SALE AND SERVICING AGREEMENT

 

EXHIBIT 10.1 – SALE AND SERVICING AGREEMENT

 

[EXECUTION COPY]

 

CARMAX AUTO OWNER TRUST 2005-1,

as Issuer,

 

CARMAX AUTO FUNDING LLC,

as Depositor,

 

and

 

CARMAX BUSINESS SERVICES, LLC,

as Servicer

 

 

SALE AND SERVICING AGREEMENT

Dated as of April 1, 2005

 

 

TABLE OF CONTENTS

 

 

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SALE AND SERVICING AGREEMENT, dated as of April 1, 2005 (as amended, supplemented or otherwise modified and in effect from time to time, this “ Agreement ”), among CARMAX AUTO OWNER TRUST 2005-1, a Delaware statutory trust (the “ Trust ”), CARMAX AUTO FUNDING LLC, a Delaware limited liability company (the “ Depositor ”), and CARMAX BUSINESS SERVICES, LLC, a Delaware limited liability company (“ CarMax ”), as servicer (in such capacity, the “ Servicer ”).

 

WHEREAS, the Trust desires to purchase certain motor vehicle retail installment sale contracts originated or acquired by CarMax in the ordinary course of business and sold to the Depositor as of the date hereof;

 

WHEREAS, the Depositor is willing to sell such contracts to the Trust as of the date hereof; and

 

WHEREAS, the Servicer is willing to service such contracts on behalf of the Trust;

 

NOW, THEREFORE, in consideration of the mutual 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, unless the context otherwise requires, whenever capitalized shall have the following meanings:

 

“ Additional Note Interest ” shall mean, for any Distribution Date and any Class of Notes, the sum of (i) all accrued but unpaid Monthly Note Interest for previous Distribution Dates for such Class plus (ii) to the extent permitted by law, interest on such accrued but unpaid Monthly Note Interest at the Note Rate applicable to such Class.

 

“ Additional Servicing Fee ” shall mean, for any Collection Period, if a successor Servicer has been appointed pursuant to Section 8.2, the amount, if any, by which (i) the compensation payable to such successor Servicer for such Collection Period exceeds (ii) the Monthly Servicing Fee for such Collection Period.

 

“ Affiliate ” shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. For purposes of this definition, “ control ” when used with respect to any Person shall mean 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.

 

“ Amount Financed ” shall mean, with respect to any Receivable, the aggregate amount advanced under such Receivable toward the purchase price of the related Financed

 

Vehicle and any related costs, including accessories, extended warranty contracts, insurance premiums and other items customarily financed as part of a motor vehicle retail installment sale contract.

 

“ Applicable Tax State ” shall mean, as of any date, (i) any State in which the Owner Trustee maintains the Corporate Trust Office, (ii) any State in which the Owner Trustee maintains its principal executive offices and (iii) any State in which the Servicer regularly conducts servicing and collection activities (other than purely ministerial activities) with respect to a material portion of the Receivables.

 

“ APR ” shall mean, with respect to any Receivable, the annual percentage rate of interest stated in such Receivable.

 

“ Authorized Officer ” shall mean, as applicable, (i) any officer within the Corporate Trust Office of the Indenture Trustee, including any vice president, assistant vice president, secretary or assistant secretary, or any financial services officer of the Indenture Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer of the Indenture Trustee to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject or (ii) any officer within the Corporate Trust Office of the Owner Trustee, including any senior vice president, vice president, assistant vice president, assistant secretary, assistant treasurer or trust officer of the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers and also, with respect to a particular matter, any other officer of the Owner Trustee to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

 

“ Available Collections ” shall mean, for any Distribution Date, (i) all Obligor payments received with respect to the Receivables during the preceding Collection Period, (ii) all Liquidation Proceeds received with respect to the Receivables during the preceding Collection Period, (iii) all interest earned on funds on deposit in the Collection Account during the preceding Collection Period, (iv) the aggregate Purchase Amount deposited in the Collection Account on the Business Day preceding such Distribution Date, (v) all prepayments received with respect to the Receivables during the preceding Collection Period attributable to any refunded item included in the Amount Financed (including amounts received as a result of rebates of extended warranty contract costs and insurance premiums and proceeds received under physical damage, theft, credit life and credit disability insurance policies) and (vi) all Simple Interest Advances deposited into the Collection Account by the Servicer on the Business Day preceding such Distribution Date; provided , however , that Available Collections for any Distribution Date shall not include any payments or other amounts (including Liquidation Proceeds) received with respect to any Purchased Receivable the Purchase Amount for which was included in Available Collections for a previous Distribution Date; provided further , that Available Collections for any Distribution Date shall not include any payments or other amounts (including Liquidation Proceeds) received with respect to any Receivable to the extent that the Servicer has made an unreimbursed Simple Interest Advance with respect to such Receivable and is entitled to reimbursement from such payments or other amounts pursuant to Section 4.4; and, provided further , that Available Collections for any Distribution Date shall not include any payments or other amounts (including Liquidation Proceeds) received with respect to the

 

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Receivables that are retained by the Servicer as reimbursement for Unreimbursed Servicer Advances pursuant to Section 4.4.

 

“ Available Funds ” shall mean, for any Distribution Date, the sum of (i) the Available Collections for such Distribution Date plus (ii) the Reserve Account Draw Amount, if any, for such Distribution Date (to the extent deposited in the Collection Account).

 

“ Business Day ” shall mean any day other than a Saturday, a Sunday or a day on which banking institutions or trust companies in New York, New York, Wilmington, Delaware, Minneapolis, Minnesota or Richmond, Virginia are authorized or obligated by law, executive order or governmental decree to remain closed.

 

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

 

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

 

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

 

“ CarMax Fiscal Year ” shall mean the period commencing on March 1 of any year and ending on February 28 (or February 29, if applicable) of the following year.

 

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

 

“ Certificate ” shall have the meaning specified in the Trust Agreement.

 

“ Certificate Payment Account ” shall mean the account established and maintained as such pursuant to Section 4.1(c).

 

“ Certificate Percentage Interest ” shall mean, with respect to a Certificate, the percentage specified on such Certificate as the Certificate Percentage Interest, which percentage represents the beneficial interest of such Certificate in the Trust. The initial Certificate Percentage Interest held by the Depositor shall be 100%.

 

“ Certificateholder ” shall have the meaning specified in the Trust Agreement.

 

“ Class ” shall mean a class of Notes, which may be the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes or the Class C Notes.

 

“ 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.

 

“ Class A-1 Final Distribution Date ” shall mean the April 2006 Distribution Date.

 

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“ Class A-1 Monthly Interest ” shall mean (i) for the initial Distribution Date, $296,430.57, and (ii) for any Distribution Date thereafter, the product of (A) the actual number of days elapsed during the period from and including the preceding Distribution Date to but excluding such Distribution Date divided by 360, (B) the Class A-1 Rate and (C) the outstanding principal balance of the Class A-1 Notes as of the preceding Distribution Date (after giving effect to all payments of principal made to the Holders of the Class A-1 Notes on or before such preceding Distribution Date).

 

“ Class A-1 Notes ” shall mean the 3.1396% Class A-1 Asset-Backed Notes issued by the Trust pursuant to the Indenture in the initial aggregate principal amount of $103,000,000.

 

“ Class A-1 Rate ” shall mean 3.1396% per annum.

 

“ Class A-2 Final Distribution Date ” shall mean the February 2008 Distribution Date.

