exv4wxfyx96y



 






Exhibit
4(f)(96)




      



EXECUTION VERSION




 






CREDIT ACCEPTANCE AUTO DEALER LOAN TRUST 2007-2

CLASS A ASSET BACKED NOTES.




 






CREDIT ACCEPTANCE AUTO DEALER LOAN TRUST 2007-2,

as the Issuer




CREDIT ACCEPTANCE FUNDING LLC 2007-2,

as the Seller




CREDIT ACCEPTANCE CORPORATION,

as the Servicer and in its individual capacity




WELLS FARGO BANK, NATIONAL ASSOCIATION

as the Trust Collateral Agent/Indenture Trustee/Backup Servicer




 






SALE AND SERVICING AGREEMENT

Dated as of October 29, 2007




 







 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	PAGE	 
	ARTICLE I DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	SECTION
1.01. Definitions
	 	 	1	 
	 
	 	 	 	 
	SECTION
1.02. Usage of Terms
	 	 	26	 
	 
	 	 	 	 
	SECTION
1.03. Closing Date and Record Date
	 	 	26	 
	 
	 	 	 	 
	SECTION
1.04. Section References
	 	 	26	 
	 
	 	 	 	 
	SECTION
1.05. Compliance Certificates
	 	 	26	 
	 
	 	 	 	 
	SECTION
1.06. Directions
	 	 	26	 
	 
	 	 	 	 
	ARTICLE II CONVEYANCE OF SELLER PROPERTY; FURTHER
ENCUMBRANCE THEREOF
	 	 	27	 
	 
	 	 	 	 
	SECTION
2.01. Sale of the Initial Seller Property to the Trust
	 	 	27	 
	 
	 	 	 	 
	SECTION
2.02. Revolving Period; Principal Collection Account
	 	 	27	 
	 
	 	 	 	 
	SECTION
2.03. Title to Trust Property
	 	 	30	 
	 
	 	 	 	 
	ARTICLE III THE DEALER LOANS AND THE CONTRACTS
	 	 	31	 
	 
	 	 	 	 
	SECTION 3.01. Representations and Warranties of Seller with respect to the Seller
Property
	 	 	31	 
	 
	 	 	 	 
	SECTION 3.02. Payment Upon Breach
	 	 	33	 
	 
	 	 	 	 
	SECTION 3.03. Custody of Dealer Agreements and Contract Files
	 	 	36	 
	 
	 	 	 	 
	ARTICLE IV ADMINISTRATION AND SERVICING OF DEALER LOANS AND CONTRACTS
	 	 	38	 
	 
	 	 	 	 
	SECTION 4.01. Appointment; Duties of Servicer
	 	 	38	 
	 
	 	 	 	 
	SECTION 4.02. Collection and Application of Payments on the Dealer Loans and
Contracts
	 	 	41	 
	 
	 	 	 	 
	SECTION 4.03. Realization Upon Contracts
	 	 	41	 
	 
	 	 	 	 
	SECTION 4.04. Physical Damage Insurance
	 	 	42	 
	 
	 	 	 	 
	SECTION 4.05. Maintenance of Security Interests in Financed Vehicles
	 	 	42	 
	 
	 	 	 	 
	SECTION 4.06. Covenants of Servicer
	 	 	42	 
	 
	 	 	 	 
	SECTION 4.07. Payments in Respect of Contracts Upon Breach
	 	 	47	 
	 
	 	 	 	 
	SECTION 4.08. Servicer Fee
	 	 	48	 
	 
	 	 	 	 
	SECTION 4.09. Servicer’s Certificate
	 	 	48	 
	 
	 	 	 	 
	SECTION 4.10. Annual Statement as to Compliance; Notice of Default
	 	 	50	 
	 
	 	 	 	 
	SECTION 4.11. Annual Independent Certified Public Accountant’s Report
	 	 	50	 
	 
	 	 	 	 
	SECTION 4.12. Access to Certain Documentation and Information Regarding Dealer Loans
and Contracts
	 	 	51	 
	 
	 	 	 	 
	SECTION 4.13. Servicer Expenses
	 	 	52	 






 









 





TABLE OF CONTENTS

(continued)




	 	 	 	 	 
	 	 	PAGE	 
	SECTION 4.14. Servicer Not to Resign as Servicer
	 	 	52	 
	 
	 	 	 	 
	SECTION 4.15. The Backup Servicer
	 	 	52	 
	 
	 	 	 	 
	SECTION 4.16. Fidelity Bond
	 	 	53	 
	 
	 	 	 	 
	SECTION 4.17. Obligations in Respect of the Owner Trustee
	 	 	53	 
	 
	 	 	 	 
	ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS AND       NOTEHOLDERS
	 	 	53	 
	 
	 	 	 	 
	SECTION 5.01. Establishment of Trust Accounts
	 	 	53	 
	 
	 	 	 	 
	SECTION 5.02. Collections; Allocation
	 	 	56	 
	 
	 	 	 	 
	SECTION 5.03. Certain Reimbursements to the Servicer
	 	 	57	 
	 
	 	 	 	 
	SECTION 5.04. Additional Deposits
	 	 	57	 
	 
	 	 	 	 
	SECTION 5.05. Reserve Account
	 	 	57	 
	 
	 	 	 	 
	SECTION 5.06. Payments under the Class A Note Insurance Policy
	 	 	59	 
	 
	 	 	 	 
	SECTION 5.07. Reserved
	 	 	61	 
	 
	 	 	 	 
	SECTION 5.08. Transfers and Distributions
	 	 	61	 
	 
	 	 	 	 
	SECTION 5.09. Distributions from the Class A Note Distribution Account
	 	 	63	 
	 
	 	 	 	 
	SECTION 5.10. Certificate Distribution Account
	 	 	64	 
	 
	 	 	 	 
	SECTION 5.11. Statements to Certificateholders and Noteholders
	 	 	65	 
	 
	 	 	 	 
	SECTION 5.12. Swap Agreement
	 	 	66	 
	 
	 	 	 	 
	ARTICLE VI THE SELLER AND THE ISSUER
	 	 	68	 
	 
	 	 	 	 
	SECTION 6.01. Representations and Warranties of the Seller
	 	 	68	 
	 
	 	 	 	 
	SECTION 6.02. Limitation on Liability of Seller and Others
	 	 	72	 
	 
	 	 	 	 
	SECTION 6.03. Seller May Own Notes
	 	 	72	 
	 
	 	 	 	 
	SECTION 6.04. Additional Covenants of the Seller
	 	 	72	 
	 
	 	 	 	 
	SECTION 6.05. Indemnities of the Issuer
	 	 	73	 
	 
	 	 	 	 
	ARTICLE VII THE SERVICER
	 	 	74	 
	 
	 	 	 	 
	SECTION 7.01. Representations of Servicer
	 	 	74	 
	 
	 	 	 	 
	SECTION 7.02. Indemnities of Servicer
	 	 	77	 
	 
	 	 	 	 
	SECTION 7.03. Merger or Consolidation of, or Assumption of the Obligations of,
Servicer; Resignation
	 	 	79	 
	 
	 	 	 	 
	SECTION 7.04. Limitation on Liability of Servicer and Others
	 	 	79	 
	 
	 	 	 	 
	SECTION 7.05. Delegation of Duties
	 	 	80	 
	 
	 	 	 	 
	SECTION 7.06. Certification Upon Satisfaction
	 	 	80	 






 ii




 









 





TABLE OF CONTENTS

(continued)




	 	 	 	 	 
	 	 	PAGE	 
	ARTICLE VIII DEFAULT
	 	 	80	 
	 
	 	 	 	 
	SECTION 8.01. Servicer Defaults
	 	 	80	 
	 
	 	 	 	 
	SECTION 8.02. Appointment of Successor
	 	 	82	 
	 
	 	 	 	 
	SECTION 8.03. Notification to Class A Noteholders and Certificateholders
	 	 	84	 
	 
	 	 	 	 
	SECTION 8.04. Waiver of Past Defaults
	 	 	84	 
	 
	 	 	 	 
	ARTICLE IX THE TRUST COLLATERAL AGENT
	 	 	84	 
	 
	 	 	 	 
	SECTION 9.01. Duties of the Trust Collateral Agent
	 	 	84	 
	 
	 	 	 	 
	SECTION 9.02. Rights of the Trust Collateral Agent
	 	 	86	 
	 
	 	 	 	 
	SECTION 9.03. Individual Rights of Trust Collateral Agent
	 	 	87	 
	 
	 	 	 	 
	SECTION 9.04. Reports by Trust Collateral Agent to Holders
	 	 	88	 
	 
	 	 	 	 
	SECTION 9.05. Compensation
	 	 	88	 
	 
	 	 	 	 
	SECTION 9.06. Eligibility
	 	 	89	 
	 
	 	 	 	 
	SECTION 9.07. Trust Collateral Agent’s Disclaimer
	 	 	89	 
	 
	 	 	 	 
	SECTION 9.08. Limitation on Liability
	 	 	89	 
	 
	 	 	 	 
	SECTION 9.09. Reliance Upon Documents
	 	 	90	 
	 
	 	 	 	 
	SECTION 9.10. Successor Trust Collateral Agent
	 	 	90	 
	 
	 	 	 	 
	SECTION 9.11. Representations and Warranties of the Trust Collateral Agent
	 	 	93	 
	 
	 	 	 	 
	SECTION 9.12. Waiver of Setoffs
	 	 	93	 
	 
	 	 	 	 
	ARTICLE X TERMINATION
	 	 	94	 
	 
	 	 	 	 
	SECTION 10.01. Optional Purchase
	 	 	94	 
	 
	 	 	 	 
	SECTION 10.02. Termination
	 	 	94	 
	 
	 	 	 	 
	ARTICLE XI MISCELLANEOUS PROVISIONS
	 	 	95	 
	 
	 	 	 	 
	SECTION 11.01. Amendment
	 	 	95	 
	 
	 	 	 	 
	SECTION 11.02. Protection of Title to Trust
	 	 	96	 
	 
	 	 	 	 
	SECTION 11.03. Limitation on Rights of Class A Noteholders
	 	 	98	 
	 
	 	 	 	 
	SECTION 11.04. Governing Law
	 	 	99	 
	 
	 	 	 	 
	SECTION 11.05. Notices
	 	 	99	 
	 
	 	 	 	 
	SECTION 11.06. Severability of Provisions
	 	 	100	 
	 
	 	 	 	 
	SECTION 11.07. Assignment
	 	 	100	 
	 
	 	 	 	 
	SECTION 11.08. Further Assurances
	 	 	100	 
	 
	 	 	 	 
	SECTION 11.09. No Waiver; Cumulative Remedies
	 	 	101	 






 iii




 









 





TABLE OF CONTENTS

(continued)




	 	 	 	 	 
	 	 	PAGE	 
	SECTION 11.10. Third-Party Beneficiaries
	 	 	101	 
	 
	 	 	 	 
	SECTION 11.11. Actions by Noteholders
	 	 	101	 
	 
	 	 	 	 
	SECTION 11.12. Corporate Obligation
	 	 	102	 
	 
	 	 	 	 
	SECTION 11.13. Covenant Not to File a Bankruptcy Petition
	 	 	102	 
	 
	 	 	 	 
	SECTION 11.14. Multiple Roles
	 	 	102	 
	 
	 	 	 	 
	EXHIBITS
	 	 	 	 
	 
	 	 	 	 
	Exhibit A  [Reserved]
	 	 	 	 
	Exhibit B  Servicer’s Certificate
	 	 	 	 
	Exhibit C  [Reserved]
	 	 	 	 
	Exhibit D  Form of Dealer Agreement
	 	 	 	 
	Exhibit E  Form of Servicer’s Acknowledgment
	 	 	 	 
	Exhibit F  Form of Contracts
	 	 	 	 
	Exhibit G  [Reserved]
	 	 	 	 
	Exhibit H  Credit Guidelines
	 	 	 	 






 iv




 









 





TABLE OF CONTENTS

(continued)




	 
	 	 	PAGE
	SCHEDULES

	 

	Schedule A Dealer Loans, Dealer Agreements and Contracts

	Schedule B Forecasted Collections

	Schedule C Perfection Representations, Warranties and Covenants







 v




 









 





          This Sale and Servicing Agreement, dated as of October 29, 2007, among CREDIT ACCEPTANCE AUTO
DEALER LOAN TRUST 2007-2 (the “Issuer” or the “Trust”), CREDIT ACCEPTANCE FUNDING LLC
2007-2, a Delaware limited liability company, as Seller (the “Seller”), CREDIT ACCEPTANCE
CORPORATION, a Michigan corporation, in its individual capacity (“Credit Acceptance”) and
as Servicer (the “Servicer”) and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking
association organized under the laws of the United States, in its capacity as Backup Servicer,
Trust Collateral Agent and Indenture Trustee (the “Backup Servicer,” “Trust Collateral
Agent” and “Indenture Trustee”).




          WITNESSETH THAT: In consideration of the premises and of the mutual agreements herein
contained, the parties hereto agree as follows:




ARTICLE I




DEFINITIONS




          SECTION 1.01. Definitions.



Whenever used in this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings. Terms used herein but not defined herein shall have
the meaning given such terms in the Indenture.




          “Adjusted Collateral Amount” means, on any Distribution Date, during the Revolving
Period, an amount equal to the sum of: (i) the Collateral Amount; and (ii) the amount on deposit
in the Principal Collection Account.




          “Advance Rate” means, on any Distribution Date, the ratio, expressed as a percentage,
where the numerator is equal to the Class A Note Balance and the denominator is equal to the
Collateral Amount.




          “Affiliate” means, with respect to any specified Person, any other Person controlling
or controlled by or under common control with such specified Person. For the purposes of this
definition, “control” when used with respect to any Person means the power to direct the management
and policies of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing. A Person shall not be deemed to be an Affiliate of any person solely
because such other Person has the contractual right or obligation to manage such Person unless such
other Person controls such Person through equity ownership or otherwise.




          “Aggregate Outstanding Eligible Loan Balance” means, on any date of determination, the
sum of the Outstanding Balances of all Eligible Loans on such day.




          “Aggregate Outstanding Net Eligible Loan Balance” means, on any date of determination,
the Aggregate Outstanding Eligible Loan Balance less the related Loan Loss Reserves at the end of
the most recent Collection Period.




 









 








          “Agreement” means this Sale and Servicing Agreement, as the same may be amended or
supplemented from time to time.




          “Amortization Period” means the period of time beginning on the earlier of (i) the
close of business on October 15, 2008, and (ii) the close of business on the Business Day before
the day on which an Early Amortization Event automatically occurs or is declared pursuant to
Section 2.02 hereof.




          “Amortization Period Additional Contract Collateral Amount” has the meaning assigned
to such term in Section 3.02(d)(i) hereof.




          “Amortization Period Additional Loan Collateral Amount” has the meaning assigned to
such term in Section 3.02(d)(i) hereof.




          “Amortization Period Payment Obligations” has the meaning assigned to such term in
Section 3.02(d)(ii) hereof.




          “Applicable Law” means, for any Person, all existing and future applicable laws,
rules, regulations (including proposed, temporary and final income tax regulations), statutes,
treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by
any Governmental Authority, and applicable judgments, decrees, injunctions, writs, orders, or
action of any Court, arbitrator or other administrative, judicial, or quasi-judicial tribunal or
agency of competent jurisdiction.




          “Assumption Date” has the meaning assigned to such term in Section 2.3(a) of the
Backup Servicing Agreement.




          “Automatic Amortization Event” has the meaning assigned to such term in Section
2.02(b) hereof.




          “Available Funds” means, with respect to any Distribution Date: (i) all Collections
(other than Dealer Collections and Repossession Expenses) received by the Servicer, the Seller or
the Originator during the related Collection Period with respect to the Contracts and the Dealer
Loans and paid over to the Issuer, (ii) all Purchase Amounts paid by the Seller, the Servicer or
the Originator and any amounts paid by the Originator in respect of the Limited Repurchase Option
during the related Collection Period, (iii) all investment earnings and interest on amounts on
deposit in the Reserve Account, the Principal Collection Account and the Collection Account during
the related Collection Period, (iv) any amounts remaining in the Principal Collection Account after
the conclusion of the Revolving Period, (v) any Net Swap Receipts (excluding Swap Termination
Payments received from the Swap Counterparty and deposited into the Swap Termination Payment
Account), (vi) amounts on deposit in the Swap Termination Payment Account that exceed the cost of
entering into a Replacement Swap Agreement or any amounts on deposit in the Swap Termination
Payment Account if the Issuer determines with the consent of the Class A Insurer (so long as no
Class A Insurer Default has occurred and is continuing) not to replace the Initial Swap Agreement;
(vii) the amount by which any amounts received from a Replacement Swap Counterparty in
consideration for entering into a Replacement Swap Agreement exceeds the payments due to the Swap Counterparty due to the
termination of the Swap Agreement following an event of default or termination event under the




2









 







Swap Agreement and (viii) on any Distribution Date, any amounts on deposit in the Reserve Account in
excess of the Reserve Account Requirement, after giving effect to all deposits to and withdrawals
from the Reserve Account on such Distribution Date.




          “Backup Servicer” means Wells Fargo Bank, National Association and its permitted
successors and assigns.




          “Backup Servicing Agreement” means the Backup Servicing Agreement dated as of the
Closing Date, among the Backup Servicer, the Class A Insurer, Credit Acceptance, the Seller, the
Issuer and the Trust Collateral Agent.




          “Backup Servicing Fee” means, as to each Distribution Date, $4,000; provided,
however, that if the Backup Servicer becomes the successor Servicer, such fee shall no
longer be paid.




          “Bankruptcy Code” means the United States Bankruptcy Reform Act of 1978 (11 U.S.C.
§ 101, et seq.), as amended from time to time.




          “Basic Documents” means this Agreement, the Certificate of Trust (as defined in the
Trust Agreement), the Trust Agreement, the Backup Servicing Agreement, the Indenture, the
Contribution Agreement, the Insurance Agreement, the Swap Agreement, the Initial Purchaser
Agreement, the Intercreditor Agreement, the Class A Insurer Premium Letter, the Class A Notes and
all other documents and certificates delivered in connection therewith.




          “Benefit Plan” has the meaning given such term in the Trust Agreement.




          “Business Day” means any day other than a Saturday or a Sunday on which banking
institutions are not required or authorized to be closed in New York, New York, Detroit, Michigan
or Minneapolis, Minnesota.




          “Capped Backup Servicer and Trustee Fees and Expenses” means, with respect to any
Distribution Date, in respect of fees, indemnification amounts and expenses due to the Backup
Servicer in its capacity as Backup Servicer, the Owner Trustee, the Indenture Trustee and the Trust
Collateral Agent: (i) on any Distribution Date on which (X) no Indenture Event of Default has
occurred or (Y) an Indenture Event of Default has occurred but is no longer continuing or has been
waived, an amount not to exceed $15,000 for any Distribution Date, in the aggregate; and (ii) on
any Distribution Date on which an Indenture Event of Default has occurred and is continuing and has
not been waived (A) to the Backup Servicer, the Indenture Trustee and the Trust Collateral Agent,
an amount not to exceed $20,850 for any Distribution Date, in the aggregate; and (B) to the Owner
Trustee, an amount not to exceed $5,000 for any Distribution Date, except with respect to
reasonable and necessary expenses of the Owner Trustee (including reasonable attorneys’ fees and
costs) incurred by the Owner Trustee in connection with any pending or threatened action, suit or
proceeding, whether civil or criminal, administrative or investigative in which the Owner Trustee
is identified as a subject or named as a party and faces potential liability, censure or penalties, other than as a result of the
gross negligence or willful misconduct of the Owner Trustee.




3









 








          “Capped Servicing Fee” means, with respect to the Servicing Fee payable to the Backup
Servicer if it has become Servicer and with respect to any Distribution Date, an amount equal to
the product of 10.00% and Collections for the related Collection Period.




          “Certificate” has the meaning given such term in the Trust Agreement.




          “Certificate Distribution Account” has the meaning assigned to such term in
Section 5.01(a)(iii) hereof.




          “Certificateholder” has the meaning given such term in the Trust Agreement.




          “Certificate Interest” means the allocable percentage interest of a Certificate held
by a Certificateholder.




          “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 Register” and “Certificate Registrar” means the register
mentioned and the registrar appointed pursuant to Section 3.4 of the Trust Agreement.




          “Class A Insurer” means XL Capital Assurance Inc., a New York stock insurance company.




          “Class A Insurer Default” means: (i) failure by the Class A Insurer to make a payment
required under the Class A Note Insurance Policy in accordance with its terms; (ii) the occurrence
of an involuntary insolvency event with respect to the Class A Insurer which remains unstayed for
60 consecutive days; (iii) consent by the Class A Insurer to the appointment of a conservator,
receiver, liquidator or other similar official in any insolvency, readjustment of debt, marshaling
of assets and liabilities, rehabilitation or similar proceedings of or relating to the Class A
Insurer or of or relating to all or substantially all of its property; or (iv) the Class A Insurer
admits in writing its inability to pay its debts generally as they become due, files a petition to
take advantage of or otherwise voluntarily commences a case or proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar statute, makes an assignment for the
benefit of its creditors, or voluntarily suspends payments of its obligations.




          “Class A Insurer Preference Payment” has the meaning set forth in Section
5.06(c)(i) hereof.




          “Class A Insurer Premium” has the meaning given such term in the Insurance Agreement.




          “Class A Insurer Premium Letter” means the premium letter, dated the Closing Date,
among the Class A Insurer, the Servicer, the Issuer and the Trust Collateral Agent.




4









 








          “Class A Insurer Premium Supplement” has the meaning set forth in the Class A Insurer
Premium Letter.




          “Class A Note Balance” equals at all times, the sum of the Class A-1A Note Balance and
Class A-1B Note Balance.




          “Class A Note Distribution Account” means the Class A Note Distribution Account
established and maintained pursuant to Section 5.01(a)(ii) hereof.




          “Class A Note Insurance Policy” means the note guaranty insurance policy issued by the
Class A Insurer to the Trust Collateral Agent for the benefit of the Class A Noteholders with
respect to the Class A Notes.




          “Class A-1A Interest Carryover Shortfall” means, as of the close of business on any
Distribution Date, the excess of the Class A-1A Interest Distributable Amount for such Distribution
Date plus any outstanding Class A-1A Interest Carryover Shortfall from the preceding Distribution
Date plus interest on such outstanding Class A-1A Interest Carryover Shortfall, to the extent
permitted by law, at the Class A-1A Note Rate from and including such preceding Distribution Date
to but excluding the current Distribution Date, over the amount in respect of interest on the Class
A-1A Notes that was actually deposited in the Class A Note Distribution Account on such current
Distribution Date.




          “Class A-1A Interest Distributable Amount” means, with respect to any Distribution
Date, interest accrued from and including the preceding Distribution Date (or, in the case of the
first Distribution Date, the Closing Date) to, but excluding the current Distribution Date, at the
Class A-1A Note Rate on the Class A-1A Note Balance immediately prior to such Distribution Date.
Interest on the Class A-1A Notes shall be due and payable on each Distribution Date and shall be
computed on the basis of a 360-day year consisting of twelve months of 30 days.




          “Class A-1A Note Balance” equals, initially, $50,000,000, and thereafter equals the
initial Class A-1A Note Balance reduced by all amounts allocable to principal and previously
distributed to the Class A-1A Noteholders.




          “Class A-1A Principal Distributable Amount” means, for any Distribution Date: (A)
during the Revolving Period, zero; and (B) during the Amortization Period, an amount equal to the
lesser of: (i) the product of (a) Available Funds remaining after payment of the amounts set forth
in clauses (i) through (vii) of Section 5.08(a) hereto and (b) a ratio computed by dividing
(1) the Class A-1A Note Balance by (2) the Class A Note Balance; and (ii) the Class A-1A Note
Balance; provided, however, on the Stated Final Maturity, the Class A-1A Principal Distributable
Amount will equal the Class A-1A Note Balance.




          “Class A-1B Interest Carryover Shortfall” means, as of the close of business on any
Distribution Date, the excess of the Class A-1B Interest Distributable Amount for such Distribution
Date plus any outstanding Class A-1B Interest Carryover Shortfall from the preceding Distribution
Date plus interest on such outstanding Class A-1B Interest Carryover Shortfall, to the extent
permitted by law, at the Class A-1B Note Rate from and including such preceding Distribution Date
to but excluding the current Distribution Date, over the amount in



5









 






respect of interest on the Class
A-1B Notes that was actually deposited in the Class A Note Distribution Account on such current
Distribution Date.




          “Class A-1B Interest Distributable Amount” means, with respect to any Distribution
Date, interest accrued from and including the preceding Distribution Date (or, in the case of the
first Distribution Date, the Closing Date) to, but excluding the current Distribution Date, at the
Class A-1B Note Rate on the Class A-1B Note Balance immediately prior to such Distribution Date.
Interest on the Class A-1B Notes shall be due and payable on each Distribution Date and shall be
calculated on the basis of the actual number of days elapsed during the period for which interest
is payable and a 360-day year.




          “Class A-1B Note Balance” equals, initially, $50,000,000, and thereafter equals the
initial Class A-1B Note Balance reduced by all amounts allocable to principal and previously
distributed to the Class A-1B Noteholders.




          “Class A-1B Principal Distributable Amount” means, for any Distribution Date: (A)
during the Revolving Period, zero; and (B) during the Amortization Period, an amount equal to the
lesser of: (i) the product of (a) Available Funds remaining after payment of the amounts set forth
in clauses (i) through (vii) of Section 5.08(a) hereto and (b) a ratio computed by dividing
(1) the Class A-1B Note Balance by (2) the Class A Note Balance; and (ii) the Class A-1B Note
Balance; provided, however, on the Stated Final Maturity, the Class A-1B Principal Distributable
Amount will equal the Class A-1B Note Balance.




          “Closing Date” means October 29, 2007.




          “Collateral Amount” means, on any Distribution Date, an amount equal to the Aggregate
Outstanding Net Eligible Loan Balance less the aggregate of the Overconcentration Loan Amounts and
the aggregate of the Dealer Loan Excess Advance Amounts, if any, after giving effect to all
purchases of Dealer Loans on such date. Solely for purposes of calculating the “Collateral
Amount”, the determination of whether a Dealer Loan is an “Eligible Loan” shall be made as if such
Dealer Loan were transferred on the date of such calculation; provided, however,
that a Dealer Loan relating to a Dealer that has become insolvent after the transfer of such Dealer
Loan to the Issuer shall continue to constitute an “Eligible Loan” (assuming that such Dealer Loan
would otherwise be an “Eligible Loan” on such date of determination if the applicable Dealer had
not become insolvent) for purposes of calculating the “Collateral Amount” so long as (i) the
characterization of such Dealer Loan as an “Eligible Loan” would not cause the percentage of the
aggregate Outstanding Balance of all Dealer Loans relating to Dealers who are insolvent to exceed
2.5% of the Aggregate Outstanding Net Eligible Loan Balance and (ii) no bankruptcy court has
entered an order (whether or not final), which order has not been vacated or
overturned, stating that a person other than the Issuer (or the Servicer on the Issuer’s
behalf) is entitled to receive any collections on the Dealer Loans or the Contracts relating
thereto.




          “Collection Account” means the account designated as such, established and maintained
pursuant to Section 5.01(a)(i) hereof.




          “Collection Guidelines” means, with respect to Credit Acceptance, the policies and
procedures of the Servicer in effect on the Closing Date relating to the collection of amounts



6









 






due on the Contracts and the Dealer Loans and as amended from time to time in accordance with the Basic
Documents, and with respect to the Backup Servicer, as successor Servicer, the usual and customary
servicing policies and procedures of the Backup Servicer.




          “Collection Period” means, with respect to each Distribution Date, the immediately
preceding calendar month. Any amount stated “as of the close of business on the last day of a
Collection Period” shall give effect to all collections, charge-offs, reserve adjustments and other
account activity during such Collection Period.




          “Collections” means, with respect to any Collection Period, all payments (including
Income Collections, Principal Collections, Dealer Collections, Recoveries, credit-related insurance
proceeds and proceeds of the Related Security and, so long as Credit Acceptance is the Servicer,
excluding certain recovery and repossession expenses, in accordance with the terms of the Dealer
Agreements) received by the Servicer, the Originator, the Issuer or the Seller on or after the
Cut-off Date in respect of the Dealer Loans and Contracts in the form of cash, checks, wire
transfers or other form of payment in accordance with the Dealer Loans, the Dealer Agreements and
the Contracts.




          “Comerica Credit Agreement” means that certain Fourth Amended and Restated Credit
Acceptance Corporation Credit Agreement, dated as of February 7, 2006, with Comerica Bank, as
administrative agent and collateral agent, and the banks signatory thereto, as amended by that
certain First Amendment to the Fourth Amended and Restated Credit Agreement, dated as of September
20, 2006, that certain Second Amendment to the Fourth Amended and Restated Credit Agreement, dated
as of January 19, 2007, and that certain Third Amendment to the Fourth Amended and Restated Credit
Agreement, dated as of June 14, 2007.




          “Computer Tape” means a computer tape or diskette (or other means of electronic
transmission acceptable to the Backup Servicer and the Class A Insurer) in a readable format
acceptable to the Backup Servicer and the Class A Insurer.




          “Continued Errors” has the meaning given such term in the Backup Servicing Agreement.




          “Contract” means any retail installment sales contract, in substantially one of the
forms attached hereto as Exhibit F, relating to the sale of a used automobile, light-duty
truck, minivan or sport utility vehicle originated by a Dealer and in which Credit Acceptance shall
have been granted a security interest and shall have acquired certain other rights under the
related Dealer Agreement to secure the related Dealer’s obligation to repay one or more related Dealer
Loans.




          “Contract Buy-Back Rate” means on any date of determination, a fraction, expressed as
a percentage, the numerator of which is the Class A Note Balance as of the last day of the
preceding Collection Period and the denominator of which is the Outstanding Balance of all Eligible
Contracts as of the last day of the preceding Collection Period.




          “Contract File” means with respect to each Contract, the physical and/or electronic
files in which Credit Acceptance maintains the fully executed original counterpart (for UCC
purposes) of the Contract (to the extent required in accordance with Section 3.03 of this



7









 






Agreement), either a standard assurance in the form commonly used in the industry relating to the
provision of a certificate of title or other evidence of lien, the original instruments modifying
the terms and conditions of such Contract and the original endorsements or assignments of such
Contract.




          “Contribution Agreement” means the Contribution Agreement dated as of even date
herewith, relating to the contribution by Credit Acceptance to the Seller of the Contributed
Property, as defined therein.




          “Corporate Trust Office” has the meaning given such term in the Trust Agreement.




          “Credit Acceptance” means Credit Acceptance Corporation, a Michigan corporation.




          “Credit Guidelines” means the policies and procedures of Credit Acceptance, relating
to the extension of credit to automobile, light-duty truck, minivan and/or sport utility dealers in
respect of retail installment contracts for the sale of automobiles, light-duty trucks, minivans
and/or sport utility vehicles including, without limitation, the policies and procedures for
determining creditworthiness and otherwise relating to the extension of credit to Dealers and the
maintenance of installment sale contracts, as in effect on the Cut-off Date and as amended from
time to time in accordance with the Basic Documents, attached hereto as Exhibit H.




          “Cut-off Date” means, (i) with respect to Dealer Loans and related collateral to be
transferred to the Issuer on the Closing Date, the close of business on August 31, 2007, and (ii)
with respect to Dealer Loans and related collateral purchased by the Issuer on each Distribution
Date during the Revolving Period, the close of business on the last day of the immediately
preceding Collection Period.




          “Dealer” means any new or used automobile, light-duty truck, minivan and/or sport
utility vehicle dealer who has entered into a Dealer Agreement with Credit Acceptance.




          “Dealer Agreement” means, each Dealer Agreement between the Originator and the related
Dealer substantially in the form of Exhibit D attached hereto; provided,
however, that the term “Dealer Agreement” shall, for the purposes of this Agreement,
include only those Dealer Agreements identified from time to time on Schedule A hereto, as amended or
supplemented from time to time in accordance herewith.




          “Dealer Collections” means, with respect to any Collection Period, the Collections
received by the Servicer during such Collection Period which pursuant to the terms of any Dealer
Agreement, are required to be remitted to the applicable Dealer.




          “Dealer Concentration Limit” means, with respect to any Dealer, an amount equal to:
(A) with respect to the Closing Date, 2.5% of the Aggregate Outstanding Net Eligible Loan Balance
as of the initial Cut-off Date and (B) with respect to each Distribution Date during the Revolving
Period on which Dealer Loans are purchased by the Issuer, 2.5% of the Aggregate Outstanding Net
Eligible Loan Balance as of such Distribution Date, after giving effect to all Collections received
during the related Collection Period and the purchase of Dealer Loans on



8









 






such Distribution Date; provided, that for the ten largest Dealers (measured by the Aggregate Outstanding Net
Eligible Loan Balance of each such Dealer), such limit shall be equal to 18.0% of the Aggregate
Outstanding Net Eligible Loan Balance of all Dealer Loans on the initial Cut-off Date or each
Distribution Date during the Revolving Period on which Dealer Loans are purchased by the Issuer, as
the case may be.




          “Dealer Loan” means a group of advances made by the Originator to a Dealer in respect
of an identified group of Contracts, all of which secure repayment thereof, plus revenue accrued
with respect to such Dealer Loan in accordance with Credit Acceptance’s accounting policies set
forth in its periodic reports filed with the Securities and Exchange Commission and the payment of
monies to a Dealer under the related Dealer Agreement, less Collections on the related Contracts
securing such Dealer Loan applied to the reduction of the balance of such Dealer Loan and
write-offs of such Dealer Loan; provided, however, that the term “Dealer Loan”
shall, for the purposes of this Agreement, include only those Dealer Loans identified from time to
time on Schedule A hereto, as amended or supplemented from time to time in accordance with
the terms of this Agreement.




          “Dealer Loan Excess Advance Amount” means, with respect to any Eligible Loan on any
Distribution Date, the amount by which the Net Loan Balance of such Eligible Loan, on the date it
was originated, exceeds 70% of the Outstanding Balance of the related Eligible Contracts on their
dates of origination.




          “Defaulted Contract” means each Contract which has become 90 days delinquent, based on
the date the last payment thereon was received by the Servicer or has had an auction check posted
to the relevant account.




          “Delivery” when used with respect to property forming a part of a Trust Account means:





     (a) with respect to bankers’ acceptances, commercial paper, negotiable certificates of
deposit and other obligations that constitute “instruments” within the meaning of Section
9-102(a)(47) of the UCC and are susceptible of physical delivery, transfer thereof by
physical delivery to the Trust Collateral Agent indorsed to, or
registered in the name of, the Trust Collateral Agent or its nominee or indorsed 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 to the Trust Collateral Agent
or by delivery of such certificated security to a securities intermediary indorsed to, or
registered in the name of, the Trust Collateral Agent or its nominee or indorsed in blank to
a securities intermediary (as defined in Section 8-102(a)(14) of the UCC) and the making by
such securities intermediary of entries on its books and records identifying such
certificated securities as belonging to the Trust Collateral Agent and the sending by such
securities intermediary of a confirmation of the purchase of such certificated security by
the Trust Collateral Agent, or (ii) by delivery thereof to a “clearing corporation” (as
defined in Section 8-102(a)(5) of the UCC) and the making by such clearing corporation of
appropriate entries on its books reducing the appropriate securities account of the
originator and increasing the appropriate securities account of a securities intermediary by
the amount of such certificated security, the identification by



9









 






the clearing corporation of the certificated securities for the sole and exclusive account of the securities
intermediary, the maintenance of such certificated securities by such clearing corporation
or its nominee subject to the clearing corporation’s exclusive control, the sending of a
confirmation by the securities intermediary of the purchase by the Trust Collateral Agent of
such securities and the making by such securities intermediary of entries on its books and
records identifying such certificated securities as belonging to the Trust Collateral Agent
(all of the foregoing, “Physical Property”), and, in any event, any such Physical Property
in registered form shall be registered in the name of the Trust Collateral Agent or its
nominee or endorsed in blank; and such additional or alternative procedures as may hereafter
become appropriate to effect the complete transfer of ownership of any such Eligible
Investment to the Trust Collateral Agent, consistent with changes in applicable law or
regulations or the interpretation thereof;




     (b) with respect to any security 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, including applicable
federal regulations and Articles 8 and 9 of the UCC: book-entry registration of such
Eligible Investment to an appropriate book-entry account maintained with a Federal Reserve
Bank by a securities intermediary which is also a “depositary” pursuant to
applicable federal regulations and issuance by such securities intermediary of a deposit
advice or other written confirmation of such book-entry registration to the Trust Collateral
Agent of the purchase by the Trust Collateral Agent of such book-entry securities; the
making by such securities 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 Trust Collateral Agent and indicating that such securities
intermediary holds such Eligible Investment solely as agent for the Trust Collateral Agent;
and such additional or alternative procedures as may hereafter become appropriate to effect
complete transfer of ownership of any such Eligible
Investment to the Trust Collateral Agent, consistent with changes in applicable law or
regulations or the interpretation thereof; and




     (c) with respect to any Eligible Investment that is an uncertificated security under
Article 8 of the UCC and that is not governed by clause (b) above, registration on the books
and records of the issuer thereof in the name of the Trust Collateral Agent or its nominee
or the securities intermediary, the sending of a confirmation by the securities intermediary
of the purchase by the Trust Collateral Agent or its nominee of such uncertificated
security, and the making by such securities intermediary of entries on its books and records
identifying such uncertificated certificates as belonging to the Trust Collateral Agent.



          In furtherance of the foregoing, any Eligible Investments held by the Trust Collateral Agent
through a securities intermediary shall be held only pursuant to a control agreement entered into
among the Seller, the Trust Collateral Agent and the securities intermediary, pursuant to which the
securities intermediary agrees to credit all financial assets (as defined in Section 8-102(a)(9) of
the UCC) purchased (as defined in Section 1-201(32) of the



10









 






UCC) at the direction of the Trust
Collateral Agent to the securities account maintained by the securities intermediary for the
benefit of the Trust Collateral Agent and agrees to comply with entitlement orders (as defined in
Section 8-102(a)(8) of the UCC) of the Trust Collateral Agent without the further consent of the
Seller and pursuant to which the securities intermediary waives any prior lien on all financial
assets credited to such securities account to which it might otherwise be entitled. Such control
agreement shall initially be governed by New York law and the Trust Collateral Agent shall not
amend the initial control agreement or enter into a control agreement with a successor securities
intermediary which in either event provides that the laws of a state other than New York shall
govern, without first obtaining a continuation of perfection and priority opinion under the laws of
such new state which is, acceptable to the Class A Insurer.




          “Determination Date” means the fourth Business Day prior to the related Distribution
Date.




          “Discretionary Amortization Event” has the meaning assigned to such term in
Section 2.02(c) hereof.




          “Distribution Date” means, for each Collection Period, the 15th day of the following
month, or if the 15th day is not a Business Day, the next following Business Day, commencing with
the First Distribution Date.




          “Early Amortization Event” means, collectively, Automatic Amortization Events and
Discretionary Amortization Events.




          “Eligible Account” shall mean a non-interest bearing segregated trust account or
accounts maintained with an institution whose deposits are insured by the FDIC, the unsecured and
uncollateralized long term debt obligations of which institution shall be rated “AA-” or higher by
S&P and “Aa3” or higher by Moody’s and in the highest short term rating category by the Rating
Agencies, and which is (i) a federal savings and loan association duly organized,
validly existing and in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking laws of any state,
(iii) a national banking association duly organized, validly existing and in good standing under
the federal banking laws, (iv) a principal subsidiary of a bank holding company, or (v) approved in
writing by the Class A Insurer, and, as confirmed in writing by the Rating Agencies, will not
result in the downgrade of the ratings of the Class A Notes, without regard to the Class A Note
Insurance Policy.




          “Eligible Contract” means each Contract which at the time of its pledge by the
applicable Dealer to the Originator satisfied the requirements for a “Qualifying Receivable” set
forth in the related Dealer Agreement; provided, however, that a Contract that has
become subject to the payment of a Purchase Amount in accordance with Section 3.02 hereof
or Section 4.07 hereof (regardless of whether such Purchase Amount is actually paid) shall
not constitute an “Eligible Contract”.




          “Eligible Dealer Agreement” means each Dealer Agreement:





     (a) which was originated by the Originator in compliance with all applicable
requirements of law and which complies with all applicable requirements of law;



11









 






     (b) with respect to which all material consents, licenses, approvals or authorizations
of, or registrations or declarations with, any Governmental Authority required to be
obtained, effected or given by the Seller, by the Originator or by the Servicer in
connection with the origination of such Dealer Agreement or the execution, delivery and
performance by the Seller, by the Originator or by the Servicer of such Dealer Agreement
have been duly obtained, effected or given and are in full force and effect;




     (c) as to which at the time of the sale of rights thereunder to the Trust, the Seller
will have good and marketable title thereto, free and clear of all Liens;




     (d) the Originator’s rights under which have been the subject of a valid grant by the
Originator of a first priority perfected security interest in such rights and in the
proceeds thereof in favor of the Seller;




     (e) which will at all times be the legal, valid and binding obligation of the Dealer
party thereto (it being understood that recourse for such payment obligation shall be
limited to the extent set forth in the Dealer Agreement), enforceable against such Dealer in
accordance with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, affecting the enforcement of creditors’ rights in general and except as such
enforceability may be limited by general principles of equity (whether considered in a suit
at law or in equity);




     (f) which constitutes either a “general intangible” or “tangible chattel paper” under
and as defined in Article 9 of the UCC;




     (g) which, at the time of the sale of the rights to payment thereunder to the Trust, no
rights to payment thereunder have been waived or modified;




     (h) which is not subject to any right of rescission, setoff, counterclaim or other
defense (including the defense of usury), other than defenses arising out of applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors’ rights in general;




     (i) as to which the Originator, the Servicer and the Seller have satisfied all
obligations to be fulfilled at the time the rights to payment thereunder are transferred to
the Trust;




     (j) as to which the related Dealer has not asserted that such agreement is void or
unenforceable;




     (k) as to which the related Dealer is not an Affiliate of an executive of Credit
Acceptance or an Affiliate of Credit Acceptance;




     (l) as to which the related Dealer is located in the United States;




     (m) as to which the related Dealer is not bankrupt or insolvent; and



12









 






     (n) as to which none of the Originator, the Servicer nor the Seller has done anything,
at the time of its sale to the Trust, to impair the rights of the Trust therein.



          “Eligible Investments” mean any one or more of the following types of investments
which mature no later than the Business Day preceding each Distribution Date:





     (i) direct obligations of, and obligations fully guaranteed as to timely payment by,
the United States of America;




     (ii) demand deposits, time deposits or certificates of deposit of any depository
institution (including any Affiliate of the Seller, the Servicer, the Trust Collateral
Agent, the Indenture Trustee or the Owner Trustee) or trust company incorporated under the
laws of the United States of America or any state thereof or the District of Columbia (or
any domestic branch of a foreign bank) and subject to supervision and examination by Federal
or state banking or depository institution authorities (including depository receipts issued
by any such institution or trust company as custodian with respect to any obligation
referred to in clause (i) above or a portion of such obligation for the benefit of the
holders of such depository receipts); provided, however, that at the time of
the investment or contractual commitment to invest therein (which shall be deemed to be made
again each time funds are reinvested following each Distribution Date), the commercial paper
or other short-term senior unsecured debt obligations (other than such obligations the
rating of which is based on the credit of a Person other than such depository institution or
trust company) of such depository institution or trust company shall have a credit rating
from Standard & Poor’s of at least A-1+ and from Moody’s of Prime-1;




     (iii) repurchase obligations with respect to any security that is a direct obligation
of, or fully guaranteed by, the United States of America or any agency or instrumentality
thereof the obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with a depository institution or trust
company (acting as principal) referred to in clause (ii) above;




     (iv) commercial paper (including commercial paper of any affiliate of the Seller, the
Servicer, the Trust Collateral Agent, the Indenture Trustee or the Owner Trustee) having,
at the time of the investment or contractual commitment to invest therein, a rating from
Standard & Poor’s of at least A-1+ and from Moody’s of Prime-1;




     (v) investments in money market funds (including funds for which the Seller, the
Servicer, the Trust Collateral Agent, the Indenture Trustee or Owner Trustee or any of their
respective Affiliates is investment manager or advisor) having a rating from Standard &
Poor’s of AAA-m or AAAm-G and from Moody’s of Aaa;




     (vi) bankers’ acceptances issued by any depository institution or trust company
referred to in clause (ii) above;




     (vii) any other demand or time deposit, obligation, security or investment as may be
acceptable, so long as a Class A Insurer Default is not continuing, to the Class A Insurer
and, as confirmed in writing by the Rating Agencies, will not result in the



13









 






downgrade of the ratings of the Class A Notes, without regard to the Class A Note Insurance Policy; and




     (viii) money market deposit accounts, certificates of deposit, demand or time deposits,
savings deposits, bankers acceptances, or federal funds, in each case as defined in
Regulation D of the Board of Governors of the Federal Reserve System and issued by or sold
by or offered by, any domestic office of any commercial bank or any depository institution
or trust company (including the Indenture Trustee or the Owner Trustee or their successors)
incorporated or organized under the laws of the United States or any States thereof which
has a combined capital and surplus and undivided profits of not less than $250,000,000 and
the deposits of which are fully insured by FDIC and which has from Moody’s a short-term
rating of not lower than P-1 or long-term rating of not lower than A-2.



          Any of the foregoing Eligible Investments may be purchased from, by or through the Owner
Trustee, the Indenture Trustee or the Trust Collateral Agent or any of their respective Affiliates.




          “Eligible Loan” means each Dealer Loan, at the time of its transfer to the Seller
under the Contribution Agreement:





     (a) which has arisen under a Dealer Agreement that, on the day the Dealer Loan was
created, qualified as an Eligible Dealer Agreement;




     (b) which was created in compliance with all applicable requirements of law and
pursuant to an Eligible Dealer Agreement which complies with all applicable requirements of
law;




     (c) with respect to which all material consents, licenses, approvals or authorizations
of, or registrations or declarations with, any Governmental Authority required to be
obtained, effected or given by the Originator, in connection with the creation of such
Dealer Loan or the execution, delivery and performance by the Originator, of the related
Eligible Dealer Agreement have been duly obtained, effected or given and are in full force
and effect;




     (d) as to which at the time of the sale of such Dealer Loan to the Trust, the Seller
will have good and marketable title thereto, free and clear of all Liens;




     (e) as to which a valid first priority perfected security interest in such Dealer Loan,
related security and in the Proceeds thereof has been granted by the Originator in favor of
the Seller, by the Seller in favor of the Issuer and by the Issuer in favor of the Indenture
Trustee;




     (f) which will at all times be the legal, valid and binding payment obligation of the
Obligor thereof (it being understood that recourse for such payment obligation shall be
limited to the extent set forth in the Dealer Agreement), enforceable against such Obligor
in accordance with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now



14









 






or hereafter in effect, affecting the enforcement of creditors’ rights in general and except as such
enforceability may be limited by general principles of equity (whether considered in a suit
at law or in equity);




     (g) which constitutes a “general intangible” under and as defined in Article 9 of the
UCC;




     (h) which is denominated and payable in United States dollars;




     (i) which, at the time of its sale to the Trust, has not been waived or modified;




     (j) which is not subject to any right of rescission (subject to the rights of the
related Dealer to repay the outstanding balance thereof and terminate the related Dealer
Agreement), setoff, counterclaim or other defense (including the defense of usury), other
than defenses arising out of applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of creditors’ rights in general;




     (k) as to which the Originator, the Servicer and the Seller have satisfied all
obligations to be fulfilled at the time it is pledged to the Trust;




     (l) as to which the related Dealer has not asserted that the related Dealer Agreement
is void or unenforceable;




     (m) as to which the related Dealer is not bankrupt or insolvent;




     (n) as to which none of the Originator, the Servicer nor the Seller has done anything,
at the time of its sale to the Trust and subsequent pledge to the Indenture Trustee, to
impair the rights of the Trust or the Indenture Trustee, as the case may be;




     (o) has not become subject to the payment of a Purchase Amount in accordance with
Section 3.02 hereof or Section 4.07 hereof (regardless of whether such
Purchase Amount is actually paid); and




     (p) the proceeds of which were used to finance the purchases of used automobiles and/or
light-duty trucks and related products.



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




          “ERISA Affiliate” means Credit Acceptance and each entity, whether or not
incorporated, which is affiliated with Credit Acceptance pursuant to Section 414(b), (c), (m) or
(o) of the Code.




          “Errors” has the meaning given such term in the Backup Servicing Agreement.




          “Final Score” means the final output from the Originator’s proprietary credit scoring
process, which, when divided by 1,000, represents the Originator’s expectations of the ultimate
collection rate on a contract at inception.




15









 








          “Financed Vehicle” means, with respect to a Contract, any used automobile, light-duty
truck, minivan or sport utility vehicle, together with all accessories thereto, securing the
related Obligor’s indebtedness thereunder.




          “Financial Covenants” means the financial covenants of the Servicer set forth in the
Insurance Agreement.




          “First Distribution Date” means November 15, 2007.




          “Forecasted Collections” means the expected amount of collections to be received with
respect to the Contracts each month as determined by Credit Acceptance in accordance with its
forecasting model, set forth on Schedule B hereto.




          “GAAP” means generally accepted accounting principles as in effect from time to time
in the United States.




          “Governmental Authority” means any nation or government, any state or other political
subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any
body or entity exercising executive, legislative, judicial, regulatory or administrative functions
of or pertaining to government and any court or arbitrator having jurisdiction over such Person.




          “Income Collections” means, with respect to any Collection Period, all Collections
received in respect of any servicing fee or finance charge as stated in, and determined in
accordance with, each respective Dealer Agreement.




          “Incomplete Contract” means any Contract the original of which is not contained in the
related Contract File as of the date for the verification thereof set forth in Section
3.03(d) hereof.




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




          “Indenture Trustee Fee” means, as to each Distribution Date, $6,000, which, prior to
the Assumption Date, if any, shall include the Backup Servicing Fee.




          “Independent” means a Person, who (1) is in fact independent of the Seller and any of
its Affiliates, (2) does not have any direct financial interest or any material indirect financial
interest in the Seller or in any Affiliate of the Seller, and (3) is not connected with the Seller
or Affiliate as an officer, employee, promoter, underwriter, trustee, partner, director, or person
performing similar functions.




          “Independent Accountants” means a firm registered with the Public Company Accounting
Oversight Board that is Independent and is acceptable to the Class A Insurer.




          “Ineligible Contract” means each contract other than an Eligible Contract.




16









 








          “Ineligible Loan” means each Dealer Loan other than an Eligible Loan ;
provided, however, that a Dealer Loan relating to a Dealer that has become
insolvent after the transfer of such Dealer Loan to the Issuer shall continue to constitute an
“Eligible Loan” (assuming that such Dealer Loan would otherwise be an “Eligible Loan” on such date
of determination if the applicable Dealer had not become insolvent) for purposes of calculating the
“Collateral Amount” so long as (i) the characterization of such Dealer Loan as an “Eligible Loan”
would not cause the percentage of the aggregate Outstanding Balance of all Dealer Loans relating to
Dealers who are insolvent to exceed 2.5% of the Aggregate Outstanding Net Eligible Loan Balance and
(ii) no bankruptcy court has entered an order (whether or not final), which order has not been
vacated or overturned, stating that a person other than the Issuer (or the Servicer on the Issuer’s
behalf) is entitled to receive any collections on the Dealer Loans or the Contracts relating
thereto.




          “Initial Purchaser Agreement” means the Initial Purchaser Agreement dated October 22,
2007, by and among the Issuer, Credit Acceptance, the Seller and Wachovia Capital Markets, LLC, as
representative of the Initial Purchasers.




          “Initial Purchasers” means Wachovia Capital Markets, LLC, a Delaware limited liability
company and J.P. Morgan Securities Inc.




          “Initial Reserve Amount” means an amount equal to 1.0% of the Aggregate Outstanding
Net Eligible Loan Balance as of the initial Cut-off Date.




          “Initial Seller Property” has the meaning given to such term in Section
2.01(a) hereof.




          “Initial Swap Agreement” means the ISDA Master Agreement, dated as of the Closing
Date, between the Initial Swap Counterparty and the Issuer, the Schedule thereto, dated as of the
Closing Date, the Credit Support Annex, if applicable, and the Confirmations thereto, dated as of
the Closing Date and entered into pursuant to such ISDA Master Agreement, as the same may be
amended from time to time in accordance with the terms thereof.




          “Initial Swap Counterparty” means Wachovia Bank, National Association, as the swap
counterparty under the Initial Swap Agreement.




          “Insolvency Proceeds” means the proceeds, after all payments and reserves from the
sale of the assets of the Trust upon the dissolution of the Trust because of an insolvency of the
Seller.




          “Insurance Agreement” means the Insurance and Reimbursement Agreement dated as of the
Closing Date, among the Class A Insurer, the Servicer, the Seller and the Issuer, as amended,
supplemented or modified from time to time.




          “Intercreditor Agreement” means the Intercreditor Agreement, dated as of October 29,
2007, among Credit Acceptance, CAC Warehouse Funding Corporation II, Credit Acceptance Funding LLC
2006-2, Credit Acceptance Auto Dealer Loan Trust 2006-2, Credit Acceptance Funding LLC 2007-1,
Credit Acceptance Auto Dealer Loan Trust 2007-1, the Seller, the Issuer, Wachovia Capital Markets,
LLC, as deal agent and collateral agent under the securitization documents relating to CAC
Warehouse Funding Corporation II, Deutsche Bank




17









 







Trust Company Americas, as indenture trustee and
trust collateral agent under the securitization documents relating to Credit Acceptance Auto Dealer
Loan Trust 2006-2, Wells Fargo Bank, National Association, as indenture trustee and trust
collateral agent under the securitization documents relating to Credit Acceptance Auto Dealer Loan
Trust 2007-1, Wells Fargo Bank, National Association, as indenture trustee and trust collateral
agent under the Indenture, Comerica Bank, as agent under the Comerica Credit Agreement, and each
other Person who becomes a party thereto after the date hereof.




          “Issuer” or “Trust” means Credit Acceptance Auto Dealer Loan Trust 2007-2, a
Delaware statutory trust.




          “Late Fees” means if the Backup Servicer has become the successor Servicer, any late
fees collected with respect to any Contract in accordance with the Collection Guidelines.




          “Lien” means with respect to a Dealer Loan, Dealer Agreement or Contract or other
property any security interest, lien, charge, pledge, equity, or encumbrance of any kind (other
than tax liens, mechanics’ liens, liens of collection attorneys or agents collecting the property
subject to such tax or mechanics’ lien, and any liens which attach thereto by operation of law).




          “Limited Repurchase Option” means the one-time purchase option of Credit Acceptance in
accordance with Section 10.01(c) hereof.




          “Loan Loss Reserve” means the loan loss reserve, calculated in accordance with Credit
Acceptance’s periodic analysis of the performance of each Dealer, maintained against the Dealer
Loans of such Dealer, consistent with the Servicer’s practices as such practices may be modified in
order to comply with generally accepted accounting principles in effect from time to time.




          “Maximum Advance Rate” means 80.0%.




          “Minimum Collateral Amount” means on any Distribution Date during the Revolving
Period, an amount equal to the Class A Note Balance divided by the Maximum Advance Rate.




          “Moody’s” means Moody’s Investors Service, Inc., and its successor and assigns.




          “Multiemployer Plan” means a multiemployer plan (within the meaning of Section 400
1(a)(3) of ERISA) in respect of which an ERISA Affiliate makes contributions or has liability.




          “Net Loan Balance” means, with respect to any Dealer Loan, the excess of the related
Outstanding Balance over the related Loan Loss Reserve.




          “Net Swap Payment” means for the Swap Agreement, the net amounts owed by the Issuer to
the Swap Counterparty, if any, on any Swap Payment Date, excluding Swap Termination Payments.




18









 








          “Net Swap Receipts” means for the Swap Agreement, the net amounts owed by the Swap
Counterparty to the Issuer, if any, on any Swap Payment Date, including, without limitation, any
Swap Termination Payments.




          “Obligor” means, with respect to any Contract, the person or persons obligated to make
payments with respect to such Contract, including any guarantor thereof.




          “Officer’s Certificate” means a certificate signed by the chairman of the board, the
vice chairman, the president, the chief financial officer, any executive vice president, any vice
president, the treasurer, any assistant treasurer, the secretary, any assistant secretary or the
controller of the Seller or the Servicer, as appropriate.




          “Opinion of Counsel” means one or more written opinions of counsel who may, except as
otherwise expressly provided in this Agreement or as otherwise required by the Trust Collateral
Agent or the Class A Insurer, be employees of or counsel to the Issuer and who shall be reasonably
satisfactory to the Trust Collateral Agent and the Class A Insurer, and which shall comply with any
applicable requirements of Section 11.1 of the Indenture, and shall be in form and substance
reasonably satisfactory to the Trust Collateral Agent and the Class A Insurer.




          “Optional Purchase” means the optional purchase of the Trust Property as set forth in
Section 10.01(a) hereof.




          “Original Advance Rate” means, with respect to any Dealer, the ratio, expressed as a
percentage, where the numerator is equal to the sum of the Outstanding Balance of all Eligible
Loans of such Dealer on the dates such Eligible Loans were originated and the denominator is equal
to the sum of payments due under all Eligible Contracts related to such Dealer on their dates of
origination.




          “Original Certificate Interest” means the percentage interest in the Trust represented
by the Certificate(s) initially authenticated and delivered by the Owner Trustee and which is 100%.




          “Originator” means Credit Acceptance.




          “Outstanding Balance” means (i) with respect to any Contract on any date of
determination, all amounts owing under such Contract (whether considered principal or as finance
charges), on such date of determination which shall be deemed to have been created at the end of
the day on the date of processing of such Contract and which shall be greater than or equal to
zero; and (ii) with respect to any Dealer Loan on any date of determination, the aggregate amount
advanced under such Dealer Loan plus revenue accrued with respect to such Dealer Loan in accordance
with Credit Acceptance’s accounting policies set forth in its periodic reports filed with the
Securities and Exchange Commission and the payment of monies to a Dealer under the related Dealer
Agreement, less Collections on the related Contracts securing such Dealer Loans applied through
such date of determination to the reduction of the balance of such Dealer Loan and write-offs of
such Dealer Loan.




          “Overconcentration Loan Amount” means, with respect to any Dealer, the amount by which
the Net Loan Balance of such Dealer’s Eligible Loans, as of the Closing Date or any




19









 







Distribution Date during the Revolving Period on which the Issuer purchases one or more Dealer Loans, as the
case may be, exceeds the Dealer Concentration Limit.




          “Owner Trustee” means U.S. Bank Trust National Association, not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its successors in interest or any
successor Owner Trustee under the Trust Agreement.




          “Owner Trustee’s Fees” means (i) for the year commencing with the Closing Date,
$3,000, payable by the Issuer in advance to the Owner Trustee on the Closing Date and (ii)
thereafter, an amount equal to $250 on each Distribution Date, payable by the Issuer to the Owner
Trustee until the Class A Notes are paid in full, in each case, plus reasonable out of pocket
expenses not to exceed $50,000 annually incurred by the Owner Trustee in fulfilling its duties
under the Basic Documents, except for the reasonable and necessary expenses of the Owner Trustee
(including reasonable attorneys’ fees and costs) incurred by the Owner Trustee in connection with
any pending or threatened action, suit or proceeding, whether civil, criminal, administrative or
investigative, in which the Owner Trustee is identified as a subject or named as
a party and faces potential liability, censure or penalties, other than as the result of the
gross negligence or willful misconduct of the Owner Trustee.




          “Permitted Incomplete Contracts” means (a) with respect to the 120th day after the
Closing Date and the 120th day after each Distribution Date during the Revolving Period, 2.0% of
the aggregate number of Contract Files required to be reviewed by each such date in accordance with
Section 3.03(d)(i) hereof, and (b) with respect to the 180th day after the Closing Date and
the 180th day after each Distribution Date during the Revolving Period, 2.0% of the aggregate
number of Contract Files required to be reviewed by each such date in accordance with Section
3.03(d)(ii) hereof.




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




          “Physical Property” has the meaning assigned to such term in the definition of
“Delivery” above.




          “Pool Factor” means, as of the close of business on a Distribution Date, a seven-digit
decimal figure equal to the outstanding principal amount of the Class A Notes divided by the
initial Class A Note Balance, after giving effect to payments allocated to principal.




          “Preference Amount” shall have the meaning given such term in Section
5.06(c)(i) hereof.




          “Principal Collection Account” means the account designated as such, established and
maintained pursuant to Section 5.01(a)(i) hereof.




          “Principal Collections” means, with respect to any Collection Period, all Collections
which are not Income Collections or Dealer Collections.





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          “Principal Deficiency” means, on any Distribution Date other than the Stated Final
Maturity, the amount by which the Class A Note Balance (after taking into account all distributions
of principal to be made from Available Funds on such Distribution Date plus amounts on deposit in
the Reserve Account available for the payment of principal) exceeds the Outstanding Balance of all
Eligible Contracts, other than Defaulted Contracts, as of the last day of the related Collection
Period.




          “Proceeds” means, with respect to any portion of the Trust Property, all “proceeds”,
as such term is defined in Article 9 of the UCC, including whatever is receivable or received when
such portion of Trust Property is sold, liquidated, foreclosed, exchanged, or otherwise disposed
of, whether such disposition is voluntary or involuntary, and includes all rights to payment with
respect to any insurance relating thereto.




          “Program” has the meaning set forth in Section 4.11(a) hereof.




          “Purchase Amount” means:




          (i) with respect to an Ineligible Loan (or Dealer Loan with respect to which the payment of a
Purchase Amount is required or is to be made pursuant to Section 10.01(a)), an amount equal
to the product of: (A) the Net Loan Balance related to such Ineligible Loan (or Dealer Loan with
respect to which the payment of a Purchase Amount is required or is to be made pursuant to
Section 10.01(a)) as of the last day of the preceding Collection Period; and (B) the
Advance Rate in effect on the Distribution Date during such preceding Collection Period;




          (ii) with respect to any Ineligible Contract (other than any Incomplete Contract), the product
of: (A) the Outstanding Balance of such Ineligible Contract; and (B) the Contract Buy-Back Rate;




          (iii) with respect to a Contract for which payment is required to be made in accordance with
Section 3.02(b)(i)(B) hereof and with respect to each review period described in
Section 3.03(d)(ii) and (iii) hereof, the product of: (A) the Outstanding Balance
as of the last day of the preceding Collection Period of all Incomplete Contracts for any such
review period, divided by the aggregate number of Contracts required to be reviewed by the end of
such review period, (B) the difference between (I) the total number of Incomplete Contracts for
such review period, and (II) the number of Permitted Incomplete Contracts for such review period,
and (C) the Contract Buy-Back Rate; and




          (iv) with respect to a Contract for which payment is required to be made at the request of the
Class A Insurer in accordance with Section 3.02(b)(ii), the product of (A) the Outstanding
Balance of the Contracts with respect to which the Class A Insurer has required payment and (B) the
Contract Buy-Back Rate,




          in each case, payable in the manner set forth in Section 5.04 hereof.




          “Purchased Loan” means a Dealer Loan with respect to which payment is required to be
made by the Seller, the Servicer or Credit Acceptance in accordance with Section 3.02 or
Section 4.07 hereof or Section 6.1 of the Contribution Agreement, as applicable.




21









 





          “Rating Agencies” means, collectively Moody’s, S&P and any other nationally recognized
statistical rating organization requested by the Seller or an Affiliate thereof to rate any of the
Class A Notes.




          “Rating Agency Condition” means, with respect to any event or circumstance and each
Rating Agency, either (a) written confirmation to the Indenture Trustee and the Class A Insurer by
such Rating Agency that the occurrence of such event or circumstance will not itself cause such
Rating Agency to downgrade or withdraw its rating assigned to any of the Class A Notes, without
giving effect to the Class A Note Insurance Policy on the ratings assigned to any of the Class A
Notes or (b) that such Rating Agency shall have been given notice of such event at least ten days
prior to the occurrence of such event (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 will itself cause such Rating Agency to downgrade or withdraw its
rating assigned to any of the Class A Notes, without giving effect to the Class A Note Insurance
Policy on the ratings assigned to any of the Class A Notes.




          “Records” means the Dealer Agreements, Contracts, Contract Files and all other
documents, books, records and other information (including, without limitation, computer programs,
tapes, discs, punch cards, data processing software and related contracts, records and other media
for storage of information) maintained with respect to the Dealer Loans and the Contracts and the
related Obligors.




          “Recoveries” means all amounts, if any, received in respect of the Trust Property by
the Servicer, the Seller, the Issuer or the Originator with respect to Defaulted Contracts.




          “Reimbursement Obligations” means any overdue premium amounts payable pursuant to the
Insurance Agreement, and any payments made on the Class A Note Insurance Policy or Swap Policy
(excluding reimbursements for Swap Termination Payments made under the Swap Policy), and any other
amounts owing to the Class A Insurer under the Insurance Agreement, the Swap Policy or any other
Transaction Document, in each case, together with interest thereon at the Prime Rate (as defined in
the Insurance Agreement) plus 2.0%.




          “Reliening Expenses” means any expenses incurred by the Backup Servicer, if it has
become the successor Servicer, in accordance with Sections 3.03(h)(ii) and 4.05
hereof, in connection with the retitling or reliening of the Financed Vehicles.




          “Replacement Swap Agreement” means, with respect to any Swap Counterparty, any
replacement Swap Agreement entered into pursuant to the conditions set forth in the Swap Agreement.




          “Replacement Swap Counterparty” means, with respect to any Swap Counterparty, any
replacement Swap Counterparty approved in writing by the Class A Insurer under a Replacement Swap
Agreement that satisfies the conditions set forth in the Swap Agreement.




          “Repossession Expenses” means, for any Collection Period, any expenses payable
pursuant to the terms of this Agreement, incurred by the Backup Servicer, if it has become the
successor Servicer, in connection with the liquidation or repossession of any Financed Vehicle,




22









 




in an aggregate amount not to exceed the cash proceeds received by the Backup Servicer, if it
has become the successor Servicer from the disposition of such Financed Vehicles during the related
Collection Period.




          “Reserve Account” means the account established and maintained pursuant to Section
5.01(a)(iv) hereof.




          “Reserve Account Requirement” means, with respect to any Distribution Date, an amount
equal to the lesser of: (A) 2.0% of the original Class A Note Balance; and (B) the Class A Note
Balance on such Distribution Date, before giving effect to the payment of principal on such
Distribution Date.




          “Revolving Period” means the period beginning on the Closing Date and terminating the
day the Amortization Period begins.




          “S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc.




          “Securities” means the Class A Notes and the Certificates.




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




          “Seller” means Credit Acceptance Funding LLC 2007-2 and any permitted successor
thereto (in the same capacity).




          “Seller Property” means, collectively, the Initial Seller Property and the Subsequent
Seller Property.




          “Servicer” means Credit Acceptance, as the Servicer of the Dealer Loans and the
Contracts, and each successor to Credit Acceptance (in the same capacity) appointed pursuant to
Section 7.03 or 8.02 hereof.




          “Servicer Certificate” means a certificate substantially in the form of Exhibit
B hereto completed and executed by the Servicer by the chairman of the board, the vice
chairman, the president, any vice president, the treasurer, any assistant treasurer, the chief
financial officer, the secretary, any assistant secretary, the controller, or any assistant
controller of the Servicer pursuant to Section 4.09 hereof.




          “Servicer Default” is as defined in Section 8.01 hereof.




          “Servicer Expenses” means any expenses incurred by the Backup Servicer, if it has
become the successor Servicer hereunder, other than Repossession Expenses, Reliening Expenses or
Transition Expenses.




          “Servicer’s Data Date” has the meaning set forth in Section 4.09(b) hereof.




          “Servicer’s Data File” has the meaning set forth in Section 4.09(b) hereof.




23









 





          “Servicing Fee” means, for each Distribution Date, a fee payable to the Servicer for
services rendered during the related Collection Period, equal to: (i) so long as Credit Acceptance
is the Servicer, the product of (A) 6.00% and (B) the total Collections for the related Collection
Period, and (ii) if the Backup Servicer is the Servicer, the sum of: (1) the greatest of: (a) the
product of 10.0% and total Collections for the related Collection Period; (b) actual costs incurred
by the Backup Servicer as successor Servicer; and (c) the product of (x) $30.00 and (y) the
aggregate number of Contracts serviced by it during the related Collection Period, plus
(2) without duplication, Late Fees and Servicer Expenses; provided, however, with
respect to each Distribution Date on which the Backup Servicer is the Servicer, the Servicing Fee
shall be at least equal to $5,000.




          “State” means any state or commonwealth of the United States of America, or the
District of Columbia.




          “Stated Final Maturity” means, with respect to the Class A Notes, April 15, 2013.




          “Subsequent Seller Property” has the meaning given to such term in Section
2.02(a) hereof.




          “Subsequent Seller Property Purchase Price” means, as to the Subsequent Seller
Property purchased by the Trust on any Distribution Date during the Revolving Period, an amount
equal to the Aggregate Outstanding Net Eligible Loan Balance of the Dealer Loans transferred to the
Trust on such Distribution Date, in the form of cash and/or capital contribution.




          “Swap Agreement” means the Initial Swap Agreement and any Replacement Swap Agreement.




          “Swap Collateral Account” means a single, segregated trust account in the name of the
Indenture Trustee, which shall be designated as the “Swap Collateral Account” which shall be held
in trust for the benefit of the Noteholders and the Class A Insurer established pursuant to
Section 5.12 (e) of the Sale and Servicing Agreement.




          “Swap Counterparty” means the Initial Swap Counterparty and any Replacement Swap
Counterparty.




          “Swap Payment Date” means the date on which Net Swap Receipts or Net Swap Payments, as
applicable, are made pursuant to the Swap Agreement.




          “Swap Policy” means the financial guaranty insurance policy for the Swap Agreement
dated as of the Closing Date issued by the Class A Insurer for the benefit of the Initial Swap
Counterparty.




          “Swap Replacement Proceeds” means any amounts received from a Replacement Swap
Counterparty in consideration for entering into a Replacement Swap Agreement for a terminated Swap
Agreement.




24









 





          “Swap Termination Payment” means any payment due to the Swap Counterparty by the
Issuer or to the Issuer by the Swap Counterparty, including interest that may accrue thereon, under
the Swap Agreement due to a termination of the Swap Agreement due to an “Event of Default” or
“Termination Event” under the Swap Agreement.




          “Swap Termination Payment Account” means a single segregated trust account held in the
United States in the name of the Indenture Trustee which shall be held in trust for the benefit of
the Class A Noteholders and the Class A Insurer pursuant to Section 5.12(b) of the Sale and
Servicing Agreement.




          “Transaction Parties” means, collectively, the Originator, the Servicer, the Seller
and the Issuer.




          “Transition Expenses” means, if the Backup Servicer has become the successor Servicer,
the sum of: (i) reasonable costs and expenses incurred by the Backup Servicer in connection with
its assumption of the servicing obligations hereunder, related to travel, Obligor welcome letters,
freight and file shipping plus (ii) a boarding fee equal to the sum of: (A) the product of
$7.50 and the number of Contracts to be serviced with respect to the first 10,000 Contracts to be
serviced; and (B) the product of $6.00 and the number of Contracts in excess of 10,000 to be
serviced with respect to any additional Contracts to be serviced; provided,
however, that the boarding fee shall not be less than $50,000.




          “Treasury Regulations” shall mean regulations, including proposed or temporary
regulations, promulgated under the Code. References herein to specific provisions of proposed or
temporary regulations shall include analogous provisions of final Treasury Regulations or other
successor Treasury Regulations.




