EXHIBIT 4(f)58
EXECUTION COPY
CREDIT ACCEPTANCE AUTO DEALER LOAN TRUST 2004-1
CLASS A ASSET BACKED NOTES
CREDIT ACCEPTANCE AUTO DEALER LOAN TRUST 2004-1,
as the Issuer
CREDIT ACCEPTANCE FUNDING LLC 2004-1,
as the Seller
CREDIT ACCEPTANCE CORPORATION,
as the Servicer and in its individual capacity
JPMORGAN CHASE BANK,
as the Trust Collateral Agent/Indenture Trustee
SYSTEMS & SERVICES TECHNOLOGIES, INC.,
as the Backup Servicer
SALE AND SERVICING AGREEMENT
Dated as of August 25, 2004
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 ......................................................... 23
SECTION 1.04. Section References ................................................................... 23
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 ................................................................ 39
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
SECTION 4.14. Servicer Not to Resign as Servicer ................................................... 49
SECTION 4.15. The Backup Servicer .................................................................. 50
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SECTION 4.16. Fidelity Bond ........................................................................... 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 ..................................................................... 55
SECTION 5.05. Reserve Account ......................................................................... 55
SECTION 5.06. Payments under the Class A Note Insurance Policy ........................................ 56
SECTION 5.07. Payments under the Backup Insurance Policy .............................................. 58
SECTION 5.08. Transfers and Distributions ............................................................. 60
SECTION 5.09. Distributions from the Class A Note Distribution Account ................................ 62
SECTION 5.10. Certificate Distribution Account ........................................................ 63
SECTION 5.11. Statements to Certificateholders and Noteholders ........................................ 64
ARTICLE VI THE SELLER AND THE ISSUER ..................................................................... 65
SECTION 6.01. Representations and Warranties of the Seller ............................................ 65
SECTION 6.02. Limitation on Liability of Seller and Others ............................................ 69
SECTION 6.03. Seller May Own Notes .................................................................... 69
SECTION 6.04. Additional Covenants of the Seller ...................................................... 70
SECTION 6.05. Indemnities of the Issuer ............................................................... 70
ARTICLE VII THE SERVICER ................................................................................. 72
SECTION 7.01. Representations of Servicer ............................................................. 72
SECTION 7.02. Indemnities of Servicer ................................................................. 74
SECTION 7.03. Merger or Consolidation of, or Assumption of the Obligations of, Servicer; Resignation .. 76
SECTION 7.04. Limitation on Liability of Servicer and Others .......................................... 77
SECTION 7.05. Delegation of Duties .................................................................... 77
SECTION 7.06. Certification Upon Satisfaction ......................................................... 77
ARTICLE VIII DEFAULT ..................................................................................... 78
SECTION 8.01. Servicer Defaults ....................................................................... 78
SECTION 8.02. Appointment of Successor ................................................................ 80
SECTION 8.03. Notification to Class A Noteholders and Certificateholders .............................. 81
SECTION 8.04. Waiver of Past Defaults ................................................................. 81
ARTICLE IX THE TRUST COLLATERAL AGENT .................................................................... 82
SECTION 9.01. Duties of the Trust Collateral Agent .................................................... 82
SECTION 9.02. Rights of the Trust Collateral Agent .................................................... 83
SECTION 9.03. Individual Rights of Trust Collateral Agent ............................................. 85
SECTION 9.04. Reports by Trust Collateral Agent to Holders ............................................ 85
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SECTION 9.05. Compensation ......................................................................... 85
SECTION 9.06. Eligibility .......................................................................... 86
SECTION 9.07. Trust Collateral Agent's Disclaimer .................................................. 86
SECTION 9.08. Limitation on Liability .............................................................. 86
SECTION 9.09. Reliance Upon Documents .............................................................. 87
SECTION 9.10. Successor Trust Collateral Agent ..................................................... 87
SECTION 9.11. Representations and Warranties of the Trust Collateral Agent ......................... 90
SECTION 9.12. Waiver of Setoffs .................................................................... 90
ARTICLE X TERMINATION ................................................................................. 91
SECTION 10.01. Optional Purchase ................................................................... 91
ARTICLE XI MISCELLANEOUS PROVISIONS ................................................................... 91
SECTION 11.01. Amendment ........................................................................... 91
SECTION 11.02. Protection of Title to Trust ........................................................ 93
SECTION 11.03. Limitation on Rights of Class A Noteholders ......................................... 95
SECTION 11.04. Governing Law ....................................................................... 96
SECTION 11.05. Notices ............................................................................. 96
SECTION 11.06. Severability of Provisions .......................................................... 97
SECTION 11.07. Assignment .......................................................................... 97
SECTION 11.08. Further Assurances .................................................................. 97
SECTION 11.09. No Waiver; Cumulative Remedies ...................................................... 97
SECTION 11.10. Third-Party Beneficiaries ........................................................... 98
SECTION 11.11. Actions by Noteholders .............................................................. 98
SECTION 11.12. Corporate Obligation ................................................................ 98
SECTION 11.13. Covenant Not to File a Bankruptcy Petition .......................................... 98
SECTION 11.14. Controlling Party ................................................................... 99
EXHIBITS
Exhibit A Reserved
Exhibit B Form of Servicer's Certificate
Exhibit C Investor Certification
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
Exhibit I Covenant Compliance Report
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SCHEDULES
Schedule A Dealer Loans, Dealer Agreements and Contracts
Schedule B Forecasted Collections
Schedule C Perfection Representations, Warranties and Covenants
Schedule D Financial Covenants and Related Definitions
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This Sale and Servicing Agreement, dated as of August 25, 2004,
among CREDIT ACCEPTANCE AUTO DEALER LOAN TRUST 2004-1 (the "Issuer" or the
"Trust"), CREDIT ACCEPTANCE FUNDING LLC 2004-1, 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"), JPMORGAN CHASE BANK, a New York banking corporation, in its
capacity as Trust Collateral Agent and Indenture Trustee (the "Trust Collateral
Agent" and the "Indenture Trustee"), and SYSTEMS & SERVICES TECHNOLOGIES, INC.,
a Delaware corporation, as Backup Servicer (the "Backup Servicer").
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 the February 2005 Distribution Date, and
(ii) the automatic occurrence or declaration of an Early Amortization Event
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
line action of any Court, arbitrator or other administrative, judicial, or
quasi-judicial tribunal or agency of competent jurisdiction.
"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, (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 Insurance Policy" means the note guaranty insurance policy
issued by the Backup Insurer to the Trust Collateral Agent for the benefit of
the Class A Noteholders with respect to the Class A Notes.
"Backup Insurer" means XL Capital Assurance Inc., a New York
corporation.
"Backup Insurer Default" means: (i) failure by the Backup Insurer to
make a payment required under the Backup Insurance Policy in accordance with its
terms; (ii) the occurrence of an involuntary insolvency event with respect to
the Backup Insurer which remains
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unstayed for 60 consecutive days; (iii) consent by the Backup Insurer to the
appointment of a conservator or receiver or 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 Backup Insurer or of
or relating to all or substantially all of its property; or (iv) the Backup
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.
"Backup Insurer Preference Amount" has the meaning set forth in
Section 5.07(c)(i) hereof.
"Backup Insurer Premium" has the meaning given such term in the
Insurance Agreement.
"Backup Insurer Premium Letter" means the premium letter, dated the
date hereof, among the Backup Insurer, the Servicer, the Issuer and the Trust
Collateral Agent.
"Backup Insurer Reimbursement Obligations" means any overdue Backup
Insurer Premium amounts payable pursuant to the Insurance Agreement, and any
payments made on the Backup Insurance Policy, and any other amounts owing to the
Backup Insurer under the Insurance Agreement, the Backup Insurer Premium Letter
or any other Basic Document, in each case, together with interest thereon at the
Prime Rate (as defined in the Insurance Agreement) plus 2.0%.
"Backup Servicer" means SST.
"Backup Servicing Agreement" means the Backup Servicing Agreement
dated as of the date hereof, among the Backup Servicer, the Class A Insurer, the
Backup 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 Backup 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.
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"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 or Detroit, Michigan (or, if the Backup Servicer has become the
successor Servicer, Missouri or Indiana).
"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) prior
to the occurrence of an Indenture Event of Default, an amount not to exceed
$15,000 for any Distribution Date, in the aggregate; and (ii) after the
occurrence of an Indenture Event of Default, but prior to the acceleration of
the Class A Notes, (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.
"Capped Servicing Fee" means, with respect to the Servicing Fee
payable to the Backup Servicer if it has become Servicer and any Distribution
Date, an amount equal to the product of 10.00% and Collections for the related
Collection Period.
"Certificate" has the meaning given such term in the Trust
Agreement.
"Certificate Distribution Account" has the meaning assigned to such
term in Section 5.01(a)(iii) hereof.
"Certificateholder" has the meaning given such term in the Trust
Agreement.
"Certificate Interest" means the allocable percentage interest of a
Certificate held by a Certificateholder.
"Certificate of Title" means, with respect to any Financed Vehicle,
the certificate of title or other documentary evidence of ownership of such
Financed Vehicle as issued by the department, agency or official of the
jurisdiction (whether in paper or electronic form) in which such Financed
Vehicle is titled, responsible for accepting applications for, and maintaining
records regarding, certificates of title and liens thereon.
"Certificate Register" and "Certificate Registrar" means the
register mentioned and the registrar appointed pursuant to Section 3.4 of the
Trust Agreement.
"Class A Insurer" means Radian Asset 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 or
receiver or 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; (iv) the Backup Insurer
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makes a payment under the Backup Insurance Policy in accordance with its terms;
or (v) 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
date hereof, 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.
"Class A Insurer Reimbursement Obligations" means any overdue Class
A Insurer Premium and Class A Insurer Premium Supplement 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, the Class A Insurer Premium Letter or any other Basic
Document, in each case, together with interest thereon at the Prime Rate (as
defined in the Insurance Agreement) plus 2.0%.
"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.
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"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 and the Backup Insurer 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 August 25, 2004.
"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.
"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 servicing
policies and procedures set forth in the Backup Servicing Agreement.
"Collection Period" means, with respect to each Distribution Date,
the 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 Third Amended and
Restated Credit Acceptance Corporation Credit Agreement, dated as of June 9,
2004, with Comerica
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Bank, as administrative agent and collateral agent, and Banc of America
Securities, LLC, as sole lead arranger and sole book manager.
"Computer Tape" means a computer tape or diskette (or other means of
electronic transmission acceptable to the Backup Servicer and the Controlling
Party) in a readable format acceptable to the Backup Servicer and the
Controlling Party.
"Continued Errors" has the meaning set forth in Section 4.09(b)(iv)
hereof.
"Contract" means any retail installment sales contract, in
substantially one of the forms attached hereto as Exhibit F, relating to the
sale of a new or 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 ownership
rights under the related Dealer Agreement to secure the related Dealer's
obligation to repay one or more related Dealer Loans.
"Contract Buy-Back Rate" means on any date of determination, a
fraction, expressed as a percentage, the numerator of which is the Class A Note
Balance as of the last day of the preceding Collection Period and the
denominator of which is the Outstanding Balance of all Eligible Contracts as of
the last day of the preceding Collection Period.
"Contract File" means with respect to each Contract, the physical
and/or electronic files in which Credit Acceptance maintains the fully executed
original counterpart (for UCC purposes) of the Contract (to the extent required
in accordance with Section 3.03 of this 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 the creditworthiness of Dealers and relating to the extension of
credit to such 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.
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"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 June 30, 2004, and (ii) with respect to Dealer Loans and related
collateral purchased by the Issuer on each Distribution Date during the
Revolving Period, the close of business on the last day of the immediately
preceding Collection Period.