 

“ Class A-2 Monthly Interest ” shall mean (i) for the initial Distribution Date, $685,440.00, and (ii) for any Distribution Date thereafter, one-twelfth of the product of (A) the Class A-2 Rate and (B) the outstanding principal balance of the Class A-2 Notes as of the preceding Distribution Date (after giving effect to all payments of principal made to the Holders of the Class A-2 Notes on or before such preceding Distribution Date).

 

“ Class A-2 Notes ” shall mean the 3.78% Class A-2 Asset-Backed Notes issued by the Trust pursuant to the Indenture in the initial aggregate principal amount of $204,000,000.

 

“ Class A-2 Rate ” shall mean 3.78% per annum.

 

“ Class A-3 Final Distribution Date ” shall mean the May 2009 Distribution Date.

 

“ Class A-3 Monthly Interest ” shall mean (i) for the initial Distribution Date, $613,075.56, and (ii) for any Distribution Date thereafter, one-twelfth of the product of (A) the Class A-3 Rate and (B) the outstanding principal balance of the Class A-3 Notes as of the preceding Distribution Date (after giving effect to all payments of principal made to the Holders of the Class A-3 Notes on or before such preceding Distribution Date).

 

“ Class A-3 Notes ” shall mean the 4.13% Class A-3 Asset-Backed Notes issued by the Trust pursuant to the Indenture in the initial aggregate principal amount of $167,000,000.

 

“ Class A-3 Rate ” shall mean 4.13% per annum.

 

“ Class A-4 Final Distribution Date ” shall mean the March 2010 Distribution Date.

 

“ Class A-4 Monthly Interest ” shall mean (i) for the initial Distribution Date, $391,894.40, and (ii) for any Distribution Date thereafter, one-twelfth of the product of (A) the Class A-4 Rate and (B) the outstanding principal balance of the Class A-4 Notes as of the preceding Distribution Date (after giving effect to all payments of principal made to the Holders of the Class A-4 Notes on or before such preceding Distribution Date).

 

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“ Class A-4 Notes ” shall mean the 4.35% Class A-4 Asset-Backed Notes issued by the Trust pursuant to the Indenture in the initial aggregate principal amount of $101,352,000.

 

“ Class A-4 Rate ” shall mean 4.35% per annum.

 

“ Class B Final Distribution Date ” shall mean the May 2010 Distribution Date.

 

“ Class B Monthly Interest ” shall mean (i) for the initial Distribution Date, $81,459.74, and (ii) for any Distribution Date thereafter, one-twelfth of the product of (A) the Class B Rate and (B) the outstanding principal balance of the Class B Notes as of the preceding Distribution Date (after giving effect to all payments of principal made to the Holders of the Class B Notes on or before such preceding Distribution Date).

 

“ Class B Notes ” shall mean the 4.57% Class B Asset-Backed Notes issued by the Trust pursuant to the Indenture in the initial aggregate principal amount of $20,053,000.

 

“ Class B Rate ” shall mean 4.57% per annum.

 

“ Class C Final Distribution Date ” shall mean the October 2011 Distribution Date.

 

“ Class C Monthly Interest ” shall mean (i) for the initial Distribution Date, $92,522.58, and (ii) for any Distribution Date thereafter, one-twelfth of the product of (A) the Class C Rate and (B) the outstanding principal balance of the Class C Notes as of the preceding Distribution Date (after giving effect to all payments of principal made to the Holders of the Class C Notes on or before such preceding Distribution Date).

 

“ Class C Notes ” shall mean the 4.82% Class C Asset-Backed Notes issued by the Trust pursuant to the Indenture in the initial aggregate principal amount of $21,595,000.

 

“ Class C Rate ” shall mean 4.82% per annum.

 

“ Class Final Distribution Date ” shall mean, as applicable, the Class A-1 Final Distribution Date, the Class A-2 Final Distribution Date, the Class A-3 Final Distribution Date, the Class A-4 Final Distribution Date, the Class B Final Distribution Date or the Class C Final Distribution Date.

 

“ Closing Date ” shall mean April 13, 2005.

 

“ Collection Account ” shall mean the account established and maintained as such pursuant to Section 4.1(a).

 

“ Collection Period ” shall mean each calendar month during the term of this Agreement or, in the case of the initial Collection Period, the period from but excluding the Cutoff Date to and including April 30, 2005.

 

“ Commission ” shall mean the Securities and Exchange Commission, and its successors.

 

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“ Computer Tape ” shall mean any computer tape or compact disk generated by the Seller which provides information relating to the Receivables and which was used by the Seller in selecting the Receivables sold to the Depositor under the Receivables Purchase Agreement on the Closing Date.

 

“ Consolidated Tangible Net Worth ” shall mean, as of any date, all amounts which, in conformity with generally accepted accounting principles, would be included under stockholder’s equity on the consolidated balance sheet of CarMax, Inc. as of such date; provided , however , that, in any event, such amounts shall be net of (i) amounts carried on the consolidated financial statements of CarMax, Inc. for any write-up in the book value of any assets of CarMax, Inc. resulting from the revaluation thereof subsequent to February 29, 2004, (ii) treasury stock, (iii) intangible assets and (iv) indebtedness owing from officers, employees, shareholders or affiliates of CarMax, Inc. (but only if the aggregate amount of such indebtedness exceeds $1,000,000).

 

“ Controlling Class ” shall mean (i) the Class A Notes so long as any Class A Notes are Outstanding, (ii) thereafter the Class B Notes so long as any Class B Notes are Outstanding and (iii) thereafter the Class C Notes as long as any Class C Notes are Outstanding.

 

“ Corporate Trust Office ” shall mean, as applicable, (i) the principal office of the Indenture Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of this Agreement is located at Wells Fargo Center, MAC N9311-161, Sixth and Marquette, Minneapolis, Minnesota, 55479 Attention: Asset Backed Securities Department, or at such other address as the Indenture Trustee may designate from time to time by notice to the Noteholders, the Owner Trustee, the Depositor, the Seller and the Servicer, or the principal corporate trust office of any successor Indenture Trustee at the address designated by such successor Indenture Trustee by notice to the Noteholders, the Owner Trustee, the Depositor, the Seller and the Servicer or (ii) the principal office of the Owner Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of this Agreement is located at 101 Barclay Street, 8W, New York, New York, 10286, Attention: Corporate Trust Division, Asset Backed Securities Group, or at such other address as the Owner Trustee may designate from time to time by notice to the Certificateholders, the Indenture Trustee, the Depositor, the Seller and the Servicer, or the principal corporate trust office of any successor Owner Trustee at the address designated by such successor Owner Trustee by notice to the Certificateholders, the Indenture Trustee, the Depositor, the Seller and the Servicer.

 

“ Cutoff Date ” shall mean March 31, 2005.

 

“ Defaulted Receivable ” shall mean a Receivable as to which (i) any payment, or any part of any payment, due under such Receivable has become 120 days or more delinquent (whether or not the Servicer has repossessed the related Financed Vehicle), (ii) the Servicer has repossessed and sold the related Financed Vehicle or (iii) the Servicer has determined in accordance with its customary practices that such Receivable is uncollectible; provided , however , that a Receivable shall not be classified as a Defaulted Receivable until the last day of the Collection Period during which one of the foregoing events first occurs; and, provided further , that a Purchased Receivable shall not be deemed to be a Defaulted Receivable.

 

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“ Delaware Trustee ” shall mean The Bank of New York (Delaware), a Delaware banking corporation, not in its individual capacity but solely as Delaware Trustee under the Trust Agreement, and any successor Delaware Trustee under the Trust Agreement.

 

“ Depositor ” shall mean CarMax Funding.

 

“ Determination Date ” shall mean the sixth day preceding each Distribution Date or, if such sixth day is not a Business Day, the following Business Day, commencing on May 10, 2005.

 

“ Distribution Date ” shall mean the 15th day of each month or, if such 15th day is not a Business Day, the following Business Day, commencing on May 16, 2005.

 

“ Eligible Institution ” shall mean (i) the corporate trust department of the Indenture Trustee or the Owner Trustee or (ii) any other depository institution organized under the laws of the United States or any State or incorporated under the laws of a foreign jurisdiction with a branch or agency located in the United States or any State qualified to take deposits and subject to supervision and examination by federal or state banking authorities which at all times has either a long-term unsecured debt rating of at least Baa3 from Moody’s or a long-term unsecured debt rating, a short-term unsecured debt rating or a certificate of deposit rating acceptable to Moody’s and whose deposits are insured by the Federal Deposit Insurance Corporation; provided , however , that (A) the commercial paper, short-term debt obligations or other short-term deposits of the depository institution described in clause (ii) above must be rated at least Prime-1 by Moody’s and at least A-1+ by Standard & Poor’s if deposits are to be held in an account maintained with such depository institution pursuant to this Agreement for fewer than 30 days and (B) the long-term unsecured debt obligations of the depository institution described in clause (ii) above must be rated at least AA- by Standard & Poor’s if deposits are to be held in an account maintained with such depository institution pursuant to this Agreement for more than 30 days.

 

“ Eligible Servicer ” shall mean a Person which, at the time of its appointment as Servicer, (i) has a net worth of not less than $50,000,000, (ii) is servicing a portfolio of motor vehicle retail installment sale contracts and/or motor vehicle loans, (iii) is legally qualified, and has the capacity, to service the Receivables, (iv) has demonstrated the ability to service a portfolio of motor vehicle retail installment sale contracts and/or motor vehicle loans similar to the Receivables professionally and competently in accordance with standards of skill and care that are consistent with prudent industry standards and (v) is qualified and entitled to use pursuant to a license or other written agreement, and agrees to maintain the confidentiality of, the software which the Servicer uses in connection with performing its duties and responsibilities under this Agreement or obtains rights to use, or develops at its own expense, software which is adequate to perform its duties and responsibilities under this Agreement.

 

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

 

“ Event of Servicing Termination ” shall mean an event specified in Section 8.1.

 

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“ Excess Collections ” shall have the meaning specified in Section 2.8(a)(xiii) of the Indenture.

 

“ Final Scheduled Maturity Date ” shall mean the October 2011 Distribution Date.

 

“ Financed Vehicle ” shall mean a new or used motor vehicle, together with all accessions thereto, securing an Obligor’s indebtedness under a Receivable.

 

“ Fiscal Quarter ” shall mean a fiscal quarter of a CarMax Fiscal Year.

 

“ Holder ” shall mean a Noteholder or a Certificateholder, as the case may be.

 

“ Indenture ” shall mean the Indenture, dated as of April 1, 2005, between the Trust 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, not in its individual capacity but solely as Indenture Trustee under the Indenture, and any successor Indenture Trustee under the Indenture.

 

“ Initial Note Balance ” shall mean, as the context may require, (i) with respect to all of the Notes, $617,000,000, or (ii) with respect to any Note, an amount equal to the initial denomination of such Note.

 

“ Initial Reserve Account Deposit ” shall mean $3,085,000.

 

“ Insolvency Event ” shall mean, with respect to any Person, (i) the making by such Person of a general assignment for the benefit of creditors, (ii) the filing by such Person of a voluntary petition in bankruptcy, (iii) such Person being adjudged bankrupt or insolvent, or having had entered against such Person an order for relief in any bankruptcy or insolvency proceeding, (iv) the filing by such Person of a petition or answer seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, (v) the filing by such Person of an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Person in any proceeding specified in clause (vii) below, (vi) seeking, consenting to or acquiescing in the appointment of a trustee, receiver or liquidator of such Person or of all or any substantial part of the assets of such Person or (vii) the failure to obtain dismissal within 60 days of the commencement of any proceeding against such Person seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation, or the entry of any order appointing a trustee, liquidator or receiver of such Person of all or any substantial portion of the assets of such Person.

 

“ Lien ” shall mean a security interest, lien, charge, pledge, equity or encumbrance of any kind, other than tax liens, mechanics’ or materialmen’s liens, judicial liens and any liens that may attach to a Financed Vehicle by operation of law.

 

“ Liquidation Proceeds ” shall mean all amounts received by the Servicer with respect to any Defaulted Receivable, net of the sum of (i) any expenses incurred by the Servicer

 

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in connection with collection of such Receivable and the disposition of the related Financed Vehicle (to the extent determinable by the Servicer and not previously reimbursed) plus (ii) any amounts required by law to be remitted to the related Obligor.

 

“ Monthly Note Interest ” shall mean, for any Distribution Date, the sum of the Class A-1 Monthly Interest, the Class A-2 Monthly Interest, the Class A-3 Monthly Interest, the Class A-4 Monthly Interest, the Class B Monthly Interest and the Class C Monthly Interest, in each case for such Distribution Date.

 

“ Monthly P&I ” shall mean, with respect to any Receivable, the amount of each monthly installment of principal and interest payable with respect to such Receivable in accordance with the terms thereof, exclusive of any charges allocable to the financing of any insurance premium and charges which represent late payment charges or extension fees.

 

“ Monthly Remittance Condition ” shall have the meaning specified in Section 4.2.

 

“ Monthly Servicing Fee ” shall mean, for any Collection Period, the fee payable to the Servicer on the following Distribution Date for services rendered during such Collection Period as determined pursuant to Section 3.8.

 

“ Moody’s ” shall mean Moody’s Investors Service, Inc., and its successors.

 

“ Net Losses ” shall mean, with respect to any Collection Period, the excess, if any, of (i) the aggregate Principal Balance of all Receivables that became Defaulted Receivables during such Collection Period over (ii) the aggregate Liquidation Proceeds received by the Servicer during such Collection Period.

 

“ Note Balance ” shall mean, at any time, as the context may require, (i) with respect to all of the Notes, an amount equal to, initially, the Initial Note Balance and, thereafter, an amount equal to the Initial Note Balance as reduced from time to time by all amounts allocable to principal previously distributed to the Noteholders or (ii) with respect to any Note, an amount equal to, initially, the initial denomination of such Note and, thereafter, an amount equal to such initial denomination as reduced from time to time by all amounts allocable to principal previously distributed in respect of such Note; provided , however , that in determining whether the Holders of Notes evidencing the requisite percentage of the Note Balance have given any request, demand, authorization, direction, notice, consent or waiver hereunder or under any other Transaction Document, Notes owned by the Trust, any other obligor upon the Notes, the Depositor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons shall be disregarded and deemed to be excluded from the Note Balance (unless such Persons own 100% of the Note Balance), except that, in determining whether the Indenture Trustee or the Owner Trustee shall be protected in relying on any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Indenture Trustee or the Owner Trustee, as applicable, knows to be so owned shall be so disregarded; and, provided further , that Notes that have been pledged in good faith may be regarded as included in the Note Balance if the pledgee establishes to the satisfaction of the Indenture Trustee or the Owner Trustee, as applicable, the pledgee’s right so to act with respect to such Notes and that the

 

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pledgee is not the Trust, any other obligor upon the Notes, the Depositor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons.

 

“ Note Payment Account ” shall mean the account established and maintained as such pursuant to Section 4.1(b).

 

“ Note Pool Factor ” shall mean, with respect to any Class of Notes as of any Distribution Date, a seven-digit decimal figure equal to the outstanding principal balance of such Class as of such Distribution Date (after giving effect to any reductions of such outstanding principal balance to be made on such Distribution Date) divided by the original outstanding principal balance of such Class.

 

“ Note Rate ” shall mean, in the case of the Class A-1 Notes, the Class A-1 Rate, in the case of the Class A-2 Notes, the Class A-2 Rate, in the case of the Class A-3 Notes, the Class A-3 Rate, in the case of the Class A-4 Notes, the Class A-4 Rate, in the case of the Class B Notes, the Class B Rate and in the case of the Class C Notes, the Class C Rate.

 

“ Noteholder ” shall mean a Person in whose name a Note is registered on the Note Register.

 

“ Obligor ” shall mean the purchaser or co-purchasers of a Financed Vehicle purchased in whole or in part by the execution and delivery of a Receivable or any other Person who owes or may be liable for payments under a Receivable.

 

“ Officer’s Certificate ” shall mean a certificate signed by the chairman, the president, any executive vice president, any senior vice president, any vice president or the treasurer of the Depositor or the Servicer, as the case may be, and delivered to the Owner Trustee and the Indenture Trustee.

 

“ Opinion of Counsel ” shall mean one or more written opinions of counsel who may, except as otherwise expressly provided in this Agreement, be an employee of, or outside counsel to, the Depositor or the Servicer and who shall be acceptable to the Indenture Trustee, the Owner Trustee or the Rating Agencies, as applicable.

 

“ Overcollateralization Target Amount ” shall mean, for any Distribution Date, 1.50% of the Pool Balance as of the last day of the preceding Collection Period; provided , however , that such amount shall not be less than $3,085,000.

 

“ Owner Trust Estate ” shall have the meaning specified in the Trust Agreement.

 

“ Owner Trustee ” shall mean The Bank of New York, a New York banking corporation, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, and any successor Owner Trustee under the Trust Agreement.

 

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“ Permitted Investments ” shall mean, on any date of determination, book-entry securities, negotiable instruments or securities represented by instruments in bearer or registered form which evidence:

 

(i) direct obligations of, and obligations fully guaranteed by, the United States or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States;

 

(ii) demand deposits, time deposits, bankers’ acceptances or certificates of deposit of any depository institution or trust company incorporated under the laws of the United States or any State (or any domestic branch of a foreign bank) and subject to supervision and examination by federal or state banking or depository institution authorities; provided , however , that such investment shall not have an “r” highlighter affixed to its rating and its terms shall have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change; and, provided further , that, at the time of the investment, the commercial paper or other short-term 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 rating from Standard & Poor’s of at least “A-1+” and from Moody’s of at least “Prime-1”;

 

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

 

(iv) short-term corporate securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States or any state thereof; provided , however , that such investment shall not have an “r” highlighter affixed to its rating and its terms shall have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change; and, provided further , that, at the time of the investment, the short-term unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such corporation) of such corporation shall have a rating from Standard & Poor’s of at least “AAA” and from Moody’s of at least “Aaa”;

 

(v) commercial paper having, at the time of the investment, a rating from Standard & Poor’s of at least “A-1+” and from Moody’s of at least “Prime-1”; provided , however , that such investment shall not have an “r” highlighter affixed to its rating and its terms shall have a predetermined fixed dollar amount of principal due at maturity that cannot vary or change;

 

(vi) guaranteed investment contracts issued by an insurance company or other corporation as to which the Rating Agency Condition shall have been satisfied;

 

(vii) investments in money market funds having a rating from Standard & Poor’s of at least “AAA-m” or “AAAm-G” and from Moody’s of at least “Aaa” (including funds for which the Indenture Trustee or the Owner Trustee or any of their respective Affiliates is investment manager or advisor); and

 

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(viii) any other investment as to which the Rating Agency Condition shall have been satisfied.

 

“ Person ” shall mean a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, limited liability partnership, trust, unincorporated organization, or government or any agency or political subdivision thereof, or any other entity of whatever nature.

 

“ Pool Balance ” shall mean, as of the last day of any Collection Period, the aggregate Principal Balance of the Receivables as of such last day; provided , however , that if the Receivables are purchased by the Servicer pursuant to Section 9.1(a) or are sold or otherwise liquidated by the Indenture Trustee following an Event of Default pursuant to Section 5.4(a) of the Indenture, the Pool Balance shall be deemed to be zero as of the last day of the Collection Period during which such purchase, sale or other liquidation occurs.

 

“ Principal Balance ” shall mean, with respect to any Receivable as of any date, the Amount Financed under such Receivable minus the sum of (i) that portion of all Scheduled Payments actually received on or prior to such date allocable to principal using the Simple Interest Method (to the extent collected) plus (ii) any rebates of extended warranty contract costs or physical damage, theft, credit life or credit disability insurance premiums included in the Amount Financed plus (iii) any full or partial prepayment applied to reduce the unpaid principal balance of such Receivable; provided , however , that (i) the Principal Balance of a Defaulted Receivable shall be zero as of the last day of the Collection Period during which it became a Defaulted Receivable and (ii) the Principal Balance of a Purchased Receivable shall be zero as of the last day of the Collection Period during which it became a Purchased Receivable.

 

“ Priority Principal Distributable Amount ” shall mean, with respect to any Distribution Date, the excess, if any, of the Note Balance of the Class A Notes as of the day preceding such Distribution Date over the Pool Balance as of the last day of the preceding Collection Period; provided , however , that the Priority Principal Distributable Amount for each Distribution Date on or after the Class Final Distribution Date for any Class of Class A Notes shall equal the greater of (i) the amount otherwise calculated pursuant to this definition and (ii) the outstanding principal balance of the Class A Notes of such Class as of the day preceding such Distribution Date.

 

“ Purchase Amount ” shall mean, with respect to any Distribution Date and any Receivable to be repurchased by the Depositor or purchased by the Servicer on such Distribution Date, an amount equal to the sum of (i) the Principal Balance of such Receivable plus (ii) the amount of accrued but unpaid interest on such Principal Balance at the related APR to but excluding such Distribution Date.

 

“ Purchased Receivable ” shall mean a Receivable as to which payment of the Purchase Amount has been made by the Depositor pursuant to Section 2.4 or by the Servicer pursuant to Section 3.7 or 9.1.

 

“ Rating Agencies ” shall mean Moody’s and Standard & Poor’s and their respective successors; provided , however , that if no such organization or successor is any longer

 

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in existence, Rating Agency shall mean a nationally recognized statistical rating organization or other comparable Person designated by the Trust, notice of which designation shall have been given to the Indenture Trustee, the Owner Trustee and the Servicer.

 

“ Rating Agency Condition ” shall mean, with respect to any action, that each Rating Agency shall have been given prior notice of such action and shall have notified the Depositor, the Seller, the Servicer, the Indenture Trustee and the Owner Trustee in writing that such action will not result in a reduction or withdrawal of the then current rating assigned by such Rating Agency to any Class of Notes.

 

“ Receivable ” shall mean a motor vehicle retail installment sale contract identified on the Receivable Schedule (as such contract may be amended, supplemented or otherwise modified and in effect from time to time).

 

“ Receivable File ” shall mean, with respect to any Receivable, the electronic entries, documents, instruments and writings with respect to such Receivable specified in Section 2.5.

 

“ Receivable Schedule ” shall mean the list identifying the Receivables attached as Schedule 1 to this Agreement (which list may be in the form of microfiche or compact disk).

 

“ Receivables Purchase Agreement ” shall mean the Receivables Purchase Agreement, dated as of April 1, 2005, between the Seller and the Depositor, as amended, supplemented or otherwise modified and in effect from time to time.

 

“ Record Date ” shall mean, with respect to any Distribution Date, the close of business on the Business Day preceding such Distribution Date; provided , however , that (i) if Definitive Notes have been issued with respect to any Class of Notes, Record Date shall mean, with respect to any Distribution Date for such Class, the last Business Day of the calendar month preceding such Distribution Date and (ii) if Definitive Certificates have been issued, Record Date shall mean, with respect to any Distribution Date for the Certificates, the last Business Day of the calendar month preceding such Distribution Date.

 

“ Regular Principal Distributable Amount ” shall mean, with respect to any Distribution Date, the lesser of (i) the Note Balance as of the day preceding such Distribution Date and (ii) (A) the excess, if any, of (x) the sum of the Note Balance as of the day preceding such Distribution Date and the Overcollateralization Target Amount for such Distribution Date over (y) the Pool Balance as of the last day of the preceding Collection Period minus (B) the sum of the Priority Principal Distributable Amount, if any, and the Secondary Principal Distributable Amount, if any, in each case for such Distribution Date.

 

“ Related Fiscal Quarter ” shall mean (i) for any Distribution Date occurring in August, September or October, the Fiscal Quarter ending on the last day of the preceding October, (ii) for any Distribution Date occurring in November, December or January, the Fiscal Quarter ending on the last day of the preceding August, (iii) for any Distribution Date occurring in February, March, April or May, the Fiscal Quarter ending on the last day of the preceding November and (iv) for any Distribution Date occurring in June or July, the Fiscal Quarter ending on the last day of the preceding February.

 

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“ Relevant UCC ” shall mean the Uniform Commercial Code as in effect from time to time in any relevant jurisdiction.

 

“ Required Payment Amount ” shall have, for any Distribution Date, the meaning specified for such Distribution Date in Section 4.6(a).

 

“ Required Rating ” shall mean a short-term unsecured debt rating of Prime-1 by Moody’s and A-1+ by Standard & Poor’s.

 

“ Required Reserve Account Amount ” shall mean, for any Distribution Date, $3,085,000; provided , however , that the Required Reserve Account Amount for any Distribution Date shall not exceed the Note Balance as of such Distribution Date (after giving effect to all payments of principal made to the Noteholders on such Distribution Date); and, provided further , that, if the Pool Balance as of the last day of the preceding Collection Period is zero, the Required Reserve Account Amount for the related Distribution Date shall be $0.

 

“ Required Secondary Reserve Account Amount ” shall mean, for any Distribution Date, $0; provided , however , that, for any Distribution Date on which a Secondary Reserve Account Funding Event has occurred and is continuing, Required Secondary Reserve Account Amount shall mean $1,542,500; provided further , that the Required Secondary Reserve Account Amount for any Distribution Date shall not exceed the Note Balance as of such Distribution Date (after giving effect to all payments of principal made to the Noteholders on such Distribution Date) minus the Reserve Account Amount as of such Distribution Date (after giving effect to all deposits to and withdrawals from the Reserve Account on such Distribution Date); and, provided further , that, if the Pool Balance as of the last day of the preceding Collection Period is zero, the Required Secondary Reserve Account Amount for the related Distribution Date shall be $0.

 

“ Reserve Account ” shall mean the account established and maintained as such pursuant to Section 4.7(a).

 

“ Reserve Account Amount ” shall mean, for any Distribution Date, the amount on deposit in and available for withdrawal from the Reserve Account on such Distribution Date (after giving effect to all deposits to and withdrawals from the Reserve Account on the preceding Distribution Date, or, in the case of the initial Distribution Date, the Closing Date), including all interest and other income (net of losses and investment expenses) earned on such amount during the preceding Collection Period.

 

“ Reserve Account Deficiency ” shall have, for any Distribution Date, the meaning specified for such Distribution Date in Section 4.6(b).

 

“ Reserve Account Draw Amount ” shall have the meaning specified in Section 4.6(b).

 

“ Reserve Account Property ” shall have the meaning specified in Section 4.7(a).

 

“ Responsible Officer ” shall mean (i) in the case of the Indenture Trustee, any managing director, principal, vice president, assistant vice president, assistant secretary, assistant treasurer or trust officer of the Indenture Trustee or any other officer of the Indenture Trustee

 

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customarily performing functions similar to those performed by any of the above designated officers and, with respect to a particular corporate trust matter, any other officer of the Indenture Trustee to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject and (ii) in the case of the Owner Trustee, any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or financial services officer of the Owner Trustee or any other officer of the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers and with direct responsibility for the administration of the Trust and, with respect to a particular corporate trust matter, any other officer of the Owner Trustee to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

 

“ Scheduled Payment ” shall mean, for any Receivable, each payment required to be made by the related Obligor in accordance with the terms of such Receivable (after giving effect to any deferral of payments pursuant to Section 3.2 or any rescheduling of payments as a result of any Insolvency Event with respect to such Obligor).

 

“ Secondary Payment Amount ” shall have, for any Distribution Date, the meaning specified for such Distribution Date in Section 4.6(e).

 

“ Secondary Principal Distributable Amount ” shall mean, with respect to any Distribution Date, (i) the excess, if any, of the sum of the Note Balance of the Class A Notes and the Note Balance of the Class B Notes, in each case as of the day preceding such Distribution Date, over the Pool Balance as of the last day of the preceding Collection Period minus (ii) the Priority Principal Distributable Amount, if any, for such Distribution Date; provided , however , that the Secondary Principal Distributable Amount for each Distribution Date on or after the Class B Final Distribution Date shall equal the greater of (i) the amount otherwise calculated pursuant to this definition and (ii) the outstanding principal balance of the Class B Notes as of the day preceding such Distribution Date; and, provided further , that the Secondary Principal Distributable Amount for each Distribution Date on or after the Class C Final Distribution Date shall equal the greater of (i) the amount otherwise calculated pursuant to this definition and (ii) the sum of the outstanding principal balance of the Class B Notes and the outstanding principal balance of the Class C Notes, in each case as of the day preceding such Distribution Date.

 

“ Secondary Reserve Account ” shall mean the account established and maintained as such pursuant to Section 4.11(a).

 

“ Secondary Reserve Account Amount ” shall mean, for any Distribution Date, the amount on deposit in and available for withdrawal from the Secondary Reserve Account on such Distribution Date (after giving effect to all deposits to and withdrawals from the Secondary Reserve Account on the preceding Distribution Date, or, in the case of the initial Distribution Date, the Closing Date), including all interest and other income (net of losses and investment expenses) earned on such amount during the preceding Collection Period.

 

“ Secondary Reserve Account Deficiency ” shall have, for any Distribution Date, the meaning specified for such Distribution Date in Section 4.6(c).

 

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“ Secondary Reserve Account Draw Amount ” shall have the meaning specified in Section 4.6(c).

 

“ Secondary Reserve Account Funding Event ” shall mean, for any Distribution Date on which CarMax, Inc. shall not have a long-term senior unsecured debt rating of at least Ba1 from Moody’s, the failure of CarMax, Inc. to have, as of the last day of the Related Fiscal Quarter, a Consolidated Tangible Net Worth of at least $600,000,000 plus an amount equal to 50% of CarMax, Inc.’s positive net income for each Fiscal Quarter ending on or after February 29, 2004 plus an amount equal to 100% of the net proceeds of any public offering completed after February 29, 2004 by CarMax, Inc. of (i) its common stock, (ii) any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any such common stock or any such convertible or exchangeable securities or (iii) any derivative or synthetic securities the value of which is determined with respect to such common stock, in each case it being understood that the effect of any such offering must be to increase the Consolidated Tangible Net Worth in order for any such net proceeds to be included in the preceding calculation.

 

“ Secondary Reserve Account Property ” shall have the meaning specified in Section 4.11(a).

 

“ Securities ” shall have the meaning specified in Section 6.7(a).

 

“ Securitization Trust ” shall have the meaning specified in Section 6.7(a).

 

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

 

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

 

“ Servicer’s Certificate ” shall have the meaning specified in Section 3.9.

 

“ Servicing Officer ” shall mean any officer of the Servicer involved in, or responsible for, the administration and servicing of the Receivables whose name appears on a list of servicing officers attached to an Officer’s Certificate furnished on the Closing Date to the Owner Trustee and the Indenture Trustee by the Servicer, as such list may be amended from time to time by the Servicer in writing.

 

“ Servicing Rate ” shall mean 1.00% per annum.

 

“ Simple Interest Advance ” shall mean, with respect to a Simple Interest Receivable, the amount, as of the last day of a Collection Period, which is advanced with respect to such Simple Interest Receivable by the Servicer pursuant to Section 4.4(a).

 

“ Simple Interest Method ” shall mean the method of allocating a fixed level payment between principal and interest, pursuant to which a portion of such payment is allocated to interest in an amount equal to the product of the APR of the related Receivable multiplied by the unpaid Principal Balance of such Receivable multiplied by the period of time (expressed as a fraction of a year, based on the actual number of days in the applicable calendar month and a

 

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365-day year) elapsed since the preceding payment was made and the remainder of such payment is allocated to principal.

 

“ Simple Interest Receivable ” shall mean any Receivable under which each payment is allocated between principal and interest in accordance with the Simple Interest Method.

 

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

 

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

 

“ Total Note Interest ” shall mean, for any Distribution Date and any Class of Notes, the sum of (i) the Monthly Note Interest for such Distribution Date for such Class plus (ii) the Additional Note Interest for such Distribution Date for such Class.

 

“ Total Servicing Fee ” shall mean, for any Collection Period, the sum of (i) the Monthly Servicing Fee for such Collection Period plus (ii) all accrued but unpaid Monthly Servicing Fees for previous Collection Periods.

 

“ Transition Costs ” shall have the meaning specified in Section 8.1(a).

 

“ Trust ” shall mean the CarMax Auto Owner Trust 2005-1, a Delaware statutory trust.

 

“ Trust Agreement ” shall mean the Amended and Restated Trust Agreement, dated as of April 1, 2005, among the Depositor, the Delaware Trustee and the Owner Trustee, as amended, supplemented or otherwise modified and in effect from time to time.

 

“ Trust Fiscal Year ” shall mean the period commencing on March 1 of any year and ending on February 28 (or February 29, if applicable) of the following year.

 

“ Trust Property ” shall mean the Receivables and the other related property sold, transferred, assigned and otherwise conveyed by the Depositor to the Trust pursuant to Section 2.1(a).

 

“ United States ” shall mean the United States of America.

 

“ Unreimbursed Servicer Advance ” shall mean a Simple Interest Advance which the Servicer determines in its sole discretion is unrecoverable.

 

SECTION 1.2 Other Definitional Provisions .

 

(a) Capitalized terms used herein and not otherwise defined herein have the meanings assigned to them in the Indenture.

 

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(b) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

 

(c) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings assigned to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control.

 

(d) 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. Article, Section, Schedule and Exhibit references contained in this Agreement are references to Articles, Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified. The term “including” shall mean “including without limitation.”

 

(e) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.

 

(f) Any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

 

ARTICLE II

TRUST PROPERTY

 

SECTION 2.1 Conveyance of Trust Property .

 

(a) In consideration of the Trust’s delivery to, or upon the written order of, the Depositor of authenticated Notes, in authorized denominations in aggregate principal amounts equal to the Initial Note Balance, and authenticated Certificates, the Depositor hereby irrevocably sells, transfers, assigns and otherwise conveys to the Trust, without recourse (subject to the obligations herein), all right, title and interest of the Depositor, 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 after the Cutoff Date;

 

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

 

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

 

(v) the Receivable Files;

 

(vi) the Collection Account, the Note Payment Account, the Certificate Payment Account, the Reserve Account and the Secondary Reserve Account and all amounts, securities, financial assets, investments and other property deposited in or credited to any of the foregoing and all proceeds thereof;

 

(vii) all rights of the Depositor under the Receivables Purchase Agreement, including the right to require the Seller to repurchase Receivables from the Depositor;

 

(viii) 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 Trust; and

 

(ix) 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, 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 Depositor and the Trust intend that the transfer of the Trust Property contemplated by Section 2.1(a) constitute a sale of the Trust Property, conveying good title to the Trust Property, from the Depositor to the Trust. If such transfer is deemed to be a pledge to secure the payment of the Notes, however, the Depositor hereby grants to the Trust a first priority security interest in all of the Depositor’s right, title and interest in, to and under the Trust Property, and all proceeds thereof, to secure the payment of the Notes, and in such event, this Agreement shall constitute a security agreement under applicable law.

 

(c) The sale, transfer, assignment and conveyance of the Trust Property made under Section 2.1(a) shall not constitute and is not intended to result in an assumption by the Trust of any obligation of the Depositor or the Seller to the Obligors or any other Person in connection with the Receivables and the other Trust Property or any obligation of the Depositor or the Seller under any agreement, document or instrument related thereto.

 

SECTION 2.2 Representations and Warranties of the Seller as to the Receivables . The Seller has made to the Depositor the representations and warranties as to the

 

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Receivables set forth in Section 3.2(b) of the Receivables Purchase Agreement. The Trust shall be deemed to have relied on such representations and warranties in accepting the Receivables. The representations and warranties set forth in Section 3.2(b) of the Receivables Purchase Agreement speak as of the execution and delivery of this Agreement, except to the extent otherwise provided, but shall survive the sale, transfer, assignment and conveyance of the Receivables to the Trust pursuant to this Agreement and the pledge of the Receivables to the Indenture Trustee pursuant to the Indenture. Pursuant to Section 2.1, the Depositor has sold, transferred, assigned and otherwise conveyed to the Trust, as part of the Trust Property, its rights under the Receivables Purchase Agreement, including its right to require the Seller to repurchase Receivables in accordance with the Receivables Purchase Agreement upon a breach of the representations and warranties set forth in Section 3.2(b) of the Receivables Purchase Agreement.

 

SECTION 2.3 Representations and Warranties of the Depositor as to the Receivables . The Depositor makes the following representations and warranties as to the Receivables on which the Trust shall be deemed to have relied in accepting the Receivables. The representations and warranties speak as of the execution and delivery of this Agreement, except to the extent otherwise provided, but shall survive the sale, transfer, assignment and conveyance of the Receivables to the Trust pursuant to this Agreement and the pledge of the Receivables to the Indenture Trustee pursuant to the Indenture.

 

(a) 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 to the Receivables Purchase Agreement, (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.

 

(b) 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.

 

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(c) 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.

 

(d) 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, reorganization, liquidation or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

 

(e) No Government Obligor . No Receivable is due from the United States or any State or from any agency, department or instrumentality of the United States or any State.

 

(f) Security Interest in Financed Vehicles . Immediately prior to the transfer of the Receivables by the Seller to the Depositor, each Receivable was secured by a valid, binding and enforceable first priority perfected security interest in favor of the Seller in the related Financed Vehicle, which security interest has been validly assigned by the Seller to the Depositor. The Servicer has received, or will receive within 180 days after the Closing Date, the original certificate of title for each Financed Vehicle (other than any Financed Vehicle that is subject to a certificate of title statute or motor vehicle registration law that does not require that the original certificate of title for such Financed Vehicle be delivered to the Seller).

 

(g) Receivables in Force . No Receivable has been satisfied, subordinated or rescinded, nor has any Financed Vehicle been released in whole or in part from the Lien granted by the related Receivable.

 

(h) No Waiver . No provision of any Receivable has been waived in such a manner that such Receivable fails to meet all of the representations and warranties made by the Depositor in this Section 2.3 with respect thereto.

 

(i) No Defenses . No Receivable is subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the operation of any of the terms of any Receivable, or the exercise of any right thereunder, will not render such Receivable unenforceable in whole or in part or subject to any right of rescission, setoff, counterclaim or defense, including the defense of usury, and the Depositor has no knowledge of any such right of rescission, setoff, counterclaim or defense being asserted or threatened with respect to any Receivable.

 

(j) No Liens . The Depositor has no knowledge of any liens or claims that have been filed, including liens for work, labor or materials or for unpaid state or federal taxes,

 

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relating to any Financed Vehicle that are prior to, or equal or coordinate with, the security interest in such Financed Vehicle created by the related Receivable.

 

(k) No Default . Except for payment defaults continuing for a period of not more than 30 days, the Depositor has no knowledge that any default, breach, violation or event permitting acceleration under the terms of any Receivable has occurred or that any continuing condition that with notice or the lapse of time or both would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable has arisen, and the Depositor has not waived any such event or condition.

 

(l) Title . The Depositor has purchased the Receivables from the Seller. The Depositor intends that the transfer of the Receivables contemplated by Section 2.1 constitute a sale of the Receivables from the Depositor to the Trust and that the beneficial interest in, and title to, the Receivables not be part of the Depositor’s estate in the event of the filing of a bankruptcy petition by or against the Depositor under any bankruptcy law. The Depositor has not sold, transferred, assigned or pledged any Receivable to any Person other than the Trust. The Depositor has not created, incurred or suffered to exist any Lien, encumbrance or security interest on any Receivable except for the Lien of the Indenture.

 

(m) Security Interest Matters . This Agreement creates a valid and continuing “security interest” (as defined in the Relevant UCC) in the Receivables 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 the Depositor. With respect to each Receivable, the Seller has taken all steps necessary to perfect its security interest against the related Obligor in the related Financed Vehicle. The Receivables constitute “tangible chattel paper” (as defined in the Relevant UCC). The Depositor owns and has good and marketable title to the Receivables free and clear of any Lien, claim or encumbrance of any Person. The Depositor has caused or will cause prior to the Closing Date the filing of all appropriate financing statements in the proper filing offices in the appropriate jurisdictions under applicable law necessary to perfect the security interest in the Receivables granted to the Trust under this Agreement. Other than the security interest granted to the Trust under this Agreement, the Depositor has not pledged, assigned, sold, granted a security interest in or otherwise conveyed any of the Receivables. The Depositor has not authorized the filing of and is not aware of any financing statements against the Depositor that include a description of collateral covering the Receivables other than any financing statement relating to the security interest granted to the Trust under this Agreement or that has been terminated. The Depositor is not aware of any judgment or tax lien filings against the Depositor. The security interest of the Seller in each Financed Vehicle has been validly assigned by the Depositor to the Trust.

 

(n) Financing Statements . All financing statements filed or to be filed against the Depositor in favor of the Indenture Trustee (as assignee of the Trust) contain a statement substantially to the following effect: “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the Indenture Trustee.”

 

(o) Valid Assignment . No Receivable has been originated in, or is subject to the laws of, any jurisdiction under which the sale, transfer, assignment and conveyance of such Receivable under the Receivables Purchase Agreement or this Agreement or the pledge of such

 

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Receivable under the Indenture is unlawful, void or voidable or under which such Receivable would be rendered void or voidable as a result of any such sale, transfer, assignment, conveyance or pledge. The Depositor has not entered into any agreement with any account debtor that prohibits, restricts or conditions the assignment of the Receivables.

 

(p) One Original . There is only one original executed copy of each Receivable.

 

(q) Principal Balance . Each Receivable had an original Principal Balance of not more than $60,000 and a remaining Principal Balance as of the Cutoff Date of not less than $500.

 

(r) No Bankrupt Obligors . As of the Cutoff Date, no Receivable was due from an Obligor that was the subject of a proceeding under the Bankruptcy Code of the United States or was bankrupt.

 

(s) New and Used Vehicles . As of the Cutoff Date, approximately 3.21% of the Pool Balance related to Receivables secured by new Financed Vehicles and approximately 96.79% of the Pool Balance related to Receivables secured by used Financed Vehicles.

 

(t) Origination . Each Receivable was originated after July 1, 1999.

 

(u) Term to Maturity . Each Receivable had an original term to maturity of not more than 72 months and not less than 12 months and a remaining term to maturity as of the Cutoff Date of not more than 71 months and not less than three months.

 

(v) Weighted Average Remaining Term to Maturity . As of the Cutoff Date, the weighted average remaining term to maturity of the Receivables was approximately 56.96 months.

 

(w) Annual Percentage Rate . Each Receivable has an APR of at least 4.45% and not more than 25.00%.

 

(x) Location of Receivable Files . The Receivable Files are maintained at the location listed in Schedule 2 to this Agreement.

 

(y) Simple Interest Method . All payments with respect to the Receivables have been allocated consistently in accordance with the Simple Interest Method.

 

(z) No Delinquent Receivables . As of the Cutoff Date, no payment due under any Receivable was more than 30 days past due.

 

(aa) Insurance . Each Obligor has obtained or agreed to obtain physical damage insurance (which insurance shall not be force placed insurance) covering the related Financed Vehicle in accordance with the Seller’s normal requirements.

 

(bb) Fair Market Value . The Receivables Purchase Price represents the fair market value of the Receivables.

 

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(cc) Custodial Agreements . Immediately prior to the transfer of the Receivables by the Seller to the Depositor, the Seller or an Affiliate of the Seller had possession of the Receivable Files and there were no, and there will not be any, custodial agreements in effect materially adversely affecting the right or ability of the Seller to make, or cause to be made, any delivery required under this Agreement.

 

(dd) Bulk Transfer Laws . The transfer of the Receivables and the Receivable Files by the Depositor to the Trust pursuant to this Agreement is not subject to the bulk transfer laws or any similar statutory provisions in effect in any applicable jurisdiction.

 

(ee) No Transfer Restrictions . The Depositor has not created, incurred or suffered to exist any restriction on transferability of the Receivables except for the restrictions on transferability imposed by this Agreement.