          “Trust Accounts” means the Collection Account, the Principal Collection Account, the
Class A Note Distribution Account, the Reserve Account, the Swap Collateral Account and the Swap
Termination Payment Account.




          “Trust Agreement” means 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 Property” means the assets conveyed to the Trust pursuant to Sections
2.01 and 2.02 hereof, and all rights of the Issuer in the Swap Agreement.




          “UCC” means the Uniform Commercial Code as in effect in the respective jurisdiction,
and with respect to the definition of “Delivery” hereunder, refers to the UCC as adopted by the
State of New York.




          “Weighted Average Original Advance Rate” means, with respect to each Distribution Date
during the Revolving Period, the ratio, expressed as a percentage, where the numerator is equal to
the aggregate for all Dealers of the product of: (i) the Original Advance Rate of each Dealer; and
(ii) the aggregate outstanding Net Loan Balance of all Eligible Loans for such Dealer and the
denominator is equal to the Aggregate Outstanding Net Eligible Loan Balance.




25









 





          SECTION 1.01. Usage of Terms.




          With respect to all terms in this Agreement, the singular includes the plural and the plural
the singular; words importing any gender include the other gender; references to “writing” include
printing, typing, lithography, and other means of reproducing words in a visible form; references
to agreements and other contractual instruments include all subsequent amendments thereto or
changes therein entered into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns; and the term
“including” means “including without limitation.”




          SECTION 1.02. Closing Date and Record Date.




          All references to the Record Date prior to the first Distribution Date in the life of the
Trust shall be to the Closing Date.




          SECTION 1.03. Section References.




          All section references shall be to Sections in this Agreement (unless otherwise provided).




          SECTION 1.04. Compliance Certificates.




          Upon any application or request by the Seller or the Servicer to the Trust Collateral Agent to
take any action under any provision herein, the Seller or the Servicer (as the case may be) shall
furnish to the Trust Collateral Agent, the Swap Counterparty and the Class A Insurer an Officer’s
Certificate stating that all conditions precedent, if any, provided for herein relating to the
proposed action have been complied with, except that in the case of any other such application or
request as to which the furnishing of such documents is specifically required by any provision of
this Agreement relating to such particular application or request, no additional certificate need
be furnished.




          Every certificate with respect to compliance with a condition or covenant provided herein
shall include a statement that each individual signing such certificate has read such covenant or
condition and the definitions herein relating thereto.




          SECTION 1.05. Directions.




          Unless otherwise specified herein, any directions required to be given hereunder by the Class
A Insurer shall, in the case of the occurrence and continuance of a Class A Insurer Default, be
made by the Majority Noteholders.




26









 





ARTICLE II




CONVEYANCE OF SELLER PROPERTY; FURTHER ENCUMBRANCE THEREOF




          SECTION 2.01. Sale of the Initial Seller Property to the Trust.




          (a) In consideration of the Trust’s delivery to, or upon the order of, the Seller on the
Closing Date of the net proceeds from the sale of the Class A Notes and the other amounts to be
distributed from time to time to the Seller in accordance with the terms of this Agreement, the
Seller does hereby convey, assign, sell and transfer without recourse, except as set forth herein,
to the Trust all of its right, title and interest in and to: (i) the Dealer Loans listed on
Schedule A hereto delivered to the Servicer, the Class A Insurer, the Backup Servicer and
the Trust Collateral Agent on the Closing Date; (ii) all rights under the Dealer Agreements related
thereto (other than the Excluded Dealer Agreement Rights), including Credit Acceptance’s right to
service the Dealer Loans and the related Contracts and receive the related servicing fee and
receive reimbursement of certain recovery and repossession expenses, in accordance with the terms
of the Dealer Agreements; (iii) Collections (other than Dealer Collections) after the applicable
Cut-off Date; (iv) a security interest in each Contract securing each Dealer Loan; (v) all records
and documents relating to the Dealer Loans and the Contracts; (vi) all security interests
purporting to secure payment of the Dealer Loans; (vii) all security interests purporting to secure
payment of each Contract (including a security interest in each Financed Vehicle); (viii) all
guarantees, insurance (including insurance insuring the priority or perfection of any Contract) or
other agreements or arrangements securing the Contracts; (ix) the Seller’s rights under the
Contribution Agreement; and (x) all Proceeds of the foregoing (the “Initial Seller
Property”).




          (b) Such sale shall be effective as of the Closing Date with respect to the Initial Seller
Property.




          (c) In consideration of the sale of the Initial Seller Property, the Trust shall (i) pay or
cause to be paid to the Seller on the Closing Date a purchase price equal to the Aggregate
Outstanding Net Eligible Loan Balance of the Dealer Loans transferred to the Trust on the Closing
Date, in the form of cash (to the extent of the net proceeds from the sale of the Class A Notes)
and capital contribution and (ii) deliver the Certificate to the Seller. The Seller directs that
the Initial Reserve Amount be deposited in the Reserve Account from such purchase price.




          (d) For the avoidance of doubt, the term “Initial Seller Property” with respect to any Dealer
Loan includes all rights arising after the Closing Date under such Dealer Loans which rights are
attributable to advances made under such Dealer Loans as the result of Contracts being added after
the Closing Date to the identifiable group of Contracts to which such Dealer Loan relates.




          SECTION 2.02. Revolving Period; Principal Collection Account.




          (a) On each Distribution Date during the Revolving Period, the Issuer shall receive Available
Funds after the payment of all amounts due and payable in Section 5.08(a)(i) through
(vi) and shall be required to use those amounts and any amounts on deposit in the




27









 







Principal Collection Account to purchase additional Dealer Loans and all collateral related
thereto from the Seller until the Collateral Amount equals the Minimum Collateral Amount. If on
any Distribution Date during the Revolving Period there are not sufficient Eligible Dealer Loans
for purchase by the Issuer to cause the Collateral Amount to equal the Minimum Collateral Amount,
an amount necessary to cause the Adjusted Collateral Amount to equal the Minimum Collateral Amount
will remain on deposit in the Principal Collection Account. Subject to the foregoing, and in
consideration of the payment of the Subsequent Seller Property Purchase Price, the Seller agrees to
convey, assign, sell and transfer without recourse, except as set forth in this Agreement, to the
Trust all of its right, title and interest in and to: (i) the Dealer Loans listed on the schedule
delivered to the Class A Insurer, the Servicer and the Trust Collateral Agent on each Distribution
Date during the Revolving Period; (ii) rights under the Dealer Agreements related thereto (other
than the Excluded Dealer Agreement Rights), including Credit Acceptance’s right to service the
Dealer Loans and the related Contracts and receive the related servicing fee and receive
reimbursement of certain recovery and repossession expenses, in accordance with the terms of the
Dealer Agreements; (iii) Collections (other than Dealer Collections) after the applicable Cut-off
Date; (iv) a security interest in each Contract securing each Dealer Loan; (v) all records and
documents relating to the Dealer Loans and the Contracts; (vi) all security interests purporting to
secure payment of the Dealer Loans; (vii) all security interests purporting to secure payment of
each Contract (including a security interest in each Financed Vehicle); (viii) all guarantees,
insurance (including insurance insuring the priority or perfection of any Contract) or other
agreements or arrangements securing the Contracts; (ix) the Seller’s rights under the Contribution
Agreement; and (x) all Proceeds of the foregoing (the “Subsequent Seller Property”).




          On each Distribution Date during the Revolving Period on which the Issuer purchases Subsequent
Seller Property, the Issuer shall deliver to the Servicer, the Backup Servicer, the Trust
Collateral Agent and the Class A Insurer a supplement to Schedule A hereto listing the
additional Dealer Loans purchased on such Distribution Date, and the Dealer Agreements and
Contracts related thereto.




          For the avoidance of doubt, the term “Subsequent Seller Property” with respect to any Dealer
Loan includes all rights arising after the end of the Revolving Period under such Dealer Loans
which rights are attributable to advances made under such Dealer Loans as the result of Contracts
being added after the last day of the last full Collection Period during the Revolving Period to
the identifiable group of Contracts to which such Dealer Loan relates.




          (b) The occurrence of any one of the following events shall constitute an “Automatic
Amortization Event”:





          (i) there is a draw on the Reserve Account;




          (ii) a Servicer Default occurs;




          (iii) an Indenture Event of Default occurs;



28









 






          (iv) on any Distribution Date, after giving effect to all purchases of Dealer Loans on
such date, the Adjusted Collateral Amount is less than the Minimum Collateral Amount, and
such deficiency continues for two (2) or more Business Days;




          (v) cumulative Collections through the end of the related Collection Period, expressed
as a percentage of the cumulative Forecasted Collections through the end of the related
Collection Period, is less than 90.0% for any three (3) consecutive Collection Periods;




          (vi) on any Distribution Date, after giving effect to the purchase of additional Dealer
Loans on such date, the amount on deposit in the Principal Collection Account is greater
than 5.0% of the Adjusted Collateral Amount, and such excess continues for two (2) or more
Business Days; or




          (vii) on any Distribution Date, the Weighted Average Original Advance Rate exceeds
50.0%.



          (c) The occurrence of any one of the following events shall constitute a “Discretionary
Amortization Event” only if after any applicable grace or cure period either the Class A Insurer,
or if a Class A Insurer Default has occurred and is continuing, the Indenture Trustee, at the
direction of the Majority Noteholders, upon written notice to the Issuer, the Servicer, the Backup
Servicer and the Trust Collateral Agent, declares that an Early Amortization Event has occurred:





          (i) the Issuer fails to make a payment or deposit when required under this Agreement or
within any applicable grace or cure period;




          (ii) the Issuer fails to observe or perform in any material respect any of its
covenants or agreements set forth in this Agreement and that failure continues unremedied
for 30 days after the earlier of (A) a Responsible Officer of the Owner Trustee obtaining
actual knowledge of such failure and (B) written notice of such failure to the Issuer by the
Class A Insurer, or if a Class A Insurer Default has occurred and is continuing, the
Indenture Trustee, at the direction of Majority Noteholders;




          (iii) any representation or warranty made by the Issuer in this Agreement or in any
certificate or document that the Issuer is required to deliver to the Indenture Trustee is
incorrect in any material respect for 30 days after the earlier of (A) a Responsible Officer
of the Owner Trustee obtaining actual knowledge of such breach or (B) written notice of that
breach to the Issuer by the Class A Insurer, or if a Class A Insurer Default has occurred
and is continuing, the Indenture Trustee, at the direction of the Majority Noteholders;




          (iv) the Indenture Trustee does not have a valid and perfected first priority security
interest in the Trust Property, or the Issuer or Credit Acceptance or an affiliate of Credit
Acceptance makes that assertion;




          (v) there is filed against Credit Acceptance, the Seller or the Issuer: (a) a notice of
federal tax lien from the IRS, (b) a notice of lien from the Pension Benefit



29









 







Guaranty Corporation under Section 412(n) of the tax code or Section 302(f) of ERISA
for a failure to make a required installment or other payment to a pension plan to which
either of those sections applies or (c) a notice of any other lien that, in the case of each
of (a), (b) and (c), could reasonably be expected to have a material adverse effect on the
business, operations or financial condition of the Issuer or the business, operations or
financial condition of Credit Acceptance and the Seller;




          (vi) one or more judgments or decrees are entered against the Seller or Credit
Acceptance involving in the aggregate liability, not paid or fully covered by insurance, of
$100,000 in the case of the Seller, and $5,000,000 in the case of Credit Acceptance, or more
and those judgments or decrees have not been vacated, discharged or stayed within 30 days
from their entry; or




          (vii) any of the Basic Documents ceases for any reason to be in full force and effect
other than in accordance with its terms.



          (d) If a Responsible Officer of the Indenture Trustee shall have actual knowledge, or the
Indenture Trustee shall receive written notice from the Class A Insurer, or, if a Class A Insurer
Default has occurred and is continuing, the Majority Noteholders, that an Early Amortization Event
has occurred, the Indenture Trustee shall promptly issue written notice of such Early Amortization
Event to the Servicer, the Class A Insurer, the Backup Servicer, the Rating Agencies, the Trust
Collateral Agent and each of the Class A Noteholders, which notice shall advise them of the nature
of the Early Amortization Event, to the extent actually known by the Indenture Trustee, and the
date of the occurrence thereof.




          (e) On the first Distribution Date during the Amortization Period, any amounts remaining on
deposit in the Principal Collection Account shall be deposited into the Collection Account and
treated as Available Funds.




          SECTION 2.03. Title to Trust Property.




          (a) Immediately upon the conveyance to the Trust by the Seller of any item of property
pursuant to Section 2.01 or 2.02, all right, title and interest of the Seller in
and to such item of property shall terminate, and all such right, title and interest shall vest in
the Trust, in accordance with the Trust Agreement and Sections 3802 and 3805 of the Business Trust
Statute (as defined in the Trust Agreement).




          (b) Immediately upon the vesting of the Trust Property in the Trust, the Trust shall have the
sole right to pledge or otherwise encumber, such Trust Property but only in accordance with the
terms of the Basic Documents. Pursuant to the Indenture, the Trust shall grant a security interest
in the Trust Property to the Indenture Trustee for the benefit of the Class A Insurer and the Class
A Noteholders to secure the repayment of the Class A Notes and amounts owed to the Class A Insurer.




          (c) It is the intention of the Seller that (i) the transfer and assignment contemplated by
this Agreement shall constitute a sale of the Seller Property from the Seller to the Trust and (ii)
the beneficial interest in and title to the Seller Property shall not be part of the




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Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller
under any bankruptcy law.




          (d) Notwithstanding the foregoing, in the event that the Seller Property is 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 Seller Property, 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 UCC;




          (ii) The conveyances provided for in Section 2.01 and Section 2.02
shall be deemed to be a grant by the Seller, and the Seller hereby grants, to the Trust 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 Seller Property, to
secure such indebtedness and the performance of the obligations of the Seller hereunder;




          (iii) The possession by the Trust, or the Servicer as the Trust’s agent, of the Dealer
Agreements, Dealer Loans and Contract Files and any other property which 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 UCC; 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
Trust for the purpose of perfecting such security interest under the UCC.



          (e) At such time as there are no Class A Notes outstanding and all sums due to (i) the
Indenture Trustee pursuant to Section 6.7 of the Indenture, (ii) the Trust Collateral Agent
pursuant to Section 9.05 hereof, (iii) the Backup Servicer hereunder and under the Backup
Servicing Agreement, (iv) the Class A Insurer in respect of the Reimbursement Obligations and (v)
the Swap Counterparty under the Swap Agreement, have been paid, the Trust Collateral Agent shall,
upon instructions from the Indenture Trustee pursuant to Section 8.2 of the Indenture, release any
remaining portion of the Trust Property from the lien of the Indenture for distribution in
accordance with the Trust Agreement.




ARTICLE III




THE DEALER LOANS AND THE CONTRACTS




          SECTION 3.01. Representations and Warranties of Seller with respect to the Seller
Property.




          The Seller makes the following representations and warranties as to the Dealer Agreements,
Dealer Loans and the Contracts on which each of the Trust Collateral Agent and the Backup Servicer
relies in connection with performance of its obligations hereunder, the Class A



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Insurer relies in issuing the Class A Note Insurance Policy and the Swap Counterparty relies in
entering into the Swap Agreement. Such representations and warranties speak as of the execution
and delivery of this Agreement on the Closing Date and each Distribution Date on which the Trust
purchases Seller Property, as the case may be, and only with respect to the Seller Property
conveyed to the Trust at the time given or made (unless otherwise specified) but shall survive the
sale, transfer, and assignment of the Seller Property to the Trust and the pledge thereof to the
Indenture Trustee pursuant to the Indenture:





          (i) Eligibility of Dealer Agreements. Each Dealer Agreement classified as an
“Eligible Dealer Agreement” (or included in any aggregation of balances of “Eligible Dealer
Agreements”) by the Seller or the Servicer in any document or report delivered hereunder
satisfied the requirements contained in the definition of Eligible Dealer Agreement on the
date so delivered.




          (ii) Eligibility of Dealer Loans. Each Dealer Loan classified as an “Eligible
Loan” (or included in any aggregation of balances of “Eligible Loans”) by the Seller or the
Servicer in any document or report delivered hereunder satisfied the requirements contained
in the definition of Eligible Loan on the date so delivered.




          (iii) Eligibility of Contracts. Each Contract classified as an “Eligible
Contract” (or included in any aggregation of balances of “Eligible Contracts”) by the Seller
or the Servicer in any document or report delivered hereunder satisfied the requirements
contained in the definition of Eligible Contract on the date so delivered.




          (iv) Accuracy of Information. All information with respect to the Dealer Loans
and other Seller Property provided to the Trust Collateral Agent or the Class A Insurer by
the Seller or the Servicer was true and correct in all material respects as of the date such
information was provided to the Trust Collateral Agent or the Class A Insurer, as
applicable.




          (v) No Liens. Each Dealer Loan and the other Seller Property has been pledged
to the Trust Collateral Agent free and clear of any Lien of any Person, and in compliance,
in all material respects, with all Applicable Laws.




          (vi) No Consents. With respect to each Dealer Loan and the other Seller
Property, all consents, licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority required to be obtained, effected or given by
the Seller, in connection with the pledge of such Dealer Agreement, Dealer Loan, Contract or
other Collateral to the Trust Collateral Agent have been duly obtained, effected or given
and are in full force and effect;




          (vii) Schedule of Dealer Loans, Dealer Agreements and Contracts. Schedule
A to this Agreement and each supplement or addendum thereto is and will be an accurate
and complete listing of all Dealer Loans, the related Dealer Agreements and Contracts in all
material respects on the date each such Dealer Loan and other Seller Property was
transferred to the Trust hereunder, and the information contained therein is and will be
true and correct in all material respects as of such date.



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          (viii) Adverse Selection. No selection procedure believed by the Seller to be
adverse to the interests of the Class A Noteholders or the Class A Insurer has been or will
be used in selecting the Dealer Agreements, Dealer Loans or Contracts.




          (ix) Contribution Agreement. The Contribution Agreement is the only agreement
pursuant to which the Seller purchases Dealer Loans from the Originator.




          (x) Security Interest. The Seller has granted a security interest (as defined
in the UCC) to the Trust Collateral Agent, as agent for the Class A Noteholders, in the
Seller Property, which is enforceable in accordance with Applicable Law upon the Closing
Date. Upon the filing of UCC-1 financing statements naming the Trust Collateral Agent as
secured party and the Seller as debtor, or upon the Trust Collateral Agent obtaining
possession or control, in the case of that portion of the Seller Property which constitutes
chattel paper or instruments, the Trust Collateral Agent, as agent for the secured parties
under the Indenture, shall have a first priority perfected security interest in the Seller
Property. All filings (including, without limitation, such UCC filings) as are necessary in
any jurisdiction to perfect the interest of the Trust Collateral Agent, as agent for the
Trust, in the Seller Property have been made.




          (xi) Representations and Warranties in Contribution Agreement. The
representations and warranties made by the Originator to the Seller in the Contribution
Agreement are hereby remade by the Seller on each date to which they speak in the
Contribution Agreement as if such representations and warranties were set forth herein. For
purposes of this Section 3.01(xi), such representations and warranties are
incorporated herein by reference as if made by the Seller to the Trust Collateral Agent, the
Swap Counterparty and the Class A Insurer under the terms hereof mutatis mutandis.




          (xii) Survival. The representations and warranties set forth in this
Section 3.01 shall survive the Seller’s transfer and assignment of the Seller
Property to the Trust and the termination of the rights and obligations of the Servicer.




          (xiii) Perfection Representations. The perfection representations, warranties
and covenants made by the Seller and set forth on Schedule C hereto shall be a part
of this Agreement for all purposes.




          (xiv) Final Score. With respect to the purchase by the Issuer of Dealer Loans
and related Seller Property on each Distribution Date during the Revolving Period, on each
such Distribution Date, immediately after giving effect thereto, the weighted average of the
Final Scores of all Contracts transferred on such Distribution Date is 665 or greater.



          SECTION 3.02. Payment Upon Breach.




          (a) The Seller, the Servicer, or the Trust Collateral Agent, as the case may be, shall inform
the other parties to this Agreement, the Swap Counterparty and the Class A Insurer promptly, in
writing, upon the discovery (which, in the case of the Trust Collateral Agent shall mean actual
knowledge of a Responsible Officer of the Trust Collateral Agent or receipt of written notice of
such breach or failure): (i) of any breach of the Seller’s representations and




33









 







warranties pursuant to Section 3.01 hereof without regard to any limitation set forth
therein concerning the knowledge of the Seller as to the facts stated therein; or (ii) with respect
to each date by which a review is required to be performed pursuant to Section 3.03(d)
hereof, that the aggregate number of Incomplete Contracts exceeds the number of Permitted
Incomplete Contracts for such date.




          (b) Unless any such breach of a representation or warranty described in clause (a)(i) of this
Section 3.02 shall have been cured by, or the number of Incomplete Contracts with respect
to any review period described in clause (a)(ii) of this Section 3.02 continues to exceed
the number of Permitted Incomplete Contracts as of last day of the first full Collection Period
following the discovery thereof: (i) the Seller shall have the obligation, and the Trust Collateral
Agent shall, at the expense of the Seller, enforce such obligation of the Seller, and if necessary,
the obligation of the Originator under the Contribution Agreement, to make a payment to the
Collection Account of the applicable Purchase Amount in respect of: (A) all Dealer Loans and
Contracts with respect to which there is a breach of any such representations and warranties, and
(B) the aggregate number of Incomplete Contracts which exceeds the number of Permitted Incomplete
Contracts, which, in the case of each of (A) and (B), are materially and adversely affected by such
event or which materially and adversely affects the interests of the Indenture Trustee, the Class A
Insurer or the Swap Counterparty as of such last day; and (ii) the Class A Insurer shall have the
right to demand the Seller, and if necessary, the Originator under the Contribution Agreement, and
upon such demand the Seller and, if applicable, the Originator, shall have the obligation, to make
a payment to the Collection Account of the applicable Purchase Amount in respect of any Permitted
Incomplete Contract which materially and adversely affects such Contract or which materially and
adversely affects the interest of the Indenture Trustee, the Class A Insurer or the Swap
Counterparty as of such last day.




          (c) The sole remedy of the Trust Collateral Agent, the Trust, the Class A Noteholders and the
Certificateholders with respect to a breach of the Seller’s representations and warranties pursuant
to Section 3.01 hereof which materially and adversely affects the interests of the
Indenture Trustee, the Class A Insurer or the Swap Counterparty shall be to require the Seller to
make payments in respect of the related Dealer Loans pursuant to this Section or to enforce the
obligation of Credit Acceptance to repurchase such Dealer Loans pursuant to the Contribution
Agreement, and to require the Seller to make payments in respect of the related Contracts pursuant
to this Section or to enforce the obligation of Credit Acceptance to make such payments pursuant to
the Contribution Agreement. The Trust Collateral Agent shall have no duty to conduct any
affirmative investigation as to the occurrence of any condition requiring the purchase of any
Dealer Loan or payment in respect of any Contract pursuant to this Section. Any expenses incurred
by the Trust Collateral Agent in enforcing the obligations of the Seller or Credit Acceptance shall
be paid pursuant to Section 5.08(a) hereof.





          (d) (i) Notwithstanding anything herein to the contrary, (A) during the Revolving
Period such payments of Purchase Amounts pursuant to Section 3.02(b) of this
Agreement shall not be required if the Adjusted Collateral Amount is equal to or greater
than the Minimum Collateral Amount, and (B) during the Amortization Period, such payments of
Purchase Amounts pursuant to Section 3.02(b) of this Agreement shall not be
required: (x) with respect to any Dealer Loan, so long as the aggregate Net Loan Balance of
all Dealer Loans which would be Ineligible Loans as a result of being subject



34









 







to the foregoing payment obligations during the Amortization Period is less than the
sum of: (1) the product of (i) the aggregate Net Loan Balance of all Eligible Loans
transferred to the Issuer during the Amortization Period and (ii) the then effective Advance
Rate; and (2) all Purchase Amounts which have been previously paid during the Amortization
Period in respect of Ineligible Loans (such sum, the “Amortization Period Additional
Loan Collateral Amount”); and (y) with respect to any Contract, so long as the aggregate
Outstanding Balance of all Contracts which would be Ineligible Contracts as a result of
being subject to the foregoing payment obligations during the Amortization Period is less
than the sum of: (1) the product of (i) the aggregate Outstanding Balance of all Eligible
Contracts an interest in which is transferred to the Issuer during the Amortization Period
and (ii) a fraction, the numerator of which is equal to the Class A Note Balance and the
denominator of which is equal to the Outstanding Balance of all Eligible Contracts; and (2)
all Purchase Amounts which have been previously paid during the Amortization Period in
respect of Ineligible Contracts (such sum, the “Amortization Period Additional Contract
Collateral Amount”).




          (ii) If such payments are required in accordance with clause (d)(i) of this Section
3.02, they shall be made: (A) with respect to Ineligible Loans, to the extent and in the
amount by which the aggregate Net Loan Balance of all Ineligible Loans which are subject to
the foregoing payment obligations during the Amortization Period exceeds the Amortization
Period Additional Loan Collateral Amount; and (B) with respect to Ineligible Contracts, to
the extent and in the amount by which the aggregate Outstanding Balance of all Ineligible
Contracts which are subject to the foregoing payment obligations during the Amortization
Period exceeds the Amortization Period Additional Contract Collateral Amount (the foregoing
payment obligations, the “Amortization Period Payment Obligations”).




          (iii) Notwithstanding the foregoing, the Seller’s obligation to make payments under
Section 3.02 hereof may be waived with the prior written consent of the Class A
Insurer or the Indenture Trustee, at the direction of the Majority Noteholders, if a Class A
Insurer Default has occurred and is continuing. Any such waiver by the Class A Insurer or
the Indenture Trustee, at the direction of the Majority Noteholders, as applicable, shall
not require any further waiver, action or consent by any other party. The party providing
such waiver shall give notice thereof to the Owner Trustee.



          (e) Any Contract which is subject to a payment in accordance with Section
3.02(b), Section 3.03(d) or Section 4.07 of this Agreement shall be an
Ineligible Contract. Any Dealer Loan which is subject to a payment in accordance with Section
3.02(b), Section 3.03(d) or Section 4.07 of this Agreement shall be an
Ineligible Loan.




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          SECTION 3.03. Custody of Dealer Agreements and Contract Files.




          (a) The Trust hereby revocably appoints Credit Acceptance as custodian of the Dealer
Agreements, the Contract Files and the Certificates of Title related to the Financed Vehicles.
Credit Acceptance hereby accepts such appointment and agrees to hold, or appoint an agent
acceptable to the Class A Insurer to hold, each Dealer Agreement, Contract File and, in states
where it is required by applicable law, the original Certificate of Title related to each Financed
Vehicle under this Agreement as custodian for the Trust and the Trust Collateral Agent.





          (b) (i) On or prior to the Closing Date and each Distribution Date during the Revolving
Period, the Servicer shall provide an Acknowledgment substantially in the form of
Exhibit E hereto dated as of the Closing Date or such Distribution Date, as
applicable, to the Owner Trustee, the Trust Collateral Agent and the Class A Insurer
confirming that the Servicer has received and is in possession of the original of each
Dealer Agreement listed on Schedule A hereto (or such amendment or supplement to
Schedule A relating to each Distribution Date, as applicable).




          (ii) If, on the 120th day after each Distribution Date during the Revolving Period, the
Servicer has not verified the presence of the original Contract related to the Contracts
listed on Schedule A hereto (or such amendment or supplement to Schedule A
relating to each Distribution Date during the Revolving Period, as applicable) with respect
to at least 98.0% of the number of Contract Files required to be reviewed by each such 120th
day in accordance with Section 3.03(d) hereof, the Servicer shall provide notice to
the Owner Trustee, the Trust Collateral Agent and the Class A Insurer dated as of such date
indicating the number of Incomplete Contracts as of such date.




          (iii) On or prior to the 120th day after the Closing Date, the 180th day
after the Closing Date and the 180th day after each Distribution Date during the Revolving
Period, the Servicer shall provide an Acknowledgment substantially in the form of
Exhibit E hereto, dated as of such date, to the Owner Trustee, the Trust Collateral
Agent and the Class A Insurer confirming that the Servicer has verified the presence of the
original contract related to at least 98.0% of the Contract Files required to be reviewed by
such date in accordance with Section 3.03(d) hereof.



          (c) To assure uniform quality in servicing the Dealer Loans and Contracts and to reduce
administrative costs, the Issuer hereby revocably appoints the Servicer and the Servicer hereby
accepts such appointment, to act as the agent of the Issuer and the Trust Collateral Agent as
custodian of the original Certificates of Title for each Financed Vehicle evidencing the security
interest of the Trust Collateral Agent in the Financed Vehicle which are hereby constructively
delivered to the Trust Collateral Agent as of the Closing Date. The Servicer agrees to maintain
the Dealer Agreements, Contract Files, Certificates of Title and Records which are delivered to it
at the offices of the Servicer as shall from time to time be identified to the Trust Collateral
Agent, the Backup Servicer and the Class A Insurer by written notice. The Servicer shall maintain,
or shall appoint an agent acceptable to the Class A Insurer to maintain, such Certificates of Title
at its principal place of business located at Silver Triangle Building, 25505 West Twelve Mile
Road, Southfield, Michigan 48034-8339 or as otherwise notified in



36









 






writing to the Trust Collateral Agent, the Backup Servicer and the Class A Insurer. The Trust
Collateral Agent shall not be responsible for the acts or omissions of the Servicer acting as
custodian.




          (d) The Servicer shall within: (i) 120 days after the Closing Date and 120 days after each
Distribution Date during the Revolving Period, review at least 75.0% of the Contract Files related
to the Dealer Loans transferred to the Trust on the Closing Date or such Distribution Date, as
applicable, to verify the presence of the original of the Contract; and (ii) 180 days after the
Closing Date and 180 days after each Distribution Date during the Revolving Period, review the
remainder of the Contract Files related to the Dealer Loans transferred to the Trust on the Closing
Date or such Distribution Date, as applicable, to verify the presence of the original of the
Contract therein; provided, however, that in the case of each of (i) and (ii)
above, the Certificate of Title with respect to each Contract need not be verified. If the number
of Incomplete Contracts (or the number of originals of Contracts that have not otherwise been
delivered to the Servicer) exceeds the number of Permitted Incomplete Contracts as of any such
120th or 180th day, as applicable, the Seller shall make the payment required by Section
3.02(b) only with respect to the excess number of Incomplete Contracts, in an amount equal to
the related Purchase Amount, in accordance with the provisions of Section 3.02(b) hereof.
Notwithstanding the foregoing sentence, but subject to the other limitations set forth herein, the
Class A Insurer may, in its sole discretion, require the Seller to remit the applicable Purchase
Amount with respect to any Permitted Incomplete Contracts.




          (e) Subject to the foregoing, Credit Acceptance may temporarily move individual Dealer
Agreements, Contract Files or Records, or any portion thereof without notice as necessary to allow
the Servicer to conduct collection and other servicing activities in accordance with its customary
practices and procedures.




          (f) The Servicer shall have and perform the following powers and duties:





          (i) hold the Dealer Agreements, Contract Files and Records in trust for the benefit of
the Trust Collateral Agent and the Trust and maintain a current inventory thereof; and




          (ii) carry out such policies and procedures in accordance with its customary actions
with respect to the handling and custody of the Dealer Agreements, Contract Files and
Records so that the integrity and physical possession of the Dealer Agreements, Contract
Files and Records will be maintained.


In performing its duties as custodian, the Servicer agrees to act with reasonable care, using that
degree of skill and care that it exercises with respect to similar Dealer Agreements, Contracts or
Dealer Loans owned or held by it.




          (g) The Servicer shall have the obligation (i) to physically segregate the Contract Files from
the other custodial files it is holding for its own account or on behalf of any other Person and
(ii) to physically mark the Contract folders to demonstrate the transfer of Contract Files and the
Trust Collateral Agent’s security interest hereunder.




37









 









          (h) (i) If a Servicer Default occurs, the Trust Collateral Agent shall have the rights
set forth in Section 8.01 hereof, including, at the request of the Class A Insurer,
the right to terminate Credit Acceptance as the custodian hereunder and the Trust Collateral
Agent shall have the right to appoint a successor custodian hereunder who shall assume all
the rights and obligations of the “custodian” hereunder. On the effective date of the
termination of Credit Acceptance as Servicer, Credit Acceptance shall be released of all of
its obligations as custodian arising on or after such date. The Dealer Agreements, Contract
Files and Records shall be delivered by Credit Acceptance to the successor custodian, on or
before the date which is two (2) Business Days prior to such date.




          (ii) During the continuance of a Servicer Default, the Servicer and the Seller shall,
at the request of the Class A Insurer or the Trust Collateral Agent, if a Class A Insurer
Default has occurred and is continuing, each in its sole discretion, take all steps
necessary to cause the Certificate of Title of each Financed Vehicle to be revised to name
the Trust Collateral Agent on behalf of the Trust as lienholder. Any costs associated with
such revision of the Certificate of Title shall be paid by the Servicer and, and to the
extent such costs are not paid by the Servicer such unpaid costs shall be recovered as
described in Section 5.08 hereof. In no event shall the Trust Collateral Agent or
the successor Servicer be required to expend funds in connection with this Section
3.03(h). If the Backup Servicer has become the successor Servicer, it shall be
reimbursed for all Reliening Expenses (in accordance with the provisions of Section
5.08(a) hereof) for any retitling effort associated with the Financed Vehicles set forth
in this Agreement.




          (iii) The Servicer shall provide to the Trust Collateral Agent access to the Dealer
Agreements, Contract Files and Records and all other documentation regarding the Dealer
Agreements, Contracts and the Dealer Loans and the related Financed Vehicles in such cases
where the Trust Collateral Agent is required in connection with the enforcement of the
rights or interests of the Trust, or by applicable statutes or regulations to review such
documentation, such access being afforded without charge.



ARTICLE IV




ADMINISTRATION AND SERVICING OF DEALER LOANS AND CONTRACTS




          SECTION 4.01. Appointment; Duties of Servicer.




          (a) Servicing; Termination. The Seller, the Trust, the Trust Collateral Agent (at the
direction of the Class A Insurer) and the Class A Insurer hereby appoint Credit Acceptance as
Servicer hereunder and Credit Acceptance hereby accepts such appointment and agrees to manage,
collect and administer each of the Dealer Loans as Servicer. Credit Acceptance shall be retained
as Servicer for an initial twelve (12) month term commencing on the Closing Date. Upon the
expiration of such twelve (12) month term, the Class A Insurer, upon written notice to the
Indenture Trustee, the Trust Collateral Agent, the Servicer, the Swap Counterparty, the Rating
Agencies and the Backup Servicer, may, at its option, renew the term of Credit Acceptance as
Servicer for a subsequent term of six (6) months; provided, however, if a Servicer
Default occurs and the Servicer is not terminated pursuant to Section 8.01 hereof, then




38









 







the Class A Insurer may renew the term of Credit Acceptance as the Servicer for a subsequent
term of three (3) months. Upon the expiration of any three (3) month term, the Class A Insurer,
upon written notice to the Indenture Trustee, the Trust Collateral Agent, the Servicer, the Swap
Counterparty, the Rating Agencies and the Backup Servicer, may at its option, renew the term of
Credit Acceptance as Servicer for an additional three (3) month term. If the Class A Insurer does
not renew any such servicing term in writing, the servicing term of Credit Acceptance shall
automatically expire. If a Class A Insurer Default has occurred and is continuing, and the twelve
(12) month, six (6) month or three (3) month servicing term, as the case may be, has not previously
expired and thereafter expires, Credit Acceptance shall continue as Servicer unless and until it is
terminated after the occurrence of a Servicer Default. Upon the occurrence of a Servicer Default,
the Class A Insurer shall have the rights set forth in Section 8.01 hereof.
Notwithstanding anything herein to the contrary, the provisions of this Section 4.01(a)
shall not apply to the Backup Servicer after it has become the successor Servicer.




          (b) Standard of Care; Types of Duties. The Servicer shall manage, service,
administer, and make collections on the Dealer Loans and the Contracts with reasonable care, using
that degree of skill and attention that the servicers in the retail automobile financing industry
exercise with respect to all comparable receivables that they service for themselves or others and
the same degree of care that the Servicer exercises with respect to any comparable dealer loan or
automobile contracts that it holds for its own account. The Servicer’s duties shall include
collection and posting of all payments, responding to inquiries of Dealers and of Obligors on such
Contracts, investigating delinquencies, sending payment statements or coupons to Dealers and
Obligors, reporting tax information to Dealers and Obligors, accounting for collections, and
furnishing monthly and annual statements to the Trust Collateral Agent with respect to
distributions. The Servicer shall follow prudent standards, policies, and procedures in performing
its duties as Servicer. Without limiting the generality of the foregoing, the Servicer is hereby
granted a limited power of attorney by the Trust Collateral Agent to execute and deliver, on behalf
of itself, the Trust, the Class A Noteholders, or the Trust Collateral Agent 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 Dealer Loans and Contracts or to the
Financed Vehicles securing such Contracts in accordance with the terms of this Agreement. If the
Servicer shall commence a legal proceeding to enforce a Dealer Loan or a Contract, the Trust
Collateral Agent (in the case of a Dealer Loan other than a Purchased Loan) shall thereupon be
deemed to have automatically assigned, solely for the purpose of collection, such Dealer Loan or
Contract to the Servicer. The Servicer shall not make the Seller, the Trust, the Trust Collateral
Agent, the Indenture Trustee or the Class A Insurer a party to any such legal proceeding without
such party’s written consent. If in any enforcement suit or legal proceeding it shall be held that
the Servicer may not enforce a Dealer Loan or a Contract on the ground that it shall not be a real
party in interest or a holder entitled to enforce the Dealer Loan or Contract, the Trust Collateral
Agent shall be deemed to have automatically assigned such Dealer Loan or Contract to the Servicer,
solely for the purpose of collection. The Trust Collateral Agent shall furnish the Servicer with
any powers of attorney and other documents prepared by the Servicer reasonably necessary or
appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder.
The Servicer, at its expense, shall obtain on behalf of the Trust all licenses, if any, required by
the laws of any jurisdiction to be held by the Trust in connection with ownership of the Dealer
Loans and its security interest in the Contracts which secure the Dealer Loans, and shall make all
filings and pay all fees as may be required in connection



39









 






therewith during the term hereof. The Seller shall assist the Backup Servicer, as successor
Servicer, in connection with any reports related to distributions.




          (c) Duties with Respect to the Basic Documents. Credit Acceptance shall perform all
its duties and, unless otherwise specified, the administrative duties of the Issuer under the Basic
Documents. In addition, Credit Acceptance shall consult with the Indenture Trustee and, so long as
a Class A Insurer Default is not continuing, the Class A Insurer, as Credit Acceptance deems
appropriate regarding the duties of the Issuer under the Basic Documents. Credit Acceptance shall
monitor the performance of the Trust and shall advise the Owner Trustee and Indenture Trustee, so
long as a Class A Insurer Default is not continuing, and the Class A Insurer, when action is
necessary to comply with the Trust’s duties under the Basic Documents. The Seller (to the extent
the Servicer does not) shall execute and deliver all Issuer Orders and Officer’s Certificates
required by the Trust under the Indenture. Notwithstanding anything herein to the contrary, the
Backup Servicer, as successor Servicer, shall not have an obligation to perform such duties set
forth in this Section 4.01(c).




          (d) Duties with Respect to the Trust.





          (i) In addition to the duties of the Servicer set forth in this Agreement or any of the
Basic Documents, the Servicer shall perform such calculations, shall execute and deliver all
Issuer Orders and Officer’s Certificates required of the Issuer under the Basic Documents,
and shall prepare for execution by the Trust or the Owner Trustee or shall cause the
preparation by other appropriate Persons of all such documents, reports, filings,
instruments, certificates, opinions, financial statements and accounting books and records
as it shall be the duty of the Trust or the Owner Trustee to prepare, file or deliver
pursuant to this Agreement or any of the Basic Documents or under state and federal tax and
securities laws and shall take all appropriate action that it is the duty of the Trust to
take pursuant to this Agreement or any of the Basic Documents, including, without
limitation, pursuant to Section 5.1 (with respect to the preparation and filing of
tax returns) and Section 11.11 of the Trust Agreement.




          (ii) In carrying out the foregoing duties or any of its other obligations under this
Agreement, the Servicer may enter into transactions with or otherwise deal with any of its
Affiliates; provided, however, that such delegation shall not relieve the
Servicer of its obligations that the terms of any such transaction or dealings shall be in
accordance with any directions received from the Trust and shall be, in the Servicer’s
opinion, no less favorable to the Trust in any material respect.


Notwithstanding anything herein to the contrary, in the event that the Backup Servicer is acting as
successor Servicer, the Seller shall assist the Backup Servicer in performing the duties set forth
in this Section 4.01(d).




          (e) Records. The Servicer shall maintain appropriate books of account and records
relating to its duties performed under Section 4.01(c) and (d) hereof, which books
of account and records shall be accessible for inspection and copy by the Owner Trustee, the
Indenture Trustee, the Class A Insurer, the Backup Servicer or the Trust Collateral Agent at any
time during normal business hours at its offices and in a reasonable manner.




40









 








          (f) Additional Information to be Furnished to the Trust. The Servicer shall furnish
to the Owner Trustee, the Indenture Trustee, the Trust Collateral Agent, the Backup Servicer, the
Swap Counterparty and the Class A Insurer from time to time such additional information regarding
the Trust or the Basic Documents as the Owner Trustee, the Indenture Trustee, the Trust Collateral
Agent, the Backup Servicer, the Swap Counterparty or the Class A Insurer shall reasonably request.




          (g) Servicer as Independent Contractor. All services, duties and responsibilities of
the Servicer under this Agreement shall be performed and carried out by the Servicer as an
independent contractor for the benefit of the Trust and the Class A Insurer, and none of the
provisions of this Agreement shall be deemed to make, authorize or appoint the Servicer as agent or
representative of the Seller, the Trust Collateral Agent, the Trust, the Class A Insurer or any
Class A Noteholder except as provided in Section 3.03 hereof.




          SECTION 4.02. Collection and Application of Payments on the Dealer Loans and
Contracts.




          The Servicer shall take or cause to be taken all such action as may be necessary or advisable
to collect all amounts due under the Dealer Loans and Contracts from time to time, all in
accordance with Applicable Laws, with reasonable care and diligence, and in accordance with the
Collection Guidelines (including, without limitation, selling or assigning Defaulted Contracts to
third parties for collection), it being understood that there shall be no recourse to the Servicer
with regard to the Dealer Loans and Contracts except as otherwise provided herein and in the other
Basic Documents. In performing its duties as Servicer, the Servicer shall use the same degree of
care and attention it employs with respect to similar contracts and loans which it services for
itself or others. Each of the Issuer, the Trust Collateral Agent and the Class A Insurer hereby
appoints as its agent the Servicer, from time to time designated pursuant to the terms hereof, to
enforce its respective rights and interests in and under the Trust Property. The Servicer shall
hold in trust for the Issuer, the Trust Collateral Agent and the Class A Insurer all Records and
all Collections (other than Dealer Collections) and any other amounts it receives in respect of the
Trust Property. In the event that a successor Servicer is appointed, the outgoing Servicer shall
deliver to the successor Servicer and the successor Servicer shall hold in trust for the Issuer,
the Trust Collateral Agent and the Class A Insurer all records which evidence or relate to all or
any part of the Trust Property.




          SECTION 4.03. Realization Upon Contracts.




          On behalf of the Trust, the Indenture Trustee and the Class A Insurer, the Servicer shall use
reasonable efforts, in accordance with the Collection Guidelines and prudent servicing procedures,
to repossess or otherwise convert the ownership of the Financed Vehicle securing any Contract as to
which the Servicer shall have determined eventual payment in full is unlikely, as soon as
practicable after the Servicer makes such determination. The Servicer may also sell or otherwise
assign Defaulted Contracts for collection in an effort to realize upon such Defaulted Contracts.
The Servicer shall follow such prudent practices and procedures as would be deemed prudent in the
servicing of comparable receivables, consistent with the standard of care required by Section
4.01(b) which may include reasonable efforts to sell the Financed Vehicle at public or




41









 




private sale. If the Backup Servicer has become the Servicer, it shall be entitled to receive
Repossession Expenses in accordance with Section 5.02 hereof.




          SECTION 4.04. Physical Damage Insurance.




          The Servicer, in accordance with prudent servicing procedures, shall require that each Obligor
on a Contract shall have obtained physical damage insurance covering the Financed Vehicle as of the
date of execution of the Contract, as may be required in accordance with the Credit Guidelines.




          SECTION 4.05. Maintenance of Security Interests in Financed Vehicles.




          The Servicer shall take such steps as are necessary to maintain perfection of the security
interest created by each Contract in the related Financed Vehicle, including, without limitation,
taking such steps as are reasonably necessary to maintain the Originator as noted lienholder on
each Certificate of Title relating to a Financed Vehicle in all states where such notation is a
means of perfection under applicable law. The Servicer shall take such steps as are necessary to
reperfect such security interest on behalf of the Indenture Trustee in the event of the relocation
of a Financed Vehicle or for any other reason. In the event that the assignment of a Contract to
the Indenture Trustee is insufficient without a notation on related Financed Vehicle’s Certificate
of Title, or without fulfilling any additional administrative requirements under the laws of the
state in which the Financed Vehicle is located, to perfect a security interest in the related
Financed Vehicle in favor of the Indenture Trustee, the parties hereto agree that the Originator’s
designation as the secured party on the Certificate of Title is, with respect to each secured
party, as applicable, in its capacity as agent of the Indenture Trustee. The Backup Servicer as
successor Servicer shall be entitled to reimbursement for all expenses incurred in connection with
its duties under this Section 4.05.




          SECTION 4.06. Covenants of Servicer.




          (a) Affirmative Covenants. From the date hereof until the Stated Final Maturity or,
if earlier, the date the Class A Notes are paid in full:





          (i) Compliance with Law. The Servicer will comply in all material respects
with all Applicable Laws, including those with respect to the Dealer Loans, the Dealer
Agreements the Contracts or any part thereof.




          (ii) Preservation of Existence. The Servicer will preserve and maintain its
existence, rights, franchises and privileges in the jurisdiction of its formation, and
qualify and remain qualified in good standing as a foreign corporation in each jurisdiction
where the failure to preserve and maintain such existence, rights, franchises, privileges
and qualification has had, or could reasonably be expected to have, a material adverse
effect on the Dealer Loans, the Dealer Agreements, the Contracts or the Class A Notes.




          (iii) Obligations and Compliance with Dealer Loans and Dealer Agreements. The
Servicer will duly fulfill and comply with all obligations on the part of the Seller to be
fulfilled or complied with under or in connection with each Dealer Loan and each Dealer
Agreement and will do nothing to impair the rights of the Trust



42









 







Collateral Agent, the Indenture Trustee, the Swap Counterparty or the Class A
Noteholders in, to and under the Trust Property. The Backup Servicer as successor Servicer
shall not have an obligation to perform the obligations of the Servicer under this
Section 4.06(a)(iii).




          (iv) Keeping of Records and Books of Account. The Servicer will maintain and
implement administrative and operating procedures (including without limitation, an ability
to recreate records consistent with standards or practices in the industry evidencing the
Dealer Loans and the Contracts in the event of the destruction of the originals thereof),
and keep and maintain all documents, books, records and other information reasonably
necessary or advisable for the collection of all Dealer Loans.




          (v) Preservation of Security Interest. The Servicer will file such financing
and continuation statements and any other documents that may be required by any law or
regulation of any Governmental Authority to preserve and protect fully the security interest
of the Indenture Trustee for the benefit of the Class A Noteholders and the Class A Insurer
in, to and under the Trust Property. In its capacity as custodian, it will maintain
possession of the Dealer Agreements and the Contract Files and Records, as custodian for the
Trust and the Trust Collateral Agent, as set forth in Section 3.3(a).




          (vi) Collection Guidelines. The Servicer will (A) comply in all material
respects with the Collection Guidelines in regard to each Dealer Loan and Contract, and (B)
furnish to the Trust Collateral Agent and the Class A Insurer quarterly, prompt notice of
any material change in the Collection Guidelines and will deliver a copy of such changes to
the Trust Collateral Agent and the Class A Insurer, quarterly.




          (vii) Books and Records. The Servicer shall keep, or cause to be kept, in
reasonable detail, books and records of account of: (A) its assets and business, and shall
clearly reflect therein the ownership of the Trust Property by the Issuer; and (B) any
statutory trust records of the Trust required in accordance with Section 4.1(c)(iv) of the
Trust Agreement.




          (viii) Access to Records; Discussions with Officers. The Servicer shall, at
the Servicer’s expense upon the prior reasonable request of the Class A Insurer, permit the
Class A Insurer, or its authorized agent, access during normal business hours at its offices
to (i) the Servicer’s books of account, records, reports and other papers with respect to
the Trust Property and the Basic Documents and (ii) any of the properties of the Servicer,
in order to examine all of such books of account, records, reports and other papers, to make
copies and extracts therefrom and to discuss the Servicer’s affairs, finances and accounts
with its officers, employees, and subject to the agreement of such accountants, independent
public accountants. Such inspections and discussions shall be conducted at such reasonable
times, as often as may be reasonably requested and in a commercially reasonable manner.




          (ix) ERISA. So long as the Seller or the Issuer are ERISA Affiliates of the
Servicer, the Servicer shall comply in all material respects with the provisions of ERISA,
the Code, and all other applicable laws, except where such non-compliance could



43









 







not reasonably be expected to result in a material adverse effect with respect to the
Servicer and its ERISA Affiliates or with respect to the Trust Property. Without limiting
the foregoing, the Servicer shall not, and shall not permit its ERISA Affiliates to: (i)
engage in any non-exempt prohibited transaction (within the meaning of the Internal Revenue
Code Section 4975 or ERISA Section 406) with respect to any Benefit Plan for which the
Servicer and its ERISA Affiliates would have a material liability; (ii) suffer to exist any
accumulated funding deficiency as defined in Section 301(a) of ERISA and Section 412(a) of
the Internal Revenue Code with respect to any Benefit Plan in an amount exceeding $500,000
or (iii) terminate any Benefit Plan or Multiemployer Plan if such termination would result
in any material liability for which the Seller or Issuer would be liable as ERISA
Affiliates.




          (x) Financial Reporting. The Servicer shall furnish or cause to be furnished
to the Class A Insurer, the Swap Counterparty and the Rating Agencies the following:




          (A) Annual Financial Statements. As soon as available, and in any event within
one hundred and twenty (120) days after the close of each fiscal year of the Servicer, the
audited consolidated balance sheet of the Servicer as of the end of such fiscal year, and
the audited consolidated statements of income, shareholders’ equity and cash flows of the
Servicer for such fiscal year in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the preceding fiscal year, in
each case prepared in accordance with GAAP, consistently applied, and accompanied by the
certificate of independent accountants and certified by an authorized officer of the
Servicer as being complete and correct in all material respects, in each case presenting the
financial condition and results of operations of the Servicer as of the dates and for the
periods indicated, in accordance with GAAP consistently applied.




          (B) Quarterly Financial Statements. As soon as available, and in any event
within 60 days after the close of the first three quarters of each fiscal year of the
Servicer, the unaudited consolidated balance sheet of the Servicer as of the end of each
such quarter, and the unaudited consolidated statements of income and cash flows of the
Servicer for the portion of the fiscal year then ended, in reasonable detail and stating in
comparative form the respective figures for the corresponding date and period in the
preceding fiscal year, prepared in accordance with GAAP, consistently applied (subject to
normal year-end adjustments), and certified by an authorized officer of the Servicer as
being complete and correct in all material respects and presenting the financial condition
and results of operations of the Servicer as of the dates and for the periods indicated, in
accordance with GAAP consistently applied (subject as to interim statements to normal
year-end adjustments).




          (C) Certification Regarding Servicer Defaults. Concurrently with the delivery
of each financial report delivered under (A) or (B) above, a certification by the chief
financial officer or treasurer of the Servicer that no Servicer Default and no event which,
with the giving of notice or the passage of time, would become a Servicer Default has
occurred and is continuing or, if any such Servicer Default or other event has



44









 







occurred and is continuing, such a Servicer Default has occurred and is continuing, the
action which the Servicer has taken or proposes to take with respect thereto.




          (D) Notices to Other Creditors. Concurrently with the delivery to the “Agent”
under the Comerica Credit Agreement, but in any event no later than when such reports and
notices are required to be given under such agreement, copies of any static pool analyses,
notices of default, SEC filings, notices disclosing adverse litigation or a material adverse
change in the Servicer’s financial condition, business or operations.




          (E) Other Material Events. As soon as possible, and in any event within three
(3) Business Days after becoming aware of (i) any material adverse change in the financial
condition of the Servicer or any of its Subsidiaries, a certificate of a financial officer
setting forth the details of such change, or (ii) the submission of any claim or the
initiation of any legal process, litigation or administrative or judicial investigation
against the Servicer or any of its Subsidiaries in any federal, state or local court or
before any arbitration board, or any such proceeding threatened by any governmental agency,
which, if adversely determined, would be reasonably likely to cause a material adverse
effect on the Servicer’s financial condition or operations, its ability to perform its
obligations hereunder or on the collectibility of the Trust Property.




          (F) Other Information. Promptly upon request, such other information
respecting the Trust Property or the Servicer as the Class A Insurer or the Rating Agencies
may reasonably request.



          (b) Negative Covenants. From the date hereof until the Stated Final Maturity or, if
earlier, the date the Class A Notes are paid in full:





          (i) Mergers, Acquisition, Sales, etc. The Servicer will not consolidate with
or merge into any other Person or convey or transfer its properties and assets substantially
as an entirety to any Person, unless the Servicer is the surviving entity and unless:




          (A) the Servicer has delivered to the Trust Collateral Agent, the Indenture Trustee,
the Owner Trustee, the Backup Servicer and the Class A Insurer an Officer’s Certificate and
an Opinion of Counsel each stating that any consolidation, merger, conveyance or transfer
and such supplemental agreement comply with the terms of this Agreement and that all
conditions precedent herein provided for relating to such transaction have been complied
with and, in the case of the Opinion of Counsel, that such supplemental agreement is legal,
valid and binding with respect to the Servicer and such other matters as the Trust
Collateral Agent or the Class A Insurer may reasonably request;




          (B) the Servicer shall have delivered written notice of such consolidation, merger,
conveyance or transfer to the Trust Collateral Agent and the Class A Insurer; and,




          (C) after giving effect thereto, no Servicer Default or event that with notice or lapse
of time, or both, would constitute a Servicer Default shall have occurred.



45









 






          (ii) Change of Name or Location of Records. Except as permitted under
Section 7.03, the Servicer shall not (A) change its name or its state of
organization, move the location of its principal place of business and chief executive
office, and the offices where it keeps records concerning the Dealer Loans from the location
referred to in Section 3.03(c), or (B) move the Records from the location thereof on
the Closing Date, unless the Servicer has given at least thirty (30) days’ written notice to
the Trust Collateral Agent, the Indenture Trustee and the Class A Insurer and has taken all
actions required under the UCC of each relevant jurisdiction in order to continue the first
priority perfected security interest of the Trust Collateral Agent as agent for the Class A
Noteholders in the Trust Property.




          (iii) Change in Payment Instructions to Obligors. The Servicer will not make
any change in its instructions to Obligors (other than pursuant to its Collection
Guidelines) regarding payments to be made directly or indirectly, unless the Trust
Collateral Agent and the Class A Insurer have each consented to such change and have
received duly executed documentation related thereto; provided, however, any
successor Servicer appointed Servicer hereunder, shall be permitted to make changes to such
instructions directing the Obligors to make payments to such successor Servicer directly or
indirectly upon its appointment, but any subsequent changes shall be subject to the consent
provisions of this clause (iii).




          (iv) No Instruments. The Servicer shall take no action to cause any Dealer
Loan to be evidenced by any instrument (as defined in the UCC as in effect in the relevant
jurisdictions).




          (v) No Liens. The Servicer shall not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to exist any Lien (other than in
favor of the Trust Collateral Agent or the Trust as specifically contemplated herein) on the
Trust Property or any interest therein; the Servicer will notify the Trust Collateral Agent
and the Class A Insurer of the existence of any Lien on any portion of the Trust Property
immediately upon discovery thereof, and the Servicer shall defend the right, title and
interest of the Trust Collateral Agent on behalf of the Class A Noteholders in, to and under
the Trust Property against all claims of third parties claiming through or under the
Servicer.




          (vi) Credit Guidelines and Collection Guidelines. The Servicer will not amend,
modify, restate or replace, in whole or in part, the Credit Guidelines or Collection
Guidelines, which change would materially impair the collectibility of any Dealer Loan or
Contract or otherwise materially adversely affect the interests or the remedies of the Trust
Collateral Agent, the Trust or the Class A Insurer under this Agreement or any other Basic
Document, without the prior written consent of the Trust Collateral Agent and the Class A
Insurer.




          (vii) Release of Contracts. Except for a release to an insurer in exchange for
insurance proceeds paid by such insurer resulting from a claim for the total insured value
of a vehicle, the Servicer shall not release or direct the Trust Collateral Agent to release
the Financed Vehicle securing each such Contract from the security



46









 







interest granted by such Contract in whole or in part, except in the event of (i)
payment in full by or on behalf of the Obligor thereunder, (ii) settlement with the Obligor
in respect of Defaulted Contracts consistent with its Collection Guidelines or (iii)
repossession, nor shall the Servicer impair the rights of the Class A Noteholders, the Swap
Counterparty or the Class A Insurer in the Contracts which secure the Dealer Loans, except
as may be required by applicable law.



          (c) Notwithstanding the foregoing, the Servicer may assign rights in and to Defaulted
Contracts to collection agents as part of the collection process under the Collection Guidelines.




          SECTION 4.07. Payments in Respect of Contracts Upon Breach.




          (a) The Servicer or the Trust Collateral Agent (provided that a Responsible Officer of the
Trust Collateral Agent has actual knowledge or has received written notice thereof) shall inform
the other parties to this Agreement, the Swap Counterparty and the Class A Insurer promptly, in
writing, upon the discovery of any breach of Section 4.01, 4.02, 4.03,
4.04, 4.05 or 4.06 hereof which materially and adversely affects the
interest of the Issuer, the Indenture Trustee or the Class A Insurer. Unless the breach shall have
been cured by the last day of the first full Collection Period following such actual knowledge or
receipt of notice by an Authorized Officer of the Servicer, the Servicer shall, as of the Business
Day preceding the Determination Date relating to the respective Collection Period, make payments
with respect to any nonconforming Dealer Loan that is materially and adversely affected by such
breach or which materially and adversely affects the interests of the Class A Insurer (or the Class
A Noteholders if a Class A Insurer Default is then continuing), and shall prepay in full any
nonconforming Contract that is materially and adversely affected by such breach or which materially
and adversely affects the interests of the Class A Insurer (or the Class A Noteholders if a Class A
Insurer Default is then continuing); provided, however, if the Backup Servicer is
acting as successor Servicer, it shall not have any obligation to make payments with respect to any
Dealer Loans or prepay any Contracts. In consideration of the making of payments with respect to
such Dealer Loan or such Contract, the Servicer shall remit the Purchase Amount. Notwithstanding
anything herein to the contrary, (i) during the Revolving Period, such payments shall not be
required if the Adjusted Collateral Amount is equal to or greater than the Minimum Collateral
Amount; and (ii) during the Amortization Period, such payments shall not be required: (A) with
respect to any Loan, so long as the aggregate Net Loan Balance of all Dealer Loans which would be
Ineligible Loans as a result of being subject to the foregoing payment obligations during the
Amortization Period is less than the Amortization Period Additional Loan Collateral Amount; and (B)
with respect to any Contract, so long as the aggregate Outstanding Balance of all Contracts which
would be Ineligible Contracts as a result of being subject to the foregoing payment obligations
during the Amortization Period is less than the Amortization Period Additional Contract Collateral
Amount.




          (b) If such payments are required in accordance with clause (a) of this Section
4.07, they shall be made only with respect to the Amortization Period Payment Obligations.
Notwithstanding the foregoing, the Servicer’s obligation to make any payment under this
Section 4.07 may be waived with the prior written consent of the Class A Insurer or
the Indenture



47









 






Trustee, at the direction of the Majority Noteholders, if a Class A Insurer Default has
occurred and is continuing. The Trust Collateral Agent shall have no duty to conduct any
affirmative investigation or inquiry as to the occurrence of any condition requiring payments to be
made with respect to any Dealer Loan or Contract pursuant to this Section. Any such waiver by the
Class A Insurer or the Indenture Trustee, at the direction of the Majority Noteholders, as
applicable, shall not require any further waiver, action or consent by any other party. The party
providing such waiver shall give notice thereof to the Owner Trustee.




          SECTION 4.08. Servicer Fee.




          The Servicer, including any successor Servicer, shall be entitled to payment of the Servicing
Fee as defined herein, which shall be payable in accordance with Section 5.08(a) hereof.
In no event shall the Indenture Trustee or the Trust Collateral Agent be responsible for the
Servicing Fee or for any differential between the Servicing Fee and the amount necessary to induce
a successor Servicer to assume the obligations of Servicer hereunder.




          SECTION 4.09. Servicer’s Certificate.




          (a) By the Determination Date in each calendar month, the Servicer shall deliver to the Trust
Collateral Agent, the Class A Insurer, the Rating Agencies, the Swap Counterparty, the Backup
Servicer, and Wachovia Capital Markets, LLC, a Servicer’s Certificate substantially in the form of
Exhibit B hereto containing all information necessary to make the transfers, deposits and
distributions pursuant to Sections 5.04 through 5.11 hereof for the Collection
Period immediately preceding the date of such Servicer’s Certificate and as of the last day of such
Collection Period, and all information necessary for the Trust Collateral Agent to make available
statements to Class A Noteholders and the Class A Insurer pursuant to Section 5.11 hereof.
Upon receipt of the Servicer’s Certificate, the Trust Collateral Agent shall conclusively rely (and
shall be fully protected in so relying) on the information contained therein for the purposes of
making distributions and allocations as provided for herein. Each Servicer’s Certificate shall be
certified by a Responsible Officer of the Servicer. The Seller shall assist the Trust Collateral
Agent with its obligation to make distributions and allocations. Dealer Loans purchased by the
Trust shall be identified by the Servicer by the Dealer’s lot number and certain other information
with respect to such Dealer Loan (as specified in Schedule A to this Agreement).




          (b) No later than 9:00 A.M. New York time on the third (3rd) Business Day of each
calendar month (the “Servicer’s Data Date”), the Servicer shall send to the Backup Servicer
a Computer Tape, detailing the Collections received during the prior Collection Period and all
other information in its possession relating to the Dealer Loans and the Contracts as may be
necessary for the complete and correct completion of the Servicer’s Certificate (the
“Servicer’s Data File”). Such Computer Tape shall be in the form and have the
specifications as may be agreed to between the Servicer and the Backup Servicer from time to time.




          (c) No later than the end of the second (2nd) Business Day prior to each
Determination Date, the Servicer shall furnish to the Backup Servicer the Servicer’s Certificate
related to the prior Collection Period together with all other information necessary for the
preparation of such Servicer’s Certificate and necessary to determine the application of




48









 




Collections. The Backup Servicer shall review the information contained in the Servicer’s
Certificate against the information on the Servicer’s Data File, on an aggregate basis.




          The Backup Servicer and the Servicer shall attempt to reconcile any such material
inconsistencies and/or to furnish any such omitted information and the Servicer shall amend the
Servicer’s Certificate to reflect the Backup Servicer’s computations or to include the omitted
information. The Backup Servicer shall in no event be liable to the Servicer with respect to any
failure of the Backup Servicer to discover or detect any errors, inconsistencies, or omissions by
the Servicer with respect to the Servicer’s Certificate and Servicer’s Data File except as
specifically set forth in this Section.




          (d) The Servicer shall provide to the Backup Servicer, or its agent, monthly, or as frequently
as may be otherwise requested, information on the Dealer Loans and related Contracts sufficient to
enable the Backup Servicer to assume the responsibilities as successor Servicer and collect on the
Contracts.




          (e) Except as provided in this Agreement, the Backup Servicer may accept and conclusively rely
on all accounting, records and work of the Servicer without audit, and the Backup Servicer shall
have no liability for the acts or omissions of the Servicer or for the inaccuracy of any data
provided, produced or supplied by the Servicer. If any Error exists in any information received
from the Servicer, and such Errors should cause or materially contribute to any Continued Errors,
the Backup Servicer shall have no liability for such Continued Errors; provided,
however, that this provision shall not protect the Backup Servicer against any liability
that would otherwise be imposed by reason of willful misconduct, bad faith or gross negligence in
discovering or correcting any Error or in the performance of its or their duties hereunder or under
this Agreement. In the event the Backup Servicer becomes aware of Errors or Continued Errors, the
Backup Servicer shall, with the prior consent of the Class A Insurer, use its best efforts to
reconstruct and reconcile such data as is commercially reasonable to correct such Errors and
Continued Errors and prevent future Continued Errors. The Backup Servicer shall be entitled to
recover its costs thereby expended from the Servicer.




          (f) The Backup Servicer and its officers, directors, employees and agent shall be indemnified
by the Servicer and the Issuer jointly and severally, from and against all claims, damages, losses
or expenses reasonably incurred by the Backup Servicer (including reasonable attorney’s fees)
arising out of claims asserted against the Backup Servicer by third parties on any matter arising
out of this Agreement to the extent the act or omission giving rise to the claim accrues before the
date on which the Backup Servicer assumes the duties of Servicer hereunder, except for any claims,
damages, losses or expenses arising from the Backup Servicer’s own gross negligence, bad faith or
willful misconduct. Indemnification by the Servicer and the Issuer under this Section
4.09(f) shall survive the termination of this Agreement or the earlier removal or resignation
of the Backup Servicer.




          (g) Other than as specifically set forth in this Agreement or in the Backup Servicing
Agreement, the Backup Servicer shall have no obligation to supervise, verify, monitor or administer
the performance of the Servicer and shall have no duty, responsibility, obligation, or liability
for any action taken or omitted by the Servicer.




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          SECTION 4.10. Annual Statement as to Compliance; Notice of Default.




          (a) The Servicer shall deliver to the Trust Collateral Agent, the Owner Trustee, the Rating
Agencies, the Swap Counterparty, the Indenture Trustee, the Class A Insurer and the Class A
Noteholders, on or before April 30th of each year beginning in the year 2008, an
Officer’s Certificate, dated as of the preceding December 31st, stating that (i) a review of the
activities of the Servicer during the preceding 12-month (or for the initial certificate, for such
shorter period as may have elapsed from the Closing Date to such December 31st or, with
respect to a successor Servicer, shorter period if a successor Servicer becomes Servicer after the
beginning of a calendar year) period and of its performance under this Agreement has been made
under such officer’s supervision and (ii) to the best of such officer’s knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement throughout such period,
or, if there has been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof.




          (b) The Servicer shall deliver to the Trust Collateral Agent, the Indenture Trustee, the Owner
Trustee, the Class A Insurer, the Swap Counterparty, the Backup Servicer and to the Rating
Agencies, promptly after having obtained knowledge thereof, but in no event later than five (5)
Business Days thereafter, written notice in an Officer’s Certificate of any event which with the
giving of notice or lapse of time, or both, would become a Servicer Default under Section
8.01. The Seller shall deliver to the Trust Collateral Agent, the Indenture Trustee, the Class
A Insurer, the Swap Counterparty, the Backup Servicer and to the Rating Agencies, promptly after
having obtained knowledge thereof, but in no event later than five (5) Business Days thereafter,
written notice in an Officer’s Certificate of any event which with the giving of notice or lapse of
time, or both, would become a Servicer Default under clause (ii) of Section 8.01. The
Trust Collateral Agent shall forward a copy of each Officer’s Certificate so received to each Class
A Noteholder.




          SECTION 4.11. Annual Independent Certified Public Accountant’s Report.




          (a) The Servicer will deliver to the Trust Collateral Agent, the Owner Trustee, the Indenture
Trustee, each Class A Noteholder, the Class A Insurer, the Swap Counterparty and the Rating
Agencies, on or before April 30th of each year beginning in the year 2008, a copy of a
report prepared by Independent Accountants, who may also render other services to the Servicer or
any of its Affiliates, or to the Seller, addressed to the Board of Directors of the Servicer, the
Indenture Trustee and the Class A Insurer and dated during the current year, to the effect that
such firm has examined the Servicer’s policies and procedures and issued its report thereon and
expressing a summary of findings (based on the procedures to be performed on the documents, records
and accounting records set forth in clause (b) of this Section 4.11) relating to the
servicing of the Dealer Loans and the related Contracts and the administration of the Dealer Loans
and the related Contracts and of the Trust during the preceding calendar year and that such
servicing and administration was conducted in compliance with the terms of this Agreement, except
for (i) such exceptions as such firm shall believe to be immaterial and (ii) such other exceptions
as shall be set forth in such report and that such examination (1) was performed in accordance with
standards established by the American Institute of Certified Public Accountants, and (2) included
tests relating to auto loans serviced for others in accordance with the requirements of the Uniform
Single Attestation Program for Mortgage Bankers (the “Program”)




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to the extent the procedures in the Program are applicable to the servicing obligations set
forth in this Agreement. For purposes of clause (i) of this Section 4.11(a), an amount
shall be deemed “immaterial” if it is less than $1,000 or 0.05%.




          In the event such independent public accountants require the Trust Collateral Agent or the
Indenture Trustee to agree to the procedures to be performed by such firm in any of the reports
required to be prepared pursuant to this Section 4.11, the Servicer shall direct the Trust
Collateral Agent or the Indenture Trustee in writing to so agree; it being understood and agreed
that the Trust Collateral Agent or the Indenture Trustee will deliver such letter of agreement in
conclusive reliance upon the direction of the Servicer, and neither the Trust Collateral Agent nor
the Indenture Trustee has made any independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness of such procedures.




          Such report shall also indicate that the firm is independent of the Servicer and its
Affiliates within the meaning of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.




          (b) The procedures to be performed by the Independent Accountants shall include: (i) a
comparison of the data contained in two (2) Servicer Certificates (which are to be selected at
random by the Class A Insurer from all of the Servicer Certificates delivered during the applicable
fiscal year) to (A) the Servicer’s internal reports derived from its loan servicing system, (B)
information obtained by the Servicer from the Indenture Trustee in compiling the Servicer
Certificates, and (C) such other information used in the preparation of the Servicer Certificates,
to confirm the calculation of the data contained in the Servicer Certificates; (ii) a comparison of
the Aggregate Outstanding Eligible Loan Balance contained on three (3) Servicer Certificates (which
are to be selected at random by the Class A Insurer from all of the Servicer Certificates delivered
during the applicable fiscal year) to the Servicer’s internal reports derived from its accounting
records, to confirm the calculation of such amount; (iii) an audit of the Servicer’s cash
collections procedures by testing a random sample of five (5) daily cash receipts from the
Servicer’s list of cash collections for the applicable fiscal year to confirm that Collections
received are deposited to the Collection Account within two (2) Business Days of receipt; and (iv)
such other procedures as may be mutually agreed upon by the Servicer, the Class A Insurer and the
Independent Accountants which are considered appropriate under the circumstances.




          SECTION 4.12. Access to Certain Documentation and Information Regarding Dealer Loans and
Contracts.




          The Servicer shall provide to each Class A Noteholder, the Indenture Trustee, the Trust
Collateral Agent, the Swap Counterparty and the Class A Insurer access to its records pertaining to
the Dealer Loans and the related Contracts, upon prior written request. Access shall be afforded
without charge, but only upon reasonable request and during the normal business hours at the
offices of the Servicer. Nothing in this Section shall affect the obligation of the Servicer to
observe any Applicable Law prohibiting disclosure of information regarding the Dealers or the
Obligors, and the failure of the Servicer to provide access to information as a result of such
obligation shall not constitute a breach of this Section.




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          SECTION 4.13. Servicer Expenses.




          The Servicer shall be required to pay all expenses incurred by it in connection with its
activities hereunder, including fees and disbursements of independent accountants, taxes imposed on
the Servicer and expenses incurred in connection with distributions and reports to Class A
Noteholders, the Indenture Trustee, the Trust Collateral Agent, the Swap Counterparty and the Class
A Insurer and with administering the duties of the Trust and the Issuer. If the Backup Servicer
has become the Servicer, it shall be entitled to be reimbursed for all Servicer Expenses,
Repossession Expenses, Reliening Expenses and Transition Expenses in accordance with
Section 5.08(a) hereof.




          SECTION 4.14. Servicer Not to Resign as Servicer.




          Subject to the provisions of Section 7.03 of this Agreement, the Servicer shall 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 shall no longer be
permissible under applicable law. Notice of any such determination permitting the resignation of
the Servicer shall be communicated to the Trust Collateral Agent, the Rating Agencies, the Class A
Insurer and the Indenture Trustee within five (5) Business Days thereafter (and, if such
communication is not in writing, shall be confirmed in writing within five (5) Business Days
thereafter) and any such determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trust Collateral Agent, the Class A Insurer and the Indenture Trustee concurrently
with or promptly after such notice. No such resignation shall become effective until the successor
Servicer, appointed in accordance with Section 8.02 hereof, shall have taken the actions
required by the last paragraph of Section 8.01 of this Agreement and shall have assumed the
responsibilities and obligations of the predecessor Servicer in accordance with Section
8.02 of this Agreement. The Trust Collateral Agent shall forward a copy of each notice so
received to each Class A Noteholder, the Swap Counterparty and the Rating Agencies.




          SECTION 4.15. The Backup Servicer.




          (a) Prior to assuming any of the Servicer’s rights and obligations hereunder the Backup
Servicer shall only be responsible to perform those duties specifically imposed upon it by the
provisions of the Backup Servicing Agreement, and no implied obligations shall be read into this
Agreement against the Backup Servicer. Such duties generally relate to following the provisions
herein which would permit the Backup Servicer to assume some or all of the Servicer’s rights and
obligations hereunder (as modified or limited herein or in the Backup Servicing Agreement) with
reasonable dispatch, following notice.




          The Backup Servicer, prior to assuming any of the Servicer’s duties hereunder, may not resign
hereunder unless it arranges for a successor Backup Servicer reasonably acceptable to the Servicer,
the Seller and the Class A Insurer or the Indenture Trustee, if a Class A Insurer Default has
occurred and is continuing, with not less than 30 days’ notice delivered to the Class A Insurer,
the Servicer and the Seller. Prior to its becoming successor Servicer, the Backup Servicer shall
have only those duties and obligations imposed by it under this Agreement, and shall have no
obligations or duties under any agreement to which it is not a party, including but not limited to
the various agreements named herein.




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          (b) The Backup Servicer shall not be required to expend or risk its own funds or otherwise
incur liability (financial or otherwise) in the performance of any of its duties hereunder, or in
the exercise of any of its rights or powers, if the repayment of such funds or written indemnity
reasonably satisfactory to it against such risk or liability is not reasonably assured to it in
writing prior to the expenditure or risk of such funds or incurrence of financial liability.
Notwithstanding any provision to the contrary, the Backup Servicer, in its capacity as such, and
not in its capacity as successor Servicer, shall not be liable for any obligation of the Servicer
contained in this Agreement, and the parties shall look only to the Servicer to perform such
obligations.




          (c) The Servicer shall have no liability, direct or indirect, to any party, for the acts or
omissions of the Backup Servicer, whenever such acts or omissions occur whenever such liability is
imposed, except as set forth in Section 4.09(f). The successor Servicer shall not be
liable for the acts or omissions of any predecessor Servicer.




          (d) Notwithstanding anything to the contrary herein, so long as a Class A Insurer Default is
not continuing, the Class A Insurer shall have the right to remove the Backup Servicer for cause at
any time and replace the Backup Servicer. In the event that the Class A Insurer exercises its
right to remove and replace Wells Fargo Bank, National Association as Backup Servicer, Wells Fargo
Bank, National Association shall have no further obligation to perform the duties of the Backup
Servicer under this Agreement.




          SECTION 4.16. Fidelity Bond.




          The Servicer hereby represents and covenants that the Servicer has obtained, and shall
continue to maintain in full force and effect, a fidelity bond covering the Servicer of a type and
in such amount as is customary for prudent servicers engaged in the business of servicing sub-prime
and non-prime motor vehicle retail installment sales contracts similar to the Contracts.




          SECTION 4.17. Obligations in Respect of the Owner Trustee.




          To the extent Credit Acceptance is no longer the Servicer hereunder, Credit Acceptance, in its
individual capacity, agrees to perform the obligations of the Servicer in respect of the Owner
Trustee and the Trust described in Section 4.01(d) and Section 4.06(a)(vii)(B)
hereof and in Section 6.2 of the Trust Agreement.




ARTICLE V




TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS




          SECTION 5.01. Establishment of Trust Accounts.





          (a) (i) On or prior to the Closing Date, the Trust Collateral Agent, on behalf of the
Indenture Trustee, for the benefit of the Class A Noteholders, the Class A Insurer, the Swap
Counterparty and, after the Class A Termination Date, the Certificateholders, shall
establish and maintain in its own name two Eligible Accounts (respectively, the
“Collection Account” and the “Principal Collection Account”) bearing



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a designation clearly indicating that the funds deposited therein are held for the
benefit of the Trust Collateral Agent on behalf of the Indenture Trustee for the benefit of
the Class A Noteholders, the Class A Insurer, the Swap Counterparty and, after the Class A
Termination Date, the Certificateholders, as their interests may appear. The Collection
Account and the Principal Collection Account shall initially be established with the Trust
Collateral Agent.




          (ii) The Trust Collateral Agent, on behalf of the Indenture Trustee, for the benefit of
the Class A Noteholders, the Class A Insurer and, after the Class A Termination Date, the
Certificateholders, shall establish and maintain in its own name an Eligible Account (the
“Class A Note Distribution Account”) bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Trust Collateral Agent on behalf
of the Indenture Trustee for the benefit of the Class A Noteholder, the Class A Insurer and,
after the Class A Termination Date, the Certificateholders, as their interests may appear.
The Class A Note Distribution Account shall initially be established with the Trust
Collateral Agent.




          (iii) The Trust Collateral Agent, on behalf of the Indenture Trustee, for the benefit
of the Certificateholders, shall establish and maintain in its own name an Eligible Account
(the “Certificate Distribution Account”) bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Trust Collateral Agent on
behalf of the Indenture Trustee for the benefit of the Certificateholders. The Certificate
Distribution Account shall initially be established with the Trust Collateral Agent.




          (iv) The Trust Collateral Agent, on behalf of the Class A Noteholders, the Class A
Insurer and, after the Class A Termination Date, the Certificateholders, as their interests
may appear, shall establish and maintain in its own name an Eligible Account (the
“Reserve Account”) bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Trust Collateral Agent on behalf of the Indenture
Trustee for the benefit of the Class A Noteholders, the Class A Insurer, the Swap
Counterparty and, after the Class A Termination Date, the Certificateholders, as their
interests may appear. The Reserve Account shall initially be established with the Trust
Collateral Agent.



          (b) Funds on deposit in the Collection Account, subject to Section 5.06(b) hereof, the
Principal Collection Account, the Swap Termination Payment Account, and the Reserve Account shall
each be invested by the Trust Collateral Agent (or any custodian with respect to funds on deposit
in any such account) in Eligible Investments selected in writing by the Servicer (pursuant to
standing instructions or otherwise), bearing interest or sold at a discount, and maturing, unless
payable on demand, no later than the Business Day immediately preceding the next Distribution Date;
provided, however, it is understood and agreed that the Trust Collateral Agent
shall not be liable for any loss arising from such investment in Eligible Investments unless the
Eligible Investment was a direct obligation of the Trust Collateral Agent in its commercial
capacity or unless such loss was caused by the Trust Collateral Agent’s negligence or willful
misconduct (it being understood and acknowledged that no loss on any such Eligible Investment which
was made in conformity with this Agreement and the




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instructions of the Servicer shall be considered “caused by the Trust Collateral Agent’s
negligence or willful misconduct”). All such Eligible Investments shall be held by or on behalf of
the Trust Collateral Agent for the benefit of the Indenture Trustee on behalf of the Class A
Noteholders, the Class A Insurer, the Swap Counterparty and, after the Class A Termination Date,
the Certificateholders, as their interests may appear. Funds deposited in the Collection Account
on the day immediately preceding a Distribution Date upon the maturity of any Eligible Investments
are not required to be invested overnight. On each Distribution Date, all interest and investment
income (net of investment losses and expenses) on funds on deposit in the Collection Account, as of
the end of the Collection Period shall be included in Available Funds; and all interest and other
investment income (net of investment losses and expenses) on funds on deposit in the Reserve
Account shall be deposited into the Reserve Account. On each Distribution Date during the
Revolving Period, all interest and other investment income (net of investment losses and expense)
on funds on deposit in the Principal Collection Account shall be deposited into the Principal
Collection Account; thereafter, such interest and other investment income (net of investment losses
and expense) shall be included in Available Funds in the Collection Account.




          (c) If (i) the Servicer shall have failed to give investment directions for any funds on
deposit in the Collection Account, the Principal Collection Account or the Reserve Account to the
Trust Collateral Agent by 2:00 p.m. Eastern Time (or such other time as may be agreed by the Issuer
and Trust Collateral Agent) on any Business Day; or (ii) an Indenture Default or Indenture Event of
Default shall have occurred and be continuing with respect to the Class A Notes but the Class A
Notes shall not have been declared due and payable, or, if such Class A Notes shall have been
declared due and payable following an Indenture Event of Default, amounts collected or receivable
from the Trust Property are being applied as if there had not been such a declaration; then the
Trust Collateral Agent shall, to the fullest extent practicable, invest and reinvest funds in the
Collection Account, the Principal Collection Account or the Reserve Account, as the case may be, in
Eligible Investments described in clause (v) of the definition thereof.




          (d) (i) Subject to the grant of the security interest pursuant to the Indenture in favor of
the Indenture Trustee, the Trust shall possess all right, title and interest in all funds on
deposit from time to time in the Trust Accounts (other than Dealer Collections) and in all proceeds
thereof and all such funds, investments, proceeds and income shall be part of the Trust Property.
Except as otherwise provided herein, the Trust Accounts shall be under the sole dominion and
control of the Trust Collateral Agent for the benefit of the Class A Noteholders, the Class A
Insurer, the Swap Counterparty and, after the Class A Termination Date, the Certificateholders, as
their interests may appear.





          (i) With respect to any Eligible Investments held from time to time in any Trust
Account, the Trust Collateral Agent agrees that:




          (A) any Eligible Investment that is held in deposit accounts shall be, except as
otherwise provided herein, subject to the exclusive custody and control of the Trust
Collateral Agent, and the Trust Collateral Agent shall have sole signature authority with
respect thereto;



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          (B) any Eligible Investment that constitutes Physical Property shall be delivered to
the Trust Collateral Agent in accordance with paragraph (a) of the definition of “Delivery”
and shall be held, pending maturity or disposition, solely by the Trust Collateral Agent or
a securities intermediary (as such term is defined in Section 8-102(a)(14) of the UCC)
acting solely for the Trust Collateral Agent;




          (C) any Eligible Investment 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 Trust
Collateral Agent, pending maturity or disposition, through continued book-entry registration
of such Eligible Investment as described in such paragraph;




          (D) any Eligible Investment that is an “uncertificated security” under Article 8 of the
UCC and that is not governed by clause (C) above shall be delivered to the Trust Collateral
Agent in accordance with paragraph (c) of the definition of “Delivery” and shall be
maintained by the Trust Collateral Agent, pending maturity or disposition, through continued
registration of the Trust Collateral Agent’s (or its nominee’s) ownership of such security;
and




          (E) not less than eight (8) days prior to each Distribution Date, the Trust Collateral
Agent shall give notice to each Eligible Institution that holds Eligible Investments in
money market deposit accounts that on such Distribution Date the Trust Collateral Agent may
be withdrawing all funds from the applicable Trust Account.



          (e) The Servicer shall have the power, revocable by the Class A Insurer, the Trust Collateral
Agent, by the Indenture Trustee or by the Owner Trustee, each with the prior written consent of the
Class A Insurer (so long as a Class A Insurer Default is not continuing) and the Indenture Trustee,
to instruct the Trust Collateral Agent to make withdrawals and payments from the Trust Accounts for
the purpose of permitting the Servicer and the Trust Collateral Agent to carry out its respective
duties hereunder.




          (f) If ratings of the unsecured and uncollateralized long-term debt obligations of the Trust
Collateral Agent or its parent are lower than “AA-” by S&P and “Aa3” by Moody’s, then the Servicer
shall, with the Trust Collateral Agent’s assistance as necessary, cause the Trust Accounts to be
moved within five (5) Business Days to another institution where such Trust Accounts will be
Eligible Accounts.




          SECTION 5.02. Collections; Allocation.




          The Servicer shall remit to the Collection Account within two (2) Business Days of receipt all
Collections collected during each Collection Period. On the Closing Date, the Servicer shall
deposit in the Collection Account the foregoing amounts received with respect to the Dealer Loans
and Contracts since the initial Cut-off Date.




          The Servicer shall determine each month the amount of Collections received during each
Collection Period which constitutes Dealer Collections and shall so notify the Trust Collateral
Agent in writing. Notwithstanding any other provision hereof, the Trust Collateral Agent, at the
written direction of the Servicer, shall distribute on each Distribution Date: (i) to




56









 




the Issuer an amount equal to the aggregate amount of Dealer Collections received during or
with respect to the prior Collection Period; and (ii) to the Backup Servicer, if it has become
successor Servicer, an amount equal to Repossession Expenses related to the prior Collection Period
prior to the distribution of Available Funds pursuant to Section 5.08(a) hereof. Upon
receipt, the Issuer shall remit all Dealer Collections to Credit Acceptance. In the event the
Backup Servicer is acting as successor Servicer, the Seller shall assist the Backup Servicer in the
performance of its obligations under this Section 5.02.




          SECTION 5.03. Certain Reimbursements to the Servicer.




          The Servicer will be entitled to be reimbursed from amounts on deposit in the Collection
Account with respect to a Collection Period for amounts previously deposited in the Collection
Account but later determined by the Servicer to have resulted from mistaken deposits or postings or
checks returned for insufficient funds. The amount to be reimbursed hereunder shall be paid to the
Servicer on the next succeeding Business Day(s) out of collections on Dealer Loans and the related
Contracts to be remitted to the Collection Account to the extent the net amount to the Collection
Account is greater than zero.




          SECTION 5.04. Additional Deposits.




          (a) The Servicer or the Seller, as applicable, shall deposit or cause to be deposited in the
Collection Account each Purchase Amount paid hereunder. Credit Acceptance shall deposit any
amounts in respect of the Limited Repurchase Option to the Collection Account. All such deposits
with respect to a Collection Period shall be made, in immediately available funds, on the Business
Day immediately preceding the Determination Date related to such Collection Period.




          (b) The proceeds of any purchase or sale of the assets of the Trust described in Section
10.01 hereof shall be deposited by the Seller or the Servicer, as applicable, in the Collection
Account on the Business Day immediately preceding the Distribution Date on which such purchase
shall occur.




          (c) Following the acceleration of the Class A Notes pursuant to Section 5.2 of the Indenture,
the proceeds shall be deposited in the Collection Account to be distributed by the Indenture
Trustee in accordance with Section 5.2(b) of the Indenture.




          (d) The Indenture Trustee will promptly, but in no event later than noon (New York City time)
on the related Distribution Date, deposit into the Collection Account all Net Swap Receipts
received by it under the Swap Agreement in immediately available funds.




          SECTION 5.05. Reserve Account.




          (a) On the Closing Date, the Seller shall direct the Trust Collateral Agent to deposit to the
Reserve Account a cash amount equal to the Initial Reserve Amount.




          (b) With respect to each Distribution Date, on the fourth Business Day immediately preceding
such Distribution Date, the Servicer (provided, that in the event the Backup Servicer is acting as
successor Servicer, the Seller shall assist the Backup Servicer in the




57









 




performance of its obligations under this Section 5.05(b)) shall instruct the Trust
Collateral Agent (based on the information contained in the Servicer’s Certificate delivered to the
Trust Collateral Agent in respect of the related Determination Date pursuant to Section
4.09), prior to the making of any transfers pursuant to Section 5.08 hereof, if
required, to withdraw from the Reserve Account to the extent available therein with respect to
amounts payable on such Distribution Date, the amounts specified below, and deposit such amounts in
the Collection Account to be applied as follows:





          (i) first, an amount equal to the excess of (x) the Servicing Fee, up to the
Capped Servicing Fee, over (y) the Available Funds required to be applied pursuant to
Section 5.08(a)(i) hereof on such Distribution Date;




          (ii) second, an amount equal to the excess of (x) the Indenture Trustee Fee and
fees payable to the Owner Trustee, up to the Capped Backup Servicer and Trustee Fees and
Expenses, over (y) the Available Funds required to be applied pursuant to Section
5.08(a)(i) hereof on such Distribution Date;




          (iii) third, an amount equal to the excess of (x) the Net Swap Payment, if any,
over (y) Available Funds required to be applied pursuant to Section 5.08(a)(ii)
hereof on such Distribution Date;




          (iv) fourth, pro rata, (x) an amount equal to the excess of (1) the Class A-1A
Interest Distributable Amount plus the Class A-1A Interest Carryover Shortfall, if any, over
(2) the Available Funds required to be applied pursuant to Section 5.08(a)(iii)
hereof on such Distribution Date and (y) an amount equal to the excess of (1) the Class A-1B
Interest Distributable Amount plus the Class A-1B Interest Carryover Shortfall, if any, over
(2) the Available Funds required to be applied pursuant to Section 5.08(a)(iii)
hereof on such Distribution Date;




          (v) fifth, an amount equal to the excess of (x) any amounts due and payable to
the Class A Insurer under Section 5.08(a)(v) hereof over (y) the Available Funds
required to be applied pursuant to Section 5.08(a)(v) hereof on such Distribution
Date;




          (vi) sixth, an amount equal to the Principal Deficiency (assuming that, for
purposes of determining the Principal Deficiency in this clause only, the amounts available
for the distribution of principal are attributable to those amounts required to be applied
pursuant to Section 5.08(a)(vii) and Section 5.08(a)(viii) hereof) on such
Distribution Date;




          (vii) seventh, if the next Distribution Date is the Stated Final Maturity, an
amount equal to the excess of (x) the Class A Note Balance over (y) the Available Funds
required to be applied pursuant to Section 5.08(a)(viii) hereof on the Stated Final
Maturity;




          (viii) eighth, an amount equal to the excess of (x) without duplication, the
Reimbursement Obligations over (y) the Available Funds required to be applied pursuant to
Section 5.08(a)(ix) hereof on such Distribution Date; and



58









 






          (ix) ninth, an amount equal to the excess of the funds remaining in the Reserve
Account after the withdrawals referred to in clauses (i) through (viii)
above over the Reserve Account Requirement on such Distribution Date.



          (c) Notwithstanding the foregoing, all transfers of funds between accounts may occur on the
Business Day immediately preceding the Distribution Date related to such transfer; all
distributions from accounts shall occur on the Distribution Date.




          (d) Amounts withdrawn from the Reserve Account pursuant to clause (b)(i)-(viii) above
shall be used solely for the amounts described in clause (b)(i)-(viii) above, as
applicable. Amounts withdrawn from the Reserve Account pursuant to clause (b)(ix) above
shall constitute Available Funds.




          SECTION 5.06. Payments under the Class A Note Insurance Policy.





          (a) (i) If, by 5:00 p.m. New York City time on the second Business Day immediately
prior to any Distribution Date with respect to the Class A Notes, the sum of (A) the Class
A-1A Interest Distributable Amount and the Class A-1B Interest Distributable Amount (in each
case exclusive of Default Interest (as defined below)) and (B) any Principal Deficiency
exceeds the sum of: (x) Available Funds on deposit in the Collection Account and available
for payment of the Class A-1A Interest Distributable Amount, Class A-1B Interest
Distributable Amount and/or Principal Deficiency; and (y) the amount on deposit in the
Reserve Account on such Distribution Date and available for payment of the Class A-1A
Interest Distributable Amount, the Class A-1B Interest Distributable Amount and/or Principal
Deficiency, the Trust Collateral Agent shall, no later than 10:00 a.m. New York time on the
Business Day immediately preceding such Distribution Date, make a claim under the Class A
Note Insurance Policy in an amount equal to such excess, in accordance with the terms of the
Class A Note Insurance Policy.




          (i) (ii) If, by 5:00 p.m. New York City time on the second Business Day immediately
prior to the Stated Final Maturity, the excess of (A) the original Class A Note Balance over
(B) the aggregate amount of any payments previously made in respect of principal on the
Class A Notes, exceeds the sum of: (x) Available Funds remaining in the Collection Account
and available for payment of the Class A-1A Principal Distributable Amount and Class A-1B
Principal Distributable Amount hereof; and (y) the amount available on the Stated Final
Maturity in the Reserve Account and available for payment of the Class A-1A Principal
Distributable Amount and Class A-1B Principal Distributable Amount, the Trust Collateral
Agent shall, no later than 10:00 a.m. New York time on the Business Day immediately
preceding the Stated Final Maturity, make a claim under the Class A Note Insurance Policy in
an amount equal to such excess, in accordance with the terms of the Class A Note Insurance
Policy.



          (b) Proceeds of claims on the Class A Note Insurance Policy shall be deposited in the
Collection Account, shall remain uninvested and shall be used solely to pay
amounts due in respect of interest and principal on the Class A Notes on each Distribution
Date or the Stated Final Maturity, as applicable.




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          (c) (i) On any day that a Responsible Officer of the Trust Collateral Agent has actual
knowledge or receives written notice that any amount previously paid to a Class A Noteholder
has been subsequently recovered from such Class A Noteholder pursuant to a final,
non-appealable order of a court of competent jurisdiction that such payment constitutes an
avoidable preference within the meaning of any applicable bankruptcy law to such Class A
Noteholder, after giving effect to any Class A Insurer Preference Payments (a
“Preference Amount”), the Trust Collateral Agent shall make a claim within one (1)
Business Day upon the Class A Note Insurance Policy for the full amount of such Preference
Amount in accordance with the terms of the Class A Note Insurance Policy and shall notify
the Class A Noteholders by mail that, in the event that any Class A Noteholder’s payment is
so recoverable, such Class A Noteholder will be entitled to payment pursuant to the terms of
the Class A Note Insurance Policy. The Trust Collateral Agent shall furnish to the Class A
Insurer at its written request the requested records it holds in its possession evidencing
the payments of principal of and interest on the Class A Notes, if any, which have been made
by the Trust Collateral Agent and subsequently recovered from any Class A Noteholders, and
the dates on which such payments were made. The proceeds of any claim for a Preference
Amount under the Class A Note Insurance Policy shall be disbursed to the receiver or trustee
in bankruptcy named in the final order of the court exercising jurisdiction on behalf of the
Class A Noteholder and not to any Class A Noteholder directly unless such Class A Noteholder
has returned principal or interest paid on the obligations to such receiver or trustee in
bankruptcy, in which case such payment shall, upon proof reasonably satisfactory to the
Class A Note Insurer, be disbursed to the Trust Collateral Agent for distribution to such
Class A Noteholder.




          (ii) Each Notice for Payment (as defined in the Class A Note Insurance Policy) shall
provide that the Trust Collateral Agent, on its behalf and on behalf of the Class A
Noteholders, thereby appoints the Class A Insurer as agent and attorney-in-fact for the
Trust Collateral Agent and each Class A Noteholder in any legal proceeding with respect to
the Class A Notes. Each Class A Noteholder, by its purchase of a Class A Note, and the
Trust Collateral Agent hereby agree that, subject to Section 9.02(e) of this
Agreement and Section 5.12 of the Indenture, so long as a Class A Insurer Default shall not
have occurred and be continuing, the Class A Insurer may at any time during the continuation
of any proceeding relating to a Preference Amount direct all matters relating to such
Preference Amount including, without limitation, (i) the direction of any appeal of any
order relating to any Preference Amount and (ii) the posting of any surety, supersedeas or
performance bond pending any such appeal at the expense of the Class A Insurer, but subject
to reimbursement as provided in the Insurance Agreement. In addition, and without
limitation of the foregoing, as set forth in Section 5.17 of the Indenture, the Class A
Insurer shall be subrogated to, and each Class A Noteholder and the Trust Collateral Agent
hereby delegate and assign, to the fullest extent permitted by law, the rights of the Trust
Collateral Agent and each Class A Noteholder in the conduct of any proceeding with respect
to a Preference Amount, including, without limitation, all
rights of any party to an adversary proceeding action with respect to any court order
issued in connection with any such Preference Amount.



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          (d) The Trust Collateral Agent shall, and hereby agrees that it will, hold the Class A Note
Insurance Policy in trust and will hold any proceeds of any claim thereunder in trust, solely for
the benefit of and use of the Class A Noteholders.




          SECTION 5.07. Reserved.




          SECTION 5.08. Transfers and Distributions.




          (a) Unless the Class A Notes have been accelerated in accordance with the terms of the
Indenture, on each Distribution Date, after making any transfers and distributions required by
Sections 5.02, 5.03, 5.04, 5.05(b) and 5.06(b)) hereof, the
Trust Collateral Agent shall (based on the information contained in the Servicer’s Certificate
delivered on the related Determination Date) cause to be made the following transfers and
distributions for such Distribution Date from Available Funds and amounts deposited to the
Collection Account from the Reserve Account (such amounts from the Reserve Account to be applied in
accordance with Section 5.05(b)), in the following order of priority:





          (i) pro rata: (A) (i) to the Servicer, the Servicing Fee and any Servicing Fee unpaid
from any prior Distribution Date, or (ii) if the Servicer has been replaced pursuant to the
terms of this Agreement, to the Backup Servicer, the Servicing Fee and any Servicing Fee
unpaid from any prior Distribution Date up to the Capped Servicing Fee; and (B) to the
Backup Servicer: (i) any Transition Expenses and (ii) any accrued and unpaid indemnification
amounts owed to it up to $17,000; and (C) pro rata, to the Backup Servicer,
so long as it has not become the Servicer, any accrued and unpaid Backup Servicing Fees, and
to the Owner Trustee, the Indenture Trustee and the Trust Collateral Agent, pro rata, their
related accrued and unpaid fees or Indenture Trustee Fee, as applicable, indemnification
amounts and expenses, up to the Capped Backup Servicer and Trustee Fees and Expenses;




          (ii) to the Swap Counterparty, the Net Swap Payment;




          (iii) to the Class A Note Distribution Account, pro rata (i) the Class A-1A Interest
Distributable Amount due and payable on such Distribution Date and the Class A-1A Interest
Carryover Shortfall, if any, from any prior Distribution Date for distribution to the Class
A-1A Noteholders and (ii) the Class A-1B Interest Distributable Amount due and payable on
such Distribution Date and the Class A-1B Interest Carryover Shortfall, if any, from any
prior Distribution Date for distribution to the Class A-1B Noteholders;




          (iv) to any successor Servicer, an amount equal to the Reliening Expenses;




          (v) to the Class A Insurer, in accordance with the terms of the Insurance Agreement and
so long as no Class A Insurer Default related to the Class A Insurer’s failure to pay any
amount due in accordance with the terms of the Class A Note
Insurance Policy or Swap Policy has occurred and is continuing: (i) the Class A Insurer
Premium, including any past due Class A Insurer Premium; (ii) its expenses; and (iii) its
Reimbursement Obligations owed in respect of any (a) draws on the Class A Note



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Insurance
Policy for the payment of the Class A-1A Interest Distributable Amount and Class A-1B
Interest Distributable Amount and (b) payments made under the Swap Policy;




          (vi) to the Reserve Account, an amount equal to the amount necessary to cause the
amount on deposit in the Reserve Account to equal the Reserve Account Requirement for such
Distribution Date;




          (vii) during the Revolving Period, to the Principal Collection Account: (i) for
application by the Issuer to purchase additional Dealer Loans from the Seller, the amount
needed to cause the Collateral Amount to equal the Minimum Collateral Amount, and if the
Minimum Collateral Amount cannot be reached due to an insufficient amount of Dealer Loans
for purchase by the Issuer, the amount needed to cause the Adjusted Collateral Amount to
equal the Minimum Collateral Amount; and (ii) the amount needed to cure any Principal
Deficiency;




          (viii) during the Amortization Period, to the Class A Note Distribution Account, pro
rata (i) the Class A-1A Principal Distributable Amount for distribution to the Class A-1A
Noteholders, until the Class A-1A Note Balance has been reduced to zero and (ii) the Class
A-1B Principal Distributable Amount for distribution to the Class A-1B Noteholders, until
the Class A-1B Note Balance has been reduced to zero;




          (ix) to the Class A Insurer, in accordance with the terms of the Insurance Agreement,
its Reimbursement Obligations and any other amounts owed to it, to the extent not paid
pursuant to clause (v);




          (x) to the Swap Counterparty, any Swap Termination Payments payable by the Issuer;




          (xi) pro rata, (i) to the Backup Servicer, any amounts owed to the Backup Servicer
pursuant to clause (1), to the extent not paid pursuant to clause (1); and (ii) pro rata, to
the Owner Trustee, Indenture Trustee and Trust Collateral Agent, any accrued fees, expenses
or indemnification amounts to the extent not paid pursuant to clause (1); and




          (xii) following the payment in full of all distributable amounts and after making all
allocations set forth in clauses (i) through (xi) above, to the Indenture Trustee for
deposit in the Certificate Distribution Account any remaining Available Funds in the
Collection Account for distribution to the Certificateholder pursuant to Section
5.10 hereof.



          (b) In the event that the Collection Account is maintained with an institution other than the
Trust Collateral Agent, the Servicer shall instruct the Trust Collateral Agent to instruct and
cause such institution to make all transfers, deposits and distributions pursuant to Section
5.08(a) hereof on the related Distribution Date.




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          (c) Notwithstanding the foregoing, all transfers of funds between accounts may occur on the
Business Day immediately preceding the Distribution Date related to such transfer; all
distributions from accounts shall occur on the Distribution Date.




          SECTION 5.09. Distributions from the Class A Note Distribution Account.




          (a) Subject to Section 5.12 hereof, on each Distribution Date, after making all
transfers and distributions required to be made on such Distribution Date by Sections 5.05
and 5.08 hereof, the Trust Collateral Agent shall (based on the information contained in
the Servicer’s Certificate delivered on the related Determination Date) distribute all amounts on
deposit in the Class A Note Distribution Account to Noteholders in respect of the Class A Notes in
the following amounts and in the following order of priority:





          (i) pro rata: (x) to the Class A-1A Noteholders the sum of (1) the Class A-1A Interest
Distributable Amount for such Distribution Date and (2) the Class A-1A Interest Carryover
Shortfall, if any, for such Distribution Date; and (y) to the Class A-1B Noteholders the sum
of (1) the Class A-1B Interest Distributable Amount for such Distribution Date and (2) the
Class A-1B Interest Carryover Shortfall, if any, for such Distribution Date;




          (ii) after the application of clause (i) above and until the outstanding principal
balance of the Class A Notes is reduced to zero, pro rata: (x) to the Holders of the Class
A-1A Notes, the Class A-1A Principal Distributable Amount for such Distribution Date; and
(y) to the Holders of the Class A-1B Notes, the Class A-1B Principal Distributable Amount
for such Distribution Date.



          (b) In the event that any withholding tax is imposed on the Trust’s payment (or allocations of
income) to a Class A Noteholder, such withholding tax shall reduce the amount otherwise
distributable to the Class A Noteholder in accordance with this Section 5.09. The Trust
Collateral Agent is hereby authorized and directed to retain from amounts otherwise distributable
to the Class A Noteholders sufficient funds for the payment of any withholding tax that is legally
owed by the Trust as instructed by the Servicer, in writing in a Servicer’s Certificate (but such
authorization shall not prevent the Trust Collateral Agent from contesting at the expense of the
Seller any such withholding tax in appropriate proceedings, and withholding payment of withholding
such tax, if permitted by law, pending the outcome of such proceedings). The amount of any
withholding tax imposed with respect to a Class A Noteholder shall be treated as cash distributed
to such Class A Noteholder at the time it is withheld by the Trust and remitted to the appropriate
taxing authority. If there is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a non-US Noteholder), the Trust Collateral Agent may
withhold such amounts in accordance with this clause (b). In the event that a Class A Noteholder
wishes to apply for a refund of any such withholding tax, the Trust Collateral Agent shall
reasonably cooperate with such Class A Noteholder in making such claim so long as such Class A
Noteholder agrees to reimburse the Trust Collateral Agent for any out-of-pocket expenses incurred.
The Class A Note Insurance Policy shall not cover any shortfalls relating to withholding taxes.




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          (c) Distributions required to be made to Noteholders on any Distribution Date shall be made to
each Class A Noteholder of record on the preceding Record Date either by wire transfer, in
immediately available funds, to the account of such Holder at a bank or other entity having
appropriate facilities therefor, if (i) such Class A Noteholder shall have provided to the Class A
Note Registrar appropriate written instructions at least ten Business Days prior to such
Distribution Date or (ii) such Class A Noteholder is the Seller, or an Affiliate thereof, or, if
not, by check mailed to such Class A Noteholder at the address of such holder appearing in the
Class A Note Register. Notwithstanding the foregoing, the final distribution in respect of any
Class A Note (whether on the Stated Final Maturity or otherwise) will be payable only upon
presentation and surrender of such Class A Note at the office or agency maintained for that purpose
by the Note Registrar pursuant to Section 2.7 of the Indenture.




          SECTION 5.10. Certificate Distribution Account.




          (a) On each Distribution Date, the Trust Collateral Agent shall (based on the information
contained in the Servicer’s Certificate delivered on the related Determination Date) distribute all
amounts on deposit in the Certificate Distribution Account to the Certificateholders.




          (b) In the event that any withholding tax is imposed on the Trust’s payment (or allocations of
income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to the
Certificateholder in accordance with this Section. The Trust Collateral Agent is hereby authorized
and directed to retain from amounts otherwise distributable to the Certificateholders sufficient
funds for the payment of any tax that is legally owed by the Trust as instructed in writing by the
Servicer (but such authorization shall not prevent the Trust Collateral Agent from contesting, at
the expense of the Seller, any such tax in appropriate proceedings, and withholding payment of such
tax, if permitted by law, pending the outcome of such proceedings). The amount of any withholding
tax imposed with respect to a Certificateholder shall be treated as cash distributed to such
Certificateholder at the time it is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a non-US Certificateholder), the Trust Collateral Agent may
withhold such amounts in accordance with this clause (b). In the event that a Holder wishes to
apply for a refund of any such withholding tax, the Trust Collateral Agent shall reasonably
cooperate with such Certificateholder in making such claim so long as such Certificateholder agrees
to reimburse the Trust Collateral Agent for any out-of-pocket expenses incurred.




          (c) Distributions required to be made to Certificateholders on any Distribution Date shall be
made to each Certificateholder of record on the preceding Record Date either by wire transfer, in
immediately available funds, to the account of such Holder at a bank or other entity having
appropriate facilities therefor, if (i) such Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least ten Business Days prior to such
Distribution Date and such Holder’s Certificates in the aggregate evidence a denomination of not
less than $500,000 or (ii) such Certificateholder is the Seller, or an Affiliate thereof, or, if
not, by check mailed to such Certificateholder at the address of such holder appearing in the
Certificate Register. Notwithstanding the foregoing, the final distribution in respect of any
Certificate (whether on the Stated Final Maturity or otherwise) will be payable only upon
presentation and




64









 




surrender of such Certificate at the office or agency maintained for that purpose by the
Certificate Registrar pursuant to Section 3.4 of the Trust Agreement.




          (d) Notwithstanding the foregoing, all transfers of funds between accounts may occur on the
Business Day immediately preceding the Distribution Date related to such transfer; all
distributions from accounts shall occur on the Distribution Date.




          SECTION 5.11. Statements to Certificateholders and Noteholders.




          On or prior to each Distribution Date, the Servicer (provided, that in the event the Backup
Servicer is acting as successor Servicer, the Seller shall assist the Backup Servicer in the
performance of its obligations under this Section 5.11) shall provide to the Trust
Collateral Agent the Servicer’s Certificate (with copies to the Rating Agencies). The Trust
Collateral Agent will be required to make the Servicer’s Certificate related to such Distribution
Date available to the Class A Insurer, the Swap Counterparty, the Class A Noteholders, the
Certificateholder, the Initial Purchasers and Bloomberg, L.P. Each Servicer’s Certificate will
include, among other things, the following information with respect to the Class A Notes with
respect to the related Distribution Date, or the period since the previous Distribution Date, as
applicable.





          (i) the amount of the related distribution allocable to principal;




          (ii) the amount of the related distribution allocable to interest;




          (iii) the amount of the related distribution payable out of the Reserve Account;




          (iv) the Aggregate Outstanding Net Eligible Loan Balance, the Aggregate Outstanding
Eligible Loan Balance and the aggregate Outstanding Balance of all Eligible Contracts as of
the close of business on the last day of the preceding Collection Period;




          (v) the Class A Note Balance and the Pool Factor;




          (vi) the amount of the Servicing Fee paid to the Servicer with respect to the related
Collection Period and/or due but unpaid with respect to such Collection Period or prior
Collection Periods, as the case may be;




          (vii) the Class A-1A Interest Carryover Shortfall, if any, and the Class A-1B Interest
Carryover Shortfall, if any;




          (viii) the total amount of Collections for the related Collection Period;




          (ix) the aggregate Purchase Amount for the Ineligible Loans and Ineligible Contracts,
if any, that was paid in such period;




          (x) LIBOR for the current Distribution Date and LIBOR for the next Distribution Date;



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          (xi) the Net Swap Receipts and the Net Swap Payment, if any; and




          (xii) the amount of any withdrawals pursuant to Section 5.12.


Each amount set forth pursuant to paragraph (i), (ii), (iii), (vi) and (vii) above shall be
expressed as a dollar amount per $1,000 of the initial note principal balance or the Original
Certificate Balance, as applicable.




          The Trust Collateral Agent shall make such information and certain other documents, reports,
and Dealer Loan and Contract information provided by the Servicer’s Certificate available to each
Class A Noteholder, the Swap Counterparty and the Class A Insurer via the Indenture Trustee’s
website. The Indenture Trustee’s internet website shall be initially located at “www.CTSLink.com”
or at such other address as shall be specified by the Indenture Trustee from time to time in
writing to the Class A Noteholders and the Class A Note Insurer. In connection with providing
access to the Indenture Trustee’s website, the Indenture Trustee may require registration and the
acceptance of a disclaimer. The Trust Collateral Agent will make no representation or warranties
as to the accuracy or completeness of such documents and will assume no responsibility therefor.




          The Trust Collateral Agent shall not be liable for the dissemination of information received
and distributed in accordance with this Agreement.




          SECTION 5.12. Swap Agreement




          (a) The Issuer shall enter into the Initial Swap Agreement with the Initial Swap Counterparty.
Subject to the requirements of this Section 5.12, the Issuer shall from time to time, upon
the direction of the Class A Insurer pursuant to Section 5.05 of the Insurance Agreement, enter
into one or more Replacement Swap Agreements in the event that the Initial Swap Agreement is
terminated due to any “Termination Event” or “Event of Default” (each as defined in the Initial
Swap Agreement) prior to its scheduled expiration and in accordance with the terms of such Swap
Agreement. Other than any Replacement Swap Agreement entered into pursuant to this Section
5.12(a), the Issuer may not enter into any additional interest rate swap agreements.




          (b) In the event of any early termination of any Swap Agreement, (i) the Indenture Trustee
shall establish the Swap Termination Payment Account (the “Swap Termination Payment Account”) over
which the Indenture Trustee shall have exclusive control and the sole right of withdrawal, and in
which no Person other than the Indenture Trustee, the Class A Noteholders and the Class A Insurer
shall have any legal or beneficial interest, (ii) any Swap Termination Payments received from the
Swap Counterparty will be remitted to the Swap Termination Payment Account and (iii) any Swap
Replacement Proceeds received from a Replacement Swap Counterparty will be remitted directly to the
Swap Counterparty being replaced; provided, that any such remittance to the Swap Counterparty being
replaced shall not exceed the amounts, if any, owed to the Swap Counterparty under the related Swap
Agreement; provided, further that a Swap Counterparty shall only receive Swap Replacement Proceeds
if all Swap Termination Payments due from such Swap Counterparty to the Issuer have been paid in
full and if such amounts have not been paid in full then the amount of Swap Replacement




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Proceeds necessary to make up any deficiency shall be remitted to the Swap Termination Payment
Account.




          (c) The Issuer shall promptly, following the early termination of any Initial Swap Agreement
due to an “Event of Default” or “Termination Event” (each as defined in the Initial Swap Agreement)
and in accordance with the terms of such Swap Agreement, enter into a Replacement Swap Agreement to
the extent possible and practicable through application of funds available in the Swap Termination
Payment Account, upon the direction of the Class A Insurer pursuant to Section 5.05 of the
Insurance Agreement (so long as no Class A Insurer Default has occurred and is continuing).




          (d) To the extent that (i) the funds available in the Swap Termination Payment Account exceed
the costs of entering into a Replacement Swap Agreement or (ii) the Issuer determines with the
consent of the Class A Insurer (so long as no Class A Insurer Default has occurred and is
continuing) not to replace the Initial Swap Agreement and the Rating Agency Condition is met with
respect to such determination, the amounts in the Swap Termination Payment Account (other than
funds used to pay the costs of entering into a Replacement Swap Agreement, if applicable) shall be
included in Available Funds and allocated in accordance with the order of priority specified in
Section 5.08(a) on the following Distribution Date. In any other situation, amounts on
deposit in the Swap Termination Payment Account at any time shall be invested pursuant to
Section 5.01(b) and on each Distribution Date after the creation of a Swap Termination
Payment Account, the funds therein shall be used to cover any shortfalls in the amounts payable
under Section 5.08(a)(i) through (xi) provided that in no event will the amount withdrawn
from the Swap Termination Payment Account on such Distribution Date exceed the amount of Net Swap
Receipts that would have been required to be paid on such Distribution Date under the terminated
interest rate swap transaction had there been no termination of such transaction. Any amounts
remaining in the Swap Termination Payment Account after payment in full of the Class A Notes shall
be included in Available Funds and allocated in accordance with the order of priority specified in
Section 5.08(a) on the following Distribution Date.




          (e) If the Swap Counterparty is required to post collateral under the terms of the Swap
Agreement, the Indenture Trustee shall establish the Swap Collateral Account (the “Swap Collateral
Account”) over which the Indenture Trustee shall have exclusive control and the sole right of
withdrawal, and in which no Person other than the Indenture Trustee, the Class A Noteholders and
the Class A Insurer shall have any legal or beneficial interest. The Indenture Trustee shall
deposit all collateral received from the Swap Counterparty under the Swap Agreement into the Swap
Collateral Account. Any and all funds at any time on deposit in, or otherwise to the credit of,
the Swap Collateral Account shall be held in trust by the Indenture Trustee for the benefit of the
Class A Noteholders and the Class A Insurer. The only permitted withdrawal from or application of
funds on deposit in, or otherwise to the credit of, the Swap Collateral Account shall be (i) for
application to obligations of the Swap Counterparty to the Issuer under the Swap Agreement in
accordance with the terms of the Swap Agreement or (ii) to return collateral to the Swap
Counterparty when and as required by the Swap Agreement.




          (f) If at any time the Swap Agreement becomes subject to early termination due to the
occurrence of an “Event of Default” or “Termination Event” (as defined in the Swap Agreement), the
Issuer and the Indenture Trustee shall use reasonable efforts (following the




67









 




expiration of any applicable grace period) to enforce the rights of the Issuer thereunder as
may be permitted by the terms of the Swap Agreement and consistent with the terms hereof and
subject to any rights of the Class A Insurer herein or under the Swap Agreement. To the extent not
fully paid from Swap Replacement Proceeds, any Swap Termination Payment owed by the Issuer to the
Swap Counterparty under the Swap Agreement shall be payable to the Swap Counterparty in
installments made on each following Distribution Date until paid in full in accordance with the
order of priority specified in Section 5.08(a). To the extent that the Swap Replacement
Proceeds exceed any such Swap Termination Payments (or if there are no Swap Termination Payments
due to the Swap Counterparty), the Swap Replacement Proceeds in excess of such Swap Termination
Payments, if any, shall be included in Available Funds and allocated and applied in accordance with
the order of priority specified in Section 5.08(a) on the following Distribution Date.




ARTICLE VI




THE SELLER AND THE ISSUER




          SECTION 6.01. Representations and Warranties of the Seller.




          The Seller makes the following representations on which the Trust, the Indenture Trustee and
the Trust Collateral Agent relied in accepting the Trust Property in trust and in connection with
the performance by the Trust Collateral Agent and the Backup Server of its obligations hereunder,
the Class A Insurer relied in issuing the Class A Note Insurance Policy and the Swap Counterparty
relied in entering into the Swap Agreement. The representations speak as of the execution and
delivery of this Agreement on the Closing Date but shall survive the sale of the Contracts to the
Trust:





          (i) Organization and Good Standing. The Seller is duly organized and validly
existing as a limited liability company in good standing under the laws of the State of
Delaware, with power and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted, and has and had at
all relevant times, full power, authority, and legal right to acquire and own the Dealer
Loans and the related Contracts.




          (ii) Due Qualification. The Seller is duly qualified to do business as a
foreign limited liability company in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions in which the ownership or lease of property or the
conduct of its business requires such qualifications.




          (iii) Power and Authority. The Seller has the power and authority to execute
and deliver this Agreement and the other Basic Documents to which it is a party and to carry
out their respective terms. The Seller has full power and authority to sell and assign the
property to be sold and assigned to and deposited with the Trust and has duly authorized
such sale and assignment to the Trust by all necessary action; and the execution, delivery,
and performance of this Agreement and the other Basic Documents to which it is a party have
been duly authorized by the Seller by all necessary action and



68









 







do not require any additional approvals or consents or other action by or any notice to
or any filing with, any Person.




          (iv) Valid Sale; Binding Obligations. This Agreement evidences a valid sale,
transfer, and assignment of the Trust Property enforceable against creditors of and
purchasers from the Seller; and a legal, valid and binding obligation of the Seller
enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of creditors’ rights
generally and to general principles of equity.




          (v) No Violation. The consummation of the transactions contemplated by this
Agreement and the other Basic Documents to which it is a party and the fulfillment of the
terms hereof and thereof does not conflict with, result in any breach of any of the terms
and provisions of, or constitute (with or without notice or lapse of time) a default under,
the Certificate of Formation, limited liability company agreement of the Seller, or any
indenture, agreement, or other instrument to which the Seller is a party or by which it is
bound; nor result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, or other instrument; or violate any
law or, to the best of the Seller’s knowledge, any order, rule, or regulation applicable to
the Seller of any court or of any federal or state regulatory body, administrative agency,
or other governmental instrumentality having jurisdiction over the Seller or its properties.




          (vi) No Proceedings. There are no proceedings or investigations pending, or to
the Seller’s best knowledge threatened, before any court, regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction over the Seller or its
properties: (A) asserting the invalidity of this Agreement, any other Basic Document to
which it is a party or the Class A Notes; (B) seeking to prevent the issuance of the Class A
Notes or the consummation of any of the transactions contemplated by this Agreement or, any
other Basic Document to which it is a party; (C) seeking any determination or ruling that
might materially and adversely affect the performance by the Seller of its obligations
under, or the validity or enforceability of, this Agreement, any other Basic Document to
which it is a party or the Class A Notes; or (D) relating to the Seller and which might
adversely affect the federal income tax attributes of the Class A Notes.




          (vii) Principal Place of Business; Jurisdiction of Organization. The principal
place of business of the Seller is located in Michigan. The Seller is organized under the
laws of Delaware as a limited liability company, and is not organized under the laws of any
other jurisdiction. “Credit Acceptance Funding LLC 2007-2” is the correct legal name of the
Seller indicated on the public records of the Seller’s jurisdiction of organization which
shows it to be organized.




          (viii) [Reserved.]




          (ix) Certificates, Statements and Reports. The officers’ certificates,
statements, reports and other documents prepared by the Seller and furnished by the



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Seller to the Issuer, the Indenture Trustee or the Class A Insurer pursuant to this
Agreement or any other Basic Document to which the Seller is a party, and in connection with
the transactions contemplated hereby or thereby, when taken as a whole, do not contain any
untrue statement of a material fact or omit to state a material fact necessary to make the
statements contained hereon or therein not misleading.




          (x) Accuracy of Information. All information heretofore furnished by the
Seller to the Trust or its successors and assigns or to the Class A Insurer pursuant to or
in connection with any Basic Document or any transaction contemplated thereby is, and all
such information hereafter furnished by the Seller will be, true and accurate in every
material respect on the date such information is stated or certified and does not contain an
material misstatement of fact or omit to state a material fact or any fact necessary to make
the statements contained therein not misleading.




          (xi) Ownership of Seller. Credit Acceptance is the sole owner of the
membership interests of the Seller, all of which are fully paid and nonassessable and owned
of record, free and clear of all mortgages, assignments, pledges, security interests,
warrants, options and rights to purchase.




          (xii) Use of Proceeds. No proceeds of any sale of Seller Property will be used
(i) for a purpose that violates, or would be inconsistent with, Regulation T, U or X
promulgated by the Board of Governors of the Federal Reserve System from time to time or
(ii) to acquire any security in any transaction which is subject to Section 12, 13 or 14 of
the Securities Exchange Act of 1934, as amended.




          (xiii) Taxes. The Seller has filed on or before their respective due dates,
all tax returns which are required to be filed in any jurisdiction or has obtained
extensions for filing such tax returns and has paid all taxes, assessments, fees and other
governmental charges against the Seller or any of its properties, income or franchises, to
the extent that such taxes have become due, other than any taxes or assessments, the
validity of which are being contested in good faith by appropriate proceedings and with
respect to which adequate provision has been made on the books of the Seller as may be
required by GAAP. To the best of the knowledge of the Seller, all such tax returns were
true and correct in all material respects and the Seller knows of any proposed material
additional tax assessment against it nor any basis therefor. Any taxes, assessments, fees
and other governmental charges payable by the Seller in connection with the execution and
delivery of the Basic Documents and the issuance of the Class A Notes have been paid or
shall have been paid at or prior to Closing Date.




          (xiv) Consolidated Returns. The Originator, the Seller and the Issuer will
file a consolidated federal income tax return at all times until the termination of the
Basic Documents.




          (xv) ERISA. The Seller is in compliance in all material respects with ERISA.



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          (xvi) Compliance with Laws. The Seller has complied in all material respects
with all applicable, laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it may be subject.




          (xvii) Material Adverse Change. Since the date of its formation, no event has
occurred that would have a material adverse effect on (i) the financial condition or
operations of the Seller, (ii) the ability of the Seller to perform its obligations under
the Basic Documents, or (iii) the collectibility of the Dealer Loans generally or any
material portion of the Dealer Loans.




          (xviii) Special Purpose Entity.




          (A) The capital of the Seller is adequate for the business and undertakings of the
Seller.




          (B) Other than as provided in the Basic Documents, the Seller is not engaged in any
business transactions with Credit Acceptance.




          (C) Other than in connection with the Basic Documents, the Seller has not incurred any
indebtedness or assumed or guarantied any indebtedness of any other entity.




          (D) At least two directors of the board of directors of the Seller shall be persons who
are not, and will not be, a director, officer, employee or holder of any equity securities
of Credit Acceptance or any of its Affiliates or Subsidiaries.




          (E) Once identified as Seller funds and assets by the Servicer and separated in
accordance with the Servicer’s normal and customary business practices, the funds and assets
of the Seller are not, and will not be, commingled with the funds of any other Person,
except for Dealer Collections and erroneous deposits.




          (F) The limited liability company agreement of the Seller requires it to maintain (A)
correct and complete minute books and records of account, and (B) minutes of the meetings
and other proceedings of its shareholders and board of directors.




          (xix) Solvency; Fraudulent Conveyance. The Seller is solvent, is able to pay
its debts as they become due and will not be rendered insolvent by the transactions
contemplated by the Basic Documents and, after giving effect thereto, will not be left with
an unreasonably small amount of capital with which to engage in its business. The Seller
does not intend to incur, or believes that it has incurred, debts beyond its ability to pay
such debts as they mature. The Seller does not contemplate the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official or any of its assets. The amount of
consideration being received by the Seller upon the sale of the Seller Property to the Trust
constitutes reasonably equivalent value and fair consideration for the Seller Property. The
Seller is not selling the Seller Property to the Trust, as provided in the Basic Documents,
with any intent to hinder, deal or defraud any of Credit Acceptance’s creditors.



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          (xx) Payment to Originator. The Seller has given reasonably equivalent value
and fair consideration for the Contributed Property conveyed to the Seller under the
Contribution Agreement and such transfer was not made for or on account of an antecedent
debt. No transfer by the Originator of any originator property under the Contribution
Agreement is or may be voidable under any section of the Bankruptcy Code.



          SECTION 6.02. Limitation on Liability of Seller and Others.




          Neither the Seller nor any of the directors or officers or employees or agents of the Seller
shall be under any liability to the Trust, the Trust Collateral Agent or the Class A Noteholders or
the Certificateholders, except as provided under this Agreement for any action taken or omitted to
be taken pursuant to this Agreement; provided, however, that this provision shall
not protect the Seller against any liability that would otherwise be imposed by reason of willful
misconduct or negligence in the performance of their respective duties under this Agreement. Each
of the Seller and any director or officer or employee or agent of the Seller may rely in good faith
on the advice of counsel, Opinion of Counsel, Officer’s Certificate, or on any document of any
kind, prima facie properly executed and submitted by any Person respecting any matters arising
hereunder. The Seller shall not be under any obligation to appear in, prosecute, or defend any
legal action that shall not be incidental to its obligations under this Agreement, and that in its
opinion may involve it in any expense or liability; provided, however, that the
Seller 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
Class A Noteholders and the Certificateholders under this Agreement. In such event, the legal
expenses and costs of such action and any liability resulting therefrom shall be expenses, costs,
and liabilities of the Seller.




          SECTION 6.03. Seller May Own Notes.




          The Seller and any Person controlling, controlled by, or under common control with the Seller
may in their individual or any other capacities become the owner or pledgee of the Class A Notes
with the same rights as it would have if it were not the Seller or an affiliate thereof, except as
otherwise provided in the definition of “Noteholder” specified in Section 1.01 and except
as otherwise specifically provided herein. The Class A Notes so owned by or pledged to the Seller
or such controlling, controlled or commonly controlled Person shall have an equal and proportionate
benefit under the provisions of this Agreement, without preference, priority, or distinction as
among all of the Class A Notes.




          SECTION 6.04. Additional Covenants of the Seller.




          The Seller shall not do any of the following, without: (i) the prior written consent of the
Class A Insurer; and (ii) the prior written consent of the Trust Collateral Agent, who shall,
without any exercise of its own discretion, also provide its written consent to the Seller upon
receipt by it of a copy of the written consent of the Class A Insurer:




          (i) engage in any business or activity other than those set forth in the Certificate of
Formation or limited liability company agreement of the Seller or amend


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           the Seller’s Certificate of Formation or limited liability company agreement other than
in accordance with its terms as in effect on the date hereof;




          (ii) incur any indebtedness, or assume or guaranty any indebtedness of any other
entity, other than (A) any indebtedness incurred in connection with the Class A Notes, and
(B) any indebtedness to Credit Acceptance incurred in connection with the acquisition of the
Dealer Loans, which indebtedness shall be subordinated to all other obligations of the
Seller and Credit Acceptance; or




          (iii) dissolve or liquidate, in whole or in part; consolidate or merge with or into any
other entity or convey or transfer its properties and assets substantially as an entirety to
any entity.




     SECTION 6.05. Indemnities of the Issuer.



     The Issuer shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Issuer under this Agreement and the other Basic Documents to which
it is a party and no implied duties or obligations shall be read into this Agreement against the
Issuer.




          (i) The Issuer shall defend, indemnify, and hold harmless the Trust Collateral Agent,
the Servicer, the Backup Servicer, the Indenture Trustee, the Class A Insurer and the Owner
Trustee and their respective officers, directors, employees and agents, and the Trust 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 Issuer or any Affiliate
thereof of a Financed Vehicle.




          (ii) The Issuer shall indemnify, defend, and hold harmless the Trust Collateral Agent,
the Indenture Trustee, the Owner Trustee, the Servicer, the Backup Servicer, the Class A
Insurer and their respective officers, directors, employees and agents, and the Trust from
and against any taxes that may at any time be asserted against them with respect to the
transactions contemplated herein, including, without limitation, any sales, gross receipts,
general corporation, tangible personal property, privilege, or license taxes (but, in the
case of the Trust, not including any taxes asserted with respect to, and as of the date of,
the sale of the Dealer Loans to the Trust or the issuance and original sale of the Class A
Notes, or asserted with respect to ownership of the Dealer Loans, or federal or other income
taxes arising out of the transactions contemplated by this Agreement) and costs and expenses
in defending against the same.




          (iii) The Issuer shall indemnify, defend, and hold harmless the Trust, the Servicer,
the Backup Servicer, the Trust Collateral Agent, the Owner Trustee, the Indenture Trustee,
the Class A Insurer, and each of their respective officers, directors, employees and agents,
and the Class A Noteholders from and 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 such party through the breach by the Issuer of
its obligations under this Agreement or any other Basic Document to which it is a party, the
negligence, willful misconduct or bad faith of the Issuer in the



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performance of its duties under this Agreement or any other Basic Document to which it
is a party.




          (iv) The Issuer shall indemnify, defend, and hold harmless the Trust Collateral Agent,
the Indenture Trustee, the Owner Trustee, the Class A Insurer, the Servicer, the Backup
Servicer and each of their respective officers, directors, employees and agents from and
against all costs, expenses, losses, claims, damages, and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts and duties herein
contained, except, with respect to any such indemnified party, to the extent that such cost,
expense, loss, claim, damage, or liability: (a) shall be due to the willful misconduct, bad
faith, or negligence (or in the case of the Owner Trustee, gross negligence) of such
indemnified party; or (b) shall arise from such indemnified party’s breach of any of its
representations or warranties in any material respect set forth in the Indenture.




          (v) The Issuer shall indemnify, defend, and hold harmless, the Indenture Trustee, the
Owner Trustee, the Class A Insurer and each of their officers, directors, employees and
agents from and against all costs, expenses, losses, claims, damages, and liabilities
arising out of or incurred in connection with the acceptance or performance of the trusts
and duties contained in the Trust Agreement, except, as to any such party, to the extent
that such cost, expense, loss, claim, damage, or liability: (a) shall be due to the willful
misconduct, bad faith or negligence (or in the case of the Owner Trustee, gross negligence)
of such party; or (b) shall arise from such breach of any of its representations or
warranties set forth in the Trust Agreement. The indemnification of the Owner Trustee
hereunder shall include indemnification for the matters set forth in Section 8.2 of
the Trust Agreement.



          Indemnification under this Section by the Issuer shall survive the termination of this
Agreement and shall include reasonable fees and expenses of counsel and expenses of litigation. If
the Issuer shall have made any indemnity payments pursuant to this Section and the recipient
thereafter collects any of such amounts from others, the recipient shall promptly repay such
amounts to the Issuer, without interest. Amounts payable by the Issuer pursuant to this
Section 6.05 shall only be payable: (i) in accordance with and only to the extent funds
are available therefor pursuant to Section 5.08(a) hereof; or (ii) to the extent the Issuer
receives additional funds designated for such purpose. No amount owing by the Issuer under this
Section 6.05 shall constitute a claim (as defined in Section 101(5) of the Bankruptcy Code)
against the Issuer and recourse to it.




ARTICLE VII




THE SERVICER




          SECTION 7.01. Representations of Servicer.




          Credit Acceptance makes the following representations on which the Trust, the Indenture
Trustee and the Trust Collateral Agent relies in accepting the Trust Property in trust and in
connection with the performance by the Trust Collateral Agent of its obligations



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hereunder, the Class A Insurer relies in issuing the Class A Note Insurance Policy and the
Swap Counterparty relies in entering into the Swap Agreement. The representations speak as of the
execution and delivery of this Agreement on the Closing Date but shall survive the sale of the
Dealer Loans to the Trust:





          (i) Organization and Good Standing. The Servicer is duly organized and is
validly existing as a corporation in good standing under the laws of the State of Michigan,
with power and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted, and has and had at
all relevant times, full power, authority, and legal right to acquire, own, sell, and
service the Dealer Loans and the related Contracts and to perform its other obligations
under the Basic Documents.




          (ii) Due Qualification. The Servicer is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses and approvals
in all jurisdictions in which the ownership or lease of property or the conduct of its
business including the servicing of the Dealer Loans and the related Contracts as required
by this Agreement requires such qualifications except where such failure will not have a
material adverse effect.




          (iii) Power and Authority. The Servicer has the power and authority to execute
and deliver this Agreement and the other Basic Documents to which it is a party and to carry
out their respective terms; and the execution, delivery, and performance of this Agreement
and the other Basic Documents to which it is a party have been duly authorized by the
Servicer by all necessary corporate action.




          (iv) Binding Obligations. This Agreement and the other Basic Documents to
which it is a party constitute legal, valid, and binding obligations of the Servicer
enforceable in accordance with their respective terms, subject to the effects of bankruptcy,
insolvency, reorganization, or other similar laws affecting the enforcement of creditors’
rights generally and to general principles of equity.




          (v) No Violation. The consummation of the transactions contemplated by this
Agreement and the other Basic Documents to which it is a party and the fulfillment of the
terms hereof and thereof do not conflict with, result in any breach of any of the terms and
provisions of, nor constitute (with or without notice or lapse of time) a default under, the
Certificate of Incorporation or bylaws of the Servicer, or any indenture, agreement, or
other instrument to which the Servicer is a party or by which it may be bound; nor result in
the creation or imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement, or other instrument (other than this Agreement); nor, to the
best of the Servicer’s knowledge, violate any law applicable to the Servicer or any order,
rule, or regulation applicable to the Servicer of any court or of any federal or state
regulatory body, administrative agency, or other governmental instrumentality having
jurisdiction over the Servicer or its properties or in any way materially adversely affect
the interest of the Class A Noteholders, the Class A Insurer, the Swap Counterparty, the
Trust, the Trust Collateral Agent or the Indenture



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Trustee in any of the Trust Property or adversely affect the Servicer’s ability to
perform its obligations under this Agreement or any other Basic Document to which it is a
party.




          (vi) No Proceedings. There are no proceedings or investigations pending, or,
to the Servicer’s best knowledge, threatened, before any court, regulatory body,
administrative agency, or other governmental instrumentality having jurisdiction over the
Servicer or its properties: (A) asserting the invalidity of this Agreement, any of the Basic
Documents to which it is a party or the Class A Notes, (B) seeking to prevent the issuance
of the Class A Notes or the consummation of any of the transactions contemplated by this
Agreement or any of the Basic Documents to which it is a party, (C) seeking any
determination or ruling that might materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability of, this Agreement, any
of the Basic Documents to which it is a party or the Class A Notes, or D) relating to the
Servicer and which might adversely affect the federal income tax attributes of the Class A
Notes.




          (vii) No Consents. The Servicer is not required to obtain the consent of any
other party or any consent, license, approval or authorization, or registration or
declaration with, any governmental authority, bureau or agency in connection with the
execution, delivery, performance, validity or enforceability of this Agreement or the other
Basic Documents to which it is a party.




          (viii) Approvals. The Servicer: (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, which violation
materially and adversely affects the business or condition (financial or otherwise) of the
Servicer and its subsidiaries, the Servicer’s ability to perform its obligations hereunder
or under any other Basic Document or any of the Trust Property; (ii) has not failed to
obtain any licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its property or to the conduct of its business which failure to obtain will
materially and adversely affect the business or condition (financial or otherwise) of the
Servicer and its subsidiaries, the Servicer’s ability to perform its obligations hereunder
or under any other Basic Document or any of the Trust Property; and (iii) is not in
violation of any term of any agreement, charter instrument, bylaw or instrument to which it
is a party or by which it may be bound, which violation or failure to obtain materially and
adversely affect the business or condition (financial or otherwise) of the Servicer and its
subsidiaries, the Servicer’s ability to perform its obligations hereunder or under any other
Basic Document or any of the Trust Property.




          (ix) Investment Company. The Servicer is not an investment company which is
required to register under the Investment Company Act of 1940, as amended.




          (x) Taxes. The Servicer has filed on a timely basis all material tax returns
required to be filed by it and paid all material taxes, to the extent that such taxes have
become due.




          (xi) No Injunctions. There are no existing injunctions, writs, restraining
orders or other similar orders which might adversely affect the performance



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by the Servicer or its obligations under, or the validity and enforceability of, this
Agreement or any other Basic Document to which it is a party.




          (xii) Practices. The practices used or to be used by the Servicer, to monitor
collections with respect to the Trust Property and repossess and dispose of the Financed
Vehicles related to the Trust Property will be, in all material respects, in conformity with
the requirements of all applicable federal and State laws, rules and regulations, and this
Agreement. The Servicer is in possession of all State and local licenses (including all
debt collection licenses) required for it to perform its services hereunder, and none of
such licenses has been suspended, revoked or terminated, except where the failure to have
such licenses would not be reasonably likely to have material adverse effect on its ability
to service the Dealer Loans or Contracts or on the interest of the Indenture Trustee, the
Trust Collateral Agent, the Class A Insurer, the Swap Counterparty or the Class A
Noteholders.



          SECTION 7.02. Indemnities of Servicer.




          The Servicer shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement and the other Basic Documents to which
it is a party and no implied duties or obligations shall be read into this Agreement against the
Servicer.





          (i) The Servicer shall defend, indemnify, and hold harmless the Trust Collateral Agent,
the Backup Servicer, the Indenture Trustee, the Class A Insurer and the Owner Trustee and
their respective officers, directors, employees and agents, and the Trust 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.




          (ii) The Servicer shall indemnify, defend, and hold harmless the Trust Collateral
Agent, the Indenture Trustee, the Owner Trustee, the Backup Servicer, the Class A Insurer
and their respective officers, directors, employees and agents, and the Trust from and
against any taxes that may at any time be asserted against them with respect to the
transactions contemplated herein, including, without limitation, any sales, gross receipts,
general corporation, tangible personal property, privilege, or license taxes (but, in the
case of the Trust, not including any taxes asserted with respect to, and as of the date of,
the sale of the Dealer Loans to the Trust or the issuance and original sale of the Class A
Notes, or asserted with respect to ownership of the Dealer Loans, or federal or other income
taxes arising out of the transactions contemplated by this Agreement) and costs and expenses
in defending against the same.




          (iii) The Servicer shall indemnify, defend, and hold harmless the Trust, the Backup
Servicer, the Trust Collateral Agent, the Owner Trustee, the Indenture Trustee, the Class A
Insurer, the Swap Counterparty and each of their respective officers, directors, employees
and agents, and the Class A Noteholders from and 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 such party



77









 







through the breach by the Servicer of its obligations under this Agreement or any other
Basic Document to which it is a party, in its capacity as Servicer, the negligence, willful
misconduct or bad faith of the Servicer in the performance of its duties under this
Agreement or any other Basic Document to which it is a party.




          (iv) The Servicer shall indemnify, defend, and hold harmless the Trust Collateral
Agent, the Indenture Trustee, the Owner Trustee, the Class A Insurer, the Backup Servicer
and each of their respective officers, directors, employees and agents from and against all
costs, expenses, losses, claims, damages, and liabilities arising out of or incurred in
connection with the acceptance or performance of the trusts and duties herein contained,
except, with respect to the any such indemnified party, to the extent that such cost,
expense, loss, claim, damage, or liability: (a) shall be due to the willful misconduct, bad
faith, or negligence (or, in the case of the Owner Trustee, gross negligence) of such
indemnified party; (b) shall arise from such indemnified party’s breach of any of its
representations or warranties in any material respect set forth in the Indenture; or (c) as
to the Trust Collateral Agent, shall arise out of or be incurred in connection with the
performance by the Trust Collateral Agent of the duties of successor Servicer hereunder.




          (v) The Servicer shall indemnify, defend, and hold harmless, the Indenture Trustee, the
Owner Trustee, the Class A Insurer and each of their officers, directors, employees and
agents from and against all costs, expenses, losses, claims, damages, and liabilities
arising out of or incurred in connection with the acceptance or performance of the trusts
and duties contained in the Trust Agreement, except, as to any such party, to the extent
that such cost, expense, loss, claim, damage, or liability: (a) shall be due to the willful
misconduct, bad faith or negligence (or in the case of the Owner Trustee, gross negligence)
of such party; or (b) shall arise from such breach of any of its representations or
warranties set forth in the Trust Agreement. The Servicer agrees to the indemnification set
forth in Section 8.2 of the Trust Agreement, which provisions are incorporated by reference
herein.




          (vi) The Servicer shall indemnify, defend, and hold harmless, the Backup Servicer and
its officers, directors, employees and agents from and against all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense, claim, damage, or
liability arose out of, or was imposed upon the Backup Servicer resulting from the acts or
omissions of the Servicer in the performance of its duties in its capacity as Servicer under
this Agreement or any other Basic Document to which it is a party.



          Indemnification under this Section by the Servicer, with respect to the period such Person was
(or was deemed to be) the Servicer, shall 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 shall
include reasonable fees and expenses of counsel and expenses of litigation. If the Servicer shall
have made any indemnity payments pursuant to this Section and the recipient thereafter collects any
of such amounts from others, the recipient shall promptly repay such amounts to the Servicer,
without interest.




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          For purposes of this Section 7.02, in the event of the termination of the rights and
obligations of the Servicer (or any successor thereto pursuant to Section 7.03) as Servicer
pursuant to Section 8.01, a non-renewal of the servicing term referred to in Section
4.01(a) or a resignation by such Servicer pursuant to this Agreement, such Servicer shall
remain the Servicer until a successor Servicer has accepted its appointment pursuant to Section
8.02. The provisions of this paragraph shall in no way affect the survival pursuant to the
preceding paragraph of the indemnification by the Servicer.




          Notwithstanding any other provision of this Agreement, the obligations of the Servicer
described in this Section shall not terminate or be deemed released upon the resignation or
termination of the Servicer and shall survive any termination of this Agreement to the extent that
such obligations arise from the Servicer’s actions hereunder while acting as Servicer.




          SECTION 7.03. Merger or Consolidation of, or Assumption of the Obligations of, Servicer;
Resignation.