"Dealer" means any new or used automobile, light-duty truck, minivan
and/or sport utility vehicle dealer who has entered into a Dealer Agreement with
Credit Acceptance.
"Dealer Agreement" means, each Dealer Agreement between the
Originator and the related Dealer substantially in the form of Exhibit D
attached hereto; provided, however, that the term "Dealer Agreement" shall, for
the purposes of this Agreement, include only those Dealer Agreements identified
from time to time on Schedule A hereto, as amended or supplemented from time to
time in accordance herewith.
"Dealer Collections" means, with respect to any Collection Period,
the Collections received by the Servicer during such Collection Period which
pursuant to the terms of any Dealer Agreement, are required to be remitted to
the applicable Dealer.
"Dealer Concentration Limit" means, with respect to any Dealer, an
amount equal to: (A) with respect to the Closing Date, 2.5% of the Aggregate
Outstanding Net Eligible Loan Balance as of the initial Cut-off Date and (B)
with respect to each Distribution Date during the Revolving Period on which
Dealer Loans are purchased by the Issuer, 2.5% of the Aggregate Outstanding Net
Eligible Loan Balance as of such Distribution Date, after giving effect to all
Collections received during the related Collection Period and the purchase of
Dealer Loans on 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; 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 for which the amounts due
thereunder should be charged off in accordance with the Servicer's accounting
policies in effect from time to time. A Contract shall become a Defaulted
Contract on the day on which the amounts due under such Contract are recorded as
charged off on the Servicer's master file of Contracts, but, in any event, shall
be deemed a Defaulted Contract no later than the earlier of (x) the day it
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becomes 90 days delinquent, based on the date the last payment thereon was
received by the Servicer and (y) the day on which an auction check is posted to
the relevant account.
"Delivery" when used with respect to property forming a part of a
Trust Account means:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that constitute
"instruments" within the meaning of Section 9-102(a)(47) of the UCC and
are susceptible of physical delivery, transfer thereof by physical
delivery to the Trust Collateral Agent indorsed to, or registered in the
name of, the Trust Collateral Agent or its nominee or indorsed in blank,
and, with respect to a certificated security (as defined in Section 8-102
of the UCC) transfer thereof (i) by delivery of such certificated security
to the Trust Collateral Agent or by delivery of such certificated security
to a securities intermediary indorsed to, or registered in the name of,
the Trust Collateral Agent or its nominee or indorsed in blank to a
securities intermediary (as defined in Section 8-102(a)(14) of the UCC)
and the making by such securities intermediary of entries on its books and
records identifying such certificated securities as belonging to the Trust
Collateral Agent and the sending by such securities intermediary of a
confirmation of the purchase of such certificated security by the Trust
Collateral Agent, or (ii) by delivery thereof to a "clearing corporation"
(as defined in Section 8-102(a)(5) of the UCC) and the making by such
clearing corporation of appropriate entries on its books reducing the
appropriate securities account of the originator and increasing the
appropriate securities account of a securities intermediary by the amount
of such certificated security, the identification by 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
9
Collateral Agent of the purchase by the Trust Collateral Agent of such
book-entry securities; the making by such securities intermediary of
entries in its books and records identifying such book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations as belonging to the Trust Collateral Agent and indicating that
such securities intermediary holds such Eligible Investment solely as
agent for the Trust Collateral Agent; and such additional or alternative
procedures as may hereafter become appropriate to effect complete transfer
of ownership of any such Eligible Investment to the Trust Collateral
Agent, consistent with changes in applicable law or regulations or the
interpretation thereof; and
(c) with respect to any Eligible Investment that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of the
issuer thereof in the name of the Trust Collateral Agent or its nominee or
the securities intermediary, the sending of a confirmation by the
securities intermediary of the purchase by the Trust Collateral Agent or
its nominee of such uncertificated security, and the making by such
securities intermediary of entries on its books and records identifying
such uncertificated certificates as belonging to the Trust Collateral
Agent.
In furtherance of the foregoing, any Eligible Investments held by
the Trust Collateral Agent through a securities intermediary shall be held only
pursuant to a control agreement entered into among the Seller, the Trust
Collateral Agent and the securities intermediary, pursuant to which the
securities intermediary agrees to credit all financial assets (as defined in
Section 8-102(a)(9) of the UCC) purchased (as defined in Section 1-201(32) of
the 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 Controlling Party.
"Determination Date" means the fifth 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.
10
"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 Controlling Party, 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 or the Backup Insurance
Policy.
"Eligible Contract" means each Contract which at the time of its
pledge by the applicable Dealer to the Originator satisfied the requirements for
a "Qualifying Receivable" set forth in the related Dealer Agreement; provided,
however, that a Contract that has become subject to the payment of a Purchase
Amount in accordance with Section 3.02 hereof or Section 4.07 hereof (regardless
of whether such Purchase Amount is actually paid) shall not constitute an
"Eligible Contract".
"Eligible Dealer Agreement" means each Dealer Agreement:
(a) which was originated by the Originator in compliance with all
applicable requirements of law and which complies with all applicable
requirements of law;
(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
11
or hereafter in effect, affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity);
(f) which constitutes either a "general intangible" or "tangible
chattel paper" under and as defined in Article 9 of the UCC;
(g) which, at the time of the sale of the rights to payment
thereunder to the Trust, no rights to payment thereunder have been waived
or modified;
(h) which is not subject to any right of rescission, setoff,
counterclaim or other defense (including the defense of usury), other than
defenses arising out of applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors'
rights in general;
(i) as to which the Originator, the Servicer and the Seller have
satisfied all obligations to be fulfilled at the time the rights to
payment thereunder are transferred to the Trust;
(j) as to which the related Dealer has not asserted that such
agreement is void or unenforceable;
(k) as to which the related Dealer is not an Affiliate of an
executive of Credit Acceptance or an Affiliate of Credit Acceptance;
(l) as to which the related Dealer is located in the United States;
(m) as to which the related Dealer is not bankrupt or insolvent; and
(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
12
made again each time funds are reinvested following each Distribution
Date), the commercial paper or other short-term senior unsecured debt
obligations (other than such obligations the rating of which is based on
the credit of a Person other than such depository institution or trust
company) of such depository institution or trust company shall have a
credit rating from Standard & Poor's of at least A-1+ and from Moody's of
Prime-1;
(iii) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) referred to in clause (ii) above;
(iv) commercial paper (including commercial paper of any affiliate
of the Seller, the Servicer, the Trust Collateral Agent, the Indenture
Trustee or the Owner Trustee) having, at the time of the investment or
contractual commitment to invest therein, a rating from Standard & Poor's
of at least A-1+ and from Moody's of Prime-1;
(v) investments in money market funds (including funds for which the
Seller, the Servicer, the Trust Collateral Agent, the Indenture Trustee or
Owner Trustee or any of their respective Affiliates is investment manager
or advisor) having a rating from Standard & Poor's of AAA-m or AAAm-G and
from Moody's of Aaa;
(vi) bankers' acceptances issued by any depository institution or
trust company referred to in clause (ii) above; and
(vii) any other demand or time deposit, obligation, security or
investment as may be acceptable, so long as both a Class A Insurer Default
and Backup Insurer Default are not continuing, to the Controlling Party
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 or the Backup Insurance Policy.
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
13
required to be obtained, effected or given by the Originator, in
connection with the creation of such Dealer Loan or the execution,
delivery and performance by the Originator, of the related Eligible Dealer
Agreement have been duly obtained, effected or given and are in full force
and effect;
(d) as to which at the time of the sale of such Dealer Loan to the
Trust, the Seller will have good and marketable title thereto, free and
clear of all Liens;
(e) as to which a valid first priority perfected security interest
in such Dealer Loan, related security and in the Proceeds thereof has been
granted by the Originator in favor of the Seller, by the Seller in favor
of the Issuer and by the Issuer in favor of the Indenture Trustee;
(f) which will at all times be the legal, valid and binding payment
obligation of the Obligor thereof (it being understood that recourse for
such payment obligation shall be limited to the extent set forth in the
Dealer Agreement), enforceable against such Obligor in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws,
now 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;
14
(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 new
or used automobiles and/or light-duty trucks and related products.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means Credit Acceptance and each entity, whether
or not incorporated, which is affiliated with Credit Acceptance pursuant to
Section 414(b), (c), (m) or (o) of the Code.
"Errors" has the meaning set forth in Section 4.09(a)(iv) hereof.
"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 new or
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 on Schedule D hereto.
"First Distribution Date" means September 15, 2004.
"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.
15
"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 date hereof, between
the Issuer and JPMorgan Chase Bank, as Indenture Trustee, as the same may be
amended and supplemented from time to time.
"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
Controlling Party.
"Ineligible Contract" means each contract other than an Eligible
Contract.
"Ineligible Loan" means each Dealer Loan other than an Eligible
Loan.
"Initial Purchaser Agreement" means the Initial Purchaser Agreement
dated August 17, 2004, by and among the Issuer, Credit Acceptance, the Seller
and Wachovia Capital Markets, LLC as the Initial Purchaser.
"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 date hereof, among the Class A Insurer, the Backup
Insurer, the Servicer, the Seller and the Issuer.
"Insurance Premium" means the Class A Insurer Insurance Premium and
the Backup Insurer Insurance Premium.
"Insurer Default" means a Class A Insurer Default or a Backup
Insurer Default, as the case may be.
"Insurers" means the Class A Insurer and the Backup Insurer.
16
"Intercreditor Agreement" means the Intercreditor Agreement dated as
of the date hereof among Credit Acceptance, CAC Warehouse Funding Corporation
II, Credit Acceptance Funding LLC 2003-1, Credit Acceptance Auto Dealer Loan
Trust 2003-1, the Seller, the Issuer, Wachovia Capital Markets, LLC, as agent,
JPMorgan Chase Bank, as indenture trustee and trust collateral agent under the
Indenture and under an indenture dated as of June 27, 2003 between JPMorgan
Chase Bank and Credit Acceptance Auto Dealer Loan Trust 2003-1, Comerica Bank,
and each other Person who becomes a party thereto after the date thereof.
"Issuer" or "Trust" means Credit Acceptance Auto Dealer Loan Trust
2004-1, 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 historic 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 75.0%.
"Minimum Collateral Amount" means on any Distribution Date during
the Revolving Period, an amount equal to the Class A Note Balance divided by the
Maximum Advance Rate.
"Moody's" means Moody's Investors Service, Inc., and its successor
and assigns.
"Multiemployer Plan" means a multiemployer plan (within the meaning
of Section 400 1(a)(3) of ERISA) in respect of which an ERISA Affiliate makes
contributions or has liability.
"Net Loan Balance" means, with respect to any Dealer Loan, the
excess of the related Outstanding Balance over the related Loan Loss Reserve.
"Obligor" means, with respect to any Contract, the person or persons
obligated to make payments with respect to such Contract, including any
guarantor thereof.
17
"Officer's Certificate" means a certificate signed by the chairman
of the board, the vice chairman, the president, the chief accounting 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 Controlling Party, be
employees of or counsel to the Issuer and who shall be reasonably satisfactory
to the Trust Collateral Agent and the Controlling Party, 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 Controlling Party.
"Optional Purchase" means the optional purchase of the Trust
Property as set forth in Section 10.01 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, less all Collections applied through such date
of determination in accordance with the related Dealer Agreement to reduce the
balance of such Dealer Loan plus or minus any adjustments to such Dealer Loan
balance for other amounts owed by such Dealer to Credit Acceptance under the
related Dealer Agreement which Credit Acceptance is entitled to make thereunder.
"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 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 Wachovia Bank of Delaware, 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.
18
"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.
"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.
"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.
"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.
"Private Placement Memorandum" means the Private Placement
Memorandum dated August 17, 2004, relating to the private placement of the Class
A Notes.
"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.
19
"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), 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) 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 Controlling Party in accordance with Section
3.02(b)(ii), the product of (A) the Outstanding Balance of the Contracts with
respect to which the Controlling Party 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.
"Rating Agencies" means, collectively Moody's, S&P and any other
nationally recognized statistical rating agency 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 the Class A Insurer Reimbursement
Obligations and the Backup Insurer Reimbursement Obligations.
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"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 on the earlier of: (i) the close of business on February 15,
2005; and (ii) the automatic occurrence or declaration of an Early Amortization
Event.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Securities" means the Class A Notes and the Certificates.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means Credit Acceptance Funding LLC 2004-1 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 accounting officer, 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.
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"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.
"SST" means Systems & Services Technologies, Inc., a Delaware
corporation.
"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,
August 17, 2009.
"Subsequent Seller Property" has the meaning given to such term in
Section 2.02(a) hereof.
"Subsequent Seller Property Purchase Price" means, as to the
Subsequent Seller Property purchased by the Trust on any Distribution Date
during the Revolving Period, an amount equal to the Aggregate Outstanding Net
Eligible Loan Balance of the Dealer Loans transferred to the Trust on such
Distribution Date, in the form of cash and/or capital contribution.
"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.
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"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 date hereof, 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 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).
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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,
the Class A Insurer and the Backup 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 Controlling Party shall, in the case of the occurrence
and continuance of both a Class A Insurer Default and a Backup 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 Insurer, the Backup Servicer and the Trust Collateral Agent
on the Closing Date; (ii) all rights under the Dealer Agreements related thereto
(other than the Excluded Dealer Agreement Rights), including Credit Acceptance's
right to service the Dealer Loans and the related Contracts and receive the
related servicing fee and receive reimbursement of certain recovery and
repossession expenses, in accordance with the terms of the Dealer Agreements;
(iii) Collections (other than Dealer Collections) after the applicable Cut-off
Date; (iv) a security interest in each Contract securing each Dealer Loan; (v)
all records and documents relating to the Dealer Loans and the Contracts; (vi)
all security interests purporting to secure payment of the Dealer Loans; (vii)
all security interests purporting to secure payment of each Contract (including
a security interest in each Financed Vehicle); (viii) all guarantees, insurance
(including insurance insuring the priority or perfection of any Contract) or
other agreements or arrangements securing the Contracts; (ix) the Seller's
rights under the Contribution Agreement; and (x) all Proceeds of the foregoing
(the "Initial Seller Property").
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(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 Backup Insurer, the Servicer and the Trust Collateral Agent
on each Distribution Date during the Revolving Period; (ii) rights under the
Dealer Agreements related thereto (other than the Excluded Dealer Agreement
Rights), including Credit Acceptance's right to service the Dealer Loans and the
related Contracts and receive the related servicing fee and receive
reimbursement of certain recovery and repossession expenses, in accordance with
the terms of the Dealer Agreements; (iii) Collections (other than Dealer
Collections) after the applicable Cut-off Date; (iv) a security interest in each
Contract securing each Dealer Loan; (v) all records and documents relating to
the Dealer Loans and the Contracts; (vi) all security interests purporting to
secure payment of the Dealer Loans; (vii) all security interests purporting to
secure payment of each Contract (including a security interest in each Financed
Vehicle); (viii) all guarantees, insurance (including insurance insuring the
priority or perfection of any Contract) or other agreements or arrangements
securing the Contracts; (ix) the Seller's rights under the Contribution
Agreement; and (x) all Proceeds of the foregoing (the "Subsequent Seller
Property").
On each Distribution Date during the Revolving Period on which the Issuer
purchases Subsequent Seller Property, the Issuer shall deliver to the Servicer,
the Backup Servicer, the
25
Trust Collateral Agent, the Class A Insurer and the Backup 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 two (2) 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 49.0%.
(c) The occurrence of any one of the following events shall
constitute a "Discretionary Amortization Event" only if after any applicable
grace or cure period either the Controlling Party, or if both a Class A Insurer
Default and a Backup Insurer Default have occurred and are 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
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unremedied for 30 days after written notice of such failure to the Issuer
by either Insurer, or if both a Class A Insurer Default and a Backup
Insurer Default have occurred and are 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 written notice of that breach to the Issuer by
either Insurer, or if both a Class A Insurer Default and a Backup Insurer
Default have occurred and are 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.
(d) If a Responsible Officer of the Indenture Trustee shall have
actual knowledge, or the Indenture Trustee shall receive written notice from an
Insurer, or, if both a Class A Insurer Default and Backup Insurer Default have
occurred and are 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 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.
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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, the
Backup Insurer and the Class A Noteholders to secure the repayment of the Class
A Notes and amounts owed to the Class A Insurer and the Backup 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;
(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.
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(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 Class A Insurer Reimbursement Obligations and
the Backup Insurer in respect of the Backup Insurer Reimbursement Obligations,
in each case, have been paid, the Trust Collateral Agent shall, upon
instructions from the Indenture Trustee pursuant to Section 8.2 of the
Indenture, release any remaining portion of the Trust Property from the lien of
the Indenture for distribution in accordance with the Trust Agreement.
ARTICLE III
THE DEALER LOANS AND THE CONTRACTS
SECTION 3.01. Representations and Warranties of Seller with respect
to the Seller Property.
The Seller makes the following representations and warranties as to the Dealer
Agreements, Dealer Loans and the Contracts on which each of the Trust Collateral
Agent and the Backup Servicer relies in connection with performance of its
obligations hereunder, the Class A Insurer relies in issuing the Class A Note
Insurance Policy and the Backup Insurer relies in issuing the Backup 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 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, the Class A Insurer or the Backup Insurer by the Seller
or the Servicer was true and correct in all
29
material respects as of the date such information was provided to the
Trust Collateral Agent, the Class A Insurer or the Backup 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 A. 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, the
Class A Insurer or the Backup 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 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
30
incorporated herein by reference as if made by the Seller to the Trust
Collateral Agent, the Class A Insurer and the Backup 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 700 or greater.
SECTION 3.02. Payment Upon Breach.
(a) The Seller, the Servicer, or the Trust Collateral Agent, as the
case may be, shall inform the other parties to this Agreement, the Class A
Insurer and the Backup 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 of the applicable Purchase
Amount in respect of: (A) all Dealer Loans and Contracts with respect to which
there is a breach of any such representations and warranties, and (B) the
aggregate number of Incomplete Contracts which exceeds the number of Permitted
Incomplete Contracts, which, in the case of each of (A) and (B), are materially
and adversely affected by such event or which materially and adversely affects
the interests of the Indenture Trustee or either Insurer as of such last day;
and (ii) the Controlling Party 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 of the applicable Purchase Amount in respect of any Permitted
Incomplete Contract which materially and
31
adversely affects such Contract or which materially and adversely affects the
interest of the Indenture Trustee or either 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
either 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").
(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
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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 Controlling Party or the Indenture Trustee, at the
direction of the Majority Noteholders, if both a Class A Insurer Default
and a Backup Insurer Default have occurred and are continuing. Any such
waiver by the Controlling Party 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
Controlling Party 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, the Class A Insurer and the Backup Insurer confirming
that the Servicer has received and is in possession of the original of
each Dealer Agreement listed on Schedule A hereto (or such amendment or
supplement to Schedule A relating to each Distribution Date, as
applicable).
(ii) If, on the 120th day after each Distribution Date during
the Revolving Period, the Servicer has not verified the presence of the
original Contract related to the Contracts listed on Schedule A hereto (or
such amendment or supplement to Schedule A relating to each Distribution
Date during the Revolving Period, as applicable) with respect to at least
98.0% of the number of Contract Files required to be reviewed by each such
120th day in accordance with Section 3.03(d) hereof, the Servicer shall
provide notice to the Owner Trustee, the Trust Collateral Agent, the Class
A Insurer and the Backup Insurer dated as of such date indicating the
number of Incomplete Contracts as of such date.
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(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, the Class A
Insurer and the Backup 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, the Class A Insurer and the Backup Insurer by
written notice. The Servicer shall maintain, or shall appoint an agent
acceptable to the Controlling Party to maintain, such Certificates of Title at
its principal place of business located at Silver Triangle Building, 25505 West
Twelve Mile Road, Southfield, Michigan 48034-8339 or as otherwise notified in
writing to the Trust Collateral Agent, the Backup Servicer, the Class A Insurer
and the Backup Insurer.
(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 a payment 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
Controlling Party may, in its sole discretion, require the Seller to remit the
applicable Purchase Amount with respect to any Permitted Incomplete Contracts.
(e) Subject to the foregoing, Credit Acceptance may temporarily move
individual Dealer Agreements, Contract Files or Records, or any portion thereof
without notice as necessary to allow the Servicer to conduct collection and
other servicing activities in accordance with its customary practices and
procedures.
(f) The Servicer shall have and perform the following powers and
duties:
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(i) hold the Dealer Agreements, Contract Files and Records in
trust for the benefit of the Trust Collateral Agent and the Trust and
maintain a current inventory thereof; and
(ii) carry out such policies and procedures in accordance with
its customary actions with respect to the handling and custody of the
Dealer Agreements, Contract Files and Records so that the integrity and
physical possession of the Dealer Agreements, Contract Files and Records
will be maintained.
In performing its duties as custodian, the Servicer agrees to act with
reasonable care, using that degree of skill and care that it exercises with
respect to similar Dealer Agreements, Contracts or Dealer Loans owned or held by
it.
(g) The Servicer shall have the obligation (i) to physically
segregate the Contract Files from the other custodial files it is holding for
its own account or on behalf of any other Person and (ii) to physically mark the
Contract folders to demonstrate the transfer of Contract Files and the Trust
Collateral Agent's security interest hereunder.
(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 Controlling Party, 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 Controlling Party or
the Trust Collateral Agent, if both a Class A Insurer Default and a Backup
Insurer Default have occurred and are continuing, each in its sole
discretion, take all steps necessary to cause the Certificate of Title of
each Financed Vehicle to be revised to name the Trust Collateral Agent on
behalf of the Trust as lienholder. Any costs associated with such revision
of the Certificate of Title shall be paid by the Servicer and, and to the
extent such costs are not paid by the Servicer such unpaid costs shall be
recovered as described in Section 5.08 hereof. In no event shall the Trust
Collateral Agent or the successor Servicer be required to expend funds in
connection with this Section 3.03(h). If the Backup Servicer has become
the successor Servicer, it shall be reimbursed for all Reliening Expenses
(in accordance with the provisions of Section 5.08(a) hereof) for any
retitling effort associated with the Financed Vehicles set forth in this
Agreement.
(iii) The Servicer shall provide to the Trust Collateral Agent
access to the Dealer Agreements, Contract Files and Records and all other
documentation regarding the Dealer Agreements, Contracts and the Dealer
Loans and the related Financed Vehicles in such cases where the Trust
Collateral Agent is required in
35
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, the Class A Insurer and the Backup 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 Controlling Party, upon written
notice to the Indenture Trustee, the Trust Collateral Agent, the Servicer, the
Rating Agencies, the Insurer not then the Controlling Party and the Backup
Servicer, may, at its option, renew the term of Credit Acceptance as Servicer
for a subsequent term of three (3) months. Upon the expiration of any three
month term, the Controlling Party, upon written notice to the Indenture Trustee,
the Trust Collateral Agent, the Servicer, the Rating Agencies, the Insurer not
then the Controlling Party 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 Controlling Party does not renew any such servicing term in writing, the
servicing term of Credit Acceptance shall automatically expire. If both a Class
A Insurer Default and a Backup Insurer Default have occurred and are continuing,
and the twelve (12) month or any three (3) month servicing term, as the case may
be, has expired, 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 Controlling Party shall have the rights set forth in
Section 8.01 hereof. Notwithstanding anything herein to the contrary, the
provisions of this Section 4.01(a) shall not apply to the Backup Servicer after
it has become the successor Servicer.
(b) Standard of Care; Types of Duties. The Servicer shall manage,
service, administer, and make collections on the Dealer Loans and the Contracts
with reasonable care, using that degree of skill and attention that the
servicers in the retail automobile financing industry exercise with respect to
all comparable receivables that they service for themselves or others and the
same degree of care that the Servicer exercises with respect to any comparable
dealer loan or automobile contracts that it holds for its own account. The
Servicer's duties shall include collection and posting of all payments,
responding to inquiries of Dealers and of Obligors on such Contracts,
investigating delinquencies, sending payment statements or coupons to Dealers
and Obligors, reporting tax information to Dealers and Obligors, accounting for
collections, and furnishing monthly and annual statements to the Trust
Collateral Agent with respect to distributions. The Servicer shall follow
prudent standards, policies, and procedures in performing its duties as
Servicer. Without limiting the generality of the foregoing, the Servicer is
hereby granted a limited power of attorney by the Trust Collateral Agent to
execute and deliver, on behalf of itself, the Trust, the Class A Noteholders, or
the Trust Collateral Agent or any of them, any and all instruments of
satisfaction or cancellation, or partial or full release or
36
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, the Class
A Insurer or the Backup 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 both a Class A Insurer
Default and a Backup Insurer Default are not continuing, the Controlling Party,
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 both
a Class A Insurer Default and a Backup Insurer Default are not continuing, and
the Controlling Party, when action is necessary to comply with the Trust's
duties under the Basic Documents. The Seller shall execute and deliver all
Issuer Orders and Officer's Certificates required by the Trust under the
Indenture. Notwithstanding anything herein to the contrary, the Backup Servicer,
as successor Servicer, shall not have an obligation to perform such duties set
forth in this Section 4.01(c).
(d) Duties with Respect to the Trust.
(i) In addition to the duties of the Servicer set forth in
this Agreement or any of the Basic Documents, the Servicer shall perform
such calculations, shall execute and deliver all Issuer Orders and
Officer's Certificates required of the Issuer under the Basic Documents,
and shall prepare for execution by the Trust or the Owner Trustee or shall
cause the preparation by other appropriate Persons of all such documents,
reports, filings, instruments, certificates and opinions 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
37
of the Basic Documents, including, without limitation, pursuant to Section
5.1 (with respect to the preparation and filing of tax returns) 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 Insurer 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 Class A Insurer and the Backup 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 Class A
Insurer or the Backup 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, the Class A Insurer and the Backup 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, the Backup 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, it being
understood that there shall be no recourse to the Servicer with regard to the
Dealer Loans and Contracts except as otherwise provided herein and in the other
Basic Documents. In performing its duties as Servicer, the Servicer shall use
the same degree of care and attention it employs with respect to similar
contracts and loans which it services for itself or others. Each of the Issuer,
the Trust Collateral Agent, the Class A Insurer and the Backup 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.
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The Servicer shall hold in trust for the Issuer, the Trust Collateral Agent and
the Class A Insurer and the Backup 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 and the Backup 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, the Class A Insurer and the
Backup 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 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 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.
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(a) Affirmative Covenants. From the date hereof until the Stated
Final Maturity Date 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, the Class A Insurer and the
Backup 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
Loan and Contract, and (B) furnish to the Trust Collateral Agent, the
Class A Insurer and the Backup 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, the Class A Insurer and the
Backup Insurer, quarterly.
(vii) Books and Records. The Servicer shall keep, or cause to
be kept, in reasonable detail, books and records of account of: (A) its
assets and business, and
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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 or the Backup Insurer, permit the Class A
Insurer or the Backup Insurer, as applicable, 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 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, the Backup 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
Servicer as of the dates and for the periods indicated, in accordance with
GAAP consistently applied.
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(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) Covenant Compliance Reports. Concurrently with the
delivery of each financial report delivered under (b) or (c) above, a
report in substantially the form attached to this Agreement as Exhibit I
and certified by the chief accounting officer or the treasurer of the
Servicer, as to whether the Servicer is in compliance with the Financial
Covenants for the applicable fiscal quarter (or year-end) of the Servicer,
as the case may be, in which report the Company shall set forth its
calculations and the resultant ratios or financial tests determined
thereunder, and certifying 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, the Backup Insurer or the Rating Agencies may reasonably request.
42
(b) Negative Covenants. From the date hereof until the Stated Final
Maturity Date or, if earlier, the date the Class A Notes are paid in full:
(i) Mergers, Acquisition, Sales, etc. The Servicer will not
consolidate with or merge into any other Person or convey or transfer its
properties and assets substantially as an entirety to any Person, unless
the Servicer is the surviving entity and unless:
(A) the Servicer has delivered to the Trust Collateral Agent,
the Indenture Trustee, the Owner Trustee, the Backup Servicer, the Class A
Insurer and the Backup 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, the Class A Insurer or the Backup Insurer may reasonably
request;
(B) the Servicer shall have delivered written notice of such
consolidation, merger, conveyance or transfer to the Trust Collateral
Agent, the Class A Insurer and the Backup 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, the
Class A Insurer and the Backup 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
Controlling Party 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).
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(iv) No Instruments. The Servicer shall take no action to
cause any Dealer Loan to be evidenced by any instrument (as defined in the
UCC as in effect in the relevant jurisdictions).
(v) No Liens. The Servicer shall not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or suffer to
exist any Lien (other than in favor of the Trust Collateral Agent or the
Trust as specifically contemplated herein) on the Trust Property or any
interest therein; the Servicer will notify the Trust Collateral Agent, the
Class A Insurer and the Backup 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 impair the
collectibility of any Dealer Loan or Contract or otherwise adversely
affect the interests or the remedies of the Trust Collateral Agent, the
Trust, the Class A Insurer or the Backup Insurer under this Agreement or
any other Basic Document, without the prior written consent of the Trust
Collateral Agent and the Controlling Party.
(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, the Class A Insurer or the Backup Insurer in
the Contracts which secure the Dealer Loans, except as may be required by
applicable law.
SECTION 4.07. Payments in Respect of Contracts Upon Breach.
(a) The Servicer or the Trust Collateral Agent (provided that a
Responsible Officer of the Trust Collateral Agent has actual knowledge or has
received written notice thereof) shall inform the other parties to this
Agreement, the Class A Insurer and the Backup 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, the Class A Insurer or the Backup 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 either Insurer (or the Class A Noteholders if both a Class A Insurer Default
and a Backup Insurer Default are then continuing),
44
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 either Insurer (or the Class A Noteholders if both a Class A
Insurer Default and a Backup Insurer Default are 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 Controlling Party or the Indenture Trustee, at the
direction of the Majority Noteholders, if both a Class A Insurer Default and a
Backup Insurer Default have occurred and are 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
Controlling Party 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 Backup
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
45
make available statements to Class A Noteholders, the Class A Insurer and the
Backup Insurer pursuant to Section 5.11 hereof. Upon receipt of the Servicer's
Certificate, the Trust Collateral Agent shall conclusively rely (and shall be
fully protected in so relying) on the information contained therein for the
purposes of making distributions and allocations as provided for herein. Each
Servicer's Certificate shall be certified by a Responsible Officer of the
Servicer. The Seller shall assist the Trust Collateral Agent with its obligation
to make distributions and allocations. Dealer Loans purchased by the Trust shall
be identified by the Servicer by the Dealer's account 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 payments on the
Dealer Loans during the prior Collection Period (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. 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. No
later than three (3) Business Days after the Backup Servicer's receipt of such
Servicer's Certificate, the Backup Servicer shall notify the Servicer, the Class
A Insurer, the Backup Insurer, the Trust Collateral Agent and the Indenture
Trustee of any inconsistencies between the Servicer's Certificate and the
Servicer's Data File and the Backup Servicer and the Servicer shall attempt to
reconcile such inconsistencies; provided, however, in the absence of a
reconciliation, the Servicer's Certificate shall control for the purpose of
calculations and distributions with respect to the related Distribution Date. If
the Backup Servicer and the Servicer are unable to reconcile discrepancies with
respect to a Servicer's Certificate by the related Distribution Date, the
Servicer shall cause the Independent Accountants, at the Servicer's expense, to
audit the Servicer's Certificate and, prior to the third Business Day, but in no
event later than the fifth calendar day, of the following month, reconcile the
discrepancies. The effect, if any, of such reconciliation shall be reflected in
the Servicer's Certificate for such next Determination Date. The Backup Servicer
shall only review the information provided by the Servicer in the Servicer's
Certificate and in the Servicer's Data File and its obligation to report any
inconsistencies shall be limited to those determinable from such information.
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
46
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. If any error, inaccuracy or omission (collectively,
"Errors") exists in any information received from the Servicer, and such Errors
should cause or materially contribute to the Backup Servicer making or
continuing any Errors (collectively, "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 Controlling Party, use its best efforts to
reconstruct and reconcile such data as is commercially reasonable to correct
such Errors and Continued Errors and prevent future Continued Errors. The Backup
Servicer shall be entitled to recover its costs thereby expended from the
Servicer.
(f) The Backup Servicer and its officers, directors, employees and
agent shall be indemnified by the Servicer and the Issuer, 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.
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,
the Backup Insurer and the Class A Noteholders, on or before April 30th of each
year beginning in the year 2005, 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 Insurer
and to the Rating Agencies,
47
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
Insurer and to such Rating Agencies, promptly after having obtained knowledge
thereof, but in no event later than five (5) Business Days thereafter, written
notice in an Officer's Certificate of any event which with the giving of notice
or lapse of time, or both, would become a Servicer Default under clause (ii) of
Section 8.01. The Trust Collateral Agent shall forward a copy of each Officer's
Certificate so received to each Class A Noteholder.
SECTION 4.11. Annual Independent Certified Public Accountant's
Report.
(a) The Servicer will deliver to the Trust Collateral Agent, the
Owner Trustee, the Indenture Trustee, each Class A Noteholder, the Class A
Insurer, the Backup Insurer and the Rating Agencies, on or before April 30th of
each year beginning in the year 2005, 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, the Class A Insurer and the Backup 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 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 in writing to so agree; it
being understood and agreed that the Trust Collateral Agent will deliver such
letter of agreement in conclusive reliance upon the direction of the Servicer,
and the Trust Collateral Agent has not 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
48
selected at random by the Controlling Party 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 Controlling Party from all of the Servicer
Certificates delivered during the applicable fiscal year) to the Servicer's
internal reports derived from its loan servicing system, 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 Controlling Party and the Independent
Accountants which are considered appropriate under the circumstances.
SECTION 4.12. Access to Certain Documentation and Information
Regarding Dealer Loans and Contracts.
The Servicer shall provide to each Class A Noteholder, the Indenture Trustee,
the Trust Collateral Agent, the Class A Insurer and the Backup 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, the Class A Insurer and the Backup 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, the Backup Insurer and the Indenture Trustee within five (5)
Business Days thereafter
49
(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, the Backup Insurer and the Indenture
Trustee concurrently with or promptly after such notice. No such resignation
shall become effective until the successor Servicer, appointed in accordance
with Section 8.02 hereof, shall have taken the actions required by the last
paragraph of Section 8.01 of this Agreement and shall have assumed the
responsibilities and obligations of the predecessor Servicer in accordance with
Section 8.02 of this Agreement. The Trust Collateral Agent shall forward a copy
of each notice so received to each Class A Noteholder 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 Controlling
Party or the Indenture Trustee, if both a Class A Insurer Default and a Backup
Insurer Default have occurred and are continuing, with not less than 30 days'
notice delivered to the Class A Insurer, the Backup 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 both
a Class A Insurer Default and Backup Insurer Default are not continuing, the
Controlling Party shall have
50
the right to remove the Backup Servicer for cause at any time and replace the
Backup Servicer. In the event that the Controlling Party exercises its right to
remove and replace SST as Backup Servicer, SST shall have no further obligation
to perform the duties of the Backup Servicer under this Agreement.
SECTION 4.16. Fidelity Bond.
The Servicer hereby represents and covenants that the Servicer has obtained, and
shall continue to maintain in full force and effect, a fidelity bond covering
the Servicer of a type and in such amount as is customary for prudent servicers
engaged in the business of servicing sub-prime and non-prime motor vehicle
retail installment sales contracts similar to the Contracts.
SECTION 4.17. Obligations in Respect of the Owner Trustee.
To the extent Credit Acceptance is no longer the Servicer hereunder, Credit
Acceptance, in its individual capacity, agrees to perform the obligations of the
Servicer in respect of the Owner Trustee and the Trust described in Section
4.01(d) and Section 4.06(a)(vii)(B) hereof and in Section 6.2 of the Trust
Agreement.
ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
AND NOTEHOLDERS
SECTION 5.01. Establishment of Trust Accounts.
(a) (i) On or prior to the Closing Date, the Trust Collateral
Agent, on behalf of the Indenture Trustee, for the benefit of the Class A
Noteholders, the Class A Insurer, the Backup 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, the
Backup 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,
the Backup 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,
the Backup 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.
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(iii) The Trust Collateral Agent, on behalf of the Indenture
Trustee, for the benefit of the Certificateholders, shall establish and
maintain in its own name an Eligible Account (the "Certificate
Distribution Account") bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Trust Collateral
Agent on behalf of the Indenture Trustee for the benefit of the
Certificateholders. The Certificate Distribution Account shall initially
be established with the Trust Collateral Agent.
(iv) The Trust Collateral Agent, on behalf of the Class A
Noteholders, the Class A Insurer, the Backup Insurer and, after the Class
A Termination Date, the Certificateholders, as their interests may appear,
shall establish and maintain in its own name an Eligible Account (the
"Reserve Account") bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Trust Collateral Agent
on behalf of the Indenture Trustee for the benefit of the Class A
Noteholders, the Class A Insurer, the Backup 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 Sections
5.06(b) and 5.07(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, the Backup 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.
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(c) If (i) the Servicer shall have failed to give investment
directions for any funds on deposit in the Collection Account, the Principal
Collection Account or the Reserve Account to the Trust Collateral Agent by 2:00
p.m. Eastern Time (or such other time as may be agreed by the Issuer and Trust
Collateral Agent) on any Business Day; or (ii) an Indenture Default or Indenture
Event of Default shall have occurred and be continuing with respect to the Class
A Notes but the Class A Notes shall not have been declared due and payable, or,
if such Class A Notes shall have been declared due and payable following an
Indenture Event of Default, amounts collected or receivable from the Trust
Property are being applied as if there had not been such a declaration; then the
Trust Collateral Agent shall, to the fullest extent practicable, invest and
reinvest funds in the Collection Account, the Principal Collection Account or
the Reserve Account, as the case may be, in Eligible Investments described in
clause (vi) of the definition thereof.
(d) (i) Subject to the grant of the security interest pursuant to
the Indenture in favor of the Indenture Trustee, the Trust shall possess all
right, title and interest in all funds on deposit from time to time in the Trust
Accounts (other than Dealer Collections) and in all proceeds thereof and all
such funds, investments, proceeds and income shall be part of the Trust
Property. Except as otherwise provided herein, the Trust Accounts shall be under
the sole dominion and control of the Trust Collateral Agent for the benefit of
the Class A Noteholders, the Class A Insurer, the Backup 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;
and
(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
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disposition, through continued registration of the Trust Collateral
Agent's (or its nominee's) ownership of such security.
(e) The Servicer shall have the power, revocable by the Controlling
Party, the Trust Collateral Agent, by the Indenture Trustee or by the Owner
Trustee, each with the prior written consent of the Controlling Party (so long
as both a Class A Insurer Default and a Backup Insurer Default are not
continuing) and the Indenture Trustee, to instruct the Trust Collateral Agent to
make withdrawals and payments from the Trust Accounts for the purpose of
permitting the Servicer and the Trust Collateral Agent to carry out its
respective duties hereunder.
(f) If ratings of the unsecured and uncollateralized long-term debt
obligations of the Trust Collateral Agent or its parent are lower than "AA-" by
S&P and "Aa3" by Moody's, then the Servicer shall, with the Trust Collateral
Agent's assistance as necessary, cause the Trust Accounts to be moved within
five (5) Business Days to another institution where such Trust Accounts will be
Eligible Accounts.
SECTION 5.02. Collections; Allocation.
The Servicer shall remit to the Collection Account within two (2) Business Days
of receipt all Collections collected during each Collection Period. On the
Closing Date, the Servicer shall deposit in the Collection Account the foregoing
amounts received with respect to the Dealer Loans and Contracts since the
initial Cut-off Date.
The Servicer shall determine each month the amount of Collections received
during each Collection Period which constitutes Dealer Collections and shall so
notify the Trust Collateral Agent in writing. Notwithstanding any other
provision hereof, the Trust Collateral Agent, at the written direction of the
Servicer, shall distribute on each Distribution Date: (i) to 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.
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SECTION 5.04. Additional Deposits.
(a) The Servicer or the Seller, as applicable, shall deposit or
cause to be deposited in the Collection Account each Purchase Amount paid
hereunder. Credit Acceptance shall deposit any amounts in respect of the Limited
Repurchase Option to the Collection Account. All such deposits with respect to a
Collection Period shall be made, in immediately available funds, on the Business
Day immediately preceding the Determination Date related to such Collection
Period.
(b) The proceeds of any purchase or sale of the assets of the Trust
described in Section 10.01 hereof shall be deposited by the Seller or the
Servicer, as applicable, in the Collection Account on the Business Day
immediately preceding the Distribution Date on which such purchase shall occur.
(c) Following the acceleration of the Class A Notes pursuant to
Section 5.2 of the Indenture, the proceeds shall be deposited in the Collection
Account to be distributed by the Indenture Trustee in accordance with Section
5.2(b) of the Indenture.
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 fifth 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 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;
(iii) third, an amount equal to the excess of (x) any amounts
due and payable to the Class A Insurer and the Backup 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;
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(iv) fourth, 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;
(v) fifth, 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;
(vi) sixth, 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
(vii) seventh, an amount equal to the excess of the funds
remaining in the Reserve Account after the withdrawals referred to in
clauses (i) through (vi) 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)-(vi) above shall be used solely for the amounts described in clause
(b)(i)-(vi) above, as applicable. Amounts withdrawn from the Reserve Account
pursuant to clause (b)(vii) above shall constitute Available Funds.
SECTION 5.06. Payments under the Class A Note Insurance Policy.
(a) (i) If, on the close of business on the fifth 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 Default Interest, as defined in the Class A Note Insurance Policy) and
(B) with respect to any Distribution Date other than the Stated Final
Maturity, any Principal Deficiency, exceeds the sum of (x) Available Funds
on deposit in the Collection Account and available for payment of the
Class A Interest Distributable Amount and/or Principal Deficiency and (y)
the amount on deposit in the Reserve Account on such Distribution Date and
available for payment of the Class A Interest Distributable Amount and/ or
Principal Deficiency, the Trust Collateral Agent shall, no later than
12:00 noon New York time, on the fourth Business Day immediately preceding
such Distribution Date make a claim under the Class A Note Insurance
Policy in an amount equal to such excess, in accordance with the terms of
the Class A Note Insurance Policy.
(i) (ii) If, on the close of business on the fifth 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
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and (y) the amount available on the Stated Final Maturity in the Reserve
Account and available for payment of the Class A Principal Distributable
Amount, the Trust Collateral Agent shall, no later than 12:00 noon New
York time, on the fourth 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.
(iii) Any payment made by the Class A Insurer in respect of
the Class A Interest Distributable Amount shall constitute a "Class A
Insurer Interest Shortfall Payment". Any payment by the Class A Insurer in
respect of principal of the Class A Notes shall constitute a "Class A
Insurer Principal Payment".
(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 (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 Holders of the Class A Notes 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 (the "Class A Insurer
Preference Payment") 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 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. The Trust Collateral Agent shall promptly notify the
Class A Insurer and the Backup Insurer of any proceeding or the
institution of any action (of
57
which a Responsible Officer of the Trust Collateral Agent has actual
knowledge) seeking the avoidance as a preferential transfer under
applicable bankruptcy, insolvency, receivership, rehabilitation or similar
law of any payment made 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 Controlling Party may at any time
during the continuation of any proceeding relating to a Preference Amount
direct all matters relating to such Preference Amount including, without
limitation, (i) the direction of any appeal of any order relating to any
Preference Amount and (ii) the posting of any surety, supersedeas or
performance bond pending any such appeal at the expense of the Controlling
Party, 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 Controlling Party 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 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 and the Backup Insurer.
(e) The Trust Collateral Agent shall immediately notify the Backup
Insurer of the existence and the amount of any claim under the Class A Note
Insurance Policy pursuant to this Section 5.06.
SECTION 5.07. Payments under the Backup 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 Backup Insurance
Policy in an amount equal to such excess, in accordance with the terms of
the Backup Insurance Policy.
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(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 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 Backup Insurance Policy in an
amount equal to such excess, in accordance with the terms of the Backup
Insurance Policy.
(b) Proceeds of claims on the Backup 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 "Backup Insurer Preference Amount"), the Trust
Collateral Agent shall make a claim within one (1) Business Day upon the
Backup Insurance Policy for the full amount of such Backup Insurer
Preference Amount in accordance with the terms of the Backup 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 Backup
Insurance Policy. The Trust Collateral Agent shall furnish to the Backup
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 Backup
Insurer Preference Amount under the Backup 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 Backup Insurer, be disbursed to
the Trust Collateral Agent for distribution to such Class A Noteholder.
(ii) Each Notice for Payment (as defined in the Backup
Insurance Policy) shall provide that the Trust Collateral Agent, on its
behalf and on behalf of the Class A Noteholders, thereby appoints the
Backup Insurer as agent and attorney-in-fact for the Trust Collateral
Agent and each Class A Noteholder in any legal proceeding with
59
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 Backup Insurer Default shall not have occurred and be
continuing, the Backup Insurer may at any time during the continuation of
any proceeding relating to a Backup Insurer Preference Amount direct all
matters relating to such Backup Insurer Preference Amount including,
without limitation, (i) the direction of any appeal of any order relating
to any Backup Insurer Preference Amount and (ii) the posting of any
surety, supersedeas or performance bond pending any such appeal at the
expense of the Backup 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 Backup
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 Backup
Insurer 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 Backup Insurer Preference Amount.
(d) The Trust Collateral Agent shall, and hereby agrees that it
will, hold the Backup 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 5.08. 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),
5.06(b) and 5.07(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, 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
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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;
(iv) to each Insurer, in accordance with the terms of the
Insurance Agreement and so long as no Insurer Default related to such
Insurer's failure to pay any amount due in accordance with the terms of
the note insurance policy issued by it has occurred and is continuing: (A)
its respective Insurance Premium, including any past due Insurance
Premium; (B) its respective expenses; and (C) its respective Reimbursement
Obligations owed in respect of any draws on the Class A Note Insurance
Policy or the Backup Insurance Policy, as the case may be, 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 Account
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 each Insurer, in accordance with the terms of the
Insurance Agreement, its respective 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 indemnification amounts owed to it 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.
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(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.
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. Neither the Class A Note Insurance Policy nor the Backup Insurance
Policy shall cover any shortfalls relating to withholding taxes.
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(c) Distributions required to be made to Noteholders on any
Distribution Date shall be made to each Class A Noteholder of record on the
preceding Record Date either by wire transfer, in immediately available funds,
to the account of such Holder at a bank or other entity having appropriate
facilities therefor, if (i) such Class A Noteholder shall have provided to the
Class A Note Registrar appropriate written instructions at least ten Business
Days prior to such Distribution Date and such Holder's Certificates in the
aggregate evidence a Certificate Interest of at least 10% of the Original
Certificate Interest or (ii) such Class A Noteholder is the Seller, or an
Affiliate thereof, or, if not, by check mailed to such Class A Noteholder at the
address of such holder appearing in the Class A Note Register. Notwithstanding
the foregoing, the final distribution in respect of any Class A Note (whether on
the Stated Final Maturity or otherwise) will be payable only upon presentation
and surrender of such Class A Note at the office or agency maintained for that
purpose by the Note Registrar pursuant to Section 2.7 of the Indenture.
SECTION 5.10. Certificate Distribution Account.
(a) On each Distribution Date, the Trust Collateral Agent shall
(based on the information contained in the Servicer's Certificate delivered on
the related Determination Date) distribute all amounts on deposit in the
Certificate Distribution Account to the Certificateholders.
(b) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Certificateholder, such tax shall reduce
the amount otherwise distributable to the Certificateholder in accordance with
this Section. The Trust Collateral Agent is hereby authorized and directed to
retain from amounts otherwise distributable to the Certificateholders sufficient
funds for the payment of any tax that is legally owed by the Trust as instructed
in writing by the Servicer (but such authorization shall not prevent the Trust
Collateral Agent from contesting, at the expense of the Seller, any such tax in
appropriate proceedings, and withholding payment of such tax, if permitted by
law, pending the outcome of such proceedings). The amount of any withholding tax
imposed with respect to a Certificateholder shall be treated as cash distributed
to such Certificateholder at the time it is withheld by the Trust and remitted
to the appropriate taxing authority. If there is a possibility that withholding
tax is payable with respect to a distribution (such as a distribution to a
non-US Certificateholder), the Trust Collateral Agent may withhold such amounts
in accordance with this clause (b). In the event that a Holder wishes to apply
for a refund of any such withholding tax, the Trust Collateral Agent shall
reasonably cooperate with such Certificateholder in making such claim so long as
such Certificateholder agrees to reimburse the Trust Collateral Agent for any
out-of-pocket expenses incurred.
(c) Distributions required to be made to Certificateholders on any
Distribution Date shall be made to each Certificateholder of record on the
preceding Record Date either by wire transfer, in immediately available funds,
to the account of such Holder at a bank or other entity having appropriate
facilities therefor, if (i) such Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least ten Business
Days prior to such Distribution Date and such Holder's Certificates in the
aggregate evidence a denomination of not less than $500,000 or (ii) such
Certificateholder is the Seller, or an Affiliate thereof, or, if not, by check
mailed to such Certificateholder at the address of such holder appearing in the
Certificate Register. Notwithstanding the foregoing, the final distribution in
respect of any Certificate
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(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.
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 Backup Insurer, the Class A Noteholders, the
Certificateholder, the Initial Purchaser and Bloomberg, L.P. (at 499 Park
Avenue, New York, New York 10022, Attention: Credit Acceptance 2004-1). 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 (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 reported under (i) above;
(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
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(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, the Class A
Insurer and the Backup Insurer, via the Trust Collateral Agent's Internet
Website, with the use of a password provided by the Trust Collateral Agent or
its agent to such Person upon receipt by the Trust Collateral Agent from such
Person of a certification in the form of Exhibit C; provided, however, that the
Trust Collateral Agent or its agent shall provide such password to the parties
to this Agreement and the Rating Agencies without requiring such certification.
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's Internet Website shall be initially
located at www.jpmorgan.com/sfr (Help Desk phone no. 1-212-623-5600) or at such
other address as shall be specified by the Trust Collateral Agent from time to
time in writing to each of the parties hereto and to each Class A Noteholder. In
connection with providing access to the Trust Collateral Agent's Internet
Website, the Trust Collateral Agent may require registration and the acceptance
of a disclaimer. 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, the Class A Insurer relied in
issuing the Class A Note Insurance Policy and the Backup Insurer relied in
issuing the Backup 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.
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(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, 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.
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(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 2004-1" 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,
the Class A Insurer or the Backup Insurer pursuant to this Agreement or
any other Basic Document to which the Seller is a party, and in connection
with the transactions contemplated hereby or thereby, when taken as a
whole, do not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements contained hereon or
therein not misleading.
(x) Accuracy of Information. All information heretofore
furnished by the Seller to the Trust or its successors and assigns or to
the Class A Insurer or the Backup 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, a
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
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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 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
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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 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
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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 Controlling Party; 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 Controlling Party:
(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;
(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, the Backup 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, the Backup 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
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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, the Backup
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.
(iv) The Issuer shall indemnify, defend, and hold harmless the
Trust Collateral Agent, the Trust Collateral Agent, the Indenture Trustee,
the Owner Trustee, the Class A Insurer, the Backup 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; (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 Issuer shall indemnify, defend, and hold harmless, the
Indenture Trustee, the Owner Trustee, the Class A Insurer, the Backup
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.
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
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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 and the Backup Insurer relies in issuing the
Backup 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:
(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
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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 Backup 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 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.
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(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 conformity with the requirements of all
applicable federal and State laws, rules and regulations, and this
Agreement. The Servicer is in possession of all State and local licenses
(including all debt collection licenses) required for it to perform its
services hereunder, and none of such licenses has been suspended, revoked
or terminated, except where the failure to have such licenses would not be
reasonably likely to have material adverse effect on its ability to
service the Dealer Loans or Contracts or on the interest of the Indenture
Trustee, the Trust Collateral Agent, the Class A Insurer, the Backup
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, the Backup 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, the Backup 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
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the Dealer Loans, or federal or other income taxes arising out of the
transactions contemplated by this Agreement) and costs and expenses in
defending against the same.
(iii) The Servicer shall indemnify, defend, and hold harmless the
Trust, the Backup Servicer, the Trust Collateral Agent, the Owner Trustee,
the Indenture Trustee, the Class A Insurer, the Backup 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.
(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 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, the Backup
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.
(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.
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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 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 Controlling Party 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 Backup 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 Backup 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 Agencies shall have confirmed the "shadow ratings"
of the Class A Notes without regard to the Class A Note Insurance Policy or the
Backup
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Insurance Policy. The Servicer shall provide notice of any merger, conversion,
consolidation or succession pursuant to this Section to the Class A Insurer, the
Backup Insurer 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;
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 Controlling Party; 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)
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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 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
Insurers 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 the 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 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 either Insurer, or if both a Class A Insurer Default and a
Backup Insurer Default have has occurred and are 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
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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, after giving
effect to all notice and grace periods set forth herein; or
(vi) the Originator or Servicer, if Credit Acceptance is the
Servicer, fails to pay when due Purchase Amounts in excess of $100,000;
then, and in each and every case, the Trust Collateral Agent, if so requested by
the Controlling Party, or if both a Class A Insurer Default and Backup Insurer
Default have occurred and are 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) if Credit Acceptance is the Servicer, reduce its servicing
term then in effect to a term of three (3) months. Upon sending or receiving any
such notice, the Trust Collateral Agent shall promptly send a copy thereof to
the Indenture Trustee, the Owner Trustee, the Rating Agencies, the Class A
Insurer, the Backup 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
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successor Servicer by the predecessor Servicer, such Transition Expenses shall
be paid under Section 5.08(a)(i) hereof. In addition, the Controlling Party
shall have the option to pay the Transition Expenses. If the Controlling Party
elects to pay any such Transition Expenses, the amount paid by the Controlling
Party 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 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 both a Class A
Insurer Default and a Backup Insurer Default are not continuing, if the
Controlling Party 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 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 both a
Class A Insurer Default and a Backup Insurer Default are not continuing, the
Controlling Party otherwise directs, the Controlling Party 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 SST, 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), SST 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, the Class
A Insurer and the Backup Insurer) or, so long as both a Class A Insurer Default
and a Backup Insurer Default are not continuing, the Controlling Party otherwise
directs, the Trust Collateral Agent shall act in such capacity as hereinabove
provided; provided, however, that the Trust Collateral Agent 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. In the event that the Trust
Collateral Agent is so prohibited by law from acting or, so
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long as both a Class A Insurer Default and a Backup Insurer Default are not
continuing, the Controlling Party otherwise directs, the outgoing Servicer shall
continue to act as Servicer hereunder until a successor Servicer which, so long
as both a Class A Insurer Default and a Backup Insurer Default are not
continuing, shall be acceptable to the Controlling Party 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 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.
(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 Controlling Party (so long as both a Class A Insurer
Default and a Backup Insurer Default are not continuing) and such successor
Servicer shall agree; provided, however, that no such compensation (excluding
Transition Expenses, Repossession Expenses and Reliening Expenses) shall be in
excess of the Servicing Fee. The Backup Servicer, the Trust Collateral Agent and
any such successor Servicer shall take such action, consistent with this
Agreement, as shall be necessary to effectuate any such succession.
SECTION 8.03. Notification to Class A Noteholders and Certificateholders.
Upon any termination of, or appointment of a successor to, the Servicer pursuant
to this Article VIII, the Trust Collateral Agent shall promptly upon its receipt
of notice thereof give prompt written notice thereof to Class A Noteholders and
the Certificateholders at their respective addresses appearing in the Note
Register and the Certificate Register, to the Owner Trustee and to each of the
Rating Agencies then rating the Class A Notes, the Class A Insurer and the
Backup Insurer.
SECTION 8.04. Waiver of Past Defaults.
So long as both a Class A Insurer Default and a Backup Insurer Default are not
continuing, the Controlling Party, may, on behalf of all Class A Noteholders,
waive any or all default(s) by the
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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 Controlling
Party 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 JPMorgan Chase Bank as the Trust Collateral
Agent, and JP Morgan Chase 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 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
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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.
(h) In no event shall JPMorgan Chase Bank, 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) JPMorgan Chase Bank 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.
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(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 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 Controlling Party (so long as both a Class A
Insurer Default and a Backup Insurer Default are 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).
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(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.
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.]
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(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
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 Controlling Party, so long as both a Class A Insurer Default
and a Backup Insurer Default are 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
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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 protected and shall incur no liability to any such party in relying
upon the accuracy, acting in reliance upon the contents, and assuming the
genuineness of any notice, demand, certificate, signature, instrument or other
document reasonably believed by the Trust Collateral Agent to be genuine and to
have been duly executed by the appropriate signatory (absent actual knowledge of
a Responsible Officer of the Trust Collateral Agent to the contrary), and the
Trust Collateral Agent shall not be required to make any independent
investigation or inquiry with respect thereto. The Trust Collateral Agent shall
at all times be free independently to establish to its reasonable satisfaction,
but shall have no duty to independently verify, the existence or nonexistence of
facts that are a condition to the exercise or enforcement of any right or remedy
hereunder or under any of the Basic Documents. The Trust Collateral Agent may
consult with counsel, and shall not be liable for any action taken or omitted to
be taken by it hereunder in good faith and in accordance with the written advice
of such counsel.
SECTION 9.09. Reliance Upon Documents.
In the absence of bad faith or willful misconduct on its part, the Trust
Collateral Agent shall be entitled to conclusively rely on any communication,
instrument, paper or other document reasonably believed by it to be genuine and
correct and to have been signed or sent by the proper Person or Persons and
shall have no liability in acting, or omitting to act, where such action or
omission to act is in reasonable reliance upon any statement or opinion
contained in any such document or instrument.
SECTION 9.10. Successor Trust Collateral Agent.
(a) Merger. Any Person into which the Trust Collateral Agent may be
converted or merged, or with which it may be consolidated, or to which it may
sell or transfer its trust business and assets as a whole or substantially as a
whole, or any Person resulting from any such conversion, merger, consolidation,
sale or transfer to which the Trust Collateral Agent is a party, shall (provided
it is otherwise qualified to serve as the Trust Collateral Agent hereunder) be
and become a successor Trust Collateral Agent hereunder and be vested with all
of the trusts, powers, discretions, immunities, privileges and other matters as
was its predecessor without the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. The Trust Collateral Agent
shall give notice to the Class A Insurer, the Backup 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, the Class A Insurer and the Backup
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.
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(c) Removal.
(i) The Issuer, prior to the Class A Termination Date with the prior
written consent of the Controlling Party, may remove the Trust Collateral Agent
by written notice if:
(A) a court having jurisdiction in the premises in respect of the
Trust Collateral Agent in an involuntary case or proceeding under federal
or state banking or bankruptcy laws, as now or hereafter constituted, or
any other applicable federal or state bankruptcy, insolvency or other
similar law, shall have entered a decree or order granting relief or
appointing a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or similar official) for the Trust Collateral
Agent or for any substantial part of the Trust Collateral Agent's
property, or ordering the winding-up or liquidation of the Trust
Collateral Agent's affairs;
(B) an involuntary case under the federal bankruptcy laws, as now
or hereafter in effect, or another present or future federal or state
bankruptcy, insolvency or similar law is commenced with respect to the
Trust Collateral Agent and such case is not dismissed within 60 days;
(C) the Trust Collateral Agent commences a voluntary case under
any federal or state banking or bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
conservator, sequestrator (or other similar official) for the Trust
Collateral Agent or for any substantial part of the Trust Collateral
Agent's property, or makes any assignment for the benefit of creditors or
fails generally to pay its debts as such debts become due or takes any
corporate action in furtherance of any of the foregoing;
(D) failure to comply with any material covenant hereunder; or
(E) the Trust Collateral Agent otherwise becomes legally incapable
of acting.
(ii) The Controlling Party 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 Controlling Party
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
Controlling Party. After the Class A Termination Date, the Issuer may appoint a
successor Trust Collateral Agent without the consent of the Controlling Party.
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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 Agent shall mail a notice of its succession to Class A
Noteholders, the Class A Insurer, the Backup 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 Controlling Party does not take office
within 60 days after the retiring Trust Collateral Agent resigns or is removed,
the retiring Trust Collateral Agent, or the Controlling Party 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 Controlling Party, 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 Controlling Party.
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 Controlling Party 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 both a Class A
Insurer Default and a Backup Insurer Default are not continuing, the Controlling
Party has the right to appoint a successor Trust Collateral Agent and if it
fails to, or if both a Class A Insurer Default and a Backup Insurer Default have
occurred and are continuing, the Owner Trustee shall have the sole right to
appoint each successor Trust Collateral Agent that meets the qualifications
required hereunder. Every temporary or permanent successor Trust Collateral
Agent appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to the Owner Trustee, each Class A Noteholder, each
Certificateholder, the Rating Agencies, the Class A Insurer, the Backup 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
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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 any Trust Collateral Agent and
appointing a successor hereunder, together with all other instruments provided
for herein, shall be maintained with the records relating to the Trust Property
and, to the extent required by applicable law, filed or recorded by the
successor Trust Collateral Agent in each place where such filing or recording is
necessary to effect the transfer of the Trust Property to the successor Trust
Collateral Agent or to protect or continue the perfection of the security
interests granted hereunder.
If no successor Trust Collateral Agent shall have been appointed and
accepted the appointment within sixty (60) days after the giving of notice of
resignation, the resigning Trust Collateral Agent may petition any court of
competent jurisdiction for the appointment of a successor Trust Collateral Agent
that meets the qualifications required hereunder.
SECTION 9.11. Representations and Warranties of the Trust Collateral
Agent.
The Trust Collateral Agent represents and warrants to the Issuer, the Class A
Insurer, the Backup Insurer and to the Class A Noteholders as follows:
(i) The Trust Collateral Agent is a New York banking corporation,
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
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Trust Accounts shall at all times be held and applied solely in accordance with
the provisions hereof.
ARTICLE X
TERMINATION
SECTION 10.01. Optional Purchase.
(a) On the last day of any Collection Period as of which the Class A Note
Balance shall be less than or equal to 15% of the initial Class A Note Balance,
the Servicer shall have the option to reacquire the Trust Property, other than
the Trust Accounts. To exercise such option, the Servicer shall deposit pursuant
to Section 5.04 in the Collection Account an amount equal to the Purchase Amount
for the Dealer Loans, plus the appraised value of any other property held by the
Trust (other than the Trust Accounts), such value to be determined by an
appraiser mutually agreed upon by the Servicer and the Trust Collateral Agent.
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 Backup 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, the Backup 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.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.01. Amendment.
This Agreement may be amended by the Seller, the Servicer, and the Trust
Collateral Agent, without the consent of any of the Class A Noteholders (at the
written direction of the Issuer), but with the prior written consent of the
Controlling Party, so long as both a Class A Insurer Default and a Backup
Insurer Default are 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,
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the Class A Insurer, the Backup 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 or the Backup 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 Controlling Party or, if both a Class A Insurer
Default and a Backup Insurance Default have occurred and are 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 51% 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 Insurers 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 or the Backup Insurance Policy.
Notwithstanding anything herein to the contrary, the Backup Insurer must
consent to all amendments to this Agreement which have an adverse effect on the
Backup Insurer.
Prior to the execution of any such amendment or consent, the Servicer will
provide and the Trust Collateral Agent shall distribute written notification of
the substance of such amendment or consent to each Rating Agency then rating the
Class A Notes, the Class A Insurer and the Backup Insurer.
Promptly after the execution of any such amendment or consent, the Trust
Collateral Agent shall furnish written notification of the substance of such
amendment or consent to each Class A Noteholder and each Certificateholder.
It shall not be necessary for the consent of Class A Noteholders pursuant
to this Section to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of Class
A Noteholders provided for in this Agreement) and of evidencing the
authorization of the execution thereof by Class A Noteholders shall be subject
to such reasonable requirements as the Trust Collateral Agent may prescribe.
92
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 Backup 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, the Class A Insurer and the Backup 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, the Class A
Insurer and the Backup 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, the Class A Insurer and the Backup 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 Controlling Party, the Servicer shall at all times
maintain each office from which it shall service the Dealer Loans and the
related Contracts, and its principal executive office, within the United States
of America.
(d) The Servicer shall maintain accounts and records as to each Dealer
Loan and Contract accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Dealer Loan and Contract,
including payments and recoveries made and payments owing (and the nature of
each) and (ii) reconciliation between payments or recoveries on (or with respect
to) each Dealer Loan and Contract and the amounts from time to time deposited in
the Collection Account in respect of such Dealer Loan and Contract.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Dealer Loans and the related
Contracts to the Trust, the Servicer's master computer records (including any
back-up archives) that refer to a Dealer Loan or Contract shall indicate clearly
(including by means of tagging) the interest of the Trust
93
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, the Backup 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 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, the Class A Insurer and the Backup 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, the Class A Insurer and the Backup 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 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)
94
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 January 30 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 both a Class A Insurer Default and a Backup Insurer Default are not
continuing, the Controlling Party has given its prior written consent and such
Holder previously shall have given to the Trust Collateral Agent a written
notice of default and of the continuance thereof, and unless also (i) the
default arises from the Seller's or the Servicer's failure to remit payments
when due hereunder, or (ii) the Majority Noteholders shall have made written
request upon the Trust Collateral Agent to institute such action, suit or
proceeding in its own name as Trust Collateral Agent under this Agreement and
such Holder shall have offered to the Trust Collateral Agent such indemnity as
it may reasonably require against the costs, expenses, and liabilities to be
incurred therein or thereby, and the Trust Collateral Agent, for 30 days after
its receipt of such notice, request, and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding and during
such 30-day period no request or waiver inconsistent with such written request
has been given to the Trust Collateral Agent pursuant to this Section or Section
8.04; no one or more Holders of Notes or Certificates shall have any right in
any manner whatever by virtue or by availing itself or themselves of any
provisions of this Agreement to affect, disturb, or prejudice the rights of the
Holders of any other of the Class A Notes or the Certificates, or to obtain or
seek to obtain priority over or preference to any other such Holder, or to
enforce any right, under this Agreement except in the manner provided in this
Agreement and for the equal, ratable, and common benefit of all Class A
Noteholders and all Certificateholders. For the protection and
95
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, the Backup Insurer or any Rating
Agency under this Agreement shall be in writing, personally 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 2004-1/Wendy Rummler, Silver Triangle
Building, 25505 West Twelve Mile Road, Southfield, Michigan 48034-8339; phone
number: (248) 353-2700 (ext. 217); fax number: (866) 249-3138; (b) in the case
of the Servicer at the following address: Attention: Credit Acceptance
Corporation/Wendy Rummler, Silver Triangle Building, 25505 West Twelve Mile
Road, Southfield, Michigan 48034-8339; phone number: (248) 353-2700 (ext. 217);
fax number: (866) 249-3138; (c) in the case of the Trust Collateral Agent and
the Indenture Trustee, at its Corporate Trust Office, 4 New York Plaza, 6th
Floor, New York, NY 10024, Attention: Institutional Trust Services/Structured
Finance; (d) in the case of the Backup Servicer, at the following address:
Systems & Services Technologies, Inc., 4315 Pickett Road, St. Joseph, MO 64503,
Attention: John Campbell, President, Joseph Booz, EVP/General Counsel, phone:
(816) 671-2022; (816) 671-2028, fax: (816) 671-2029; (e) in the case of the
Owner Trustee, at: One Rodney Square 920 No. King St., 1st Floor, Wilmington, DE
19801 Attn: Sterling Correia, phone: (302) 888-7528; fax: (302) 888-7544; (f) in
the case of the Class A Insurer, to: Radian Asset Assurance Inc., 335 Madison
Avenue, New York, New York 10017, Attention: Chief Risk Officer and Chief Legal
Officer with an electronic copy sent to ABSRM@radian.biz in the case of any
information required to be provided to the Class A Insurer (and if such notice
refers to a Servicer Default or is a notice with respect to which the failure on
the part of the Class A Insurer to respond shall be deemed to constitute consent
or acceptance, such notice shall be marked to indicate "Urgent Material
Enclosed"); (g) in the case of the Backup Insurer, to: XL Capital Assurance
Inc., 1201 Avenue of the Americas, 31st Floor, New York, NY 10020-1001,
Attention: Surveillance; (h) in the case of S&P, to: Standard &
96
Poor's Rating Services, Asset Backed Surveillance Department, 55 Water Street,
New York, New York 10041 or to such other address as shall be designated by
written notice to the other parties; and (i) in the case of Moody's, to: Moody's
Investors Service, Inc., Attention: [ ], 99 Church Street, New York, NY 10007 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 or the Backup Insurer.
SECTION 11.07. Assignment.
Notwithstanding anything to the contrary contained herein, except as provided in
Sections 6.02, 6.05 and 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 Controlling Party.
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 Controlling Party 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, the Backup 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.
97
SECTION 11.10. Third-Party Beneficiaries.
This Agreement will inure to the benefit of and be binding upon the parties
hereto, the Indenture Trustee, the Class A Noteholders and the
Certificateholders, respectively, and their respective successors and permitted
assigns. Except as may be otherwise provided in this Agreement, no other person
will have any right or obligation hereunder. Each of the Class A Insurer and the
Backup 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
98
receiver, liquidator, assignee, trustee, sequestrator (or similar official) of
the Seller or the Trust or any portion of the property of the Seller or the
Trust. The parties hereto agree that all obligations of the Issuer and the
Seller are non-recourse to the Trust Property except as specifically set forth
in the Basic Documents.
SECTION 11.14. Controlling Party. So long as any Class A Note is
outstanding, the Controlling Party shall have the power to exercise the voting,
consent and control rights granted to the Class A Noteholders, except as set
forth in Section 11.01 hereof; provided, however, that after the occurrence and
during the continuance of a Class A Insurer Default, all voting, consent or
control rights of the Class A Insurer shall be suspended and the Backup Insurer
shall be the Controlling Party. Upon the cure of a Class A Insurer Default, such
voting, consent and control rights shall be reinstated and the Backup Insurer
shall no longer be the Controlling Party. If the Backup Insurer is the
Controlling Party, after the occurrence and during the continuance of a Backup
Insurer Default, any voting, consent or control rights granted to the Backup
Insurer shall be suspended. Upon the cure of any such Backup Insurer Default,
the Backup Insurer's voting, consent and control rights shall be reinstated.
99
IN WITNESS WHEREOF, the Issuer, Seller, Credit Acceptance, as Servicer and
in its individual capacity, Backup Servicer 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 2004-1, as Seller
By: ______________________________________
Name:
Title:
CREDIT ACCEPTANCE CORPORATION, as Servicer
and in its individual capacity
By: ______________________________________
Name:
Title:
100
[Sale and Servicing Agreement Signature Page]
101
CREDIT ACCEPTANCE AUTO DEALER LOAN TRUST 2004-1, as
Issuer
By: Wachovia Bank of Delaware, National Association, not
in its individual capacity but solely as Owner Trustee
on behalf of the Trust
By:_____________________________________________________
Name:
Title:
JPMORGAN CHASE BANK, as Trust Collateral Agent and
Indenture Trustee
By:_____________________________________________________
Name:
Title:
SYSTEMS & SERVICES TECHNOLOGIES, INC., as Backup
Servicer
By:_____________________________________________________
Name:
Title:
[Sale and Servicing Agreement Signature Page 2]
102
EXHIBIT A
[Reserved.]
A-1
EXHIBIT B
Credit Acceptance Auto Dealer Loan Trust 2004-1
Servicer's Certificate
B-1
EXHIBIT C
Investor Certification
for Electronic Password
Date:
JPMORGAN CHASE BANK
Attention: Corporate Trust Services -- Asset-Backed Administration
Credit Acceptance Auto Dealer Loan Trust 2004-1
In accordance with Section 5.11 of the Sale and Servicing Agreement dated
as of August 25, 2004 (the "Agreement"), by and among Credit Acceptance Funding
Corporation Trust 2004-1, as the Issuer, Credit Acceptance Funding LLC 2004-1,
as the Seller, Credit Acceptance Corporation, as the Servicer, JPMorgan Chase
Bank, as the Trust Collateral Agent, and Systems & Services Technologies, Inc.,
as the Backup Servicer, with respect to the Class A Asset Backed Notes (the
"Class A Notes") and the Asset Backed Certificates the ("Certificates"), the
undersigned hereby certifies and agrees as follows:
1. The undersigned is a beneficial owner of $________ principal balance of
the Class A Notes.
2. The undersigned is requesting a password pursuant to Section 5.11 of
the Agreement for access to certain information (the "Information") on the Trust
Collateral Agent's website.
3. In consideration of the Trust Collateral Agent's disclosure to the
undersigned of the Information, or the password in connection therewith, the
undersigned will keep the Information confidential (except from such outside
persons are as are assisting it in connection with the related Notes, from its
accountants and attorneys, and otherwise from such governmental or banking
authorities or agencies to which the undersigned is subject), and such
Information will not, without the prior written consent of the Trust Collateral
Agent, be otherwise disclosed by the undersigned or by its officers, directors,
partners, employees, agents or representatives (collectively, the
"Representatives") in any manner whatsoever, in whole or in part.
4. The undersigned will not use or disclose the Information in any manner
which could result in a violation of any provision of the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of 1934,
as amended, or would require registration of any Class A Note pursuant to
Section 5 of the Securities Act.
5. The undersigned shall be fully liable for any breach of this agreement
by itself or any of its Representatives and shall indemnify each of the parties
to the Agreement for
C-1
any loss, liability or expense incurred thereby with respect to any such breach
by the undersigned or any of its Representatives.
6. Capitalized terms used but not defined herein shall have the respective
meanings assigned thereto in the Agreement.
IN WITNESS WHEREOF, the undersigned has caused its name to be signed
hereby by its duly authorized officer, as of the day and year written above.
___________________________________
Beneficial Owner
By:_________________________________
Title:______________________________
Company:____________________________
Phone:______________________________
C-2
EXHIBIT D
FORM OF DEALER AGREEMENT
D-1
EXHIBIT E
FORM OF
SERVICER'S ACKNOWLEDGMENT
Credit Acceptance Corporation (the "Servicer") under the Sale and
Servicing Agreement, dated as of August 25, 2004 (the "Sale and Servicing
Agreement") among Credit Acceptance Auto Dealer Loan Trust 2004-1, Credit
Acceptance Funding LLC 2004-1, JPMorgan Chase Bank, Systems & Services
Technologies, Inc. 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, the Backup 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:______________________________
E-1
EXHIBIT F
FORM OF CONTRACTS
F-1
EXHIBIT G
COLLECTION GUIDELINES
G-1
EXHIBIT H
CREDIT GUIDELINES
[On file with the Servicer]
H-1
EXHIBIT I
COVENANT COMPLIANCE REPORT
1. Asset Coverage Ratio
Consolidated Net Assets $
Consolidated Funded Debt
Excess Net Assets $
-----
2. Total Liabilities Ratio
Consolidated Total Liabilities $
Consolidated Tangible Net Worth
Ratio
-----
Permitted
-----
3. Minimum Tangible Net Worth
Base Net Worth $
80% Consolidated Net Income
Minimum Tangible Net Worth $
Actual Consolidated Tangible Net Worth
Excess Consolidated Tangible Net Worth $
-----
4. Fixed Charge Coverage Ratio
Consolidated Net Income, as adjusted (last four quarters) $
Add:
Income Taxes
Interest
Depreciation and Amortization
Rent
Consolidated income available for fixed charges $
Fixed Charges:
Interest $
Rent
Total Fixed Charges $
Fixed Charge Coverage Ratio
Allowable fixed charge coverage ratio
I-1
SCHEDULE A
to Sale and
Servicing Agreement
Dealer Loans, Dealer Agreements and Contracts
A-1
SCHEDULE B
to Sale and
Servicing Agreement
FORECASTED COLLECTIONS
CREDIT ACCEPTANCE
COLLECTION PERIOD FORECASTED COLLECTIONS
- ----------------- ----------------------
Jul-04 11,362,125
Aug-04 11,189,429
Sep-04 10,941,809
Oct-04 10,691,403
Nov-04 10,416,844
Dec-04 10,142,136
Jan-05 9,862,100
Feb-05 9,559,223
Mar-05 9,206,020
Apr-05 8,862,697
May-05 8,530,931
Jun-05 8,174,849
Jul-05 7,806,554
Aug-05 7,454,739
Sep-05 7,078,852
Oct-05 6,780,099
Nov-05 6,429,626
Dec-05 6,086,504
Jan-06 5,785,415
Feb-06 5,464,658
Mar-06 5,091,838
Apr-06 4,749,266
May-06 4,425,381
Jun-06 4,110,990
Jul-06 3,735,723
Aug-06 3,357,937
Sep-06 3,051,996
Oct-06 2,785,597
Nov-06 2,544,986
Dec-06 2,296,996
Jan-07 2,031,341
Feb-07 1,759,906
Mar-07 1,351,943
Apr-07 1,035,298
May-07 834,566
Jun-07 654,149
Jul-07 606,925
Aug-07 606,216
Sep-07 605,375
B-1
CREDIT ACCEPTANCE
COLLECTION PERIOD FORECASTED COLLECTIONS
- ----------------- ----------------------
Oct-07 604,894
Nov-07 603,946
Dec-07 603,608
Jan-08 603,091
Feb-08 601,761
Mar-08 595,660
Apr-08 589,164
May-08 583,734
Jun-08 578,465
Jul-08 570,405
Aug-08 561,400
Sep-08 551,239
Oct-08 541,522
Nov-08 532,343
Dec-08 525,643
Jan-09 518,623
Feb-09 510,975
Mar-09 499,325
Apr-09 490,049
May-09 483,132
Jun-09 478,938
Jul-09 478,071
Aug-09 471,318
Sep-09 463,135
Oct-09 453,561
Nov-09 440,065
Dec-09 432,527
Jan-10 430,535
Feb-10 421,234
Mar-10 402,537
Apr-10 382,354
May-10 366,629
Jun-10 346,031
Jul-10 336,824
Aug-10 332,239
Sep-10 300,461
Oct-10 285,911
Nov-10 242,974
Dec-10 224,440
Jan-11 222,082
Feb-11 164,648
Mar-11 99,899
Apr-11 85,295
May-11 59,044
Jun-11 47,416
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 steps 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
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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 or the Backup 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
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Perfection Representations, Warranties 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 or the Backup
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.
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SCHEDULE D
to Sale and
Servicing Agreement
FINANCIAL COVENANTS
AND RELATED DEFINITIONS
1. Maintain Asset Coverage Ratio. Credit Acceptance shall, on a Consolidated
basis, maintain at all times, Consolidated Net Assets at a level greater than or
equal to Consolidated Funded Debt.
2. Maintain Total Liabilities Ratio Level. Credit Acceptance shall, on a
Consolidated basis, maintain as of the end of each fiscal quarter a ratio of
Consolidated Total Liabilities (including in the calculation thereof, all Debt
incurred by a Special Purpose Subsidiary, whether or not included therein under
GAAP) to Credit Acceptance's Consolidated Tangible Net Worth equal to or less
than 1.75 to 1.0.
3. Minimum Tangible Net Worth. Credit Acceptance shall, on a Consolidated
basis, maintain Consolidated Tangible Net Worth of not less than Two Hundred
Twenty Million Dollars ($220,000,000), plus the sum of (i) eighty percent (80%)
of Consolidated Net Income for each fiscal quarter of Credit Acceptance (A)
beginning on or after April 1, 2004, (B) ending on or before the applicable date
of determination thereof, and (C) for which Consolidated Net Income as
determined above is a positive amount and (ii) the Equity Offering Adjustment.
4. Maintain Fixed Charge Coverage Ratio Liabilities. Credit Acceptance shall,
on a Consolidated basis, maintain as of the end of each fiscal quarter a Fixed
Charge Coverage Ratio of not less than 2.50 to 1.0.
DEFINITIONS
Other than the term "Credit Acceptance," which shall have the meaning given to
it in this Sale and Servicing Agreement, capitalized terms used in this Schedule
D shall have the meanings given such terms in the Comerica Credit Agreement as
in effect on the date of this Sale and Servicing Agreement.
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