract or installment loan evidencing such Receivable. Such rate may be less
than the “Annual Percentage Rate” disclosed in the Receivable.


     “Controlling Class” means, with respect to any Notes Outstanding, the
Outstanding Class A Notes, voting together as a single Class, so long as the
Class A Notes are Outstanding, and thereafter the Outstanding Class B Notes so
long as the Class B Notes are Outstanding.


     “Corporate Trust Office” means:



	(s)	 	as used with respect to Indenture Trustee, the principal office of the
Indenture Trustee at which at any particular time its corporate trust
business shall be administered which office at date of the execution of
the Indenture is located at 101 Barclay Street, Floor 8 West, New York,
New York 10286 (telecopier no. (212) 815-2493), Attention: Asset Backed
Securities Unit, or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the
Administrator, the Servicer and the Issuer, or the principal corporate
trust office of any successor Indenture Trustee (the address of which the
successor Indenture Trustee will notify the Noteholders, the
Administrator, the Servicer and the Owner Trustee); and
	 
	(t)	 	as used with respect to Owner Trustee, the corporate trust office of the
Owner Trustee, c/o Deutsche Bank Trust Company Americas, 60 Wall Street,
26th Floor, Mail Stop NYC60-2606, New York, New York 10005, Attention:
Corporate Trust & Agency Services, Structured Finance, or at such other
address as the Owner Trustee may designate by notice to the
Certificateholder and the Seller, or the principal corporate trust office
of any successor Owner Trustee (the address of which the successor Owner
Trustee will notify the Certificateholder and the Seller).



     “Customary Servicing Practices” means the customary servicing practices of
the Servicer or any Sub-Servicer with respect to all comparable motor vehicle
receivables that the Servicer or such Sub-Servicer, as applicable, services for
itself and others, as such practices may be changed from time to time, it being
understood that the Servicer and the Sub-Servicers may not have the same
“Customary Servicing Practices”.



		
	 	     “Cut-Off Date” means May 31, 2003.



7






 






     “Dealer” means a motor vehicle dealership.


     “Default” means any occurrence that is, or with notice or lapse of time or
both would become, an Event of Default.


     “Defaulted Receivable” means, with respect to any Collection Period and
any Receivable, the earlier of (a) the date on which any payment is past due 90
or more days or (b) the date on which the related vehicle has been repossessed.
The Outstanding Principal Balance of any Receivable that becomes a “Defaulted
Receivable” will be deemed to be zero as of the date it becomes a “Defaulted
Receivable”.


     “Definitive Note” means a definitive fully registered Note issued pursuant
to Section 2.12 of the Indenture.


     “Delivery” when used with respect to Trust Account Property means:



		
	 	     (a)   with respect to bankers’ acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
“instruments” as defined in Section 9-102(47) of the UCC and are
susceptible of physical delivery, transfer thereof to the Indenture
Trustee or its nominee or custodian by physical delivery to the Indenture
Trustee or its nominee or custodian endorsed to, or registered in the
name of, the Indenture Trustee or its nominee or custodian or endorsed in
blank, and, with respect to a “certificated security” (as defined in
Section 8-102 of the UCC) transfer thereof (i) by delivery of such
certificated security endorsed to, or registered in the transfer thereof
(i) by delivery of such certificated security endorsed to, or registered
in the name of, the Indenture Trustee or its nominee or custodian to the
Indenture Trustee or its nominee or custodian, or to another person,
other than a “securities intermediary” (as defined in Section 8-102(14)
of the UCC), who acquires possession of the certificated security on
behalf of the Indenture Trustee or its nominee or custodian or, having
previously acquired possession of the certificate, acknowledges that it
holds for the Indenture Trustee or its nominee or custodian or (ii) by
delivery thereof to a “securities intermediary”, endorsed to the
Indenture Trustee or its nominee or custodian, and the making by such
“securities intermediary” of entries on its books and records identifying
such certificated securities as belonging to the Indenture Trustee or its
nominee or custodian and the sending by such “securities intermediary” of
a confirmation of the purchase of such certificated security by the
Indenture Trustee or its nominee or custodian, or (iii) by delivery
thereof to a “clearing corporation” (all of the foregoing, “Physical
Property”), and, in any event, any such Physical Property in registered
form shall be in the name of the Indenture Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership of any
such Trust Account Property to the Indenture Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or
the interpretation thereof;
	 
	 	     (b)   with respect to any securities issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations, the
following procedures, all in accordance with applicable law,




8










 




	 	 	including applicable
Federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Trust Account Property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a financial
intermediary which is also a “depository” pursuant to applicable Federal
regulations and issuance by such financial intermediary of a deposit
advice or other written confirmation of such book-entry registration to
the Indenture Trustee or its nominee or custodian of the purchase by the
Indenture Trustee or its nominee or custodian of such book-entry
securities; the making by such financial intermediary of entries in its
books and records identifying such book entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations as
belonging to the Indenture Trustee or its nominee or custodian and
indicating that such custodian holds such Trust Account Property solely
as agent for the Indenture Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become appropriate
to effect complete transfer of ownership of any such Trust Account
Property to the Indenture Trustee or its nominee or custodian, consistent
with changes in applicable law or regulations or the interpretation
thereof; and
	 
