EXHIBIT 4(f)(88)
EXECUTION COPY
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CREDIT ACCEPTANCE AUTO DEALER LOAN TRUST 2007-1
CLASS A ASSET BACKED NOTES
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CREDIT ACCEPTANCE AUTO DEALER LOAN TRUST 2007-1,
as the Issuer
CREDIT ACCEPTANCE FUNDING LLC 2007-1,
as the Seller
CREDIT ACCEPTANCE CORPORATION,
as the Servicer and in its individual capacity
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION
as the Trust Collateral Agent/Indenture Trustee/Backup Servicer
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SALE AND SERVICING AGREEMENT
Dated as of April 12, 2007
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS ................................................... 1
SECTION 1.01. Definitions ............................................ 1
SECTION 1.02. Usage of Terms ......................................... 23
SECTION 1.03. Closing Date and Record Date ........................... 24
SECTION 1.04. Section References ..................................... 24
SECTION 1.05. Compliance Certificates ................................ 24
SECTION 1.06. Directions ............................................. 24
ARTICLE II CONVEYANCE OF SELLER PROPERTY; FURTHER ENCUMBRANCE THEREOF ... 24
SECTION 2.01. Sale of the Initial Seller Property to the Trust ....... 24
SECTION 2.02. Revolving Period; Principal Collection Account ......... 25
SECTION 2.03. Title to Trust Property ................................ 28
ARTICLE III THE DEALER LOANS AND THE CONTRACTS .......................... 29
SECTION 3.01. Representations and Warranties of Seller with
respect to the Seller Property ...................... 29
SECTION 3.02. Payment Upon Breach .................................... 31
SECTION 3.03. Custody of Dealer Agreements and Contract Files ........ 33
ARTICLE IV ADMINISTRATION AND SERVICING OF DEALER LOANS AND CONTRACTS ... 36
SECTION 4.01. Appointment; Duties of Servicer ........................ 36
SECTION 4.02. Collection and Application of Payments on the Dealer
Loans and Contracts ................................. 38
SECTION 4.03. Realization Upon Contracts ............................. 39
SECTION 4.04. Physical Damage Insurance .............................. 39
SECTION 4.05. Maintenance of Security Interests in Financed
Vehicles ............................................ 39
SECTION 4.06. Covenants of Servicer .................................. 40
SECTION 4.07. Payments in Respect of Contracts Upon Breach ........... 44
SECTION 4.08. Servicer Fee ........................................... 45
SECTION 4.09. Servicer's Certificate ................................. 45
SECTION 4.10. Annual Statement as to Compliance; Notice of Default ... 47
SECTION 4.11. Annual Independent Certified Public Accountant's
Report .............................................. 48
SECTION 4.12. Access to Certain Documentation and Information
Regarding Dealer Loans and Contracts ................ 49
SECTION 4.13. Servicer Expenses ...................................... 49
TABLE OF CONTENTS
(continued)
PAGE
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SECTION 4.14. Servicer Not to Resign as Servicer ..................... 49
SECTION 4.15. The Backup Servicer .................................... 50
SECTION 4.16. Fidelity Bond .......................................... 50
SECTION 4.17. Obligations in Respect of the Owner Trustee ............ 51
ARTICLE V TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS AND NOTEHOLDERS ................................... 51
SECTION 5.01. Establishment of Trust Accounts ........................ 51
SECTION 5.02. Collections; Allocation ................................ 54
SECTION 5.03. Certain Reimbursements to the Servicer ................. 54
SECTION 5.04. Additional Deposits .................................... 54
SECTION 5.05. Reserve Account ........................................ 55
SECTION 5.06. Payments under the Class A Note Insurance Policy ....... 56
SECTION 5.07. Reserved ............................................... 58
SECTION 5.08. Transfers and Distributions ............................ 58
SECTION 5.09. Distributions from the Class A Note Distribution
Account ............................................. 60
SECTION 5.10. Certificate Distribution Account ....................... 61
SECTION 5.11. Statements to Certificateholders and Noteholders ....... 62
ARTICLE VI THE SELLER AND THE ISSUER .................................... 63
SECTION 6.01. Representations and Warranties of the Seller ........... 63
SECTION 6.02. Limitation on Liability of Seller and Others ........... 67
SECTION 6.03. Seller May Own Notes ................................... 67
SECTION 6.04. Additional Covenants of the Seller ..................... 67
SECTION 6.05. Indemnities of the Issuer .............................. 68
ARTICLE VII THE SERVICER ................................................ 69
SECTION 7.01. Representations of Servicer ............................ 69
SECTION 7.02. Indemnities of Servicer ................................ 72
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer; Resignation ............... 74
SECTION 7.04. Limitation on Liability of Servicer and Others ......... 74
SECTION 7.05. Delegation of Duties ................................... 75
SECTION 7.06. Certification Upon Satisfaction ........................ 75
ARTICLE VIII DEFAULT .................................................... 75
SECTION 8.01. Servicer Defaults ...................................... 75
ii
TABLE OF CONTENTS
(continued)
PAGE
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SECTION 8.02. Appointment of Successor ............................... 77
SECTION 8.03. Notification to Class A Noteholders and
Certificateholders .................................. 79
SECTION 8.04. Waiver of Past Defaults ................................ 79
ARTICLE IX THE TRUST COLLATERAL AGENT ................................... 79
SECTION 9.01. Duties of the Trust Collateral Agent ................... 79
SECTION 9.02. Rights of the Trust Collateral Agent ................... 81
SECTION 9.03. Individual Rights of Trust Collateral Agent ............ 82
SECTION 9.04. Reports by Trust Collateral Agent to Holders ........... 83
SECTION 9.05. Compensation ........................................... 83
SECTION 9.06. Eligibility ............................................ 84
SECTION 9.07. Trust Collateral Agent's Disclaimer .................... 84
SECTION 9.08. Limitation on Liability ................................ 84
SECTION 9.09. Reliance Upon Documents ................................ 85
SECTION 9.10. Successor Trust Collateral Agent ....................... 85
SECTION 9.11. Representations and Warranties of the Trust
Collateral Agent .................................... 88
SECTION 9.12. Waiver of Setoffs ...................................... 88
ARTICLE X TERMINATION ................................................... 88
SECTION 10.01. Optional Purchase ..................................... 89
SECTION 10.02. Termination ........................................... 89
ARTICLE XI MISCELLANEOUS PROVISIONS ..................................... 89
SECTION 11.01. Amendment ............................................. 89
SECTION 11.02. Protection of Title to Trust .......................... 91
SECTION 11.03. Limitation on Rights of Class A Noteholders ........... 93
SECTION 11.04. Governing Law ......................................... 94
SECTION 11.05. Notices ............................................... 94
SECTION 11.06. Severability of Provisions ............................ 95
SECTION 11.07. Assignment ............................................ 95
SECTION 11.08. Further Assurances .................................... 95
SECTION 11.09. No Waiver; Cumulative Remedies ........................ 95
SECTION 11.10. Third-Party Beneficiaries ............................. 95
SECTION 11.11. Actions by Noteholders ................................ 96
SECTION 11.12. Corporate Obligation .................................. 96
iii
TABLE OF CONTENTS
(continued)
PAGE
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SECTION 11.13. Covenant Not to File a Bankruptcy Petition ............ 96
SECTION 11.14. Multiple Roles ........................................ 97
EXHIBITS
Exhibit A [Reserved]
Exhibit B Servicer's Certificate
Exhibit C [Reserved]
Exhibit D Form of Dealer Agreement
Exhibit E Form of Servicer's Acknowledgment
Exhibit F Form of Contracts
Exhibit G Collection Guidelines
Exhibit H Credit Guidelines
iv
TABLE OF CONTENTS
(continued)
PAGE
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SCHEDULES
Schedule A Dealer Loans, Dealer Agreements and Contracts
Schedule B Forecasted Collections
Schedule C Perfection Representations, Warranties and Covenants
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This Sale and Servicing Agreement, dated as of April 12, 2007, among
CREDIT ACCEPTANCE AUTO DEALER LOAN TRUST 2007-1 (the "Issuer" or the "Trust"),
CREDIT ACCEPTANCE FUNDING LLC 2007-1, a Delaware limited liability company, as
Seller (the "Seller"), CREDIT ACCEPTANCE CORPORATION, a Michigan corporation, in
its individual capacity ("Credit Acceptance") and as Servicer (the "Servicer")
and ▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION, a national banking association
organized under the laws of the United States, in its capacity as Backup
Servicer, Trust Collateral Agent and Indenture Trustee (the "Backup Servicer,"
"Trust Collateral Agent" and "Indenture Trustee").
WITNESSETH THAT: In consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.
Whenever used in this Agreement, the following words and phrases, unless the
context otherwise requires, shall have the following meanings. Terms used herein
but not defined herein shall have the meaning given such terms in the Indenture.
"Adjusted Collateral Amount" means, on any Distribution Date, during
the Revolving Period, an amount equal to the sum of: (i) the Collateral Amount;
and (ii) the amount on deposit in the Principal Collection Account.
"Advance Rate" means, on any Distribution Date, the ratio, expressed
as a percentage, where the numerator is equal to the Class A Note Balance and
the denominator is equal to the Collateral Amount.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect to
any Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. A Person shall not be deemed to be an
Affiliate of any person solely because such other Person has the contractual
right or obligation to manage such Person unless such other Person controls such
Person through equity ownership or otherwise.
"Agreement" means this Sale and Servicing Agreement, as the same may
be amended or supplemented from time to time.
"Aggregate Outstanding Eligible Loan Balance" means, on any date of
determination, the sum of the Outstanding Balances of all Eligible Loans on such
day.
"Aggregate Outstanding Net Eligible Loan Balance" means, on any date
of determination, the Aggregate Outstanding Eligible Loan Balance less the
related Loan Loss Reserves at the end of the most recent Collection Period.
"Amortization Period" means the period of time beginning on the
earlier of (i) the close of business on April 15, 2008, and (ii) the close of
business on the Business Day before the day on which an Early Amortization Event
automatically occurs or is declared pursuant to Section 2.02 hereof.
"Amortization Period Additional Contract Collateral Amount" has the
meaning assigned to such term in Section 3.02(d)(i) hereof.
"Amortization Period Additional Loan Collateral Amount" has the
meaning assigned to such term in Section 3.02(d)(i) hereof.
"Amortization Period Payment Obligations" has the meaning assigned to
such term in Section 3.02(d)(ii) hereof.
"Applicable Law" means, for any Person, all existing and future
applicable laws, rules, regulations (including proposed, temporary and final
income tax regulations), statutes, treaties, codes, ordinances, permits,
certificates, orders and licenses of and interpretations by any Governmental
Authority, and applicable judgments, decrees, injunctions, writs, orders, or
action of any Court, arbitrator or other administrative, judicial, or
quasi-judicial tribunal or agency of competent jurisdiction.
"Assumption Date" has the meaning assigned to such term in Section
2.3(a) of the Backup Servicing Agreement.
"Automatic Amortization Event" has the meaning assigned to such term
in Section 2.02(b) hereof.
"Available Funds" means, with respect to any Distribution Date: (i)
all Collections (other than Dealer Collections and Repossession Expenses)
received by the Servicer, the Seller or the Originator during the related
Collection Period with respect to the Contracts and the Dealer Loans and paid
over to the Issuer, (ii) all Purchase Amounts paid by the Seller, the Servicer
or the Originator and any amounts paid by the Originator in respect of the
Limited Repurchase Option during the related Collection Period, (iii) all
investment earnings and interest on amounts on deposit in the Reserve Account,
the Principal Collection Account and the Collection Account during the related
Collection Period, (iv) any amounts remaining in the Principal Collection
Account after the conclusion of the Revolving Period, and (v) on any
Distribution Date, any amounts on deposit in the Reserve Account in excess of
the Reserve Account Requirement, after giving effect to all deposits to and
withdrawals from the Reserve Account on such Distribution Date.
"Backup Servicer" means ▇▇▇▇▇ Fargo Bank, National Association and its
permitted successors and assigns.
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"Backup Servicing Agreement" means the Backup Servicing Agreement
dated as of the Closing Date, among the Backup Servicer, the Class A Insurer,
Credit Acceptance, the Seller, the Issuer and the Trust Collateral Agent.
"Backup Servicing Fee" means, as to each Distribution Date, $4,000;
provided, however, that if the Backup Servicer becomes the successor Servicer,
such fee shall no longer be paid.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of
1978 (11 U.S.C. Section 101, et seq.), as amended from time to time.
"Basic Documents" means this Agreement, the Certificate of Trust (as
defined in the Trust Agreement), the Trust Agreement, the Backup Servicing
Agreement, the Indenture, the Contribution Agreement, the Insurance Agreement,
the Initial Purchaser Agreement, the Intercreditor Agreement, the Class A
Insurer Premium Letter, the Class A Notes and all other documents and
certificates delivered in connection therewith.
"Benefit Plan" has the meaning given such term in the Trust Agreement.
"Business Day" means any day other than a Saturday or a Sunday on
which banking institutions are not required or authorized to be closed in New
York, New York, Detroit, Michigan or Minneapolis, Minnesota.
"Capped Backup Servicer and Trustee Fees and Expenses" means, with
respect to any Distribution Date, in respect of fees, indemnification amounts
and expenses due to the Backup Servicer in its capacity as Backup Servicer, the
Owner Trustee, the Indenture Trustee and the Trust Collateral Agent: (i) on any
Distribution Date on which (X) no Indenture Event of Default has occurred or (Y)
an Indenture Event of Default has occurred but is no longer continuing or has
been waived, an amount not to exceed $15,000 for any Distribution Date, in the
aggregate; and (ii) on any Distribution Date on which an Indenture Event of
Default has occurred and is continuing and has not been waived (A) to the Backup
Servicer, the Indenture Trustee and the Trust Collateral Agent, an amount not to
exceed $20,850 for any Distribution Date, in the aggregate; and (B) to the Owner
Trustee, an amount not to exceed $5,000 for any Distribution Date, except with
respect to reasonable and necessary expenses of the Owner Trustee (including
reasonable attorneys' fees and costs) incurred by the Owner Trustee in
connection with any pending or threatened action, suit or proceeding, whether
civil or criminal, administrative or investigative in which the Owner Trustee is
identified as a subject or named as a party and faces potential liability,
censure or penalties, other than as a result of the gross negligence or willful
misconduct of the Owner Trustee.
"Capped Servicing Fee" means, with respect to the Servicing Fee
payable to the Backup Servicer if it has become Servicer and with respect to any
Distribution Date, an amount equal to the product of 10.00% and Collections for
the related Collection Period.
"Certificate" has the meaning given such term in the Trust Agreement.
"Certificate Distribution Account" has the meaning assigned to such
term in Section 5.01(a)(iii) hereof.
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"Certificateholder" has the meaning given such term in the Trust
Agreement.
"Certificate Interest" means the allocable percentage interest of a
Certificate held by a Certificateholder.
"Certificate of Title" means, with respect to any Financed Vehicle,
the certificate of title or other documentary evidence of ownership of such
Financed Vehicle as issued by the department, agency or official of the
jurisdiction (whether in paper or electronic form) in which such Financed
Vehicle is titled, responsible for accepting applications for, and maintaining
records regarding, certificates of title and liens thereon.
"Certificate Register" and "Certificate Registrar" means the register
mentioned and the registrar appointed pursuant to Section 3.4 of the Trust
Agreement.
"Class A Insurer" means XL Capital Assurance Inc., a New York stock
insurance company.
"Class A Insurer Default" means: (i) failure by the Class A Insurer to
make a payment required under the Class A Note Insurance Policy in accordance
with its terms; (ii) the occurrence of an involuntary insolvency event with
respect to the Class A Insurer which remains unstayed for 60 consecutive days;
(iii) consent by the Class A Insurer to the appointment of a conservator,
receiver, liquidator or other similar official in any insolvency, readjustment
of debt, marshaling of assets and liabilities, rehabilitation or similar
proceedings of or relating to the Class A Insurer or of or relating to all or
substantially all of its property; or (iv) the Class A Insurer admits in writing
its inability to pay its debts generally as they become due, files a petition to
take advantage of or otherwise voluntarily commences a case or proceeding under
any applicable bankruptcy, insolvency, reorganization or other similar statute,
makes an assignment for the benefit of its creditors, or voluntarily suspends
payments of its obligations.
"Class A Insurer Interest Shortfall Payment" has the meaning set forth
in Section 5.06(a)(iii) hereof.
"Class A Insurer Preference Payment" has the meaning set forth in
Section 5.06(c)(i) hereof.
"Class A Insurer Premium" has the meaning given such term in the
Insurance Agreement.
"Class A Insurer Premium Letter" means the premium letter, dated the
Closing Date, among the Class A Insurer, the Servicer, the Issuer and the Trust
Collateral Agent.
"Class A Insurer Premium Supplement" has the meaning set forth in the
Class A Insurer Premium Letter.
"Class A Insurer Principal Payment" has the meaning set forth in
Section 5.06(a)(iii) hereof.
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"Class A Interest Carryover Shortfall" means, as of the close of
business on any Distribution Date, the excess of the Class A Interest
Distributable Amount for such Distribution Date plus any outstanding Class A
Interest Carryover Shortfall from the preceding Distribution Date plus interest
on such outstanding Class A Interest Carryover Shortfall, to the extent
permitted by law, at the Class A Note Rate from and including such preceding
Distribution Date to but excluding the current Distribution Date, over the
amount in respect of interest on the Class A Notes that was actually deposited
in the Class A Note Distribution Account on such current Distribution Date.
"Class A Interest Distributable Amount" means, with respect to any
Distribution Date, interest accrued from and including the preceding
Distribution Date (or, in the case of the first Distribution Date, from the
Closing Date) to, but excluding, the current Distribution Date, at the Class A
Note Rate on the Class A Note Balance immediately prior to such Distribution
Date.
"Class A Note Balance" equals, initially, $100,000,000 and thereafter
equals the initial Class A Note Balance reduced by all amounts allocable to
principal previously distributed to Class A Noteholders.
"Class A Note Distribution Account" means the Class A Note
Distribution Account established and maintained pursuant to Section 5.01(a)(ii)
hereof.
"Class A Note Insurance Policy" means the note guaranty insurance
policy issued by the Class A Insurer to the Trust Collateral Agent for the
benefit of the Class A Noteholders with respect to the Class A Notes.
"Class A Principal Distributable Amount" means, for any Distribution
Date (A) during the Revolving Period, $0; and (B) during the Amortization
Period, an amount equal to the lesser of: (i) Available Funds remaining after
payment of the amounts set forth in clauses (i) through (vi) of Section 5.08(a)
hereto; and (ii) the Class A Note Balance; provided, however, on the Stated
Final Maturity, the Class A Principal Distributable Amount will equal the Class
A Note Balance.
"Closing Date" means April 12, 2007.
"Collateral Amount" means, on any Distribution Date, an amount equal
to the Aggregate Outstanding Net Eligible Loan Balance less the aggregate of the
Overconcentration Loan Amounts and the aggregate of the Dealer Loan Excess
Advance Amounts, if any, after giving effect to all purchases of Dealer Loans on
such date. Solely for purposes of calculating the "Collateral Amount", the
determination of whether a Dealer Loan is an "Eligible Loan" shall be made as if
such Dealer Loan were transferred on the date of such calculation; provided,
however, that a Dealer Loan relating to a Dealer that has become insolvent after
the transfer of such Dealer Loan to the Issuer shall continue to constitute an
"Eligible Loan" (assuming that such Dealer Loan would otherwise be an "Eligible
Loan" on such date of determination if the applicable Dealer had not become
insolvent) for purposes of calculating the "Collateral Amount" so long as (i)
the characterization of such Dealer Loan as an "Eligible Loan" would not cause
the percentage of the aggregate Outstanding Balance of all Dealer Loans relating
to Dealers who are insolvent to exceed 2.5% of the Aggregate Outstanding Net
Eligible Loan Balance and (ii) no
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bankruptcy court has entered an order (whether or not final), which order has
not been vacated or overturned, stating that a person other than the Issuer (or
the Servicer on the Issuer's behalf) is entitled to receive any collections on
the Dealer Loans or the Contracts relating thereto.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.01(a)(i) hereof.
"Collection Guidelines" means, with respect to Credit Acceptance, the
policies and procedures of the Servicer in effect on the Closing Date relating
to the collection of amounts due on the Contracts and the Dealer Loans and as
amended from time to time in accordance with the Basic Documents, and with
respect to the Backup Servicer, as successor Servicer, the usual and customary
servicing policies and procedures of the Backup Servicer.
"Collection Period" means, with respect to each Distribution Date, the
immediately preceding calendar month. Any amount stated "as of the close of
business on the last day of a Collection Period" shall give effect to all
collections, charge-offs, reserve adjustments and other account activity during
such Collection Period.
"Collections" means, with respect to any Collection Period, all
payments (including Income Collections, Principal Collections, Dealer
Collections, Recoveries, credit-related insurance proceeds and proceeds of the
Related Security and, so long as Credit Acceptance is the Servicer, excluding
certain recovery and repossession expenses, in accordance with the terms of the
Dealer Agreements) received by the Servicer, the Originator, the Issuer or the
Seller on or after the Cut-off Date in respect of the Dealer Loans and Contracts
in the form of cash, checks, wire transfers or other form of payment in
accordance with the Dealer Loans, the Dealer Agreements and the Contracts.
"Comerica Credit Agreement" means that certain Fourth Amended and
Restated Credit Acceptance Corporation Credit Agreement, dated as of February 7,
2006, with Comerica Bank, as administrative agent and collateral agent, and the
banks signatory thereto, as amended by that certain First Amendment to the
Fourth Amended and Restated Credit Agreement, dated as of September 20, 2006 and
that certain Second Amendment to the Fourth Amended and Restated Credit
Agreement, dated as of January 19, 2007.
"Computer Tape" means a computer tape or diskette (or other means of
electronic transmission acceptable to the Backup Servicer and the Class A
Insurer) in a readable format acceptable to the Backup Servicer and the Class A
Insurer.
"Continued Errors" has the meaning given such term in the Backup
Servicing Agreement.
"Contract" means any retail installment sales contract, in
substantially one of the forms attached hereto as Exhibit F, relating to the
sale of a used automobile, light-duty truck, minivan or sport utility vehicle
originated by a Dealer and in which Credit Acceptance shall have been granted a
security interest and shall have acquired certain other rights under the related
Dealer Agreement to secure the related Dealer's obligation to repay one or more
related Dealer Loans.
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"Contract Buy-Back Rate" means on any date of determination, a
fraction, expressed as a percentage, the numerator of which is the Class A Note
Balance as of the last day of the preceding Collection Period and the
denominator of which is the Outstanding Balance of all Eligible Contracts as of
the last day of the preceding Collection Period.
"Contract File" means with respect to each Contract, the physical
and/or electronic files in which Credit Acceptance maintains the fully executed
original counterpart (for UCC purposes) of the Contract (to the extent required
in accordance with Section 3.03 of this Agreement), either a standard assurance
in the form commonly used in the industry relating to the provision of a
certificate of title or other evidence of lien, the original instruments
modifying the terms and conditions of such Contract and the original
endorsements or assignments of such Contract.
"Contribution Agreement" means the Contribution Agreement dated as of
even date herewith, relating to the contribution by Credit Acceptance to the
Seller of the Contributed Property, as defined therein.
"Corporate Trust Office" has the meaning given such term in the Trust
Agreement.
"Credit Acceptance" means Credit Acceptance Corporation, a Michigan
corporation.
"Credit Guidelines" means the policies and procedures of Credit
Acceptance, relating to the extension of credit to automobile, light-duty truck,
minivan and/or sport utility dealers in respect of retail installment contracts
for the sale of automobiles, light-duty trucks, minivans and/or sport utility
vehicles including, without limitation, the policies and procedures for
determining creditworthiness and otherwise relating to the extension of credit
to Dealers and the maintenance of installment sale contracts, as in effect on
the Cut-off Date and as amended from time to time in accordance with the Basic
Documents, attached hereto as Exhibit H.
"Cut-off Date" means, (i) with respect to Dealer Loans and related
collateral to be transferred to the Issuer on the Closing Date, the close of
business on February 28, 2007, and (ii) with respect to Dealer Loans and related
collateral purchased by the Issuer on each Distribution Date during the
Revolving Period, the close of business on the last day of the immediately
preceding Collection Period.
"Dealer" means any new or used automobile, light-duty truck, minivan
and/or sport utility vehicle dealer who has entered into a Dealer Agreement with
Credit Acceptance.
"Dealer Agreement" means, each Dealer Agreement between the Originator
and the related Dealer substantially in the form of Exhibit D attached hereto;
provided, however, that the term "Dealer Agreement" shall, for the purposes of
this Agreement, include only those Dealer Agreements identified from time to
time on Schedule A hereto, as amended or supplemented from time to time in
accordance herewith.
7
"Dealer Collections" means, with respect to any Collection Period, the
Collections received by the Servicer during such Collection Period which
pursuant to the terms of any Dealer Agreement, are required to be remitted to
the applicable Dealer.
"Dealer Concentration Limit" means, with respect to any Dealer, an
amount equal to: (A) with respect to the Closing Date, 2.5% of the Aggregate
Outstanding Net Eligible Loan Balance as of the initial Cut-off Date and (B)
with respect to each Distribution Date during the Revolving Period on which
Dealer Loans are purchased by the Issuer, 2.5% of the Aggregate Outstanding Net
Eligible Loan Balance as of such Distribution Date, after giving effect to all
Collections received during the related Collection Period and the purchase of
Dealer Loans on such Distribution Date; provided, that for the ten largest
Dealers (measured by the Aggregate Outstanding Net Eligible Loan Balance of each
such Dealer), such limit shall be equal to 18.0% of the Aggregate Outstanding
Net Eligible Loan Balance of all Dealer Loans on the initial Cut-off Date or
each Distribution Date during the Revolving Period on which Dealer Loans are
purchased by the Issuer, as the case may be.
"Dealer Loan" means a group of advances made by the Originator to a
Dealer in respect of an identified group of Contracts, all of which secure
repayment thereof, plus revenue accrued with respect to such Dealer Loan in
accordance with Credit Acceptance's accounting policies set forth in its
periodic reports filed with the Securities and Exchange Commission and the
payment of monies to a Dealer under the related Dealer Agreement, less
Collections on the related Contracts securing such Dealer Loan applied to the
reduction of the balance of such Dealer Loan and write-offs of such Dealer Loan;
provided, however, that the term "Dealer Loan" shall, for the purposes of this
Agreement, include only those Dealer Loans identified from time to time on
Schedule A hereto, as amended or supplemented from time to time in accordance
with the terms of this Agreement.
"Dealer Loan Excess Advance Amount" means, with respect to any
Eligible Loan on any Distribution Date, the amount by which the Net Loan Balance
of such Eligible Loan, on the date it was originated, exceeds 70% of the
Outstanding Balance of the related Eligible Contracts on their dates of
origination.
"Defaulted Contract" means each Contract which has become 90 days
delinquent, based on the date the last payment thereon was received by the
Servicer or has had an auction check posted to the relevant account.
"Delivery" when used with respect to property forming a part of a
Trust Account means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9-102(a)(47) of the UCC and are susceptible
of physical delivery, transfer thereof by physical delivery to the Trust
Collateral Agent indorsed to, or registered in the name of, the Trust
Collateral Agent or its nominee or indorsed in blank, and, with respect to
a certificated security (as defined in Section 8-102 of the UCC) transfer
thereof (i) by delivery of such certificated security to the Trust
Collateral Agent or by delivery of such certificated security to a
securities intermediary indorsed to, or
8
registered in the name of, the Trust Collateral Agent or its nominee or
indorsed in blank to a securities intermediary (as defined in Section
8-102(a)(14) of the UCC) and the making by such securities intermediary of
entries on its books and records identifying such certificated securities
as belonging to the Trust Collateral Agent and the sending by such
securities intermediary of a confirmation of the purchase of such
certificated security by the Trust Collateral Agent, or (ii) by delivery
thereof to a "clearing corporation" (as defined in Section 8-102(a)(5) of
the UCC) and the making by such clearing corporation of appropriate entries
on its books reducing the appropriate securities account of the originator
and increasing the appropriate securities account of a securities
intermediary by the amount of such certificated security, the
identification by the clearing corporation of the certificated securities
for the sole and exclusive account of the securities intermediary, the
maintenance of such certificated securities by such clearing corporation or
its nominee subject to the clearing corporation's exclusive control, the
sending of a confirmation by the securities intermediary of the purchase by
the Trust Collateral Agent of such securities and the making by such
securities intermediary of entries on its books and records identifying
such certificated securities as belonging to the Trust Collateral Agent
(all of the foregoing, "Physical Property"), and, in any event, any such
Physical Property in registered form shall be registered in the name of the
Trust Collateral Agent or its nominee or endorsed in blank; and such
additional or alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of any such Eligible Investment
to the Trust Collateral Agent, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following
procedures, all in accordance with applicable law, including applicable
federal regulations and Articles 8 and 9 of the UCC: book-entry
registration of such Eligible Investment to an appropriate book-entry
account maintained with a Federal Reserve Bank by a securities intermediary
which is also a "depositary" pursuant to applicable federal regulations and
issuance by such securities intermediary of a deposit advice or other
written confirmation of such book-entry registration to the Trust
Collateral Agent of the purchase by the Trust Collateral Agent of such
book-entry securities; the making by such securities intermediary of
entries in its books and records identifying such book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations as belonging to the Trust Collateral Agent and indicating that
such securities intermediary holds such Eligible Investment solely as agent
for the Trust Collateral Agent; and such additional or alternative
procedures as may hereafter become appropriate to effect complete transfer
of ownership of any such Eligible Investment to the Trust Collateral Agent,
consistent with changes in applicable law or regulations or the
interpretation thereof; and
(c) with respect to any Eligible Investment that is an uncertificated
security under Article 8 of the UCC and that is not governed by clause (b)
above, registration on the books and records of the issuer thereof in the
name of the Trust Collateral Agent or its nominee or the securities
intermediary, the sending of a confirmation by the securities
9
intermediary of the purchase by the Trust Collateral Agent or its nominee
of such uncertificated security, and the making by such securities
intermediary of entries on its books and records identifying such
uncertificated certificates as belonging to the Trust Collateral Agent.
In furtherance of the foregoing, any Eligible Investments held by the
Trust Collateral Agent through a securities intermediary shall be held only
pursuant to a control agreement entered into among the Seller, the Trust
Collateral Agent and the securities intermediary, pursuant to which the
securities intermediary agrees to credit all financial assets (as defined in
Section 8-102(a)(9) of the UCC) purchased (as defined in Section 1-201(32) of
the UCC) at the direction of the Trust Collateral Agent to the securities
account maintained by the securities intermediary for the benefit of the Trust
Collateral Agent and agrees to comply with entitlement orders (as defined in
Section 8-102(a)(8) of the UCC) of the Trust Collateral Agent without the
further consent of the Seller and pursuant to which the securities intermediary
waives any prior lien on all financial assets credited to such securities
account to which it might otherwise be entitled. Such control agreement shall
initially be governed by New York law and the Trust Collateral Agent shall not
amend the initial control agreement or enter into a control agreement with a
successor securities intermediary which in either event provides that the laws
of a state other than New York shall govern, without first obtaining a
continuation of perfection and priority opinion under the laws of such new state
which is, acceptable to the Class A Insurer.
"Determination Date" means the fourth Business Day prior to the
related Distribution Date.
"Discretionary Amortization Event" has the meaning assigned to such
term in Section 2.02(c) hereof.
"Distribution Date" means, for each Collection Period, the 15th day of
the following month, or if the 15th day is not a Business Day, the next
following Business Day, commencing with the First Distribution Date.
"Early Amortization Event" means, collectively, Automatic Amortization
Events and Discretionary Amortization Events.
"Eligible Account" shall mean a non-interest bearing segregated trust
account or accounts maintained with an institution whose deposits are insured by
the FDIC, the unsecured and uncollateralized long term debt obligations of which
institution shall be rated "AA-" or higher by S&P and "Aa3" or higher by Moody's
and in the highest short term rating category by the Rating Agencies, and which
is (i) a federal savings and loan association duly organized, validly existing
and in good standing under the federal banking laws, (ii) an institution duly
organized, validly existing and in good standing under the applicable banking
laws of any state, (iii) a national banking association duly organized, validly
existing and in good standing under the federal banking laws, (iv) a principal
subsidiary of a bank holding company, or (v) approved in writing by the Class A
Insurer, and, as confirmed in writing by the Rating Agencies, will not result in
the downgrade of the ratings of the Class A Notes, without regard to the Class A
Note Insurance Policy.
10
"Eligible Contract" means each Contract which at the time of its
pledge by the applicable Dealer to the Originator satisfied the requirements for
a "Qualifying Receivable" set forth in the related Dealer Agreement; provided,
however, that a Contract that has become subject to the payment of a Purchase
Amount in accordance with Section 3.02 hereof or Section 4.07 hereof (regardless
of whether such Purchase Amount is actually paid) shall not constitute an
"Eligible Contract".
"Eligible Dealer Agreement" means each Dealer Agreement:
(a) which was originated by the Originator in compliance with all
applicable requirements of law and which complies with all applicable
requirements of law;
(b) with respect to which all material consents, licenses, approvals
or authorizations of, or registrations or declarations with, any
Governmental Authority required to be obtained, effected or given by the
Seller, by the Originator or by the Servicer in connection with the
origination of such Dealer Agreement or the execution, delivery and
performance by the Seller, by the Originator or by the Servicer of such
Dealer Agreement have been duly obtained, effected or given and are in full
force and effect;
(c) as to which at the time of the sale of rights thereunder to the
Trust, the Seller will have good and marketable title thereto, free and
clear of all Liens;
(d) the Originator's rights under which have been the subject of a
valid grant by the Originator of a first priority perfected security
interest in such rights and in the proceeds thereof in favor of the Seller;
(e) which will at all times be the legal, valid and binding obligation
of the Dealer party thereto (it being understood that recourse for such
payment obligation shall be limited to the extent set forth in the Dealer
Agreement), enforceable against such Dealer in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity);
(f) which constitutes either a "general intangible" or "tangible
chattel paper" under and as defined in Article 9 of the UCC;
(g) which, at the time of the sale of the rights to payment thereunder
to the Trust, no rights to payment thereunder have been waived or modified;
(h) which is not subject to any right of rescission, setoff,
counterclaim or other defense (including the defense of usury), other than
defenses arising out of applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights in general;
11
(i) as to which the Originator, the Servicer and the Seller have
satisfied all obligations to be fulfilled at the time the rights to payment
thereunder are transferred to the Trust;
(j) as to which the related Dealer has not asserted that such
agreement is void or unenforceable;
(k) as to which the related Dealer is not an Affiliate of an executive
of Credit Acceptance or an Affiliate of Credit Acceptance;
(l) as to which the related Dealer is located in the United States;
(m) as to which the related Dealer is not bankrupt or insolvent; and
(n) as to which none of the Originator, the Servicer nor the Seller
has done anything, at the time of its sale to the Trust, to impair the
rights of the Trust therein.
"Eligible Investments" mean any one or more of the following types of
investments which mature no later than the Business Day preceding each
Distribution Date:
(i) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(ii) demand deposits, time deposits or certificates of deposit of any
depository institution (including any Affiliate of the Seller, the
Servicer, the Trust Collateral Agent, the Indenture Trustee or the Owner
Trustee) or trust company incorporated under the laws of the United States
of America or any state thereof or the District of Columbia (or any
domestic branch of a foreign bank) and subject to supervision and
examination by Federal or state banking or depository institution
authorities (including depository receipts issued by any such institution
or trust company as custodian with respect to any obligation referred to in
clause (i) above or a portion of such obligation for the benefit of the
holders of such depository receipts); provided, however, that at the time
of the investment or contractual commitment to invest therein (which shall
be deemed to be made again each time funds are reinvested following each
Distribution Date), the commercial paper or other short-term senior
unsecured debt obligations (other than such obligations the rating of which
is based on the credit of a Person other than such depository institution
or trust company) of such depository institution or trust company shall
have a credit rating from Standard & Poor's of at least A-1+ and from
Moody's of Prime-1;
(iii) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) referred to in clause (ii) above;
(iv) commercial paper (including commercial paper of any affiliate of
the Seller, the Servicer, the Trust Collateral Agent, the Indenture Trustee
or the Owner
12
Trustee) having, at the time of the investment or contractual commitment to
invest therein, a rating from Standard & Poor's of at least A-1+ and from
Moody's of Prime-1;
(v) investments in money market funds (including funds for which the
Seller, the Servicer, the Trust Collateral Agent, the Indenture Trustee or
Owner Trustee or any of their respective Affiliates is investment manager
or advisor) having a rating from Standard & Poor's of AAA-m or AAAm-G and
from Moody's of Aaa;
(vi) bankers' acceptances issued by any depository institution or
trust company referred to in clause (ii) above;
(vii) any other demand or time deposit, obligation, security or
investment as may be acceptable, so long as a Class A Insurer Default is
not continuing, to the Class A Insurer and, as confirmed in writing by the
Rating Agencies, will not result in the downgrade of the ratings of the
Class A Notes, without regard to the Class A Note Insurance Policy; and
(viii) money market deposit accounts, certificates of deposit, demand
or time deposits, savings deposits, bankers acceptances, or federal funds,
in each case as defined in Regulation D of the Board of Governors of the
Federal Reserve System and issued by or sold by or offered by, any domestic
office of any commercial bank or any depository institution or trust
company (including the Indenture Trustee or the Owner Trustee or their
successors) incorporated or organized under the laws of the United States
or any States thereof which has a combined capital and surplus and
undivided profits of not less than $250,000,000 and the deposits of which
are fully insured by FDIC and which has from Moody's a short-term rating of
not lower than P-1 or long-term rating of not lower than A-2.
Any of the foregoing Eligible Investments may be purchased from, by or
through the Owner Trustee, the Indenture Trustee or the Trust Collateral Agent
or any of their respective Affiliates.
"Eligible Loan" means each Dealer Loan, at the time of its transfer to
the Seller under the Contribution Agreement:
(a) which has arisen under a Dealer Agreement that, on the day the
Dealer Loan was created, qualified as an Eligible Dealer Agreement;
(b) which was created in compliance with all applicable requirements
of law and pursuant to an Eligible Dealer Agreement which complies with all
applicable requirements of law;
(c) with respect to which all material consents, licenses, approvals
or authorizations of, or registrations or declarations with, any
Governmental Authority required to be obtained, effected or given by the
Originator, in connection with the creation of such Dealer Loan or the
execution, delivery and performance by the Originator, of the related
Eligible Dealer Agreement have been duly obtained, effected or given and
are in full force and effect;
13
(d) as to which at the time of the sale of such Dealer Loan to the
Trust, the Seller will have good and marketable title thereto, free and
clear of all Liens;
(e) as to which a valid first priority perfected security interest in
such Dealer Loan, related security and in the Proceeds thereof has been
granted by the Originator in favor of the Seller, by the Seller in favor of
the Issuer and by the Issuer in favor of the Indenture Trustee;
(f) which will at all times be the legal, valid and binding payment
obligation of the Obligor thereof (it being understood that recourse for
such payment obligation shall be limited to the extent set forth in the
Dealer Agreement), enforceable against such Obligor in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws,
now or hereafter in effect, affecting the enforcement of creditors' rights
in general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity);
(g) which constitutes a "general intangible" under and as defined in
Article 9 of the UCC;
(h) which is denominated and payable in United States dollars;
(i) which, at the time of its sale to the Trust, has not been waived
or modified;
(j) which is not subject to any right of rescission (subject to the
rights of the related Dealer to repay the outstanding balance thereof and
terminate the related Dealer Agreement), setoff, counterclaim or other
defense (including the defense of usury), other than defenses arising out
of applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights in general;
(k) as to which the Originator, the Servicer and the Seller have
satisfied all obligations to be fulfilled at the time it is pledged to the
Trust;
(l) as to which the related Dealer has not asserted that the related
Dealer Agreement is void or unenforceable;
(m) as to which the related Dealer is not bankrupt or insolvent;
(n) as to which none of the Originator, the Servicer nor the Seller
has done anything, at the time of its sale to the Trust and subsequent
pledge to the Indenture Trustee, to impair the rights of the Trust or the
Indenture Trustee, as the case may be;
(o) has not become subject to the payment of a Purchase Amount in
accordance with Section 3.02 hereof or Section 4.07 hereof (regardless of
whether such Purchase Amount is actually paid); and
(p) the proceeds of which were used to finance the purchases of used
automobiles and/or light-duty trucks and related products.
14
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means Credit Acceptance and each entity, whether or
not incorporated, which is affiliated with Credit Acceptance pursuant to Section
414(b), (c), (m) or (o) of the Code.
"Errors" has the meaning given such term in the Backup Servicing
Agreement.
"Final Score" means the final output from the Originator's proprietary
credit scoring process, which, when divided by 1,000, represents the
Originator's expectations of the ultimate collection rate on a contract at
inception.
"Financed Vehicle" means, with respect to a Contract, any used
automobile, light-duty truck, minivan or sport utility vehicle, together with
all accessories thereto, securing the related Obligor's indebtedness thereunder.
"Financial Covenants" means the financial covenants of the Servicer
set forth in the Insurance Agreement.
"First Distribution Date" means May 15, 2007.
"Forecasted Collections" means the expected amount of collections to
be received with respect to the Contracts each month as determined by Credit
Acceptance in accordance with its forecasting model, set forth on Schedule B
hereto.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator having jurisdiction over such Person.
"Income Collections" means, with respect to any Collection Period, all
Collections received in respect of any servicing fee or finance charge as stated
in, and determined in accordance with, each respective Dealer Agreement.
"Incomplete Contract" means any Contract the original of which is not
contained in the related Contract File as of the date for the verification
thereof set forth in Section 3.03(d) hereof.
"Indenture" means the Indenture dated as of the Closing Date, between
the Issuer and ▇▇▇▇▇ Fargo Bank, National Association, as Indenture Trustee, as
the same may be amended and supplemented from time to time.
15
"Indenture Trustee Fee" means, as to each Distribution Date, $6,000,
which, prior to the Assumption Date, if any, shall include the Backup Servicing
Fee.
"Independent" means a Person, who (1) is in fact independent of the
Seller and any of its Affiliates, (2) does not have any direct financial
interest or any material indirect financial interest in the Seller or in any
Affiliate of the Seller, and (3) is not connected with the Seller or Affiliate
as an officer, employee, promoter, underwriter, trustee, partner, director, or
person performing similar functions.
"Independent Accountants" means a firm registered with the Public
Company Accounting Oversight Board that is Independent and is acceptable to the
Class A Insurer.
"Ineligible Contract" means each contract other than an Eligible
Contract.
"Ineligible Loan" means each Dealer Loan other than an Eligible Loan ;
provided, however, that a Dealer Loan relating to a Dealer that has become
insolvent after the transfer of such Dealer Loan to the Issuer shall continue to
constitute an "Eligible Loan" (assuming that such Dealer Loan would otherwise be
an "Eligible Loan" on such date of determination if the applicable Dealer had
not become insolvent) for purposes of calculating the "Collateral Amount" so
long as (i) the characterization of such Dealer Loan as an "Eligible Loan" would
not cause the percentage of the aggregate Outstanding Balance of all Dealer
Loans relating to Dealers who are insolvent to exceed 2.5% of the Aggregate
Outstanding Net Eligible Loan Balance and (ii) no bankruptcy court has entered
an order (whether or not final), which order has not been vacated or overturned,
stating that a person other than the Issuer (or the Servicer on the Issuer's
behalf) is entitled to receive any collections on the Dealer Loans or the
Contracts relating thereto.
"Initial Purchasers" means Wachovia Capital Markets, LLC, a Delaware
limited liability company and ▇.▇. ▇▇▇▇▇▇ Securities Inc.
"Initial Purchaser Agreement" means the Initial Purchaser Agreement
dated April 3, 2007, by and among the Issuer, Credit Acceptance, the Seller and
Wachovia Capital Markets, LLC, as representative of the Initial Purchasers.
"Initial Reserve Amount" means an amount equal to 1.0% of the
Aggregate Outstanding Net Eligible Loan Balance as of the initial Cut-off Date.
"Initial Seller Property" has the meaning given to such term in
Section 2.01(a) hereof.
"Insolvency Proceeds" means the proceeds, after all payments and
reserves from the sale of the assets of the Trust upon the dissolution of the
Trust because of an insolvency of the Seller.
"Insurance Agreement" means the Insurance and Reimbursement Agreement
dated as of the Closing Date, among the Class A Insurer, the Servicer, the
Seller and the Issuer, as amended, supplemented or modified from time to time.
16
"Intercreditor Agreement" means the Intercreditor Agreement, dated as
of April 12, 2007, among Credit Acceptance, CAC Warehouse Funding Corporation
II, Credit Acceptance Funding LLC 2006-1, Credit Acceptance Auto Dealer Loan
Trust 2006-1, Credit Acceptance Funding LLC 2006-2, Credit Acceptance Auto
Dealer Loan Trust 2006-2, the Seller, the Issuer, Wachovia Capital Markets, LLC,
as deal agent and collateral agent under the securitization documents relating
to CAC Warehouse Funding Corporation II, The Bank of New York (as
successor-in-interest to the corporate trust business of JPMorgan Chase Bank,
N.A.), as indenture trustee and trust collateral agent under the securitization
documents relating to Credit Acceptance Auto Dealer Loan Trust ▇▇▇▇-▇, ▇▇▇▇▇▇▇▇
Bank Trust Company Americas, as indenture trustee and trust collateral agent
under the securitization documents relating to Credit Acceptance Auto Dealer
Loan Trust 2006-2, ▇▇▇▇▇ Fargo Bank, National Association, as indenture trustee
and trust collateral agent under the Indenture, Comerica Bank, as agent under
the Comerica Credit Agreement, and each other Person who becomes a party thereto
after the date hereof.
"Issuer" or "Trust" means Credit Acceptance Auto Dealer Loan Trust
2007-1, a Delaware statutory trust.
"Late Fees" means if the Backup Servicer has become the successor
Servicer, any late fees collected with respect to any Contract in accordance
with the Collection Guidelines.
"Lien" means with respect to a Dealer Loan, Dealer Agreement or
Contract or other property any security interest, lien, charge, pledge, equity,
or encumbrance of any kind (other than tax liens, mechanics' liens, liens of
collection attorneys or agents collecting the property subject to such tax or
mechanics' lien, and any liens which attach thereto by operation of law).
"Limited Repurchase Option" means the one-time purchase option of
Credit Acceptance in accordance with Section 10.01(c) hereof.
"Loan Loss Reserve" means the loan loss reserve, calculated in
accordance with Credit Acceptance's periodic analysis of the performance of each
Dealer, maintained against the Dealer Loans of such Dealer, consistent with the
Servicer's practices as such practices may be modified in order to comply with
generally accepted accounting principles in effect from time to time.
"Maximum Advance Rate" means 80.0%.
"Minimum Collateral Amount" means on any Distribution Date during the
Revolving Period, an amount equal to the Class A Note Balance divided by the
Maximum Advance Rate.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., and its successor and
assigns.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
Section 400 1(a)(3) of ERISA) in respect of which an ERISA Affiliate makes
contributions or has liability.
17
"Net Loan Balance" means, with respect to any Dealer Loan, the excess
of the related Outstanding Balance over the related Loan Loss Reserve.
"Obligor" means, with respect to any Contract, the person or persons
obligated to make payments with respect to such Contract, including any
guarantor thereof.
"Officer's Certificate" means a certificate signed by the chairman of
the board, the vice chairman, the president, the chief financial officer, any
executive vice president, any vice president, the treasurer, any assistant
treasurer, the secretary, any assistant secretary or the controller of the
Seller or the Servicer, as appropriate.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Agreement or as otherwise
required by the Trust Collateral Agent or the Class A Insurer, be employees of
or counsel to the Issuer and who shall be reasonably satisfactory to the Trust
Collateral Agent and the Class A Insurer, and which shall comply with any
applicable requirements of Section 11.1 of the Indenture, and shall be in form
and substance reasonably satisfactory to the Trust Collateral Agent and the
Class A Insurer.
"Optional Purchase" means the optional purchase of the Trust Property
as set forth in Section 10.01(a) hereof.
"Original Advance Rate" means, with respect to any Dealer, the ratio,
expressed as a percentage, where the numerator is equal to the sum of the
Outstanding Balance of all Eligible Loans of such Dealer on the dates such
Eligible Loans were originated and the denominator is equal to the sum of the
Outstanding Balance of all Eligible Contracts related to such Dealer on their
dates of origination.
"Original Certificate Interest" means the percentage interest in the
Trust represented by the Certificate(s) initially authenticated and delivered by
the Owner Trustee and which is 100%.
"Originator" means Credit Acceptance.
"Outstanding Balance" means (i) with respect to any Contract on any
date of determination, all amounts owing under such Contract (whether considered
principal or as finance charges), on such date of determination which shall be
deemed to have been created at the end of the day on the date of processing of
such Contract and which shall be greater than or equal to zero; and (ii) with
respect to any Dealer Loan on any date of determination, the aggregate amount
advanced under such Dealer Loan plus revenue accrued with respect to such Dealer
Loan in accordance with Credit Acceptance's accounting policies set forth in its
periodic reports filed with the Securities and Exchange Commission and the
payment of monies to a Dealer under the related Dealer Agreement, less
Collections on the related Contracts securing such Dealer Loans applied through
such date of determination to the reduction of the balance of such Dealer Loan
and write-offs of such Dealer Loan.
"Overconcentration Loan Amount" means, with respect to any Dealer, the
amount by which the Net Loan Balance of such Dealer's Eligible Loans, as of the
Closing Date or any
18
Distribution Date during the Revolving Period on which the Issuer purchases one
or more Dealer Loans, as the case may be, exceeds the Dealer Concentration
Limit.
"Owner Trustee" means U.S. Bank Trust National Association, not in its
individual capacity but solely as Owner Trustee under the Trust Agreement, its
successors in interest or any successor Owner Trustee under the Trust Agreement.
"Owner Trustee's Fees" means (i) for the year commencing with the
Closing Date, $3,000, payable by the Issuer in advance to the Owner Trustee on
the Closing Date and (ii) thereafter, an amount equal to $250 on each
Distribution Date, payable by the Issuer to the Owner Trustee until the Class A
Notes are paid in full, in each case, plus reasonable out of pocket expenses not
to exceed $50,000 annually incurred by the Owner Trustee in fulfilling its
duties under the Basic Documents, except for the reasonable and necessary
expenses of the Owner Trustee (including reasonable attorneys' fees and costs)
incurred by the Owner Trustee in connection with any pending or threatened
action, suit or proceeding, whether civil, criminal, administrative or
investigative, in which the Owner Trustee is identified as a subject or named as
a party and faces potential liability, censure or penalties, other than as the
result of the gross negligence or willful misconduct of the Owner Trustee.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
limited liability company, or government or any agency or political subdivision
thereof.
"Permitted Incomplete Contracts" means (a) with respect to the 120th
day after the Closing Date and the 120th day after each Distribution Date during
the Revolving Period, 2.0% of the aggregate number of Contract Files required to
be reviewed by each such date in accordance with Section 3.03(d)(i) hereof, and
(b) with respect to the 180th day after the Closing Date and the 180th day after
each Distribution Date during the Revolving Period, 2.0% of the aggregate number
of Contract Files required to be reviewed by each such date in accordance with
Section 3.03(d)(ii) hereof.
"Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.
"Pool Factor" means, as of the close of business on a Distribution
Date, a seven-digit decimal figure equal to the outstanding principal amount of
the Class A Notes divided by the initial Class A Note Balance, after giving
effect to payments allocated to principal.
"Preference Amount" shall have the meaning given such term in Section
5.06(c)(i) hereof.
"Principal Collection Account" means the account designated as such,
established and maintained pursuant to Section 5.01(a)(i) hereof.
"Principal Collections" means, with respect to any Collection Period,
all Collections which are not Income Collections or Dealer Collections.
19
"Principal Deficiency" means, on any Distribution Date other than the
Stated Final Maturity, the amount by which the Class A Note Balance (after
taking into account all distributions of principal to be made from Available
Funds on such Distribution Date plus amounts on deposit in the Reserve Account
available for the payment of principal) exceeds the Outstanding Balance of all
Eligible Contracts, other than Defaulted Contracts, as of the last day of the
related Collection Period.
"Proceeds" means, with respect to any portion of the Trust Property,
all "proceeds", as such term is defined in Article 9 of the UCC, including
whatever is receivable or received when such portion of Trust Property is sold,
liquidated, foreclosed, exchanged, or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes all rights to payment with
respect to any insurance relating thereto.
"Program" has the meaning set forth in Section 4.11(a) hereof.
"Purchase Amount" means:
(i) with respect to an Ineligible Loan (or Dealer Loan with respect to
which the payment of a Purchase Amount is required or is to be made pursuant to
Section 10.01(a)), an amount equal to the product of: (A) the Net Loan Balance
related to such Ineligible Loan (or Dealer Loan with respect to which the
payment of a Purchase Amount is required or is to be made pursuant to Section
10.01(a)) as of the last day of the preceding Collection Period; and (B) the
Advance Rate in effect on the Distribution Date during such preceding Collection
Period;
(ii) with respect to any Ineligible Contract (other than any
Incomplete Contract), the product of: (A) the Outstanding Balance of such
Ineligible Contract; and (B) the Contract Buy-Back Rate;
(iii) with respect to a Contract for which payment is required to be
made in accordance with Section 3.02(b)(i)(B) hereof and with respect to each
review period described in Section 3.03(d)(ii) and (iii) hereof, the product of:
(A) the Outstanding Balance as of the last day of the preceding Collection
Period of all Incomplete Contracts for any such review period, divided by the
aggregate number of Contracts required to be reviewed by the end of such review
period, (B) the difference between (I) the total number of Incomplete Contracts
for such review period, and (II) the number of Permitted Incomplete Contracts
for such review period, and (C) the Contract Buy-Back Rate; and
(iv) with respect to a Contract for which payment is required to be
made at the request of the Class A Insurer in accordance with Section
3.02(b)(ii), the product of (A) the Outstanding Balance of the Contracts with
respect to which the Class A Insurer has required payment and (B) the Contract
Buy-Back Rate,
in each case, payable in the manner set forth in Section 5.04 hereof.
"Purchased Loan" means a Dealer Loan with respect to which payment is
required to be made by the Seller, the Servicer or Credit Acceptance in
accordance with Section 3.02 or Section 4.07 hereof or Section 6.1 of the
Contribution Agreement, as applicable.
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"Rating Agencies" means, collectively ▇▇▇▇▇'▇, S&P and any other
nationally recognized statistical rating organization requested by the Seller or
an Affiliate thereof to rate any of the Class A Notes.
"Records" means the Dealer Agreements, Contracts, Contract Files and
all other documents, books, records and other information (including, without
limitation, computer programs, tapes, discs, punch cards, data processing
software and related contracts, records and other media for storage of
information) maintained with respect to the Dealer Loans and the Contracts and
the related Obligors.
"Recoveries" means all amounts, if any, received in respect of the
Trust Property by the Servicer, the Seller, the Issuer or the Originator with
respect to Defaulted Contracts.
"Reimbursement Obligations" means any overdue premium amounts payable
pursuant to the Insurance Agreement, and any payments made on the Class A Note
Insurance Policy, and any other amounts owing to the Class A Insurer under the
Insurance Agreement or any other Transaction Document, in each case, together
with interest thereon at the Prime Rate (as defined in the Insurance Agreement)
plus 2.0%.
"Reliening Expenses" means any expenses incurred by the Backup
Servicer, if it has become the successor Servicer, in accordance with Sections
3.03(h)(ii) and 4.05 hereof, in connection with the retitling or reliening of
the Financed Vehicles.
"Repossession Expenses" means, for any Collection Period, any expenses
payable pursuant to the terms of this Agreement, incurred by the Backup
Servicer, if it has become the successor Servicer, in connection with the
liquidation or repossession of any Financed Vehicle, in an aggregate amount not
to exceed the cash proceeds received by the Backup Servicer, if it has become
the successor Servicer from the disposition of such Financed Vehicles during the
related Collection Period.
"Reserve Account" means the account established and maintained
pursuant to Section 5.01(a)(iv) hereof.
"Reserve Account Requirement" means, with respect to any Distribution
Date, an amount equal to the lesser of: (A) 2.0% of the original Class A Note
Balance; and (B) the Class A Note Balance on such Distribution Date, before
giving effect to the payment of principal on such Distribution Date.
"Revolving Period" means the period beginning on the Closing Date and
terminating the day the Amortization Period begins.
"S&P" means Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
"Securities" means the Class A Notes and the Certificates.
"Securities Act" means the Securities Act of 1933, as amended.
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"Seller" means Credit Acceptance Funding LLC 2007-1 and any permitted
successor thereto (in the same capacity).
"Seller Property" means, collectively, the Initial Seller Property and
the Subsequent Seller Property.
"Servicer" means Credit Acceptance, as the Servicer of the Dealer
Loans and the Contracts, and each successor to Credit Acceptance (in the same
capacity) appointed pursuant to Section 7.03 or 8.02 hereof.
"Servicer Certificate" means a certificate substantially in the form
of Exhibit B hereto completed and executed by the Servicer by the chairman of
the board, the vice chairman, the president, any vice president, the treasurer,
any assistant treasurer, the chief financial officer, the secretary, any
assistant secretary, the controller, or any assistant controller of the Servicer
pursuant to Section 4.09 hereof.
"Servicer Default" is as defined in Section 8.01 hereof.
"Servicer Expenses" means any expenses incurred by the Backup
Servicer, if it has become the successor Servicer hereunder, other than
Repossession Expenses, Reliening Expenses or Transition Expenses.
"Servicer's Data Date" has the meaning set forth in Section 4.09(b)
hereof.
"Servicer's Data File" has the meaning set forth in Section 4.09(b)
hereof.
"Servicing Fee" means, for each Distribution Date, a fee payable to
the Servicer for services rendered during the related Collection Period, equal
to: (i) so long as Credit Acceptance is the Servicer, the product of (A) 6.00%
and (B) the total Collections for the related Collection Period, and (ii) if the
Backup Servicer is the Servicer, the sum of: (1) the greatest of: (a) the
product of 10.0% and total Collections for the related Collection Period; (b)
actual costs incurred by the Backup Servicer as successor Servicer; and (c) the
product of (x) $30.00 and (y) the aggregate number of Contracts serviced by it
during the related Collection Period, plus (2) without duplication, Late Fees
and Servicer Expenses; provided, however, with respect to each Distribution Date
on which the Backup Servicer is the Servicer, the Servicing Fee shall be at
least equal to $5,000.
"State" means any state or commonwealth of the United States of
America, or the District of Columbia.
"Stated Final Maturity" means, with respect to the Class A Notes,
October 15, 2012.
"Subsequent Seller Property" has the meaning given to such term in
Section 2.02(a) hereof.
"Subsequent Seller Property Purchase Price" means, as to the
Subsequent Seller Property purchased by the Trust on any Distribution Date
during the Revolving Period, an
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amount equal to the Aggregate Outstanding Net Eligible Loan Balance of the
Dealer Loans transferred to the Trust on such Distribution Date, in the form of
cash and/or capital contribution.
"Transaction Parties" means, collectively, the Originator, the
Servicer, the Seller and the Issuer.
"Transition Expenses" means, if the Backup Servicer has become the
successor Servicer, the sum of: (i) reasonable costs and expenses incurred by
the Backup Servicer in connection with its assumption of the servicing
obligations hereunder, related to travel, Obligor welcome letters, freight and
file shipping plus (ii) a boarding fee equal to the sum of: (A) the product of
$7.50 and the number of Contracts to be serviced with respect to the first
10,000 Contracts to be serviced; and (B) the product of $6.00 and the number of
Contracts in excess of 10,000 to be serviced with respect to any additional
Contracts to be serviced; provided, however, that the boarding fee shall not be
less than $50,000.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust Accounts" means the Collection Account, the Principal
Collection Account, the Class A Note Distribution Account and the Reserve
Account.
"Trust Agreement" means the Amended and Restated Trust Agreement dated
as of the Closing Date, between the Seller and the Owner Trustee, as the same
may be amended and supplemented from time to time.
"Trust Property" means the assets conveyed to the Trust pursuant to
Sections 2.01 and 2.02 hereof.
"UCC" means the Uniform Commercial Code as in effect in the respective
jurisdiction, and with respect to the definition of "Delivery" hereunder, refers
to the UCC as adopted by the State of New York.
"Weighted Average Original Advance Rate" means, with respect to each
Distribution Date during the Revolving Period, the ratio, expressed as a
percentage, where the numerator is equal to the aggregate for all Dealers of the
product of: (i) the Original Advance Rate of each Dealer; and (ii) the aggregate
outstanding Net Loan Balance of all Eligible Loans for such Dealer and the
denominator is equal to the Aggregate Outstanding Net Eligible Loan Balance.
SECTION 1.02. Usage of Terms.
With respect to all terms in this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the other
gender; references to "writing" include printing, typing, lithography, and other
means of reproducing words in a visible form; references to agreements and other
contractual instruments include all subsequent amendments thereto or changes
therein entered into in accordance with their respective terms
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and not prohibited by this Agreement; references to Persons include their
permitted successors and assigns; and the term "including" means "including
without limitation."
SECTION 1.03. Closing Date and Record Date.
All references to the Record Date prior to the first Distribution Date
in the life of the Trust shall be to the Closing Date.
SECTION 1.04. Section References.
All section references shall be to Sections in this Agreement (unless
otherwise provided).
SECTION 1.05. Compliance Certificates.
Upon any application or request by the Seller or the Servicer to the
Trust Collateral Agent to take any action under any provision herein, the Seller
or the Servicer (as the case may be) shall furnish to the Trust Collateral Agent
and the Class A Insurer an Officer's Certificate stating that all conditions
precedent, if any, provided for herein relating to the proposed action have been
complied with, except that in the case of any other such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Agreement relating to such particular application or request,
no additional certificate need be furnished.
Every certificate with respect to compliance with a condition or
covenant provided herein shall include a statement that each individual signing
such certificate has read such covenant or condition and the definitions herein
relating thereto.
SECTION 1.06. Directions.
Unless otherwise specified herein, any directions required to be given
hereunder by the Class A Insurer shall, in the case of the occurrence and
continuance of a Class A Insurer Default, be made by the Majority Noteholders.
ARTICLE II
CONVEYANCE OF SELLER PROPERTY; FURTHER ENCUMBRANCE THEREOF
SECTION 2.01. Sale of the Initial Seller Property to the Trust.
(a) In consideration of the Trust's delivery to, or upon the order of,
the Seller on the Closing Date of the net proceeds from the sale of the Class A
Notes and the other amounts to be distributed from time to time to the Seller in
accordance with the terms of this Agreement, the Seller does hereby convey,
assign, sell and transfer without recourse, except as set forth herein, to the
Trust all of its right, title and interest in and to: (i) the Dealer Loans
listed on Schedule A hereto delivered to the Servicer, the Class A Insurer, the
Backup Servicer and the Trust Collateral Agent on the Closing Date; (ii) all
rights under the Dealer Agreements related thereto (other than the Excluded
Dealer Agreement Rights), including Credit Acceptance's right
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to service the Dealer Loans and the related Contracts and receive the related
servicing fee and receive reimbursement of certain recovery and repossession
expenses, in accordance with the terms of the Dealer Agreements; (iii)
Collections (other than Dealer Collections) after the applicable Cut-off Date;
(iv) a security interest in each Contract securing each Dealer Loan; (v) all
records and documents relating to the Dealer Loans and the Contracts; (vi) all
security interests purporting to secure payment of the Dealer Loans; (vii) all
security interests purporting to secure payment of each Contract (including a
security interest in each Financed Vehicle); (viii) all guarantees, insurance
(including insurance insuring the priority or perfection of any Contract) or
other agreements or arrangements securing the Contracts; (ix) the Seller's
rights under the Contribution Agreement; and (x) all Proceeds of the foregoing
(the "Initial Seller Property").
(b) Such sale shall be effective as of the Closing Date with respect
to the Initial Seller Property.
(c) In consideration of the sale of the Initial Seller Property, the
Trust shall (i) pay or cause to be paid to the Seller on the Closing Date a
purchase price equal to the Aggregate Outstanding Net Eligible Loan Balance of
the Dealer Loans transferred to the Trust on the Closing Date, in the form of
cash (to the extent of the net proceeds from the sale of the Class A Notes) and
capital contribution and (ii) deliver the Certificates to the Seller. The Seller
directs that the Initial Reserve Amount be deposited in the Reserve Account from
such purchase price.
(d) For the avoidance of doubt, the term "Initial Seller Property"
with respect to any Dealer Loan includes all rights arising after the Closing
Date under such Dealer Loans which rights are attributable to advances made
under such Dealer Loans as the result of Contracts being added after the Closing
Date to the identifiable group of Contracts to which such Dealer Loan relates.
SECTION 2.02. Revolving Period; Principal Collection Account.
