Document:

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                                                                   Exhibit 10.19

               CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
                                       OF
                            CLASS B PREFERENCE SHARES
                                       OF
                          RAM REINSURANCE COMPANY LTD.

     The Class B Preference Shares (the "Class B Preference Shares") of RAM
Reinsurance Company Ltd., a company organized under the laws of Bermuda (the
"Company"), shall have the designation, preferences and rights, and shall be
subject to the restrictions, as hereinafter appearing in this Certificate of
Designation, Preferences and Rights (this "Class B Certificate"):

     Section 1 Designation and Amount. There shall be a class of perpetual,
non-cumulative, redeemable preference shares of the Company which shall be
designated as "Class B Preference Shares," par value U.S. $1,000 per share. The
number of shares constituting such class shall initially be 500.01. Such number
of shares may be increased or decreased at any time and from time to time by
resolution of the Board; provided, however, that no decrease shall reduce the
number of authorized shares to a number less than the number of shares then
outstanding.

     Section 2 Definitions. Unless the context or use indicates another or
different meaning or intent, the following terms shall have the following
meanings for purposes of this Class B Certificate, whether used in the singular
or plural:

     "Affiliate" shall mean, as to any Person, any Person controlled by, in
control of, or under common control with, such Person.

     "Agent Member" shall mean a member of the Securities Depository that will
act on behalf of an Existing Holder or a Potential Holder that is identified as
such in a Holder's Purchaser's Letter.

     "Auction" shall mean a periodic implementation of the Auction Procedures.

     "Auction Agent" shall mean The Bank of New York (Delaware) unless and until
(i) another commercial bank or trust company duly organized under the laws of
the United States of America and/or any state or territory thereof, having its
principal place of business in New York, New York, and having a combined capital
stock surplus and undivided profits of at least fifteen million dollars (U.S.
$15,000,000), or (ii) a member of the National Association of Securities
Dealers, Inc., having a capitalization of at least fifteen million dollars (U.S.
$15,000,000), and, in either case, authorized by law to perform all the duties
imposed on it under the Auction Agent Agreement and appointed by the Company,
enters into an agreement with the Company to follow the Auction Procedures for
the purpose of determining the Auction Rate and to act as transfer agent,
registrar or dividend disbursing agent for the Class B Preference Shares.

     "Auction Agent Agreement" shall mean the agreement entered into between the
Company and the Auction Agent and any similar agreement with a successor Auction
Agent providing, among other things, that the Auction Agent will follow the
Auction Procedures for the purpose of determining the Auction Rate.

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     "Auction Date" shall mean, for each Subsequent Dividend Period, the last
Business Day of the immediately preceding Dividend Period.

     "Auction Procedures" shall mean the procedures set forth in the Auction
Agent Agreement for conducting Auctions, substantially as described in Sections
13 through 20.

     "Auction Rate" shall mean a rate per annum equal to the lesser of (i) the
rate provided to the Company by the Auction Agent, as determined by the Auction
Agent pursuant to the Auction Procedures, and (ii) the Maximum Rate.

     "Board" shall mean the Board of Directors of the Company.

     "Broker-Dealer" shall mean any broker-dealer or other entity (i) that is
permitted by law to perform the functions required of a broker-dealer in the
Auction Procedures, (ii) that is a member of, or a participant in, the
Securities Depository, (iii) that has been selected by the Company and (iv) that
has entered into a Broker-Dealer Agreement with the Auction Agent that remains
in effect.

     "Broker-Dealer Agreement" shall mean any agreement among the Company, the
Auction Agent and a Broker-Dealer, pursuant to which such Broker-Dealer agrees
to follow the Auction Procedures.

     "Business Day" shall mean a day on which the New York Stock Exchange is
open for trading and which is not a Saturday, Sunday or any other day on which
the banks in the City of New York, New York, or in the city of Hamilton,
Bermuda, are authorized or obligated by law to close.

     "Bye-laws" shall mean the bye-laws of the Company.

     "Class A Preference Shares" shall mean any Class A Preference Shares of the
Company authorized by the Board and issued by the Company from time to time.

     "Class B Certificate" shall have the meaning given such term in the first
paragraph of this Agreement.

     "Class B Preference Shares" shall have the meaning given such term in the
first paragraph of this Agreement.

     "Common Shares" shall mean the Voting Common Shares and Non-Voting Common
Shares, as issued and outstanding from time to time.

     "Companies Act" shall mean the Companies Act 1981, as amended from time to
time.

     "Company" shall have the meaning given such term in the first paragraph of
this Agreement.

     "Contingent Capital Preference Share Directors" shall have the meaning
given to such term in Section 6(c).

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     "Contingent Capital Preference Shares" shall mean any class of preference
shares of the Company issued from time to time in connection with contingent
capital facilities which utilize the issuance of CPS Securities.

     "CPS Securities" shall mean (i) the initial issuance of Committed Preferred
Securities issued as Money Market Committed Preferred Custodial Trust Securities
by Blue Water Trust I and (ii) any future Committed Preferred Securities issued
as Money Market Committed Preferred Custodial Trust Securities which are subject
to auction procedures substantially similar to those set forth in Sections 13
through 20.

     "Custodial Trust" shall mean the issuer of the initial issuance of CPS
Securities.

     "Date of Original Issue" shall mean, for the Class B Preference Shares, the
first Business Day after the Initial Auction Date.

     "Dividend" shall mean a payment in cash declared by the Company payable to
a Holder of Class B Preference Shares.

     "Dividend Payment Date" shall mean the first Business Day following the
last day of each Dividend Period.

     "Dividend Period" shall mean the Initial Dividend Period and each
Subsequent Dividend Period.

     "Dividend Rate" shall mean the rate per annum at which a Dividend shall be
payable for any Dividend Period, which rate shall equal (i) for the Initial
Dividend Period, the Initial Dividend Rate, (ii) for each Subsequent Dividend
Period prior to a Fixed-Rate Distribution Event, the Auction Rate, and (iii) for
each Subsequent Dividend Period following a Fixed-Rate Distribution Event, a
rate equal to the fixed-rate equivalent of one-month LIBOR plus 3.00%. The
fixed-rate equivalent shall be determined by using the "bid" 30-year U.S. dollar
swap rate as quoted on page 19901 on the Bridge Telerate Service (or on any
successor or substitute page of such service, or any successor to or substitute
page for such service, providing rate quotations comparable to those currently
provided on such page of such service, as determined by the Auction Agent from
time to time) at 11:00 a.m. New York time on the LIBOR Determination Date;
provided, however, that if the 30-year U.S. dollar swap rate is not available,
the fixed-rate equivalent will be determined by using the "bid" 10-year U.S.
dollar swap rate.

     "Existing Holder" shall mean any Person who is listed as the owner of any
Class B Preference Shares on the records of the Auction Agent at the close of
business on the Business Day prior to such Auction.

     "Fixed-Rate Distribution Event" shall have the meaning given to such term
in Section 3(b).

     "Fixed-Rate Optional Redemption Date" shall have the meaning given to such
term in Section 4(a).

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     "Holder" shall mean a Person identified as a holder of record of Class B
Preference Shares in the Register.

     "Holding Company" shall mean, collectively, Holdings, Holdings II and any
other Person, all or substantially all of the assets of which are comprised,
directly or indirectly, of holdings of securities of the Company.

     "Holdings" shall mean RAM Holdings Ltd., a company organized under the laws
of Bermuda and the holder of all of the Voting Common Shares of the Company.

     "Holdings II" shall mean RAM Holdings II Ltd., a company organized under
the laws of Bermuda and the holder of all of the Non-Voting Common Shares of the
Company.

     "Initial Auction Date" shall mean the first Business Day preceding the
Initial Dividend Period.

     "Initial Dividend Payment Date" shall mean such date as shall be determined
by the Board or a duly appointed committee thereof prior to the issuance of the
Class B Preference Shares; provided that (i) such date is a standard date for
the Class B Preference Shares market and (ii) such day is a Business Day.

     "Initial Dividend Period" shall mean the period from and including the Date
of Original Issue to and excluding the Initial Dividend Payment Date.

     "Initial Dividend Rate" shall mean, for the Class B Preference Shares, the
rate determined with respect to the corresponding CPS Securities on the Initial
Auction Date.

     "LIBOR" shall mean, on the LIBOR Determination Date, the interest rate for
the applicable Dividend Period determined by the Auction Agent on the basis of
the British Bankers' Association "Interest Settlement Rate" for three-month
deposits in U.S. dollars as found on Telerate page 3750 (or on any successor or
substitute page of such service, or any successor to or substitute page for such
service, providing rate quotations comparable to those currently provided on
such page of such service, as determined by the Auction Agent from time to time
for purposes of providing quotations of interest rates applicable to deposits in
U.S. dollars in the London interbank market) as of 11:00 a.m. London time on
such LIBOR Determination Date. As used herein "Telerate page 3750" means the
display designated as page 3750 on the Bridge Telerate Service. If on any LIBOR
Determination Date the Auction Agent cannot determine LIBOR on the basis of the
method set forth above, LIBOR shall be the rate per annum the Auction Agent
determines to be either (a) the arithmetic mean (rounding such arithmetic mean
upwards if necessary to the nearest whole multiple of 1/16%) of the three-month
U.S. dollar lending rate that New York City banks selected by the Auction Agent
are quoting on the relevant LIBOR Determination Date to the principal London
offices of at least two leading banks in the London interbank market or (b) in
the event such arithmetic mean cannot be determined by the Auction Agent, the
lowest three-month U.S. dollar lending rate that the New York City banks
selected by the Auction Agent quoting on such LIBOR Determination Date to
leading European banks. The establishment of LIBOR on each LIBOR Determination
Date by the Auction Agent shall (in the absence of manifest error) be final and
binding.

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     "LIBOR Determination Date" shall mean the second London business day prior
to the commencement of the first Dividend Period following the Fixed-Rate
Distribution Event.

     "Liquidation Preference" shall have the meaning given to such term in
Section 5(a).