		 	     (c)   with respect to any item of Trust Account Property that is an
uncertificated security (as defined in Section 8-102(18) of the UCC) and
that is not governed by clause (b) above, (i) registration on the books
and records of the issuer thereof in the name of the Indenture Trustee or
its nominee or custodian, or (ii) registration on the books and records
of the issuer thereof in the name of another person, other than a
securities intermediary, who acknowledges that it holds such
uncertificated security for the benefit of the Indenture Trustee or its
nominee or custodian.
	 
	 	 	“Depositor” means the Seller in its capacity as Depositor under the Trust
Agreement.
	 
	 	 	“Determination Date” means the second Business Day preceding the related
Payment Date, beginning July 17, 2003.
	 
	 	 	“Dollar” and “$” mean lawful currency of the United States of America.
	 
	 	 	“DTC” means The Depository Trust Company, and its successors.



          “Eligible Account” means either (a) a segregated account with an Eligible
Institution or (b) a segregated trust account with the corporate trust
department of a depository institution acting in its fiduciary capacity
organized under the laws of the United States of America or any one of the
states thereof or the District of Columbia (or any domestic branch of a foreign
bank), having corporate trust powers and acting as trustee for funds deposited
in such account, so long as the long-term unsecured debt of such depository
institution shall have a credit rating from each Rating Agency in one of its
generic rating categories which signifies investment grade. Any such trust
account may be maintained with the Owner Trustee, the Indenture Trustee or any
of their respective Affiliates, if such accounts meet the requirements
described in clause (b) of the preceding sentence.



          “Eligible Institution” means a depository institution or trust company
(which may be the Owner Trustee, the Indenture Trustee or any of their
respective Affiliates) organized under the laws of the United States of America
or any one of the states thereof or the District of Columbia


9






 


(or any domestic branch of a foreign bank) (a) which at all times has
either (A) a long-term senior unsecured debt rating of “Aa2” or better by
Moody’s and “AA-” or better by Standard & Poor’s or such other rating that is
acceptable to each Rating Agency, as evidenced by a letter from such Rating
Agency to the Issuer or the Indenture Trustee, (B) a certificate of deposit
rating of “P-1” by Moody’s and “A-1+” by Standard & Poor’s or (C) such other
rating that is acceptable to each Rating Agency, as evidenced by a letter from
such Rating Agency to the Issuer or the Indenture Trustee and (b) whose
deposits are insured by the Federal Deposit Insurance Corporation.


     “Eligible Receivable” means a Receivable meeting all of the criteria set
forth on Schedule I of each of the Purchase Agreement and the Sale and
Servicing Agreement as of the Closing Date.


     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.


     “ERISA Affiliate” means at any time, with respect to any Person or entity,
any member of such Person’s or entity’s “controlled group”, within the meaning
of Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code.


     “Event of Default” has the meaning set forth in Section 5.1 of the
Indenture.


     “Exchange Act” means the Securities Exchange Act of 1934, as amended.


     “Final Scheduled Payment Date” means, with respect to (i) the Class A-1
Notes, the Class A-1 Final Scheduled Payment Date, (ii) the Class A-2 Notes,
the Class A-2 Final Scheduled Payment Date, (iii) the Class A-3 Notes, the
Class A-3 Final Scheduled Payment Date, (iv) the Class A-4 Notes, the Class A-4
Final Scheduled Payment Date and (v) the Class B Notes, the Class B Final
Scheduled Payment Date.


     “Financed Vehicle” means an automobile or light-duty truck, together with
all accessions thereto, securing an Obligor’s indebtedness under the applicable
Receivable.


     “GAAP” means generally accepted accounting principles in the USA, applied
on a materially consistent basis.


     “Grant” means mortgage, pledge, bargain, sell, warrant, alienate, remise,
release, convey, assign, transfer, create, grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm
pursuant to the Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto. Other forms of the verb “to Grant”
shall have correlative meanings.


10






 


     “Governmental Authority” means any (a) Federal, state, municipal, foreign
or other governmental entity, board, bureau, agency or instrumentality, (b)
administrative or regulatory authority (including any central bank or similar
authority) or (c) court or judicial authority.


     “Holder” means, as the context may require, the Certificateholder or a
Noteholder or both.


     “Indenture” means the Indenture, dated as of the Closing Date, between the
Issuer and Indenture Trustee, as the same may be amended and supplemented from
time to time.


     “Indenture Trustee” means The Bank of New York, a New York banking
corporation, not in its individual capacity but as indenture trustee under the
Indenture, or any successor trustee under the Indenture.