(a) On each Distribution Date during the Revolving Period, the Issuer
shall receive Available Funds after the payment of all amounts due and payable
in Section 5.08(a)(i) through (v) and shall be required to use those amounts and
any amounts on deposit in the Principal Collection Account to purchase
additional Dealer Loans and all collateral related thereto from the Seller until
the Collateral Amount equals the Minimum Collateral Amount. If on any
Distribution Date during the Revolving Period there are not sufficient Eligible
Dealer Loans for purchase by the Issuer to cause the Collateral Amount to equal
the Minimum Collateral Amount, an amount necessary to cause the Adjusted
Collateral Amount to equal the Minimum Collateral Amount will remain on deposit
in the Principal Collection Account. Subject to the foregoing, and in
consideration of the payment of the Subsequent Seller Property Purchase Price,
the Seller agrees to convey, assign, sell and transfer without recourse, except
as set forth in this Agreement, to the Trust all of its right, title and
interest in and to: (i) the Dealer Loans listed on the schedule delivered to the
Class A Insurer, the Servicer and the Trust Collateral Agent on each
Distribution Date during the Revolving Period; (ii) rights under the Dealer
Agreements related thereto (other than the Excluded Dealer Agreement Rights),
including Credit Acceptance's right to service the Dealer Loans and the related
Contracts and receive the related servicing fee and receive reimbursement of
certain recovery and repossession expenses,
25
in accordance with the terms of the Dealer Agreements; (iii) Collections (other
than Dealer Collections) after the applicable Cut-off Date; (iv) a security
interest in each Contract securing each Dealer Loan; (v) all records and
documents relating to the Dealer Loans and the Contracts; (vi) all security
interests purporting to secure payment of the Dealer Loans; (vii) all security
interests purporting to secure payment of each Contract (including a security
interest in each Financed Vehicle); (viii) all guarantees, insurance (including
insurance insuring the priority or perfection of any Contract) or other
agreements or arrangements securing the Contracts; (ix) the Seller's rights
under the Contribution Agreement; and (x) all Proceeds of the foregoing (the
"Subsequent Seller Property").
On each Distribution Date during the Revolving Period on which the Issuer
purchases Subsequent Seller Property, the Issuer shall deliver to the Servicer,
the Backup Servicer, the Trust Collateral Agent and the Class A Insurer a
supplement to Schedule A hereto listing the additional Dealer Loans purchased on
such Distribution Date, and the Dealer Agreements and Contracts related thereto.
For the avoidance of doubt, the term "Subsequent Seller Property" with
respect to any Dealer Loan includes all rights arising after the end of the
Revolving Period under such Dealer Loans which rights are attributable to
advances made under such Dealer Loans as the result of Contracts being added
after the last day of the last full Collection Period during the Revolving
Period to the identifiable group of Contracts to which such Dealer Loan relates.
(b) The occurrence of any one of the following events shall constitute
an "Automatic Amortization Event":
(i) there is a draw on the Reserve Account;
(ii) a Servicer Default occurs;
(iii) an Indenture Event of Default occurs;
(iv) on any Distribution Date, after giving effect to all
purchases of Dealer Loans on such date, the Adjusted Collateral Amount is
less than the Minimum Collateral Amount, and such deficiency continues for
two (2) or more Business Days;
(v) cumulative Collections through the end of the related
Collection Period, expressed as a percentage of the cumulative Forecasted
Collections through the end of the related Collection Period, is less than
90.0% for any three (3) consecutive Collection Periods;
(vi) on any Distribution Date, after giving effect to the
purchase of additional Dealer Loans on such date, the amount on deposit in
the Principal Collection Account is greater than 5.0% of the Adjusted
Collateral Amount, and such excess continues for two (2) or more Business
Days; or
(vii) on any Distribution Date, the Weighted Average Original
Advance Rate exceeds 50.0%.
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(c) The occurrence of any one of the following events shall constitute
a "Discretionary Amortization Event" only if after any applicable grace or cure
period either the Class A Insurer, or if a Class A Insurer Default has occurred
and is continuing, the Indenture Trustee, at the direction of the Majority
Noteholders, upon written notice to the Issuer, the Servicer, the Backup
Servicer and the Trust Collateral Agent, declares that an Early Amortization
Event has occurred:
(i) the Issuer fails to make a payment or deposit when required
under this Agreement or within any applicable grace or cure period;
(ii) the Issuer fails to observe or perform in any material
respect any of its covenants or agreements set forth in this Agreement and
that failure continues unremedied for 30 days after the earlier of (A) a
Responsible Officer of the Owner Trustee obtaining actual knowledge of such
failure and (B) written notice of such failure to the Issuer by the Class A
Insurer, or if a Class A Insurer Default has occurred and is continuing,
the Indenture Trustee, at the direction of Majority Noteholders;
(iii) any representation or warranty made by the Issuer in this
Agreement or in any certificate or document that the Issuer is required to
deliver to the Indenture Trustee is incorrect in any material respect for
30 days after the earlier of (A) a Responsible Officer of the Owner Trustee
obtaining actual knowledge of such breach or (B) written notice of that
breach to the Issuer by the Class A Insurer, or if a Class A Insurer
Default has occurred and is continuing, the Indenture Trustee, at the
direction of the Majority Noteholders;
(iv) the Indenture Trustee does not have a valid and perfected
first priority security interest in the Trust Property, or the Issuer or
Credit Acceptance or an affiliate of Credit Acceptance makes that
assertion;
(v) there is filed against Credit Acceptance, the Seller or the
Issuer: (a) a notice of federal tax lien from the IRS, (b) a notice of lien
from the Pension Benefit Guaranty Corporation under Section 412(n) of the
tax code or Section 302(f) of ERISA for a failure to make a required
installment or other payment to a pension plan to which either of those
sections applies or (c) a notice of any other lien that, in the case of
each of (a), (b) and (c), could reasonably be expected to have a material
adverse effect on the business, operations or financial condition of the
Issuer or the business, operations or financial condition of Credit
Acceptance and the Seller;
(vi) one or more judgments or decrees are entered against the
Seller or Credit Acceptance involving in the aggregate liability, not paid
or fully covered by insurance, of $100,000 in the case of the Seller, and
$5,000,000 in the case of Credit Acceptance, or more and those judgments or
decrees have not been vacated, discharged or stayed within 30 days from
their entry; or
(vii) any of the Basic Documents ceases for any reason to be in
full force and effect other than in accordance with its terms.
27
(d) If a Responsible Officer of the Indenture Trustee shall have
actual knowledge, or the Indenture Trustee shall receive written notice from the
Class A Insurer, or, if a Class A Insurer Default has occurred and is
continuing, the Majority Noteholders, that an Early Amortization Event has
occurred, the Indenture Trustee shall promptly issue written notice of such
Early Amortization Event to the Servicer, the Class A Insurer, the Backup
Servicer, the Rating Agencies, the Trust Collateral Agent and each of the Class
A Noteholders, which notice shall advise them of the nature of the Early
Amortization Event, to the extent actually known by the Indenture Trustee, and
the date of the occurrence thereof.
(e) On the first Distribution Date during the Amortization Period, any
amounts remaining on deposit in the Principal Collection Account shall be
deposited into the Collection Account and treated as Available Funds.
SECTION 2.03. Title to Trust Property.
(a) Immediately upon the conveyance to the Trust by the Seller of any
item of property pursuant to Section 2.01 or 2.02, all right, title and interest
of the Seller in and to such item of property shall terminate, and all such
right, title and interest shall vest in the Trust, in accordance with the Trust
Agreement and Sections 3802 and 3805 of the Business Trust Statute (as defined
in the Trust Agreement).
(b) Immediately upon the vesting of the Trust Property in the Trust,
the Trust shall have the sole right to pledge or otherwise encumber, such Trust
Property but only in accordance with the terms of the Basic Documents. Pursuant
to the Indenture, the Trust shall grant a security interest in the Trust
Property to the Indenture Trustee for the benefit of the Class A Insurer and the
Class A Noteholders to secure the repayment of the Class A Notes and amounts
owed to the Class A Insurer.
(c) It is the intention of the Seller that (i) the transfer and
assignment contemplated by this Agreement shall constitute a sale of the Seller
Property from the Seller to the Trust and (ii) the beneficial interest in and
title to the Seller Property shall not be part of the Seller's estate in the
event of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law.
(d) Notwithstanding the foregoing, in the event that the Seller
Property is held to be property of the Seller, or if for any reason this
Agreement is held or deemed to create indebtedness or a security interest in the
Seller Property, then it is intended that:
(i) This Agreement shall be deemed to be a security agreement
within the meaning of Articles 8 and 9 of the UCC;
(ii) The conveyances provided for in Section 2.01 and Section
2.02 shall be deemed to be a grant by the Seller, and the Seller hereby
grants, to the Trust a security interest in all of its right (including the
power to convey title thereto), title and interest, whether now owned or
hereafter acquired, in and to the Seller Property, to secure such
indebtedness and the performance of the obligations of the Seller
hereunder;
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(iii) The possession by the Trust, or the Servicer as the Trust's
agent, of the Dealer Agreements, Dealer Loans and Contract Files and any
other property which constitute instruments, money, negotiable documents or
chattel paper shall be deemed to be "possession by the secured party" or
possession by the purchaser or a person designated by such purchaser, for
purposes of perfecting the security interest pursuant to the UCC; and
(iv) Notifications to persons holding such property, and
acknowledgments, receipts or confirmations from persons holding such
property, shall be deemed to be notifications to, or acknowledgments,
receipts or confirmations from, bailees or agents (as applicable) of the
Trust for the purpose of perfecting such security interest under the UCC.
(e) At such time as there are no Class A Notes outstanding and all
sums due to (i) the Indenture Trustee pursuant to Section 6.7 of the Indenture,
(ii) the Trust Collateral Agent pursuant to Section 9.05 hereof, (iii) the
Backup Servicer hereunder and under the Backup Servicing Agreement and (iv) the
Class A Insurer in respect of the Reimbursement Obligations, have been paid, the
Trust Collateral Agent shall, upon instructions from the Indenture Trustee
pursuant to Section 8.2 of the Indenture, release any remaining portion of the
Trust Property from the lien of the Indenture for distribution in accordance
with the Trust Agreement.
ARTICLE III
THE DEALER LOANS AND THE CONTRACTS
SECTION 3.01. Representations and Warranties of Seller with respect to
the Seller Property.
The Seller makes the following representations and warranties as to
the Dealer Agreements, Dealer Loans and the Contracts on which each of the Trust
Collateral Agent and the Backup Servicer relies in connection with performance
of its obligations hereunder, and the Class A Insurer relies in issuing the
Class A Note Insurance Policy. Such representations and warranties speak as of
the execution and delivery of this Agreement on the Closing Date and each
Distribution Date on which the Trust purchases Seller Property, as the case may
be, and only with respect to the Seller Property conveyed to the Trust at the
time given or made (unless otherwise specified) but shall survive the sale,
transfer, and assignment of the Seller Property to the Trust and the pledge
thereof to the Indenture Trustee pursuant to the Indenture:
(i) Eligibility of Dealer Agreements. Each Dealer Agreement
classified as an "Eligible Dealer Agreement" (or included in any
aggregation of balances of "Eligible Dealer Agreements") by the Seller or
the Servicer in any document or report delivered hereunder satisfied the
requirements contained in the definition of Eligible Dealer Agreement on
the date so delivered.
(ii) Eligibility of Dealer Loans. Each Dealer Loan classified as
an "Eligible Loan" (or included in any aggregation of balances of "Eligible
Loans") by the
29
Seller or the Servicer in any document or report delivered hereunder
satisfied the requirements contained in the definition of Eligible Loan on
the date so delivered.
(iii) Eligibility of Contracts. Each Contract classified as an
"Eligible Contract" (or included in any aggregation of balances of
"Eligible Contracts") by the Seller or the Servicer in any document or
report delivered hereunder satisfied the requirements contained in the
definition of Eligible Contract on the date so delivered.
(iv) Accuracy of Information. All information with respect to the
Dealer Loans and other Seller Property provided to the Trust Collateral
Agent or the Class A Insurer by the Seller or the Servicer was true and
correct in all material respects as of the date such information was
provided to the Trust Collateral Agent or the Class A Insurer, as
applicable.
(v) No Liens. Each Dealer Loan and the other Seller Property has
been pledged to the Trust Collateral Agent free and clear of any Lien of
any Person, and in compliance, in all material respects, with all
Applicable Laws.
(vi) No Consents. With respect to each Dealer Loan and the other
Seller Property, all consents, licenses, approvals or authorizations of or
registrations or declarations with any Governmental Authority required to
be obtained, effected or given by the Seller, in connection with the pledge
of such Dealer Agreement, Dealer Loan, Contract or other Collateral to the
Trust Collateral Agent have been duly obtained, effected or given and are
in full force and effect;
(vii) Schedule of Dealer Loans, Dealer Agreements and Contracts.
Schedule A to this Agreement and each supplement or addendum thereto is and
will be an accurate and complete listing of all Dealer Loans, the related
Dealer Agreements and Contracts in all material respects on the date each
such Dealer Loan and other Seller Property was transferred to the Trust
hereunder, and the information contained therein is and will be true and
correct in all material respects as of such date.
(viii) Adverse Selection. No selection procedure believed by the
Seller to be adverse to the interests of the Class A Noteholders or the
Class A Insurer has been or will be used in selecting the Dealer
Agreements, Dealer Loans or Contracts.
(ix) Contribution Agreement. The Contribution Agreement is the
only agreement pursuant to which the Seller purchases Dealer Loans from the
Originator.
(x) Security Interest. The Seller has granted a security interest
(as defined in the UCC) to the Trust Collateral Agent, as agent for the
Class A Noteholders, in the Seller Property, which is enforceable in
accordance with Applicable Law upon the Closing Date. Upon the filing of
UCC-1 financing statements naming the Trust Collateral Agent as secured
party and the Seller as debtor, or upon the Trust Collateral Agent
obtaining possession or control, in the case of that portion of the Seller
Property which constitutes chattel paper or instruments, the Trust
Collateral Agent, as agent for the Secured Parties, shall have a first
priority perfected security interest in the Seller Property. All filings
(including, without limitation, such UCC filings) as are necessary in
30
any jurisdiction to perfect the interest of the Trust Collateral Agent, as
agent for the Trust, in the Seller Property have been made.
(xi) Representations and Warranties in Contribution Agreement.
The representations and warranties made by the Originator to the Seller in
the Contribution Agreement are hereby remade by the Seller on each date to
which they speak in the Contribution Agreement as if such representations
and warranties were set forth herein. For purposes of this Section
3.01(xi), such representations and warranties are incorporated herein by
reference as if made by the Seller to the Trust Collateral Agent and the
Class A Insurer under the terms hereof mutatis mutandis.
(xii) Survival. The representations and warranties set forth in
this Section 3.01 shall survive the Seller's transfer and assignment of the
Seller Property to the Trust and the termination of the rights and
obligations of the Servicer.
(xiii) Perfection Representations. The perfection
representations, warranties and covenants made by the Seller and set forth
on Schedule C hereto shall be a part of this Agreement for all purposes.
(xiv) Final Score. With respect to the purchase by the Issuer of
Dealer Loans and related Seller Property on each Distribution Date during
the Revolving Period, on each such Distribution Date, immediately after
giving effect thereto, the weighted average of the Final Scores of all
Contracts transferred on such Distribution Date is 665 or greater.
SECTION 3.02. Payment Upon Breach.
(a) The Seller, the Servicer, or the Trust Collateral Agent, as the
case may be, shall inform the other parties to this Agreement and the Class A
Insurer promptly, in writing, upon the discovery (which, in the case of the
Trust Collateral Agent shall mean actual knowledge of a Responsible Officer of
the Trust Collateral Agent or receipt of written notice of such breach or
failure): (i) of any breach of the Seller's representations and warranties
pursuant to Section 3.01 hereof without regard to any limitation set forth
therein concerning the knowledge of the Seller as to the facts stated therein;
or (ii) with respect to each date by which a review is required to be performed
pursuant to Section 3.03(d) hereof, that the aggregate number of Incomplete
Contracts exceeds the number of Permitted Incomplete Contracts for such date.
(b) Unless any such breach of a representation or warranty described
in clause (a)(i) of this Section 3.02 shall have been cured by, or the number of
Incomplete Contracts with respect to any review period described in clause
(a)(ii) of this Section 3.02 continues to exceed the number of Permitted
Incomplete Contracts as of last day of the first full Collection Period
following the discovery thereof: (i) the Seller shall have the obligation, and
the Trust Collateral Agent shall, at the expense of the Seller, enforce such
obligation of the Seller, and if necessary, the obligation of the Originator
under the Contribution Agreement, to make a payment to the Collection Account of
the applicable Purchase Amount in respect of: (A) all Dealer Loans and Contracts
with respect to which there is a breach of any such representations and
warranties, and (B) the aggregate number of Incomplete Contracts which exceeds
the number of Permitted
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Incomplete Contracts, which, in the case of each of (A) and (B), are materially
and adversely affected by such event or which materially and adversely affects
the interests of the Indenture Trustee or the Class A Insurer as of such last
day; and (ii) the Class A Insurer shall have the right to demand the Seller, and
if necessary, the Originator under the Contribution Agreement, and upon such
demand the Seller and, if applicable, the Originator, shall have the obligation,
to make a payment to the Collection Account of the applicable Purchase Amount in
respect of any Permitted Incomplete Contract which materially and adversely
affects such Contract or which materially and adversely affects the interest of
the Indenture Trustee or the Class A Insurer as of such last day.
(c) The sole remedy of the Trust Collateral Agent, the Trust, the
Class A Noteholders and the Certificateholders with respect to a breach of the
Seller's representations and warranties pursuant to Section 3.01 hereof which
materially and adversely affects the interests of the Indenture Trustee or the
Class A Insurer shall be to require the Seller to make payments in respect of
the related Dealer Loans pursuant to this Section or to enforce the obligation
of Credit Acceptance to repurchase such Dealer Loans pursuant to the
Contribution Agreement, and to require the Seller to make payments in respect of
the related Contracts pursuant to this Section or to enforce the obligation of
Credit Acceptance to make such payments pursuant to the Contribution Agreement.
The Trust Collateral Agent shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the purchase of
any Dealer Loan or payment in respect of any Contract pursuant to this Section.
Any expenses incurred by the Trust Collateral Agent in enforcing the obligations
of the Seller or Credit Acceptance shall be paid pursuant to Section 5.08(a)
hereof.
(d) (i) Notwithstanding anything herein to the contrary, (A) during
the Revolving Period such payments of Purchase Amounts pursuant to Section
3.02(b) of this Agreement shall not be required if the Adjusted Collateral
Amount is equal to or greater than the Minimum Collateral Amount, and (B) during
the Amortization Period, such payments of Purchase Amounts pursuant to Section
3.02(b) of this Agreement shall not be required: (x) with respect to any Dealer
Loan, so long as the aggregate Net Loan Balance of all Dealer Loans which would
be Ineligible Loans as a result of being subject to the foregoing payment
obligations during the Amortization Period is less than the sum of: (1) the
product of (i) the aggregate Net Loan Balance of all Eligible Loans transferred
to the Issuer during the Amortization Period and (ii) the then effective Advance
Rate; and (2) all Purchase Amounts which have been previously paid during the
Amortization Period in respect of Ineligible Loans (such sum, the "Amortization
Period Additional Loan Collateral Amount"); and (y) with respect to any
Contract, so long as the aggregate Outstanding Balance of all Contracts which
would be Ineligible Contracts as a result of being subject to the foregoing
payment obligations during the Amortization Period is less than the sum of: (1)
the product of (i) the aggregate Outstanding Balance of all Eligible Contracts
an interest in which is transferred to the Issuer during the Amortization Period
and (ii) a fraction, the numerator of which is equal to the Class A Note Balance
and the denominator of which is equal to the Outstanding Balance of all Eligible
Contracts; and (2) all Purchase Amounts which have been previously paid during
the Amortization Period in respect of Ineligible Contracts (such sum, the
"Amortization Period Additional Contract Collateral Amount").
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(ii) If such payments are required in accordance with clause
(d)(i) of this Section 3.02, they shall be made: (A) with respect to
Ineligible Loans, to the extent and in the amount by which the aggregate
Net Loan Balance of all Ineligible Loans which are subject to the foregoing
payment obligations during the Amortization Period exceeds the Amortization
Period Additional Loan Collateral Amount; and (B) with respect to
Ineligible Contracts, to the extent and in the amount by which the
aggregate Outstanding Balance of all Ineligible Contracts which are subject
to the foregoing payment obligations during the Amortization Period exceeds
the Amortization Period Additional Contract Collateral Amount (the
foregoing payment obligations, the "Amortization Period Payment
Obligations").
(iii) Notwithstanding the foregoing, the Seller's obligation to
make payments under Section 3.02 hereof may be waived with the prior
written consent of the Class A Insurer or the Indenture Trustee, at the
direction of the Majority Noteholders, if a Class A Insurer Default has
occurred and is continuing. Any such waiver by the Class A Insurer or the
Indenture Trustee, at the direction of the Majority Noteholders, as
applicable, shall not require any further waiver, action or consent by any
other party. The party providing such waiver shall give notice thereof to
the Owner Trustee.
(e) Any Contract which is subject to a payment in accordance with
Section 3.02(b), Section 3.03(d) or Section 4.07 of this Agreement shall be an
Ineligible Contract. Any Dealer Loan which is subject to a payment in accordance
with Section 3.02(b), Section 3.03(d) or Section 4.07 of this Agreement shall be
an Ineligible Loan.
SECTION 3.03. Custody of Dealer Agreements and Contract Files.
(a) The Trust hereby revocably appoints Credit Acceptance as custodian
of the Dealer Agreements, the Contract Files and the Certificates of Title
related to the Financed Vehicles. Credit Acceptance hereby accepts such
appointment and agrees to hold, or appoint an agent acceptable to the Class A
Insurer to hold, each Dealer Agreement, Contract File and, in states where it is
required by applicable law, the original Certificate of Title related to each
Financed Vehicle under this Agreement as custodian for the Trust and the Trust
Collateral Agent.
(b) (i) On or prior to the Closing Date and each Distribution Date
during the Revolving Period, the Servicer shall provide an Acknowledgment
substantially in the form of Exhibit E hereto dated as of the Closing Date or
such Distribution Date, as applicable, to the Owner Trustee, the Trust
Collateral Agent and the Class A Insurer confirming that the Servicer has
received and is in possession of the original of each Dealer Agreement listed on
Schedule A hereto (or such amendment or supplement to Schedule A relating to
each Distribution Date, as applicable).
(ii) If, on the 120th day after each Distribution Date during the
Revolving Period, the Servicer has not verified the presence of the
original Contract related to the Contracts listed on Schedule A hereto (or
such amendment or supplement to Schedule A relating to each Distribution
Date during the Revolving Period, as applicable) with respect to at least
98.0% of the number of Contract Files required to be reviewed by
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each such 120th day in accordance with Section 3.03(d) hereof, the Servicer
shall provide notice to the Owner Trustee, the Trust Collateral Agent and
the Class A Insurer dated as of such date indicating the number of
Incomplete Contracts as of such date.
(iii) On or prior to the 120th day after the Closing Date, the
180th day after the Closing Date and the 180th day after each Distribution
Date during the Revolving Period, the Servicer shall provide an
Acknowledgment substantially in the form of Exhibit E hereto, dated as of
such date, to the Owner Trustee, the Trust Collateral Agent and the Class A
Insurer confirming that the Servicer has verified the presence of the
original contract related to at least 98.0% of the Contract Files required
to be reviewed by such date in accordance with Section 3.03(d) hereof.
(c) To assure uniform quality in servicing the Dealer Loans and
Contracts and to reduce administrative costs, the Issuer hereby revocably
appoints the Servicer and the Servicer hereby accepts such appointment, to act
as the agent of the Issuer and the Trust Collateral Agent as custodian of the
original Certificates of Title for each Financed Vehicle evidencing the security
interest of the Trust Collateral Agent in the Financed Vehicle which are hereby
constructively delivered to the Trust Collateral Agent as of the Closing Date.
The Servicer agrees to maintain the Dealer Agreements, Contract Files,
Certificates of Title and Records which are delivered to it at the offices of
the Servicer as shall from time to time be identified to the Trust Collateral
Agent, the Backup Servicer and the Class A Insurer by written notice. The
Servicer shall maintain, or shall appoint an agent acceptable to the Class A
Insurer to maintain, such Certificates of Title at its principal place of
business located at Silver Triangle Building, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇ or as otherwise notified in writing to the Trust
Collateral Agent, the Backup Servicer and the Class A Insurer. The Trust
Collateral Agent shall not be responsible for the acts or omissions of the
Servicer acting as custodian.
(d) The Servicer shall within: (i) 120 days after the Closing Date and
120 days after each Distribution Date during the Revolving Period, review at
least 75.0% of the Contract Files related to the Dealer Loans transferred to the
Trust on the Closing Date or such Distribution Date, as applicable, to verify
the presence of the original of the Contract; and (ii) 180 days after the
Closing Date and 180 days after each Distribution Date during the Revolving
Period, review the remainder of the Contract Files related to the Dealer Loans
transferred to the Trust on the Closing Date or such Distribution Date, as
applicable, to verify the presence of the original of the Contract therein;
provided, however, that in the case of each of (i) and (ii) above, the
Certificate of Title with respect to each Contract need not be verified. If the
number of Incomplete Contracts (or the number of originals of Contracts that
have not otherwise been delivered to the Servicer) exceeds the number of
Permitted Incomplete Contracts as of any such 120th or 180th day, as applicable,
the Seller shall make the payment required by Section 3.02(b) only with respect
to the excess number of Incomplete Contracts, in an amount equal to the related
Purchase Amount, in accordance with the provisions of Section 3.02(b) hereof.
Notwithstanding the foregoing sentence, but subject to the other limitations set
forth herein, the Class A Insurer may, in its sole discretion, require the
Seller to remit the applicable Purchase Amount with respect to any Permitted
Incomplete Contracts.
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(e) Subject to the foregoing, Credit Acceptance may temporarily move
individual Dealer Agreements, Contract Files or Records, or any portion thereof
without notice as necessary to allow the Servicer to conduct collection and
other servicing activities in accordance with its customary practices and
procedures.
(f) The Servicer shall have and perform the following powers and
duties:
(i) hold the Dealer Agreements, Contract Files and Records in
trust for the benefit of the Trust Collateral Agent and the Trust and
maintain a current inventory thereof; and
(ii) carry out such policies and procedures in accordance with
its customary actions with respect to the handling and custody of the
Dealer Agreements, Contract Files and Records so that the integrity and
physical possession of the Dealer Agreements, Contract Files and Records
will be maintained.
In performing its duties as custodian, the Servicer agrees to act with
reasonable care, using that degree of skill and care that it exercises with
respect to similar Dealer Agreements, Contracts or Dealer Loans owned or held by
it.
(g) The Servicer shall have the obligation (i) to physically segregate
the Contract Files from the other custodial files it is holding for its own
account or on behalf of any other Person and (ii) to physically ▇▇▇▇ the
Contract folders to demonstrate the transfer of Contract Files and the Trust
Collateral Agent's security interest hereunder.
(h) (i) If a Servicer Default occurs, the Trust Collateral Agent shall
have the rights set forth in Section 8.01 hereof, including, at the request of
the Class A Insurer, the right to terminate Credit Acceptance as the custodian
hereunder and the Trust Collateral Agent shall have the right to appoint a
successor custodian hereunder who shall assume all the rights and obligations of
the "custodian" hereunder. On the effective date of the termination of Credit
Acceptance as Servicer, Credit Acceptance shall be released of all of its
obligations as custodian arising on or after such date. The Dealer Agreements,
Contract Files and Records shall be delivered by Credit Acceptance to the
successor custodian, on or before the date which is two (2) Business Days prior
to such date.
(ii) During the continuance of a Servicer Default, the Servicer
and the Seller shall, at the request of the Class A Insurer or the Trust
Collateral Agent, if a Class A Insurer Default has occurred and is
continuing, each in its sole discretion, take all steps necessary to cause
the Certificate of Title of each Financed Vehicle to be revised to name the
Trust Collateral Agent on behalf of the Trust as lienholder. Any costs
associated with such revision of the Certificate of Title shall be paid by
the Servicer and, and to the extent such costs are not paid by the Servicer
such unpaid costs shall be recovered as described in Section 5.08 hereof.
In no event shall the Trust Collateral Agent or the successor Servicer be
required to expend funds in connection with this Section 3.03(h). If the
Backup Servicer has become the successor Servicer, it shall be reimbursed
for all Reliening Expenses (in accordance with the provisions of Section
5.08(a) hereof) for any retitling effort associated with the Financed
Vehicles set forth in this Agreement.
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(iii) The Servicer shall provide to the Trust Collateral Agent
access to the Dealer Agreements, Contract Files and Records and all other
documentation regarding the Dealer Agreements, Contracts and the Dealer
Loans and the related Financed Vehicles in such cases where the Trust
Collateral Agent is required in connection with the enforcement of the
rights or interests of the Trust, or by applicable statutes or regulations
to review such documentation, such access being afforded without charge.
ARTICLE IV
ADMINISTRATION AND SERVICING OF DEALER LOANS AND CONTRACTS
SECTION 4.01. Appointment; Duties of Servicer.
(a) Servicing; Termination. The Seller, the Trust, the Trust
Collateral Agent (at the direction of the Class A Insurer) and the Class A
Insurer hereby appoint Credit Acceptance as Servicer hereunder and Credit
Acceptance hereby accepts such appointment and agrees to manage, collect and
administer each of the Dealer Loans as Servicer. Credit Acceptance shall be
retained as Servicer for an initial twelve (12) month term commencing on the
Closing Date. Upon the expiration of such twelve (12) month term, the Class A
Insurer, upon written notice to the Indenture Trustee, the Trust Collateral
Agent, the Servicer, the Rating Agencies and the Backup Servicer, may, at its
option, renew the term of Credit Acceptance as Servicer for a subsequent term of
six (6) months; provided, however, if a Servicer Default occurs and the Servicer
is not terminated pursuant to Section 8.01 hereof, then the Class A Insurer may
renew the term of Credit Acceptance as the Servicer for a subsequent term of
three (3) months. Upon the expiration of any three (3) month term, the Class A
Insurer, upon written notice to the Indenture Trustee, the Trust Collateral
Agent, the Servicer, the Rating Agencies and the Backup Servicer, may at its
option, renew the term of Credit Acceptance as Servicer for an additional three
(3) month term. If the Class A Insurer does not renew any such servicing term in
writing, the servicing term of Credit Acceptance shall automatically expire. If
a Class A Insurer Default has occurred and is continuing, and the twelve (12)
month, six (6) month or three (3) month servicing term, as the case may be, has
not previously expired and thereafter expires, Credit Acceptance shall continue
as Servicer unless and until it is terminated after the occurrence of a Servicer
Default. Upon the occurrence of a Servicer Default, the Class A Insurer shall
have the rights set forth in Section 8.01 hereof. Notwithstanding anything
herein to the contrary, the provisions of this Section 4.01(a) shall not apply
to the Backup Servicer after it has become the successor Servicer.
(b) Standard of Care; Types of Duties. The Servicer shall manage,
service, administer, and make collections on the Dealer Loans and the Contracts
with reasonable care, using that degree of skill and attention that the
servicers in the retail automobile financing industry exercise with respect to
all comparable receivables that they service for themselves or others and the
same degree of care that the Servicer exercises with respect to any comparable
dealer loan or automobile contracts that it holds for its own account. The
Servicer's duties shall include collection and posting of all payments,
responding to inquiries of Dealers and of Obligors on such Contracts,
investigating delinquencies, sending payment statements or coupons to Dealers
and Obligors, reporting tax information to Dealers and Obligors, accounting for
36
collections, and furnishing monthly and annual statements to the Trust
Collateral Agent with respect to distributions. The Servicer shall follow
prudent standards, policies, and procedures in performing its duties as
Servicer. Without limiting the generality of the foregoing, the Servicer is
hereby granted a limited power of attorney by the Trust Collateral Agent to
execute and deliver, on behalf of itself, the Trust, the Class A Noteholders, or
the Trust Collateral Agent or any of them, any and all instruments of
satisfaction or cancellation, or partial or full release or discharge, and all
other comparable instruments, with respect to such Dealer Loans and Contracts or
to the Financed Vehicles securing such Contracts in accordance with the terms of
this Agreement. If the Servicer shall commence a legal proceeding to enforce a
Dealer Loan or a Contract, the Trust Collateral Agent (in the case of a Dealer
Loan other than a Purchased Loan) shall thereupon be deemed to have
automatically assigned, solely for the purpose of collection, such Dealer Loan
or Contract to the Servicer. The Servicer shall not make the Seller, the Trust,
the Trust Collateral Agent, the Indenture Trustee or the Class A Insurer a party
to any such legal proceeding without such party's written consent. If in any
enforcement suit or legal proceeding it shall be held that the Servicer may not
enforce a Dealer Loan or a Contract on the ground that it shall not be a real
party in interest or a holder entitled to enforce the Dealer Loan or Contract,
the Trust Collateral Agent shall be deemed to have automatically assigned such
Dealer Loan or Contract to the Servicer, solely for the purpose of collection.
The Trust Collateral Agent shall furnish the Servicer with any powers of
attorney and other documents prepared by the Servicer reasonably necessary or
appropriate to enable the Servicer to carry out its servicing and administrative
duties hereunder. The Servicer, at its expense, shall obtain on behalf of the
Trust all licenses, if any, required by the laws of any jurisdiction to be held
by the Trust in connection with ownership of the Dealer Loans and its security
interest in the Contracts which secure the Dealer Loans, and shall make all
filings and pay all fees as may be required in connection therewith during the
term hereof. The Seller shall assist the Backup Servicer, as successor Servicer,
in connection with any reports related to distributions.
(c) Duties with Respect to the Basic Documents. Credit Acceptance
shall perform all its duties and, unless otherwise specified, the administrative
duties of the Issuer under the Basic Documents. In addition, Credit Acceptance
shall consult with the Indenture Trustee and, so long as a Class A Insurer
Default is not continuing, the Class A Insurer, as Credit Acceptance deems
appropriate regarding the duties of the Issuer under the Basic Documents. Credit
Acceptance shall monitor the performance of the Trust and shall advise the Owner
Trustee and Indenture Trustee, so long as a Class A Insurer Default is not
continuing, and the Class A Insurer, when action is necessary to comply with the
Trust's duties under the Basic Documents. The Seller (to the extent the Servicer
does not) shall execute and deliver all Issuer Orders and Officer's Certificates
required by the Trust under the Indenture. Notwithstanding anything herein to
the contrary, the Backup Servicer, as successor Servicer, shall not have an
obligation to perform such duties set forth in this Section 4.01(c).
(d) Duties with Respect to the Trust.
(i) In addition to the duties of the Servicer set forth in this
Agreement or any of the Basic Documents, the Servicer shall perform such
calculations, shall execute and deliver all Issuer Orders and Officer's
Certificates required of the Issuer under the Basic Documents, and shall
prepare for execution by the Trust or the Owner Trustee or shall cause the
preparation by other appropriate Persons of all such documents,
37
reports, filings, instruments, certificates, opinions, financial statements
and accounting books and records as it shall be the duty of the Trust or
the Owner Trustee to prepare, file or deliver pursuant to this Agreement or
any of the Basic Documents or under state and federal tax and securities
laws and shall take all appropriate action that it is the duty of the Trust
to take pursuant to this Agreement or any of the Basic Documents,
including, without limitation, pursuant to Section 5.1 (with respect to the
preparation and filing of tax returns) and Section 11.11 of the Trust
Agreement.
(ii) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions
with or otherwise deal with any of its Affiliates; provided, however, that
such delegation shall not relieve the Servicer of its obligations that the
terms of any such transaction or dealings shall be in accordance with any
directions received from the Trust and shall be, in the Servicer's opinion,
no less favorable to the Trust in any material respect.
Notwithstanding anything herein to the contrary, in the event that the Backup
Servicer is acting as successor Servicer, the Seller shall assist the Backup
Servicer in performing the duties set forth in this Section 4.01(d).
(e) Records. The Servicer shall maintain appropriate books of account
and records relating to its duties performed under Section 4.01(c) and (d)
hereof, which books of account and records shall be accessible for inspection
and copy by the Owner Trustee, the Indenture Trustee, the Class A Insurer, the
Backup Servicer or the Trust Collateral Agent at any time during normal business
hours at its offices and in a reasonable manner.
(f) Additional Information to be Furnished to the Trust. The Servicer
shall furnish to the Owner Trustee, the Indenture Trustee, the Trust Collateral
Agent, the Backup Servicer and the Class A Insurer from time to time such
additional information regarding the Trust or the Basic Documents as the Owner
Trustee, the Indenture Trustee, the Trust Collateral Agent, the Backup Servicer
or the Class A Insurer shall reasonably request.
(g) Servicer as Independent Contractor. All services, duties and
responsibilities of the Servicer under this Agreement shall be performed and
carried out by the Servicer as an independent contractor for the benefit of the
Trust and the Class A Insurer, and none of the provisions of this Agreement
shall be deemed to make, authorize or appoint the Servicer as agent or
representative of the Seller, the Trust Collateral Agent, the Trust, the Class A
Insurer or any Class A Noteholder except as provided in Section 3.03 hereof.
SECTION 4.02. Collection and Application of Payments on the Dealer
Loans and Contracts.
The Servicer shall take or cause to be taken all such action as may be
necessary or advisable to collect all amounts due under the Dealer Loans and
Contracts from time to time, all in accordance with Applicable Laws, with
reasonable care and diligence, and in accordance with the Collection Guidelines
(including, without limitation, selling or assigning Defaulted Contracts to
third parties for collection), it being understood that there shall be no
recourse to the Servicer with regard to the Dealer Loans and Contracts except as
otherwise provided herein and in the
38
other Basic Documents. In performing its duties as Servicer, the Servicer shall
use the same degree of care and attention it employs with respect to similar
contracts and loans which it services for itself or others. Each of the Issuer,
the Trust Collateral Agent and the Class A Insurer hereby appoints as its agent
the Servicer, from time to time designated pursuant to the terms hereof, to
enforce its respective rights and interests in and under the Trust Property. The
Servicer shall hold in trust for the Issuer, the Trust Collateral Agent and the
Class A Insurer all Records and all Collections (other than Dealer Collections)
and any other amounts it receives in respect of the Trust Property. In the event
that a successor Servicer is appointed, the outgoing Servicer shall deliver to
the successor Servicer and the successor Servicer shall hold in trust for the
Issuer, the Trust Collateral Agent and the Class A Insurer all records which
evidence or relate to all or any part of the Trust Property.
SECTION 4.03. Realization Upon Contracts.
On behalf of the Trust, the Indenture Trustee and the Class A Insurer,
the Servicer shall use reasonable efforts, in accordance with the Collection
Guidelines and prudent servicing procedures, to repossess or otherwise convert
the ownership of the Financed Vehicle securing any Contract as to which the
Servicer shall have determined eventual payment in full is unlikely, as soon as
practicable after the Servicer makes such determination. The Servicer may also
sell or otherwise assign Defaulted Contracts for collection in an effort to
realize upon such Defaulted Contracts. The Servicer shall follow such prudent
practices and procedures as would be deemed prudent in the servicing of
comparable receivables, consistent with the standard of care required by Section
4.01(b) which may include reasonable efforts to sell the Financed Vehicle at
public or private sale. If the Backup Servicer has become the Servicer, it shall
be entitled to receive Repossession Expenses in accordance with Section 5.02
hereof.
SECTION 4.04. Physical Damage Insurance.
The Servicer, in accordance with prudent servicing procedures, shall
require that each Obligor on a Contract shall have obtained physical damage
insurance covering the Financed Vehicle as of the date of execution of the
Contract, as may be required in accordance with the Credit Guidelines.
SECTION 4.05. Maintenance of Security Interests in Financed Vehicles.
The Servicer shall take such steps as are necessary to maintain
perfection of the security interest created by each Contract in the related
Financed Vehicle, including, without limitation, taking such steps as are
reasonably necessary to maintain the Originator as noted lienholder on each
Certificate of Title relating to a Financed Vehicle in all states where such
notation is a means of perfection under applicable law. The Servicer shall take
such steps as are necessary to reperfect such security interest on behalf of the
Indenture Trustee in the event of the relocation of a Financed Vehicle or for
any other reason. In the event that the assignment of a Contract to the
Indenture Trustee is insufficient without a notation on related Financed
Vehicle's Certificate of Title, or without fulfilling any additional
administrative requirements under the laws of the state in which the Financed
Vehicle is located, to perfect a security interest in the related Financed
Vehicle in favor of the Indenture Trustee, the parties hereto agree that the
Originator's designation as the secured party on the Certificate of Title is,
with respect to each
39
secured party, as applicable, in its capacity as agent of the Indenture Trustee.
The Backup Servicer as successor Servicer shall be entitled to reimbursement for
all expenses incurred in connection with its duties under this Section 4.05.
SECTION 4.06. Covenants of Servicer.
(a) Affirmative Covenants. From the date hereof until the Stated Final
Maturity or, if earlier, the date the Class A Notes are paid in full:
(i) Compliance with Law. The Servicer will comply in all material
respects with all Applicable Laws, including those with respect to the
Dealer Loans, the Dealer Agreements the Contracts or any part thereof.
(ii) Preservation of Existence. The Servicer will preserve and
maintain its existence, rights, franchises and privileges in the
jurisdiction of its formation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification has had, or could reasonably be expected to have, a material
adverse effect on the Dealer Loans, the Dealer Agreements, the Contracts or
the Class A Notes.
(iii) Obligations and Compliance with Dealer Loans and Dealer
Agreements. The Servicer will duly fulfill and comply with all obligations
on the part of the Seller to be fulfilled or complied with under or in
connection with each Dealer Loan and each Dealer Agreement and will do
nothing to impair the rights of the Trust Collateral Agent, the Indenture
Trustee or the Class A Noteholders in, to and under the Trust Property. The
Backup Servicer as successor Servicer shall not have an obligation to
perform the obligations of the Servicer under this Section 4.06(a)(iii).
(iv) Keeping of Records and Books of Account. The Servicer will
maintain and implement administrative and operating procedures (including
without limitation, an ability to recreate records consistent with
standards or practices in the industry evidencing the Dealer Loans and the
Contracts in the event of the destruction of the originals thereof), and
keep and maintain all documents, books, records and other information
reasonably necessary or advisable for the collection of all Dealer Loans.
(v) Preservation of Security Interest. The Servicer will file
such financing and continuation statements and any other documents that may
be required by any law or regulation of any Governmental Authority to
preserve and protect fully the security interest of the Indenture Trustee
for the benefit of the Class A Noteholders and the Class A Insurer in, to
and under the Trust Property. In its capacity as custodian, it will
maintain possession of the Dealer Agreements and the Contract Files and
Records, as custodian for the Trust and the Trust Collateral Agent, as set
forth in Section 3.3(a).
(vi) Collection Guidelines. The Servicer will (A) comply in all
material respects with the Collection Guidelines in regard to each Dealer
Loan and Contract, and (B) furnish to the Trust Collateral Agent and the
Class A Insurer quarterly, prompt notice of any material change in the
Collection Guidelines and will deliver a copy of such changes to the Trust
Collateral Agent and the Class A Insurer, quarterly.
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(vii) Books and Records. The Servicer shall keep, or cause to be
kept, in reasonable detail, books and records of account of: (A) its assets
and business, and shall clearly reflect therein the ownership of the Trust
Property by the Issuer; and (B) any statutory trust records of the Trust
required in accordance with Section 4.1(c)(iv) of the Trust Agreement.
(viii) Access to Records; Discussions with Officers. The Servicer
shall, at the Servicer's expense upon the prior reasonable request of the
Class A Insurer, permit the Class A Insurer, or its authorized agent,
access during normal business hours at its offices to (i) the Servicer's
books of account, records, reports and other papers with respect to the
Trust Property and the Basic Documents and (ii) any of the properties of
the Servicer, in order to examine all of such books of account, records,
reports and other papers, to make copies and extracts therefrom and to
discuss the Servicer's affairs, finances and accounts with its officers,
employees, and subject to the agreement of such accountants, independent
public accountants. Such inspections and discussions shall be conducted at
such reasonable times, as often as may be reasonably requested and in a
commercially reasonable manner.
(ix) ERISA. So long as the Seller or the Issuer are ERISA
Affiliates of the Servicer, the Servicer shall comply in all material
respects with the provisions of ERISA, the Code, and all other applicable
laws, except where such non-compliance could not reasonably be expected to
result in a material adverse effect with respect to the Servicer and its
ERISA Affiliates or with respect to the Trust Property. Without limiting
the foregoing, the Servicer shall not, and shall not permit its ERISA
Affiliates to: (i) engage in any non-exempt prohibited transaction (within
the meaning of the Internal Revenue Code Section 4975 or ERISA Section 406)
with respect to any Benefit Plan for which the Servicer and its ERISA
Affiliates would have a material liability; (ii) suffer to exist any
accumulated funding deficiency as defined in Section 301(a) of ERISA and
Section 412(a) of the Internal Revenue Code with respect to any Benefit
Plan in an amount exceeding $500,000 or (iii) terminate any Benefit Plan or
Multiemployer Plan if such termination would result in any material
liability for which the Seller or Issuer would be liable as ERISA
Affiliates.
(x) Financial Reporting. The Servicer shall furnish or cause to
be furnished to the Class A Insurer and the Rating Agencies the following:
(A) Annual Financial Statements. As soon as available, and in any
event within one hundred and twenty (120) days after the close of each
fiscal year of the Servicer, the audited consolidated balance sheet of the
Servicer as of the end of such fiscal year, and the audited consolidated
statements of income, shareholders' equity and cash flows of the Servicer
for such fiscal year in reasonable detail and stating in comparative form
the respective figures for the corresponding date and period in the
preceding fiscal year, in each case prepared in accordance with GAAP,
consistently applied, and accompanied by the certificate of independent
accountants and certified by an authorized officer of the Servicer as being
complete and correct in all material respects, in each case presenting the
financial condition and results of operations of the
41
Servicer as of the dates and for the periods indicated, in accordance with
GAAP consistently applied.
(B) Quarterly Financial Statements. As soon as available, and in
any event within 60 days after the close of the first three quarters of
each fiscal year of the Servicer, the unaudited consolidated balance sheet
of the Servicer as of the end of each such quarter, and the unaudited
consolidated statements of income and cash flows of the Servicer for the
portion of the fiscal year then ended, in reasonable detail and stating in
comparative form the respective figures for the corresponding date and
period in the preceding fiscal year, prepared in accordance with GAAP,
consistently applied (subject to normal year-end adjustments), and
certified by an authorized officer of the Servicer as being complete and
correct in all material respects and presenting the financial condition and
results of operations of the Servicer as of the dates and for the periods
indicated, in accordance with GAAP consistently applied (subject as to
interim statements to normal year-end adjustments).
(C) Certification Regarding Servicer Defaults. Concurrently with
the delivery of each financial report delivered under (A) or (B) above, a
certification by the chief financial officer or treasurer of the Servicer
that no Servicer Default and no event which, with the giving of notice or
the passage of time, would become a Servicer Default has occurred and is
continuing or, if any such Servicer Default or other event has occurred and
is continuing, such a Servicer Default has occurred and is continuing, the
action which the Servicer has taken or proposes to take with respect
thereto.
(D) Notices to Other Creditors. Concurrently with the delivery to
the "Agent" under the Comerica Credit Agreement, but in any event no later
than when such reports and notices are required to be given under such
agreement, copies of any static pool analyses, notices of default, SEC
filings, notices disclosing adverse litigation or a material adverse change
in the Servicer's financial condition, business or operations.
(E) Other Material Events. As soon as possible, and in any event
within three (3) Business Days after becoming aware of (i) any material
adverse change in the financial condition of the Servicer or any of its
Subsidiaries, a certificate of a financial officer setting forth the
details of such change, or (ii) the submission of any claim or the
initiation of any legal process, litigation or administrative or judicial
investigation against the Servicer or any of its Subsidiaries in any
federal, state or local court or before any arbitration board, or any such
proceeding threatened by any governmental agency, which, if adversely
determined, would be reasonably likely to cause a material adverse effect
on the Servicer's financial condition or operations, its ability to perform
its obligations hereunder or on the collectibility of the Trust Property.
(F) Other Information. Promptly upon request, such other
information respecting the Trust Property or the Servicer as the Class A
Insurer or the Rating Agencies may reasonably request.
(b) Negative Covenants. From the date hereof until the Stated Final
Maturity or, if earlier, the date the Class A Notes are paid in full:
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(i) Mergers, Acquisition, Sales, etc. The Servicer will not
consolidate with or merge into any other Person or convey or transfer its
properties and assets substantially as an entirety to any Person, unless
the Servicer is the surviving entity and unless:
(A) the Servicer has delivered to the Trust Collateral Agent, the
Indenture Trustee, the Owner Trustee, the Backup Servicer and the Class A
Insurer an Officer's Certificate and an Opinion of Counsel each stating
that any consolidation, merger, conveyance or transfer and such
supplemental agreement comply with the terms of this Agreement and that all
conditions precedent herein provided for relating to such transaction have
been complied with and, in the case of the Opinion of Counsel, that such
supplemental agreement is legal, valid and binding with respect to the
Servicer and such other matters as the Trust Collateral Agent or the Class
A Insurer may reasonably request;
(B) the Servicer shall have delivered written notice of such
consolidation, merger, conveyance or transfer to the Trust Collateral Agent
and the Class A Insurer; and,
(C) after giving effect thereto, no Servicer Default or event
that with notice or lapse of time, or both, would constitute a Servicer
Default shall have occurred.
(ii) Change of Name or Location of Records. Except as permitted
under Section 7.03, the Servicer shall not (A) change its name or its state
of organization, move the location of its principal place of business and
chief executive office, and the offices where it keeps records concerning
the Dealer Loans from the location referred to in Section 3.03(c), or (B)
move the Records from the location thereof on the Closing Date, unless the
Servicer has given at least thirty (30) days' written notice to the Trust
Collateral Agent, the Indenture Trustee and the Class A Insurer and has
taken all actions required under the UCC of each relevant jurisdiction in
order to continue the first priority perfected security interest of the
Trust Collateral Agent as agent for the Class A Noteholders in the Trust
Property.
(iii) Change in Payment Instructions to Obligors. The Servicer
will not make any change in its instructions to Obligors (other than
pursuant to its Collection Guidelines) regarding payments to be made
directly or indirectly, unless the Trust Collateral Agent and the Class A
Insurer have each consented to such change and have received duly executed
documentation related thereto; provided, however, any successor Servicer
appointed Servicer hereunder, shall be permitted to make changes to such
instructions directing the Obligors to make payments to such successor
Servicer directly or indirectly upon its appointment, but any subsequent
changes shall be subject to the consent provisions of this clause (iii).
(iv) No Instruments. The Servicer shall take no action to cause
any Dealer Loan to be evidenced by any instrument (as defined in the UCC as
in effect in the relevant jurisdictions).
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(v) No Liens. The Servicer shall not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to
exist any Lien (other than in favor of the Trust Collateral Agent or the
Trust as specifically contemplated herein) on the Trust Property or any
interest therein; the Servicer will notify the Trust Collateral Agent and
the Class A Insurer of the existence of any Lien on any portion of the
Trust Property immediately upon discovery thereof, and the Servicer shall
defend the right, title and interest of the Trust Collateral Agent on
behalf of the Class A Noteholders in, to and under the Trust Property
against all claims of third parties claiming through or under the Servicer.
(vi) Credit Guidelines and Collection Guidelines. The Servicer
will not amend, modify, restate or replace, in whole or in part, the Credit
Guidelines or Collection Guidelines, which change would materially impair
the collectibility of any Dealer Loan or Contract or otherwise materially
adversely affect the interests or the remedies of the Trust Collateral
Agent, the Trust or the Class A Insurer under this Agreement or any other
Basic Document, without the prior written consent of the Trust Collateral
Agent and the Class A Insurer.
(vii) Release of Contracts. Except for a release to an insurer in
exchange for insurance proceeds paid by such insurer resulting from a claim
for the total insured value of a vehicle, the Servicer shall not release or
direct the Trust Collateral Agent to release the Financed Vehicle securing
each such Contract from the security interest granted by such Contract in
whole or in part, except in the event of (i) payment in full by or on
behalf of the Obligor thereunder, (ii) settlement with the Obligor in
respect of Defaulted Contracts consistent with its Collection Guidelines or
(iii) repossession, nor shall the Servicer impair the rights of the Class A
Noteholders or the Class A Insurer in the Contracts which secure the Dealer
Loans, except as may be required by applicable law.
(c) Notwithstanding the foregoing, the Servicer may assign rights in
and to Defaulted Contracts to collection agents as part of the collection
process under the Collection Guidelines.
SECTION 4.07. Payments in Respect of Contracts Upon Breach.
(a) The Servicer or the Trust Collateral Agent (provided that a
Responsible Officer of the Trust Collateral Agent has actual knowledge or has
received written notice thereof) shall inform the other parties to this
Agreement and the Class A Insurer promptly, in writing, upon the discovery of
any breach of Section 4.01, 4.02, 4.03, 4.04, 4.05 or 4.06 hereof which
materially and adversely affects the interest of the Issuer, the Indenture
Trustee or the Class A Insurer. Unless the breach shall have been cured by the
last day of the first full Collection Period following such actual knowledge or
receipt of notice by an Authorized Officer of the Servicer, the Servicer shall,
as of the Business Day preceding the Determination Date relating to the
respective Collection Period, make payments with respect to any nonconforming
Dealer Loan that is materially and adversely affected by such breach or which
materially and adversely affects the interests of the Class A Insurer (or the
Class A Noteholders if a Class A
44
Insurer Default is then continuing), and shall prepay in full any nonconforming
Contract that is materially and adversely affected by such breach or which
materially and adversely affects the interests of the Class A Insurer (or the
Class A Noteholders if a Class A Insurer Default is then continuing); provided,
however, if the Backup Servicer is acting as successor Servicer, it shall not
have any obligation to make payments with respect to any Dealer Loans or prepay
any Contracts. In consideration of the making of payments with respect to such
Dealer Loan or such Contract, the Servicer shall remit the Purchase Amount.
Notwithstanding anything herein to the contrary, (i) during the Revolving
Period, such payments shall not be required if the Adjusted Collateral Amount is
equal to or greater than the Minimum Collateral Amount; and (ii) during the
Amortization Period, such payments shall not be required: (A) with respect to
any Loan, so long as the aggregate Net Loan Balance of all Dealer Loans which
would be Ineligible Loans as a result of being subject to the foregoing payment
obligations during the Amortization Period is less than the Amortization Period
Additional Loan Collateral Amount; and (B) with respect to any Contract, so long
as the aggregate Outstanding Balance of all Contracts which would be Ineligible
Contracts as a result of being subject to the foregoing payment obligations
during the Amortization Period is less than the Amortization Period Additional
Contract Collateral Amount.
(b) If such payments are required in accordance with clause (a) of
this Section 4.07, they shall be made only with respect to the Amortization
Period Payment Obligations. Notwithstanding the foregoing, the Servicer's
obligation to make any payment under this Section 4.07 may be waived with the
prior written consent of the Class A Insurer or the Indenture Trustee, at the
direction of the Majority Noteholders, if a Class A Insurer Default has occurred
and is continuing. The Trust Collateral Agent shall have no duty to conduct any
affirmative investigation or inquiry as to the occurrence of any condition
requiring payments to be made with respect to any Dealer Loan or Contract
pursuant to this Section. Any such waiver by the Class A Insurer or the
Indenture Trustee, at the direction of the Majority Noteholders, as applicable,
shall not require any further waiver, action or consent by any other party. The
party providing such waiver shall give notice thereof to the Owner Trustee.
SECTION 4.08. Servicer Fee.
The Servicer, including any successor Servicer, shall be entitled to
payment of the Servicing Fee as defined herein, which shall be payable in
accordance with Section 5.08(a) hereof. In no event shall the Indenture Trustee
or the Trust Collateral Agent be responsible for the Servicing Fee or for any
differential between the Servicing Fee and the amount necessary to induce a
successor Servicer to assume the obligations of Servicer hereunder.
SECTION 4.09. Servicer's Certificate.
(a) By the Determination Date in each calendar month, the Servicer
shall deliver to the Trust Collateral Agent, the Class A Insurer, the Rating
Agencies, the Backup Servicer, and Wachovia Capital Markets, LLC, a Servicer's
Certificate substantially in the form of Exhibit B hereto containing all
information necessary to make the transfers, deposits and distributions pursuant
to Sections 5.04 through 5.11 hereof for the Collection Period immediately
preceding the date of such Servicer's Certificate and as of the last day of such
Collection Period, and all information necessary for the Trust Collateral Agent
to make available statements to Class A Noteholders and the Class A Insurer
pursuant to Section 5.11 hereof. Upon receipt of
45
the Servicer's Certificate, the Trust Collateral Agent shall conclusively rely
(and shall be fully protected in so relying) on the information contained
therein for the purposes of making distributions and allocations as provided for
herein. Each Servicer's Certificate shall be certified by a Responsible Officer
of the Servicer. The Seller shall assist the Trust Collateral Agent with its
obligation to make distributions and allocations. Dealer Loans purchased by the
Trust shall be identified by the Servicer by the Dealer's lot number and certain
other information with respect to such Dealer Loan (as specified in Schedule A
to this Agreement).
(b) No later than 9:00 A.M. New York time on the third (3rd) Business
Day of each calendar month (the "Servicer's Data Date"), the Servicer shall send
to the Backup Servicer a Computer Tape, detailing the Collections received
during the prior Collection Period and all other information in its possession
relating to the Dealer Loans and the Contracts as may be necessary for the
complete and correct completion of the Servicer's Certificate (the "Servicer's
Data File"). Such Computer Tape shall be in the form and have the specifications
as may be agreed to between the Servicer and the Backup Servicer from time to
time.
(c) No later than the end of the second (2nd) Business Day prior to
each Determination Date, the Servicer shall furnish to the Backup Servicer the
Servicer's Certificate related to the prior Collection Period together with all
other information necessary for the preparation of such Servicer's Certificate
and necessary to determine the application of Collections. The Backup Servicer
shall review the information contained in the Servicer's Certificate against the
information on the Servicer's Data File, on an aggregate basis.
The Backup Servicer and the Servicer shall attempt to reconcile any
such material inconsistencies and/or to furnish any such omitted information and
the Servicer shall amend the Servicer's Certificate to reflect the Backup
Servicer's computations or to include the omitted information. The Backup
Servicer shall in no event be liable to the Servicer with respect to any failure
of the Backup Servicer to discover or detect any errors, inconsistencies, or
omissions by the Servicer with respect to the Servicer's Certificate and
Servicer's Data File except as specifically set forth in this Section.
(d) The Servicer shall provide to the Backup Servicer, or its agent,
monthly, or as frequently as may be otherwise requested, information on the
Dealer Loans and related Contracts sufficient to enable the Backup Servicer to
assume the responsibilities as successor Servicer and collect on the Contracts.
(e) Except as provided in this Agreement, the Backup Servicer may
accept and conclusively rely on all accounting, records and work of the Servicer
without audit, and the Backup Servicer shall have no liability for the acts or
omissions of the Servicer or for the inaccuracy of any data provided, produced
or supplied by the Servicer. If any Error exists in any information received
from the Servicer, and such Errors should cause or materially contribute to any
Continued Errors, the Backup Servicer shall have no liability for such Continued
Errors; provided, however, that this provision shall not protect the Backup
Servicer against any liability that would otherwise be imposed by reason of
willful misconduct, bad faith or gross negligence in discovering or correcting
any Error or in the performance of its or their duties hereunder or under this
Agreement. In the event the Backup Servicer becomes aware of Errors or Continued
Errors, the Backup Servicer shall, with the prior consent of the Class A
Insurer, use its best
46
efforts to reconstruct and reconcile such data as is commercially reasonable to
correct such Errors and Continued Errors and prevent future Continued Errors.
The Backup Servicer shall be entitled to recover its costs thereby expended from
the Servicer.
(f) The Backup Servicer and its officers, directors, employees and
agent shall be indemnified by the Servicer and the Issuer jointly and severally,
from and against all claims, damages, losses or expenses reasonably incurred by
the Backup Servicer (including reasonable attorney's fees) arising out of claims
asserted against the Backup Servicer by third parties on any matter arising out
of this Agreement to the extent the act or omission giving rise to the claim
accrues before the date on which the Backup Servicer assumes the duties of
Servicer hereunder, except for any claims, damages, losses or expenses arising
from the Backup Servicer's own gross negligence, bad faith or willful
misconduct. Indemnification by the Servicer and the Issuer under this Section
4.09(f) shall survive the termination of this Agreement or the earlier removal
or resignation of the Backup Servicer.
(g) Other than as specifically set forth in this Agreement or in the
Backup Servicing Agreement, the Backup Servicer shall have no obligation to
supervise, verify, monitor or administer the performance of the Servicer and
shall have no duty, responsibility, obligation, or liability for any action
taken or omitted by the Servicer.
SECTION 4.10. Annual Statement as to Compliance; Notice of Default.
(a) The Servicer shall deliver to the Trust Collateral Agent, the
Owner Trustee, the Rating Agencies, the Indenture Trustee, the Class A Insurer
and the Class A Noteholders, on or before April 30th of each year beginning in
the year 2008, an Officer's Certificate, dated as of the preceding December
31st, stating that (i) a review of the activities of the Servicer during the
preceding 12-month (or for the initial certificate, for such shorter period as
may have elapsed from the Closing Date to such December 31st or, with respect to
a successor Servicer, shorter period if a successor Servicer becomes Servicer
after the beginning of a calendar year) period and of its performance under this
Agreement has been made under such officer's supervision and (ii) to the best of
such officer's knowledge, based on such review, the Servicer has fulfilled all
its obligations under this Agreement throughout such period, or, if there has
been a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof.
(b) The Servicer shall deliver to the Trust Collateral Agent, the
Indenture Trustee, the Owner Trustee, the Class A Insurer, the Backup Servicer
and to the Rating Agencies, promptly after having obtained knowledge thereof,
but in no event later than five (5) Business Days thereafter, written notice in
an Officer's Certificate of any event which with the giving of notice or lapse
of time, or both, would become a Servicer Default under Section 8.01. The Seller
shall deliver to the Trust Collateral Agent, the Indenture Trustee, the Class A
Insurer, the Backup Servicer and to the Rating Agencies, promptly after having
obtained knowledge thereof, but in no event later than five (5) Business Days
thereafter, written notice in an Officer's Certificate of any event which with
the giving of notice or lapse of time, or both, would become a Servicer Default
under clause (ii) of Section 8.01. The Trust Collateral Agent shall forward a
copy of each Officer's Certificate so received to each Class A Noteholder.
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SECTION 4.11. Annual Independent Certified Public Accountant's Report.
(a) The Servicer will deliver to the Trust Collateral Agent, the Owner
Trustee, the Indenture Trustee, each Class A Noteholder, the Class A Insurer and
the Rating Agencies, on or before April 30th of each year beginning in the year
2008, a copy of a report prepared by Independent Accountants, who may also
render other services to the Servicer or any of its Affiliates, or to the
Seller, addressed to the Board of Directors of the Servicer, the Indenture
Trustee and the Class A Insurer and dated during the current year, to the effect
that such firm has examined the Servicer's policies and procedures and issued
its report thereon and expressing a summary of findings (based on the procedures
to be performed on the documents, records and accounting records set forth in
clause (b) of this Section 4.11) relating to the servicing of the Dealer Loans
and the related Contracts and the administration of the Dealer Loans and the
related Contracts and of the Trust during the preceding calendar year and that
such servicing and administration was conducted in compliance with the terms of
this Agreement, except for (i) such exceptions as such firm shall believe to be
immaterial and (ii) such other exceptions as shall be set forth in such report
and that such examination (1) was performed in accordance with standards
established by the American Institute of Certified Public Accountants, and (2)
included tests relating to auto loans serviced for others in accordance with the
requirements of the Uniform Single Attestation Program for Mortgage Bankers (the
"Program") to the extent the procedures in the Program are applicable to the
servicing obligations set forth in this Agreement. For purposes of clause (i) of
this Section 4.11(a), an amount shall be deemed "immaterial" if it is less than
$1,000 or 0.05%.
In the event such independent public accountants require the Trust
Collateral Agent or the Indenture Trustee to agree to the procedures to be
performed by such firm in any of the reports required to be prepared pursuant to
this Section 4.11, the Servicer shall direct the Trust Collateral Agent or the
Indenture Trustee in writing to so agree; it being understood and agreed that
the Trust Collateral Agent or the Indenture Trustee will deliver such letter of
agreement in conclusive reliance upon the direction of the Servicer, and neither
the Trust Collateral Agent nor the Indenture Trustee has made any independent
inquiry or investigation as to, and shall have no obligation or liability in
respect of, the sufficiency, validity or correctness of such procedures.
Such report shall also indicate that the firm is independent of the
Servicer and its Affiliates within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants.
(b) The procedures to be performed by the Independent Accountants
shall include: (i) a comparison of the data contained in two (2) Servicer
Certificates (which are to be selected at random by the Class A Insurer from all
of the Servicer Certificates delivered during the applicable fiscal year) to (A)
the Servicer's internal reports derived from its loan servicing system, (B)
information obtained by the Servicer from the Indenture Trustee in compiling the
Servicer Certificates, and (C) such other information used in the preparation of
the Servicer Certificates, to confirm the calculation of the data contained in
the Servicer Certificates; (ii) a comparison of the Aggregate Outstanding
Eligible Loan Balance contained on three (3) Servicer Certificates (which are to
be selected at random by the Class A Insurer from all of the Servicer
Certificates delivered during the applicable fiscal year) to the Servicer's
internal reports derived
48
from its accounting records, to confirm the calculation of such amount; (iii) an
audit of the Servicer's cash collections procedures by testing a random sample
of five (5) daily cash receipts from the Servicer's list of cash collections for
the applicable fiscal year to confirm that Collections received are deposited to
the Collection Account within two (2) Business Days of receipt; and (iv) such
other procedures as may be mutually agreed upon by the Servicer, the Class A
Insurer and the Independent Accountants which are considered appropriate under
the circumstances.
SECTION 4.12. Access to Certain Documentation and Information
Regarding Dealer Loans and Contracts.
The Servicer shall provide to each Class A Noteholder, the Indenture
Trustee, the Trust Collateral Agent and the Class A Insurer access to its
records pertaining to the Dealer Loans and the related Contracts, upon prior
written request. Access shall be afforded without charge, but only upon
reasonable request and during the normal business hours at the offices of the
Servicer. Nothing in this Section shall affect the obligation of the Servicer to
observe any Applicable Law prohibiting disclosure of information regarding the
Dealers or the Obligors, and the failure of the Servicer to provide access to
information as a result of such obligation shall not constitute a breach of this
Section.
SECTION 4.13. Servicer Expenses.
The Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder, including fees and disbursements of
independent accountants, taxes imposed on the Servicer and expenses incurred in
connection with distributions and reports to Class A Noteholders, the Indenture
Trustee, the Trust Collateral Agent and the Class A Insurer and with
administering the duties of the Trust and the Issuer. If the Backup Servicer has
become the Servicer, it shall be entitled to be reimbursed for all Servicer
Expenses, Repossession Expenses, Reliening Expenses and Transition Expenses in
accordance with Section 5.08(a) hereof.
SECTION 4.14. Servicer Not to Resign as Servicer.
Subject to the provisions of Section 7.03 of this Agreement, the
Servicer shall not resign from the obligations and duties hereby imposed on it
as Servicer under this Agreement except upon determination that the performance
of its duties under this Agreement shall no longer be permissible under
applicable law. Notice of any such determination permitting the resignation of
the Servicer shall be communicated to the Trust Collateral Agent, the Rating
Agencies, the Class A Insurer and the Indenture Trustee within five (5) Business
Days thereafter (and, if such communication is not in writing, shall be
confirmed in writing within five (5) Business Days thereafter) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trust Collateral Agent, the Class A Insurer and the Indenture
Trustee concurrently with or promptly after such notice. No such resignation
shall become effective until the successor Servicer, appointed in accordance
with Section 8.02 hereof, shall have taken the actions required by the last
paragraph of Section 8.01 of this Agreement and shall have assumed the
responsibilities and obligations of the predecessor Servicer in accordance
49
with Section 8.02 of this Agreement. The Trust Collateral Agent shall forward a
copy of each notice so received to each Class A Noteholder and the Rating
Agencies.
SECTION 4.15. The Backup Servicer.
(a) Prior to assuming any of the Servicer's rights and obligations
hereunder the Backup Servicer shall only be responsible to perform those duties
specifically imposed upon it by the provisions of the Backup Servicing
Agreement, and no implied obligations shall be read into this Agreement against
the Backup Servicer. Such duties generally relate to following the provisions
herein which would permit the Backup Servicer to assume some or all of the
Servicer's rights and obligations hereunder (as modified or limited herein or in
the Backup Servicing Agreement) with reasonable dispatch, following notice.
The Backup Servicer, prior to assuming any of the Servicer's duties
hereunder, may not resign hereunder unless it arranges for a successor Backup
Servicer reasonably acceptable to the Servicer, the Seller and the Class A
Insurer or the Indenture Trustee, if a Class A Insurer Default has occurred and
is continuing, with not less than 30 days' notice delivered to the Class A
Insurer, the Servicer and the Seller. Prior to its becoming successor Servicer,
the Backup Servicer shall have only those duties and obligations imposed by it
under this Agreement, and shall have no obligations or duties under any
agreement to which it is not a party, including but not limited to the various
agreements named herein.
(b) The Backup Servicer shall not be required to expend or risk its
own funds or otherwise incur liability (financial or otherwise) in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if the repayment of such funds or written indemnity reasonably
satisfactory to it against such risk or liability is not reasonably assured to
it in writing prior to the expenditure or risk of such funds or incurrence of
financial liability. Notwithstanding any provision to the contrary, the Backup
Servicer, in its capacity as such, and not in its capacity as successor
Servicer, shall not be liable for any obligation of the Servicer contained in
this Agreement, and the parties shall look only to the Servicer to perform such
obligations.
(c) The Servicer shall have no liability, direct or indirect, to any
party, for the acts or omissions of the Backup Servicer, whenever such acts or
omissions occur whenever such liability is imposed, except as set forth in
Section 4.09(f). The successor Servicer shall not be liable for the acts or
omissions of any predecessor Servicer.
(d) Notwithstanding anything to the contrary herein, so long as a
Class A Insurer Default is not continuing, the Class A Insurer shall have the
right to remove the Backup Servicer for cause at any time and replace the Backup
Servicer. In the event that the Class A Insurer exercises its right to remove
and replace ▇▇▇▇▇ Fargo Bank, National Association as Backup Servicer, ▇▇▇▇▇
Fargo Bank, National Association shall have no further obligation to perform the
duties of the Backup Servicer under this Agreement.
SECTION 4.16. Fidelity Bond.
The Servicer hereby represents and covenants that the Servicer has
obtained, and shall continue to maintain in full force and effect, a fidelity
bond covering the Servicer of a type
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and in such amount as is customary for prudent servicers engaged in the business
of servicing sub-prime and non-prime motor vehicle retail installment sales
contracts similar to the Contracts.
SECTION 4.17. Obligations in Respect of the Owner Trustee.
To the extent Credit Acceptance is no longer the Servicer hereunder,
Credit Acceptance, in its individual capacity, agrees to perform the obligations
of the Servicer in respect of the Owner Trustee and the Trust described in
Section 4.01(d) and Section 4.06(a)(vii)(B) hereof and in Section 6.2 of the
Trust Agreement.
ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
AND NOTEHOLDERS
SECTION 5.01. Establishment of Trust Accounts.
(a) (i) On or prior to the Closing Date, the Trust Collateral Agent,
on behalf of the Indenture Trustee, for the benefit of the Class A Noteholders,
the Class A Insurer and, after the Class A Termination Date, the
Certificateholders, shall establish and maintain in its own name two Eligible
Accounts (respectively, the "Collection Account" and the "Principal Collection
Account") bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Trust Collateral Agent on behalf of the
Indenture Trustee for the benefit of the Class A Noteholders, the Class A
Insurer and, after the Class A Termination Date, the Certificateholders, as
their interests may appear. The Collection Account and the Principal Collection
Account shall initially be established with the Trust Collateral Agent.
(ii) The Trust Collateral Agent, on behalf of the Indenture
Trustee, for the benefit of the Class A Noteholders, the Class A Insurer
and, after the Class A Termination Date, the Certificateholders, shall
establish and maintain in its own name an Eligible Account (the "Class A
Note Distribution Account") bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the Trust
Collateral Agent on behalf of the Indenture Trustee for the benefit of the
Class A Noteholder, the Class A Insurer and, after the Class A Termination
Date, the Certificateholders, as their interests may appear. The Class A
Note Distribution Account shall initially be established with the Trust
Collateral Agent.
(iii) The Trust Collateral Agent, on behalf of the Indenture
Trustee, for the benefit of the Certificateholders, shall establish and
maintain in its own name an Eligible Account (the "Certificate Distribution
Account") bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Trust Collateral Agent on behalf of
the Indenture Trustee for the benefit of the Certificateholders. The
Certificate Distribution Account shall initially be established with the
Trust Collateral Agent.
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(iv) The Trust Collateral Agent, on behalf of the Class A
Noteholders, the Class A Insurer and, after the Class A Termination Date,
the Certificateholders, as their interests may appear, shall establish and
maintain in its own name an Eligible Account (the "Reserve Account")
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Trust Collateral Agent on behalf of the
Indenture Trustee for the benefit of the Class A Noteholders, the Class A
Insurer and, after the Class A Termination Date, the Certificateholders, as
their interests may appear. The Reserve Account shall initially be
established with the Trust Collateral Agent.
(b) Funds on deposit in the Collection Account, subject to Section
5.06(b) hereof, the Principal Collection Account and the Reserve Account shall
each be invested by the Trust Collateral Agent (or any custodian with respect to
funds on deposit in any such account) in Eligible Investments selected in
writing by the Servicer (pursuant to standing instructions or otherwise),
bearing interest or sold at a discount, and maturing, unless payable on demand,
no later than the Business Day immediately preceding the next Distribution Date;
provided, however, it is understood and agreed that the Trust Collateral Agent
shall not be liable for any loss arising from such investment in Eligible
Investments unless the Eligible Investment was a direct obligation of the Trust
Collateral Agent in its commercial capacity or unless such loss was caused by
the Trust Collateral Agent's negligence or willful misconduct (it being
understood and acknowledged that no loss on any such Eligible Investment which
was made in conformity with this Agreement and the instructions of the Servicer
shall be considered "caused by the Trust Collateral Agent's negligence or
willful misconduct"). All such Eligible Investments shall be held by or on
behalf of the Trust Collateral Agent for the benefit of the Indenture Trustee on
behalf of the Class A Noteholders, the Class A Insurer and, after the Class A
Termination Date, the Certificateholders, as their interests may appear. Funds
deposited in the Collection Account on the day immediately preceding a
Distribution Date upon the maturity of any Eligible Investments are not required
to be invested overnight. On each Distribution Date, all interest and investment
income (net of investment losses and expenses) on funds on deposit in the
Collection Account, as of the end of the Collection Period shall be included in
Available Funds; and all interest and other investment income (net of investment
losses and expenses) on funds on deposit in the Reserve Account shall be
deposited into the Reserve Account. On each Distribution Date during the
Revolving Period, all interest and other investment income (net of investment
losses and expense) on funds on deposit in the Principal Collection Account
shall be deposited into the Principal Collection Account; thereafter, such
interest and other investment income (net of investment losses and expense)
shall be included in Available Funds in the Collection Account.
(c) If (i) the Servicer shall have failed to give investment
directions for any funds on deposit in the Collection Account, the Principal
Collection Account or the Reserve Account to the Trust Collateral Agent by 2:00
p.m. Eastern Time (or such other time as may be agreed by the Issuer and Trust
Collateral Agent) on any Business Day; or (ii) an Indenture Default or Indenture
Event of Default shall have occurred and be continuing with respect to the Class
A Notes but the Class A Notes shall not have been declared due and payable, or,
if such Class A Notes shall have been declared due and payable following an
Indenture Event of Default, amounts collected or receivable from the Trust
Property are being applied as if there had not been such a declaration; then the
Trust Collateral Agent shall, to the fullest extent practicable, invest and
reinvest funds in the Collection Account, the Principal Collection
52
Account or the Reserve Account, as the case may be, in Eligible Investments
described in clause (v) of the definition thereof.
(d) (i) Subject to the grant of the security interest pursuant to the
Indenture in favor of the Indenture Trustee, the Trust shall possess all right,
title and interest in all funds on deposit from time to time in the Trust
Accounts (other than Dealer Collections) and in all proceeds thereof and all
such funds, investments, proceeds and income shall be part of the Trust
Property. Except as otherwise provided herein, the Trust Accounts shall be under
the sole dominion and control of the Trust Collateral Agent for the benefit of
the Class A Noteholders, the Class A Insurer and, after the Class A Termination
Date, the Certificateholders, as their interests may appear.
(ii) With respect to any Eligible Investments held from time to
time in any Trust Account, the Trust Collateral Agent agrees that:
(A) any Eligible Investment that is held in deposit accounts
shall be, except as otherwise provided herein, subject to the exclusive
custody and control of the Trust Collateral Agent, and the Trust Collateral
Agent shall have sole signature authority with respect thereto;
(B) any Eligible Investment that constitutes Physical Property
shall be delivered to the Trust Collateral Agent in accordance with
paragraph (a) of the definition of "Delivery" and shall be held, pending
maturity or disposition, solely by the Trust Collateral Agent or a
securities intermediary (as such term is defined in Section 8-102(a)(14) of
the UCC) acting solely for the Trust Collateral Agent;
(C) any Eligible Investment that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations shall be delivered in accordance with paragraph (b) of the
definition of "Delivery" and shall be maintained by the Trust Collateral
Agent, pending maturity or disposition, through continued book-entry
registration of such Eligible Investment as described in such paragraph;
(D) any Eligible Investment that is an "uncertificated security"
under Article 8 of the UCC and that is not governed by clause (C) above
shall be delivered to the Trust Collateral Agent in accordance with
paragraph (c) of the definition of "Delivery" and shall be maintained by
the Trust Collateral Agent, pending maturity or disposition, through
continued registration of the Trust Collateral Agent's (or its nominee's)
ownership of such security; and
(E) not less than eight (8) days prior to each Distribution Date,
the Trust Collateral Agent shall give notice to each Eligible Institution
that holds Eligible Investments in money market deposit accounts that on
such Distribution Date the Trust Collateral Agent may be withdrawing all
funds from the applicable Trust Account.
(e) The Servicer shall have the power, revocable by the Class A
Insurer, the Trust Collateral Agent, by the Indenture Trustee or by the Owner
Trustee, each with the prior written consent of the Class A Insurer (so long as
a Class A Insurer Default is not continuing)
53
and the Indenture Trustee, to instruct the Trust Collateral Agent to make
withdrawals and payments from the Trust Accounts for the purpose of permitting
the Servicer and the Trust Collateral Agent to carry out its respective duties
hereunder.
(f) If ratings of the unsecured and uncollateralized long-term debt
obligations of the Trust Collateral Agent or its parent are lower than "AA-" by
S&P and "Aa3" by ▇▇▇▇▇'▇, then the Servicer shall, with the Trust Collateral
Agent's assistance as necessary, cause the Trust Accounts to be moved within
five (5) Business Days to another institution where such Trust Accounts will be
Eligible Accounts.
SECTION 5.02. Collections; Allocation.
The Servicer shall remit to the Collection Account within two (2)
Business Days of receipt all Collections collected during each Collection
Period. On the Closing Date, the Servicer shall deposit in the Collection
Account the foregoing amounts received with respect to the Dealer Loans and
Contracts since the initial Cut-off Date.
The Servicer shall determine each month the amount of Collections
received during each Collection Period which constitutes Dealer Collections and
shall so notify the Trust Collateral Agent in writing. Notwithstanding any other
provision hereof, the Trust Collateral Agent, at the written direction of the
Servicer, shall distribute on each Distribution Date: (i) to the Issuer an
amount equal to the aggregate amount of Dealer Collections received during or
with respect to the prior Collection Period; and (ii) to the Backup Servicer, if
it has become successor Servicer, an amount equal to Repossession Expenses
related to the prior Collection Period prior to the distribution of Available
Funds pursuant to Section 5.08(a) hereof. Upon receipt, the Issuer shall remit
all Dealer Collections to Credit Acceptance. In the event the Backup Servicer is
acting as successor Servicer, the Seller shall assist the Backup Servicer in the
performance of its obligations under this Section 5.02.
SECTION 5.03. Certain Reimbursements to the Servicer.
The Servicer will be entitled to be reimbursed from amounts on deposit
in the Collection Account with respect to a Collection Period for amounts
previously deposited in the Collection Account but later determined by the
Servicer to have resulted from mistaken deposits or postings or checks returned
for insufficient funds. The amount to be reimbursed hereunder shall be paid to
the Servicer on the next succeeding Business Day(s) out of collections on Dealer
Loans and the related Contracts to be remitted to the Collection Account to the
extent the net amount to the Collection Account is greater than zero.
SECTION 5.04. Additional Deposits.
(a) The Servicer or the Seller, as applicable, shall deposit or cause
to be deposited in the Collection Account each Purchase Amount paid hereunder.
Credit Acceptance shall deposit any amounts in respect of the Limited Repurchase
Option to the Collection Account. All such deposits with respect to a Collection
Period shall be made, in immediately available funds, on the Business Day
immediately preceding the Determination Date related to such Collection Period.
54
(b) The proceeds of any purchase or sale of the assets of the Trust
described in Section 10.01 hereof shall be deposited by the Seller or the
Servicer, as applicable, in the Collection Account on the Business Day
immediately preceding the Distribution Date on which such purchase shall occur.
(c) Following the acceleration of the Class A Notes pursuant to
Section 5.2 of the Indenture, the proceeds shall be deposited in the Collection
Account to be distributed by the Indenture Trustee in accordance with Section
5.2(b) of the Indenture.
SECTION 5.05. Reserve Account.
(a) On the Closing Date, the Seller shall direct the Trust Collateral
Agent to deposit to the Reserve Account a cash amount equal to the Initial
Reserve Amount.
(b) With respect to each Distribution Date, on the fourth Business Day
immediately preceding such Distribution Date, the Servicer (provided, that in
the event the Backup Servicer is acting as successor Servicer, the Seller shall
assist the Backup Servicer in the performance of its obligations under this
Section 5.05(b)) shall instruct the Trust Collateral Agent (based on the
information contained in the Servicer's Certificate delivered to the Trust
Collateral Agent in respect of the related Determination Date pursuant to
Section 4.09), prior to the making of any transfers pursuant to Section 5.08
hereof, if required, to withdraw from the Reserve Account to the extent
available therein with respect to amounts payable on such Distribution Date, the
amounts specified below, and deposit such amounts in the Collection Account to
be applied as follows:
(i) first, an amount equal to the excess of (x) the Servicing
Fee, up to the Capped Servicing Fee, over (y) the Available Funds required
to be applied pursuant to Section 5.08(a)(i) hereof on such Distribution
Date;
(ii) second, an amount equal to the Indenture Trustee Fee and
fees payable to the Owner Trustee up to the Capped Backup Servicer and
Trustee Fees and Expenses;
(iii) third, an amount equal to the excess of (x) the Class A
Interest Distributable Amount plus the Class A Interest Carryover
Shortfall, if any, over (y) the Available Funds required to be applied
pursuant to Section 5.08(a)(ii) hereof on such Distribution Date;
(iv) fourth, an amount equal to the excess of (x) any amounts due
and payable to the Class A Insurer under Section 5.08(a)(iv) hereof over
(y) the Available Funds required to be applied pursuant to Section
5.08(a)(iv) hereof on such Distribution Date;
(v) fifth, an amount equal to the Principal Deficiency (assuming
that, for purposes of determining the Principal Deficiency in this clause
only, the amounts available for the distribution of principal are
attributable to those amounts required to be applied pursuant to Section
5.08(a)(vii) hereof) on such Distribution Date;
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(vi) sixth, if the next Distribution Date is the Stated Final
Maturity, an amount equal to the excess of (x) the Class A Note Balance
over (y) the Available Funds required to be applied pursuant to Section
5.08(a)(vii) hereof on the Stated Final Maturity;
(vii) seventh, an amount equal to the excess of (x) without
duplication, the Reimbursement Obligations over (y) the Available Funds
required to be applied pursuant to Section 5.08(a)(viii) hereof on such
Distribution Date; and
(viii) eighth, an amount equal to the excess of the funds
remaining in the Reserve Account after the withdrawals referred to in
clauses (i) through (vii) above over the Reserve Account Requirement on
such Distribution Date.
(c) Notwithstanding the foregoing, all transfers of funds between
accounts may occur on the Business Day immediately preceding the Distribution
Date related to such transfer; all distributions from accounts shall occur on
the Distribution Date.
(d) Amounts withdrawn from the Reserve Account pursuant to clause
(b)(i)-(vii) above shall be used solely for the amounts described in clause
(b)(i)-(vii) above, as applicable. Amounts withdrawn from the Reserve Account
pursuant to clause (b)(viii) above shall constitute Available Funds.
SECTION 5.06. Payments under the Class A Note Insurance Policy.
(a) (i) If, by 5:00 p.m. New York City time on the second Business Day
immediately prior to any Distribution Date with respect to the Class A Notes,
the sum of (A) the Class A Interest Distributable Amount (exclusive of any
default interest) and (B) any Principal Deficiency, exceeds the sum of: (w)
Available Funds on deposit in the Collection Account and available for payment
of the Class A Interest Distributable Amount and/or Principal Deficiency; (x)
the amount on deposit in the Reserve Account on such Distribution Date and
available for payment of the Class A Interest Distributable Amount and/or
Principal Deficiency; (y) any Class A Insurer Interest Shortfall Payment paid in
respect of the Class A Interest Distributable Amount; and (z) any Class A
Insurer Principal Payment paid in respect of any Principal Deficiency, the Trust
Collateral Agent shall, no later than 10:00 a.m. New York time on the Business
Day immediately preceding such Distribution Date, make a claim under the Class A
Note Insurance Policy in an amount equal to such excess, in accordance with the
terms of the Class A Note Insurance Policy.
(ii) If, by 5:00 p.m. New York City time on the second
Business Day immediately prior to the Stated Final Maturity, the excess of
(A) the original Class A Note Balance over (B) the aggregate amount of any
payments previously made in respect of principal on the Class A Notes,
exceeds the sum of (x) Available Funds remaining in the Collection Account
and available for payment of the Class A Principal Distributable Amount
hereof, (y) the amount available on the Stated Final Maturity in the
Reserve Account and available for payment of the Class A Principal
Distributable Amount and (z) any payments made by the Class A Insurer in
respect of principal on the Stated Final
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Maturity under the Class A Note Insurance Policy, the Trust Collateral
Agent shall, no later than 10:00 a.m. New York time on the Business Day
immediately preceding the Stated Final Maturity, make a claim under the
Class A Note Insurance Policy in an amount equal to such excess, in
accordance with the terms of the Class A Note Insurance Policy.
(b) Proceeds of claims on the Class A Note Insurance Policy shall be
deposited in the Collection Account, shall remain uninvested and shall be used
solely to pay amounts due in respect of interest and principal on the Class A
Notes on each Distribution Date or the Stated Final Maturity, as applicable.
(c) (i) On any day that a Responsible Officer of the Trust Collateral
Agent has actual knowledge or receives written notice that any amount previously
paid to a Class A Noteholder has been subsequently recovered from such Class A
Noteholder pursuant to a final, non-appealable order of a court of competent
jurisdiction that such payment constitutes an avoidable preference within the
meaning of any applicable bankruptcy law to such Class A Noteholder, after
giving effect to any Class A Insurer Preference Payments (a "Preference
Amount"), the Trust Collateral Agent shall make a claim within one (1) Business
Day upon the Class A Note Insurance Policy for the full amount of such
Preference Amount in accordance with the terms of the Class A Note Insurance
Policy and shall notify the Class A Noteholders by mail that, in the event that
any Class A Noteholder's payment is so recoverable, such Class A Noteholder will
be entitled to payment pursuant to the terms of the Class A Note Insurance
Policy. The Trust Collateral Agent shall furnish to the Class A Insurer at its
written request the requested records it holds in its possession evidencing the
payments of principal of and interest on the Class A Notes, if any, which have
been made by the Trust Collateral Agent and subsequently recovered from any
Class A Noteholders, and the dates on which such payments were made. The
proceeds of any claim for a Preference Amount under the Class A Note Insurance
Policy shall be disbursed to the receiver or trustee in bankruptcy named in the
final order of the court exercising jurisdiction on behalf of the Class A
Noteholder and not to any Class A Noteholder directly unless such Class A
Noteholder has returned principal or interest paid on the obligations to such
receiver or trustee in bankruptcy, in which case such payment shall, upon proof
reasonably satisfactory to the Class A Note Insurer, be disbursed to the Trust
Collateral Agent for distribution to such Class A Noteholder.
(ii) Each Notice for Payment (as defined in the Class A Note
Insurance Policy) shall provide that the Trust Collateral Agent, on its
behalf and on behalf of the Class A Noteholders, thereby appoints the Class
A Insurer as agent and attorney-in-fact for the Trust Collateral Agent and
each Class A Noteholder in any legal proceeding with respect to the Class A
Notes. Each Class A Noteholder, by its purchase of a Class A Note, and the
Trust Collateral Agent hereby agree that, subject to Section 9.02(e) of
this Agreement and Section 5.12 of the Indenture, so long as a Class A
Insurer Default shall not have occurred and be continuing, the Class A
Insurer may at any time during the continuation of any proceeding relating
to a Preference Amount direct all matters relating to such Preference
Amount including, without limitation, (i) the direction of any appeal of
any order relating to any Preference Amount and (ii) the posting of any
surety,
57
supersedeas or performance bond pending any such appeal at the expense of
the Class A Insurer, but subject to reimbursement as provided in the
Insurance Agreement. In addition, and without limitation of the foregoing,
as set forth in Section 5.17 of the Indenture, the Class A Insurer shall be
subrogated to, and each Class A Noteholder and the Trust Collateral Agent
hereby delegate and assign, to the fullest extent permitted by law, the
rights of the Trust Collateral Agent and each Class A Noteholder in the
conduct of any proceeding with respect to a Preference Amount, including,
without limitation, all rights of any party to an adversary proceeding
action with respect to any court order issued in connection with any such
Preference Amount.
(d) The Trust Collateral Agent shall, and hereby agrees that it will,
hold the Class A Note Insurance Policy in trust and will hold any proceeds of
any claim thereunder in trust, solely for the benefit of and use of the Class A
Noteholders.
SECTION 5.07. Reserved.
SECTION 5.08. Transfers and Distributions.
(a) Unless the Class A Notes have been accelerated in accordance with
the terms of the Indenture, on each Distribution Date, after making any
transfers and distributions required by Sections 5.02, 5.03, 5.04, 5.05(b) and
5.06(b)) hereof, the Trust Collateral Agent shall (based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date) cause to be made the following transfers and distributions for such
Distribution Date from Available Funds and amounts deposited to the Collection
Account from the Reserve Account (such amounts from the Reserve Account to be
applied in accordance with Section 5.05(b)), in the following order of priority:
(i) pro rata: (A) (i) to the Servicer, the Servicing Fee and any
Servicing Fee unpaid from any prior Distribution Date, or (ii) if the
Servicer has been replaced pursuant to the terms of this Agreement, to the
Backup Servicer, the Servicing Fee and any Servicing Fee unpaid from any
prior Distribution Date up to the Capped Servicing Fee; and (B) to the
Backup Servicer: (i) any Transition Expenses and (ii) any accrued and
unpaid indemnification amounts owed to it up to $17,000; and (C) pro rata,
to the Backup Servicer, so long as it has not become the Servicer, any
accrued and unpaid Backup Servicing Fees, and to the Owner Trustee, the
Indenture Trustee and the Trust Collateral Agent, pro rata, their related
accrued and unpaid fees or Indenture Trustee Fee, as applicable,
indemnification amounts and expenses, up to the Capped Backup Servicer and
Trustee Fees and Expenses;
(ii) to the Class A Note Distribution Account, the Class A
Interest Distributable Amount due and payable on such Distribution Date and
the Class A Interest Carryover Shortfall, if any, from any prior
Distribution Date, for distribution to the Class A Noteholders;
(iii) to any successor Servicer, an amount equal to the Reliening
Expenses;
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(iv) to the Class A Insurer, in accordance with the terms of the
Insurance Agreement and so long as no Class A Insurer Default related to
the Class A Insurer's failure to pay any amount due in accordance with the
terms of the Class A Note Insurance Policy has occurred and is continuing:
(A) the Class A Insurer Premium, including any past due Class A Insurer
Premium; (B) its expenses; and (C) its Reimbursement Obligations owed in
respect of any draws on the Class A Note Insurance Policy for the payment
of the Class A Interest Distributable Amount;
(v) to the Reserve Account, an amount equal to the amount
necessary to cause the amount on deposit in the Reserve Account to equal
the Reserve Account Requirement for such Distribution Date;
(vi) during the Revolving Period, to the Principal Collection
Account: (i) for application by the Issuer to purchase additional Dealer
Loans from the Seller, the amount needed to cause the Collateral Amount to
equal the Minimum Collateral Amount, and if the Minimum Collateral Amount
cannot be reached due to an insufficient amount of Dealer Loans for
purchase by the Issuer, the amount needed to cause the Adjusted Collateral
Amount to equal the Minimum Collateral Amount; and (ii) the amount needed
to cure any Principal Deficiency;
(vii) during the Amortization Period, to the Class A Note
Distribution Account, the Class A Principal Distributable Amount for
distribution to the Class A Noteholders, until the Class A Note Balance has
been reduced to zero;
(viii) to the Class A Insurer, in accordance with the terms of
the Insurance Agreement, its Reimbursement Obligations and any other
amounts owed to it, to the extent not paid pursuant to clause (iv);
(ix) pro rata, (A) to the Backup Servicer, any Servicing Fee or
any amounts owed to it pursuant to clause (i) to the extent not paid
pursuant to clause (i), and (B) pro rata, to the Owner Trustee, the
Indenture Trustee and the Trust Collateral Agent, any accrued fees,
indemnification amounts or expenses, to the extent not paid pursuant to
clause (i); and
(x) following the payment in full of all distributable amounts
and after making all allocations set forth in clauses (i) through (ix)
above, to the Indenture Trustee for deposit in the Certificate Distribution
Account any remaining Available Funds in the Collection Account for
distribution to the Certificateholder pursuant to Section 5.10 hereof.
(b) In the event that the Collection Account is maintained with an
institution other than the Trust Collateral Agent, the Servicer shall instruct
the Trust Collateral Agent to instruct and cause such institution to make all
transfers, deposits and distributions pursuant to Section 5.08(a) hereof on the
related Distribution Date.
(c) Notwithstanding the foregoing, all transfers of funds between
accounts may occur on the Business Day immediately preceding the Distribution
Date related to such transfer; all distributions from accounts shall occur on
the Distribution Date.
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SECTION 5.09. Distributions from the Class A Note Distribution
Account.
(a) Subject to Section 5.12 hereof, on each Distribution Date, after
making all transfers and distributions required to be made on such Distribution
Date by Sections 5.05 and 5.08 hereof, the Trust Collateral Agent shall (based
on the information contained in the Servicer's Certificate delivered on the
related Determination Date) distribute all amounts on deposit in the Class A
Note Distribution Account to Noteholders in respect of the Class A Notes in the
following amounts and in the following order of priority:
(i) to the Class A Noteholders the sum of (x) the Class A
Interest Distributable Amount for such Distribution Date and (y) the Class
A Interest Carryover Shortfall, if any, for such Distribution Date; and
(ii) after the application of clause (i) above and until the
outstanding principal balance of the Class A Notes is reduced to zero, to
the Holders of the Class A Notes, the Class A Principal Distributable
Amount for such Distribution Date.
(b) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Class A Noteholder, such withholding tax
shall reduce the amount otherwise distributable to the Class A Noteholder in
accordance with this Section 5.09. The Trust Collateral Agent is hereby
authorized and directed to retain from amounts otherwise distributable to the
Class A Noteholders sufficient funds for the payment of any withholding tax that
is legally owed by the Trust as instructed by the Servicer, in writing in a
Servicer's Certificate (but such authorization shall not prevent the Trust
Collateral Agent from contesting at the expense of the Seller any such
withholding tax in appropriate proceedings, and withholding payment of
withholding such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to a Class
A Noteholder shall be treated as cash distributed to such Class A Noteholder at
the time it is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-US Noteholder), the
Trust Collateral Agent may withhold such amounts in accordance with this clause
(b). In the event that a Class A Noteholder wishes to apply for a refund of any
such withholding tax, the Trust Collateral Agent shall reasonably cooperate with
such Class A Noteholder in making such claim so long as such Class A Noteholder
agrees to reimburse the Trust Collateral Agent for any out-of-pocket expenses
incurred. The Class A Note Insurance Policy shall not cover any shortfalls
relating to withholding taxes.
(c) Distributions required to be made to Noteholders on any
Distribution Date shall be made to each Class A Noteholder of record on the
preceding Record Date either by wire transfer, in immediately available funds,
to the account of such Holder at a bank or other entity having appropriate
facilities therefor, if (i) such Class A Noteholder shall have provided to the
Class A Note Registrar appropriate written instructions at least ten Business
Days prior to such Distribution Date or (ii) such Class A Noteholder is the
Seller, or an Affiliate thereof, or, if not, by check mailed to such Class A
Noteholder at the address of such holder appearing in the Class A Note Register.
Notwithstanding the foregoing, the final distribution in respect of any Class A
Note (whether on the Stated Final Maturity or otherwise) will be payable only
upon presentation
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and surrender of such Class A Note at the office or agency maintained for that
purpose by the Note Registrar pursuant to Section 2.7 of the Indenture.
SECTION 5.10. Certificate Distribution Account.
(a) On each Distribution Date, the Trust Collateral Agent shall (based
on the information contained in the Servicer's Certificate delivered on the
related Determination Date) distribute all amounts on deposit in the Certificate
Distribution Account to the Certificateholders.
(b) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Certificateholder, such tax shall reduce
the amount otherwise distributable to the Certificateholder in accordance with
this Section. The Trust Collateral Agent is hereby authorized and directed to
retain from amounts otherwise distributable to the Certificateholders sufficient
funds for the payment of any tax that is legally owed by the Trust as instructed
in writing by the Servicer (but such authorization shall not prevent the Trust
Collateral Agent from contesting, at the expense of the Seller, any such tax in
appropriate proceedings, and withholding payment of such tax, if permitted by
law, pending the outcome of such proceedings). The amount of any withholding tax
imposed with respect to a Certificateholder shall be treated as cash distributed
to such Certificateholder at the time it is withheld by the Trust and remitted
to the appropriate taxing authority. If there is a possibility that withholding
tax is payable with respect to a distribution (such as a distribution to a
non-US Certificateholder), the Trust Collateral Agent may withhold such amounts
in accordance with this clause (b). In the event that a Holder wishes to apply
for a refund of any such withholding tax, the Trust Collateral Agent shall
reasonably cooperate with such Certificateholder in making such claim so long as
such Certificateholder agrees to reimburse the Trust Collateral Agent for any
out-of-pocket expenses incurred.
