Document:

exv10w7

 

Exhibit 10.7

SWAP TRANSACTION CONFIRMATION

	 	 	 
	Date:

	 	February 13, 2007
	 
	 	 
	To:

	 	Volkswagen Auto Loan Enhanced Trust 2007-1 (“Party B”)

c/o Deutsche Bank Trust Company Delaware, as Owner Trustee

1011 Centre Road, 2nd Floor

Wilmington, Delaware 19805

Attention: Elizabeth Ferry

Telephone:

Facsimile: (302) 636-3399
	 
	 	 
	From:

	 	HSBC Bank USA, National Association (“Party A”)

452 5th Avenue

New York, NY 10018

Attention: Christian McGreevy

Telephone: 212-525-8710

Facsimile: 212-525-5517

	 
	 	 
	Ref. No.

	 	463011HN

Dear Sir or Madam:

The purpose of this letter (this “Confirmation”) is to confirm the terms and conditions of the
Transaction entered into between us on the Trade Date specified below (the “Transaction”). This
Confirmation constitutes a “Confirmation” as referred to in the ISDA Master Agreement specified
below.

1. The definitions and provisions contained in (i) the 2000 ISDA Definitions (the “ISDA
Definitions”), as published by the International Swaps and Derivatives Association, Inc, and (ii)
the Sale and Servicing Agreement dated as of February 13, 2007 (the “Sale and Servicing Agreement”)
between Party B, Volkswagen Auto Lease/Loan Underwritten Funding, LLC, VW Credit, Inc. and
Citibank, N.A. relating to the issuance by Party B of certain debt obligations, are incorporated
into this Confirmation. In the event of any inconsistency between the ISDA Definitions and this
Confirmation, this Confirmation will govern. References herein to a “Transaction” shall be deemed
to be references to a “Swap Transaction” for purposes of the ISDA Definitions. Capitalized terms
used but not defined herein have the meanings ascribed to them in the Indenture.

 

 

2. The terms of the particular Transaction to which the Confirmation relates are as follows:

	 	 	 
	Transaction Type:

	 	Interest Rate Swap
	 
	 	 
	Currency for Payments:

	 	U.S. Dollars
	 
	 	 
	Notional Amount:

	 	For the Initial Calculation Period, the Notional
Amount shall be equal to USD 283,571,000. For
each subsequent Calculation Period, the Notional
Amount shall be equal to the aggregate Note
Balance of the Class A-4 Notes on the first day
of such Calculation Period. With respect to any
Payment Date, the aggregate Note Balance of the
Class A-4 Notes will be determined using the
Servicer Certificate issued on the Determination
Date immediately preceding the Payment Date
(giving effect to any reductions of the Note
Balance of the Class A-4 Notes reflected in such
Servicer Certificate).
	 
	 	 
	Initial Calculation Period:

	 	February 13, 2007 to but excluding March 20, 2007.
	 
	 	 
	Term:
	 	 
	 
	 	 
	Trade Date:

	 	February 6, 2007
	 
	 	 
	Effective Date:

	 	February 13, 2007
	 
	 	 
	Termination Date:

	 	The earlier of (i) July 22, 2013 and (ii) the
date on which the Note Balance of the Class A-4
Notes is reduced to zero.
	 
	 	 
	Fixed Amounts:
	 	 
	 
	Fixed Rate Payer:

	 	Party B
	 
	 	 
	Calculation Period End Dates:

	 	Monthly on the 20th of each month,
commencing March 20, 2007, through and including
the Termination Date.
	 
	 	 
	Payment Dates:

	 	Monthly on the 20th of each month,
commencing March 20, 2007, through and including
the Termination Date.
	 
	 	 
	Business Day Convention:

	 	Following
	 
	 	 
	Business Day:

	 	Principal place of business of Party A, New York,
Delaware and Michigan
	 
	 	 
	Fixed Rate:

	 	5.1470%
	 
	 	 
	Fixed Rate Day Count
Basis:

	 	30/360

 

 

	 	 	 
	Floating Amounts:
	 	 
	 
	 	 
	Floating Rate Payer:

	 	Party A
	 
	 	 
	Calculation Period End Dates:

	 	Monthly on the 20th of each month,
commencing March 20, 2007, through and including
the Termination Date, subject to adjustment in
accordance with the Following Business Day
Convention.
	 