     “Independent” means, when used with respect to any specified Person, that
such Person (i) is in fact independent of the Issuer, any other obligor upon
the Notes, the Administrator and any Affiliate of any of the foregoing Persons,
(ii) does not have any direct financial interest or any material indirect
financial interest in the Issuer, any such other obligor, the Administrator or
any Affiliate of any of the foregoing Persons and (iii) is not connected with
the Issuer, any such other obligor, the Administrator or any Affiliate of any
of the foregoing Persons as an officer, employee, promoter, underwriter,
trustee, partner, director or Person performing similar functions.


     “Independent Certificate” means a certificate or opinion to be delivered
to the Indenture Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.1 of the Indenture,
made by an independent appraiser or other expert appointed by an Issuer Order,
and such opinion or certificate shall state that the signer has read the
definition of “Independent” in this Indenture and that the signer is
Independent within the meaning thereof.


     “Initial Class A-1 Note Balance” means $315,000,000.


     “Initial Class A-2 Note Balance” means $370,000,000.


     “Initial Class A-3 Note Balance” means $385,000,000.


     “Initial Class A-4 Note Balance” means $214,173,000.


     “Initial Class B Note Balance” means $29,559,766.


     “Initial Note Balance” means, for any Class, the Initial Class A-1 Note
Balance, the Initial Class A-2 Note Balance, the Initial Class A-3 Note
Balance, the Initial Class A-4 Note Balance and the Initial Class B Note
Balance, as applicable, or with respect to the Notes generally, the sum of the
foregoing.


     “Initial Reserve Account Deposit Amount” means an amount equal to
$6,568,663.83.


11






 


     “Insurance Policy” means (i) any theft and physical damage insurance
policy maintained by the Obligor under a Receivable, providing coverage against
loss or damage to or theft of the related Financed Vehicle, and (ii) any credit
life or credit disability insurance maintained by an Obligor in connection with
any Receivable.


     “Interest Period” means, with respect to any Payment Date, from and
including the Closing Date (in the case of the first Payment Date) or from and
including the most recent Payment Date to but excluding that Payment Date.


     “Interest Rate” means (a) with respect to the Class A-1 Notes, the Class
A-1 Interest Rate, (b) with respect to the Class A-2 Notes, the Class A-2
Interest Rate, (c) with respect to the A-3 Notes, the Class A-3 Interest Rate,
(d) with respect to the Class A-4 Notes, the Class A-4 Interest Rate or (e)
with respect to the Class B Notes, the Class B Interest Rate.


     “Internal Revenue Code” means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto, and the regulations
promulgated and the rulings issued thereunder.


     “Issuer” means Volkswagen Auto Loan Enhanced Trust 2003-1, a Delaware
statutory trust established pursuant to the Trust Agreement and the filing of
the Certificate of Trust, until a successor replaces it and, thereafter, means
such successor.


     “Issuer Order” and “Issuer Request” means a written order or request of
the Issuer signed in the name of the Issuer by any one of its Authorized
Officers and delivered to the Indenture Trustee.


     “Lien” means, for any asset or property of a Person, a lien, security
interest, mortgage, pledge or encumbrance in, of or on such asset or property
in favor of any other Person, except any Permitted Lien.


     “Liquidation Proceeds” means, with respect to any Receivable, (a)
insurance proceeds received by the Servicer with respect to the Insurance
Policies, (b) amounts received by the Servicer in connection with such
Receivable pursuant to the exercise of rights under such Receivable and (c) the
monies collected by the Servicer (from whatever source, including proceeds of a
sale of a Financed Vehicle, a deficiency balance recovered from the Obligor
after the charge-off of such Receivable or as a result of any recourse against
the related Dealer, if any) on such Receivable, in the case of each of the
foregoing clauses (a) through (c), net of any expenses (including, without
limitation, any auction, painting, repair or refurbishment expenses in respect
of the related Financed Vehicle) incurred by the Servicer in connection
therewith and any payments required by law to be remitted to the Obligor;
provided, however, that the Repurchase Price for any Receivable shall not
constitute “Liquidation Proceeds”.


     “Monthly Remittance Condition” has the meaning set forth in Section 4.2 of
the Sale and Servicing Agreement.


     “Moody’s” means Moody’s Investors Service, Inc., or any successor that is
a nationally recognized statistical rating organization.


12






 


     “Net Pool Balance” means, as of any date, the aggregate Outstanding
Principal Balance of all Receivables (other than Defaulted Receivables) of the
Issuer on such date.


     “Note” means a Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4
Note or Class B Note, in each case substantially in the form of Exhibit A to
the Indenture.


     “Note Balance” means, with respect to any date of determination, for any
Class, the Class A-1 Note Balance, the Class A-2 Note Balance, the Class A-3
Note Balance, the Class A-4 Note Balance or the Class B Note Balance, as
applicable, or with respect to the Notes generally, the sum of all of the
foregoing.


     “Note Depository Agreement” means the agreement, dated as of the Closing
Date, among the Issuer, the Indenture Trustee and DTC, as the initial Clearing
Agency relating to the Notes, as the same may be amended or supplemented from
time to time.


     “Note Factor” means, with respect to the Notes or any Class of Notes on
any Payment Date, a six-digit decimal figure equal to the Note Balance of the
Notes or such Class of Notes, as applicable, as of the end of the preceding
Collection Period divided by the Note Balance of the Notes or such Class of
Notes, as applicable, as of the Closing Date. The Note Factor will be 1.000000
as of the Closing Date; thereafter, the Note Factor will decline to reflect
reductions in the Note Balance of the Notes or such Class of Notes, as
applicable.


     “Note Owner” means, with respect to a Book-Entry Note, the Person who is
the beneficial owner of such Book-Entry Note, as reflected on the books of the
Clearing Agency or a Person maintaining an account with such Clearing Agency
(directly as a Clearing Agency Participant or as an indirect participant, in
each case in accordance with the rules of such Clearing Agency).


     “Note Register” and “Note Registrar” have the respective meanings set
forth in Section 2.4 of the Indenture.


     “Noteholder” means, as of any date, the Person in whose name a Note is
registered on the Note Register on such date.


     “Obligor” means, for any Receivable, each Person obligated to pay such
Receivable.


     “Officer’s Certificate” means (i) with respect to the Issuer, a
certificate signed by any Authorized Officer of the Issuer and (ii) with
respect to the Seller or the Servicer, a certificate signed by the chairman of
the board, the president, any executive vice president, any vice president, the
treasurer, any assistant treasurer or the controller of the Seller or the
Servicer, as applicable.


     “Opinion of Counsel” means one or more written opinions of counsel who
may, except as otherwise expressly provided in the Indenture or any other
applicable Transaction Document, be employees of or counsel to the Issuer, the
Servicer, the Seller or the Administrator, and which opinion or opinions comply
with any applicable requirements of the Transaction Documents and are in form
and substance reasonably satisfactory to the recipient(s). Opinions of Counsel
need


13






 




 address matters of law only and may be based upon stated assumptions as to
relevant matters of fact.


     “Optional Purchase” has the meaning set forth in Section 8.1 of the Sale
and Servicing Agreement.


     “Optional Purchase Price” has the meaning set forth in Section 8.1 of the
Sale and Servicing Agreement.


     “Originator” means, with respect to any Receivable, either VCI or VW Bank,
and “Originators” means, together, VCI and VW Bank.


     “Other Assets” means any assets (or interests therein) (other than the
Trust Estate) conveyed or purported to be conveyed by the Seller to another
Person or Persons other than the Issuer, whether by way of a sale, capital
contribution or by virtue of the granting of a lien.


     “Outstanding” means, as of any date, all Notes (or all Notes of an
applicable Class) theretofore authenticated and delivered under the Indenture
except:


     (i)    Notes (or Notes of an applicable Class) theretofore cancelled by the
Note Registrar or delivered to the Note Registrar for cancellation;


     (ii)    Notes (or Notes of an applicable Class) or portions thereof the
payment for which money in the necessary amount has been theretofore deposited
with the Indenture Trustee or any Paying Agent in trust for the related
Noteholders (provided, however, that if such Notes are to be redeemed, notice
of such redemption has been duly given pursuant to this Indenture or provision
therefor, satisfactory to the Indenture Trustee, has been made); and


     (iii)   Notes (or Notes of an applicable Class) in exchange for or in lieu
of other Notes (or Notes of such Class) that have been authenticated and
delivered pursuant to this Indenture unless proof satisfactory to the Indenture
Trustee is presented that any such Notes are held by a bona fide purchaser;


provided that in determining whether Noteholders holding the requisite
aggregate principal amount of Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any
Transaction Document, Notes owned by the Issuer, the Seller, the Servicer, the
Administrator or any of their respective Affiliates shall be disregarded and
deemed not to be Outstanding unless all of the Notes are then owned by the
Issuer, the Seller, the Servicer, the Administrator or any of the their
respective Affiliates, except that, in determining whether the Indenture
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, vote or waiver, only Notes that a
Responsible Officer of the Indenture Trustee knows to be so owned shall be so
disregarded. Notes so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee thereof establishes to the satisfaction
of the Indenture Trustee such pledgee’s right so to act with respect to such
Notes and that such pledgee is not the Issuer, the Seller, the Servicer, the
Administrator or any of their respective Affiliates.


14






 


     “Outstanding Principal Balance” means, with respect to any Receivable as
of any date, the outstanding principal balance of such Receivable calculated in
accordance with the Customary Servicing Practices.


     “Owner Trustee” means Deutsche Bank Trust Company Delaware, a Delaware
banking corporation, not in its individual capacity but solely as owner trustee
under the Trust Agreement, and any successor Owner Trustee thereunder.


     “Paying Agent” means the Indenture Trustee or any other Person that meets
the eligibility standards for the Indenture Trustee set forth in Section 6.11
of the Indenture and is authorized by the Issuer to make the payments to and
distributions from the Principal Distribution Account, including the payment of
principal of or interest on the Notes on behalf of the Issuer.