(c) Distributions required to be made to Certificateholders on any
Distribution Date shall be made to each Certificateholder of record on the
preceding Record Date either by wire transfer, in immediately available funds,
to the account of such Holder at a bank or other entity having appropriate
facilities therefor, if (i) such Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least ten Business
Days prior to such Distribution Date and such Holder's Certificates in the
aggregate evidence a denomination of not less than $500,000 or (ii) such
Certificateholder is the Seller, or an Affiliate thereof, or, if not, by check
mailed to such Certificateholder at the address of such holder appearing in the
Certificate Register. Notwithstanding the foregoing, the final distribution in
respect of any Certificate (whether on the Stated Final Maturity or otherwise)
will be payable only upon presentation and surrender of such Certificate at the
office or agency maintained for that purpose by the Certificate Registrar
pursuant to Section 3.4 of the Trust Agreement.
(d) Notwithstanding the foregoing, all transfers of funds between
accounts may occur on the Business Day immediately preceding the Distribution
Date related to such transfer; all distributions from accounts shall occur on
the Distribution Date.
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SECTION 5.11. Statements to Certificateholders and Noteholders.
On or prior to each Distribution Date, the Servicer (provided, that in
the event the Backup Servicer is acting as successor Servicer, the Seller shall
assist the Backup Servicer in the performance of its obligations under this
Section 5.11) shall provide to the Trust Collateral Agent the Servicer's
Certificate (with copies to the Rating Agencies). The Trust Collateral Agent
will be required to make the Servicer's Certificate related to such Distribution
Date available to the Class A Insurer, the Class A Noteholders, the
Certificateholder, the Initial Purchasers and Bloomberg, L.P. Each Servicer's
Certificate will include, among other things, the following information with
respect to the Class A Notes with respect to the related Distribution Date, or
the period since the previous Distribution Date, as applicable.
(i) the amount of the related distribution allocable to
principal;
(ii) the amount of the related distribution allocable to
interest;
(iii) the amount of the related distribution payable out of the
Reserve Account;
(iv) the Aggregate Outstanding Net Eligible Loan Balance, the
Aggregate Outstanding Eligible Loan Balance and the aggregate Outstanding
Balance of all Eligible Contracts as of the close of business on the last
day of the preceding Collection Period;
(v) the Class A Note Balance and the Pool Factor;
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period and/or due but unpaid with respect
to such Collection Period or prior Collection Periods, as the case may be;
(vii) the Class A Interest Carryover Shortfall, if any;
(viii) the total amount of Collections for the related Collection
Period; and
(ix) the aggregate Purchase Amount for the Ineligible Loans and
Ineligible Contracts, if any, that was paid in such period.
Each amount set forth pursuant to paragraph (i), (ii), (iii), (vi) and (vii)
above shall be expressed as a dollar amount per $1,000 of the initial note
principal balance or the Original Certificate Balance, as applicable.
The Trust Collateral Agent shall make such information and certain
other documents, reports, and Dealer Loan and Contract information provided by
the Servicer's Certificate available to each Class A Noteholder and the Class A
Insurer via the Indenture Trustee's website. The Indenture Trustee's internet
website shall be initially located at "▇▇▇.▇▇▇▇▇▇▇.▇▇▇" or at such other address
as shall be specified by the Indenture Trustee from time to time in writing to
the Class A Noteholders and the Class A Note Insurer. In
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connection with providing access to the Indenture Trustee's website, the
Indenture Trustee may require registration and the acceptance of a disclaimer.
The Trust Collateral Agent will make no representation or warranties as to the
accuracy or completeness of such documents and will assume no responsibility
therefor.
The Trust Collateral Agent shall not be liable for the dissemination
of information received and distributed in accordance with this Agreement.
ARTICLE VI
THE SELLER AND THE ISSUER
SECTION 6.01. Representations and Warranties of the Seller.
The Seller makes the following representations on which the Trust, the
Indenture Trustee and the Trust Collateral Agent relied in accepting the Trust
Property in trust and in connection with the performance by the Trust Collateral
Agent and the Backup Server of its obligations hereunder and the Class A Insurer
relied in issuing the Class A Note Insurance Policy. The representations speak
as of the execution and delivery of this Agreement on the Closing Date but shall
survive the sale of the Contracts to the Trust:
(i) Organization and Good Standing. The Seller is duly organized
and validly existing as a limited liability company in good standing under
the laws of the State of Delaware, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and has and had at all
relevant times, full power, authority, and legal right to acquire and own
the Dealer Loans and the related Contracts.
(ii) Due Qualification. The Seller is duly qualified to do
business as a foreign limited liability company in good standing, and has
obtained all necessary licenses and approvals in all jurisdictions in which
the ownership or lease of property or the conduct of its business requires
such qualifications.
(iii) Power and Authority. The Seller has the power and authority
to execute and deliver this Agreement and the other Basic Documents to
which it is a party and to carry out their respective terms. The Seller has
full power and authority to sell and assign the property to be sold and
assigned to and deposited with the Trust and has duly authorized such sale
and assignment to the Trust by all necessary action; and the execution,
delivery, and performance of this Agreement and the other Basic Documents
to which it is a party have been duly authorized by the Seller by all
necessary action and do not require any additional approvals or consents or
other action by or any notice to or any filing with, any Person.
(iv) Valid Sale; Binding Obligations. This Agreement evidences a
valid sale, transfer, and assignment of the Trust Property enforceable
against creditors of and purchasers from the Seller; and a legal, valid and
binding obligation of the Seller enforceable in accordance with its terms,
subject to the effects of bankruptcy, insolvency,
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reorganization, or other similar laws affecting the enforcement of
creditors' rights generally and to general principles of equity.
(v) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Basic Documents to which it is
a party and the fulfillment of the terms hereof and thereof does not
conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time) a default under,
the Certificate of Formation, limited liability company agreement of the
Seller, or any indenture, agreement, or other instrument to which the
Seller is a party or by which it is bound; nor result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement, or other instrument; or violate any law or,
to the best of the Seller's knowledge, any order, rule, or regulation
applicable to the Seller of any court or of any federal or state regulatory
body, administrative agency, or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(vi) No Proceedings. There are no proceedings or investigations
pending, or to the Seller's best knowledge threatened, before any court,
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Seller or its properties: (A)
asserting the invalidity of this Agreement, any other Basic Document to
which it is a party or the Class A Notes; (B) seeking to prevent the
issuance of the Class A Notes or the consummation of any of the
transactions contemplated by this Agreement or, any other Basic Document to
which it is a party; (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement,
any other Basic Document to which it is a party or the Class A Notes; or
(D) relating to the Seller and which might adversely affect the federal
income tax attributes of the Class A Notes.
(vii) Principal Place of Business; Jurisdiction of Organization.
The principal place of business of the Seller is located in Michigan. The
Seller is organized under the laws of Delaware as a limited liability
company, and is not organized under the laws of any other jurisdiction.
"Credit Acceptance Funding LLC 2007-1" is the correct legal name of the
Seller indicated on the public records of the Seller's jurisdiction of
organization which shows it to be organized.
(viii) [Reserved.]
(ix) Certificates, Statements and Reports. The officers'
certificates, statements, reports and other documents prepared by the
Seller and furnished by the Seller to the Issuer, the Indenture Trustee or
the Class A Insurer pursuant to this Agreement or any other Basic Document
to which the Seller is a party, and in connection with the transactions
contemplated hereby or thereby, when taken as a whole, do not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained hereon or therein not
misleading.
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(x) Accuracy of Information. All information heretofore furnished
by the Seller to the Trust or its successors and assigns or to the Class A
Insurer pursuant to or in connection with any Basic Document or any
transaction contemplated thereby is, and all such information hereafter
furnished by the Seller will be, true and accurate in every material
respect on the date such information is stated or certified and does not
contain an material misstatement of fact or omit to state a material fact
or any fact necessary to make the statements contained therein not
misleading.
(xi) Ownership of Seller. Credit Acceptance is the sole owner of
the membership interests of the Seller, all of which are fully paid and
nonassessable and owned of record, free and clear of all mortgages,
assignments, pledges, security interests, warrants, options and rights to
purchase, except for the lien thereon in favor of Comerica Bank, as
collateral agent under the Comerica Credit Agreement.
(xii) Use of Proceeds. No proceeds of any sale of Seller Property
will be used (i) for a purpose that violates, or would be inconsistent
with, Regulation T, U or X promulgated by the Board of Governors of the
Federal Reserve System from time to time or (ii) to acquire any security in
any transaction which is subject to Section 12, 13 or 14 of the Securities
Exchange Act of 1934, as amended.
(xiii) Taxes. The Seller has filed on or before their respective
due dates, all tax returns which are required to be filed in any
jurisdiction or has obtained extensions for filing such tax returns and has
paid all taxes, assessments, fees and other governmental charges against
the Seller or any of its properties, income or franchises, to the extent
that such taxes have become due, other than any taxes or assessments, the
validity of which are being contested in good faith by appropriate
proceedings and with respect to which adequate provision has been made on
the books of the Seller as may be required by GAAP. To the best of the
knowledge of the Seller, all such tax returns were true and correct in all
material respects and the Seller knows of any proposed material additional
tax assessment against it nor any basis therefor. Any taxes, assessments,
fees and other governmental charges payable by the Seller in connection
with the execution and delivery of the Basic Documents and the issuance of
the Class A Notes have been paid or shall have been paid at or prior to
Closing Date.
(xiv) Consolidated Returns. The Originator, the Seller and the
Issuer will file a consolidated federal income tax return at all times
until the termination of the Basic Documents.
(xv) ERISA. The Seller is in compliance in all material respects
with ERISA.
(xvi) Compliance with Laws. The Seller has complied in all
material respects with all applicable, laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be
subject.
(xvii) Material Adverse Change. Since the date of its formation,
no event has occurred that would have a material adverse effect on (i) the
financial condition
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or operations of the Seller, (ii) the ability of the Seller to perform its
obligations under the Basic Documents, or (iii) the collectibility of the
Dealer Loans generally or any material portion of the Dealer Loans.
(xviii) Special Purpose Entity.
(A) The capital of the Seller is adequate for the business and
undertakings of the Seller.
(B) Other than as provided in the Basic Documents, the Seller is
not engaged in any business transactions with Credit Acceptance.
(C) Other than in connection with the Basic Documents, the Seller
has not incurred any indebtedness or assumed or guarantied any indebtedness
of any other entity.
(D) At least two directors of the board of directors of the
Seller shall be persons who are not, and will not be, a director, officer,
employee or holder of any equity securities of Credit Acceptance or any of
its Affiliates or Subsidiaries.
(E) Once identified as Seller funds and assets by the Servicer
and separated in accordance with the Servicer's normal and customary
business practices, the funds and assets of the Seller are not, and will
not be, commingled with the funds of any other Person, except for Dealer
Collections and erroneous deposits.
(F) The limited liability company agreement of the Seller
requires it to maintain (A) correct and complete minute books and records
of account, and (B) minutes of the meetings and other proceedings of its
shareholders and board of directors.
(xix) Solvency; Fraudulent Conveyance. The Seller is solvent, is
able to pay its debts as they become due and will not be rendered insolvent
by the transactions contemplated by the Basic Documents and, after giving
effect thereto, will not be left with an unreasonably small amount of
capital with which to engage in its business. The Seller does not intend to
incur, or believes that it has incurred, debts beyond its ability to pay
such debts as they mature. The Seller does not contemplate the commencement
of insolvency, bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar
official or any of its assets. The amount of consideration being received
by the Seller upon the sale of the Seller Property to the Trust constitutes
reasonably equivalent value and fair consideration for the Seller Property.
The Seller is not selling the Seller Property to the Trust, as provided in
the Basic Documents, with any intent to hinder, deal or defraud any of
Credit Acceptance's creditors.
(xx) Payment to Originator. The Seller has given reasonably
equivalent value and fair consideration for the Contributed Property
conveyed to the Seller under the Contribution Agreement and such transfer
was not made for or on account of an antecedent debt. No transfer by the
Originator of any originator property under the
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Contribution Agreement is or may be voidable under any section of the
Bankruptcy Code.
SECTION 6.02. Limitation on Liability of Seller and Others.
Neither the Seller nor any of the directors or officers or employees
or agents of the Seller shall be under any liability to the Trust, the Trust
Collateral Agent or the Class A Noteholders or the Certificateholders, except as
provided under this Agreement for any action taken or omitted to be taken
pursuant to this Agreement; provided, however, that this provision shall not
protect the Seller against any liability that would otherwise be imposed by
reason of willful misconduct or negligence in the performance of their
respective duties under this Agreement. Each of the Seller and any director or
officer or employee or agent of the Seller may rely in good faith on the advice
of counsel, Opinion of Counsel, Officer's Certificate, or on any document of any
kind, prima facie properly executed and submitted by any Person respecting any
matters arising hereunder. The Seller shall not be under any obligation to
appear in, prosecute, or defend any legal action that shall not be incidental to
its obligations under this Agreement, and that in its opinion may involve it in
any expense or liability; provided, however, that the Seller may undertake any
reasonable action that it may deem necessary or desirable in respect of this
Agreement and the rights and duties of the parties to this Agreement and the
interests of the Class A Noteholders and the Certificateholders under this
Agreement. In such event, the legal expenses and costs of such action and any
liability resulting therefrom shall be expenses, costs, and liabilities of the
Seller.
SECTION 6.03. Seller May Own Notes.
The Seller and any Person controlling, controlled by, or under common
control with the Seller may in their individual or any other capacities become
the owner or pledgee of the Class A Notes with the same rights as it would have
if it were not the Seller or an affiliate thereof, except as otherwise provided
in the definition of "Noteholder" specified in Section 1.01 and except as
otherwise specifically provided herein. The Class A Notes so owned by or pledged
to the Seller or such controlling, controlled or commonly controlled Person
shall have an equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among all of the
Class A Notes.
SECTION 6.04. Additional Covenants of the Seller.
The Seller shall not do any of the following, without: (i) the prior
written consent of the Class A Insurer; and (ii) the prior written consent of
the Trust Collateral Agent, who shall, without any exercise of its own
discretion, also provide its written consent to the Seller upon receipt by it of
a copy of the written consent of the Class A Insurer:
(i) engage in any business or activity other than those set forth
in the Certificate of Formation or limited liability company agreement of
the Seller or amend the Seller's Certificate of Formation or limited
liability company agreement other than in accordance with its terms as in
effect on the date hereof;
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(ii) incur any indebtedness, or assume or guaranty any
indebtedness of any other entity, other than (A) any indebtedness incurred
in connection with the Class A Notes, and (B) any indebtedness to Credit
Acceptance incurred in connection with the acquisition of the Dealer Loans,
which indebtedness shall be subordinated to all other obligations of the
Seller and Credit Acceptance; or
(iii) dissolve or liquidate, in whole or in part; consolidate or
merge with or into any other entity or convey or transfer its properties
and assets substantially as an entirety to any entity.
SECTION 6.05. Indemnities of the Issuer.
The Issuer shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Issuer under this Agreement
and the other Basic Documents to which it is a party and no implied duties or
obligations shall be read into this Agreement against the Issuer.
(i) The Issuer shall defend, indemnify, and hold harmless the
Trust Collateral Agent, the Servicer, the Backup Servicer, the Indenture
Trustee, the Class A Insurer and the Owner Trustee and their respective
officers, directors, employees and agents, and the Trust from and against
any and all costs, expenses, losses, damages, claims, and liabilities,
arising out of or resulting from the use, ownership, or operation by the
Issuer or any Affiliate thereof of a Financed Vehicle.
(ii) The Issuer shall indemnify, defend, and hold harmless the
Trust Collateral Agent, the Indenture Trustee, the Owner Trustee, the
Servicer, the Backup Servicer, the Class A Insurer and their respective
officers, directors, employees and agents, and the Trust from and against
any taxes that may at any time be asserted against them with respect to the
transactions contemplated herein, including, without limitation, any sales,
gross receipts, general corporation, tangible personal property, privilege,
or license taxes (but, in the case of the Trust, not including any taxes
asserted with respect to, and as of the date of, the sale of the Dealer
Loans to the Trust or the issuance and original sale of the Class A Notes,
or asserted with respect to ownership of the Dealer Loans, or federal or
other income taxes arising out of the transactions contemplated by this
Agreement) and costs and expenses in defending against the same.
(iii) The Issuer shall indemnify, defend, and hold harmless the
Trust, the Servicer, the Backup Servicer, the Trust Collateral Agent, the
Owner Trustee, the Indenture Trustee, the Class A Insurer, and each of
their respective officers, directors, employees and agents, and the Class A
Noteholders from and against any and all costs, expenses, losses, claims,
damages, and liabilities to the extent that such cost, expense, loss,
claim, damage, or liability arose out of, or was imposed upon such party
through the breach by the Issuer of its obligations under this Agreement or
any other Basic Document to which it is a party, the negligence, willful
misconduct or bad faith of the Issuer in the performance of its duties
under this Agreement or any other Basic Document to which it is a party.
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(iv) The Issuer shall indemnify, defend, and hold harmless the
Trust Collateral Agent, the Indenture Trustee, the Owner Trustee, the Class
A Insurer, the Servicer, the Backup Servicer and each of their respective
officers, directors, employees and agents from and against all costs,
expenses, losses, claims, damages, and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties herein contained, except, with respect to any such indemnified
party, to the extent that such cost, expense, loss, claim, damage, or
liability: (a) shall be due to the willful misconduct, bad faith, or
negligence (or in the case of the Owner Trustee, gross negligence) of such
indemnified party; or (b) shall arise from such indemnified party's breach
of any of its representations or warranties in any material respect set
forth in the Indenture.
(v) The Issuer shall indemnify, defend, and hold harmless, the
Indenture Trustee, the Owner Trustee, the Class A Insurer and each of their
officers, directors, employees and agents from and against all costs,
expenses, losses, claims, damages, and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties contained in the Trust Agreement, except, as to any such party, to
the extent that such cost, expense, loss, claim, damage, or liability: (a)
shall be due to the willful misconduct, bad faith or negligence (or in the
case of the Owner Trustee, gross negligence) of such party; or (b) shall
arise from such breach of any of its representations or warranties set
forth in the Trust Agreement. The indemnification of the Owner Trustee
hereunder shall include indemnification for the matters set forth in
Section 8.2 of the Trust Agreement.
Indemnification under this Section by the Issuer shall survive the
termination of this Agreement and shall include reasonable fees and expenses of
counsel and expenses of litigation. If the Issuer shall have made any indemnity
payments pursuant to this Section and the recipient thereafter collects any of
such amounts from others, the recipient shall promptly repay such amounts to the
Issuer, without interest. Amounts payable by the Issuer pursuant to this Section
6.05 shall only be payable: (i) in accordance with and only to the extent funds
are available therefor pursuant to Section 5.08(a) hereof; or (ii) to the extent
the Issuer receives additional funds designated for such purpose. No amount
owing by the Issuer under this Section 6.05 shall constitute a claim (as defined
in Section 101(5) of the Bankruptcy Code) against the Issuer and recourse to it.
ARTICLE VII
THE SERVICER
SECTION 7.01. Representations of Servicer.
Credit Acceptance makes the following representations on which the
Trust, the Indenture Trustee and the Trust Collateral Agent relies in accepting
the Trust Property in trust and in connection with the performance by the Trust
Collateral Agent of its obligations hereunder, the Class A Insurer relies in
issuing the Class A Note Insurance Policy. The representations speak as of the
execution and delivery of this Agreement on the Closing Date but shall survive
the sale of the Dealer Loans to the Trust:
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(i) Organization and Good Standing. The Servicer is duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Michigan, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and has and had at all
relevant times, full power, authority, and legal right to acquire, own,
sell, and service the Dealer Loans and the related Contracts and to perform
its other obligations under the Basic Documents.
(ii) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business including the
servicing of the Dealer Loans and the related Contracts as required by this
Agreement requires such qualifications except where such failure will not
have a material adverse effect.
(iii) Power and Authority. The Servicer has the power and
authority to execute and deliver this Agreement and the other Basic
Documents to which it is a party and to carry out their respective terms;
and the execution, delivery, and performance of this Agreement and the
other Basic Documents to which it is a party have been duly authorized by
the Servicer by all necessary corporate action.
(iv) Binding Obligations. This Agreement and the other Basic
Documents to which it is a party constitute legal, valid, and binding
obligations of the Servicer enforceable in accordance with their respective
terms, subject to the effects of bankruptcy, insolvency, reorganization, or
other similar laws affecting the enforcement of creditors' rights generally
and to general principles of equity.
(v) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Basic Documents to which it is
a party and the fulfillment of the terms hereof and thereof do not conflict
with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the
Certificate of Incorporation or bylaws of the Servicer, or any indenture,
agreement, or other instrument to which the Servicer is a party or by which
it may be bound; nor result in the creation or imposition of any Lien upon
any of its properties pursuant to the terms of any such indenture,
agreement, or other instrument (other than this Agreement); nor, to the
best of the Servicer's knowledge, violate any law applicable to the
Servicer or any order, rule, or regulation applicable to the Servicer of
any court or of any federal or state regulatory body, administrative
agency, or other governmental instrumentality having jurisdiction over the
Servicer or its properties or in any way materially adversely affect the
interest of the Class A Noteholders, the Class A Insurer, the Trust, the
Trust Collateral Agent or the Indenture Trustee in any of the Trust
Property or adversely affect the Servicer's ability to perform its
obligations under this Agreement or any other Basic Document to which it is
a party.
(vi) No Proceedings. There are no proceedings or investigations
pending, or, to the Servicer's best knowledge, threatened, before any
court, regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction
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over the Servicer or its properties: (A) asserting the invalidity of this
Agreement, any of the Basic Documents to which it is a party or the Class A
Notes, (B) seeking to prevent the issuance of the Class A Notes or the
consummation of any of the transactions contemplated by this Agreement or
any of the Basic Documents to which it is a party, (C) seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, any of the Basic Documents to which it
is a party or the Class A Notes, or D) relating to the Servicer and which
might adversely affect the federal income tax attributes of the Class A
Notes.
(vii) No Consents. The Servicer is not required to obtain the
consent of any other party or any consent, license, approval or
authorization, or registration or declaration with, any governmental
authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement or the other
Basic Documents to which it is a party.
(viii) Approvals. The Servicer: (i) is not in violation of any
laws, ordinances, governmental rules or regulations to which it is subject,
which violation materially and adversely affects the business or condition
(financial or otherwise) of the Servicer and its subsidiaries, the
Servicer's ability to perform its obligations hereunder or under any other
Basic Document or any of the Trust Property; (ii) has not failed to obtain
any licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its property or to the conduct of its
business which failure to obtain will materially and adversely affect the
business or condition (financial or otherwise) of the Servicer and its
subsidiaries, the Servicer's ability to perform its obligations hereunder
or under any other Basic Document or any of the Trust Property; and (iii)
is not in violation of any term of any agreement, charter instrument, bylaw
or instrument to which it is a party or by which it may be bound, which
violation or failure to obtain materially and adversely affect the business
or condition (financial or otherwise) of the Servicer and its subsidiaries,
the Servicer's ability to perform its obligations hereunder or under any
other Basic Document or any of the Trust Property.
(ix) Investment Company. The Servicer is not an investment
company which is required to register under the Investment Company Act of
1940, as amended.
(x) Taxes. The Servicer has filed on a timely basis all material
tax returns required to be filed by it and paid all material taxes, to the
extent that such taxes have become due.
(xi) No Injunctions. There are no existing injunctions, writs,
restraining orders or other similar orders which might adversely affect the
performance by the Servicer or its obligations under, or the validity and
enforceability of, this Agreement or any other Basic Document to which it
is a party.
(xii) Practices. The practices used or to be used by the
Servicer, to monitor collections with respect to the Trust Property and
repossess and dispose of the Financed Vehicles related to the Trust
Property will be, in all material respects, in
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conformity with the requirements of all applicable federal and State laws,
rules and regulations, and this Agreement. The Servicer is in possession of
all State and local licenses (including all debt collection licenses)
required for it to perform its services hereunder, and none of such
licenses has been suspended, revoked or terminated, except where the
failure to have such licenses would not be reasonably likely to have
material adverse effect on its ability to service the Dealer Loans or
Contracts or on the interest of the Indenture Trustee, the Trust Collateral
Agent, the Class A Insurer or the Class A Noteholders.
SECTION 7.02. Indemnities of Servicer.
The Servicer shall be liable in accordance herewith only to the extent
of the obligations specifically undertaken by the Servicer under this Agreement
and the other Basic Documents to which it is a party and no implied duties or
obligations shall be read into this Agreement against the Servicer.
(i) The Servicer shall defend, indemnify, and hold harmless the
Trust Collateral Agent, the Backup Servicer, the Indenture Trustee, the
Class A Insurer and the Owner Trustee and their respective officers,
directors, employees and agents, and the Trust from and against any and all
costs, expenses, losses, damages, claims, and liabilities, arising out of
or resulting from the use, ownership, or operation by the Servicer or any
Affiliate thereof of a Financed Vehicle.
(ii) The Servicer shall indemnify, defend, and hold harmless the
Trust Collateral Agent, the Indenture Trustee, the Owner Trustee, the
Backup Servicer, the Class A Insurer and their respective officers,
directors, employees and agents, and the Trust from and against any taxes
that may at any time be asserted against them with respect to the
transactions contemplated herein, including, without limitation, any sales,
gross receipts, general corporation, tangible personal property, privilege,
or license taxes (but, in the case of the Trust, not including any taxes
asserted with respect to, and as of the date of, the sale of the Dealer
Loans to the Trust or the issuance and original sale of the Class A Notes,
or asserted with respect to ownership of the Dealer Loans, or federal or
other income taxes arising out of the transactions contemplated by this
Agreement) and costs and expenses in defending against the same.
(iii) The Servicer shall indemnify, defend, and hold harmless the
Trust, the Backup Servicer, the Trust Collateral Agent, the Owner Trustee,
the Indenture Trustee, the Class A Insurer and each of their respective
officers, directors, employees and agents, and the Class A Noteholders from
and against any and all costs, expenses, losses, claims, damages, and
liabilities to the extent that such cost, expense, loss, claim, damage, or
liability arose out of, or was imposed upon such party through the breach
by the Servicer of its obligations under this Agreement or any other Basic
Document to which it is a party, in its capacity as Servicer, the
negligence, willful misconduct or bad faith of the Servicer in the
performance of its duties under this Agreement or any other Basic Document
to which it is a party.
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(iv) The Servicer shall indemnify, defend, and hold harmless the
Trust Collateral Agent, the Indenture Trustee, the Owner Trustee, the Class
A Insurer, the Backup Servicer and each of their respective officers,
directors, employees and agents from and against all costs, expenses,
losses, claims, damages, and liabilities arising out of or incurred in
connection with the acceptance or performance of the trusts and duties
herein contained, except, with respect to the any such indemnified party,
to the extent that such cost, expense, loss, claim, damage, or liability:
(a) shall be due to the willful misconduct, bad faith, or negligence (or,
in the case of the Owner Trustee, gross negligence) of such indemnified
party; (b) shall arise from such indemnified party's breach of any of its
representations or warranties in any material respect set forth in the
Indenture; or (c) as to the Trust Collateral Agent, shall arise out of or
be incurred in connection with the performance by the Trust Collateral
Agent of the duties of successor Servicer hereunder.
(v) The Servicer shall indemnify, defend, and hold harmless, the
Indenture Trustee, the Owner Trustee, the Class A Insurer and each of their
officers, directors, employees and agents from and against all costs,
expenses, losses, claims, damages, and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties contained in the Trust Agreement, except, as to any such party, to
the extent that such cost, expense, loss, claim, damage, or liability: (a)
shall be due to the willful misconduct, bad faith or negligence (or in the
case of the Owner Trustee, gross negligence) of such party; or (b) shall
arise from such breach of any of its representations or warranties set
forth in the Trust Agreement. The Servicer agrees to the indemnification
set forth in Section 8.2 of the Trust Agreement, which provisions are
incorporated by reference herein.
(vi) The Servicer shall indemnify, defend, and hold harmless, the
Backup Servicer and its officers, directors, employees and agents from and
against all costs, expenses, losses, claims, damages, and liabilities to
the extent that such cost, expense, claim, damage, or liability arose out
of, or was imposed upon the Backup Servicer resulting from the acts or
omissions of the Servicer in the performance of its duties in its capacity
as Servicer under this Agreement or any other Basic Document to which it is
a party.
Indemnification under this Section by the Servicer, with respect to
the period such Person was (or was deemed to be) the Servicer, shall survive the
termination of such Person as Servicer or a resignation by such Person as
Servicer as well as the termination of this Agreement and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Servicer shall have made any indemnity payments pursuant to this Section and the
recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts to the Servicer, without interest.
For purposes of this Section 7.02, in the event of the termination of
the rights and obligations of the Servicer (or any successor thereto pursuant to
Section 7.03) as Servicer pursuant to Section 8.01, a non-renewal of the
servicing term referred to in Section 4.01(a) or a resignation by such Servicer
pursuant to this Agreement, such Servicer shall remain the Servicer until a
successor Servicer has accepted its appointment pursuant to Section 8.02. The
provisions
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of this paragraph shall in no way affect the survival pursuant to the preceding
paragraph of the indemnification by the Servicer.
Notwithstanding any other provision of this Agreement, the obligations
of the Servicer described in this Section shall not terminate or be deemed
released upon the resignation or termination of the Servicer and shall survive
any termination of this Agreement to the extent that such obligations arise from
the Servicer's actions hereunder while acting as Servicer.
SECTION 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer; Resignation.
Any Person (i) into which the Servicer may be merged or consolidated,
(ii) resulting from any merger, conversion, or consolidation to which the
Servicer shall be a party, or (iii) succeeding to the business of the Servicer
(or to substantially all of the Servicer's business insofar as it relates to the
making of Dealer Loans to Dealers and the servicing of the Dealer Loans and the
related Contracts), which corporation in any of the foregoing cases executes an
agreement of assumption acceptable to the Class A Insurer to perform every
obligation of the Servicer under this Agreement and the other Basic Documents to
which it is a party, will be the successor to the Servicer under this Agreement
and the other Basic Documents to which it is a party without the execution or
filing of any paper or any further act on the part of any of the parties to this
Agreement; provided, however, that (x) the Servicer shall have delivered to the
Trust Collateral Agent, the Class A Insurer, the Owner Trustee and the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each stating that
such consolidation, conversion, merger or succession and such agreement of
assumption comply with this Section and that all conditions precedent provided
for in this Agreement and the other Basic Documents to which it is a party
relating to such transaction have been complied with and (y) the Servicer shall
have delivered to the Trust Collateral Agent, the Class A Insurer, the Owner
Trustee and the Indenture Trustee an Opinion of Counsel either (A) stating that,
in the opinion of such Counsel, all financing statements and continuation
statements and amendments thereto have been filed that are necessary fully to
preserve and protect the interest of the Trust in the Contracts which secure the
Dealer Loans, and reciting the details of such filings, or (B) stating that, in
the opinion of such Counsel, no such action shall be necessary to preserve and
protect such interest and (z) the Rating Agency Condition shall have been
satisfied. The Servicer shall provide notice of any merger, conversion,
consolidation or succession pursuant to this Section to the Class A Insurer, the
Trust Collateral Agent and the Rating Agencies then providing a rating for the
Class A Notes. The Trust Collateral Agent shall forward a copy of each such
notice to each Class A Noteholder. Notwithstanding anything herein to the
contrary, the execution of the foregoing agreement of assumption and compliance
with clauses (x), (y) and (z) above shall be conditions to the consummation of
the transactions referred to in clauses (i), (ii), (iii) or (iv) above.
SECTION 7.04. Limitation on Liability of Servicer and Others.
Subject to Section 7.02, neither the Servicer nor any of the directors
or officers or employees or agents of the Servicer shall be under any liability
to the Trust, the Trust Collateral Agent or the Class A Noteholders or the
Certificateholders, except as provided under this Agreement or any other Basic
Document to which it is a party, for any action taken or omitted to be taken
pursuant to this Agreement in the good faith business judgment of the Servicer;
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provided, however, that this provision shall not protect the Servicer against
any liability that would otherwise be imposed by reason of bad faith, willful
misconduct in the performance of duties, or by reason of negligence in the
performance of its duties under this Agreement or any other Basic Document to
which it is a party. The Servicer and any director, officer or employee or agent
of the Servicer may rely in good faith on any advice of counsel, Opinion of
Counsel or on any Officer's Certificate of the Seller or certificate of auditors
or other document of any kind believed to be genuine and to have been signed by
the proper party in respect of any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute, or defend any legal action that shall
not be incidental to its duties to service the Dealer Loans and the related
Contracts in accordance with this Agreement, and that in its opinion may involve
it in any expense or liability; provided, however, that the Servicer may
undertake any reasonable action that it may deem necessary or desirable in
respect of this Agreement and the rights and duties of the parties to this
Agreement and the interests of the Class A Noteholders and the
Certificateholders under this Agreement. In such event, the legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs, and liabilities of the Servicer.
SECTION 7.05. Delegation of Duties.
The Servicer may at any time perform specific duties or all the duties
enumerated herein as servicer under this Agreement through a sub-contractor
acceptable to the Class A Insurer; provided, that no such delegation or
subcontracting shall relieve the Servicer of its responsibilities with respect
to such duties as to which the Servicer shall remain primarily responsible with
respect thereto.
SECTION 7.06. Certification Upon Satisfaction.
Upon the satisfaction and discharge of the Indenture pursuant to
Section 4.1 thereof, the Servicer shall deliver to the Owner Trustee a written
certification of a Responsible Officer stating, to the best knowledge of such
Responsible Officer, that (a) no claims remain against the Issuer, or (b) the
only pending or threatened claims known to such Responsible Officer (including
contingent and unliquidated claims) are those listed on a schedule to such
certification.
ARTICLE VIII
DEFAULT
SECTION 8.01. Servicer Defaults.
If any one of the following events (each, a "Servicer Default") shall occur:
(i) any failure by the Servicer: (x) to deposit to the Collection
Account (A) any amount required to be deposited therein by the Servicer
(other than any such failure resulting from an administrative or technical
error of the Servicer in the amount so deposited); or (B) within one (1)
Business Day after the Servicer becomes aware that, as a result of an
administrative or technical error of the Servicer, any amount
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previously deposited by the Servicer to the Collection Account was less
than the amount required to be deposited therein by the Servicer, the
amount of such shortfall; or (y) to deliver to the Trust Collateral Agent
or the Class A Insurer the Servicer's Certificate on the related
Determination Date;
(ii) failure on the part of the Servicer duly to observe or to
perform in any material respect any other covenants or agreements of the
Servicer set forth in any Basic Document, or any representation or warranty
of the Servicer made in this Agreement, any other Basic Document or in any
certificate or other writing delivered pursuant to any Basic Document
proving to have been incorrect in any material respect as of the time when
the same shall have been made, which default, if capable of cure, shall
continue unremedied for a period of 30 days (or a longer period, not in
excess of 60 days, as may be reasonably necessary to remedy such default,
if the default is capable of remedy within 60 days or less and the Servicer
delivers an Officer's Certificate to the Indenture Trustee to the effect
that it has commenced, or will promptly commence and diligently pursue, all
reasonable efforts to remedy the default) after (x) there shall have been
given written notice of such failure, requiring the same to be remedied,
(1) to the Servicer, by the Trust Collateral Agent, or (2) to the Servicer
by the Class A Insurer, or if a Class A Insurer Default has occurred and is
continuing, by the Trust Collateral Agent at the direction of Class A
Noteholders representing at least 25% or the Outstanding Class A Note
Balance; or (y) discovery of such failure by an officer of the Servicer; or
(iii) the entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a conservator, receiver, or liquidator for the Servicer or
any of its subsidiaries in any insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings, or for the
winding up or liquidation of its respective affairs, and the continuance of
any such decree or order unstayed and in effect for a period of 60
consecutive days or the entry of any decree or order for relief in respect
of the Servicer or any of its subsidiaries under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debt,
or similar law, whether now or hereafter in effect, which decree or order
for relief continues unstayed and in effect for a period of 60 consecutive
days; or
(iv) the consent by the Servicer or any of its subsidiaries to
the appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and liabilities, or
similar proceedings of or relating to the Servicer or any of its
subsidiaries or relating to substantially all of its property; or the
admission by the Servicer or any of its subsidiaries in writing of its
inability to pay its debts generally as they become due, the filing by the
Servicer or any of its subsidiaries of a petition to take advantage of any
applicable insolvency or reorganization statute, the making by the Servicer
or any of its subsidiaries of an assignment for the benefit of its
creditors, or the voluntarily suspension by the Servicer or any of its
subsidiaries of payment of its obligations;
(v) the Servicer breaches any Financial Covenant; or
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(vi) the Originator or Servicer, if Credit Acceptance is the
Servicer, fails to pay when due Purchase Amounts in excess of $100,000;
then, and in each and every case, the Trust Collateral Agent, if so requested by
the Class A Insurer, or if a Class A Insurer Default has occurred and is
continuing, the Majority Noteholders by notice then given in writing to the
Servicer, the Backup Servicer, the Trust Collateral Agent may: (A) terminate all
of the rights and obligations of the Servicer under this Agreement or (B) renew
the term of the Servicer pursuant to Section 4.01(a) hereof. Upon sending or
receiving any such notice, the Trust Collateral Agent shall promptly send a copy
thereof to the Indenture Trustee, the Owner Trustee, the Rating Agencies, the
Class A Insurer and to each Class A Noteholder. Within 30 days after the receipt
by the Backup Servicer of such written notice (if such notices relates to
terminating the Servicer) and subject to Section 8.02(a)), all authority and
power of the Servicer under this Agreement, whether with respect to the Class A
Notes or the Dealer Loans or Contracts or otherwise, shall, without further
action, pass to and be vested in the Backup Servicer or such successor Servicer
as may be appointed under Section 8.02; and, without limitation, the Backup
Servicer is hereby authorized and empowered to execute and deliver, on behalf of
the predecessor servicer, as attorney-in-fact or otherwise, any and all
documents and other instruments, and to do or accomplish all other acts or
things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Dealer
Loans and the Contracts and related documents, or otherwise.
The predecessor Servicer shall cooperate with the successor Servicer
and the Backup Servicer in effecting the termination of the responsibilities and
rights of the predecessor Servicer under this Agreement, including the transfer
to the Backup Servicer or the successor Servicer for administration by it of all
cash amounts that shall at the time be held by the predecessor servicer for
deposit, or shall thereafter be received with respect to a Dealer Loan or
related Contract, and the related accounts and records maintained by the
Servicer. All Transition Expenses shall be paid by the predecessor servicer upon
presentation of reasonable documentation of such costs and expenses. If such
Transition Expenses are not paid to the successor Servicer by the predecessor
Servicer, such Transition Expenses shall be paid under Section 5.08(a)(i)
hereof. In addition, the Class A Insurer shall have the option to pay the
Transition Expenses. If the Class A Insurer elects to pay any such Transition
Expenses, the amount paid by the Class A Insurer shall constitute part of the
Reimbursement Obligations owed to it.
SECTION 8.02. Appointment of Successor.
(a) Upon the Servicer's receipt of notice of termination pursuant to
Section 8.01, the expiration and non-renewal of the Servicer's term pursuant to
Section 4.01(a) or the Servicer's resignation in accordance with the terms of
this Section 4.14, the predecessor servicer shall continue to perform its
functions as Servicer under this Agreement, in the case of termination, only
until (i) the date of such expiration, in the case of a termination pursuant to
Section 4.01(a), (ii) the date specified in such termination notice or, if no
such date is specified in a notice of termination, until receipt of such notice
and, (iii) in the case of resignation, until the later of (x) the date 30 days
from the delivery to the Backup Servicer and the Trust Collateral Agent and the
Indenture Trustee of written notice of such resignation (or the date of written
confirmation of such notice prior to the expiration of the 45 days) in
accordance with the terms
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of this Agreement and (y) the date upon which the predecessor servicer shall
become unable to act as Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the Servicer's resignation or
termination hereunder, and, so long as a Class A Insurer Default is not
continuing, if the Class A Insurer so directs, the Backup Servicer shall be the
successor in all respects to the Servicer in its capacity as servicer under this
Agreement and the transactions set forth or provided for herein and shall be
subject to the responsibilities, duties and liabilities relating thereto placed
on the Servicer by the terms and provisions hereof, as modified or limited
hereby or by the Backup Servicing Agreement; provided, however, that the Backup
Servicer shall not be liable for any actions of any Servicer prior to such
succession or for any breach by the Servicer of any of its representations and
warranties contained in this Agreement or in any related document or agreement.
Notwithstanding the above, if the Backup Servicer is legally unable to so act
or, so long as a Class A Insurer Default is not continuing, the Class A Insurer
otherwise directs, the Class A Insurer may appoint a successor Servicer,
otherwise, the Trust Collateral Agent shall appoint (after soliciting bids from
potential servicers), or petition a court of competent jurisdiction to appoint,
a Servicer as the successor Servicer hereunder, in the assumption of all or any
part of the responsibilities, duties or liabilities of the outgoing Servicer
hereunder. In the event that ▇▇▇▇▇ Fargo Bank, National Association, as Backup
Servicer, is legally unable to act as Servicer under this Agreement and another
entity is appointed as successor Servicer under this Section 8.02(a), ▇▇▇▇▇
Fargo Bank, National Association shall have no further obligation to perform the
obligations of Servicer or Backup Servicer under this Agreement. Pending
appointment of a successor to the outgoing Servicer hereunder, if the Backup
Servicer is prohibited by law from so acting (as evidenced by an Opinion of
Counsel to the Trust Collateral Agent and the Class A Insurer) or, so long as a
Class A Insurer Default is not continuing, the Class A Insurer otherwise
directs, the outgoing Servicer shall continue to act as Servicer hereunder until
a successor Servicer which, so long as a Class A Insurer Default is not
continuing, shall be acceptable to the Class A Insurer is appointed and assumes
the obligations as successor Servicer. In the event the Backup Servicer assumes
the responsibilities of the Servicer pursuant to this Section 8.02, the Backup
Servicer will make reasonable efforts consistent with Applicable Law to become
licensed, qualified and in good standing under the laws which require licensing
or qualification, in order to perform its obligations as Servicer hereunder or,
alternatively, shall retain an agent who is so licensed, qualified and in good
standing.
(b) Upon appointment, the Backup Servicer or the successor Servicer
shall be the successor in all respects to the predecessor servicer and shall be
subject to the responsibilities, duties, and liabilities arising thereafter
relating thereto placed on the predecessor servicer, (subject to the limitations
and modifications thereto set forth herein or in the Backup Servicing Agreement)
and shall be entitled to (to the extent arranged in accordance with the
following paragraph) the Servicing Fee, Servicer Expenses, Reliening Expenses,
Repossession Expenses and all of the rights granted to the predecessor servicer,
by the terms and provisions of this Agreement, provided that neither the Backup
Servicer nor the successor Servicer shall be liable for the acts or omissions of
any predecessor servicer. The Backup Servicer or any successor Servicer shall
provide Credit Acceptance with copies of all documents and information
reasonably necessary for Credit Acceptance to perform its obligations under
Section 4.17 of this Agreement.
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(c) In connection with such appointment, the Trust Collateral Agent
may make such arrangements for the compensation of such successor Servicer
(including Transition Expenses) out of payments on Dealer Loans and related
Contracts as it, the Class A Insurer (so long as a Class A Insurer Default is
not continuing) and such successor Servicer shall agree; provided, however, that
no such compensation (excluding Transition Expenses, Repossession Expenses and
Reliening Expenses) shall be in excess of the Servicing Fee. The Backup
Servicer, the Trust Collateral Agent and any such successor Servicer shall take
such action, consistent with this Agreement, as shall be necessary to effectuate
any such succession.
SECTION 8.03. Notification to Class A Noteholders and
Certificateholders.
Upon any termination of, or appointment of a successor to, the
Servicer pursuant to this Article VIII, the Trust Collateral Agent shall
promptly upon its receipt of notice thereof give prompt written notice thereof
to Class A Noteholders and the Certificateholders at their respective addresses
appearing in the Note Register and the Certificate Register, to the Owner
Trustee and to each of the Rating Agencies then rating the Class A Notes and the
Class A Insurer.
SECTION 8.04. Waiver of Past Defaults.
So long as a Class A Insurer Default is not continuing, the Class A
Insurer, may, on behalf of all Class A Noteholders, waive any or all default(s)
by the Servicer or the Seller in the performance of its obligations hereunder
and its consequences, except a default in making any required deposits to or
payments from a Trust Account in accordance with this Agreement. Upon any such
waiver of a past default, such default shall cease to exist, and any Servicer
Default arising therefrom shall be deemed to have been remedied for every
purpose of this Agreement. Notwithstanding anything herein to the contrary, the
Class A Insurer shall have the right to waive the payment of any Purchase Amount
required hereunder.
ARTICLE IX
THE TRUST COLLATERAL AGENT
SECTION 9.01. Duties of the Trust Collateral Agent.
(a) The Issuer hereby appoints ▇▇▇▇▇ Fargo Bank, National Association,
as the Trust Collateral Agent, and ▇▇▇▇▇ Fargo Bank, National Association hereby
accepts such appointment.
(b) (i) the Trust Collateral Agent undertakes to perform such duties
and only such duties as are specifically set forth in this Agreement and the
Basic Documents and no implied covenants or obligations shall be read into this
Sale and Servicing Agreement or the Basic Documents against the Trust Collateral
Agent; and
(ii) in the absence of bad faith or willful misconduct on its
part, the Trust Collateral Agent may conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trust Collateral Agent and
conforming to the requirements of this Agreement and the
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Basic Documents; however, the Trust Collateral Agent shall examine the
certificates and opinions to determine whether or not they conform on their
face to the requirements of this Agreement and the Basic Documents.
(c) The Trust Collateral Agent may not be relieved from liability for
its own negligent action, its own negligent failure to act or its own bad faith
or willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section; and
(ii) the Trust Collateral Agent shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the Trust
Collateral Agent unless it is proved that the Trust Collateral Agent was
negligent in ascertaining the pertinent facts.
(d) Money held in trust by the Trust Collateral Agent need not be
segregated from other funds except to the extent required by law or the terms of
this Agreement.
(e) No provision of this Agreement shall require the Trust Collateral
Agent to expend or risk its own funds or otherwise incur liability (financial or
otherwise) in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers, if it shall have reasonable grounds to believe
that repayment of such funds or indemnity satisfactory to it against such risk
or liability reasonably satisfactory to it is not reasonably assured to it.
(f) Every provision of this Agreement relating to the conduct or
affecting the liability of or affording protection to the Trust Collateral Agent
shall be subject to the provisions of this Section.
(g) Without limiting the generality of this Section, the Trust
Collateral Agent shall have no duty (A) to see to any recording, filing or
depositing of this Agreement or any agreement referred to herein or any
financing statement or continuation statement evidencing a security interest in
the Contracts which secure the Dealer Loans or the Financed Vehicles, or to see
to the maintenance of any such recording or filing or depositing or to any
rerecording, refiling or redepositing of any thereof, (B) to see to any
insurance on the Financed Vehicles or Obligors or to effect or maintain any such
insurance, (C) to see to the payment or discharge of any tax, assessment or
other governmental charge or any Lien or encumbrance of any kind owing with
respect to, assessed or levied against any part of the Trust, (D) to confirm or
verify the contents of any reports or certificates delivered to the Trust
Collateral Agent pursuant to this Agreement believed by the Trust Collateral
Agent to be genuine and to have been signed or presented by the proper party or
parties, or (E) to inspect the Contracts at any time or ascertain or inquire as
to the performance or observance of any of the Issuer's, the Seller's or the
Servicer's representations, warranties or covenants or the Servicer's duties and
obligations as Servicer and as custodian of the Dealer Agreements, the original
Certificates of Title relating to the Financed Vehicles and the Contracts under
this Agreement.
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(h) In no event shall ▇▇▇▇▇ Fargo Bank, National Association, in any
of its capacities hereunder, be deemed to have assumed any duties of the Owner
Trustee under the Delaware Statutory Trust Act, common law, or the Trust
Agreement.
(i) ▇▇▇▇▇ Fargo Bank, National Association by its execution hereof
accepts its appointment as Trust Collateral Agent under the Indenture and this
Agreement. The Trust Collateral Agent shall act upon and in compliance with the
written instructions of the Indenture Trustee delivered pursuant to the
Indenture promptly following receipt of such written instructions; provided that
the Trust Collateral Agent shall not act in accordance with any instructions:
(i) which are not authorized by, or in violation of the provisions of, the
Indenture or this Agreement; (ii) which are in violation of any applicable law,
rule or regulation; or (iii) for which the Trust Collateral Agent has not
received indemnity reasonably satisfactory to it. Receipt of such instructions
shall not be a condition to the exercise by the Trust Collateral Agent of its
express duties hereunder, except where the Indenture or this Agreement provides
that the Trust Collateral Agent is permitted to act only following and in
accordance with such instructions.
SECTION 9.02. Rights of the Trust Collateral Agent.
(a) Before the Trust Collateral Agent acts or refrains from acting, it
may require an Officer's Certificate or an Opinion of Counsel. The Trust
Collateral Agent shall not be liable for any action it takes or omits to take in
good faith in reliance on an Officer's Certificate or Opinion of Counsel.
(b) The Trust Collateral Agent may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys or a custodian or nominee and shall not be responsible for
the misconduct or negligence of any agent, attorney, custodian or nominee
appointed with due care.
(c) The Trust Collateral Agent shall not be liable for any action it
takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that the Trust Collateral
Agent's conduct does not constitute willful misconduct, negligence or bad faith.
(d) The Trust Collateral Agent may consult with counsel, and the
written advice or opinion of counsel with respect to legal matters relating to
this Sale and Servicing Agreement and the Class A Notes or Certificates shall be
full and complete authorization and protection from liability in respect to any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the written advice or opinion of such counsel.
(e) The Trust Collateral Agent shall be under no obligation to
exercise any of the rights and powers vested in it by this Agreement or the
other Basic Documents, or to institute, conduct or defend any litigation under
this Agreement or in relation to this Sale and Servicing Agreement, at the
request, order or direction of any of the Holders of Notes or Certificates or
the instructing party, as the case may be, pursuant to the provisions of this
Agreement, unless it shall have been offered to the Trust Collateral Agent
security or indemnity
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reasonably satisfactory to it against the costs, expenses and liabilities that
may be incurred therein or thereby.
(f) The Trust Collateral Agent shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, bond or other paper or document, unless requested in writing to do so
by the Majority Noteholders or the Class A Insurer (so long as a Class A Insurer
Default is not continuing); provided, however, that if the payment within a
reasonable time to the Trust Collateral Agent of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trust Collateral Agent, not reasonably assured to the
Trust Collateral Agent by the security afforded to it by the terms of this
Agreement, the Trust Collateral Agent may require indemnity reasonably
satisfactory to it against such cost, expense or liability as a condition to so
proceeding; the reasonable expense of every such examination shall be paid by
the requesting Holders or the instructing party, as the case may be, or, if paid
by the Trust Collateral Agent, shall be reimbursed by the requesting Holders
upon demand.
(g) Delivery of any reports, information and documents to the Trust
Collateral Agent provided for herein is for informational purposes only (unless
otherwise expressly stated herein) and the Trust Collateral Agent's receipt of
such shall not constitute constructive knowledge of any information contained
therein or determinable from information contained therein, including the
Servicer's, Seller's or Issuer's compliance with any of its representations,
warranties or covenants hereunder (as to which the Trust Collateral Agent is
entitled to rely exclusively on Officers' Certificates).
(h) The Trust Collateral Agent shall not be deemed to have knowledge
of a Servicer Default or an Early Amortization Event unless a Responsible
Officer of the Trust Collateral Agent has actual knowledge or has received
written notice thereof.
(i) In no event shall the Indenture Trustee be liable for any
indirect, or consequential, punitive or special damages, regardless of the form
of action and whether or not any such damages were foreseeable or contemplated.
(j) The Trust Collateral Agent may conclusively rely and shall be
fully protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, consent,
order, approval or other paper or document believed by it to be genuine and to
have been signed or presented by the property party or parties.
(k) In no event shall the Trust Collateral Agent be liable for any act
or omission on the part of the Issuer or the Servicer or any other Person. The
Trust Collateral Agent shall not be responsible for monitoring or supervising
the Issuer or the Servicer.
SECTION 9.03. Individual Rights of Trust Collateral Agent.
The Trust Collateral Agent in its individual or any other capacity may
become the owner or pledgee of Notes and may otherwise deal with the Issuer or
its Affiliates with the same rights it would have if it were not Trust
Collateral Agent.
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The Trust Collateral Agent and its Affiliates are permitted to receive
additional compensation that could be deemed to be in the Trust Collateral
Agent's economic self-interest for (i) serving as investment adviser,
administrator, shareholder servicing agent, custodian or sub-custodian with
respect to certain of the Eligible Investments, (ii) using Affiliates to effect
transactions in certain Eligible Investments and (iii) effecting transactions in
certain Eligible Investments. The Trust Collateral Agent does not guarantee the
performance of any Eligible Investments.
In order to comply with the laws, rules, regulations and executive
orders in effect from time to time applicable to banking institutions, including
those relating to the funding of terrorist activities and money laundering, the
Trust Collateral Agent is required to obtain, verify and record certain
information relating to individuals and entities which maintain a business
relationship with the Trust Collateral Agent. Accordingly, each of the parties
hereto agree to provide the Trust Collateral Agent upon its request from time to
time such identifying information and documentation as may be available for such
party in order to enable the Trust Collateral Agent to comply with such laws,
rules, regulations and executive orders in effect from time to time applicable
to banking institutions.
SECTION 9.04. Reports by Trust Collateral Agent to Holders.
The Trust Collateral Agent shall on behalf of the Issuer deliver to
each Class A Noteholder such information as may be reasonably required to enable
such Holder to prepare its Federal and state income tax returns.
SECTION 9.05. Compensation.
(a) The Issuer shall pay to the Trust Collateral Agent from time to
time compensation provided under this Agreement, as provided in a separate fee
letter, and all reasonable out-of-pocket expenses incurred or made by it,
including costs of collection, in addition to the compensation for its services,
except any such expense as may be attributable to its willful misconduct,
negligence or bad faith. Such compensation and expenses shall be paid in
accordance with Section 5.08(a) hereof. Such expenses shall include securities
transaction charges relating to the investment of funds on deposit in the Trust
Accounts and the reasonable compensation and reasonable expenses, disbursements
and advances of the Trust Collateral Agent's counsel and of all persons not
regularly in its employ; provided, however, that the securities transaction
charges referred to above shall, in the case of certain Eligible Investments
selected by the Servicer, be waived for a particular investment in the event
that any amounts are received by the Trust Collateral Agent from a financial
institution in connection with the purchase of such Eligible Investments.
(b) [Reserved.]
(c) The Issuer's and the Servicer's payment obligations to the Trust
Collateral Agent pursuant to this Section shall survive the discharge of this
Agreement and any resignation or removal of the Trust Collateral Agent. When the
Trust Collateral Agent incurs expenses after the occurrence of an Indenture
Event of Default specified in Section 5.1(iv) or (v) of the Indenture with
respect to the Issuer, the expenses are intended to constitute expenses of
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administration under Title 11 of the United States Code or any other applicable
Federal or state bankruptcy, insolvency or similar law. Notwithstanding anything
else set forth in this Agreement or the Basic Documents, the Trust Collateral
Agent agrees that the obligations of the Issuer or the Seller (but not the
Servicer) to the Trust Collateral Agent hereunder and under the Basic Documents
shall not be recourse to the assets of the Issuer, the Seller or any Class A
Noteholder.
SECTION 9.06. Eligibility.
The Trust Collateral Agent under this Agreement shall at all times be
a corporation or banking association having an office in the same state as the
location of the Corporate Trust Office as specified in this Agreement;
acceptable to the Class A Insurer, so long as a Class A Insurer Default is not
continuing; organized and doing business under the laws of such state or the
United States of America; authorized under such laws to exercise corporate trust
powers; having a combined capital and surplus of at least $100,000,000; having
long-term unsecured debt obligations rated at least "Baa2" by Moody's and "BBB-"
by Standard and Poor's; and subject to supervision or examination by federal or
state authorities. If such corporation shall publish reports of condition at
least annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then for the purpose of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. In case at any time the Trust Collateral Agent shall cease to be
eligible in accordance with the provisions of this Section, the Trust Collateral
Agent shall resign immediately, provided that such resignation shall not be
effective until a successor Trust Collateral Agent accepts appointment in
accordance with Section 9.10(d) hereof.
SECTION 9.07. Trust Collateral Agent's Disclaimer.
The Trust Collateral Agent shall not be responsible for and make no
representation as to the validity, sufficiency or adequacy of this Agreement,
the Trust Property or the Securities, shall not be accountable for the Issuer's
use of the proceeds from the Securities, and shall not be responsible for any
statement of the Issuer in this Agreement or in any document issued in
connection with the sale of the Securities or in the Securities.
SECTION 9.08. Limitation on Liability.
Neither the Trust Collateral Agent nor any of its directors, officers
or employees shall be liable for any action taken or omitted to be taken by it
or them hereunder, or in connection herewith, except that the Trust Collateral
Agent shall be liable for its negligence, bad faith or willful misconduct; nor
shall the Trust Collateral Agent be responsible for the validity, effectiveness,
value, sufficiency or enforceability against the Issuer of this Agreement or any
of the Trust Property (or any part thereof). Notwithstanding any term or
provision of this Agreement, the Trust Collateral Agent shall incur no liability
to the Issuer for any action taken or omitted by the Trust Collateral Agent in
connection with the Trust Property, except for the negligence, bad faith or
willful misconduct on the part of the Trust Collateral Agent, and, further,
shall incur no liability to the Issuer except for negligence, bad faith or
willful misconduct in carrying out its duties to the Issuer. Subject to Section
9.09, the Trust Collateral Agent shall be
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protected and shall incur no liability to any such party in relying upon the
accuracy, acting in reliance upon the contents, and assuming the genuineness of
any notice, demand, certificate, signature, instrument or other document
reasonably believed by the Trust Collateral Agent to be genuine and to have been
duly executed by the appropriate signatory (absent actual knowledge of a
Responsible Officer of the Trust Collateral Agent to the contrary), and the
Trust Collateral Agent shall not be required to make any independent
investigation or inquiry with respect thereto. The Trust Collateral Agent shall
at all times be free independently to establish to its reasonable satisfaction,
but shall have no duty to independently verify, the existence or nonexistence of
facts that are a condition to the exercise or enforcement of any right or remedy
hereunder or under any of the Basic Documents. The Trust Collateral Agent may
consult with counsel, and shall not be liable for any action taken or omitted to
be taken by it hereunder in good faith and in accordance with the written advice
of such counsel.
SECTION 9.09. Reliance Upon Documents.
In the absence of bad faith or willful misconduct on its part, the
Trust Collateral Agent shall be entitled to conclusively rely on any
communication, instrument, paper or other document reasonably believed by it to
be genuine and correct and to have been signed or sent by the proper Person or
Persons and shall have no liability in acting, or omitting to act, where such
action or omission to act is in reasonable reliance upon any statement or
opinion contained in any such document or instrument.
SECTION 9.10. Successor Trust Collateral Agent.
(a) Merger. Any Person into which the Trust Collateral Agent may be
converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its trust business and assets as a whole or substantially as a
whole, or any Person resulting from any such conversion, merger, consolidation,
sale or transfer to which the Trust Collateral Agent is a party, shall (provided
it is otherwise qualified to serve as the Trust Collateral Agent hereunder) be
and become a successor Trust Collateral Agent hereunder and be vested with all
of the trusts, powers, discretions, immunities, privileges and other matters as
was its predecessor without the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. The Trust Collateral Agent
shall give notice to the Class A Insurer and the Rating Agencies of any such
transaction.
(b) Resignation. The Trust Collateral Agent and any successor Trust
Collateral Agent may resign at any time by giving sixty days prior written
notice to the Issuer, the Rating Agencies and the Class A Insurer; provided,
that such resignation shall not be effective until a successor Trust Collateral
Agent is appointed and accepts appointment in accordance with clause (d) below.
(c) Removal.
(i) The Issuer, prior to the Class A Termination Date with the
prior written consent of the Class A Insurer, may remove the Trust
Collateral Agent by written notice if:
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(A) a court having jurisdiction in the premises in respect
of the Trust Collateral Agent in an involuntary case or proceeding
under federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, shall have entered a decree or order
granting relief or appointing a receiver, liquidator, assignee,
custodian, trustee, conservator, sequestrator (or similar official)
for the Trust Collateral Agent or for any substantial part of the
Trust Collateral Agent's property, or ordering the winding-up or
liquidation of the Trust Collateral Agent's affairs;
(B) an involuntary case under the federal bankruptcy laws,
as now or hereafter in effect, or another present or future federal or
state bankruptcy, insolvency or similar law is commenced with respect
to the Trust Collateral Agent and such case is not dismissed within 60
days;
(C) the Trust Collateral Agent commences a voluntary case
under any federal or state banking or bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law, or consents to the
appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, conservator, sequestrator (or other
similar official) for the Trust Collateral Agent or for any
substantial part of the Trust Collateral Agent's property, or makes
any assignment for the benefit of creditors or fails generally to pay
its debts as such debts become due or takes any corporate action in
furtherance of any of the foregoing;
(D) failure to comply with any material covenant hereunder;
or
(E) the Trust Collateral Agent otherwise becomes legally
incapable of acting.
(ii) The Class A Insurer may remove the Trust Collateral Agent
for any reason by 30 days' prior written notice.
(iii) If the Trust Collateral Agent resigns or is removed or if a
vacancy exists in the office of Trust Collateral Agent for any reason (the
Trust Collateral Agent in such event being referred to herein as the
retiring Trust Collateral Agent), prior to the Class A Termination Date the
Class A Insurer may appoint a successor Trust Collateral Agent and if it
fails to, the Issuer shall promptly appoint a successor Trust Collateral
Agent acceptable to the Class A Insurer. After the Class A Termination
Date, the Issuer may appoint a successor Trust Collateral Agent without the
consent of the Class A Insurer.
A successor Trust Collateral Agent shall deliver a written acceptance of
its appointment to the retiring Trust Collateral Agent and to the Issuer.
Thereupon the resignation or removal of the retiring Trust Collateral Agent
shall become effective, and the successor Trust Collateral Agent shall have all
the rights, powers and duties of the retiring Trust Collateral Agent under this
Indenture subject to satisfaction of the Rating Agency Condition. The successor
Trust Collateral
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Agent shall mail a notice of its succession to Class A Noteholders, the Class A
Insurer and the Rating Agencies. The retiring Trust Collateral Agent shall
promptly transfer all property held by it as Trust Collateral Agent to the
successor Trust Collateral Agent.
If a successor Trust Collateral Agent that is, prior to the Class A
Termination Date, acceptable to the Class A Insurer does not take office within
60 days after the retiring Trust Collateral Agent resigns or is removed, the
retiring Trust Collateral Agent, or the Class A Insurer may petition any court
of competent jurisdiction for the appointment of a successor Trust Collateral
Agent that is meets the eligibility requirements set forth in Section 9.06
hereof.
If the Trust Collateral Agent fails to comply with Section 9.12, any
Noteholder, prior to the Class A Termination Date with the prior written consent
of the Class A Insurer, may petition any court of competent jurisdiction for the
removal of the Trust Collateral Agent and the appointment of a successor Trust
Collateral Agent acceptable to the Class A Insurer.
Any resignation or removal of the Trust Collateral Agent and appointment of
a successor Trust Collateral Agent pursuant to any of the provisions of this
Section shall not become effective until acceptance of appointment by the
successor Trust Collateral Agent acceptable to the Class A Insurer pursuant to
this Section 9.10(c) and payment of all fees and expenses owed to the outgoing
Trust Collateral Agent by the Servicer and the Issuer.
Notwithstanding the replacement of the Trust Collateral Agent pursuant to
this Section, the Issuer's and the Servicer's obligations under Section 9.05
shall continue for the benefit of the retiring Trust Collateral Agent.
(d) Acceptance by Successor. If the Trust Collateral Agent has
resigned or has been removed pursuant to this Section 9.10, so long as a Class A
Insurer Default is not continuing, the Class A Insurer has the right to appoint
a successor Trust Collateral Agent and if it fails to, or if a Class A Insurer
Default has occurred and is continuing, the Owner Trustee shall have the sole
right to appoint each successor Trust Collateral Agent that meets the
qualifications required hereunder. Every temporary or permanent successor Trust
Collateral Agent appointed hereunder shall execute, acknowledge and deliver to
its predecessor and to the Owner Trustee, each Class A Noteholder, each
Certificateholder, the Rating Agencies, the Class A Insurer and the Issuer an
instrument in writing accepting such appointment hereunder and the relevant
predecessor shall execute, acknowledge and deliver such other documents and
instruments as will effectuate the delivery of all Collateral to the successor
Trust Collateral Agent, whereupon such successor, without any further act, deed
or conveyance, shall become fully vested with all the estates, properties,
rights, powers, duties and obligations of its predecessor. Such predecessor
shall, nevertheless, on the written request of the Issuer, execute and deliver
an instrument transferring to such successor all the estates, properties, rights
and powers of such predecessor hereunder. In the event that any instrument in
writing from the Issuer is reasonably required by a successor Trust Collateral
Agent to more fully and certainly vest in such successor the estates,
properties, rights, powers, duties and obligations vested or intended to be
vested hereunder in the Trust Collateral Agent, any and all such written
instruments shall, at the request of the temporary or permanent successor Trust
Collateral Agent, be forthwith executed, acknowledged and delivered by the Owner
Trustee or the Issuer, as the case may be. The designation of any successor
Trust Collateral Agent and the instrument or instruments removing
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any Trust Collateral Agent and appointing a successor hereunder, together with
all other instruments provided for herein, shall be maintained with the records
relating to the Trust Property and, to the extent required by applicable law,
filed or recorded by the successor Trust Collateral Agent in each place where
such filing or recording is necessary to effect the transfer of the Trust
Property to the successor Trust Collateral Agent or to protect or continue the
perfection of the security interests granted hereunder.
If no successor Trust Collateral Agent shall have been appointed and
accepted the appointment within sixty (60) days after the giving of notice of
resignation, the resigning Trust Collateral Agent may petition any court of
competent jurisdiction for the appointment of a successor Trust Collateral Agent
that meets the qualifications required hereunder.
SECTION 9.11. Representations and Warranties of the Trust Collateral
Agent.
The Trust Collateral Agent represents and warrants to the Issuer, the
Class A Insurer, and to the Class A Noteholders as follows:
(i) The Trust Collateral Agent is a national banking association,
duly organized and validly existing under the laws of the United States and
is authorized to conduct and engage in a banking and trust business under
such laws.
(ii) The Trust Collateral Agent has full corporate power,
authority, and legal right to execute, deliver, and perform this Agreement
and the other Basic Documents to which it is a party, and has taken all
necessary action to authorize the execution, delivery, and performance, by
it of this Agreement and the other Basic Documents to which it is a party.
(iii) This Agreement and the other Basic Documents to which it is
a party have been duly executed and delivered by the Trust Collateral
Agent.
(iv) This Agreement and the other Basic Documents to which it is
a party are the legal, valid and binding obligations of the Trust
Collateral Agent enforceable in accordance with their respective terms,
subject to the effects of bankruptcy, insolvency, reorganization, or other
similar laws affecting the enforcement of creditors' rights generally and
to general principles of equity.
SECTION 9.12. Waiver of Setoffs.
Except with respect to the Certificate Distribution Account, the Trust
Collateral Agent hereby expressly waives any and all rights of setoff that the
Trust Collateral Agent may otherwise at any time have under applicable law with
respect to any Trust Account and agrees that amounts in the Trust Accounts shall
at all times be held and applied solely in accordance with the provisions
hereof.
ARTICLE X
TERMINATION
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SECTION 10.01. Optional Purchase.
(a) On the last day of any Collection Period as of which the Class A
Note Balance shall be less than or equal to 15% of the initial Class A Note
Balance, the Servicer shall have the option to reacquire the Trust Property,
other than the Trust Accounts. To exercise such option, the Servicer shall
deposit pursuant to Section 5.04 in the Collection Account an amount equal to
the Purchase Amount for the Dealer Loans, plus the appraised value of any other
property held by the Trust (other than the Trust Accounts), such value to be
determined by an appraiser mutually agreed upon by the Servicer and the Class A
Insurer. Notwithstanding the foregoing, the Servicer shall not exercise such
option unless the Purchase Amount is sufficient to pay the full amount of
principal and interest due and payable on the Class A Notes, and all amounts due
and payable to the Class A Insurer, the Indenture Trustee, the Trust Collateral
Agent, the Backup Servicer and the Owner Trustee under the Basic Documents. Upon
such deposit the Servicer shall succeed to all interests in and to the Trust
(other than the Trust Accounts).
(b) Notice of any termination of the Trust shall be given by the
Servicer to the Owner Trustee, the Indenture Trustee, the Trust Collateral
Agent, the Class A Insurer and the Rating Agencies as soon as practicable after
the Servicer has received notice of the occurrence of an event of termination
under Section 9.1(a) of the Trust Agreement.
(c) Credit Acceptance shall have the right to purchase at any time
1.0% of the Dealer Loans, based upon the Aggregate Outstanding Net Eligible Loan
Balance on the date of purchase for an amount equal to the greater of: (i) the
Purchase Amount related to such Dealer Loans; and (ii) the aggregate fair market
value of such Dealer Loans.
SECTION 10.02. Termination.
Upon the earlier of (a) the payment of the full amount of principal
and interest due and payable on the Class A Notes, and all amounts due and
payable to the Class A Insurer, the Indenture Trustee, the Trust Collateral
Agent, the Backup Servicer and the Owner Trustee under the Basic Documents and
the satisfaction and discharge of the Indenture, and (b) the payment in full or
other liquidation of the last outstanding Dealer Loan and the subsequent
distribution of amounts in respect of such Dealer Loans as provided in the Basic
Documents and the satisfaction and discharge of the Indenture, this Agreement
shall terminate; provided that Section 7.06, Section 9.05(c), Section 11.13 and
the indemnification obligations of the Issuer under Section 6.05 and of the
Servicer under Section 4.09(f) and Section 7.02 shall survive such termination.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.01. Amendment.
This Agreement may be amended by the Seller, the Servicer, and the
Trust Collateral Agent, without the consent of any of the Class A Noteholders
(at the written direction
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of the Issuer), but with the prior written consent of the Class A Insurer, so
long as a Class A Insurer Default is not continuing, to: (i) cure any ambiguity,
to correct or supplement any provisions in this Agreement, or to add any other
provisions with respect to matters or questions arising under this Agreement
that shall not be inconsistent with the provisions of this Agreement; or (ii)
reflect the succession of a successor Servicer; provided, however, that in
connection with any amendment pursuant to clause (i), the action referred to
therein shall not, as evidenced by an Opinion of Counsel, adversely affect in
any material respect the interests of any Class A Noteholder; and provided,
further, that in connection with any amendment pursuant to clause (ii) above,
the Servicer shall deliver to the Trust Collateral Agent, the Class A Insurer
and the Indenture Trustee a letter from each Rating Agency, which then has a
rating on the Class A Notes, to the effect that such amendment will not cause
the then current ratings on the Class A Notes to be qualified, reduced or
withdrawn without regard to the Class A Note Insurance Policy.
This Agreement may also be amended from time to time by the Seller,
the Servicer, and the Trust Collateral Agent (at the written direction of the
Issuer) with the consent of the Class A Insurer or, if a Class A Insurer Default
has occurred and is continuing, the Holders of Class A Notes (which consent of
any Holder of a Class A Note given pursuant to this Section or pursuant to any
other provision of this Agreement shall be conclusive and binding on such Holder
and on all future Holders of such Class A Note and of any Class A Note issued
upon the registration of transfer thereof or in exchange thereof or in lieu
thereof whether or not notation of such consent is made upon the Class A Note),
evidencing not less than a majority of the sum of the then outstanding Class A
Note Balance for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement, or of modifying
in any manner the rights of the Holders of the Class A Notes; provided, however,
that no such amendment shall (a) increase or reduce in any manner the amount of,
or accelerate or delay the timing of, collections of payments on Contracts or
distributions that shall be required to be made on any Class A Note or change
the Class A Note Rate or the Class A Principal Distributable Amount or (b)
reduce the aforesaid percentage required to consent to any such amendment,
without the consent of the Holders of all Class A Notes then outstanding.
Notwithstanding the foregoing, however, no consent of any Class A Noteholder
shall be required in connection with any amendment in order for the
Certificateholders to sell, assign, transfer or otherwise dispose of the excess
interest, provided that the Certificateholders present evidence to the Trust
Collateral Agent and the Class A Insurer that the ratings of the Class A Notes
shall not be reduced or withdrawn as a result without regard to the Class A Note
Insurance Policy.
Prior to the execution of any such amendment or consent, the Servicer
will provide and the Trust Collateral Agent shall distribute written
notification of the substance of such amendment or consent to each Rating Agency
then rating the Class A Notes and the Class A Insurer.
Promptly after the execution of any such amendment or consent, the
Trust Collateral Agent shall furnish a copy of the substance of such amendment
or consent to each Class A Noteholder and each Certificateholder.
It shall not be necessary for the consent of Class A Noteholders
pursuant to this Section to approve the particular form of any proposed
amendment or consent, but it shall be
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sufficient if such consent shall approve the substance thereof. The manner of
obtaining such consents (and any other consents of Class A Noteholders provided
for in this Agreement) and of evidencing the authorization of the execution
thereof by Class A Noteholders shall be subject to such reasonable requirements
as the Trust Collateral Agent may prescribe.
Prior to the execution of any amendment to this Agreement, the Trust
Collateral Agent shall be entitled to receive and conclusively rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
11.02(i)(1). The Trust Collateral Agent may, but shall not be obligated to,
enter into any such amendment which affects the Trust Collateral Agent's own
rights, duties or immunities under this Agreement or otherwise.
SECTION 11.02. Protection of Title to Trust.
(a) The Seller shall file such financing statements and cause to be
filed such continuation statements, all in such manner and in such places as may
be required by law fully to preserve, maintain, and protect the interest of the
Class A Noteholders, the Class A Insurer, the Indenture Trustee and the Trust
Collateral Agent in the Dealer Loans and the related Contracts and in the
proceeds thereof and the sale of accounts and chattel paper. The Seller shall
deliver (or cause to be delivered) to the Trust Collateral Agent and the Class A
Insurer file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(b) None of the Originator, the Seller nor the Servicer shall change
its name, identity, state of incorporation or formation or corporate structure
in any manner that would, could, or might make any financing statement or
continuation statement filed by the Seller in accordance with paragraph (a)
above seriously misleading within the meaning of Section 9-506 or Section 9-507
of the UCC, unless it shall have given the Trust Collateral Agent and the Class
A Insurer at least five days' prior written notice thereof and shall have
promptly filed appropriate amendments to all previously filed financing
statements or continuation statements.
(c) The Seller, the Originator and the Servicer shall give the Trust
Collateral Agent and the Class A Insurer at least 60 days' prior written notice
of any relocation of its principal executive office or change of its state of
incorporation or formation if, as a result of any such change, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new financing
statement and shall promptly file any such amendment. Unless otherwise permitted
by the Class A Insurer, the Servicer shall at all times maintain each office
from which it shall service the Dealer Loans and the related Contracts, and its
principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to each Dealer
Loan and Contract accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Dealer Loan and Contract,
including payments and recoveries made and payments owing (and the nature of
each) and (ii) reconciliation between payments or recoveries on (or with respect
to) each Dealer Loan and Contract and the amounts from time to time deposited in
the Collection Account in respect of such Dealer Loan and Contract.
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(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Dealer Loans and the related
Contracts to the Trust, the Servicer's master computer records (including any
back-up archives) that refer to a Dealer Loan or Contract shall indicate clearly
(including by means of tagging) the interest of the Trust in such Dealer Loan or
Contract and that such Dealer Loan or Contract is owned by the Trust. Indication
of the Trust's ownership of a Dealer Loan or Contract shall be deleted from or
modified on the Servicer's computer systems when, and only when, the Dealer Loan
or Contract shall have been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in, or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender, or other transferee, the
Servicer shall give to such prospective purchaser, lender, or other transferee
computer tapes, records, or print-outs (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any Dealer Loan
or Contract, shall indicate clearly (including by means of tagging) that such
Dealer Loan or Contract has been sold and is owned by the Trust.
(g) The Servicer shall, upon reasonable prior notice, permit the Trust
Collateral Agent, the Class A Insurer and their respective agents at any time
during normal business hours to inspect, audit, and make copies of and abstracts
from the Servicer's records regarding any Dealer Loan or Contract at the office
of the Servicer in a reasonable manner.
(h) Upon request, the Servicer shall furnish to the Trust Collateral
Agent, the Indenture Trustee and the Class A Insurer, within twenty Business
Days, a list of all Dealer Loans and Contracts (by agreement or contract number
and name of Dealer or Obligor) then held as part of the Trust, together with a
reconciliation of such list to the schedule of Dealer Loans, Dealer Agreements
and Contracts attached hereto as Schedule A and to each of the Servicer's
Certificates furnished before such request indicating removal of Dealer Loans or
Contracts from the Trust.
(i) The Seller shall deliver to the Trust Collateral Agent, the
Indenture Trustee and the Class A Insurer:
(1) upon the execution and delivery of this Agreement and of each
amendment thereto, an Opinion of Counsel either (A) stating that, in
the opinion of such counsel, all financing statements (and releases of
financing statements) and continuation statements have been filed that
are necessary fully to preserve and protect the interest of the
Indenture Trustee and the Trust Collateral Agent in the Dealer Loans
and the related Contracts, and reciting the details of the expected
filings thereof or referring to prior Opinions of Counsel in which
such details are given, or (B) stating that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect
such interest; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three
months after the Cut-off Date, an Opinion of Counsel, dated as of a
date during such 90-day period, either (A) stating that, in the
opinion of such Counsel, all financing statements and
92
continuation statements have been filed that are necessary fully to
preserve and protect the interest of the Indenture Trustee and the
Trust Collateral Agent in the Dealer Loans and the related Contracts,
and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) stating
that, in the opinion of such Counsel, no such action shall be
necessary to preserve and protect such interest. Such Opinion of
Counsel shall also describe the filing of any financing statements and
continuation statements that will, in the opinion of such counsel, be
required to preserve and protect the interest of the Indenture Trustee
and the Trust Collateral Agent in the Dealer Loans and the related
Contracts, until the 90th day in the following calendar year.
Each Opinion of Counsel referred to in clause (i)(1) or (i)(2) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following calendar year to preserve perfection of such interest.
(j) For the purpose of facilitating the execution of this Agreement
and for other purposes, this Agreement may be executed in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
all of which counterparts shall constitute but one and the same instrument.
SECTION 11.03. Limitation on Rights of Class A Noteholders.
No Class A Noteholder shall have any right to vote (except as provided
in this Agreement or in the Indenture) or in any manner otherwise control the
operation and management of the Trust, or the obligations of the parties to this
Agreement, nor shall anything in this Agreement set forth, or contained in the
terms of the Class A Notes be construed so as to constitute the Class A
Noteholders from time to time as partners or members of an association; nor
shall any Class A Noteholder be under any liability to any third person by
reason of any action taken pursuant to any provision of this Agreement.
No Class A Noteholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this Agreement,
unless, so long as a Class A Insurer Default is not continuing, the Class A
Insurer has given its prior written consent and such Holder previously shall
have given to the Trust Collateral Agent a written notice of default and of the
continuance thereof, and unless also (i) the default arises from the Seller's or
the Servicer's failure to remit payments when due hereunder, or (ii) the
Majority Noteholders shall have made written request upon the Trust Collateral
Agent to institute such action, suit or proceeding in its own name as Trust
Collateral Agent under this Agreement and such Holder shall have offered to the
Trust Collateral Agent such indemnity as it may reasonably require against the
costs, expenses, and liabilities to be incurred therein or thereby, and the
Trust Collateral Agent, for 30 days after its receipt of such notice, request,
and offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding and during such 30-day period no request or waiver
inconsistent with such written request has been given to the Trust Collateral
Agent pursuant to this Section or Section 8.04; no one or more Holders of Notes
or Certificates shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the Class A
93
Notes or the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right, under this
Agreement except in the manner provided in this Agreement and for the equal,
ratable, and common benefit of all Class A Noteholders and all
Certificateholders. For the protection and enforcement of the provisions of this
Section, each Class A Noteholder, each Certificateholder and the Trust
Collateral Agent shall be entitled to such relief as can be given either at law
or in equity.
In the event the Trust Collateral Agent shall receive conflicting or
inconsistent requests and indemnity from two or more groups of Holders of Class
A Notes, each representing less than the required amount of the Class A Notes,
the Indenture Trustee in its sole discretion may determine what action, if any,
shall be taken, notwithstanding any other provisions of this Agreement.
SECTION 11.04. Governing Law.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (INCLUDING SECTION 1401 OF THE GENERAL OBLIGATIONS LAW OF THE
STATE OF NEW YORK), BUT OTHERWISE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.05. Notices.
All demands, notices, and communications upon or to the Seller, the
Servicer, the Trust Collateral Agent, the Backup Servicer, the Owner Trustee,
the Indenture Trustee, the Class A Insurer or any Rating Agency under this
Agreement shall be in writing, personally delivered, electronically delivered or
mailed by certified mail, return receipt requested, and shall be deemed to have
been duly given upon receipt: (a) in the case of the Seller at the following
address: Attention: Credit Acceptance Funding LLC 2007-1/▇▇▇▇▇ ▇▇▇▇▇▇▇, Silver
Triangle Building, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇;
phone: (▇▇▇) ▇▇▇-▇▇▇▇ (ext. 4217); fax: (▇▇▇) ▇▇▇-▇▇▇▇; (b) in the case of the
Servicer at the following address: Attention: Credit Acceptance
Corporation/▇▇▇▇▇ ▇▇▇▇▇▇▇, Silver Triangle Building, ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇; phone: (▇▇▇) ▇▇▇-▇▇▇▇ (ext. 4217); fax:
(▇▇▇) ▇▇▇-▇▇▇▇; (c) in the case of the Backup Servicer, Trust Collateral Agent
and Indenture Trustee, at MAC #▇▇▇▇-▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Corporate Trust Services - Asset-Backed
Administration, phone: (▇▇▇) ▇▇▇-▇▇▇▇; fax: (▇▇▇) ▇▇▇-▇▇▇▇; (d) in the case of
the Owner Trustee, at: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, phone: (▇▇▇) ▇▇▇-▇▇▇▇; fax: (▇▇▇) ▇▇▇-▇▇▇▇; (e)
in the case of the Class A Insurer, to: XL Capital Assurance Inc., 1221 Avenue
of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Surveillance;
(f) in the case of S&P, via electronic delivery to ▇▇▇▇▇▇▇▇_▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
(or for any information not available in electronic format, send hard copies to:
Standard & Poor's Rating Services, ABS Surveillance Group, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or to such other address as shall be designated by written
notice to the other parties); and (g) in the case of Moody's, via electronic
delivery to ▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇ (or for information not available in
electronic format, send hard copies to: ▇▇▇▇▇'▇ Investors Service, Inc., ABS
Monitoring
94
Department, ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ or to such other
address as shall be designated by written notice to the other parties. Any
notice required or permitted to be mailed to a Class A Noteholder or
Certificateholder, as the case may be shall be given by first class mail,
postage prepaid, at the address of such Holder as shown in the Class A Note or
Certificate Register. Any notice so mailed within the time prescribed in this
Agreement shall be conclusively presumed to have been duly given, whether or not
the Class A Noteholder or the Certificateholder, as the case may be, shall
receive such notice.
SECTION 11.06. Severability of Provisions.
If any one or more of the covenants, agreements, provisions, or terms
of this Agreement shall be for any reason whatsoever held invalid, then such
covenants, agreements, provisions, or terms shall be deemed severable from the
remaining covenants, agreements, provisions, or terms of this Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Agreement or of the Securities or the rights of the Holders thereof or of
the Class A Insurer.
SECTION 11.07. Assignment.
Notwithstanding anything to the contrary contained herein, except as
provided in Section 7.03 and as provided in the provisions of this Agreement
concerning the resignation of the Servicer, this Agreement may not be assigned
by the Seller or the Servicer without the prior written consent of the Trust
Collateral Agent and the Class A Insurer.
SECTION 11.08. Further Assurances.
The Seller and the Servicer agree to do and perform, from time to
time, any and all acts and to execute any and all further instruments required
or reasonably requested by the Trust Collateral Agent or the Class A Insurer
more fully to effect the purposes of this Agreement and the other Basic
Documents, including, without limitation, the execution of any financing
statements or continuation statements relating to the Dealer Loans or the
related Contracts for filing under the provisions of the UCC of any applicable
jurisdiction.
SECTION 11.09. No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of the
Trust Collateral Agent, the Class A Insurer or the Class A Noteholders or the
Certificateholders, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges therein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 11.10. Third-Party Beneficiaries.
This Agreement will inure to the benefit of and be binding upon the
parties hereto, the Indenture Trustee, the Class A Noteholders and the
Certificateholders, respectively, and their respective successors and permitted
assigns. Except as may be otherwise provided in
95
this Agreement, no other person will have any right or obligation hereunder. The
Class A Insurer is an express third party beneficiary of this Agreement.
SECTION 11.11. Actions by Noteholders.
(a) Wherever in this Agreement a provision is made that an action may
be taken or a notice, demand, or instruction given by Noteholders, such action,
notice, demand or instruction may be taken or given by any Class A Noteholder,
unless such provision requires a specific percentage of Noteholders.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Agreement to be taken or given by Class
A Noteholders, may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Class A Noteholders, in person or by
an agent duly appointed in writing.
(c) The fact and date of the execution by any Class A Noteholder or
any Certificateholder of any instrument or writing may be proved in any
reasonable manner which the Trust Collateral Agent deems sufficient.
(d) Any request, demand, authorization, direction, notice, consent,
waiver, or other act by a Class A Noteholder shall bind such Class A Noteholder
and every subsequent holder of such Class A Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trust Collateral Agent, the Seller or
the Servicer in reliance thereon, whether or not notation of such action is made
upon such Class A Note.
(e) The Trust Collateral Agent may require such additional proof of
any matter referred to in this Section as it shall deem necessary.
SECTION 11.12. Corporate Obligation.
No recourse may be taken, directly or indirectly, against any partner,
incorporator, subscriber to the capital stock, stockholder, director, officer or
employee of the Seller or the Servicer with respect to their respective
obligations and indemnities under this Agreement or any certificate or other
writing delivered in connection herewith.
SECTION 11.13. Covenant Not to File a Bankruptcy Petition.
The parties hereto agree that until one year and one day after such
time as the Class A Notes issued under the Indenture are paid in full, they
shall not (i) institute the filing of a bankruptcy petition against the Seller
or the Trust based upon any claim in its favor arising hereunder or under the
Basic Documents; (ii) file a petition or consent to a petition seeking relief on
behalf of the Seller or the Trust under the Bankruptcy Law; or (iii) consent to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
similar official) of the Seller or the Trust or any portion of the property of
the Seller or the Trust. The parties hereto agree that all obligations of the
Issuer and the Seller are non-recourse to the Trust Property except as
specifically set forth in the Basic Documents.
96
SECTION 11.14. Multiple Roles.
The parties expressly acknowledge and consent to ▇▇▇▇▇ Fargo Bank,
National Association acting in the possible dual capacity of successor Servicer
and in the capacity as Indenture Trustee and Trust Collateral Agent. ▇▇▇▇▇ Fargo
Bank, National Association may, in such dual capacity, discharge its separate
functions fully, without hindrance or regard to conflict of interest principles,
duty of loyalty principles or other breach of fiduciary duties to the extent
that any such conflict or breach arises from the performance by ▇▇▇▇▇ Fargo
Bank, National Association of express duties set forth in this Agreement or any
other Basic Document in any of such capacities, all of which defenses, claims or
assertions are hereby expressly waived by the other parties hereto except in the
case of negligence (other than errors in judgment) and willful misconduct by
▇▇▇▇▇ Fargo Bank, National Association.
97
IN WITNESS WHEREOF, the Issuer, Seller, Credit Acceptance, as Servicer
and in its individual capacity, Backup Servicer, the Indenture Trustee and the
Trust Collateral Agent have caused this Sale and Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
CREDIT ACCEPTANCE FUNDING
LLC 2007-1, as Seller
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Treasurer
CREDIT ACCEPTANCE CORPORATION, as
Servicer and in its individual capacity
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Treasurer
CREDIT ACCEPTANCE AUTO DEALER
LOAN TRUST 2007-1, as Issuer
By: U.S. Bank Trust National
Association, not in its individual
capacity but solely as Owner Trustee
on behalf of the Trust
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION,
as Backup Servicer, Trust Collateral
Agent and Indenture Trustee
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
EXHIBIT A
[Reserved.]
EXHIBIT B
Credit Acceptance Auto Dealer Loan Trust 2007-1
Servicer's Certificate
EXHIBIT C
[Reserved]
EXHIBIT D
FORM OF DEALER AGREEMENT
EXHIBIT E
FORM OF
SERVICER'S ACKNOWLEDGMENT
Credit Acceptance Corporation (the "Servicer") under the Sale and
Servicing Agreement, dated as of April 12, 2007 (the "Sale and Servicing
Agreement") among Credit Acceptance Auto Dealer Loan Trust 2007-1, Credit
Acceptance Funding LLC 2007-1, ▇▇▇▇▇ Fargo Bank, National Association and Credit
Acceptance Corporation, as the Servicer and in its individual capacity, pursuant
to which the Servicer holds on behalf of the Class A Noteholders, the Class A
Insurer and the Trust Collateral Agent certain [Dealer Agreements] [Contracts]
as described in the Sale and Servicing Agreement, hereby acknowledges receipt
thereof, listed on Schedule A to said Sale and Servicing Agreement except as
noted in the Exception List attached as Schedule I hereto.
IN WITNESS WHEREOF, the Servicer has caused this acknowledgment to be
executed by its duly authorized officer as of this ____ day of __________, 20__.
CREDIT ACCEPTANCE CORPORATION,
as Servicer
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
EXHIBIT F
FORM OF CONTRACTS
EXHIBIT G
COLLECTION GUIDELINES
EXHIBIT H
CREDIT GUIDELINES
[On file with the Servicer]
SCHEDULE A
to Sale and
Servicing Agreement
Dealer Loans, Dealer Agreements and Contracts
SCHEDULE B
to Sale and
Servicing Agreement
FORECASTED COLLECTIONS
CREDIT
ACCEPTANCE
CUMULATIVE
COLLECTION FORECASTED
PERIOD COLLECTIONS
-------------- --------------
March 2007 $10,678,312.98
April 2007 $10,531,898.99
May 2007 $10,261,436.29
June 2007 $ 9,997,392.61
July 2007 $ 9,702,363.90
August 2007 $ 9,378,380.50
September 2007 $ 9,026,368.78
October 2007 $ 8,661,612.96
November 2007 $ 8,320,867.81
December 2007 $ 7,975,634.97
January 2008 $ 7,638,636.30
February 2008 $ 7,253,658.39
March 2008 $ 6,823,129.84
April 2008 $ 6,420,449.73
May 2008 $ 6,027,161.95
June 2008 $ 5,664,322.66
July 2008 $ 5,338,398.71
August 2008 $ 5,015,562.11
September 2008 $ 4,679,042.67
October 2008 $ 4,360,543.98
November 2008 $ 4,055,934.50
December 2008 $ 3,754,049.68
January 2009 $ 3,469,673.64
February 2009 $ 3,160,922.85
March 2009 $ 2,843,586.69
April 2009 $ 2,563,959.92
May 2009 $ 2,298,005.64
June 2009 $ 2,049,519.75
July 2009 $ 1,813,337.24
August 2009 $ 1,604,836.22
September 2009 $ 1,369,704.10
October 2009 $ 1,167,707.99
November 2009 $ 989,104.19
December 2009 $ 832,636.07
January 2010 $ 717,364.13
February 2010 $ 581,760.28
March 2010 $ 421,795.88
April 2010 $ 421,692.33
May 2010 $ 421,662.55
June 2010 $ 421,577.14
July 2010 $ 421,533.23
August 2010 $ 421,430.49
September 2010 $ 421,290.78
October 2010 $ 421,056.44
November 2010 $ 420,748.36
December 2010 $ 420,268.31
January 2011 $ 419,597.60
February 2011 $ 417,470.97
March 2011 $ 413,905.58
April 2011 $ 410,392.88
May 2011 $ 406,488.91
June 2011 $ 403,077.30
July 2011 $ 400,521.02
August 2011 $ 396,792.08
September 2011 $ 391,784.67
October 2011 $ 386,545.14
November 2011 $ 381,971.12
December 2011 $ 376,185.20
January 2012 $ 371,186.01
February 2012 $ 364,961.29
March 2012 $ 348,571.08
April 2012 $ 341,427.27
May 2012 $ 334,618.05
June 2012 $ 327,037.95
July 2012 $ 326,480.37
August 2012 $ 329,464.21
September 2012 $ 328,948.12
October 2012 $ 329,873.79
November 2012 $ 330,552.67
December 2012 $ 335,569.74
January 2013 $ 342,387.85
February 2013 $ 351,750.19
March 2013 $ 337,985.02
April 2013 $ 325,484.72
May 2013 $ 331,562.34
June 2013 $ 339,826.82
July 2013 $ 358,958.18
August 2013 $ 331,389.64
September 2013 $ 284,037.16
October 2013 $ 234,124.75
November 2013 $ 187,144.25
December 2013 $ 142,259.74
January 2014 $ 99,594.82
February 2014 $ 41,423.67
B-2
SCHEDULE C
to Sale and
Servicing Agreement
PERFECTION REPRESENTATIONS, WARRANTIES AND COVENANTS
In addition to the representations, warranties and covenants contained in
the Agreement, the Seller hereby represents, warrants, and covenants to the
Trust and the Indenture Trustee as follows on the Closing Date and on each
Distribution Date on which the Trust purchases Dealer Loans, in each case only
with respect to the Seller Property conveyed to the Trust on such Closing Date
or the relevant Distribution Date:
GENERAL
1. The Agreement creates a valid and continuing security interest (as defined in
UCC Section 9-102) in the Seller Property in favor of the Trust, which security
interest is prior to all other Liens, and is enforceable as such as against
creditors of and purchasers from and assignees of the Seller.
2. Each Contract constitutes "tangible chattel paper" or a "payment intangible",
within the meaning of UCC Section 9-102. Each Dealer Loan constitutes a "payment
intangible" or a "general intangible" within the meaning of UCC Section 9-102.
3. Each Dealer Agreement constitutes either a "general intangible" or "tangible
chattel paper" within the meaning of UCC Section 9-102.
4. The Seller has taken or will take all necessary actions with respect to the
Dealer Loans to perfect its security interest in the Dealer Loans and in the
property securing the Dealer Loans.
CREATION
1. The Seller owns and has good and marketable title to the Initial Seller
Property or Subsequent Seller Property, as applicable, free and clear of any
Lien, claim or encumbrance of any Person, excepting only liens for taxes,
assessments or similar governmental charges or levies incurred in the ordinary
course of business that are not yet due and payable or as to which any
applicable grace period shall not have expired, or that are being contested in
good faith by proper proceedings and for which adequate reserves have been
established, but only so long as foreclosure with respect to such a lien is not
imminent and the use and value of the property to which the Lien attaches is not
impaired during the pendency of such proceeding.
PERFECTION
1. The Seller has caused or will have caused, within ten days after the
effective date of the Indenture, the filing of all appropriate financing
statements in the proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the contribution and sale of the Contributed
Property from the Originator to the Seller, the transfer and sale of the Seller
Property
from the Seller to the Issuer, and the security interest in the Collateral
granted to the Indenture Trustee under the Indenture.
2. With respect to Seller Property that constitutes tangible chattel paper, such
tangible chattel paper is in the possession of the Servicer, in its capacity as
custodian for the Trust and the Trust Collateral Agent, and the Trust Collateral
Agent has received a written acknowledgment from the Servicer, in its capacity
as custodian, that it is holding such tangible chattel paper solely on its
behalf and for the benefit of the Trust Collateral Agent, the Seller, the Trust
and the relevant Dealer(s). All financing statements filed or to be filed
against the Seller in favor of the Issuer or its assignee in connection with
this Agreement describing the Seller Property contain a statement to the
following effect: "A purchase of or security interest in any collateral
described in this financing statement will violate the rights of the Secured
Party."
PRIORITY
1. Other than the security interest granted to the Issuer pursuant to this
Agreement, the Seller has not pledged, assigned, sold, granted a security
interest in, or otherwise conveyed any of the Seller Property. None of the
Originator, the Servicer nor the Seller has authorized the filing of, or is
aware of any financing statements against either the Seller, the Originator or
the Trust that includes a description of the Seller Property and proceeds
related thereto other than any financing statement: (i) relating to the sale of
Contributed Property by the Originator to the Seller under the Contribution
Agreement, (ii) relating to the security interest granted to the Trust
hereunder, (iii) relating to the security interest granted to the Trust
Collateral Agent under the Indenture; or (iv) that has been terminated or
amended to reflect a release of the Seller Property.
2. Neither the Seller, the Originator nor the Trust is aware of any judgment,
ERISA or tax lien filings against either the Seller, the Originator or the
Trust.
3. None of the tangible chattel paper that constitutes or evidences the
Contracts or the Dealer Agreements has any marks or notations indicating that it
has been pledged, assigned or otherwise conveyed to any Person other than the
Originator, the Servicer, the Seller, the Trust, a collection agent or the Trust
Collateral Agent.
SURVIVAL OF PERFECTION REPRESENTATIONS
1. Notwithstanding any other provision of the Agreement, the Contribution
Agreement, the Indenture or any other Basic Document, the Perfection
Representations, Warranties and Covenants contained in this Schedule shall be
continuing, and remain in full force and effect (notwithstanding any replacement
of the Servicer or termination of Servicer's rights to act as such) until such
time as all obligations under the Sale and Servicing Agreement, Contribution
Agreement and the Indenture have been finally and fully paid and performed.
NO WAIVER
1. The parties hereto: (i) shall not, without obtaining a confirmation of the
then-current ratings of the Class A Notes (without giving effect to the Class A
Note Insurance Policy), waive any of the Perfection Representations, Warranties
or Covenants; (ii) shall provide the Rating Agencies with prompt written notice
of any breach of the Perfection Representations, Warranties
C-2
or Covenants, and shall not, without obtaining a confirmation of the
then-current ratings of the Class A Notes (without giving effect to the Class A
Note Insurance Policy) as determined after any adjustment or withdrawal of the
ratings following notice of such breach, waive a breach of any of the Perfection
Representations, Warranties or Covenants.
C-3