	 	 
	Payment Dates:

	 	Monthly on the 20th of each month,
commencing March 20, 2007, through and including
the Termination Date.
	 
	 	 
	Business Day Convention:

	 	Following
	 
	 	 
	Business Day:

	 	Principal place of business of Party A, New York,
Delaware and Michigan
	 
	 	 
	For Payment Dates:
	 	 
	 
	 	 
	For Reset Dates:
	 	 
	 
	 	 
	For the determination of the
Floating Rate:

	 	London
	 
	 	 
	Floating Rate Option:

	 	USD-LIBOR-BBA
	 
	 	 
	Designated Maturity:

	 	1 Month
	 
	 	 
	Spread:

	 	None
	 
	 	 
	Floating Rate Day Count:
	 	 
	 
	 	 
	Basis:

	 	Actual/360
	 
	 	 
	Reset Dates:

	 	The first day of each Calculation Period
	 
	 	 
	Compounding:

	 	Inapplicable

3. The additional provisions of this Confirmation are as follows:

	 	 	 
	Calculation Agent:

	 	As specified in the Agreement
	 
	 	 
	Payments to Party A:

	 	HSBC Bank USA, National Association

ABA # 021-001-088

For Credit to Department 299

A/C: 000-04929-8

HSBC Derivative Products Group
	 
	 	 
	Payments to Party B:

	 	Volkswagen Auto Loan Enhanced Trust 2007-1

    Collection Account, AC #106348
	 
	 	 
	 

	 	Deposits to the Collection Account shall be made via fed
wire in accordance with the instructions below:

 

 

	 	 	 
	 

	 	Citibank, N.A.

ABA: 021-000-089

Account: 3617-2242

Ref: VW 2007-1 Collection Account 106348

4. Documentation

This Confirmation supplements, forms a part of, and is subject to, the 1992 ISDA Master Agreement
dated as of February 13, 2007 (including the Schedule thereto) as amended and supplemented from
time to time (the “Agreement”) between you and us. All provisions contained in the Agreement
govern this Confirmation except as expressly modified herein.

 

 

Unless otherwise provided in the Agreement, this Confirmation is governed by the laws of the State
of New York.

Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a
copy of this Confirmation and returning it to us.

	 	 	 	 	 	 	 
	Very truly yours,	 	 	 	 
	 
	 	 	 	 	 	 
	HSBC BANK USA, NATIONAL ASSOCIATION	 	 	 	 
	 
	 	 	 	 	 	 
	By: 

Name:

	 	/s/ Antonia Landgraf
 

Antonia Landgraf
	 	 	 	 
	Title:

	 	Assistant Vice President	 	 	 	 
	 
	 	 	 	 	 	 
	Accepted and confirmed as of the date first above written:	 	 
	 
	VOLKSWAGEN AUTO LOAN ENHANCED TRUST 2007-1	 	 
	By: Deutsche Bank Trust Company Delaware, not in its 

individual capacity but solely in its capacity as 

Owner Trustee	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Michele HY Voon	 	 	 	 
	 

	 	 	 	 	 	 
	Name:

	 	Michele HY Voon	 	 	 	 
	Title:

	 	Attorney-in-fact	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ Susan Barstock	 	 	 	 
	 

	 	 	 	 	 	 
	Name:

	 	Susan Barstock	 	 	 	 
	Title:

	 	Attorney-in-factexv10w8

 

Exhibit 10.8

ISDA®

International Swaps and Derivatives Association, Inc.

CREDIT SUPPORT ANNEX

to the Schedule to the

ISDA MASTER AGREEMENT

dated as of February 13, 2007

between

HSBC Bank USA, National Association (“Party A”)

and

Volkswagen Auto Loan Enhanced Trust 2007-1 (“Party B”)

This Annex supplements, forms part of, and is subject to, the ISDA Master Agreement referred to
above (this “Agreement”), is part of its Schedule and is a Credit Support Document under this
Agreement with respect to Party A.

Accordingly, the parties agree as follows:

Paragraphs
1 - 12. Incorporation

Paragraphs 1 through 12 inclusive of the ISDA Credit Support Annex (Bilateral Form)
(ISDA Agreements Subject to New York Law Only) published in 1994 by the
International Swaps and Derivatives Association, Inc. are incorporated herein by
reference and made a part hereof:

Paragraph 13. Elections and Variables

	(a)	 	Security Interest for “Obligations”. The term “Obligations” as used in this Annex includes
no additional obligations of Secured Party and, for purposes of the definition of Obligations
in Paragraph 12, includes no additional obligations of Pledgor.
	 
	(b)	 	Credit Support Obligations.

	 	(i)	 	“Delivery Amount” will have the meanings specified in Paragraph 3(a) except that
the words “upon a demand made by the Secured Party on or promptly following a Valuation
Date” shall be deleted and replaced by the words “on each Valuation Date”.
	 
	 	(ii)	 	“Credit Support Amount” (x) means the Credit Support Amount required under
Paragraph 13(n) (in the case of a Party A Rating Downgrade or Level Two S&P

1

 

	 	 	 	Party A
Downgrade relating to an action taken by S&P); (y) has the meaning specified under the
relevant definition of Ratings Criteria (in the case of Moody’s First Trigger Event or
Moody’s Second Trigger Event); or (z) means Party B’s Exposure under the Agreement to
which this Annex relates (in the case of a Party A Rating Downgrade relating to an action
taken by Fitch), in each case as calculated on a daily basis by the Valuation Agent. The
Credit Support Amount shall be calculated by reference to the provisions set forth in
this Annex which would result in Party A transferring the greatest amount of Eligible
Credit Support to Party B or, if applicable, which would result in Party B returning the
least amount of Posted Credit Support. In circumstances where more than one of the
Ratings Criteria or Party A Rating Downgrade apply, the Credit Support Amount shall be
calculated by reference to the Ratings Criteria or Party A Rating Downgrade or Level Two
S&P Party A Downgrade which would result in Party A transferring the greatest amount of
Eligible Credit Support or, if applicable, which would result in Party B returning the
least amount of Posted Credit Support.
	 
	 	(iii)	 	Eligible Collateral. The following items will qualify as “Eligible Collateral”:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Moody’s Second	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Ratings	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Trigger**	 	S&P & Fitch**
	(A)	 	Cash: US Dollars
	 	 	 	 	 	 	100	%	 	 	100	%	 	 	100	%
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(B)	 	U.S. Treasury
Securities:
	 	 	 	 	 	 	100	%	 	 	100	%	 	 	98.9	%
	 	 	negotiable debt
obligations issued
by the U.S.
Treasury Department
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

2

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Moody’s Second	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Ratings	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Trigger**	 	S&P & Fitch**
	 	 	(“Treasuries”)
having a remaining
maturity of up to
and not more than 1
year.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(C)	 	Treasuries having a
	 	 	 	 	 	 	100	%	 	99% (1-2yr)	 	98.0% (1-2yr)
	 	 	remaining maturity
	 	 	 	 	 	 	 	 	 	98% (2-3yr)	 	97.4% (2-3yr)
	 	 	of greater than 1
	 	 	 	 	 	 	 	 	 	97% (3-5yr)	 	95.5% (3-5yr)
	 	 	year but not more
	 	 	 	 	 	 	 	 	 	96% (5-7yr)	 	93.7% (5-7yr)
	 	 	than 10 years.
	 	 	 	 	 	 	 	 	 	94% (7-10yr)	 	92.5% (7-10yr)
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(D)	 	Treasuries having a
	 	 	 	 	 	 	100	%	 	90% (10-20yr)	 	91.1% (10-20yr)
	 	 	remaining maturity
	 	 	 	 	 	 	 	 	 	88% (>20yr)	 	88.6% (>20yr)
	 	 	of greater than 10
years.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(E)	 	Agency Securities:
	 	 	 	 	 	 	100	%	 	 	99	%	 	 	98.5	%
	 	 	Debenture
obligations of the
Federal National
Mortgage
Association (FNMA),
Federal Home Loan
Mortgage
Corporation (FHLMC)
(collectively,
“Agency
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

3

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Moody’s Second	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Ratings	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Trigger**	 	S&P & Fitch**
	 	 	Securities”) having
a remaining
maturity of not
more than 1 year.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(F)	 	Agency Securities
	 	 	 	 	 	 	100	%	 	99% (1-2yr)	 	97.7% (1-2yr)
	 	 	having a remaining
	 	 	 	 	 	 	 	 	 	98% (2-3yr)	 	97.3% (2-3yr)
	 	 	maturity of greater
	 	 	 	 	 	 	 	 	 	96% (3-5yr)	 	94.5% (3-5yr)
	 	 	than 1 year but not
more than 5 years.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(G)	 	Agency Securities
	 	 	 	 	 	 	100	%	 	93% (5-10yr)	 	93.1% (5-7yr)
	 	 	having a remaining
	 	 	 	 	 	 	 	 	 	 	 	 	 	90.7% (7-10yr)
	 	 	maturity of greater
than 5 years but
not more than 10
years.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(H)	 	Agency Securities
	 	 	 	 	 	 	100	%	 	 	89	%	 	 	87.7	%
	 	 	having a remaining
maturity of greater
than 10 years but
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

4

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Moody’s Second	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Ratings	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Trigger**	 	S&P & Fitch**
	 	 	not more than 20
years.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(I)	 	Agency Securities
	 	 	 	 	 	 	100	%	 	 	87	%	 	 	84.4	%
	 	 	having a remaining
maturity of greater
than 20 years but
not more than 30
years.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(J)	 	FHLMC Certificates.
	 	 	 	 	 	% to be	 	% to be determined	 	 	91.5	%
	 	 	Mortgage
	 	 	 	 	 	determined	 	 	 	 	 	 	 	 
	 	 	participation
certificates issued
by FHLMC evidencing
undivided interests
or participations
in pools of first
lien conventional
or FHA/VA
residential
mortgages or deeds
of trust,
guaranteed by
FHLMC, and having a
remaining maturity
of not more than 30
years.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

5

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Moody’s Second	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Ratings	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Trigger**	 	S&P & Fitch**
	(K)	 	FNMA Certificates.
	 	 	 	 	 	% to be	 	% to be 	 	 	91.5	%
	 	 	Mortgage-backed
	 	 	 	 	 	determined	 	 	determined	 	 	 	 	 
	 	 	pass-through
certificates issued
by FNMA evidencing
undivided interests
in pools of first
lien mortgages or
deeds of trust on
residential
properties,
guaranteed by FNMA,
having a remaining
maturity of not
more than 30 years.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(L)	 	GNMA Certificates.
	 	 	 	 	 	% to be 	 	% to be 	 	 	91.5	%
	 	 	Mortgage-backed
pass-through
certificates issued
by private
entities,
evidencing
undivided interests
in pools of first
lien mortgages or
deeds of trust on
	 	 	 	 	 	 	determined	 	 	 	determined	 	 	 	 	 

6

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Moody’s Second	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Ratings	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Trigger**	 	S&P & Fitch**
	 	 	single family
residences,
guaranteed by the
Government National
Mortgage
Association (GNMA)
with the full faith
and credit of the
United States, and
having a remaining
maturity of not
more than 30
years.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(M)	 	Commercial Paper.
	 	 	 	 	 	% to be	 	% to be	 	 	99.0	%
	 	 	Commercial
	 	 	 	 	 	determined	 	 	determined	 	 	 	 	 
	 	 	Paper with a rating
of at least P-1 by
Moody’s, at least
F-1 by Fitch and at
least A-1+ by S&P
and having a
remaining maturity
of not more than 30
days.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	(N)	 	Other. Other
	 	 	 	 	 	% to be	 	% to be	 	% to be
	 	 	items of Credit
Support approved in
writing by each
applicable rating
agency with such
valuation
	 	 	 	 	 	 	determined	 	 	 	determined	 	 	 	determined	 

7

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Moody’s Second	 	 
	 	 	 	 	Valuation	 	Moody’s First	 	Ratings	 	 
	 	 	 	 	Percentage:*	 	Ratings Trigger	 	Trigger**	 	S&P & Fitch**
	 	 	percentages as
determined by each
applicable rating
agency.
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

			
	*	 	The Valuation Percentage shall equal the percentage specified under such Rating Agency’s name
above. If Party A is rated by more than one Rating Agency specified above, the Valuation
Percentage shall equal the lowest of the applicable percentages specified above.
	 
	**	 	A parenthetical in the form of (a-b yr) means a security having a remaining maturity greater
than or equal to a years and less than b years.

	 	(iv)	 	There shall be no “Other Eligible Support” for Party A for purposes of this Annex.
	 
	 	(v)	 	Thresholds.

	 	(A)	 	“Independent Amount” means with respect to Party A: Not
Applicable.
	 
	 	 	 	“Independent Amount” means with respect to Party B: Not Applicable.
	 
	 	(B)	 	“Threshold” means with respect to Party A: Infinity; provided
that for so long as Party A is not above the Moody’s First Trigger Required
Ratings and either (i) Party A had been below the Moody’s First Trigger
Required
Ratings since this Annex was executed or (ii) at least 30 Local Business
Days have elapsed since the last time Party A had been below the Moody’s
First Trigger Required Ratings, the Threshold with respect to Party A shall
be zero; further, provided, if a Moody’s Second Rating Trigger Requirement
has occurred and is continuing pursuant to the Agreement, the Threshold
shall be zero in the event Party A fails to assign all of its rights and
obligations under the Agreement on or before the 20th day after the date of
a Moody’s Second Rating Trigger Requirement (as described in Part 1(g) of
the Schedule) continues to

8

 

	 	 	 	exist. Party A will post Eligible Collateral on
or prior to the 20th day following a Moody’s Second Rating
Trigger Requirement.
	 
	 	 	 	“Threshold” means with respect to Party B: Not Applicable.
	 
	 	(C)	 	“Minimum Transfer Amount” means with respect to Party A: (i)
$100,000 when the Notional Amount is greater than $50 million, or (ii)
otherwise, $50,000.
	 
	 	 	 	“Minimum Transfer Amount” means with respect to Party B: (i) $100,000 when
the Notional Amount is greater than $50 million, or (ii) otherwise, $50,000.
	 
	 	(D)	 	Rounding. The Delivery Amount will be rounded up and the
Return Amount will be rounded down to the nearest integral multiple of
$10,000.00, respectively.

	(c)	 	Valuation and Timing.

	 	(i)	 	“Valuation Agent” means Party A; provided, however, that if an Event of Default
shall have occurred with respect to which Party A is the Defaulting Party, Party B
shall have the right to designate as Valuation Agent an independent party, reasonably
acceptable to Party A, the cost for which shall be borne by Party A. All calculations
by the Valuation Agent must be made in accordance with standard market practice,
including, in the event of a dispute as to the Value of any Eligible Credit Support or
Posted Credit Support, by making reference to quotations received by the Valuaton Agent
from one or more pricing sources.
	 
	 	(ii)	 	“Valuation Date” means: each Local Business Day on which the Credit Support
Amount would be greater than zero.
	 
	 	(iii)	 	“Valuation Time” means:

	 	o	 	the close of business in the city of the Valuation Agent
on the Valuation Date or date of calculation, as applicable;
	 
	 	þ 	 	the close of business on the Local Business Day before the
Valuation Date or date of calculation, as applicable;

9

 

provided that the calculations of Value and Exposure will be made as of approximately the
same time on the same date.

(iv) “Notification Time” means 1:00 p.m., New York time, on a Local Business Day.

(v) Notwithstanding the definition of Valuation Agent and Valuation Date, at any time while
the long-term unsecured debt or counterparty rating of Party A’s Credit Support Provider is
not above “BBB”, the calculations of Exposure and the Value of any Eligible Credit Support
or Posted Credit Support must be verified by an external mark monthly. The external mark
must be obtained by an independent third party, and cannot be verified by the same entity
more than four times in any 12-month period. In addition, the external mark-to-market
valuations should reflect the higher of two bids from counterparties that would be eligible
and willing to provide the swap in the absence of the current provider. The Value of any
Eligible Credit Support or Posted Credit Support and Exposure should be based on the greater
of the calculations of the Valuation Agent and the external marks, and any deficiencies in
Value and Exposure must be cured within three days.

(vi) Notice to S&P. At any time at which Party A (or, to the extent applicable, its Credit
Support Provider) does not have a long-term unsubordinated and unsecured debt rating of at
least “BBB+” from S&P, the Valuation Agent shall provide to S&P not later than the
Notification Time on the Local Business Day following each Valuation Date its calculations
of the Secured Party’s Exposure and the S&P Value of any Eligible Credit Support or Posted
Credit Support for that Valuation Date. The Valuation Agent shall also provide to S&P any
external marks received pursuant to the preceding paragraph.

	(d)	 	Conditions Precedent. No event shall constitute a “Specified Condition”.
	 
	(e)	 	Substitution.