     “Payment Date” means the 20th day of each calendar month beginning July
21, 2003; provided, however, whenever a Payment Date would otherwise be a day
that is not a Business Day, the Payment Date shall be the next Business Day.
As used herein, the “related” Payment Date with respect to a Collection Period
shall be deemed to be the Payment Date which follows such Collection Period.


     “Payment Default” has the meaning set forth in Section 5.4(a) of the
Indenture.


     “Permitted Investments” means (a) evidences of indebtedness, maturing
within thirty (30) days after the date of loan thereof, issued by, or
guaranteed by the full faith and credit of, the federal government of the USA,
(b) repurchase agreements with banking institutions or broker-dealers
registered under the Exchange Act which are fully secured by obligations of the
kind specified in clause (a), (c) money market funds (i) rated not lower than
the highest rating category from Moody’s and “AAA m” or “AAAm-g” from Standard
& Poor’s or (ii) which are otherwise acceptable to each Rating Agency, as
evidenced by a letter from such Rating Agency to the Issuer or the Indenture
Trustee, (d) commercial paper (including commercial paper of any Affiliate of
the Seller, the Servicer, the Indenture Trustee or the Owner Trustee) rated, at
the time of the investment or contractual commitment to invest therein, at
least “A-1+” (or the equivalent) by Standard & Poor’s and at least “P-1” (or
the equivalent) by Moody’s or (e) such other investments acceptable to each
Rating Agency, as evidenced by a letter from such Rating Agency to the Issuer
or the Indenture Trustee.


     “Permitted Liens” means (a) the interest of the parties under the
Transaction Documents, (b) any liens for taxes not due and payable or the
amount of which is being contested in good faith by appropriate proceedings and
(c) any liens of mechanics, suppliers, vendors, materialmen, laborers,
employees, repairmen and other like liens securing obligations which are not
due and payable or the amount or validity of which is being contested in good
faith by appropriate proceedings.


     “Person” means any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization or government
or any agency or political subdivision thereof.


     “Physical Property” is defined in the definition of “Delivery” above.


15






 


     “Predecessor Note” means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; provided, however, for the purpose of this definition,
any Note authenticated and delivered under Section 2.5 of the Indenture in lieu
of a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Note.


     “Principal Distribution Account” means the account by that name
established and maintained pursuant to Section 4.1 of the Sale and Servicing
Agreement.


     “Principal Distribution Amount” means, for any Payment Date, an amount not
less than zero equal to the excess, if any, of (a) the sum of the Note Balance
of all Classes of Notes as of the preceding Payment Date, after giving effect
to any principal payments made on the Notes on such preceding Payment Date (or,
in the case of the initial Payment Date, as of the Closing Date), over (b) the
Adjusted Pool Balance for such Payment Date; provided, however, that the
Principal Distribution Amount shall not exceed the sum of the Note Balances of
all Classes of Notes on such Payment Date; and provided, further, that the
Principal Distribution Amount on and after the Final Scheduled Payment Date for
a Class of Notes shall not be less than the amount that is necessary to reduce
to zero the Note Balance of such Class of Notes and all other Classes of Notes
maturing on or before such date.


     “Proceeding” means any suit in equity, action at law or other judicial or
administrative proceeding.


     “Purchase Agreement” means the Purchase Agreement dated as of June 27,
2003, between VCI and the Seller, as amended, modified or supplemented from
time to time.


     “Purchased Assets” has the meaning set forth in Section 2.1 of the
Purchase Agreement.


     “Rating Agency” means either of each of Moody’s and Standard & Poor’s, as
indicated by the context.


     “Rating Agency Condition” means, with respect to any event or circumstance
and each Rating Agency, either (a) written confirmation by such Rating Agency
that the occurrence of such event or circumstance will not cause it to
downgrade, qualify or withdraw its rating assigned to any of the Notes or (b)
that such Rating Agency shall have been given notice of such event or
circumstance at least ten days prior to the occurrence of such event or
circumstance (or, if ten days’ advance notice is impracticable, as much advance
notice as is practicable) and such Rating Agency shall not have issued any
written notice that the occurrence of such event or circumstance will cause it
to downgrade, qualify or withdraw its rating assigned to the Notes.


     “Receivable” means any retail motor vehicle installment sales contract or
installment loan with respect to a new or used automobile or light-duty truck
which shall appear on the Schedule of Receivables and all Related Security in
connection therewith which has not been released from the lien of the
Indenture.


     “Receivable Files” is defined in Section 2.4 of the Sale and Servicing
Agreement.


16






 


     “Record Date” means, unless otherwise specified in any Transaction
Document, with respect to any Payment Date or Redemption Date, (i) for any
Definitive Notes and for the Certificates, the close of business on the last
Business Day of the calendar month immediately preceding the calendar month in
which such Payment Date or Redemption Date occurs and (ii) for any Book-Entry
Notes, the close of business on the Business Day immediately preceding such
Payment Date or Redemption Date.


