RECEIVABLES PURCHASE AGREEMENT

EXHIBIT 10.3 – RECEIVABLES PURCHASE AGREEMENT

 

[EXECUTION COPY]

 

CARMAX BUSINESS SERVICES, LLC,

as Seller,

 

and

 

CARMAX AUTO FUNDING LLC,

as Purchaser

 

 

RECEIVABLES PURCHASE AGREEMENT

Dated as of December 1, 2005

 

 

 

TABLE OF CONTENTS

 

 

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RECEIVABLES PURCHASE AGREEMENT

 

This Receivables Purchase Agreement, dated as of December 1, 2005, is between CarMax Business Services, LLC, a Delaware limited liability company (“ CarMax ”), as seller (the “ Seller ”), and CarMax Auto Funding LLC, a Delaware limited liability company (“ CarMax Funding ”), as purchaser (the “ Purchaser ”).

 

WHEREAS, in the regular course of business, CarMax Auto Superstores, Inc., a Virginia corporation (“ CarMax Auto ”), and certain affiliates of CarMax Auto originate motor vehicle retail installment sale contracts secured by new and used motor vehicles;

 

WHEREAS, the Seller intends to convey all of its right, title and interest in and to contracts having an aggregate outstanding principal balance of $450,000,013.70 as of the close of business on November 30, 2005 (the “ Receivables ”) to the Purchaser and, concurrently with its purchase of the Receivables, the Purchaser intends to convey all of its right, title and interest in and to the Receivables to CarMax Auto Owner Trust 2005-3, as issuer (the “ Issuer ”), pursuant to a Sale and Servicing Agreement, dated as of December 1, 2005 (the “ Sale and Servicing Agreement ”), among the Issuer, CarMax Funding, as depositor, and CarMax, as servicer; and

 

WHEREAS, the Seller and the Purchaser wish to set forth the terms pursuant to which the Receivables are to be sold by the Seller to the Purchaser;

 

NOW, THEREFORE, in consideration of the mutual terms and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1 Definitions . Whenever used in this Agreement, the following words and phrases shall have the following meanings:

 

“ Agreement ” shall mean this Receivables Purchase Agreement and all amendments hereof and supplements hereto.

 

“ Base Prospectus ” shall mean the prospectus, dated December 5, 2005, of the Purchaser relating to the public offering by the Purchaser of the Notes.

 

“ Bill of Sale ” shall mean the Bill of Sale and Assignment, substantially in the form attached as Exhibit A.

 

“ CarMax ” shall mean CarMax Business Services, LLC, a Delaware limited liability company, and its successors.

 

“ CarMax Auto ” shall mean CarMax Auto Superstores, Inc., a Virginia corporation, and its successors.

“ CarMax Funding ” shall mean CarMax Auto Funding LLC, a Delaware limited liability company, and its successors.

 

“ CarMax Funding II ” shall mean CarMax Funding II, LLC, a Delaware limited liability company, and its successors.

 

“ Class A Notes ” shall mean the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes issued pursuant to the Indenture.

 

“ Class B Notes ” shall mean the Class B Notes issued pursuant to the Indenture.

 

“ Class C Notes ” shall mean the Class C Notes issued pursuant to the Indenture.

 

“ Closing Date ” shall mean December 14, 2005.

 

“ Cutoff Date ” shall mean November 30, 2005.

 

“ Delaware Trustee ” shall mean The Bank of New York (Delaware), a Delaware banking corporation, as Delaware trustee under the Trust Agreement, and its successors in such capacity.

 

“ Depositor ” shall mean CarMax Funding, in its capacity as Depositor under the Trust Agreement, and its successors in such capacity.

 

“ Indenture ” shall mean the Indenture, dated as of December 1, 2005, between the Issuer and the Indenture Trustee, as amended, supplemented or otherwise modified and in effect from time to time.

 

“ Indenture Trustee ” shall mean Wells Fargo Bank, National Association, a national banking association, as indenture trustee under the Indenture, and its successors in such capacity.

 

“ Initial Reserve Account Deposit ” shall mean $2,250,000.

 

“ Issuer ” shall mean CarMax Auto Owner Trust 2005-3, a Delaware statutory trust, and its successors.

 

“ Noteholders ” shall mean the registered holders of the Notes.

 

“ Notes ” shall mean the Class A Notes, the Class B Notes and the Class C Notes.