	 	(i)	 	“Substitution Date” means the Local Business Day in New York on which the
Secured Party is able to confirm irrevocable receipt of the Substitute Credit Support,
provided that (x) such receipt is confirmed before 3:00 p.m. (New York time) on such
Local Business Day in New York and (y) the Secured Party has received, before 1:00 p.m.
(New York time) on the immediately preceding Local Business Day in New York, the notice
of substitution described in Paragraph 4(d)(i).

10

 

	 	(ii)	 	Consent. The Pledgor is not required to obtain the Secured Party’s consent for any
substitution pursuant to Paragraph 4(d).

	(f)	 	Dispute Resolution.

	 	(i)	 	“Resolution Time” means 1:00 p.m., New York time, on the Local Business Day
following the date on which a notice is given that gives rise to a dispute under
Paragraph 5.
	 
	 	(ii)	 	Value. For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of Posted Credit
Support will be calculated as follows: for Cash, the U.S. dollar value thereof, and for
each item of Eligible Collateral (except for Cash), an amount in U.S. dollars equal to
the product of (i) either (A) the bid price for such security quoted on such day by a
principal market-maker for such security selected in good faith by the Secured Party or
(B) the most recent publicly available bid price for such security as reported by a
quotation service or in a medium selected in good faith and in a commercially reasonable
manner by Secured Party, multiplied by (ii) the percentage figure listed in Paragraph
13(b)(ii) hereof with respect to such security.
	 
	 	(iii)	 	Alternative. The provisions of Paragraph 5 will apply.

	(g)	 	Holding and Using Posted Collateral.

	 	(i)	 	Eligibility to Hold Posted Collateral; Custodians. Secured Party will not be
entitled to hold Posted Collateral itself, and instead the Secured Party will be entitled
to hold Posted Collateral through the Indenture Trustee which Posted
Collateral (i) shall not be commingled or used with any other asset held by the
Indenture Trustee but shall be held in a separate account for this purpose only and
(ii) shall not be transferred to any other person or entity but Party A pursuant to
the provisions herein except (x) in any case contemplated by Paragraph 8(a) of this
Annex with respect to Party A or (y) as directed by Party A; provided, however, that
if the Indenture Trustee does not have a short-term debt rating of at least “A-1“ by
S&P, then a third party custodian with a short-term debt rating of at least “A-1“ by
S&P must hold such Posted Collateral.
	 
	 	(ii)	 	Use of Posted Collateral. The provisions of Paragraph 6(c) will not apply to
Secured Party and without prejudice to Secured Party’s rights under Paragraph 8

11

 

	 	 	 	of the
Credit Support Annex, Secured Party will not take any action specified in such Section
6(c).

	(h)	 	Distributions and Interest Amount.

	 	(i)	 	The “Interest Rate”, with respect to Eligible Collateral in the form of Cash,
for any day, will be the lesser of (x) the rate opposite the caption “Federal funds
(effective)” for such day as published by the Federal Reserve Publication H.15 (519) or
any successor publication as published by the Board of Governors of the Federal Reserve
System and (y) the rate of interest actually received on such Cash.
	 
	 	(ii)	 	The “Transfer of Interest Amount” will be made within 3 Local Business Days
after the last Local Business Day of each calendar month.
	 
	 	(iii)	 	Alternative Interest Amount. The provisions of Paragraph 6(d)(ii) will apply.

	(i)	 	Additional Representations. None.
	 
	(j)	 	Other Eligible Support and Other Posted Support. Not Applicable.
	 
	(k)	 	Demands and Notices. All demands, specifications and notices made by a party to this Annex
will be made to the following:

	 	 	 	 	 
	 

	 	Party A:
	 	As set forth in the Schedule.
	 
	 	 	 	 
	 

	 	Party B:
	 	As set forth in the Schedule.

	(l)	 	Addresses for Transfers.

	 	 	 	 	 
	 

	 	Party A:
	 	Cash/Interest Payments: (USD Only)
	 
	 	 	 	 
	 

	 	 	 	USD Cash Collateral Instructions:
	 

	 	 	 	HSBC BANK USA NA
	 

	 	 	 	ABA: 021001088
	 

	 	 	 	A/C: CSA Collateral

12

 

	 	 	 	 	 
	 

	 	 	 	A/C #: 713007176
	 
	 	 	 	 
	 

	 	 	 	Eligible Collateral (other than cash):
	 
	 	 	 	 
	 

	 	 	 	JPMChase NYC
	 

	 	 	 	ABA: 021000021
	 

	 	 	 	A/C: MMCMG
	 
	 	 	 	 
	 

	 	Party B:
	 	Contact Indenture Trustee in the event Transfers are required.

	(m)	 	Other Provisions.

	 	(i)	 	This Credit Support Annex is a Security Agreement under the New York UCC.
	 
	 	(ii)	 	Paragraph 1(b) of this Annex is amended by deleting it and restating it in full as
follows:

“(b) Secured Party and Pledgor. All references in this Annex to the “Secured
Party” mean Party B, and all references in this Annex to the “Pledgor” mean Party A;
provided, however, that if Other Posted Support is held by Party B, all references
herein to the Secured Party with respect to that Other Posted Support will be to
Party B as the beneficiary thereof and will not subject that
support or Party B as the beneficiary thereof to provisions of law generally
relating to security interests and secured parties.”

	 	(iii)	 	Paragraph 2 of this Annex is amended by deleting the first sentence thereof
and restating that sentence in full as follows:
	 
	 	 	 	“Party A, as the Pledgor, hereby pledges to Party B, as the Secured Party, as
security for the Pledgor’s Obligations, and grants to the Secured Party a first
priority continuing security interest in, lien on and right of Set-off against all
Posted Collateral Transferred to or received by the Secured Party hereunder.”
	 
	 	(iv)	 	Only Party A makes the representations contained in Paragraph 9 of this Annex.

13

 

	 	(v)	 	Paragraph 12 of this Annex is amended by deleting the definitions of “Pledgor”
and “Secured Party” and replacing them with the following:”
	 
	 	 	 	“ ‘Secured Party’ means Party B.
	 
	 	 	 	‘Pledgor’ means Party A.”
	 
	 	(vi)	 	Paragraph 12 is hereby amended by adding, in alphabetical order, the following:
	 
	 	 	 	“Moody’s” means Moody’s Investor Services, Inc., or any successor to the rating
business of such entity.”
	 
	 	 	 	“S&P” means Standard and Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., or any successor to the rating business of such entity.”

	(n)	 	S&P Credit Support Amount. With respect to a Party A Rating Downgrade or Level Two S&P Party
A Downgrade relating to an action taken by S&P, the “Credit Support Amount” shall mean with
respect to a Pledgor on a Valuation Date the sum of:

	 	(i)	 	the greater of MTM and $0, plus
	 
	 	(ii)	 	VB

where:

“MTM” means Secured Party’s Exposure;

“VB” means the Notional Amount (as defined in the Confirmation for each outstanding
Transaction under this Agreement) times the relevant percentage set out in Table A below:

TABLE A

14

 

Volatility Buffer

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Less than 10 years,	 	 
	 	 	 	 	 	 	but more than 5	 	Greater than 10
	 	 	Less than 5 years	 	years to	 	years to
	 	 	to Termination Date	 	Termination Date of	 	Termination Date of
	Counterparty	 	of the Transaction.	 	the Transaction.	 	the Transaction.
	 
	The rating by S&P
of Party A’s
long-term
unsecured,
unsubordinated
obligations is at
least equal to “A”
	 	 	3.25	%	 	 	4.00	%	 	 	4.75	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	The rating by S&P
of Party A’s
long-term
unsecured,
unsubordinated
obligations is
equal to “A-”
	 	 	4.00	%	 	 	5.00	%	 	 	6.25	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	The rating by S&P
of Party A’s
long-term
unsecured,
unsubordinated
obligations is
equal to or less
than “BB+”
	 	 	4.50	%	 	 	6.75	%	 	 	7.50	%

	(o)	 	Moody’s Ratings Criteria.
	 
	 	 	“Ratings Criteria” means, the criteria used by Moody’s (“Moody’s Criteria”) for the purposes
of determining the amount of Eligible Credit Support Party A is required to transfer at any
time when the Threshold with respect to Party A is zero.

15

 

	 	 	Moody’s Criteria
	 
	 	 	Moody’s Credit Support Amount.* With respect to a Moody’s First Trigger Event or a Moody’s
Second Trigger Event relating to an action taken by Moody’s, the “Credit Support Amount”
shall mean with respect to a Pledgor on a Valuation Date the sum of:

	 	(i)	 	With respect to a Moody’s First Trigger Event:

	 	(A)	 	the greater of the Secured Party’s Exposure and $0, plus
	 
	 	(B)	 	Notional Amount times the relevant percentage set out in Table B below.