     “Records” means, for any Receivable, all contracts, books, records and
other documents or information (including computer programs, tapes, disks,
software and related property and rights, to the extent legally transferable)
relating to such Receivable or the related Obligor.


     “Redemption Date” means in the case of a redemption of the Notes pursuant
to Section 10.1 of the Indenture, the Payment Date specified by the
Administrator or the Issuer pursuant to Section 10.1 of the Indenture.


     “Redemption Price” means an amount equal to the unpaid principal amount of
the Notes redeemed plus accrued and unpaid interest thereon at the applicable
Interest Rate for the Notes being so redeemed, up to but excluding the
Redemption Date.


     “Registered Holder” means the Person in whose name a Note is registered on
the Note Register on the related Record Date.


     “Related Security” means, for any Receivable, (i) the security interest in
the related Financed Vehicle, (ii) any proceeds from claims on any Insurance
Policy (if such Receivable became a Defaulted Receivable after the Cut-Off
Date), (iii) any other property securing the Receivables, (iv) all rights of
the applicable Originator against the related Dealer and (v) all proceeds of
the foregoing.


     “Repurchase Price” means, with respect to any Repurchased Receivable, a
price equal to the Outstanding Principal Balance of such Receivable plus any
unpaid accrued interest related to such Receivable accrued to and including the
end of the Collection Period preceding the date that such Repurchased
Receivable was purchased by VCI, the Servicer or the Seller, as applicable.


     “Repurchased Receivable” means a Receivable purchased by VCI pursuant to
Section 3.3 of the Purchase Agreement, by the Servicer pursuant to Section 3.6
of the Sale and Servicing Agreement or by the Seller pursuant to Section 2.3 of
the Sale and Servicing Agreement.


     “Reserve Account” means the account designated as such, established and
maintained pursuant to Section 4.1 of the Sale and Servicing Agreement.


     “Reserve Account Draw Amount” means, for any Payment Date, the amount
withdrawn from the Reserve Account, equal to the lesser of (a) the Available
Funds Shortfall Amount, if any, or (b) the amount on deposit in the Reserve
Account on such Payment Date. In addition, if the sum of the amounts in the
Reserve Account and the remaining Available Funds after the payments under
clauses first through fourth of Section 4.4(a) of the Sale and Servicing
Agreement would be sufficient to pay in full the aggregate unpaid Note Balance
of all of the outstanding Classes of Notes, then the Reserve Account Draw
Amount will, if so specified by


17






 




the Servicer in the Servicer’s Certificate, include such additional amount
as may be necessary to pay all Outstanding Notes in full.


     “Reserve Account Excess Amount” means, with respect to any Payment Date,
means an amount equal to the excess, if any, of (a) the amount of cash or other
immediately available funds in the Reserve Account on that Payment Date, after
giving effect to all deposits to and withdrawals from the Reserve Account
relating to that Payment Date, over (b) the Specified Reserve Account Balance
with respect to that Payment Date.


     “Responsible Officer” means, (a) with respect to the Indenture Trustee,
any officer within the corporate trust department of the Indenture Trustee,
including any vice president, assistant vice president, assistant treasurer,
trust officer or any other officer of the Indenture Trustee who customarily
performs functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of such person’s knowledge of and familiarity with the
particular subject and who shall have direct responsibility for the
administration of the Indenture, (b) with respect to the Owner Trustee, any
officer within the Corporate Trust Office of the Owner Trustee and having
direct responsibility for the administration of the Issuer, including any
Managing Director, Director, Vice President, Assistant Vice President,
Assistant Treasurer, Assistant Secretary or Associate, or any other officer
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer’s knowledge of
and familiarity with the particular subject and (c) with respect to the
Servicer or Seller, any officer of such Person having direct responsibility for
the transactions contemplated by the Transaction Documents, including the
President, Treasurer or Secretary or any Vice President, Controller, Assistant
Vice President, Assistant Treasurer, Assistant Secretary, or any other officer
customarily performing functions similar to those performed by any of the above
designated officers and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer’s knowledge of
and familiarity with the particular subject.


     “Sale and Servicing Agreement” means the Sale and Servicing Agreement,
dated as of June 27, 2003, among the Seller, the Issuer, the Servicer and the
Indenture Trustee, as the same may be amended, modified or supplemented from
time to time.


     “Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as amended,
modified or supplemented from time to time, and any successor law thereto.


     “Schedule of Receivables” means, the schedule of Receivables transferred
by the Seller to the Issuer on the Closing Date pursuant to the Sale and
Servicing Agreement.


     “Securities Act” means the Securities Act of 1933, as amended.


     “Seller” means Volkswagen Public Auto Loan Securitization, LLC, a Delaware
limited liability company.


     “Servicer” means VCI, initially, and any replacement Servicer appointed
pursuant to the Sale and Servicing Agreement.