 

SECTION 2.4 Repurchase by Depositor upon Breach . The Depositor, the Servicer or the Owner Trustee, as the case may be, shall inform the other parties to this Agreement, the Seller and the Indenture Trustee promptly, in writing, upon the discovery of any breach or failure to be true of the representations and warranties set forth in Section 2.3. If such breach or failure shall not have been cured by the close of business on the last day of the Collection Period which includes the thirtieth (30th) day after the date on which the Depositor becomes aware of, or receives written notice from the Seller, the Servicer or the Owner Trustee of, such breach or failure, and such breach or failure materially and adversely affects the interest of the Trust in a Receivable, the Depositor shall repurchase such Receivable from the Trust on the Distribution Date immediately following such Collection Period. In consideration of the repurchase of a Receivable hereunder, the Depositor shall remit the Purchase Amount of such Receivable in the manner specified in Section 4.5. The sole remedy of the Trust, the Owner Trustee, the Indenture Trustee, the Noteholders and the Certificateholders with respect to a breach or failure to be true of the representations and warranties set forth in Section 2.3 shall be to require the Depositor to repurchase Receivables pursuant to this Section 2.4. Neither the Owner Trustee nor the Indenture Trustee shall have any duty to conduct an affirmative investigation as to the occurrence of any condition requiring the repurchase of any Receivable pursuant to this Section 2.4 or the eligibility of any Receivable for purposes of this Agreement.

 

SECTION 2.5 Custody of Receivable Files . To assure uniform quality in servicing the Receivables and to reduce administrative costs, the Trust, upon the execution and delivery of this Agreement, hereby revocably appoints the Servicer as its agent, and the Servicer hereby accepts such appointment, to act as custodian on behalf of the Trust and the Indenture Trustee of the following documents or instruments, which are hereby constructively delivered to the Indenture Trustee, as pledgee of the Trust pursuant to the Indenture with respect to each Receivable (collectively, a “ Receivable File ”):

 

(i) the original, executed copy of such Receivable;

 

(ii) the original credit application with respect to such Receivable fully executed by the related Obligor or a photocopy thereof or a record thereof on a computer file or disc or on microfiche;

 

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(iii) the original certificate of title for the related Financed Vehicle or such other documents that the Seller or the Servicer shall keep on file, in accordance with its customary practices and procedures, evidencing the security interest of the Seller in such Financed Vehicle;

 

(iv) documents evidencing the commitment of the related Obligor to maintain physical damage insurance covering the related Financed Vehicle; and

 

(v) any and all other documents (including any computer file or disc or microfiche) that the Seller or the Servicer shall keep on file, in accordance with its customary practices and procedures, relating to such Receivable, the related Obligor or the related Financed Vehicle.

 

On the Closing Date, the Servicer shall deliver to the Trust and the Indenture Trustee an Officer’s Certificate confirming that the Servicer has received, on behalf of the Trust and the Indenture Trustee, all the documents and instruments necessary for the Servicer to act as the agent of the Trust and the Indenture Trustee for the purposes set forth in this Section 2.5, including the documents referred to herein, and the Trust, the Owner Trustee and the Indenture Trustee are hereby authorized to rely on such Officer’s Certificate. In addition, within 180 days after the Closing Date, the Servicer shall deliver to the Trust and the Indenture Trustee an Officer’s Certificate certifying that the Servicer has received the original certificate of title for each Financed Vehicle except each Financed Vehicle securing an outstanding Receivable for which the Servicer has not received the original certificate of title as shall be identified in such Officer’s Certificate (and indicating whether such Financed Vehicle is subject to a certificate of title statute or motor vehicle registration law that requires that the original certificate of title for such Financed Vehicle be delivered to the Seller).

 

SECTION 2.6 Duties of Servicer as Custodian .

 

(a) Safekeeping . The Servicer, in its capacity as custodian, shall hold the Receivable Files for the benefit of the Trust and the Indenture Trustee and maintain such accurate and complete accounts, records and computer systems pertaining to each Receivable File as shall enable the Servicer and the Trust to comply with the terms and provisions of this Agreement and the Indenture Trustee to comply with the terms and conditions of the Indenture. In performing its duties as custodian, the Servicer shall act with reasonable care, using that degree of skill and attention that the Servicer exercises with respect to the files relating to comparable motor vehicle retail installment sale contracts that the Servicer services for itself or others. The Servicer shall conduct, or cause to be conducted, in accordance with its customary practices and procedures, periodic audits of the Receivable Files held by it under this Agreement, and of the related accounts, records and computer systems, in such a manner as shall enable the Trust or the Indenture Trustee to verify the accuracy of the Servicer’s record keeping. The Servicer shall promptly report to the Owner Trustee and the Indenture Trustee any failure on its part to hold the Receivable Files and maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure. Nothing herein shall be deemed to require an initial review or any periodic review by the Trust, the Owner Trustee or the Indenture Trustee of the Receivable Files, and none of the Trust, the

 

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Owner Trustee or the Indenture Trustee shall be liable or responsible for any action or failure to act by the Servicer in its capacity as custodian hereunder.

 

(b) Maintenance of and Access to Records . The Servicer shall maintain each Receivable File at the location listed in Schedule 2 or at such other location as shall be specified to the Trust and the Indenture Trustee by written notice not later than ninety (90) days after any change in location. The Servicer shall make available to the Trust and the Indenture Trustee, or its duly authorized representatives, attorneys or auditors, a list of locations of the Receivable Files, the Receivable Files, and the related accounts, records, and computer systems maintained by the Servicer, at such times as the Trust or the Indenture Trustee shall instruct.

 

(c) Release of Documents . As soon as practicable after receiving written instructions from the Indenture Trustee, the Servicer shall release any document in the Receivable Files to the Indenture Trustee, the Indenture Trustee’s agent or the Indenture Trustee’s designee, as the case may be, at such place as the Indenture Trustee may reasonably designate.

 

(d) Title to Receivables . The Servicer shall not at any time have or in any way attempt to assert any interest in any Receivable held by it as custodian hereunder or in the related Receivable File other than for collecting or enforcing such Receivable for the benefit of the Trust. The entire equitable interest in such Receivable and the related Receivable File shall at all times be vested in the Trust.

 

SECTION 2.7 Instructions; Authority to Act . The Servicer shall be deemed to have received proper instructions with respect to the Receivable Files upon its receipt of written instructions signed by an Authorized Officer. A certified copy of excerpts of authorizing resolutions of the Board of Directors of the Indenture Trustee shall constitute conclusive evidence of the authority of any such Authorized Officer to act and shall be considered in full force and effect until receipt by the Servicer of written notice to the contrary given by the Indenture Trustee.

 

SECTION 2.8 Indemnification of the Custodian . The Servicer, in its capacity as custodian, shall indemnify and hold harmless the Trust, the Owner Trustee and the Indenture Trustee and each of their respective officers, directors, employees and agents from and against any and all liabilities, obligations, losses, compensatory damages, payments, costs or expenses (including legal fees if any) of any kind whatsoever that may be imposed on, incurred or asserted against the Trust, the Owner Trustee or the Indenture Trustee or any of their respective officers, directors, employees and agents as the result of any act or omission by the Servicer relating to the maintenance and custody of the Receivable Files; provided , however , that the Servicer shall not be liable hereunder to the Owner Trustee to the extent that such liabilities, obligations, losses, compensatory damages, payments, costs or expenses result from the willful misfeasance, bad faith or negligence of the Owner Trustee and shall not be liable hereunder to the Indenture Trustee to the extent that such liabilities, obligations, losses, compensatory damages, payments, costs or expenses result from the willful misfeasance, bad faith or negligence of the Indenture Trustee.

 

SECTION 2.9 Effective Period and Termination . The Servicer’s appointment as custodian shall become effective as of the Cutoff Date and shall continue in full force and

 

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effect until terminated pursuant