 

“ Owner Trustee ” shall mean The Bank of New York, a New York banking corporation, as owner trustee under the Trust Agreement, and its successors in such capacity.

 

“ Prospectus Supplement ” shall mean the final prospectus supplement, dated December 6, 2005, of the Purchaser relating to the public offering by the Purchaser of the Notes.

 

“ Prospectus ” shall mean the Prospectus Supplement and the Base Prospectus.

 

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“ Purchaser ” shall mean CarMax Funding, in its capacity as purchaser of the Receivables under this Agreement, and its successors in such capacity.

 

“ Receivables ” shall mean the motor vehicle retail installment sale contracts sold by the Seller to the Purchaser pursuant to this Agreement and identified on the Receivables Schedule.

 

“ Receivables Purchase Price ” shall mean $463,500,000.

 

“ Receivables Schedule ” shall mean the schedule of receivables attached as Schedule A, as amended, supplemented or otherwise modified and in effect from time to time.

 

“ Representative ” shall mean Wachovia Capital Markets, LLC, a Delaware limited liability company, as representative of the Underwriters.

 

“ Sale and Servicing Agreement ” shall have the meaning specified in the recitals.

 

“ Seller ” shall mean CarMax, in its capacity as seller of the Receivables under this Agreement, and its successors in such capacity.

 

“ State ” shall mean any of the 50 states of the United States or the District of Columbia.

 

“ Transaction Documents ” shall mean this Agreement, the Trust Agreement, the Sale and Servicing Agreement, the Indenture, the Administration Agreement and the other documents and certificates delivered in connection therewith, in each case as amended, supplemented or otherwise modified and in effect from time to time.

 

“ Trust Agreement ” shall mean the Trust Agreement, dated as of September 30, 2005, among CarMax Funding, the Delaware Trustee and the Owner Trustee, as amended and restated by the Amended and Restated Trust Agreement, dated as of December 1, 2005, among CarMax Funding, the Delaware Trustee and the Owner Trustee.

 

“ Trustee ” shall mean either the Owner Trustee or the Indenture Trustee, as the context requires.

 

“ UCC ” shall mean the Uniform Commercial Code as in effect in the applicable jurisdiction.

 

“ Underwriters ” shall mean the underwriters named in Schedule A to the Underwriting Agreement.

 

“ Underwriting Agreement ” shall mean the Underwriting Agreement, dated December 6, 2005, among CarMax Funding, CarMax and the Representative, relating to the purchase of the Notes by the Underwriters from CarMax Funding.

 

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SECTION 1.2 Other Definitional Provisions .

 

(a) Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Sale and Servicing Agreement.

 

(b) The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, subsection, Schedule and Exhibit references contained in this Agreement are references to Sections, subsections, Schedules and Exhibits in or to this Agreement unless otherwise specified; the term “proceeds” shall have the meaning set forth in the applicable UCC; and the word “including” shall mean including without limitation.

 

ARTICLE II

CONVEYANCE OF RECEIVABLES

 

SECTION 2.1 Sale and Conveyance of Receivables .

 

(a) On the Closing Date, subject to the terms and conditions of this Agreement, the Seller hereby agrees to sell, transfer, assign, set over and otherwise convey to the Purchaser, and the Purchaser hereby agrees to purchase from the Seller, without recourse (subject to the Seller’s obligations hereunder and the satisfaction of the conditions set forth in Section 4.1), all of the right, title and interest of the Seller, whether now owned or hereafter acquired, in, to and under the following:

 

(i) the Receivables;

 

(ii) all amounts received on or in respect of the Receivables (including proceeds of the repurchase of Receivables by the Seller pursuant to Section 3.2(f)) after the Cutoff Date;

 

(iii) the security interests in the Financed Vehicles granted by the Obligors pursuant to the Receivables and any other interest of the Seller in such Financed Vehicles;

 

(iv) all proceeds from claims on or refunds of premiums of any physical damage or theft insurance policies covering the Financed Vehicles and any proceeds or refunds of premiums of any credit life or credit disability insurance policies relating to the Financed Vehicles or the Obligors;

 

(v) the Receivable Files;

 

(vi) the right to realize upon any property (including the right to receive future Liquidation Proceeds) that shall have secured a Receivable and have been repossessed by or on behalf of the Issuer; and

 

(vii) all present and future claims, demands, causes of action and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing,

 

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including all proceeds of the conversion thereof, voluntary or involuntary, into cash or other liquid property; all accounts, general intangibles, chattel paper, instruments, documents, money, investment property, deposit accounts, letters of credit, letter-of-credit rights, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations; and all other property which at any time constitutes all or part of or is included in the proceeds of any of the foregoing.