          Any Person (i) into which the Servicer may be merged or consolidated, (ii) resulting from any
merger, conversion, or consolidation to which the Servicer shall be a party, or (iii) succeeding to
the business of the Servicer (or to substantially all of the Servicer’s business insofar as it
relates to the making of Dealer Loans to Dealers and the servicing of the Dealer Loans and the
related Contracts), which corporation in any of the foregoing cases executes an agreement of
assumption acceptable to the Class A Insurer to perform every obligation of the Servicer under this
Agreement and the other Basic Documents to which it is a party, will be the successor to the
Servicer under this Agreement and the other Basic Documents to which it is a party without the
execution or filing of any paper or any further act on the part of any of the parties to this
Agreement; provided, however, that (x) the Servicer shall have delivered to the
Trust Collateral Agent, the Class A Insurer, the Swap Counterparty, the Owner Trustee and the
Indenture Trustee an Officer’s Certificate and an Opinion of Counsel each stating that such
consolidation, conversion, merger or succession and such agreement of assumption comply with this
Section and that all conditions precedent provided for in this Agreement and the other Basic
Documents to which it is a party relating to such transaction have been complied with and (y) the
Servicer shall have delivered to the Trust Collateral Agent, the Class A Insurer, the Swap
Counterparty, the Owner Trustee and 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 filed that are necessary fully to preserve and protect the interest of
the Trust in the Contracts which secure the Dealer Loans, and reciting the details of such filings,
or (B) stating that, in the opinion of such Counsel, no such action shall be necessary to preserve
and protect such interest and (z) the Rating Agency Condition shall have been satisfied. The
Servicer shall provide notice of any merger, conversion, consolidation or succession pursuant to
this Section to the Class A Insurer, the Swap Counterparty, the Trust Collateral Agent and the
Rating Agencies then providing a rating for the Class A Notes. The Trust Collateral Agent shall
forward a copy of each such notice to each Class A Noteholder. Notwithstanding anything herein to
the contrary, the execution of the foregoing agreement of assumption and compliance with clauses
(x), (y) and (z) above shall be conditions to the consummation of the transactions referred to in
clauses (i), (ii), (iii) or (iv) above.




          SECTION 7.04. Limitation on Liability of Servicer and Others.




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          Subject to Section 7.02, neither the Servicer nor any of the directors or officers or
employees or agents of the Servicer shall be under any liability to the Trust, the Trust Collateral
Agent, the Swap Counterparty or the Class A Noteholders or the Certificateholders, except as
provided under this Agreement or any other Basic Document to which it is a party, for any action
taken or omitted to be taken pursuant to this Agreement in the good faith business judgment of the
Servicer; provided, however, that this provision shall not protect the Servicer
against any liability that would otherwise be imposed by reason of bad faith, willful misconduct in
the performance of duties, or by reason of negligence in the performance of its duties under this
Agreement or any other Basic Document to which it is a party. The Servicer and any director,
officer or employee or agent of the Servicer may rely in good faith on any advice of counsel,
Opinion of Counsel or on any Officer’s Certificate of the Seller or certificate of auditors or
other document of any kind believed to be genuine and to have been signed by the proper party in
respect of any matters arising under this Agreement.




          Except as provided in this Agreement, the Servicer shall not be under any obligation to appear
in, prosecute, or defend any legal action that shall not be incidental to its duties to service the
Dealer Loans and the related Contracts 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 Class
A Noteholders and the Certificateholders under this Agreement. In such event, the legal expenses
and costs of such action and any liability resulting therefrom shall be expenses, costs, and
liabilities of the Servicer.




          SECTION 7.05. Delegation of Duties.




          The Servicer may at any time perform specific duties or all the duties enumerated herein as
servicer under this Agreement through a sub-contractor acceptable to the Class A Insurer;
provided, that no such delegation or subcontracting shall relieve the Servicer of its
responsibilities with respect to such duties as to which the Servicer shall remain primarily
responsible with respect thereto.




          SECTION 7.06. Certification Upon Satisfaction.




          Upon the satisfaction and discharge of the Indenture pursuant to Section 4.1 thereof,
the Servicer shall deliver to the Owner Trustee a written certification of a Responsible Officer
stating, to the best knowledge of such Responsible Officer, that (a) no claims remain against the
Issuer, or (b) the only pending or threatened claims known to such Responsible Officer (including
contingent and unliquidated claims) are those listed on a schedule to such certification.




ARTICLE VIII

DEFAULT




          SECTION 8.01. Servicer Defaults.



If any one of the following events (each, a “Servicer Default”) shall occur:




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          (i) any failure by the Servicer: (x) to deposit to the Collection Account (A) any
amount required to be deposited therein by the Servicer (other than any such failure
resulting from an administrative or technical error of the Servicer in the amount so
deposited); or (B) within one (1) Business Day after the Servicer becomes aware that, as a
result of an administrative or technical error of the Servicer, any amount previously
deposited by the Servicer to the Collection Account was less than the amount required to be
deposited therein by the Servicer, the amount of such shortfall; or (y) to deliver to the
Trust Collateral Agent or the Class A Insurer the Servicer’s Certificate on the related
Determination Date;




          (ii) failure on the part of the Servicer duly to observe or to perform in any material
respect any other covenants or agreements of the Servicer set forth in any Basic Document,
or any representation or warranty of the Servicer made in this Agreement, any other Basic
Document or in any certificate or other writing delivered pursuant to any Basic Document
proving to have been incorrect in any material respect as of the time when the same shall
have been made, which default, if capable of cure, shall continue unremedied for a period of
30 days (or a longer period, not in excess of 60 days, as may be reasonably necessary to
remedy such default, if the default is capable of remedy within 60 days or less and the
Servicer delivers an Officer’s Certificate to the Indenture Trustee to the effect that it
has commenced, or will promptly commence and diligently pursue, all reasonable efforts to
remedy the default) after (x) there shall have been given written notice of such failure,
requiring the same to be remedied, (1) to the Servicer, by the Trust Collateral Agent, or
(2) to the Servicer by the Class A Insurer, or if a Class A Insurer Default has occurred and
is continuing, by the Trust Collateral Agent at the direction of Class A Noteholders
representing at least 25% or the Outstanding Class A Note Balance; or (y) discovery of such
failure by an officer of the Servicer; or




          (iii) the entry of a decree or order by a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a conservator, receiver, or
liquidator for the Servicer or any of its subsidiaries in any insolvency, readjustment of
debt, marshalling of assets and liabilities, or similar proceedings, or for the winding up
or liquidation of its respective affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 60 consecutive days or the entry of any decree or
order for relief in respect of the Servicer or any of its subsidiaries under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debt, or similar law,
whether now or hereafter in effect, which decree or order for relief continues unstayed and
in effect for a period of 60 consecutive days; or




          (iv) the consent by the Servicer or any of its subsidiaries to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities, or similar proceedings of or relating to the Servicer or any of
its subsidiaries or relating to substantially all of its property; or the admission by the
Servicer or any of its subsidiaries in writing of its inability to pay its debts generally
as they become due, the filing by the Servicer or any of its subsidiaries of a petition to
take advantage of any applicable insolvency or reorganization statute, the making by the
Servicer or any of its subsidiaries of an assignment for the benefit of its



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creditors, or the voluntarily suspension by the Servicer or any of its subsidiaries of
payment of its obligations;




          (v) the Servicer breaches any Financial Covenant; or




          (vi) the Originator or Servicer, if Credit Acceptance is the Servicer, fails to pay
when due Purchase Amounts in excess of $100,000;


then, and in each and every case, the Trust Collateral Agent, if so requested by the Class A
Insurer, or if a Class A Insurer Default has occurred and is continuing, the Majority Noteholders
by notice then given in writing to the Servicer, the Backup Servicer, the Swap Counterparty, the
Trust Collateral Agent may: (A) terminate all of the rights and obligations of the Servicer under
this Agreement or (B) renew the term of the Servicer pursuant to Section 4.01(a) hereof.
Upon sending or receiving any such notice, the Trust Collateral Agent shall promptly send a copy
thereof to the Indenture Trustee, the Owner Trustee, the Rating Agencies, the Class A Insurer, the
Swap Counterparty and to each Class A Noteholder. Within 30 days after the receipt by the Backup
Servicer of such written notice (if such notices relates to terminating the Servicer) and subject
to Section 8.02(a)), all authority and power of the Servicer under this Agreement, whether
with respect to the Class A Notes or the Dealer Loans or Contracts or otherwise, shall, without
further action, pass to and be vested in the Backup Servicer or such successor Servicer as may be
appointed under Section 8.02; and, without limitation, the Backup Servicer is 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 notice of
termination, whether to complete the transfer and endorsement of the Dealer Loans and the Contracts
and related documents, or otherwise.




          The predecessor Servicer shall cooperate with the successor Servicer and the Backup Servicer
in effecting the termination of the responsibilities and rights of the predecessor Servicer under
this Agreement, including the transfer to the Backup Servicer or the successor Servicer for
administration by it of all cash amounts that shall at the time be held by the predecessor servicer
for deposit, or shall thereafter be received with respect to a Dealer Loan or related Contract, and
the related accounts and records maintained by the Servicer. All Transition Expenses shall be paid
by the predecessor servicer upon presentation of reasonable documentation of such costs and
expenses. If such Transition Expenses are not paid to the successor Servicer by the predecessor
Servicer, such Transition Expenses shall be paid under Section 5.08(a)(i) hereof. In
addition, the Class A Insurer shall have the option to pay the Transition Expenses. If the Class A
Insurer elects to pay any such Transition Expenses, the amount paid by the Class A Insurer shall
constitute part of the Reimbursement Obligations owed to it.




          SECTION 8.02. Appointment of Successor.




          (a) Upon the Servicer’s receipt of notice of termination pursuant to Section 8.01, the
expiration and non-renewal of the Servicer’s term pursuant to Section 4.01(a) or the Servicer’s
resignation in accordance with the terms of this Section 4.14, the predecessor servicer
shall continue to perform its functions as Servicer under this Agreement, in the case of



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termination, only until (i) the date of such expiration, in the case of a termination pursuant
to Section 4.01(a), (ii) the date specified in such termination notice or, if no such date
is specified in a notice of termination, until receipt of such notice and, (iii) in the case of
resignation, until the later of (x) the date 30 days from the delivery to the Backup Servicer and
the Trust Collateral Agent and the Indenture Trustee of written notice of such resignation (or the
date of written confirmation of such notice prior to the expiration of the 45 days) in accordance
with the terms of this Agreement and (y) the date upon which the predecessor servicer shall become
unable to act as Servicer, as specified in the notice of resignation and accompanying Opinion of
Counsel. In the event of the Servicer’s resignation or termination hereunder, and, so long as a
Class A Insurer Default is not continuing, if the Class A Insurer so directs, the Backup Servicer
shall be the successor in all respects to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be subject to the
responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, as modified or limited hereby or by the Backup Servicing Agreement;
provided, however, that the Backup Servicer shall not be liable for any actions of
any Servicer prior to such succession or for any breach by the Servicer of any of its
representations and warranties contained in this Agreement or in any related document or agreement.
Notwithstanding the above, if the Backup Servicer is legally unable to so act or, so long as a
Class A Insurer Default is not continuing, the Class A Insurer otherwise directs, the Class A
Insurer may appoint a successor Servicer, otherwise, the Trust Collateral Agent shall appoint
(after soliciting bids from potential servicers), or petition a court of competent jurisdiction to
appoint, a Servicer as the successor Servicer hereunder, in the assumption of all or any part of
the responsibilities, duties or liabilities of the outgoing Servicer hereunder. In the event that
Wells Fargo Bank, National Association, as Backup Servicer, is legally unable to act as Servicer
under this Agreement and another entity is appointed as successor Servicer under this Section
8.02(a), Wells Fargo Bank, National Association shall have no further obligation to perform the
obligations of Servicer or Backup Servicer under this Agreement. Pending appointment of a
successor to the outgoing Servicer hereunder, if the Backup Servicer is prohibited by law from so
acting (as evidenced by an Opinion of Counsel to the Trust Collateral Agent and the Class A
Insurer) or, so long as a Class A Insurer Default is not continuing, the Class A Insurer otherwise
directs, the outgoing Servicer shall continue to act as Servicer hereunder until a successor
Servicer which, so long as a Class A Insurer Default is not continuing, shall be acceptable to the
Class A Insurer is appointed and assumes the obligations as successor Servicer. In the event the
Backup Servicer assumes the responsibilities of the Servicer pursuant to this Section 8.02,
the Backup Servicer will make reasonable efforts consistent with Applicable Law to become licensed,
qualified and in good standing under the laws which require licensing or qualification, in order to
perform its obligations as Servicer hereunder or, alternatively, shall retain an agent who is so
licensed, qualified and in good standing.




          (b) Upon appointment, the Backup Servicer or the successor Servicer shall be the successor in
all respects to the predecessor servicer and shall be subject to the responsibilities, duties, and
liabilities arising thereafter relating thereto placed on the predecessor servicer, (subject to the
limitations and modifications thereto set forth herein or in the Backup Servicing Agreement) and
shall be entitled to (to the extent arranged in accordance with the following paragraph) the
Servicing Fee, Servicer Expenses, Reliening Expenses, Repossession Expenses and all of the rights
granted to the predecessor servicer, by the terms and provisions of this Agreement, provided that
neither the Backup Servicer nor the successor Servicer shall be



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liable for the acts or omissions of any predecessor servicer. The Backup Servicer or any
successor Servicer shall provide Credit Acceptance with copies of all documents and information
reasonably necessary for Credit Acceptance to perform its obligations under Section 4.17 of
this Agreement.




          (c) In connection with such appointment, the Trust Collateral Agent may make such arrangements
for the compensation of such successor Servicer (including Transition Expenses) out of payments on
Dealer Loans and related Contracts as it, the Class A Insurer (so long as a Class A Insurer Default
is not continuing) and such successor Servicer shall agree; provided, however, that
no such compensation (excluding Transition Expenses, Repossession Expenses and Reliening Expenses)
shall be in excess of the Servicing Fee. The Backup Servicer, the Trust Collateral Agent and any
such successor Servicer shall take such action, consistent with this Agreement, as shall be
necessary to effectuate any such succession.




          SECTION 8.03. Notification to Class A Noteholders and Certificateholders.




          Upon any termination of, or appointment of a successor to, the Servicer pursuant to this
Article VIII, the Trust Collateral Agent shall promptly upon its receipt of notice thereof give
prompt written notice thereof to Class A Noteholders and the Certificateholders at their respective
addresses appearing in the Note Register and the Certificate Register, to the Owner Trustee and to
each of the Rating Agencies then rating the Class A Notes, the Swap Counterparty and the Class A
Insurer.




          SECTION 8.04. Waiver of Past Defaults.




          So long as a Class A Insurer Default is not continuing, the Class A Insurer, may, on behalf of
all Class A Noteholders, waive any or all default(s) by the Servicer or the Seller in the
performance of its obligations hereunder and its consequences, except a default in making any
required deposits to or payments from a Trust Account in accordance with this Agreement. Upon any
such waiver of a past default, such default shall cease to exist, and any Servicer Default arising
therefrom shall be deemed to have been remedied for every purpose of this Agreement.
Notwithstanding anything herein to the contrary, the Class A Insurer shall have the right to waive
the payment of any Purchase Amount required hereunder.




ARTICLE IX




THE TRUST COLLATERAL AGENT




          SECTION 9.01. Duties of the Trust Collateral Agent.




          (a) The Issuer hereby appoints Wells Fargo Bank, National Association, as the Trust Collateral
Agent, and Wells Fargo Bank, National Association hereby accepts such appointment.




          (b) (i) the Trust Collateral Agent undertakes to perform such duties and only such duties as
are specifically set forth in this Agreement and the Basic Documents and no implied covenants or
obligations shall be read into this Sale and Servicing Agreement or the Basic Documents against the
Trust Collateral Agent; and




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           (ii) in the absence of bad faith or willful misconduct on its part, the Trust
Collateral Agent may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions furnished to
the Trust Collateral Agent and conforming to the requirements of this Agreement and the
Basic Documents; however, the Trust Collateral Agent shall examine the certificates and
opinions to determine whether or not they conform on their face to the requirements of this
Agreement and the Basic Documents.



          (c) The Trust Collateral Agent may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own bad faith or willful misconduct, except that:





          (i) this paragraph does not limit the effect of paragraph (b) of this Section; and




          (ii) the Trust Collateral Agent shall not be liable for any error of judgment made in
good faith by a Responsible Officer of the Trust Collateral Agent unless it is proved that
the Trust Collateral Agent was negligent in ascertaining the pertinent facts.



          (d) Money held in trust by the Trust Collateral Agent need not be segregated from other funds
except to the extent required by law or the terms of this Agreement.




          (e) No provision of this Agreement shall require the Trust Collateral Agent to expend or risk
its own funds or otherwise incur liability (financial or otherwise) in the performance of any of
its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable
grounds to believe that repayment of such funds or indemnity satisfactory to it against such risk
or liability reasonably satisfactory to it is not reasonably assured to it.




          (f) Every provision of this Agreement relating to the conduct or affecting the liability of or
affording protection to the Trust Collateral Agent shall be subject to the provisions of this
Section.




          (g) Without limiting the generality of this Section, the Trust Collateral Agent shall have no
duty (A) to see to any recording, filing or depositing of this Agreement or any agreement referred
to herein or any financing statement or continuation statement evidencing a security interest in
the Contracts which secure the Dealer Loans or the Financed Vehicles, or to see to the maintenance
of any such recording or filing or depositing or to any rerecording, refiling or redepositing of
any thereof, (B) to see to any insurance on the Financed Vehicles or Obligors or to effect or
maintain any such insurance, (C) to see to the payment or discharge of any tax, assessment or other
governmental charge or any Lien or encumbrance of any kind owing with respect to, assessed or
levied against any part of the Trust, (D) to confirm or verify the contents of any reports or
certificates delivered to the Trust Collateral Agent pursuant to this Agreement believed by the
Trust Collateral Agent to be genuine and to have been signed or presented by the proper party or
parties, or (E) to inspect the Contracts at any time or ascertain or inquire as to the performance
or observance of any of the Issuer’s, the Seller’s or the Servicer’s
representations, warranties or covenants or the Servicer’s duties and obligations as Servicer
and




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as custodian of the Dealer Agreements, the original Certificates of Title relating to the
Financed Vehicles and the Contracts under this Agreement.




          (h) In no event shall Wells Fargo Bank, National Association, in any of its capacities
hereunder, be deemed to have assumed any duties of the Owner Trustee under the Delaware Statutory
Trust Act, common law, or the Trust Agreement.




          (i) Wells Fargo Bank, National Association by its execution hereof accepts its appointment as
Trust Collateral Agent under the Indenture and this Agreement. The Trust Collateral Agent shall
act upon and in compliance with the written instructions of the Indenture Trustee delivered
pursuant to the Indenture promptly following receipt of such written instructions; provided that
the Trust Collateral Agent shall not act in accordance with any instructions: (i) which are not
authorized by, or in violation of the provisions of, the Indenture or this Agreement; (ii) which
are in violation of any applicable law, rule or regulation; or (iii) for which the Trust Collateral
Agent has not received indemnity reasonably satisfactory to it. Receipt of such instructions shall
not be a condition to the exercise by the Trust Collateral Agent of its express duties hereunder,
except where the Indenture or this Agreement provides that the Trust Collateral Agent is permitted
to act only following and in accordance with such instructions.




          SECTION 9.02. Rights of the Trust Collateral Agent.




          (a) Before the Trust Collateral Agent acts or refrains from acting, it may require an
Officer’s Certificate or an Opinion of Counsel. The Trust Collateral Agent shall not be liable for
any action it takes or omits to take in good faith in reliance on an Officer’s Certificate or
Opinion of Counsel.




          (b) The Trust Collateral Agent may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee
and shall not be responsible for the misconduct or negligence of any agent, attorney, custodian or
nominee appointed with due care.




          (c) The Trust Collateral Agent shall not be liable for any action it takes or omits to take in
good faith which it believes to be authorized or within its rights or powers; provided,
however, that the Trust Collateral Agent’s conduct does not constitute willful misconduct,
negligence or bad faith.




          (d) The Trust Collateral Agent may consult with counsel, and the written advice or opinion of
counsel with respect to legal matters relating to this Sale and Servicing Agreement and the Class A
Notes or Certificates shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance
with the written advice or opinion of such counsel.




          (e) The Trust Collateral Agent shall be under no obligation to exercise any of the rights and
powers vested in it by this Agreement or the other Basic Documents, or to institute, conduct or
defend any litigation under this Agreement or in relation to this Sale and Servicing Agreement, at
the request, order or direction of any of the Holders of Notes or
Certificates or the instructing party, as the case may be, pursuant to the provisions of this




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Agreement, unless it shall have been offered to the Trust Collateral Agent security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities that may be incurred
therein or thereby.




          (f) The Trust Collateral Agent shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond or other paper or document, unless requested in writing to
do so by the Majority Noteholders or the Class A Insurer (so long as a Class A Insurer Default is
not continuing); provided, however, that if the payment within a reasonable time to
the Trust Collateral Agent of the costs, expenses or liabilities likely to be incurred by it in the
making of such investigation is, in the opinion of the Trust Collateral Agent, not reasonably
assured to the Trust Collateral Agent by the security afforded to it by the terms of this
Agreement, the Trust Collateral Agent may require indemnity reasonably satisfactory to it against
such cost, expense or liability as a condition to so proceeding; the reasonable expense of every
such examination shall be paid by the requesting Holders or the instructing party, as the case may
be, or, if paid by the Trust Collateral Agent, shall be reimbursed by the requesting Holders upon
demand.




          (g) Delivery of any reports, information and documents to the Trust Collateral Agent provided
for herein is for informational purposes only (unless otherwise expressly stated herein) and the
Trust Collateral Agent’s receipt of such shall not constitute constructive knowledge of any
information contained therein or determinable from information contained therein, including the
Servicer’s, Seller’s or Issuer’s compliance with any of its representations, warranties or
covenants hereunder (as to which the Trust Collateral Agent is entitled to rely exclusively on
Officers’ Certificates).




          (h) The Trust Collateral Agent shall not be deemed to have knowledge of a Servicer Default or
an Early Amortization Event unless a Responsible Officer of the Trust Collateral Agent has actual
knowledge or has received written notice thereof.




          (i) In no event shall the Indenture Trustee be liable for any indirect, or consequential,
punitive or special damages, regardless of the form of action and whether or not any such damages
were foreseeable or contemplated.




          (j) The Trust Collateral Agent may conclusively rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval or other paper or document believed by it to be genuine
and to have been signed or presented by the property party or parties.




          (k) In no event shall the Trust Collateral Agent be liable for any act or omission on the part
of the Issuer or the Servicer or any other Person. The Trust Collateral Agent shall not be
responsible for monitoring or supervising the Issuer or the Servicer.




          SECTION 9.03. Individual Rights of Trust Collateral Agent.




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          The Trust Collateral Agent in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trust Collateral Agent.




          The Trust Collateral Agent and its Affiliates are permitted to receive additional compensation
that could be deemed to be in the Trust Collateral Agent’s economic self-interest for (i) serving
as investment adviser, administrator, shareholder servicing agent, custodian or sub-custodian with
respect to certain of the Eligible Investments, (ii) using Affiliates to effect transactions in
certain Eligible Investments and (iii) effecting transactions in certain Eligible Investments. The
Trust Collateral Agent does not guarantee the performance of any Eligible Investments.




          In order to comply with the laws, rules, regulations and executive orders in effect from time
to time applicable to banking institutions, including those relating to the funding of terrorist
activities and money laundering, the Trust Collateral Agent is required to obtain, verify and
record certain information relating to individuals and entities which maintain a business
relationship with the Trust Collateral Agent. Accordingly, each of the parties hereto agree to
provide the Trust Collateral Agent upon its request from time to time such identifying information
and documentation as may be available for such party in order to enable the Trust Collateral Agent
to comply with such laws, rules, regulations and executive orders in effect from time to time
applicable to banking institutions.




          SECTION 9.04. Reports by Trust Collateral Agent to Holders.




          The Trust Collateral Agent shall on behalf of the Issuer deliver to each Class A Noteholder
such information as may be reasonably required to enable such Holder to prepare its Federal and
state income tax returns.




          SECTION 9.05. Compensation.




          (a) The Issuer shall pay to the Trust Collateral Agent from time to time compensation provided
under this Agreement, as provided in a separate fee letter, and all reasonable out-of-pocket
expenses incurred or made by it, including costs of collection, in addition to the compensation for
its services, except any such expense as may be attributable to its willful misconduct, negligence
or bad faith. Such compensation and expenses shall be paid in accordance with Section
5.08(a) hereof. Such expenses shall include securities transaction charges relating to the
investment of funds on deposit in the Trust Accounts and the reasonable compensation and reasonable
expenses, disbursements and advances of the Trust Collateral Agent’s counsel and of all persons not
regularly in its employ; provided, however, that the securities transaction charges
referred to above shall, in the case of certain Eligible Investments selected by the Servicer, be
waived for a particular investment in the event that any amounts are received by the Trust
Collateral Agent from a financial institution in connection with the purchase of such Eligible
Investments.




          (b) [Reserved.]




          (c) The Issuer’s and the Servicer’s payment obligations to the Trust Collateral Agent pursuant
to this Section shall survive the discharge of this Agreement and any resignation




88









 







or removal of the Trust Collateral Agent. When the Trust Collateral Agent incurs expenses
after the occurrence of an Indenture Event of Default specified in Section 5.1(iv) or (v) of the
Indenture with respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable Federal or state
bankruptcy, insolvency or similar law. Notwithstanding anything else set forth in this Agreement
or the Basic Documents, the Trust Collateral Agent agrees that the obligations of the Issuer or the
Seller (but not the Servicer) to the Trust Collateral Agent hereunder and under the Basic Documents
shall not be recourse to the assets of the Issuer, the Seller or any Class A Noteholder.




          SECTION 9.06. Eligibility.




          The Trust Collateral Agent under this Agreement shall at all times be a corporation or banking
association having an office in the same state as the location of the Corporate Trust Office as
specified in this Agreement; acceptable to the Class A Insurer, so long as a Class A Insurer
Default is not continuing; organized and doing business under the laws of such state or the United
States of America; authorized under such laws to exercise corporate trust powers; having a combined
capital and surplus of at least $100,000,000; having long-term unsecured debt obligations rated at
least “Baa2” by Moody’s and “BBB-” by Standard and Poor’s; and subject to supervision or
examination by federal or state authorities. If such corporation shall publish reports of
condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trust Collateral Agent shall cease to be
eligible in accordance with the provisions of this Section, the Trust Collateral Agent shall resign
immediately, provided that such resignation shall not be effective until a successor Trust
Collateral Agent accepts appointment in accordance with Section 9.10(d) hereof.




          SECTION 9.07. Trust Collateral Agent’s Disclaimer.




          The Trust Collateral Agent shall not be responsible for and make no representation as to the
validity, sufficiency or adequacy of this Agreement, the Trust Property or the Securities, shall
not be accountable for the Issuer’s use of the proceeds from the Securities, and shall not be
responsible for any statement of the Issuer in this Agreement or in any document issued in
connection with the sale of the Securities or in the Securities.




          SECTION 9.08. Limitation on Liability.




          Neither the Trust Collateral Agent nor any of its directors, officers or employees shall be
liable for any action taken or omitted to be taken by it or them hereunder, or in connection
herewith, except that the Trust Collateral Agent shall be liable for its negligence, bad faith or
willful misconduct; nor shall the Trust Collateral Agent be responsible for the validity,
effectiveness, value, sufficiency or enforceability against the Issuer of this Agreement or any of
the Trust Property (or any part thereof). Notwithstanding any term or provision of this Agreement,
the Trust Collateral Agent shall incur no liability to the Issuer for any action taken or omitted
by the Trust Collateral Agent in connection with the Trust Property, except for the




89









 




negligence, bad faith or willful misconduct on the part of the Trust Collateral Agent, and,
further, shall incur no liability to the Issuer except for negligence, bad faith or willful
misconduct in carrying out its duties to the Issuer. Subject to Section 9.09, the Trust
Collateral Agent shall be protected and shall incur no liability to any such party in relying upon
the accuracy, acting in reliance upon the contents, and assuming the genuineness of any notice,
demand, certificate, signature, instrument or other document reasonably believed by the Trust
Collateral Agent to be genuine and to have been duly executed by the appropriate signatory (absent
actual knowledge of a Responsible Officer of the Trust Collateral Agent to the contrary), and the
Trust Collateral Agent shall not be required to make any independent investigation or inquiry with
respect thereto. The Trust Collateral Agent shall at all times be free independently to establish
to its reasonable satisfaction, but shall have no duty to independently verify, the existence or
nonexistence of facts that are a condition to the exercise or enforcement of any right or remedy
hereunder or under any of the Basic Documents. The Trust Collateral Agent may consult with
counsel, and shall not be liable for any action taken or omitted to be taken by it hereunder in
good faith and in accordance with the written advice of such counsel.




          SECTION 9.09. Reliance Upon Documents.




          In the absence of bad faith or willful misconduct on its part, the Trust Collateral Agent
shall be entitled to conclusively rely on any communication, instrument, paper or other document
reasonably believed by it to be genuine and correct and to have been signed or sent by the proper
Person or Persons and shall have no liability in acting, or omitting to act, where such action or
omission to act is in reasonable reliance upon any statement or opinion contained in any such
document or instrument.




          SECTION 9.10. Successor Trust Collateral Agent.




          (a) Merger. Any Person into which the Trust Collateral Agent may be converted or
merged, or with which it may be consolidated, or to which it may sell or transfer its trust
business and assets as a whole or substantially as a whole, or any Person resulting from any such
conversion, merger, consolidation, sale or transfer to which the Trust Collateral Agent is a party,
shall (provided it is otherwise qualified to serve as the Trust Collateral Agent hereunder) be and
become a successor Trust Collateral Agent hereunder and be vested with all of the trusts, powers,
discretions, immunities, privileges and other matters as was its predecessor without the execution
or filing of any instrument or any further act, deed or conveyance on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. The Trust Collateral Agent shall
give notice to the Class A Insurer, the Swap Counterparty and the Rating Agencies of any such
transaction.




          (b) Resignation. The Trust Collateral Agent and any successor Trust Collateral Agent
may resign at any time by giving sixty days prior written notice to the Issuer, the Rating Agencies
and the Class A Insurer; provided, that such resignation shall not be effective until a successor
Trust Collateral Agent is appointed and accepts appointment in accordance with clause (d) below.




          (c) Removal.




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          (i) The Issuer, prior to the Class A Termination Date with the prior written consent of
the Class A Insurer, may remove the Trust Collateral Agent by written notice if:




          (A) a court having jurisdiction in the premises in respect of the Trust
Collateral Agent in an involuntary case or proceeding under federal or state banking
or bankruptcy laws, as now or hereafter constituted, or any other applicable federal
or state bankruptcy, insolvency or other similar law, shall have entered a decree or
order granting relief or appointing a receiver, liquidator, assignee, custodian,
trustee, conservator, sequestrator (or similar official) for the Trust Collateral
Agent or for any substantial part of the Trust Collateral Agent’s property, or
ordering the winding-up or liquidation of the Trust Collateral Agent’s affairs;




          (B) an involuntary case under the federal bankruptcy laws, as now or hereafter
in effect, or another present or future federal or state bankruptcy, insolvency or
similar law is commenced with respect to the Trust Collateral Agent and such case is
not dismissed within 60 days;




          (C) the Trust Collateral Agent commences a voluntary case under any federal or
state banking or bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, or consents
to the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, conservator, sequestrator (or other similar official) for the
Trust Collateral Agent or for any substantial part of the Trust Collateral Agent’s
property, or makes any assignment for the benefit of creditors or fails generally to
pay its debts as such debts become due or takes any corporate action in furtherance
of any of the foregoing;




          (D) failure to comply with any material covenant hereunder; or




          (E) the Trust Collateral Agent otherwise becomes legally incapable of acting.




          (ii) The Class A Insurer may remove the Trust Collateral Agent for any reason by 30
days’ prior written notice.




          (iii) If the Trust Collateral Agent resigns or is removed or if a vacancy exists in the
office of Trust Collateral Agent for any reason (the Trust Collateral Agent in such event
being referred to herein as the retiring Trust Collateral Agent), prior to the Class A
Termination Date the Class A Insurer may appoint a successor Trust Collateral Agent and if
it fails to, the Issuer shall promptly appoint a successor Trust Collateral Agent acceptable
to the Class A Insurer. After the Class A Termination Date, the Issuer may appoint a
successor Trust Collateral Agent without the consent of the Class A Insurer.



          A successor Trust Collateral Agent shall deliver a written acceptance of its appointment to
the retiring Trust Collateral Agent and to the Issuer. Thereupon the resignation or removal of



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the retiring Trust Collateral Agent shall become effective, and the successor Trust Collateral
Agent shall have all the rights, powers and duties of the retiring Trust Collateral Agent under
this Indenture subject to satisfaction of the Rating Agency Condition. The successor Trust
Collateral Agent shall mail a notice of its succession to Class A Noteholders, the Class A Insurer,
the Swap Counterparty and the Rating Agencies. The retiring Trust Collateral Agent shall promptly
transfer all property held by it as Trust Collateral Agent to the successor Trust Collateral Agent.




     If a successor Trust Collateral Agent that is, prior to the Class A Termination Date,
acceptable to the Class A Insurer does not take office within 60 days after the retiring Trust
Collateral Agent resigns or is removed, the retiring Trust Collateral Agent, or the Class A Insurer
may petition any court of competent jurisdiction for the appointment of a successor Trust
Collateral Agent that is meets the eligibility requirements set forth in Section 9.06
hereof.



     If the Trust Collateral Agent fails to comply with Section 9.12, any Noteholder, prior
to the Class A Termination Date with the prior written consent of the Class A Insurer, may petition
any court of competent jurisdiction for the removal of the Trust Collateral Agent and the
appointment of a successor Trust Collateral Agent acceptable to the Class A Insurer.



     Any resignation or removal of the Trust Collateral Agent and appointment of a successor Trust
Collateral Agent pursuant to any of the provisions of this Section shall not become effective until
acceptance of appointment by the successor Trust Collateral Agent acceptable to the Class A Insurer
pursuant to this Section 9.10(c) and payment of all fees and expenses owed to the outgoing
Trust Collateral Agent by the Servicer and the Issuer.



     Notwithstanding the replacement of the Trust Collateral Agent pursuant to this Section, the
Issuer’s and the Servicer’s obligations under Section 9.05 shall continue for the benefit
of the retiring Trust Collateral Agent.



          (d) Acceptance by Successor. If the Trust Collateral Agent has resigned or has been
removed pursuant to this Section 9.10, so long as a Class A Insurer Default is not
continuing, the Class A Insurer has the right to appoint a successor Trust Collateral Agent and if
it fails to, or if a Class A Insurer Default has occurred and is continuing, the Owner Trustee
shall have the sole right to appoint each successor Trust Collateral Agent that meets the
qualifications required hereunder. Every temporary or permanent successor Trust Collateral Agent
appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Owner
Trustee, each Class A Noteholder, each Certificateholder, the Rating Agencies, the Class A Insurer,
the Swap Counterparty and the Issuer an instrument in writing accepting such appointment hereunder
and the relevant predecessor shall execute, acknowledge and deliver such other documents and
instruments as will effectuate the delivery of all Collateral to the successor Trust Collateral
Agent, whereupon such successor, without any further act, deed or conveyance, shall become fully
vested with all the estates, properties, rights, powers, duties and obligations of its predecessor.
Such predecessor shall, nevertheless, on the written request of the Issuer, execute and deliver an
instrument transferring to such successor all the estates, properties, rights and powers of such
predecessor hereunder. In the event that any instrument in writing from the Issuer is reasonably
required by a successor Trust Collateral Agent to more fully and certainly vest in such successor
the estates, properties, rights, powers, duties and obligations vested or intended to be vested
hereunder in the Trust Collateral Agent, any and all such written



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instruments shall, at the request of the temporary or permanent successor Trust Collateral
Agent, be forthwith executed, acknowledged and delivered by the Owner Trustee or the Issuer, as the
case may be. The designation of any successor Trust Collateral Agent and the instrument or
instruments removing any Trust Collateral Agent and appointing a successor hereunder, together with
all other instruments provided for herein, shall be maintained with the records relating to the
Trust Property and, to the extent required by applicable law, filed or recorded by the successor
Trust Collateral Agent in each place where such filing or recording is necessary to effect the
transfer of the Trust Property to the successor Trust Collateral Agent or to protect or continue
the perfection of the security interests granted hereunder.




          If no successor Trust Collateral Agent shall have been appointed and accepted the appointment
within sixty (60) days after the giving of notice of resignation, the resigning Trust Collateral
Agent may petition any court of competent jurisdiction for the appointment of a successor Trust
Collateral Agent that meets the qualifications required hereunder.




          SECTION 9.11. Representations and Warranties of the Trust Collateral Agent.




          The Trust Collateral Agent represents and warrants to the Issuer, the Class A Insurer, the
Swap Counterparty and to the Class A Noteholders as follows:





          (i) The Trust Collateral Agent is a national banking association, duly organized and
validly existing under the laws of the United States and is authorized to conduct and engage
in a banking and trust business under such laws.




          (ii) The Trust Collateral Agent has full corporate power, authority, and legal right to
execute, deliver, and perform this Agreement and the other Basic Documents to which it is a
party, and has taken all necessary action to authorize the execution, delivery, and
performance, by it of this Agreement and the other Basic Documents to which it is a party.




          (iii) This Agreement and the other Basic Documents to which it is a party have been
duly executed and delivered by the Trust Collateral Agent.




          (iv) This Agreement and the other Basic Documents to which it is a party are the legal,
valid and binding obligations of the Trust Collateral Agent enforceable in accordance with
their respective terms, subject to the effects of bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors’ rights generally and to general
principles of equity.



          SECTION 9.12. Waiver of Setoffs.




          Except with respect to the Certificate Distribution Account, the Trust Collateral Agent hereby
expressly waives any and all rights of setoff that the Trust Collateral Agent may otherwise at any
time have under applicable law with respect to any Trust Account and agrees that amounts in the
Trust Accounts shall at all times be held and applied solely in accordance with the provisions
hereof.




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ARTICLE X

TERMINATION




          SECTION 10.01. Optional Purchase.




          (a) On the last day of any Collection Period as of which the Class A Note Balance shall be
less than or equal to 15% of the initial Class A Note Balance, the Servicer shall have the option
to reacquire the Trust Property, other than the Trust Accounts. To exercise such option, the
Servicer shall deposit pursuant to Section 5.04 in the Collection Account an amount equal
to the Purchase Amount for the Dealer Loans, plus the appraised value of any other property held by
the Trust (other than the Trust Accounts), such value to be determined by an appraiser mutually
agreed upon by the Servicer and the Class A Insurer. Notwithstanding the foregoing, the Servicer
shall not exercise such option unless the Purchase Amount is sufficient to pay the full amount of
principal and interest due and payable on the Class A Notes, and all amounts due and payable to the
Class A Insurer, the Swap Counterparty, the Indenture Trustee, the Trust Collateral Agent, the
Backup Servicer and the Owner Trustee under the Basic Documents. Upon such deposit the Servicer
shall succeed to all interests in and to the Trust (other than the Trust Accounts).




          (b) Notice of any termination of the Trust shall be given by the Servicer to the Owner
Trustee, the Indenture Trustee, the Trust Collateral Agent, the Class A Insurer, the Swap
Counterparty and the Rating Agencies as soon as practicable after the Servicer has received notice
of the occurrence of an event of termination under Section 9.1(a) of the Trust Agreement.




          (c) Credit Acceptance shall have the right to purchase at any time 1.0% of the Dealer Loans,
based upon the Aggregate Outstanding Net Eligible Loan Balance on the date of purchase for an
amount equal to the greater of: (i) the Purchase Amount related to such Dealer Loans; and (ii) the
aggregate fair market value of such Dealer Loans.




          SECTION 10.02. Termination.




          Upon the earlier of (a) the payment of the full amount of principal and interest due and
payable on the Class A Notes, and all amounts due and payable to the Class A Insurer, the Swap
Counterparty, the Indenture Trustee, the Trust Collateral Agent, the Backup Servicer and the Owner
Trustee under the Basic Documents and the satisfaction and discharge of the Indenture, and (b) the
payment in full or other liquidation of the last outstanding Dealer Loan and the subsequent
distribution of amounts in respect of such Dealer Loans as provided in the Basic Documents and the
satisfaction and discharge of the Indenture, this Agreement shall terminate; provided that
Section 7.06, Section 9.05(c), Section 11.13 and the indemnification
obligations of the Issuer under Section 6.05 and of the Servicer under Section
4.09(f) and Section 7.02 shall survive such termination.





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ARTICLE XI

MISCELLANEOUS PROVISIONS




          SECTION 11.01. Amendment.



          This Agreement may be amended by the Seller, the Servicer, and the Trust Collateral Agent,
without the consent of any of the Class A Noteholders (at the written direction of the Issuer), but
with the prior written consent of the Class A Insurer, so long as a Class A Insurer Default is not
continuing, to: (i) cure any ambiguity, to correct or supplement any provisions in this Agreement,
or to add any other provisions with respect to matters or questions arising under this Agreement
that shall not be inconsistent with the provisions of this Agreement; or (ii) reflect the
succession of a successor Servicer; provided, however, that in connection with any
amendment pursuant to clause (i), (a) the action referred to therein shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of any Class A
Noteholder and (b) that such amendment shall not materially and adversely affect the rights and
obligations of the Swap Counterparty under this Agreement unless the Swap Counterparty shall have
consented in writing to such amendment; and provided, further, that in connection with any
amendment pursuant to clause (ii) above, the Servicer shall deliver to the Trust Collateral Agent,
the Class A Insurer, the Swap Counterparty and the Indenture Trustee a letter from each Rating
Agency, which then has a rating on the Class A Notes, to the effect that such amendment will not
cause the then current ratings on the Class A Notes to be qualified, reduced or withdrawn without
regard to the Class A Note Insurance Policy.



          This Agreement may also be amended from time to time by the Seller, the Servicer, and the
Trust Collateral Agent (at the written direction of the Issuer) with the consent of the Class A
Insurer or, if a Class A Insurer Default has occurred and is continuing, the Holders of Class A
Notes (which consent of any Holder of a Class A Note given pursuant to this Section or pursuant to
any other provision of this Agreement shall be conclusive and binding on such Holder and on all
future Holders of such Class A Note and of any Class A Note issued upon the registration of
transfer thereof or in exchange thereof or in lieu thereof whether or not notation of such consent
is made upon the Class A Note), evidencing not less than a majority of the sum of the then
outstanding Class A Note Balance, as the case may be, 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 Holders of the Class A Notes; provided, however,
that no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or
delay the timing of, collections of payments on Contracts or distributions that shall be required
to be made on any Class A Note or change the Class A-1A Note Rate, the Class A-1B Note Rate, the
Class A-1A Principal Distributable Amount or the Class A-1B Principal Distributable Amount, (b)
materially and adversely affect the rights and obligations of the Swap Counterparty under this
Agreement unless the Swap Counterparty shall have consented in writing to such amendment or (c)
reduce the aforesaid percentage required to consent to any such amendment, without the consent of
the Holders of all Class A Notes then outstanding. Notwithstanding the foregoing, however, no
consent of any Class A Noteholder shall be required in connection with any amendment in order for
the Certificateholders to sell, assign, transfer or otherwise dispose of the excess interest,
provided that the Certificateholders present evidence to the Trust Collateral Agent, the Class A
Insurer and the Swap Counterparty that the ratings of the



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Class A Notes shall not be reduced or withdrawn as a result without regard to the Class A Note
Insurance Policy.



          Prior to the execution of any such amendment or consent, the Servicer will provide and the
Trust Collateral Agent shall distribute written notification of the substance of such amendment or
consent to each Rating Agency then rating the Class A Notes, the Swap Counterparty and the Class A
Insurer.



          Promptly after the execution of any such amendment or consent, the Trust Collateral Agent
shall furnish a copy of the substance of such amendment or consent to each Class A Noteholder and
each Certificateholder.



          It shall not be necessary for the consent of Class A Noteholders pursuant to this Section to
approve the particular form of any proposed amendment or consent, but it shall be sufficient if
such consent shall approve the substance thereof. The manner of obtaining such consents (and any
other consents of Class A Noteholders provided for in this Agreement) and of evidencing the
authorization of the execution thereof by Class A Noteholders shall be subject to such reasonable
requirements as the Trust Collateral Agent may prescribe.



          Prior to the execution of any amendment to this Agreement, the Trust Collateral Agent 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 the Opinion of Counsel referred to
in Section 11.02(i)(1). The Trust Collateral Agent may, but shall not be obligated to,
enter into any such amendment which affects the Trust Collateral Agent’s own rights, duties or
immunities under this Agreement or otherwise.



          SECTION 11.02. Protection of Title to Trust.



          (a) The Seller shall file such financing statements and cause to be filed such continuation
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 Class A Noteholders, the Class A Insurer, the Indenture
Trustee and the Trust Collateral Agent in the Dealer Loans and the related Contracts and in the
proceeds thereof and the sale of accounts and chattel paper. The Seller shall deliver (or cause to
be delivered) to the Trust Collateral Agent and the Class A Insurer file-stamped copies of, or
filing receipts for, any document filed as provided above, as soon as available following such
filing.



          (b) None of the Originator, the Seller nor the Servicer shall change its name, identity, state
of incorporation or formation or corporate structure in any manner that would, could, or might make
any financing statement or continuation statement filed by the Seller in accordance with paragraph
(a) above seriously misleading within the meaning of §9-506 or §9-507 of the UCC, unless it shall
have given the Trust Collateral Agent and the Class A Insurer at least five days’ prior written
notice thereof and shall have promptly filed appropriate amendments to all previously filed
financing statements or continuation statements.



          (c) The Seller, the Originator and the Servicer shall give the Trust Collateral Agent and the
Class A Insurer at least 60 days’ prior written notice of any relocation of its principal executive
office or change of its state of incorporation or formation if, as a result of any



96









 







such change, the applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing statement and
shall promptly file any such amendment. Unless otherwise permitted by the Class A Insurer, the
Servicer shall at all times maintain each office from which it shall service the Dealer Loans and
the related Contracts, and its principal executive office, within the United States of America.



          (d) The Servicer shall maintain accounts and records as to each Dealer Loan and Contract
accurately and in sufficient detail to permit (i) the reader thereof to know at any time the status
of such Dealer Loan and Contract, 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 Dealer Loan and Contract and the amounts from time to time deposited in the Collection Account
in respect of such Dealer Loan and Contract.



          (e) The Servicer shall maintain its computer systems so that, from and after the time of sale
under this Agreement of the Dealer Loans and the related Contracts to the Trust, the Servicer’s
master computer records (including any back-up archives) that refer to a Dealer Loan or Contract
shall indicate clearly (including by means of tagging) the interest of the Trust in such Dealer
Loan or Contract and that such Dealer Loan or Contract is owned by the Trust. Indication of the
Trust’s ownership of a Dealer Loan or Contract shall be deleted from or modified on the Servicer’s
computer systems when, and only when, the Dealer Loan or Contract shall have been paid in full or
repurchased.



          (f) If at any time the Seller or the Servicer shall propose to sell, grant a security interest
in, or otherwise transfer any interest in automotive 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 print-outs (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any Dealer Loan or Contract, shall
indicate clearly (including by means of tagging) that such Dealer Loan or Contract has been sold
and is owned by the Trust.



          (g) The Servicer shall, upon reasonable prior notice, permit the Trust Collateral Agent, the
Class A Insurer and their respective agents at any time during normal business hours to inspect,
audit, and make copies of and abstracts from the Servicer’s records regarding any Dealer Loan or
Contract at the office of the Servicer in a reasonable manner.



          (h) Upon request, the Servicer shall furnish to the Trust Collateral Agent, the Indenture
Trustee and the Class A Insurer, within twenty Business Days, a list of all Dealer Loans and
Contracts (by agreement or contract number and name of Dealer or Obligor) then held as part of the
Trust, together with a reconciliation of such list to the schedule of Dealer Loans, Dealer
Agreements and Contracts attached hereto as Schedule A and to each of the Servicer’s
Certificates furnished before such request indicating removal of Dealer Loans or Contracts from the
Trust.



          (i) The Seller shall deliver to the Trust Collateral Agent, the Indenture Trustee and the
Class A Insurer:



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     (1) upon the execution and delivery of this Agreement and of each amendment
thereto, an Opinion of Counsel either (A) stating that, in the opinion of such
counsel, all financing statements (and releases of financing statements) and
continuation statements have been filed that are necessary fully to preserve and
protect the interest of the Indenture Trustee and the Trust Collateral Agent in the
Dealer Loans and the related Contracts, and reciting the details of the expected
filings thereof or referring to prior Opinions of Counsel in which such details are
given, or (B) stating that, in the opinion of such counsel, no such action shall be
necessary to preserve and protect such interest; and




     (2) within 90 days after the beginning of each calendar year beginning with the
first calendar year beginning more than three months after the Cut-off Date, an
Opinion of Counsel, dated as of a date during such 90-day period, either (A) stating
that, in the opinion of such Counsel, all financing statements and continuation
statements have been filed that are necessary fully to preserve and protect the
interest of the Indenture Trustee and the Trust Collateral Agent in the Dealer Loans
and the related Contracts, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) stating that, in
the opinion of such Counsel, no such action shall be necessary to preserve and
protect such interest. Such Opinion of Counsel shall also describe the filing of
any financing statements and continuation statements that will, in the opinion of
such counsel, be required to preserve and protect the interest of the Indenture
Trustee and the Trust Collateral Agent in the Dealer Loans and the related
Contracts, until the 90th day in the following calendar year.



          Each Opinion of Counsel referred to in clause (i)(1) or (i)(2) above shall specify any action
necessary (as of the date of such opinion) to be taken in the following calendar year to preserve
perfection of such interest.



          (j) For the purpose of facilitating the execution of this Agreement and for other purposes,
this Agreement may be executed in any number of counterparts, each of which counterparts shall be
deemed to be an original, and all of which counterparts shall constitute but one and the same
instrument.



          SECTION 11.03. Limitation on Rights of Class A Noteholders.



          No Class A Noteholder shall have any right to vote (except as provided in this Agreement or in
the Indenture) or in any manner otherwise control the operation and management of the Trust, or the
obligations of the parties to this Agreement, nor shall anything in this Agreement set forth, or
contained in the terms of the Class A Notes be construed so as to constitute the Class A
Noteholders from time to time as partners or members of an association; nor shall any Class A
Noteholder be under any liability to any third person by reason of any action taken pursuant to any
provision of this Agreement.



          No Class A Noteholder shall have any right by virtue or by availing itself of any provisions
of this Agreement to institute any suit, action, or proceeding in equity or at law upon or under or
with respect to this Agreement, unless, so long as a Class A Insurer Default is not



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continuing, the Class A Insurer has given its prior written consent and such Holder previously
shall have given to the Trust Collateral Agent a written notice of default and of the continuance
thereof, and unless also (i) the default arises from the Seller’s or the Servicer’s failure to
remit payments when due hereunder, or (ii) the Majority Noteholders shall have made written request
upon the Trust Collateral Agent to institute such action, suit or proceeding in its own name as
Trust Collateral Agent under this Agreement and such Holder shall have offered to the Trust
Collateral Agent such indemnity as it may reasonably require against the costs, expenses, and
liabilities to be incurred therein or thereby, and the Trust Collateral Agent, for 30 days after
its receipt of such notice, request, and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding and during such 30-day period no request or waiver
inconsistent with such written request has been given to the Trust Collateral Agent pursuant to
this Section or Section 8.04; no one or more Holders of Notes or Certificates shall have
any right in any manner whatever by virtue or by availing itself or themselves of any provisions of
this Agreement to affect, disturb, or prejudice the rights of the Holders of any other of the Class
A Notes or the Certificates, or to obtain or seek to obtain priority over or preference to any
other such Holder, or to enforce any right, under this Agreement except in the manner provided in
this Agreement and for the equal, ratable, and common benefit of all Class A Noteholders and all
Certificateholders. For the protection and enforcement of the provisions of this Section, each
Class A Noteholder, each Certificateholder and the Trust Collateral Agent shall be entitled to such
relief as can be given either at law or in equity.



          In the event the Trust Collateral Agent shall receive conflicting or inconsistent requests and
indemnity from two or more groups of Holders of Class A Notes, each representing less than the
required amount of the Class A Notes, the Indenture Trustee in its sole discretion may determine
what action, if any, shall be taken, notwithstanding any other provisions of this Agreement.



          SECTION 11.04. Governing Law.



          THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), BUT OTHERWISE,
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.



          SECTION 11.05. Notices.



          All demands, notices, and communications upon or to the Seller, the Servicer, the Trust Collateral
Agent, the Backup Servicer, the Owner Trustee, the Indenture Trustee, the Class A Insurer or any
Rating Agency under this Agreement shall be in writing, personally delivered, electronically
delivered or mailed by certified mail, return receipt requested, and shall be deemed to have been
duly given upon receipt: (a) in the case of the Seller at the following address: Attention:
Credit Acceptance Funding LLC 2007-2/Wendy Rummler, Silver Triangle Building, 25505 West Twelve
Mile Road, Southfield, Michigan 48034-8339; phone: (248) 353-2700 (ext. 4217); fax: (866) 249-3138;
(b) in the case of the Servicer at the following address: Attention: Credit Acceptance
Corporation/Wendy Rummler, Silver Triangle Building, 25505 West Twelve



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Mile Road, Southfield, Michigan 48034-8339; phone: (248) 353-2700 (ext. 4217); fax: (866) 249-3138;
(c) in the case of the Backup Servicer, Trust Collateral Agent and Indenture Trustee, at MAC
#9311-161, Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: Corporate
Trust Services — Asset-Backed Administration, phone: (612) 667-8058; fax: (612) 667-3464; (d) in
the case of the Owner Trustee, at: 300 Delaware Avenue, 9th Floor, Wilmington, Delaware 19801,
Attn: Sterling Correia, phone: (302) 552-3104; fax: (302) 552-3129; (e) in the case of the Class A
Insurer, to: XL Capital Assurance Inc., 1221 Avenue of the Americas, 31st Floor, New
York, NY 10020-1001, Attention: Surveillance; (f) in the case of S&P, via electronic delivery to
Servicer—reports@sandp.com (or for any information not available in electronic format, send hard
copies to: Standard & Poor’s Rating Services, ABS Surveillance Group, 55 Water Street, New York,
New York 10041 or to such other address as shall be designated by written notice to the other
parties); (g) in the case of Moody’s, via electronic delivery to ServicerReports@moodys.com (or for
information not available in electronic format, send hard copies to: Moody’s Investors Service,
Inc., ABS Monitoring Department, 99 Church Street, 4th Floor, New York, NY 10007; and
(h) in the case of the Initial Swap Counterparty, 301 South College Street, DC-8, Charlotte, NC
28202, Attention: Derivatives Documentation Group or to such other address as shall be designated
by written notice to the other parties. Any notice required or permitted to be mailed to a Class A
Noteholder or Certificateholder, as the case may be shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Class A Note or Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to
have been duly given, whether or not the Class A Noteholder or the Certificateholder, as the case
may be, shall receive such notice.



          SECTION 11.06. 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 or of the Securities or the rights of the Holders thereof or of the Class A Insurer.



          SECTION 11.07. Assignment.



          Notwithstanding anything to the contrary contained herein, except as provided in Section
7.03 and as provided in the provisions of this Agreement concerning the resignation of the
Servicer, this Agreement may not be assigned by the Seller or the Servicer without the prior
written consent of the Trust Collateral Agent, the Swap Counterparty and the Class A Insurer.



          SECTION 11.08. Further Assurances.



          The Seller and the Servicer agree to do and perform, from time to time, any and all acts and
to execute any and all further instruments required or reasonably requested by the Trust Collateral
Agent or the Class A Insurer more fully to effect the purposes of this Agreement and the other
Basic Documents, including, without limitation, the execution of any financing



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statements or continuation statements relating to the Dealer Loans or the related Contracts
for filing under the provisions of the UCC of any applicable jurisdiction.



          SECTION 11.09. No Waiver; Cumulative Remedies.



          No failure to exercise and no delay in exercising, on the part of the Trust Collateral Agent,
the Class A Insurer or the Class A Noteholders or the Certificateholders, any right, remedy, power
or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise
of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and
privileges therein provided are cumulative and not exhaustive of any rights, remedies, powers and
privileges provided by law.



          SECTION 11.10. Third-Party Beneficiaries.



          This Agreement will inure to the benefit of and be binding upon the parties hereto, the
Indenture Trustee, the Class A Noteholders and the Certificateholders, respectively, and their
respective successors and permitted assigns. Except as may be otherwise provided in this
Agreement, no other person will have any right or obligation hereunder. The Class A Insurer and
the Swap Counterparty are each an express third party beneficiary of this Agreement.



          SECTION 11.11. Actions by Noteholders.



          (a) Wherever in this Agreement a provision is made that an action may be taken or a notice,
demand, or instruction given by Noteholders, such action, notice, demand or instruction may be
taken or given by any Class A Noteholder, unless such provision requires a specific percentage of
Noteholders.



          (b) Any request, demand, authorization, direction, notice, consent, waiver or other action
provided by this Agreement to be taken or given by Class A Noteholders, may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by such Class A
Noteholders, in person or by an agent duly appointed in writing.



          (c) The fact and date of the execution by any Class A Noteholder or any Certificateholder of
any instrument or writing may be proved in any reasonable manner which the Trust Collateral Agent
deems sufficient.



          (d) Any request, demand, authorization, direction, notice, consent, waiver, or other act by a
Class A Noteholder shall bind such Class A Noteholder and every subsequent holder of such Class A
Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done or omitted to be done by the Trust Collateral Agent, the Seller or the
Servicer in reliance thereon, whether or not notation of such action is made upon such Class A
Note.



          (e) The Trust Collateral Agent may require such additional proof of any matter referred to in
this Section as it shall deem necessary.



101









 





          SECTION 11.12. Corporate Obligation.



          No recourse may be taken, directly or indirectly, against any partner, incorporator,
subscriber to the capital stock, stockholder, director, officer or employee of the Seller or the
Servicer with respect to their respective obligations and indemnities under this Agreement or any
certificate or other writing delivered in connection herewith.



          SECTION 11.13. Covenant Not to File a Bankruptcy Petition.



          The parties hereto agree that until one year and one day after such time as the Class A Notes
issued under the Indenture are paid in full, they shall not (i) institute the filing of a
bankruptcy petition against the Seller or the Trust based upon any claim in its favor arising
hereunder or under the Basic Documents; (ii) file a petition or consent to a petition seeking
relief on behalf of the Seller or the Trust under the Bankruptcy Law; or (iii) consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of the
Seller or the Trust or any portion of the property of the Seller or the Trust. The parties hereto
agree that all obligations of the Issuer and the Seller are non-recourse to the Trust Property
except as specifically set forth in the Basic Documents.



          SECTION 11.14. Multiple Roles.



          The parties expressly acknowledge and consent to Wells Fargo Bank, National Association acting
in the possible dual capacity of successor Servicer and in the capacity as Indenture Trustee and
Trust Collateral Agent. Wells Fargo Bank, National Association may, in such dual capacity,
discharge its separate functions fully, without hindrance or regard to conflict of interest
principles, duty of loyalty principles or other breach of fiduciary duties to the extent that any
such conflict or breach arises from the performance by Wells Fargo Bank, National Association of
express duties set forth in this Agreement or any other Basic Document in any of such capacities,
all of which defenses, claims or assertions are hereby expressly waived by the other parties hereto
except in the case of negligence (other than errors in judgment) and willful misconduct by Wells
Fargo Bank, National Association.



102









 





          IN WITNESS WHEREOF, the Issuer, Seller, Credit Acceptance, as Servicer and in its individual
capacity, Backup Servicer, the Indenture Trustee and the Trust Collateral Agent have caused this
Sale and Servicing Agreement to be duly executed by their respective officers as of the day and
year first above written.



	 	 	 	 	 	 	 
	 	 	CREDIT ACCEPTANCE FUNDING,

LLC 2007-2, as Seller	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Douglas W. Busk
 

	 	 
	 

	 	 	 	Name: Douglas W. Busk	 	 
	 

	 	 	 	Title: Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	CREDIT ACCEPTANCE CORPORATION, as Servicer and in its

individual capacity	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Douglas W. Busk	 	 
	 

	 	 	 	 

Name: Douglas W. Busk
	 	 
	 

	 	 	 	Title: Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	CREDIT ACCEPTANCE AUTO DEALER

LOAN TRUST 2007-2, as Issuer	 	 
	 
	 	 	 	 	 	 
	 	 	By: U.S. Bank Trust National Association, not in its individual
capacity but solely as Owner Trustee on behalf of the Trust	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Annette E. Morgan	 	 
	 

	 	 	 	 

Name: Annette E. Morgan
	 	 
	 

	 	 	 	Title: Trust Officer	 	 
	 
	 	 	 	 	 	 
	 	 	WELLS FARGO BANK, NATIONAL ASSOCIATION, as

Backup Servicer, Trust
Collateral Agent and Indenture Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Marianna C. Stershic	 	 
	 

	 	 	 	 

Name: Marianna C. Stershic
	 	 
	 

	 	 	 	Title: Vice President	 	 






 









 






EXHIBIT A




[Reserved.]




 









 





EXHIBIT B




Credit Acceptance Auto Dealer Loan Trust 2007-2

Servicer’s Certificate





 









 








EXHIBIT C




[Reserved]




 









 





EXHIBIT D




FORM OF DEALER AGREEMENT





 









 








EXHIBIT E




FORM OF

SERVICER’S ACKNOWLEDGMENT




          Credit Acceptance Corporation (the “Servicer”) under the Sale and Servicing Agreement,
dated as of October 29, 2007 (the “Sale and Servicing Agreement”) among Credit Acceptance
Auto Dealer Loan Trust 2007-2, Credit Acceptance Funding LLC 2007-2, Wells Fargo Bank, National
Association and Credit Acceptance Corporation, as the Servicer and in its individual capacity,
pursuant to which the Servicer holds on behalf of the Class A Noteholders, the Class A Insurer and
the Trust Collateral Agent certain [Dealer Agreements] [Contracts] as described in the Sale and
Servicing Agreement, hereby acknowledges receipt thereof, listed on Schedule A to said Sale
and Servicing Agreement except as noted in the Exception List attached as Schedule I hereto.




          IN WITNESS WHEREOF, the Servicer has caused this acknowledgment to be executed by its duly
authorized officer as of this                      day of                     , 20                    .




	 	 	 	 	 	 	 
	 	 	CREDIT ACCEPTANCE CORPORATION,

as Servicer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 

	 	 






 









 





EXHIBIT F




FORM OF CONTRACTS




 









 





EXHIBIT G




[RESERVED]




 









 





EXHIBIT H




CREDIT GUIDELINES




[On file with the Servicer]




 









 





SCHEDULE A

to Sale and

Servicing Agreement




Dealer Loans, Dealer Agreements and Contracts




 









 





SCHEDULE B

to Sale and

Servicing Agreement




Forecasted Collections




	 	 	 	 	 
	 	 	Credit Acceptance
	 	 	Cumulative Forecasted
	Collection Period	 	Collections
	September 2007

	 	 	9,273,458.66	 
	October 2007

	 	 	9,056,530.20	 
	November 2007

	 	 	8,814,366.36	 
	December 2007

	 	 	8,565,878.94	 
	January 2008

	 	 	8,293,507.70	 
	February 2008

	 	 	7,992,350.98	 
	March 2008

	 	 	7,672,901.23	 
	April 2008

	 	 	7,366,695.37	 
	May 2008

	 	 	7,069,447.46	 
	June 2008

	 	 	6,767,463.29	 
	July 2008

	 	 	6,481,790.67	 
	August 2008

	 	 	6,208,210.82	 
	September 2008

	 	 	5,916,969.96	 
	October 2008

	 	 	5,648,613.07	 
	November 2008

	 	 	5,391,426.75	 
	December 2008

	 	 	5,153,002.48	 
	January 2009

	 	 	4,920,814.38	 
	February 2009

	 	 	4,671,385.76	 
	March 2009

	 	 	4,392,224.77	 
	April 2009

	 	 	4,137,653.87	 
	May 2009

	 	 	3,896,155.08	 
	June 2009

	 	 	3,652,342.07	 
	July 2009

	 	 	3,415,973.33	 
	August 2009

	 	 	3,180,103.22	 
	September 2009

	 	 	2,956,599.89	 
	October 2009

	 	 	2,737,772.72	 
	November 2009

	 	 	2,504,874.03	 
	December 2009

	 	 	2,289,539.29	 
	January 2010

	 	 	2,105,768.56	 
	February 2010

	 	 	1,887,748.53	 
	March 2010

	 	 	1,617,851.67	 
	April 2010

	 	 	1,402,871.19	 
	May 2010

	 	 	1,264,488.15	 
	June 2010

	 	 	1,144,527.08	 
	July 2010

	 	 	1,062,678.25	 
	August 2010

	 	 	1,002,477.09	 
	September 2010

	 	 	953,480.01	 
	October 2010

	 	 	953,480.01	 
	November 2010

	 	 	953,480.01	 
	December 2010

	 	 	953,480.01	 






 









 






	 	 	 	 	 
	 	 	Credit Acceptance
	 	 	Cumulative Forecasted
	Collection Period	 	Collections
	January 2011
	 	 	953,480.01	 
	February 2011
	 	 	953,449.10	 
	March 2011
	 	 	953,222.50	 
	April 2011
	 	 	952,338.20	 
	May 2011
	 	 	951,232.43	 
	June 2011
	 	 	950,324.85	 
	July 2011
	 	 	949,480.72	 
	August 2011
	 	 	947,484.10	 
	September 2011
	 	 	944,825.45	 
	October 2011
	 	 	942,472.50	 
	November 2011
	 	 	940,114.42	 
	December 2011
	 	 	937,174.06	 
	January 2012
	 	 	933,493.02	 
	February 2012
	 	 	927,103.59	 
	March 2012
	 	 	915,863.42	 
	April 2012
	 	 	905,335.98	 
	May 2012
	 	 	895,140.53	 
	June 2012
	 	 	884,658.18	 
	July 2012
	 	 	873,820.42	 
	August 2012
	 	 	867,559.43	 
	September 2012
	 	 	859,118.36	 
	October 2012
	 	 	850,838.27	 
	November 2012
	 	 	839,859.02	 
	December 2012
	 	 	832,600.32	 
	January 2013
	 	 	823,458.10	 
	February 2013
	 	 	813,550.22	 
	March 2013
	 	 	787,979.86	 
	April 2013
	 	 	759,640.13	 
	May 2013
	 	 	746,652.93	 
	June 2013
	 	 	736,785.16	 
	July 2013
	 	 	725,828.94	 
	August 2013
	 	 	696,007.47	 
	September 2013
	 	 	660,624.25	 
	October 2013
	 	 	614,743.98	 
	November 2013
	 	 	570,976.83	 
	December 2013
	 	 	525,406.58	 
	January 2014
	 	 	487,062.97	 
	February 2014
	 	 	404,626.97	 
	March 2014
	 	 	323,738.69	 
	April 2014
	 	 	234,571.83	 
	May 2014
	 	 	167,518.41	 
	June 2014
	 	 	108,969.02	 
	July 2014
	 	 	63,773.89	 
	August 2014
	 	 	29,313.10	 






B-2









 





SCHEDULE C

to Sale and

Servicing Agreement




Perfection Representations, Warranties And Covenants




     In addition to the representations, warranties and covenants contained in the Agreement, the
Seller hereby represents, warrants, and covenants to the Trust and the Indenture Trustee as follows
on the Closing Date and on each Distribution Date on which the Trust purchases Dealer Loans, in
each case only with respect to the Seller Property conveyed to the Trust on such Closing Date or
the relevant Distribution Date:



General



1. The Agreement creates a valid and continuing security interest (as defined in UCC Section 9-102)
in the Seller Property in favor of the Trust, which security interest is prior to all other Liens,
and is enforceable as such as against creditors of and purchasers from and assignees of the Seller.



2. Each Contract constitutes “tangible chattel paper” or a “payment intangible”, within the meaning
of UCC Section 9-102. Each Dealer Loan constitutes a “payment intangible” or a “general
intangible” within the meaning of UCC Section 9-102.



3. Each Dealer Agreement constitutes either a “general intangible” or “tangible chattel paper”
within the meaning of UCC Section 9-102.



4. The Seller has taken or will take all necessary actions with respect to the Dealer Loans to
perfect its security interest in the Dealer Loans and in the property securing the Dealer Loans.




Creation



1. The Seller owns and has good and marketable title to the Initial Seller Property or Subsequent
Seller Property, as applicable, free and clear of any Lien, claim or encumbrance of any Person,
excepting only liens for taxes, assessments or similar governmental charges or levies incurred in
the ordinary course of business that are not yet due and payable or as to which any applicable
grace period shall not have expired, or that are being contested in good faith by proper
proceedings and for which adequate reserves have been established, but only so long as foreclosure
with respect to such a lien is not imminent and the use and value of the property to which the Lien
attaches is not impaired during the pendency of such proceeding.




Perfection



1. The Seller has caused or will have caused, within ten days after the effective date of the
Indenture, the filing of all appropriate financing statements in the proper filing office in the
appropriate jurisdictions under applicable law in order to perfect the contribution and sale of the
Contributed Property from the Originator to the Seller, the transfer and sale of the Seller
Property



 









 






from the Seller to the Issuer, and the security interest in the Collateral granted to the Indenture
Trustee under the Indenture.



2. With respect to Seller Property that constitutes tangible chattel paper, such tangible chattel
paper is in the possession of the Servicer, in its capacity as custodian for the Trust and the
Trust Collateral Agent, and the Trust Collateral Agent has received a written acknowledgment from
the Servicer, in its capacity as custodian, that it is holding such tangible chattel paper solely
on its behalf and for the benefit of the Trust Collateral Agent, the Seller, the Trust and the
relevant Dealer(s). All financing statements filed or to be filed against the Seller in favor of
the Issuer or its assignee in connection with this Agreement describing the Seller Property contain
a statement to the following effect: “A purchase of or security interest in any collateral
described in this financing statement will violate the rights of the Secured Party.”




Priority



1. Other than the security interest granted to the Issuer pursuant to this Agreement, the Seller
has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the
Seller Property. None of the Originator, the Servicer nor the Seller has authorized the filing of,
or is aware of any financing statements against either the Seller, the Originator or the Trust that
includes a description of the Seller Property and proceeds related thereto other than any financing
statement: (i) relating to the sale of Contributed Property by the Originator to the Seller under
the Contribution Agreement, (ii) relating to the security interest granted to the Trust hereunder,
(iii) relating to the security interest granted to the Trust Collateral Agent under the Indenture;
or (iv) that has been terminated or amended to reflect a release of the Seller Property.



2. Neither the Seller, the Originator nor the Trust is aware of any judgment, ERISA or tax lien
filings against either the Seller, the Originator or the Trust.



3. None of the tangible chattel paper that constitutes or evidences the Contracts or the Dealer
Agreements has any marks or notations indicating that it has been pledged, assigned or otherwise
conveyed to any Person other than the Originator, the Servicer, the Seller, the Trust, a collection
agent or the Trust Collateral Agent.




Survival of Perfection Representations



1. Notwithstanding any other provision of the Agreement, the Contribution Agreement, the Indenture
or any other Basic Document, the Perfection Representations, Warranties and Covenants contained in
this Schedule shall be continuing, and remain in full force and effect (notwithstanding any
replacement of the Servicer or termination of Servicer’s rights to act as such) until such time as
all obligations under the Sale and Servicing Agreement, Contribution Agreement and the Indenture
have been finally and fully paid and performed.




No Waiver



1. The parties hereto: (i) shall not, without obtaining a confirmation of the then-current ratings
of the Class A Notes (without giving effect to the Class A Note Insurance Policy), waive any of the
Perfection Representations, Warranties or Covenants; (ii) shall provide the Rating Agencies with
prompt written notice of any breach of the Perfection Representations, Warranties



C-2









 






or Covenants, and shall not, without obtaining a confirmation of the then-current ratings of the
Class A Notes (without giving effect to the Class A Note Insurance Policy) as determined after any
adjustment or withdrawal of the ratings following notice of such breach, waive a breach of any of
the Perfection Representations, Warranties or Covenants.




C-3