18






 


     “Servicer Replacement Event” means any one or more of the following that
shall have occurred and be continuing:


     (a)    any failure by the Servicer to deliver or cause to be delivered any
required payment to the Indenture Trustee for distribution to the Noteholders,
which failure continues unremedied for ten business days after discovery
thereof by a Responsible Officer of the Servicer or receipt by the Servicer of
written notice thereof from the Indenture Trustee or Noteholders evidencing a
majority of the aggregate principal amount of the Outstanding Notes, 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 Sale and Servicing
Agreement, which failure materially and adversely affects the rights of the
Issuer or the Noteholders, and which continues unremedied for 90 days after
discovery thereof by a Responsible Officer of the Servicer or receipt by the
Servicer of written notice thereof from the Indenture Trustee or Noteholders
evidencing a majority of the aggregate principal amount of the Outstanding
Notes, voting together as a single Class;


     (c)   any representation or warranty of the Servicer made in any Transaction
Document to which the Servicer is a party or by which it is bound or any
certificate delivered pursuant to the Sale and Servicing Agreement proves to
have been incorrect in any material respect when made, which failure materially
and adversely affects the rights of the Issuer or the Noteholders, and which
failure continues unremedied for 90 days after discovery thereof by a
Responsible Officer of the Servicer or receipt by the Servicer of written
notice thereof from the Indenture Trustee or Noteholders evidencing a majority
of the aggregate principal amount of the Outstanding Notes, voting together as
a single Class (it being understood that any repurchase of a Receivable by VCI
pursuant to Section 3.3 of the Purchase Agreement, by the Seller pursuant to
Section 2.3 of the Sale and Servicing Agreement or by the Servicer pursuant to
Section 3.6 of the Sale and Servicing Agreement shall be deemed to remedy any
incorrect representation or warranty with respect to such Receivable); or


     (d)   the Servicer suffers a Bankruptcy Event;


     provided, however, that a delay or failure of performance referred to under
clauses (a), (b) or (c) above for a period of 150 days will not constitute a
Servicer Termination Event if such delay or failure was caused by force majeure
or other similar occurrence.


     “Servicer’s Certificate” means the certificate delivered pursuant to
Section 3.8 of the Sale and Servicing Agreement.


     “Servicing Fee” means, for any Payment Date, the product of (A)
one-twelfth (or, in the case of the first Payment Date, a fraction, the
numerator of which is the number of days from but not including the Cut-Off
Date to and including the last day of the first Collection Period and the
denominator of which is 360), (B) the Servicing Fee Rate and (C) the Net Pool
Balance as of the first day of the related Collection Period (or, in the case
of the first Payment Date, as of the Cut-Off Date).


     “Servicing Fee Rate” means 1.00% per annum.


19






 


     “Simple Interest Method” means the method of calculating interest due on a
motor vehicle receivable on a daily basis based on the actual outstanding
principal balance of the receivable on that date.


     “Simple Interest Receivable” means any motor vehicle receivable pursuant
to which the payments due from the Obligors during any month are allocated
between interest, principal and other charges based on the actual date on which
a payment is received and for which interest is calculated using the Simple
Interest Method.


     “Specified Reserve Account Balance” means, for any Payment Date, the
lesser of $9,852,995.74 and the aggregate outstanding principal balance of the
Notes after giving effect to all payments of principal on such Payment Date.


     “Standard & Poor’s” means Standard & Poor’s Ratings Services, a division
of The McGraw-Hill Companies, Inc., or any successor that is a nationally
recognized statistical rating organization.


     “Statutory Trust Statute” means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code § 3801 et seq.


     “Sub-Servicer” means any Affiliate of the Servicer or any sub-contractor
to whom any or all duties of the Servicer (including, without limitation, its
duties as custodian) under the Transaction Documents have been delegated in
accordance with Section 6.5 of the Sale and Servicing Agreement.


     “Supplemental Servicing Fees” means any and all (i) late fees, (ii)
extension fees, (iii) non-sufficient funds charges and (iv) any and all other
administrative fees or similar charges allowed by applicable law with respect
to any Receivable.


     “TIA” or “Trust Indenture Act” means the Trust Indenture Act of 1939, as
amended and as in force on the date hereof, unless otherwise specifically
provided.


     “Transaction Documents” means the Indenture, the Notes, the Note
Depository Agreement, the Sale and Servicing Agreement, the Purchase Agreement,
the Administration Agreement, the Trust Agreement and all other agreements
executed or furnished on the Closing Date in connection herewith and therewith,
as the same may be amended or modified from time to time.


     “Transferred Assets” means (a) the Purchased Assets, (b) all of the
Seller’s rights under the Purchase Agreement and (c) all proceeds of the
foregoing.


     “Trust Accounts” is defined in Section 4.1 of the Sale and Servicing
Agreement.


     “Trust Account Property” means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.


20






 


     “Trust Agreement” means the Trust Agreement, dated as of May 20, 2003, as
amended and restated by the Amended and Restated Trust Agreement, dated as of
the Closing Date, between the Seller and the Owner Trustee, as the same may be
amended and supplemented from time to time.


     “Trust Estate” means all money, accounts, chattel paper, general
intangibles, goods, instruments, investment property and other property of the
Issuer, including without limitation (i) the Receivables acquired by the Issuer
under the Sale and Servicing Agreement, (ii) the security interests in the
Financed Vehicles, (iii) any proceeds from claims on any Insurance Policy or
refunds in connection with extended service agreements relating to Receivables
which became Defaulted Receivables after the Cut-Off Date, (iv) any other
property securing the Receivables, (v) the rights of the applicable Originator
under agreements with Dealers relating to Receivables, (vi) the rights of the
Issuer to the funds on deposit from time to time in the Trust Accounts and any
other account or accounts established pursuant to the Indenture or Sale and
Servicing Agreement and all cash, investment property and other property from
time to time credited thereto and all proceeds thereof (including investment
earnings, net of losses and investment expenses, on amounts on deposit
therein), (vi) the rights of the Seller, as buyer, under the Purchase
Agreement, (vii) the rights of the Seller under the Sale and Servicing
Agreement and (viii) all proceeds of the foregoing.


     “UCC” means, unless the context otherwise requires, the Uniform Commercial
Code as in effect in the relevant jurisdiction, as amended from time to time.


     “United States” or “USA” means the United States of America (including all
states, the District of Columbia and political subdivisions thereof).


     “VCI” means VW Credit, Inc., a Delaware corporation, and its successors
and assigns.


     “VW Bank” means Volkswagen Bank USA, a Utah industrial loan company, and
its successors and assigns.


     “Yield Supplement Overcollateralization Amount” means, with respect to any
Payment Date, the dollar amount set forth next to such Payment Date on Schedule
X hereto.


     The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms. Unless otherwise inconsistent with the
terms of this Agreement, all accounting terms used herein shall be interpreted,
and all accounting determinations hereunder shall be made, in accordance with
GAAP. Amounts to be calculated hereunder shall be continuously recalculated at
the time any information relevant to such calculation changes.


21






 



SCHEDULE X


YIELD SUPPLEMENT OVERCOLLATERALIZATION AMOUNT




	 	 	 	 	 
	 	 	Yield Supplement
	Payment Date	 	Overcollateralization Amount
	
	 	

	Closing Date
	 	$	20,681,728	 
	July 2003
	 	$	19,878,640	 
	August 2003
	 	$	19,094,864	 
	September 2003
	 	$	18,330,500	 
	October 2003
	 	$	17,585,647	 
	November 2003
	 	$	16,860,396	 
	December 2003
	 	$	16,154,839	 
	January 2004
	 	$	15,469,024	 
	February 2004
	 	$	14,802,920	 
	March 2004
	 	$	14,156,502	 
	April 2004
	 	$	13,529,776	 
	May 2004
	 	$	12,922,782	 
	June 2004
	 	$	12,335,300	 
	July 2004
	 	$	11,766,604	 
	August 2004
	 	$	11,215,746	 
	September 2004
	 	$	10,681,557	 
	October 2004
	 	$	10,163,263	 
	November 2004
	 	$	9,660,461	 
	December 2004
	 	$	9,173,017	 
	January 2005
	 	$	8,700,771	 
	February 2005
	 	$	8,243,434	 
	March 2005
	 	$	7,800,571	 
	April 2005
	 	$	7,371,612	 
	May 2005
	 	$	6,956,131	 
	June 2005
	 	$	6,553,912	 
	July 2005
	 	$	6,164,756	 
	August 2005
	 	$	5,788,675	 
	September 2005
	 	$	5,425,666	 
	October 2005
	 	$	5,075,713	 
	November 2005
	 	$	4,738,813	 
	December 2005
	 	$	4,414,931	 
	January 2006
	 	$	4,103,970	 
	February 2006
	 	$	3,805,743	 
	March 2006
	 	$	3,519,993	 
	April 2006
	 	$	3,246,408	 
	May 2006
	 	$	2,984,673	 
	June 2006
	 	$	2,734,307	 
	July 2006
	 	$	2,494,954	 
	August 2006
	 	$	2,266,664	 



 






 





	 	 	 	 	 
	 	 	Yield Supplement
	Payment Date	 	Overcollateralization Amount
	
	 	

	September 2006
	 	$	2,049,484	 
	October 2006
	 	$	1,843,393	 
	November 2006
	 	$	1,648,415	 
	December 2006
	 	$	1,464,573	 
	January 2007
	 	$	1,291,876	 
	February 2007
	 	$	1,130,350	 
	March 2007
	 	$	979,998	 
	April 2007
	 	$	840,809	 
	May 2007
	 	$	712,673	 
	June 2007
	 	$	595,317	 
	July 2007
	 	$	488,497	 
	August 2007
	 	$	392,264	 
	September 2007
	 	$	306,667	 
	October 2007
	 	$	231,744	 
	November 2007
	 	$	167,517	 
	December 2007
	 	$	113,949	 
	January 2008
	 	$	70,958	 
	February 2008
	 	$	38,442	 
	March 2008
	 	$	16,194	 
	April 2008
	 	$	3,946