 

(b) The parties hereto intend that the conveyance of the Receivables and related property hereunder be a sale and not a loan. In the event that the conveyance hereunder is not for any reason considered a sale, the Seller hereby grants to the Purchaser a first priority perfected security interest in all of the Seller’s right, title and interest in, to and under the Receivables and all other property conveyed hereunder and listed in this Section and all proceeds of any of the foregoing. The parties intend that this Agreement constitute a security agreement under applicable law. Such grant is made to secure the payment of all amounts payable hereunder, including the Receivables Purchase Price. If such conveyance is for any reason considered to be a loan and not a sale, the Seller consents to the Purchaser transferring such security interest in favor of the Indenture Trustee and transferring the obligations secured thereby to the Indenture Trustee.

 

(c) The Seller agrees to treat the transfer of the Receivables and the related property contemplated by this Section for all purposes (including tax and financial accounting purposes) as an absolute transfer on all relevant books, records, tax returns, financial statements and other applicable documents.

 

SECTION 2.2 Receivables Purchase Price; Payments on the Receivables .

 

(a) On the Closing Date, in exchange for the Receivables and other assets described in Section 2.1, the Purchaser shall pay to the Seller the Receivables Purchase Price. An amount equal to $446,728,269.66 of the Receivables Purchase Price shall be paid by the Purchaser to the Seller in cash or immediately available funds. The remainder of the Receivables Purchase Price shall be paid by crediting the Seller with a contribution to the capital of the Purchaser. The Purchaser shall deposit, from funds it receives from the issuance of the Notes, an amount equal to the Initial Reserve Account Deposit into the Reserve Account, which amount shall be an asset of the Issuer.

 

(b) The Purchaser shall be entitled to, and shall convey such right to the Owner Trustee pursuant to the Sale and Servicing Agreement, all payments of principal and interest on or in respect of the Receivables received after the Cutoff Date.

 

SECTION 2.3 Transfer of Receivables . Pursuant to the Sale and Servicing Agreement, the Purchaser will assign all of its right, title and interest in, to and under the Receivables and other assets described in Section 2.1 to the Issuer. The parties hereto acknowledge that the Issuer will pledge its rights in, to and under the Receivables and other assets described in Section 2.1 to the Indenture Trustee pursuant to the Indenture. The Purchaser has the right to assign its interest under this Agreement as may be required to effect the purposes of the Sale and Servicing Agreement, without the consent of the Seller, and the Owner Trustee as assignee shall succeed to the rights and obligations hereunder of the Purchaser.

 

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SECTION 2.4 Examination of Receivable Files . The Seller will make the Receivable Files available to the Purchaser or its agent for examination during normal business hours at the Seller’s offices or such other location as otherwise shall be agreed upon by the Purchaser and the Seller.

 

SECTION 2.5 Expenses . The Seller will reimburse the Purchaser for expenses of the Purchaser in connection with the sale of the Notes, including expenses which are reimbursable to the Underwriters by the Purchaser pursuant to the Underwriting Agreement.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

SECTION 3.1 Representations and Warranties of the Purchaser . The Purchaser hereby makes the following representations and warranties to the Seller as of the date of this Agreement and as of the Closing Date:

 

(a) Organization and Good Standing . The Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and has 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 had at all relevant times, and shall have, power, authority and legal right to acquire, own and sell the Receivables.

 

(b) Power and Authority; Binding Obligation . The Purchaser has the power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery and performance of this Agreement has been duly authorized by the Purchaser by all necessary action. This Agreement constitutes the legal, valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, liquidation and other similar laws and to general equitable principles.

 

(c) No Violation . The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof shall 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 limited liability company agreement or certificate of formation of the Purchaser, or conflict with or breach any of the material terms or provisions of, or constitute (with or without notice or lapse of time) a default under, any indenture, agreement or other instrument to which the Purchaser is a party or by which it may be bound.