     "Maximum Rate" shall mean the maximum dividend rate that can result from an
Auction, which shall be the rate (expressed as a percentage rounded to the
nearest one one-thousandth (.001) of 1.000%) that is equal to the sum of (A) the
Reference Rate in effect as of the end of the Business Day prior to the Auction
Date for the applicable Dividend Period, plus (B)(l) if, as of the end of the
Business Day prior to the Auction Date for the applicable Dividend Period, the
CPS Securities are rated at or above "A2" and "A+" by Moody's and Standard &
Poor's, respectively, then 2.00%; or (2) if, as of the end of the Business Day
prior to the Auction Date for the applicable Dividend Period, the CPS Securities
are rated below "A2" or "A+" by Moody's or Standard & Poor's, respectively, then
3.00%. In no event shall the Maximum Rate on any date of determination exceed
the maximum rate permitted under applicable law. If all outstanding CPS
Securities of the Custodial Trust are subject to Hold Orders (as defined in
Section 14(a)(i)(A)), the Dividend Rate for the next Dividend Period will be the
Dividend Rate per annum equal to 95% of the Reference Rate on the Auction Date
for such Dividend Period.

     "Memorandum of Association" shall mean the memorandum of association of the
Company registered with the Bermuda Registrar of Companies on February 3, 1998,
as amended from time to time.

     "Moody's" shall mean Moody's Investors Service, Inc., and its successors.

     "Non-Voting Common Shares" shall mean the non-voting common shares of the
Company, as issued and outstanding from time to time.

     "Optional Redemption Date" shall have the meaning given to such term in
Section 4(a).

     "Outstanding" shall mean, as of any date, the Class B Preference Shares
theretofore issued by the Company except, without duplication, (i) any Class B
Preference Shares theretofore cancelled or delivered to the Auction Agent for
cancellation, (ii) any Class B Preference Shares as to which the Company or any
Affiliate thereof (including any Affiliate that is a Broker-Dealer) shall be the
owner, (iii) any Class B Preference Shares represented by any certificate in
lieu of which a new certificate has been executed and delivered by the Company
or (iv) any Class B Preference Shares previously redeemed by the Company.

     "Person" shall mean and shall include an individual, a partnership, a
limited liability company, a corporation, a trust, an unincorporated
association, a joint venture or other entity or a government or any agency or
political subdivision thereof.

     "Potential Holder" shall mean any Person, including any Existing Holder,
who may be interested in acquiring any Class B Preference Shares (or, in the
case of an Existing Holder, additional Class B Preference Shares).

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     "Purchaser's Letter" shall mean a letter addressed to the Custodial Trust
and the Broker-Dealer in which a Person agrees, among other things, to offer to
purchase, purchase, offer to sell and/or sell any CPS Securities as set forth in
the Auction Procedures.

     "Put Agreement" shall mean the put option agreement between the Company and
the Custodial Trust.

     "Redemption Date" shall have the meaning given to such term in Section
4(a).

     "Redemption Price" shall mean the price paid by the Company for the Class B
Preference Shares redeemed on any Redemption Date, as determined in accordance
with Section 4.

     "Reference Date" shall have the meaning given to such term in Section 2
within the definition of "Subsequent Dividend Period."

     "Reference Rate" shall mean, on any date, the 30-day LIBOR rate as
published by the British Bankers' Association as of 11:00 a.m., London time, on
such date.

     "Register" shall mean the register of Holders maintained on behalf of the
Company by the Auction Agent or any other Person in its capacity as transfer
agent and registrar for the Class B Preference Shares.

     "Resale Restriction Termination Date" shall have the meaning given to such
term in Section 9.

     "Securities Depository" shall mean The Depository Trust Company or any
successor company or other entity selected by the Company as securities
depository for the Class B Preference Shares that agrees to follow the
procedures required to be followed by such securities depository in connection
with the Class B Preference Shares.

     "Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., and its successors.

     "Subsequent Dividend Period" shall mean (i) prior to a Fixed-Rate
Distribution Event, the period commencing on and including the Dividend Payment
Date for the preceding Dividend Period and ending on and including the date
which is 28 days thereafter, and (ii) following a Fixed-Rate Distribution Event,
the period commencing on and including the Dividend Payment Date for the
preceding Dividend Period and ending on and including the date which is 90 days
thereafter (in each case, such ending date the "Reference Date"); provided that
if the Reference Date is not a Business Day, the Subsequent Dividend Period will
continue to but not include the next Business Day, in which case the next
Subsequent Dividend Period will end on and include the next Reference Date
following the date on which the preceding Dividend Period would have ended if
such normally scheduled date had been a Business Day.

     "Voting Common Shares" shall mean voting common shares of the Company, as
issued and outstanding from time to time.

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     Section 3 Dividends.

     (a) General. Subject to a Maximum Rate for each Subsequent Dividend Period,
Holders of outstanding Class B Preference Shares, in preference to the holders
of Common Shares and of any other class of shares ranking junior to the Class B
Preference Shares, shall be entitled to receive out of any funds legally
available therefor when, as and if declared by the Board or a duly authorized
committee thereof, cash Dividends at a rate per share equal to the Dividend Rate
for the respective Dividend Period. Dividends on the Class B Preference Shares
will accrue from the Date of Original Issue. Auctions for each Dividend Period
prior to a Fixed- Rate Distribution Event will be held on each Auction Date. If
on any Auction Date an auction is not held for any reason (other than because
such date is not determined to be an Auction Date until after it has passed or
as otherwise provided in Section 12(a)), the Dividend Rate for the next
succeeding Dividend Period shall equal the Maximum Rate on such Auction Date. So
long as any Class B Preference Shares shall be outstanding, no dividends, except
dividends payable in Common Shares or other shares ranking junior to the Class B
Preference Shares, shall be paid or declared and no distribution shall be made
on the Common Shares or any other shares ranking junior to the Class B
Preference Shares, nor shall any Common Shares be purchased, retired or
otherwise acquired by the Company, unless all accrued and unpaid Dividends on
the Class B Preference Shares for the then current Dividend Period shall have
been declared and paid or a sum sufficient for payment thereof set apart;
provided that dividends on any Common Shares or other shares (whether common or
preference shares) ranking junior to the Class B Preference Shares may be made
at all times for the purpose of, and only in such amounts as are necessary for,
enabling any Holding Company (i) to service indebtedness for borrowed money as
such payments become due (or to satisfy any of its guarantee obligations made in
respect of indebtedness of the Company or any Holding Company) or (ii) to pay
its operating expenses; provided, further, that no such dividends may be applied
towards the payment of, or setting apart a sum sufficient for the payment of,
any accrued and unpaid dividends on the common or preference shares of any
Holding Company unless all accrued and unpaid Dividends on the Class B
Preference Shares shall have been declared and paid or a sum sufficient for
payment thereof shall have been set apart. For the sake of clarity, nothing in
this Section 3(a) shall be construed as prohibiting the payment of any dividends
declared with respect to the Class A Preference Shares.

          (i) No dividends may be paid upon or declared or set apart for any
     additional Contingent Capital Preference Shares or any other preference
     shares of the Company ranking on parity as to dividends with the Class B
     Preference Shares for any Dividend Period unless at the same time a like
     proportionate dividend for the same Dividend Period, ratable in proportion
     to the respective dividend rates fixed therefor, shall be paid upon or
     declared and set apart for all of the classes of the Company's preference
     shares ranking on parity as to dividends with the Class B Preference Shares
     then issued and outstanding and entitled to receive such dividends.

          (ii) If Dividends are not paid in full upon the Class B Preference
     Shares or dividends on any other capital shares of the Company ranking on a
     parity as to Dividends with the Class B Preference Shares, dividends may be
     declared upon shares of the Class B Preference Shares and any other such
     parity shares, but only if such dividends are declared pro rata so that the
     amount of dividends declared per share on the Class B

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     Preference Shares and such other shares shall in all cases bear to each
     other the same ratio that the amount of accrued but unpaid dividends per
     share on the shares of the Class B Preference Shares and such other parity
     shares bear to each other.

          (iii) Dividends (or amounts equal to accrued and unpaid Dividends) due
     and payable on the Class B Preference Shares with respect to a Dividend
     Period will be computed by multiplying the applicable Dividend Rate by a
     fraction, the numerator of which shall be the number of days in the
     Dividend Period and the denominator of which shall be three-hundred sixty
     (360) and multiplying the amount so obtained by the product of one hundred
     thousand dollars (U.S. $100,000) times the number of such shares
     outstanding (excluding any fractional shares).

          (iv) Dividends shall be non-cumulative; provided, that Dividends shall
     be cumulative during such period of time (A) commencing on the first day of
     any Dividend Period in which (1) dividends on the Common Shares or other
     shares ranking junior to the Class B Preference Shares have been paid
     pursuant to Section 3(a) above or (2) dividends on the Class A Preference
     Shares have been paid, in each case while all accrued and unpaid Dividends
     on the Class B Preference Shares for the then current Dividend Period shall
     not be declared and paid on the Dividend Payment Date or a sum sufficient
     for payment thereof shall not have been set apart and (B) ending on the
     date that all accumulated and unpaid Dividends have been declared and paid
     or a sum sufficient for the payment thereof shall have been set apart
     (provided that the period during which Dividends shall be cumulative shall
     not exceed the maximum period permitted under applicable law).

          (v) Each Dividend shall be payable to the Holders of Class B
     Preference Shares as of the opening of business on each Dividend Payment
     Date; provided that so long as the Class B Preference Shares are held of
     record by a nominee of the Securities Depository, Dividends will be paid to
     the nominee of the Securities Depository. The Securities Depository will
     credit the accounts of the Agent Members of Existing Holders of the Class B
     Preference Shares in accordance with the Securities Depository's normal
     procedures. The Agent Member of an Existing Holder will be responsible for
     holding or disbursing such payments to such Existing Holder in accordance
     with the instructions of such Existing Holder.

     (b) Fixed-Rate Distribution Event. On any Dividend Payment Date following
the exercise by the Company of its put option rights under the Put Agreement,
such Class B Preference Shares will be distributed by the Custodial Trust to the
holders of the Custodial Trust's CPS Securities with a dividend rate described
in clause (iii) of the definition of Dividend Rate upon the occurrence of any of
the following: (i) the Company elects to have such Class B Preference Shares
bear the fixed-rate dividend described in clause (iii) of the definition of
Dividend Rate; (ii) the Company fails to pay the Dividend Rate described in
clauses (i) or (ii) of the definition of Dividend Rate to the Custodial Trust
for the Dividend Period; or (iii) the Company fails to pay the fees and expenses
of the Custodial Trust for the Dividend Period (in each case, a "Fixed-Rate
Distribution Event"); provided, however, in the case of clause (ii) and (iii),
such failure shall not have been cured by the Company within three Business Days
from notice thereof by the Custodial Trust.

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     (c) Fractional Shares. The Company may issue one fractional share of a
Class B Preference Share in an amount equal to one one-hundredth (0.01) of a
whole share.

     Section 4 Redemption.

     (a) The Company shall have the right to redeem the Class B Preference
Shares outstanding, in whole or in part, beginning twenty-eight (28) days after
issuance of the Class B Preference Shares and every twenty-eight (28) days
thereafter consistent with the timing of Auction Dates (each an "Optional
Redemption Date"); provided that the Company shall not redeem the Class B
Preference Shares if after giving effect to a partial redemption, the aggregate
Liquidation Preference of Class B Preference Shares outstanding immediately
after such partial redemption would be less than twenty million dollars (U.S.
$20,000,000). Notwithstanding the foregoing, following a Fixed-Rate Distribution
Event, the Company shall only be permitted to redeem the Class B Preference
Shares subject to such Fixed-Rate Distribution Event on any Auction Date
occurring after the second anniversary of such Fixed-Rate Distribution Event (a
"Fixed-Rate Optional Redemption Date" and, together with an Optional Redemption
Date, a "Redemption Date"). In the case of any redemption pursuant to this
Section 4, the Redemption Price shall be an amount equal to the aggregate
Liquidation Preference of the Class B Preference Shares redeemed plus all
Dividends accrued but unpaid on such Class B Preference Shares as of the
Redemption Date for the then current Dividend Period and any previously
accumulated dividends payable under Section 3(a). In the event of a partial
redemption of the Class B Preference Shares, the Redemption Price shall be
allocated pro rata among the Holders of the Class B Preference Shares. Payment
of the Redemption Price will be made on the first Dividend Payment Date after
the Company elects to redeem Class B Preference Shares.

     (b) Notice of every such redemption shall be mailed, postage prepaid, or
transmitted by facsimile, e-mail or any other standard form of written
telecommunication, to the Holders of the Class B Preference Shares to be
redeemed at their respective addresses then appearing on the Register (which
shall mean the Securities Depository if the Class B Preference Shares are held
of record by a nominee of the Securities Depository), not less than ten days nor
more than fifteen days prior to the Redemption Date. At any time before or after
a notice of redemption has been given, the Company may deposit the aggregate
Redemption Price of the Class B Preference Shares to be redeemed with any bank
or trust company in New York, New York, having capital and surplus of more than
five million dollars (U.S. $5,000,000), named in such notice, directed to be
paid to the respective Holders of the Class B Preference Shares to be redeemed,
in amounts equal to the Redemption Price of the Class B Preference Shares to be
redeemed, on surrender of the share certificate or certificates held by such
Holders, and upon the making of such deposit such Holders shall cease to be
shareholders with respect to such shares, and after such notice shall have been
given and such deposit shall have been made, such Holders shall have no interest
in or claim against the Company with respect to such shares except only to
receive such money from such bank or trust company without interest.

     (c) If the Holders of the Class B Preference Shares which shall have been
called for redemption shall not, within one year after such deposit, claim the
amount deposited for the redemption thereof, any such bank or trust company
shall, upon demand, pay over to the Company such unclaimed amounts and thereupon
such bank or trust company shall be relieved of all responsibility in respect
thereof and to such Holders; if the Holders of the Class B

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Preference Shares which shall have been called for redemption shall not, within
ten years after such deposit, claim the amount deposited for the redemption
thereof, the Company shall be relieved of all responsibility in respect thereof
and to such Holders.

     (d) Any Class B Preference Shares that are redeemed by the Company pursuant
to this Section 4 shall be canceled and resume the status of authorized and
unissued Class B Preference Shares.

     Section 5 Liquidation Preference.

     (a) In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the Company, to the extent allowed by applicable law, Holders will
be entitled to receive the liquidation preference amount per share (the
"Liquidation Preference") plus accrued and unpaid Dividends (whether or not
earned or declared) thereon, to and including the date such Liquidation
Preference is paid. The Class B Preference Shares will have a par value of one
thousand dollars (U.S. $1,000) per share and a Liquidation Preference per share
of one hundred thousand dollars (U.S. $100,000). Payment of the Liquidation
Preference will be made on the first Dividend Payment Date after the Board
approves the liquidation of the Company.

     (b) In the event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up, the available assets of the Company are insufficient
to pay the amount of the liquidating distributions on all outstanding Class B
Preference Shares, then, to the extent allowed by applicable law, the Holders
shall share in any such distribution of assets on a pro rata basis based on
aggregate Liquidation Preference. Unless and until payment in full has been made
to the Holders of the Class B Preference Shares and to holders of all shares of
other classes ranking on a parity as to liquidation with the Class B Preference
Shares (including the Class A Preference Shares) upon liquidation of the
liquidating distributions to which they are entitled, upon liquidation,
dissolution or winding up of the Company, no dividends or distributions may be
made to the holders of the Common Shares or on any other class of capital shares
ranking junior to the Class B Preference Shares upon liquidation and no
purchase, redemption or other acquisition for any consideration by the Company
may be made in respect of such Common Shares or on any other class of capital
shares ranking junior to the Class B Preference Shares upon liquidation. After
any payment of the full amount of the liquidating distributions to which they
are entitled, the Holders of Class B Preference Shares will have no right or
claim to any of the remaining assets of the Company.

     (c) The merger, amalgamation or consolidation of the Company into or with
any other corporation, or the merger of any other corporation into it, or the
transfer or sale of all or substantially all the property or business of the
Company, shall not be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary, for the purposes of this Section 5.

     (d) A dividend or distribution of all or substantially all of the assets of
the Company to the holders of the Company's Common Shares or a repurchase or
redemption of all or substantially all of the Common Shares of the Company shall
be deemed to be a liquidation, dissolution or winding up of the Company for
purposes of this Section 5.

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     Section 6 Voting Rights.

     (a) Except as set forth herein or otherwise required by applicable law, the
Holders of Class B Preference Shares shall have no special voting rights and
their consent shall not be required for taking any corporate action.

     (b) The affirmative vote of the Holders of at least a majority-in-interest
of the Class B Preference Shares at any time outstanding, given in person or by
proxy at a meeting called for the purpose at which the Holders of Class B
Preference Shares shall vote separately as a class, shall be necessary to effect
any amendment, alteration or repeal of any of the provisions of the Memorandum
of Association or the Bye-laws that would adversely affect the rights or
preferences of the Holders of Class B Preference Shares (including without
limitation the issuance of any equity securities of the Company senior to the
Class B Preference Shares with respect to the right to receive dividends or the
right to receive distributions upon a voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company) provided, however, that
for purposes of this Section 6, (i) neither an amendment to the Memorandum of
Association or the Bye-laws so as to authorize or create, or to increase the
authorized or outstanding amount of, Class B Preference Shares or of any shares
of any class ranking on a parity with or junior to the Class B Preference
Shares, nor an amendment to the Memorandum of Association or the Bye-laws so as
to increase the number of directors of the Company, shall be deemed to adversely
affect the rights or preferences of the Holders of Class B Preference Shares and
(ii) no merger, amalgamation or consolidation of the Company with another
Person, transfer or sale by the Company of all or substantially all of its
assets, or any voluntary liquidation of the Company, shall be deemed to
adversely affect the rights or preferences of the Holders of Class B Preference
Shares if following such event, there would be no other preference shares
outstanding senior in ranking to the Class B Preference Shares (other than the
Class A Preference Shares, except in any instance when the Class A Preference
Shares are not senior in ranking pursuant to Section 11(b)), and the Class B
Preference Shares are exchanged for preferred shares of any surviving entity
having the same rights and preferences with respect to such entity as the Class
B Preference Shares have with respect to the Company.

     (c) If the Company has failed to pay Dividends in full on the Class B
Preference Shares for eighteen consecutive months or funds sufficient to pay
such dividends in full shall not have been deposited with the Auction Agent,
subject to the Companies Act, the number of members of the Board shall
automatically be increased by two and the holders of the Contingent Capital
Preference Shares, voting as a single class, shall be entitled to fill the
vacancies so created by electing two additional directors (the "Contingent
Capital Preference Share Directors"). The meeting to elect the Contingent
Capital Preference Share Directors shall be held no more than sixty days after
the last day of an eighteen consecutive month period during which the Company
failed to pay Dividends on the Class B Preference Shares. The term of the
Contingent Capital Preference Share Directors shall cease upon the Company
paying dividends in full on, or the redemption in full of, the Class B
Preference Shares and, at such time, the Contingent Capital Preference Share
Directors will cease to serve on the Board without any further action on the
part of the Board or any holders of Contingent Capital Preference Shares.

     Section 7 Conversion. The Class B Preference Shares may not be converted
into Common Shares.

                                       11

<PAGE>

     Section 8 Notice. All notices or communications, unless otherwise specified
in this Class B Certificate, shall be sufficiently given if in writing and
delivered in person, mailed by first-class mail, postage prepaid, or transmitted
by facsimile, e-mail or any other standard form of written telecommunication to
a Holder of Class B Preference Shares at the address of such Holder set forth in
the Register. Notice shall be deemed given on the earlier of the date received
or the date five days after which such notice is mailed or transmitted.

     Section 9 Transfer Restrictions. The Class B Preference Shares may only be
sold or otherwise transferred in accordance with the restrictions set forth in
the legend below.

               "THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
          THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
          ANY STATE OR OTHER SECURITIES LAW. NEITHER THIS SECURITY NOR ANY
          INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
          PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
          REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
          TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
          THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
          "QUALIFIED INSTITUTIONAL BUYER" WITHIN THE MEANING OF RULE 144A OF THE
          SECURITIES ACT OR (B) IT IS AN "INSTITUTIONAL ACCREDITED INVESTOR"
          WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) OF THE
          SECURITIES ACT AND (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE
          WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY
          RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION
          THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF
          ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH RAM
          REINSURANCE COMPANY LTD. (THE "COMPANY") OR ANY AFFILIATE OF THE
          COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
          SECURITY) AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY
          APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
          SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) PURSUANT TO A
          REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
          SECURITIES ACT, (B) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
          RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A
          QUALIFIED INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR
          FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
          GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (C)
          PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
          REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO
          EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
          SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT

                                       12

<PAGE>

          THE COMPANY, THE CUSTODIAL TRUST AND THE BANK OF NEW YORK (DELAWARE),
          AS TRUSTEE, SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
          TRANSFER PURSUANT TO CLAUSE (B) OR (C) TO REQUIRE THE DELIVERY OF AN
          OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
          SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE
          REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE,
          PROVIDED THAT THE COMPANY, THE CUSTODIAL TRUST AND THE TRUSTEE SHALL
          HAVE THE RIGHT PRIOR TO ANY SUCH REMOVAL TO REQUIRE THE DELIVERY OF AN
          OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
          SATISFACTORY TO EACH OF THEM.. AS USED HEREIN, THE TERMS "UNITED
          STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
          REGULATIONS UNDER THE SECURITIES ACT."

Such restrictive legend shall be placed on the certificates representing any
Class B Preference Shares and shall not be removed prior to the Resale
Restriction Termination Date with respect to such shares.

     Section 10 Other Rights of Holders of Class B Preference Shares. Unless
otherwise required by law, the Holders of Class B Preference Shares shall not
have any rights other than as set forth in this Class B Certificate.

     Section 11 Ranking.

     (a) For the purpose of this Class B Certificate, whenever reference is made
to shares "ranking on a parity with the Class B Preference Shares," such
reference shall mean and include all shares of the Company in respect of which
the rights of the holders thereof as to the payment of dividends or as to
distributions in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company rank equally with the
rights of the Holders of Class B Preference Shares; and whenever reference is
made to shares either "ranking junior" or "ranking senior" or to the Class B
Preference Shares such reference shall mean and include all shares of the
Company in respect of which the rights of the holders thereof as to the payment
of dividends and as to distributions in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company are either
senior or junior and subordinate to the rights of the Holders of the Class B
Preference Shares.

     (b) The Class A Preference Shares shall rank senior to the Class B
Preference Shares and any rights and preferences created with respect to the
Class A Preference Shares shall in no way be restricted or otherwise affected by
the rights and preferences created with respect to the Class B Preference
Shares; provided, however, that notwithstanding the foregoing, upon the
occurrence of a voluntary or involuntary liquidation (other than a voluntary
liquidation as described in Section 6(b)(ii) (without regard to the
parenthetical therein)), dissolution or winding up of the Company, the Class A
Preference Shares shall rank in all respects pari passu with the Class B
Preference Shares.

                                       13

<PAGE>

     Section 12 Act of God, Natural Disaster, Etc.

     (a) Notwithstanding anything else set forth herein, if an Auction Date is
not a Business Day because the New York Stock Exchange or banks in the city of
Hamilton, Bermuda are closed for business due to an act of God, natural
disaster, act of war, civil or military disturbance, act of terrorism, sabotage,
riots or a loss or malfunction of utilities or communications services or the
Auction Agent is not able to conduct an Auction in accordance with the Auction
Procedures for any reason, then the Dividend Rate for the next Dividend Period
shall be the Dividend Rate determined on the previous Auction Date.

     (b) Notwithstanding anything else set forth herein, if a Dividend Payment
Date is not a Business Day because the New York Stock Exchange or banks in the
city of Hamilton, Bermuda, are closed for business due to an act of God, natural
disaster, act of war, civil or military disturbance, act of terrorism, sabotage,
riots or a loss or malfunction of utilities or communications services or the
Dividend payable on such date can not be paid for any such or similar reason,
then:

          (i) the Dividend Payment Date for the affected Dividend Period shall
     be the next Business Day on which the Company and its paying agent, if any,
     are able to cause the Dividend to be paid using their reasonable best
     efforts;

          (ii) the affected Dividend Period shall end on the day it would have
     ended had such event not occurred and the Dividend Payment Date had
     remained the scheduled date;

          (iii) the next Dividend Period will begin and end on the dates on
     which it would have begun and ended had such event not occurred and the
     Dividend Payment Date remained the scheduled date; and

          (iv) no interest shall accrue in respect of such delay in payment of
     Dividends.

     Section 13 Certain Definitions for Sections 13 through 20. Capitalized
terms used in the description of the Auction Procedures set forth in Sections 13
through 20 shall have the following meanings, unless the context otherwise
requires:

     (a) "Available CPS Securities" shall have the meaning specified in Section
18(a).

     (b) "Bid" shall have the meaning specified in Section 14(a)(i)(B).

     (c) "Bidder" shall have the meaning specified in Section 14(a).

     (d) "Existing Holder" shall mean, for purposes of Sections 13 through 20,
any Person who is listed as the owner of any CPS Securities on the records of
the Auction Agent at the close of business on the Business Day prior to such
Auction.

     (e) "Holder" shall mean, for purposes of Sections 13 through 20, a Person
identified as a holder of record of CPS Securities.

                                       14

<PAGE>

     (f) "Hold Order" shall have the meaning specified in Section 14(a)(i)(A).

     (g) "Liquidation Preference" shall mean, for purposes of Sections 13
through 20, at any given time, the liquidation preference of a CPS Security at
such time.

     (h) "Order" shall have the meaning specified in Section 14(a).

     (i) "Potential Holder" shall have the mean, for purposes of Sections 13
through 20, any Person, including any Existing Holder, who may be interested in
acquiring any CPS Securities (or, in the case of an Existing Holder, additional
CPS Securities).

     (j) "Remaining Amount" shall have the meaning specified in Section
19(b)(iv).

     (k) "Sell Order" shall have the meaning specified in Section 14(a)(i)(C).

     (l) "Submission Deadline" shall have the meaning set forth in Section
14(a).

     (m) "Submitted Bid" shall have the meaning set forth in Section
17(a)(iii)(B).

     (n) "Submitted Hold Order" shall have the meaning specified in Section
17(a)(iii)(A).

     (o) "Submitted Order" shall mean any Submitted Bid, any Submitted Hold
Order or any Submitted Sell Order.

     (p) "Submitted Sell Order" shall have the meaning specified in Section
17(a)(iii)(C).

     (q) "Sufficient Clearing Bids" shall have the meaning specified in Section
18(a).

     (r) "Winning Bid Rate" shall have the meaning specified in Section 18(b).

     Section 14 Orders by Existing Holders and Potential Holders.

     (a) Prior to 1:00 p.m. New York City time on each Auction Date or such
other time on any Auction Date by which the Broker-Dealer is required to submit
Orders to the Auction Agent as specified by the Auction Agent from time to time
(the "Submission Deadline"):

          (i) each Existing Holder of CPS Securities may submit to the
     Broker-Dealer an order, by telephone or otherwise, consisting of
     information as to:

               (A) the Liquidation Preference of outstanding CPS Securities, if
          any, held by such Existing Holder that such Existing Holder desires to
          continue to hold without regard to the Dividend Rate for the next
          succeeding Dividend Period (a "Hold Order");

               (B) the Liquidation Preference of outstanding CPS Securities, if
          any, held by such Existing Holder that such Existing Holder offers to
          sell if the Dividend Rate for the next succeeding Dividend Period
          shall be less than the rate per annum specified by such Existing
          Holder (a "Bid"); or

                                       15

<PAGE>

               (C) the Liquidation Preference of outstanding CPS Securities, if
          any, held by such Existing Holder that such Existing Holder offers to
          sell without regard to the Dividend Rate for the next succeeding
          Dividend Period (a "Sell Order"); and

          (ii) in addition to the information specified in (i) above, each
     Existing Holder that is an investment manager, fiduciary or a Person that
     is submitting Orders to a Broker-Dealer on behalf of more than one
     beneficial owner of the CPS Securities must submit to the Broker-Dealer an
     Order, by telephone or otherwise, consisting of information as to:

               (A) the number of accounts for which the Order is being submitted
          (including accounts which are not submitting Orders in the Auction,
          which would be deemed Hold Orders);

               (B) the face amount of outstanding CPS Securities held by such
          accounts; and

               (C) the nature of the Order for each account (i.e., Hold, Bid or
          Sell Orders), and if there is more than one Order per account, the
          number of shares of CPS Securities per Order; and

          (iii) the Broker-Dealer may contact Potential Holders by telephone or
     otherwise to determine the Liquidation Preference of CPS Securities which
     each such Potential Holder offers to purchase if the Dividend Rate for the
     next succeeding Dividend Period is not less than the Bid specified by such
     Potential Holder.

For purposes hereof, the communication to a Broker-Dealer of information
referred to in clause (i) or (ii) of this Section 14(a) is hereinafter referred
to as an "Order" and collectively as "Orders." Each Existing Holder and each
Potential Holder placing an Order is hereinafter referred to as a "Bidder" and
collectively as "Bidders."

     (b) (i) Subject to the provisions described in Section 16 under "Validity
     of Orders," a Bid by an Existing Holder will constitute an irrevocable
     offer to sell:

               (A) the Liquidation Preference of CPS Securities specified in
          such Bid if the Dividend Rate is less than the rate specified in such
          Bid; or

               (B) such Liquidation Preference or a lesser Liquidation
          Preference of CPS Securities to be determined as set forth in Section
          19 under "Acceptance and Rejection of Orders," if the Dividend Rate is
          equal to the rate specified in such Bid.

     Subject to the provisions described in Section 16 under "Validity of
     Orders," a Sell Order by an Existing Holder will constitute an irrevocable
     offer to sell the Liquidation Preference of outstanding CPS Securities
     specified in such Sell Order.

                                       16

<PAGE>

          (ii) Subject to the provisions described in Section 16 under "Validity
     of Orders," a Bid by a Potential Holder will constitute an irrevocable
     offer to purchase:

               (A) the Liquidation Preference of CPS Securities specified in
          such Bid if the Dividend Rate is higher than the rate specified in
          such Bid; or

               (B) such Liquidation Preference or a lesser Liquidation
          Preference of CPS Securities as set forth in Section 19 under
          "Acceptance and Rejection of Orders," if the Dividend Rate is equal to
          the rate specified in such Bid.

     (c) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent will round such rate down to
the next highest one-thousandth (0.001) of 1.000%.

     (d) If an Order or Orders covering all outstanding CPS Securities held by
any Existing Holder is not submitted to the Auction Agent prior to the
Submission Deadline for any reason, including the failure of a Broker-Dealer to
submit such Existing Holder's Order to the Auction Agent prior to the Submission
Deadline, the Auction Agent will deem a Hold Order to have been submitted on
behalf of such Existing Holder covering the Liquidation Preference of
outstanding CPS Securities held by such Existing Holder and not subject to an
Order submitted to the Auction Agent.

     (e) Neither a Custodial Trust nor the Auction Agent will be responsible for
any failure of the Broker-Dealer to submit an Order to the Auction Agent on
behalf of any Existing Holder or Potential Holder, nor will any such party be
responsible for failure by the Securities Depository to effect any transfer or
to provide the Auction Agent with current information regarding registration of
transfers.

     (f) Neither the Company nor any Affiliate thereof, nor any Holder of a
fractional share, may submit an Order in any Auction.

     (g) An Existing Holder may submit different types of Orders in an Auction
with respect to the CPS Securities then held by such Existing Holder. An
Existing Holder that offers to purchase additional CPS Securities is, for
purposes of such offer, treated as a Potential Holder with respect to such
securities.

     Section 15 Maximum Rate. Any Bid specifying a rate higher than the Maximum
Rate will (i) be treated as a Sell Order if submitted by an Existing Holder and
(ii) not be accepted if submitted by a Potential Holder.

     Section 16 Validity of Orders.

     (a) If any Existing Holder submits through a Broker-Dealer to the Auction
Agent one or more Orders covering in the aggregate more than the Liquidation
Preference of outstanding CPS Securities actually held by such Existing Holder,
such Orders will be considered valid as follows and in the order of priority set
forth below:

                                       17

<PAGE>

          (i) all Hold Orders will be considered valid, but only up to and
     including, in the aggregate, the Liquidation Preference of CPS Securities
     actually held by such Existing Holder, and if the aggregate Liquidation
     Preference of CPS Securities subject to such Hold Orders exceeds the
     aggregate Liquidation Preference of CPS Securities actually held by such
     Existing Holder, the aggregate Liquidation Preference of CPS Securities
     subject to each such Hold Order will be reduced to the aggregate
     Liquidation Preference of CPS Securities actually held by such Existing
     Holder;

          (ii) (A) any Bid will be considered valid up to and including the
     excess of the Liquidation Preference of CPS Securities actually held by
     such Existing Holder over the aggregate Liquidation Preference of CPS
     Securities subject to any Hold Orders referred to in paragraph (A) above;

               (B) subject to subparagraph (A) above, if more than one Bid with
          the same rate is submitted on behalf of such Existing Holder and the
          aggregate Liquidation Preference of CPS Securities subject to such
          Bids is greater than such excess, such Bids will be considered valid
          up to and including the amount of such excess and the Liquidation
          Preference of CPS Securities subject to each Bid with the same rate
          will be reduced to the Liquidation Preference of CPS Securities equal
          to such excess;

               (C) subject to subparagraphs (A) and (B) above, if more than one
          Bid with different rates is submitted on behalf of such Existing
          Holder, such Bids will be considered valid first in the ascending
          order of their respective rates until the highest rate is reached at
          which such excess exists and then at such rate up to and including the
          Liquidation Preference of such excess; and

               (D) in any event, the aggregate Liquidation Preference of CPS
          Securities, if any, subject to Bids not valid under this paragraph
          (ii) will be treated as the subject of a Bid by a Potential Holder at
          the rate therein specified; and

          (iii) all Sell Orders will be considered valid up to and including the
     excess of the aggregate Liquidation Preference of CPS Securities actually
     held by such Existing Holder over the aggregate Liquidation Preference of
     CPS Securities subject to Hold Orders referred to in paragraph (i) above
     and valid Bids referred to in paragraph (ii) above; provided, that if the
     aggregate Liquidation Preference of CPS Securities subject to such Sell
     Orders exceeds the aggregate Liquidation Preference of CPS Securities held
     by such Existing Holder, the aggregate Liquidation Preference of CPS
     Securities subject to each such Sell Order will be reduced to the aggregate
     Liquidation Preference of CPS Securities held by such Existing Holder.

     If more than one Bid for CPS Securities is submitted on behalf of any
Potential Holder, each Bid submitted will be a separate Bid with the rate and
amount therein specified. Any Bid or Sell Order submitted by an Existing Holder
not equal to an integral multiple of the Liquidation Preference of each share of
CPS Securities will be rejected and be deemed a Hold Order. Any Bid submitted by
a Potential Holder not equal to an integral multiple of the Liquidation
Preference of CPS Securities will be rejected. Any Order submitted in an Auction
by a Broker-

                                       18

<PAGE>

Dealer to the Auction Agent prior to the Submission Deadline on any Auction Date
shall be irrevocable.

     Section 17 Submission of Orders by Broker-Dealer to Auction Agent.

     (a) The Broker-Dealer shall submit in writing or through the Auction
Agent's auction processing system to the Auction Agent, prior to the Submission
Deadline on each Auction Date, all Orders obtained by the Broker-Dealer and
specifying with respect to each Order:

          (i) the name of the Bidder placing such Order;

          (ii) the aggregate Liquidation Preference of CPS Securities that are
     the subject of such Order;

          (iii) to the extent that such Bidder is an Existing Holder:

               (A) the aggregate Liquidation Preference of CPS Securities
          subject to any Hold Order placed by such Existing Holder (each, a
          "Submitted Hold Order");

               (B) the aggregate Liquidation Preference of CPS Securities
          subject to any Bid placed by such Existing Holder and the rate
          specified in such Bid (each, a "Submitted Bid"); and

               (C) the aggregate Liquidation Preference of CPS Securities
          subject to any Sell Order placed by such Existing Holder (each, a
          "Submitted Sell Order"); and

          (iv) to the extent such Bidder is a Potential Holder, the rate
     specified in such Potential Holder's Bid.

     (b) If any rate specified in any Bid contains more than three figures to
the right of the decimal point, the Auction Agent shall round such rate down to
the next one-thousandth (.00l) of 1.000%.

     (c) If an Order or Orders covering the aggregate Liquidation Preference of
CPS Securities held by an Existing Holder are not submitted to the Auction Agent
prior to the Submission Deadline for any reason, including the failure of a
Broker-Dealer to contact such Existing Holder or to submit such Existing
Holder's Order to the Auction Agent, the Auction Agent shall deem a Hold Order
to have been submitted on behalf of such Existing Holder covering the
Liquidation Preference of the CPS Securities held by such Existing Holder which
are not subject to Orders submitted to the Auction Agent.

     (d) If one or more Orders on behalf of an Existing Holder covering in the
aggregate more than the Liquidation Preference of the CPS Securities actually
held by such Existing Holder are submitted to the Auction Agent, such Orders
shall be considered valid as follows and in the following order of priority:

                                       19

<PAGE>

          (i) all Hold Orders submitted on behalf of such Existing Holder shall
     be considered valid, but only up to and including in the aggregate the
     Liquidation Preference of the CPS Securities actually held by such Existing
     Holder, and, if the Liquidation Preference of CPS Securities subject to
     such Hold Orders exceeds the Liquidation Preference of CPS Securities
     actually held by such Existing Holder, the Liquidation Preference of CPS
     Securities subject to each such Hold Order shall be reduced to the
     Liquidation Preference of the CPS Securities actually held by such Existing
     Holder;

          (ii) (A) any Bid submitted on behalf of such Existing Holder shall be
          considered valid up to and including the excess of the Liquidation
          Preference of the CPS Securities actually held by such Existing Holder
          over the Liquidation Preference of the CPS Securities subject to any
          Hold Order referred to in subparagraph (i) above;

               (B) subject to Section 17(d)(ii)(A), if more than one Bid with
          the same rate is submitted on behalf of such Existing Holder and the
          aggregate Liquidation Preference of the CPS Securities subject to such
          Bids is greater than such excess, such Bids shall be considered valid
          up to the amount of such excess, and the Liquidation Preference of the
          CPS Securities subject to each Bid with the same rate shall be reduced
          to the Liquidation Preference of the CPS Securities equal to such
          excess;

               (C) subject to Section 17(d)(ii)(A) and (B), if more than one Bid
          with different rates is submitted on behalf of such Existing Holder,
          such Bids shall be considered valid first in the ascending order of
          their respective rates until the highest rate is reached at which such
          excess exists and then at such rate up to and including the
          Liquidation Preference of such excess; and

               (D) in any such event, the number, if any, of such CPS Securities
          subject to Bids not valid under Section 17 (d)(ii) shall be treated as
          the subject of a Bid by a Potential Holder; and

          (iii) all Sell Orders shall be considered valid but only up to and
     including in the aggregate the excess of the Liquidation Preference of the
     CPS Securities actually held by such Existing Holder over the Liquidation
     Preference of the CPS Securities subject to Hold Orders referred to in
     Section 17(d)(ii)(A) and valid Bids referred to in this Section
     17(d)(ii)(B).

     (e) If more than one Bid is submitted on behalf of any Potential Holder,
each Bid submitted shall be a separate Bid with the rate and Liquidation
Preference of the CPS Securities therein specified.

     Section 18 Determination of Sufficient Clearing Bids, Winning Bid Rate and
Dividend Rate.

     (a) Not earlier than the Submission Deadline on each Auction Date, the
Auction Agent will assemble all valid Submitted Orders and will determine the
excess of the total Liquidation Preference of CPS Securities on such Auction
Date over the sum of the aggregate

                                       20

<PAGE>

Liquidation Preference of CPS Securities subject to Submitted Hold Orders (such
excess being hereinafter referred to as the "Available CPS Securities"), and
whether Sufficient Clearing Bids have been made in the Auction. "Sufficient
Clearing Bids" will have been made if the number of CPS Securities that are the
subject of Submitted Bids by Potential Holders specifying rates not higher than
the applicable Maximum Rate equals or exceeds the number of CPS Securities that
are the subject of Submitted Sell Orders (including the number of CPS Securities
subject to Bids by Existing Holders specifying rates higher than the applicable
Maximum Rate).

     (b) If Sufficient Clearing Bids have been made, the Auction Agent will
determine the lowest rate specified in the Submitted Bids (the "Winning Bid
Rate") which, taking into account the rates in the Submitted Bids of Existing
Holders, would result in Existing Holders continuing to hold an aggregate amount
of CPS Securities which, when added to the amount of CPS Securities to be
purchased by Potential Holders, based on the rates in their Submitted Bids,
would equal not less than the Liquidation Preference of Available CPS
Securities. In such event, the Winning Bid Rate will be the Dividend Rate for
the next succeeding Dividend Period.

     (c) If Sufficient Clearing Bids have not been made (other than because all
of the outstanding CPS Securities are subject to Submitted Hold Orders), the
Dividend Rate will be the Maximum Rate for the next succeeding Dividend Period.

     (d) If all of the Existing Holders indicate a desire to hold all of the CPS
Securities of a class without regard to the Dividend Rate, the Dividend Rate
payable on such CPS Securities for the next Dividend Period will be a percentage
(as selected by the Board prior to the issuance of the CPS Securities) of the
Reference Rate in effect as of the end of the Auction Date.

     Section 19 Acceptance and Rejection of Orders.

     (a) Existing Holders will continue to hold the Liquidation Preference of
CPS Securities that are subject to Submitted Hold Orders and, based on the
determination made as described under Section 17, Submitted Bids and Submitted
Sell Orders will be accepted or rejected and the Auction Agent will take such
other action as set forth below.

     (b) If Sufficient Clearing Bids have been made, all Submitted Sell Orders
will be accepted and, subject to the discretion of the Auction Agent to round
and allocate certain CPS Securities as described below, Submitted Bids will be
accepted or rejected as follows in the following order of priority and all other
Submitted Bids shall be rejected:

          (i) Each Existing Holder's Submitted Bid specifying any rate that is
     higher than the Winning Bid Rate will be accepted, thus requiring each such
     Existing Holder to sell the aggregate Liquidation Preference of CPS
     Securities subject to such Submitted Bids;

          (ii) Each Existing Holder's Submitted Bid specifying any rate that is
     lower than the Winning Bid Rate will be rejected, thus entitling each such
     Existing Holder to continue to hold the aggregate Liquidation Preference of
     CPS Securities subject to such Submitted Bids;

                                       21

<PAGE>

          (iii) Potential Holders' Submitted Bids specifying any rate that is
     lower than the Winning Bid Rate will be accepted;

          (iv) Each Existing Holder's Submitted Bids specifying a rate that is
     equal to the Winning Bid Rate will be rejected, thus entitling each such
     Existing Holder to continue to hold the aggregate Liquidation Preference of
     CPS Securities subject to such Submitted Bid, unless the aggregate
     Liquidation Preference of CPS Securities subject to all such Submitted Bids
     is greater than the Liquidation Preference of CPS Securities (the
     "Remaining Amount") equal to the excess of the Available CPS Securities
     over the aggregate Liquidation Preference of CPS Securities subject to
     Submitted Bids described in subparagraphs (i) and (ii) above, in which
     event such Submitted Bid of such Existing Holder will be rejected in part,
     and such Existing Holder will be entitled to continue to hold the
     Liquidation Preference of CPS Securities subject to such Submitted Bid, but
     only in a Liquidation Preference equal to the aggregate Liquidation
     Preference of CPS Securities obtained by multiplying the Remaining Amount
     by a fraction, the numerator of which is the Liquidation Preference of CPS
     Securities held by such Existing Holder subject to such Submitted Bid and
     the denominator of which is the sum of the Liquidation Preference of
     outstanding CPS Securities subject to such Submitted Bids made by all such
     Existing Holders that specified a rate equal to the Winning Bid Rate; and

          (v) Each Potential Holder's Submitted Bid specifying a rate that is
     equal to the Winning Bid Rate will be accepted but only in a Liquidation
     Preference equal to the Liquidation Preference of CPS Securities obtained
     by multiplying the excess of the aggregate Liquidation Preference of
     Available CPS Securities over the aggregate Liquidation Preference of CPS
     Securities subject to Submitted Bids described in subparagraphs (ii), (iii)
     and (iv) above by a fraction, the numerator of which is the aggregate
     Liquidation Preference of CPS Securities subject to such Submitted Bid and
     the denominator of which is the sum of the Liquidation Preference of CPS
     Securities subject to Submitted Bids made by all such Potential Holders
     that specified a rate equal to the Winning Bid Rate.

     (c) If Sufficient Clearing Bids have not been made (other than because all
of the CPS Securities are subject to Submitted Hold Orders), subject to the
discretion of the Auction Agent to round and allocate certain CPS Securities as
described below, Submitted Orders will be accepted or rejected as follows in the
following order of priority and all other Submitted Bids shall be rejected:

          (i) Existing Holders' Submitted Bids specifying any rate that is equal
     to or lower than the applicable Maximum Rate will be rejected, thus
     entitling each such Existing Holder to continue to hold the aggregate
     Liquidation Preference of CPS Securities subject to such Submitted Bids;

          (ii) Potential Holders' Submitted Bids specifying any rate that is
     equal to or lower than the applicable Maximum Rate will be accepted, thus
     requiring such Potential Holders to purchase the aggregate Liquidation
     Preference of CPS Securities subject to such Submitted Bids; and

                                       22

<PAGE>

          (iii) Each Existing Holder's Submitted Bids specifying any rate that
     is higher than the applicable Maximum Rate and the Submitted Sell Order of
     each Existing Holder will be accepted, thus entitling each Existing Holder
     that submitted any such Submitted Bid or Submitted Sell Order to sell the
     CPS Securities subject to such Submitted Bid or Submitted Sell Order, but
     in both cases only in a Liquidation Preference equal to the aggregate
     Liquidation Preference of CPS Securities obtained by multiplying the
     aggregate Liquidation Preference of CPS Securities subject to Submitted
     Bids described in clause (ii) above by a fraction, the numerator of which
     is the aggregate Liquidation Preference of CPS Securities held by such
     Existing Holder subject to such Submitted Bid or Submitted Sell Order and
     the denominator of which is the aggregate Liquidation Preference of CPS
     Securities subject to all such Submitted Bids and Submitted Sell Orders.

     If as a result of the procedures described in subparagraphs (ii) or (iii)
above, any Existing Holder would be entitled or required to sell, or any
Potential Holder would be entitled or required to purchase, a fraction of a
security of CPS Securities, the Auction Agent will, in such manner as it will,
in its sole discretion determine to round up or down the number of CPS
Securities to be purchased or sold by any Existing Holder or Potential Holder so
that only whole securities will be entitled to be purchased or sold by each
Potential Holder or Existing Holder even if such allocation results in one or
more of such Potential Holders not purchasing any CPS Securities.

     Based on the results of each Auction, the Auction Agent will determine the
aggregate Liquidation Preference of CPS Securities to be purchased and the
aggregate Liquidation Preference of CPS Securities to be sold by Potential
Holders and Existing Holders on whose behalf the Broker-Dealer submitted Bids or
Sell Orders.

     Section 20 Maximum Number of Holders.

     (a) Unless and until the Company obtains the approval of the Broker-Dealer
and notifies the Auction Agent of a different number, the maximum number of
partners for the CPS Securities shall be eighty (80) and the maximum number of
holders for the CPS Securities shall be twenty-five (25), in either case, the
"maximum number of Holders". If the Company or the Broker-Dealer determines (and
provides written notice thereof to the Auction Agent prior to 10:00 a.m., New
York City time, on any Auction Date) or if the Auction Agent determines, that as
a result of allocations of CPS Securities made by the Auction Agent in an
Auction in accordance with the Auction Procedures, there is a significant
possibility that the number of Holders of a Custodial Trust's CPS Securities
would be greater than the maximum number of Holders, the Auction Agent shall:
(1) in consultation with the Company and the Broker-Dealer, review the ownership
of the CPS Securities to determine whether any Person has been counted more than
once in determining the number of Holders and (2) in consultation with the
Broker-Dealer and with any other Persons that the Auction Agent determines would
become Existing Holders of CPS Securities on behalf of more than one Holder,
determine the number of beneficial Holders of CPS Securities on behalf of which
such Broker-Dealer and other Persons would hold CPS Securities, and if, after
completing such determination and eliminating all Persons that have been counted
more than once, the number of Holders of CPS Securities would

                                       23

<PAGE>

nonetheless be greater than the maximum number of Holders, then the Auction
Agent shall make a new determination of the results of such Auction as follows,
in the following order of priority:

          (i) if one or more Bids of Existing Holders specifying the Winning Bid
     Rate would have been accepted in part, or one or more Bids of Potential
     Holders specifying the Winning Bid Rate would have been rejected in part,
     and the Auction Agent determines (in consultation with the Broker-Dealer)
     that the acceptance in whole or in part of one or more Bids of Existing
     Holders specifying the Winning Bid Rate or the rejection in whole or in
     part of one or more Bids of Potential Holders specifying the Winning Bid
     Rate would cause the number of Holders to be less than or equal to the
     maximum number of Holders, to that extent such Bids shall be accepted or
     rejected, as the case may be;

          (ii) if the Auction Agent determines (in consultation with the
     Broker-Dealer) that: (1) the rejection in whole or in part of one or more
     Bids of Existing Holders specifying a rate or rates lower than the maximum
     rate but higher than the rate which would have been the Winning Bid Rate,
     or the acceptance in whole or in part of one or more Bids of Potential
     Holders specifying such a rate or rates and (2) the rejection in whole or
     in part of one or more Bids of Potential Holders specifying a rate or rates
     equal to or lower than the rate which would have been the Winning Bid Rate,
     would cause the number of Holders to be less than or equal to the maximum
     number of Holders, to that extent such Bid of any Existing Holder that is
     so rejected or any such Bid of any Potential Holder that is so accepted and
     the highest rate specified in any such Bid of any Existing Holder that is
     so rejected or any such Bid of any Potential Holder that is so accepted
     shall be the Winning Bid Rate; provided that, to the extent practicable,
     Bids of Existing Holders which would have been accepted specifying a lower
     rate shall be rejected, and Bids of Potential Holders specifying a lower
     rate shall be accepted before such Bids specifying a higher distribution
     rate; and provided, further, that subject to the foregoing proviso, to the
     extent practicable, Bids of Potential Holders which would have been
     accepted specifying a higher rate shall be rejected before such Bids
     specifying a lower rate, and Bids of Existing Holders specifying a rate
     shall be rejected before Bids of Potential Holders specifying the same rate
     are accepted; or

     (b) If the Auction Agent determines, in consultation with the
Broker-Dealer, that the application of the foregoing procedures could not result
in the number of Holders being less than or equal to the maximum number of
Holders, then Sufficient Clearing Bids shall be deemed not to exist for such
Auction and the "Maximum Rate" shall be the rate for the next succeeding
distribution period for the CPS Securities held by the Custodial Trust and sell
orders shall be accepted, in the sole discretion of the Auction Agent, only to
the extent that their acceptance would not cause the number of Holders to exceed
the maximum number of Holders for such Custodial Trust; provided that to the
extent practicable, Bids of Potential Holders specifying a lower rate shall be
accepted before Bids of Potential Holders specifying a higher rate.

                                       24<PAGE>

                                                                  EXECUTION COPY

                 AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT

            AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT (this "Amendment"),
dated as of February 10, 2006, among CAC WAREHOUSE FUNDING CORPORATION II, as
borrower (the "Borrower"), CREDIT ACCEPTANCE CORPORATION, as Originator (the
"Originator"), WACHOVIA CAPITAL MARKETS, LLC, as deal agent (the "Deal Agent")
and collateral agent (the "Collateral Agent"), WACHOVIA BANK, NATIONAL
ASSOCIATION, as liquidity agent for the VFCC Purchaser Group (the "Liquidity
Agent") and as the sole Investor (the "Investor") and VARIABLE FUNDING CAPITAL
COMPANY, LLC (f/k/a Variable Funding Capital Corporation), as a lender (and
together with the Liquidity Agent, the "Lenders").

            Capitalized terms used and not defined in this Amendment shall have
the meanings given such terms in the Loan and Security Agreement, dated as of
September 30, 2003 (the "Loan Agreement"), among the Borrower, the Originator,
the Investors, the Lenders, the Deal Agent, the Backup Servicer and the
Collateral Agent.

                             PRELIMINARY STATEMENTS

            WHEREAS, each of the signatories hereto is party to the Loan
Agreement; and WHEREAS, each of the signatories hereto wishes to amend the Loan
Agreement as hereinafter provided;

            NOW, THEREFORE, in consideration of the mutual covenants contained
herein and in the Loan Agreement, and other good and valuable consideration, the
receipt and adequacy of which is hereby expressly acknowledged, and intending to
be legally bound hereby, the signatories hereto agree as follows:

      Section 1. Amendment.

            (a) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definition of "Available Funds" in its entirety and replacing it with the
following:

            "With respect to any Payment Date: (i) all amounts deposited in the
            Collection Account during the Collection Period (other than Dealer
            Collections and Repossession Expenses) that ended on the last day of
            the calendar month immediately preceding the calendar month in which
            such Payment Date occurs and investment earnings thereon; (ii) all
            amounts deposited in the Collection Account from the Reserve Account
            in accordance with Section 2.7 hereof; (iii) all amounts paid by the
            Borrower pursuant to Section 4.5 hereof during or with respect to
            the prior Collection Period in respect of Ineligible Loans or
            Ineligible Contracts (other than payments in respect of
            Nonconforming Contracts); (iv)

<PAGE>

            amounts paid by the Borrower pursuant to Section 2.16 hereof; and
            (v) all amounts paid under any Dealer Agreement."

            (b) Section 1.1 of the Loan Agreement is hereby amended by adding
the following definition of "Commitment Termination Date" immediately after the
definition of "Breakage Costs":

            "With respect to each Purchaser Group, February 9, 2007, or with
            respect to each Purchaser Group, such later date to which the
            Commitment Termination Date may be extended in the sole discretion
            of such Purchaser Group in accordance with the terms of Section
            2.1(b)."

            (c) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definition of "Credit Agreement" in its entirety and replacing it with the
following:

            "The Fourth Amended and Restated Credit Agreement, dated as of
            February 7, 2006 among Credit Acceptance, Comerica Bank, as
            Administrative Agent and Collateral Agent and the banks signatory
            thereto; provided, however, to the extent the Credit Agreement is
            amended or terminated after February 10, 2006, references to the
            Credit Agreement shall refer to the Credit Agreement on February 10,
            2006 unless otherwise consented to by the Deal Agent."

            (d) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definition of "Dealer Concentration Limit" in its entirety and replacing it
with the following:

            "With respect to any Dealer, an amount equal to, in the case of
            Loans related to any Dealer, 4.0% of the aggregate Net Loan Balance,
            on the Funding Date."

            (e) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definition of "Defaulted Contract" in its entirety and replacing it with the
following:

            "A Contract shall be deemed a Defaulted Contract no later than the
            earlier of (x) the day it becomes 90 days delinquent, based on the
            date the last payment thereon was received by the Servicer and (y)
            the day on which an auction check is posted to the relevant
            account."

            (f) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definition of "Forecasted Collections" in its entirety and replacing it with
the following:

            "The expected amount of Collections to be received with respect to
            the Aggregate Outstanding Eligible Loan Balance each month as
            determined by Credit Acceptance in accordance with its forecasting
            model, which shall be submitted to the Deal Agent with each Funding
            Notice related to a proposed Advance when new Pools are pledged to
            the Collateral Agent."

                                       2
<PAGE>

            (g) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definition of "Loan" in its entirety and replacing it with the following:

            "All amounts advanced by Credit Acceptance under a Dealer Agreement
            and payable from Collections, including servicing charges, insurance
            charges and service policies and all related finance charges, late
            charges, and all other fees and charges; provided, however, that the
            term "Loan" shall, for the purposes of this Agreement, include only
            those Loans identified from time to time on Schedule V hereto, as
            amended from time to time in accordance herewith."

            (h) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definition of "Loan Loss Reserve" in its entirety and replacing it with the
following:

            "The loan loss reserve, calculated in accordance with Credit
            Acceptance's periodic analysis of the performance of each Dealer,
            maintained against the Loans of such Dealer."

            (i) Section 1.1 of the Loan Agreement is hereby amended by adding
the following definition of "Nonconforming Contract Payment Amount" immediately
after the definition of "Nonconforming Contract":

            "An amount equal to the sum of (i): (x) the product of the
            Outstanding Balance of such Contract as of the last day of the
            related Collection Period and a fraction, the numerator of which is
            Capital as of the Funding Date and the denominator of which is the
            Outstanding Balance of Eligible Contracts as of the Funding Date;
            (ii) accrued and unpaid Carrying Costs, Increased Costs, Indemnified
            Amounts and Additional Amounts related to such Contract through the
            date of such deposit; (iii) any related Servicer Advances; and (iv)
            and all Hedge Costs due to the relevant Hedge Counterparties for any
            termination in whole or in part of one or more transactions related
            to the relevant Hedging Agreement, as required by the terms of any
            Hedging Agreement."

            (j) Section 1.1 of the Loan Agreement is hereby amended by deleting
paragraph (ii) of the definition of "Outstanding Balance" in its entirety and
replacing it with the following:

            "with respect to any Loan on any date of determination, the
            aggregate amount advanced under such Loan plus revenue accrued with
            respect to such 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 applied through such date of determination in
            accordance with the related Dealer Agreement to the reduction of the
            balance of such Loan and write offs of such Loan."

                                       3
<PAGE>

            (k) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definitions of "Overconcentration Contract" and "Recency Basis" in their
entirety.

            (l) Section 1.1 of the Loan Agreement is hereby amended by deleting
paragraph (i) of the definition of "Related Security" in its entirety and
replacing it with the following:

            "the Dealer Agreements (other than Excluded Dealer Agreement Rights,
            but including Credit Acceptance's rights to service the Loans and
            the related Contracts and receive the related collection fee and
            receive reimbursement of certain repossession and recovery expenses,
            in accordance with the terms of the Dealer Agreements) and Contracts
            securing payment of such Loan;"

            (m) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definition of "Required Reserve Account Amount" in its entirety and
replacing it with the following:

            "With respect to any date of determination, an amount equal to the
            product of (i) 1.0% and (ii) the Capital on such date (after the
            application of funds pursuant to Section 2.7 on the related Payment
            Date plus all amounts required to be maintained by the Borrower
            pursuant to Section 6.2(c)(ii) hereof); provided, however, the
            Required Reserve Account Amount shall at no time be less than the
            product of 0.5% and the Facility Limit and provided, further, that
            if the Capital is zero, the Required Reserve Account Amount shall be
            $100,000."

            (n) Section 1.1 of the Loan Agreement is hereby amended by deleting
the definition of "Take-Out" in its entirety and replacing it with the
following:

            "The release of certain Loans and the related contracts from the
            Lien of this Agreement and the reduction of the Capital by the
            lesser of (a) 85% of currently outstanding Capital or (b)
            $100,000,000."

            (o) Section 2.2(iii) and (iv) of the Loan Agreement are hereby
amended by deleting Section 2.2(iii) and (iv) in their entirety and replacing
them with the following:

            "(iii) In connection with such pledge, the Borrower agrees to
            deliver to the Collateral Agent on the Closing Date or any Funding
            Date on which new Pools are pledged to the Collateral Agent, as the
            case may be, one or more computer files containing true and complete
            lists of all Dealer Agreements, Pools and Loans securing the payment
            of the Notes and amounts due under the Transaction Documents and all
            of the Borrower's obligations under the Notes and the Transaction
            Documents as of the Closing Date or Funding Date, and all Contracts
            securing all such Loans, identified by account number, dealer
            number, and pool number and Outstanding Balance as of the Funding
            Date. Such file shall be marked as Schedule V hereto or as an
            addendum thereto, shall be delivered to the

                                       4
<PAGE>

            Collateral Agent as confidential and proprietary, and such Schedule
            V and each addendum thereto are hereby incorporated into and made a
            part of this Agreement.

            (iv) In connection with such pledge, each of the Borrower, Credit
            Acceptance and the Servicer also agrees, within 180 days of the
            Closing Date or relevant Funding Date, as the case may be, to
            clearly mark 98% of the Contracts or Contract folders securing a
            Loan with the following legend: "THIS AGREEMENT HAS BEEN PLEDGED TO
            WACHOVIA CAPITAL MARKETS, LLC AS COLLATERAL AGENT FOR THE BENEFIT OF
            CERTAIN SECURED PARTIES". Such legend shall be in bold, in type face
            at least as large as 12 point and shall be entirely in capital
            letters."

            (p) Section 2.7(b) of the Loan Agreement is hereby amended by
deleting Section 2.7(b) in its entirety and replacing it with the following:

            "One Business Day per calendar month, the date of which is to be
            chosen by the Borrower, the Collateral Agent shall, upon two
            Business Days' prior written request of the Borrower, withdraw from
            the Collection Account an amount not to exceed the amount on deposit
            therein on the date of such request . The Collateral Agent shall
            distribute such amount to the Deal Agent for the account of the
            Lenders, to be distributed by the Deal Agent to the Lenders, pro
            rata, as a payment in reduction of Capital. Notwithstanding anything
            in this Section 2.7(b) to the contrary, the Collateral Agent shall
            not be required to effect any such withdrawal or the Deal Agent make
            any such distribution until the Servicer has certified to the
            Collateral Agent and the Deal Agent in writing that it reasonably
            believes that at the end of the related Collection Period the sum of
            Available Funds and Excess Reserve Amount, after giving effect to
            such payment, will be greater than the amount needed to make the
            payments required pursuant to Section 2.7(a)(i) through (xii)."

            (q) Section 2.16(a) of the Loan Agreement is hereby amended by
deleting the first paragraph of Section 2.16(a) in its entirety and replacing it
with the following:

            "On any Business Day (the "Take-Out Date"), the Borrower shall have
            the right to effect a Take-Out and require the Collateral Agent to
            release its security interest and Lien on the related Contracts and
            Loans, subject to the following terms and conditions:"

            (r) Section 2.16(a)(iv) of the Loan Agreement is hereby amended by
deleting Section 2.16(a)(iv) in its entirety and replacing it with the
following:

            "On the Take-Out Date, the Collateral Agent shall have received, for
            the benefit of the Secured Parties and the Hedge Counterparties, as
            applicable, in immediately available funds, an amount equal to the
            sum of: (A) the aggregate

                                       5
<PAGE>

            outstanding Capital being paid plus (B) an amount equal to the
            related unpaid Yield (including Yield not yet accrued) to the end of
            the Accrual Period plus (C) an aggregate amount equal to the sum of
            all other amounts due and owing to the Deal Agent, the Lenders, the
            Backup Servicer, the Successor Servicer, the Hedge Counterparties
            and the other Secured Parties, as applicable, under this Agreement
            and the other Transaction Documents, to the extent accrued to such
            date and to accrue thereafter (including, without limitation,
            Breakage Costs and Hedge Costs) plus (D) any outstanding Servicer
            Advances plus (E) all other Aggregate Unpaids. No such reduction
            shall be given effect unless the Borrower has complied with the
            terms of any Hedging Agreement requiring that any derivative
            transaction related thereto be terminated in whole or in part as a
            result of any such reduction in the Capital and Borrower has paid
            all Hedge Costs due to the relevant Hedge Counterparty for any such
            termination;"

            (s) Section 2.16(a) of the Loan Agreement is hereby amended by
adding the following paragraph (vi) immediately after Section 2.16(a)(v):

            "The Borrower shall certify in writing to the Collateral Agent and
            the Deal Agent that no adverse selection was employed in the
            selection of the Loans and Contracts to be released."

            (t) Section 4.1(bb) of the Loan Agreement is hereby amended by
deleting Section 4.1(bb) in its entirety and replacing it with the following:

            "Amount of Loans and Contracts; Computer File. When new Pools are
            pledged to the Collateral Agent, the related Funding Notice shall
            provide (A) the aggregate Outstanding Balance of the Contracts to be
            pledged to the Collateral Agent on the related Funding Date; (B) the
            Aggregate Outstanding Eligible Loan Balance; and (C) the Aggregate
            Outstanding Eligible Loan Net Balance; each as of the applicable
            Cut-off Date and as reported in the Loan Servicing System or as a
            product of the Loan Loss Reserve analysis. The computer file or
            microfiche list delivered pursuant to Section 2.2(a)(iii) hereof is
            complete and accurately reflects the information regarding the
            Loans, Dealer Agreements and Contracts in all material respects."

            (u) Section 4.5(c) through (f) of the Loan Agreement are hereby
amended by deleting Section 4.5(c) through (f) in their entirety and replacing
them with the following:

            "(c) [Reserved.]

            (d) Remedy for Breach. The parties hereto agree that the sole remedy
            for the breach by the Borrower of the representations and warranties
            set forth in Section 4.2 hereof with respect to the eligibility of a
            Loan or Contract shall be set forth in this Section 4.5 and Section
            6.2(c)(ii).

                                       6
<PAGE>

            (e) Application. Amounts paid in accordance with Section 4.5(a) and
            (b) shall be distributed on the next succeeding Payment Date in
            accordance with Section 2.7.

            (f) Notwithstanding anything herein to the contrary, during the
            Revolving Period, payments required under Section 4.5(a) and (b)
            shall not be required if the Capital is equal to or less than the
            Borrowing Base."

            (v) Section 6.2(c)(ii) of the Loan Agreement is hereby amended by
deleting Section 6.2(c)(ii) in its entirety and replacing it with the following:

            "The Custodian shall within 180 days after the Closing Date or
            Funding Date, as applicable, review 100% of the Contract Files to
            verify the presence of the original retail installment contract and
            security agreement and/or installment loans with respect to each
            Contract, provided, however, that the Certificate of Title or other
            evidence of lien with respect to a Contract need not be verified. If
            the number of Contracts for which any of the foregoing documents
            have not been delivered to the Custodian within 180 days of the
            Closing Date or relevant Funding Date, as the case may be, or
            corrected (each such Contract, a "Nonconforming Contract"), exceeds
            2% of the aggregate Contract Files required to be reviewed pursuant
            to this Section 6.2(c)(ii), the Borrower shall make a deposit to the
            Reserve Account only with respect to the excess number of
            Nonconforming Contracts, in an amount equal to the related
            Nonconforming Contract Payment Amount. Once per month, the amount on
            deposit in the Reserve Account in respect of Nonconforming Contracts
            shall be adjusted to account for increases or decreases in the
            excess number of Nonconforming Contracts. The Borrower shall, in the
            case of an increase, promptly deposit to the Reserve Account the
            amount of any such increase. In the case of a decrease, the amount
            of any such decrease shall be deemed to be part of the Excess
            Reserve Amount. During the Revolving Period, payments required under
            this Section 6.2(c)(ii) shall not be required if the Capital is
            equal to or less than the Borrowing Base by the amount of the
            payment that would otherwise be required to be made by this clause."

            (w) Section 6.11(a) of the Loan Agreement is hereby amended by
deleting Section 6.11(a) in its entirety and replacing it with the following:

            "any failure by the Servicer to make any payment, transfer or
            deposit as required by this Agreement or any other Transaction
            Document, other than any such failure resulting from an
            administrative or technical error of the Servicer in the amount so
            paid, transferred or deposited; provided that 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 paid, transferred

                                       7
<PAGE>

            or deposited by the Servicer was less than the amount required to be
            paid, transferred or deposited by the Servicer, the Servicer pays,
            transfers or deposits the amount of such shortfall;"

            (x) Section 10.1(u) of the Loan Agreement is hereby amended by
deleting Section 10.1(u) in its entirety and replacing it with the following:

            "a Take-Out has not occurred within 90 days of February 10, 2006, or
            within 360 days of the most recent Take-Out occurring after February
            10, 2006."

      Section 2. Conditions to Effectiveness. This Amendment shall become
effective on and as of the date hereof, upon the receipt by the Deal Agent of an
executed counterpart of this Amendment from each party hereto.

      Section 3. Severability of Provisions. Any provision of this Amendment
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

      Section 4. Captions. The captions in this Amendment are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.

      Section 5. Agreement to Remain in Full Force and Effect. Except as amended
hereby, the Loan Agreement shall remain in full force and effect and is hereby
ratified, adopted and confirmed in all respects. All references in the Loan
Agreement to "herein," or words of like import, and all references to the Loan
Agreement in any agreement or document shall hereafter be deemed to refer to the
Loan Agreement as amended hereby.

      Section 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

      Section 7. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Amendment.

      Section 8. Representations and Warranties. The Borrower hereby certifies
that (i) the representations and warranties made by it in Section 4.1 of the
Loan Agreement are true and correct as of the date hereof, as though made on and
as of the date hereof and (ii) as of the date hereof, there is no Termination
Event or Servicer Termination Event or event which, with the passage of time of
the giving of notice, could result in a Termination Event or a Servicer
Termination Event.

      Section 9. Waiver of Notice. Each of the parties hereto hereby waives any
notice in connection with the execution and delivery of this Amendment.

                                       8
<PAGE>

                            [Signature page follows]

                                       9
<PAGE>

            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date and year first above written.

                                       CAC WAREHOUSE FUNDING CORPORATION II,
                                       as Borrower

                                       By: /s/ Douglas W. Busk
                                          -------------------
                                          Name: Douglas W. Busk
                                          Title: Treasurer

                                       CREDIT ACCEPTANCE CORPORATION, as
                                       Originator

                                       By: /s/ Douglas W. Busk
                                          ---------------------
                                          Name: Douglas W. Busk
                                          Title: Treasurer

                                       WACHOVIA CAPITAL MARKETS, LLC, as Deal
                                       Agent and Collateral Agent

                                       By: /s/ Chad Kobos
                                          ----------------
                                          Name: Chad Kobos
                                          Title: Director

                                       WACHOVIA BANK, NATIONAL ASSOCIATION, as
                                       Liquidity Agent and the Sole Investor

                                       By: /s/ Justin Zacocs
                                          -------------------
                                          Name: Justin Zacocs
                                          Title: Vice President

                                       VARIABLE FUNDING CAPITAL COMPANY, LLC,
                                       as a Lender

                                       By: Wachovia Capital Markets, LLC, as
                                       attorney-in-fact
                                       By: /s/ Douglas R. Wilson, Sr.
                                          ---------------------------
                                          Name: Douglas R. Wilson, Sr.
                                          Title: Vice President

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