	 	(ii)	 	With respect to a Moody’s Second Trigger Event:

	 	(A)	 	the greater of the Secured Party’s Exposure, $0 or the amount
owed by Party A on the next Payment Date (as such term is defined in the
Confirmation for each outstanding Transaction under this Agreement), plus
	 
	 	(B)	 	Notional Amount times the relevant percentage set out in Table B below.

 

*  To the extent that both the Moody’s Credit Support Amount and the S&P Credit Support Amount
apply, the greater of the two amounts shall be the Credit Support Amount.

TABLE B

	 	 	 	 	 	 	 	 	 
	Weighted Average Life of	 	Moody’s First Trigger	 	Moody’s Second Trigger
	Hedge in Years	 	Event has Occurred	 	Event has Occurred
	1
	 	 	0.15	%	 	 	0.50	%
	2
	 	 	0.30	%	 	 	1.00	%
	3
	 	 	0.40	%	 	 	1.50	%
	4
	 	 	0.60	%	 	 	1.90	%
	5
	 	 	0.70	%	 	 	2.40	%
	6
	 	 	0.80	%	 	 	2.80	%

16

 

	 	 	 	 	 	 	 	 	 
	Weighted Average Life of	 	Moody’s First Trigger	 	Moody’s Second Trigger
	Hedge in Years	 	Event has Occurred	 	Event has Occurred
	7
	 	 	1.00	%	 	 	3.20	%
	8
	 	 	1.10	%	 	 	3.60	%
	9
	 	 	1.20	%	 	 	4.00	%
	10
	 	 	1.30	%	 	 	4.40	%
	11
	 	 	1.40	%	 	 	4.70	%
	12
	 	 	1.50	%	 	 	5.00	%
	13
	 	 	1.60	%	 	 	5.40	%
	14
	 	 	1.70	%	 	 	5.70	%
	15
	 	 	1.80	%	 	 	6.00	%
	16
	 	 	1.90	%	 	 	6.30	%
	17
	 	 	2.00	%	 	 	6.60	%
	18
	 	 	2.00	%	 	 	6.90	%
	19
	 	 	2.00	%	 	 	7.20	%
	20
	 	 	2.00	%	 	 	7.50	%
	21
	 	 	2.00	%	 	 	7.80	%
	22
	 	 	2.00	%	 	 	8.00	%
	23
	 	 	2.00	%	 	 	8.00	%
	24
	 	 	2.00	%	 	 	8.00	%
	25
	 	 	2.00	%	 	 	8.00	%

17

 

	 	 	 	 	 	 	 	 	 
	Weighted Average Life of	 	Moody’s First Trigger	 	Moody’s Second Trigger
	Hedge in Years	 	Event has Occurred	 	Event has Occurred
	26
	 	 	2.00	%	 	 	8.00	%
	27
	 	 	2.00	%	 	 	8.00	%
	28
	 	 	2.00	%	 	 	8.00	%
	29
	 	 	2.00	%	 	 	8.00	%
	30
	 	 	2.00	%	 	 	8.00	%

18

 

Accepted and agreed:

	 	 	 	 	 	 	 	 	 
	HSBC BANK USA, NATIONAL ASSOCIATION	 	 	 	VOLKSWAGEN AUTO LOAN ENHANCED TRUST 2007-1
	 
	 	 	 	 	 	 	 	 
	By:
	 	/s/ Sandra Nicotra 	 	 	 	 	 	 
	 	 	 	 	 	 	By: DEUTSCHE BANK TRUST COMPANY DELAWARE, not in its individual capacity but solely in its capacity as Owner Trustee
	 

	 	Name: Sandra Nicotra	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Title: Senior Vice President
	 	 	 	By:	 	/s/ Michele Hy Voon 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Date: February 13, 2007
	 	 	 	 	 	Name: Michele Hy Voon
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Title: Attorney-in-fact
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Date: February 13, 2007
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	/s/ Susan Barstock 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Name: Susan Barstock
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Title: Attorney-in-fact
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	Date: February 13, 2007

Credit
Support Annex

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