 

(d) No Proceedings . There are no proceedings or investigations pending, or, to the knowledge of the Purchaser, threatened, against the Purchaser before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Purchaser or its properties (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or (iii) seeking any determination or ruling that, in the

 

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reasonable judgment of the Purchaser would materially and adversely affect the performance by the Purchaser of its obligations under, or the validity or enforceability of, this Agreement or the Receivables.

 

SECTION 3.2 Representations and Warranties of the Seller .

 

(a) The Seller hereby makes the following representations and warranties to the Purchaser as of the date of this Agreement and as of the Closing Date:

 

(i) Organization and Good Standing . The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and has 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 had at all relevant times, and shall have, power, authority and legal right to acquire, own and sell the Receivables.

 

(ii) Power and Authority; Binding Obligation . The Seller has the power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery and performance of this Agreement has been duly authorized by the Seller by all necessary action. This Agreement constitutes the legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, subject, as to enforceability, to applicable bankruptcy, insolvency, reorganization, conservatorship, receivership, liquidation and other similar laws and to general equitable principles.

 

(iii) No Violation . The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof shall 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 formation or limited liability company agreement of the Seller, or conflict with or breach any of the material terms or provisions of, or constitute (with or without notice or lapse of time) a default under, any indenture, agreement or other instrument to which the Seller is a party or by which it may be bound.

 

(iv) No Proceedings . There are no proceedings or investigations pending, or, to the knowledge of the Seller, threatened, against the Seller before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Seller or its properties (i) asserting the invalidity of this Agreement, (ii) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or (iii) seeking any determination or ruling that, in the reasonable judgment of the Seller would materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, this Agreement or the Receivables.

 

(v) No Tax Liens . The Seller is not aware of any material judgment or tax lien filings against the Seller.

 

(b) The Seller hereby makes the following representations and warranties to the Purchaser as of the date of this Agreement and as of the Closing Date, which representations

 

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and warranties shall remain operative and in full force and effect, shall survive the transfer and conveyance of the Receivables and other assets described in Section 2.1 by the Seller to the Purchaser and by the Purchaser to the Issuer and shall inure to the benefit of the Purchaser, the Trustees and the Noteholders:

 

(i) Characteristics of Receivables . Each Receivable (i) has been originated by CarMax Auto or an Affiliate of CarMax Auto in the ordinary course of business in connection with the sale of a new or used motor vehicle and has been fully and properly executed by the parties thereto, (ii) contains customary and enforceable provisions such that the rights and remedies of the holder thereof are adequate for realization against the collateral of the benefits of the security, (iii) provides for level monthly payments that fully amortize the Amount Financed by maturity (except that the period between the date of such Receivable and the date of the first Scheduled Payment may be less than or greater than one month and the amount of the first and last Scheduled Payments may be less than or greater than the level payments) and yield interest at the related APR, (iv) provides for, in the event that such Receivable is prepaid, a prepayment that fully pays the Principal Balance of such Receivable with interest at the related APR through the date of payment, (v) is a retail installment sale contract substantially in the form of Exhibit B, (vi) is secured by a new or used motor vehicle that had not been repossessed as of the Cutoff Date, (vii) is a Simple Interest Receivable, (viii) relates to an Obligor who has made at least one payment under such Receivable as of the Cutoff Date and (ix) relates to an Obligor whose mailing address is located in any State.

 

(ii) Receivable Schedule . The information set forth in the Receivable Schedule was true and correct in all material respects as of the opening of business on the Cutoff Date, and no selection procedures believed to be adverse to the Depositor and/or the Noteholders were utilized in selecting the Receivables from those retail installment sale contracts which met the criteria contained in this Agreement. The information set forth in the compact disk or other listing regarding the Receivables made available to the Depositor and its assigns (which compact disk or other listing is required to be delivered as specified herein) is true and correct in all material respects.

 

(iii) Compliance with Law . Each Receivable and the sale of the related Financed Vehicle complied, at the time such Receivable was originated and complies, as of the Closing Date, in all material respects with all requirements of applicable federal, state and local laws, and regulations thereunder, including usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board’s Regulations B and Z, the Servicemembers Civil Relief Act, state adaptations of the National Consumer Act and the Uniform Consumer Credit Code and any other consumer credit, equal opportunity and disclosure laws applicable to such Receivable and sale.

 

(iv) Binding Obligation . Each Receivable represents the genuine, legal, valid and binding payment obligation in writing of the related Obligor, enforceable by the holder thereof in all material respects in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency