<PAGE>
As filed with the Securities and Exchange Commission on October 1, 1999
Registration No. 333-79087
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CARMAX AUTO OWNER TRUST 1999-1
(Issuer with respect to the securities)
--------------
CARMAX AUTO RECEIVABLES LLC
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
--------------
Virginia 54-1942944
(I.R.S. employer identification number)
(State or other jurisdiction of
incorporation or organization)
4900 Cox Road
Glen Allen, Virginia 23060
(804) 747-0422
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Michael T. Chalifoux
CarMax Auto Receivables LLC
4900 Cox Road
Glen Allen, Virginia 23060
(804) 747-0422
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
Copies to:
David E. Melson, Esquire Richard S. Fortunato, Esquire
McGuire, Woods, Battle & Boothe LLP Skadden, Arps, Slate, Meagher & Flom
901 East Cary Street LLP
Richmond, Virginia 23219 919 Third Avenue
(804) 775-1000 New York, New York 10022
(212) 735-3000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable on or after the effective date of this Registration Statement.
If the only securities registered on this Form are to be offered pursuant to
dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Proposed
Proposed Maximum
Amount Maximum Aggregate Amount of
Title of each Class of to be Offering Price Offering Registration
Securities to be Registered Registered Per Unit(1) Price(1) Fee
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<S> <C> <C> <C> <C>
Class A-1 Asset-Backed
Notes...................... $200,000 100% $200,000 $55.60(2)
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Class A-2 Asset-Backed
Notes...................... $200,000 100% $200,000 $55.60(2)
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Class A-3 Asset-Backed
Notes...................... $200,000 100% $200,000 $55.60(2)
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Class A-4 Asset-Backed
Notes...................... $200,000 100% $200,000 $55.60(2)
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Asset-Backed Certificates... $200,000 100% $200,000 $55.60(2)
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act.
(2) Previously paid.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1999
PROSPECTUS
$
Carmax Auto Owner Trust 1999-1
$ % Class A-1 Asset-Backed Notes
$ % Class A-2 Asset-Backed Notes
$ % Class A-3 Asset-Backed Notes
$ % Class A-4 Asset-Backed Notes
$ % Asset-Backed Certificates
[CARMAX LOGO]
CarMax Auto Receivables LLC
Seller
CarMax Auto Superstores, Inc.
Servicer
<TABLE>
<CAPTION>
Underwriting Discounts
Price and Commissions Net Proceeds to Seller
------------ ---------------------- ----------------------
<S> <C> <C> <C>
Class A-1 Notes... $( %) $( %) $( %)
Class A-2 Notes... $( %) $( %) $( %)
Class A-3 Notes... $( %) $( %) $( %)
Class A-4 Notes... $( %) $( %) $( %)
Certificates...... $( %) $( %) $( %)
Total......... $ $ $
</TABLE>
-----------
The price of the notes and the certificates will also include any interest
accrued on the notes and the certificates from the date of issuance.
Consider carefully the Risk Factors beginning on page 10 in this Prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
Underwriters of the Notes
Banc of America Securities LLC
First Union Capital Markets
Goldman, Sachs & Co.
Underwriter of the Certificates
Banc of America Securities LLC
The date of this Prospectus is , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS............ 3
PROSPECTUS SUMMARY......................................................... 4
RISK FACTORS............................................................... 10
DESCRIPTION OF THE TRUST................................................... 19
THE ORIGINATOR'S FINANCE OPERATIONS........................................ 21
First North American Credit.............................................. 21
Underwriting Procedures.................................................. 21
Collection Procedures.................................................... 22
Physical Damage Insurance................................................ 24
Allocation of Payments................................................... 24
Delinquency and Credit Loss Experience................................... 24
Delinquency and Credit Loss Trends....................................... 26
Year 2000 Compliance..................................................... 27
DESCRIPTION OF THE CONTRACT POOL........................................... 29
WEIGHTED AVERAGE LIFE OF THE OFFERED SECURITIES............................ 32
ALLOCATION OF PRINCIPAL BALANCES; MONTHLY REPORTS.......................... 39
USE OF PROCEEDS............................................................ 39
DESCRIPTION OF CARMAX AUTO SUPERSTORES AND CARMAX AUTO RECEIVABLES......... 40
CarMax Auto Superstores.................................................. 40
CarMax Auto Receivables.................................................. 41
DESCRIPTION OF THE NOTES................................................... 43
Note Registration........................................................ 43
Interest Payments........................................................ 43
Principal Payments....................................................... 44
Optional Redemption...................................................... 45
The Indenture Trustee.................................................... 45
DESCRIPTION OF THE CERTIFICATES............................................ 46
Certificate Registration................................................. 46
Interest Payments........................................................ 46
Principal Payments....................................................... 46
Optional Prepayment...................................................... 47
The Owner Trustee........................................................ 47
REGISTRATION OF THE OFFERED SECURITIES..................................... 47
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
COLLECTIONS AND PAYMENTS................................................. 54
The Trust Accounts..................................................... 54
Payment Sources........................................................ 54
The Reserve Account.................................................... 55
Subordination of the Certificates...................................... 57
Payment Date Distributions--Collection Account......................... 57
Payment Date Distributions--Note Payment Account....................... 58
Payment Date Distributions--Certificate Payment Account................ 59
Application of Collection and Payment Provisions to First Payment
Date.................................................................. 59
Statements to Noteholders.............................................. 60
Statements to Certificateholders....................................... 61
DESCRIPTION OF THE INSURER............................................... 62
DESCRIPTION OF THE INSURANCE POLICY...................................... 64
REPORTS TO SECURITYHOLDERS............................................... 65
DESCRIPTION OF THE INDENTURE............................................. 65
DESCRIPTION OF THE TRUST AGREEMENT....................................... 74
DESCRIPTION OF THE PURCHASE AGREEMENT AND THE SALE AND SERVICING
AGREEMENT............................................................... 77
MATERIAL LEGAL ASPECTS OF THE TRANSACTION................................ 84
MATERIAL FEDERAL INCOME TAX CONSEQUENCES................................. 90
ERISA CONSIDERATIONS..................................................... 102
UNDERWRITING............................................................. 105
LEGAL MATTERS............................................................ 106
EXPERTS.................................................................. 107
WHERE YOU CAN FIND MORE INFORMATION...................................... 107
GLOSSARY................................................................. 108
ANNEX A: GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES... 113
</TABLE>
2
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IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN THIS PROSPECTUS
This prospectus describes the specific terms of the notes and the
certificates, including:
. the amount and other terms, including interest rates, for each class
of notes and for the certificates;
. the timing of interest and principal payments;
. information about the contracts;
. information about the credit enhancement for each class of notes and
for the certificates;
. the credit ratings for each class of notes and for the certificates;
and
. the method for selling the notes and the certificates.
You should rely only on the information provided or incorporated by
reference in this prospectus. CarMax Auto Receivables has not authorized
anyone to provide you with additional or different information. CarMax Auto
Receivables is not offering the notes or the certificates in any state in
which the offer is not permitted.
This prospectus includes a number of cross references to captions under
which you can find additional, related discussions. The preceding table of
contents provides the pages at which these captions are located.
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PROSPECTUS SUMMARY
This summary highlights selected information from this prospectus and does
not contain all of the information that you should consider in making your
investment decision. To understand all of the terms of this offering, you
should read carefully this prospectus in its entirety.
The Terms of the Offered Securities
<TABLE>
<CAPTION>
Class A-1 Class A-2 Class A-3 Class A-4
Notes Notes Notes Notes Certificates
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Initial Principal
Amount................. $ $ $ $ $
Interest Rate Per
Annum.................. % % % % %
Interest Accrual
Method................. actual/360 30/360 30/360 30/360 30/360
Payment Dates
(monthly).............. 15th 15th 15th 15th 15th
First Payment Date...... November 15, 1999 November 15, 1999 November 15, 1999 November 15, 1999 November 15, 1999
Final Payment Date...... , 200 , 200 , 200 , 200 , 200
Anticipated Ratings
(Moody's/S&P).......... P-1/A-1+ Aaa/AAA Aaa/AAA Aaa/AAA Aaa/AAA
</TABLE>
It is a condition to the offering of the notes and the certificates that
these ratings be obtained. However, a rating agency may in its discretion lower
or withdraw its rating in the future.
The Trust
The CarMax Auto Owner Trust 1999-1 will issue the notes and the certificates.
The notes will be non-recourse obligations of, and the certificates will
represent beneficial ownership interests in, the trust. The notes and the
certificates will not represent interests in or obligations of CarMax Auto
Superstores, CarMax Auto Receivables or any other person or entity.
The Trust Property
The property of the trust will include:
. a pool of simple interest retail installment sale contracts originated by
CarMax Auto Superstores in the ordinary course of business in connection with
the sale of new and used motor vehicles;
. amounts received on or in respect of the contracts after September 30, 1999;
. security interests in the vehicles financed under the contracts;
. any proceeds from claims on or refunds of premiums with respect to insurance
policies relating to the financed vehicles or the related obligors;
. funds on deposit in a collection account, a note payment account, a
certificate payment account and a reserve account;
. an unconditional and irrevocable insurance policy issued by MBIA Insurance
Corporation guaranteeing payments of monthly interest and monthly principal
on the notes and the certificates and payments of the monthly servicing fee
to the servicer;
. rights under the purchase agreement to cause CarMax Auto Superstores to
repurchase contracts affected materially and adversely by breaches of the
4
<PAGE>
representations and warranties of CarMax Auto Superstores made in the
purchase agreement; and
. rights under the sale and servicing agreement to cause the servicer to
purchase contracts affected materially and adversely by breaches of the
representations and warranties of the servicer made in the sale and servicing
agreement.
The contracts were selected from the retail installment sale contract portfolio
of CarMax Auto Superstores based on the criteria specified in the sale and
servicing agreement and described in this prospectus. The contracts do not
include "sub-prime" contracts or contracts that do not conform to CarMax Auto
Superstores' underwriting standards.
CarMax Auto Superstores, under its trade name First North American Credit
Corporation, First North American Credit or FNAC, is the registered lienholder
on the certificate of title for each of the financed vehicles. Payment of the
amount due to the registered lienholder under each contract is secured by a
first perfected security interest in the related financed vehicle.
The Originator of the Contracts
CarMax Auto Superstores will originate the contracts and sell them to CarMax
Auto Receivables. CarMax Auto Superstores' principal executive offices are
located at 4900 Cox Road, Glen Allen, Virginia 23060, and its telephone number
is (804) 747-0422.
The Seller of the Contracts
CarMax Auto Receivables will transfer the contracts and related property to the
trust. CarMax Auto Receivables' principal executive offices are located at 4900
Cox Road, Suite , Glen Allen, Virginia 23060, and its telephone number is
(804) 747- .
The Servicer of the Contracts
CarMax Auto Superstores will act as servicer of the contracts. The servicer's
principal executive offices are located at 4900 Cox Road, Glen Allen, Virginia
23060, and its telephone number is (804) 747-0422.
The Owner Trustee
First Union Trust Company, National Association, will act as trustee of the
trust.
The Indenture Trustee
Bankers Trust Company will act as trustee with respect to the notes.
The Purchase Agreement
CarMax Auto Superstores and CarMax Auto Receivables will enter into a purchase
agreement under which CarMax Auto Superstores will sell the contracts to CarMax
Auto Receivables.
The Sale and Servicing Agreement
CarMax Auto Receivables, the servicer and the trust will enter into a sale and
servicing agreement under which CarMax Auto Receivables will transfer the
contracts to the trust and the servicer will agree to service, manage, maintain
custody of and collect amounts due under the contracts for a monthly servicing
fee.
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<PAGE>
The Trust Agreement
CarMax Auto Receivables and the owner trustee will enter into a trust agreement
under which the trust will issue the certificates.
The Indenture
The trust and the indenture trustee will enter into an indenture under which
the trust will issue the notes.
Interest Payments
Interest will be payable on the notes and the certificates monthly on the 15th
day of each month or, if the 15th day is not a business day, on the following
business day, beginning November 15, 1999. Interest will be payable on each
payment date to noteholders and certificateholders of record as of the day
before that payment date; provided, however, that if the notes or the
certificates, as applicable, are issued in fully registered, certificated form,
the record date will be the last day of the month immediately preceding the
month in which the related payment date occurs.
Principal Payments
Principal will be payable on the notes on each payment date to the noteholders
of record as of the related record date. In general, the amount of principal
payable to the noteholders on each payment date will equal the lesser of:
. the principal balance of the notes as of the day preceding that payment date;
and
. the amount necessary to reduce the principal balance of the notes and the
certificates as of the day preceding that payment date to the principal
balance of the contracts as of the last day of the preceding month.
The principal balance of any class of notes will be payable in full on the
final scheduled payment date applicable to that class.
In general, principal will be paid to the noteholders in the order of the
numerical designation of the notes, starting with the class A-1 notes and
ending with the class A-4 notes. For example, no principal will be paid to the
holders of the class A-2 notes until the principal balance of the class A-1
notes has been paid in full.
Principal will be payable on the certificates on each payment date to the
certificateholders of record as of the related record date; provided, however,
that no principal will be paid to the certificateholders until the principal
balance of the notes has been paid in full. In general, the amount of principal
payable to the certificateholders on each payment date on or after which the
principal balance of the notes has been paid in full will equal the lesser of:
. the principal balance of the certificates as of the day preceding that
payment date; and
. the amount necessary to reduce the principal balance of the certificates as
of the day preceding that payment date to the principal balance of the
contracts as of the last day of the preceding month.
The principal balance of the certificates will be payable in full on the final
scheduled payment date applicable to the certificates.
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<PAGE>
Payment Sources
On each payment date, payments on the notes and the certificates will be made
from the following sources:
. obligor payments received with respect to the contracts during the preceding
month;
. liquidation proceeds received with respect to the contracts during the
preceding month;
. interest earned on funds on deposit in the collection account;
. payments made by CarMax Auto Superstores or the servicer in connection with
the required repurchase or purchase of contracts;
. amounts withdrawn on that payment date from the reserve account; and
. amounts paid on that payment date under the insurance policy.
Credit Enhancement
The notes will benefit from the following sources of credit enhancement:
. amounts available to be paid under the insurance policy;
. funds on deposit in the reserve account, which funds will also be available
to make required payments to the servicer, the certificateholders and the
insurer; and
. the subordination of the certificates.
The certificates will benefit from the following sources of credit enhancement:
. amounts available to be paid under the insurance policy; and
. funds on deposit in the reserve account, which funds will also be available
to make required payments to the servicer, the noteholders and the insurer.
The credit enhancement for the notes and the certificates is intended to
protect you against losses or delays in payments on your notes and your
certificates by absorbing losses on the contracts and other shortfalls in cash
flow.
The Insurance Policy
MBIA Insurance Corporation will issue an insurance policy for the benefit of
the noteholders and the certificateholders under which the insurer will
unconditionally and irrevocably guarantee the payment of monthly interest and
monthly principal to the noteholders and the certificateholders. In general,
the insurer will pay under the insurance policy with respect to each payment
date the amount, if any, by which:
. the monthly servicing fee for the preceding month plus any overdue monthly
servicing fees for previous months plus the monthly interest and monthly
principal for that payment date payable to the noteholders and the
certificateholders plus any overdue monthly interest for previous payment
dates payable to the noteholders and the certificateholders exceeds
. the funds otherwise available on that payment date to pay those amounts,
including amounts available to be withdrawn from the reserve account.
All amounts paid under the insurance policy will be deposited in the collection
account.
7
<PAGE>
The Reserve Account
On the closing date, the servicer will establish with the indenture trustee,
for the benefit of the noteholders, the certificateholders, the servicer and
the insurer, a reserve account into which excess collections on the contracts
will be deposited and from which amounts may be withdrawn to make required
payments on the notes and the certificates. CarMax Auto Receivables will
deposit $ in the reserve account on the closing date. On each payment date,
the servicer will deposit in the reserve account the amount, if any, by which:
. the amount collected on or in respect of the contracts during the preceding
month exceeds
. the amount which the trust is required to pay on that payment date to the
noteholders, the certificateholders, the servicer and the insurer.
On each payment date, the indenture trustee will withdraw funds from the
reserve account, up to the amount on deposit in the reserve account, to the
extent needed to make the following payments:
. to the servicer, the monthly servicing fee for the preceding month plus any
overdue monthly servicing fees for previous months;
. to the noteholders, monthly interest and monthly principal for that payment
date plus any overdue monthly interest for previous payment dates;
. to the certificateholders, monthly interest and monthly principal for that
payment date plus any overdue monthly interest for previous payment dates;
and
. to the insurer, the monthly insurance premium for the preceding month plus
any overdue monthly insurance premiums for previous months plus the aggregate
amount of any unreimbursed payments under the insurance policy.
The amount required to be on deposit in the reserve account on any payment date
will equal the greater of $ and % of the principal balance of the
contracts as of the last day of the preceding month.
If the amount on deposit in the reserve account on any payment date exceeds the
amount required to be on deposit in the reserve account on that payment date,
after giving effect to all required deposits to and withdrawals from the
reserve account on that payment date, that excess will be paid to CarMax Auto
Receivables. Any amount paid to CarMax Auto Receivables will no longer be an
asset of the trust.
Subordination of the Certificates
The certificateholders will not be entitled to receive monthly interest on any
payment date until the noteholders have received monthly interest on that
payment date. In addition, the certificateholders will not be entitled to
receive monthly principal on any payment date until the notes have been paid in
full. If the notes have been declared immediately due and payable following the
occurrence of an event of default under the indenture, amounts received on or
in respect of the contracts or available to be withdrawn from the reserve
account will be applied on each payment date to pay principal on the notes, and
will not be available to pay monthly interest on the certificates, until the
notes have been paid
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<PAGE>
in full. The insurer will remain obligated to pay monthly interest on the
certificates on each payment date in accordance with the terms of the insurance
policy following an acceleration of the notes.
Eligibility of Class A-1 Notes for Purchase by Money Market Funds
The class A-1 notes will be eligible securities for purchase by money market
funds under Rule 2a-7 of the Investment Company Act of 1940, as amended.
Tax Status
In the opinion of special tax counsel to CarMax Auto Receivables, the trust
will not be treated as an association taxable as a corporation or as a publicly
traded partnership taxable as a corporation and the notes will be characterized
as debt for federal income tax purposes. If you purchase a note, you agree to
treat it as debt for tax purposes. CarMax Auto Receivables, the servicer and
the certificateholders will agree to treat the trust as a partnership for
federal income tax purposes. As a partnership, the trust will not be subject to
federal income tax and the certificateholders will be required to report their
respective shares of the trust's taxable income, deductions and other tax
attributes. See "Material Federal Income Tax Consequences" beginning on page 90
of this prospectus for a further discussion of the tax consequences of
acquiring, holding and disposing of the notes or the certificates.
ERISA Considerations
The notes may be eligible for purchase by employee benefit plans subject to
Title I of the Employee Retirement Income Security Act of 1974, as amended. Any
benefit plan fiduciary considering the purchase of the notes should consult
with experienced legal counsel in determining whether all required conditions
for that purchase have been satisfied. The certificates are not eligible for
purchase by employee benefit plans subject to Title I of ERISA. See "ERISA
Considerations" beginning on page 102 of this prospectus for a further
discussion of the ERISA considerations applicable to a purchase of the notes or
the certificates.
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<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, as well as the
other investment considerations described in this prospectus, as you decide
whether to purchase the notes or the certificates.
The Insurance Policy may
not be Available to Assure
Payment of Your Notes or
Your Certificates.....
The insurer will unconditionally guarantee the
payment of monthly interest and monthly principal
to the noteholders and the certificateholders
with respect to each payment date if payments
received on or in respect of the contracts,
including amounts recovered in connection with
the repossession and sale of financed vehicles
that secure defaulted contracts, and the amount
on deposit in the reserve account are not
sufficient to make that payment. CarMax Auto
Receivables cannot assure you, however, that the
insurer will perform its obligations under the
insurance policy. The insurer may not perform its
obligations under the insurance policy for a
variety of reasons. These reasons include, but
are not limited to, the occurrence of an event of
bankruptcy, insolvency, receivership or
liquidation with respect to the insurer or a
dispute as to the basis for a policy claim. If
contract payments and the amount on deposit in
the reserve account are not sufficient on any
payment date to pay in full the monthly interest
and monthly principal due on that payment date,
and if there is a default under the insurance
policy, you will experience payment delays with
respect to your notes or your certificates. If
the amount of that insufficiency is not offset by
excess contract payments on subsequent payment
dates, you will experience losses with respect to
your notes or your certificates. See "Description
of the Insurer" beginning on page 62 of this
prospectus and "Description of the Insurance
Policy" beginning on page 64 of this prospectus
for a further discussion of the insurer and the
insurance policy.
10
<PAGE>
The Amount on Deposit in
The Reserve Account may
not be Sufficient to
Assure Payment of Your
Notes or Your
Certificates..........
The amount on deposit in the reserve account will
be used to fund the payment of monthly interest
and monthly principal to the noteholders and the
certificateholders on each payment date if
payments received on or in respect of the
contracts, including amounts recovered in
connection with the repossession and sale of
financed vehicles that secure defaulted
contracts, are not sufficient to make that
payment. CarMax Auto Receivables cannot assure
you, however, that the amount on deposit in the
reserve account will be sufficient on any payment
date to assure payment of your notes or your
certificates. If the contracts experience higher
losses than were projected in determining the
amount required to be on deposit in the reserve
account and the principal balance of the
certificates, the amount on deposit in the
reserve account may be less than projected. If
contract payments and the amount on deposit in
the reserve account are not sufficient on any
payment date to pay in full the monthly interest
and monthly principal due on that payment date,
and if there is a default under the insurance
policy, you will experience payment delays with
respect to your notes or your certificates. If
the amount of that insufficiency is not offset by
excess contract payments on subsequent payment
dates, you will experience losses with respect to
your notes or your certificates. See "Collections
and Payments--The Reserve Account" beginning on
page 55 of this prospectus for a further
discussion of the reserve account.
The Subordination of the
Certificates may not be
Adequate to Assure Payment
of Your Notes.........
The subordination of the certificates will
increase the likelihood that amounts owed on the
notes will be paid in full. CarMax Auto
Receivables cannot assure you, however, that the
subordination of the certificates will be
sufficient to assure payment of your notes or
your certificates. If the contracts experience
higher losses than were projected in determining
the amount required to be on deposit in the
reserve account and the principal balance of the
certificates, the funds available on any payment
date may not be sufficient to pay in full the
monthly interest
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<PAGE>
and monthly principal due to the noteholders on
that payment date, even if those funds are not
used to pay monthly interest or monthly principal
due to the certificateholders. If payments
received on or in respect of the contracts,
including amounts recovered in connection with
the repossession and sale of financed vehicles
that secure defaulted contracts, and the amount
on deposit in the reserve account are not
sufficient on any payment date to pay in full the
monthly interest and monthly principal due on
that payment date, and if there is a default
under the insurance policy, you will experience
payment delays with respect to your notes or your
certificates. If the amount of that insufficiency
is not offset by excess contract payments on
subsequent payment dates, you will experience
losses with respect to your notes or your
certificates. See "Collections and Payments--
Subordination of the Certificates" beginning on
page 56 of this prospectus for a further
discussion of the subordination of the
certificates.
The Collateral Value of
the Financed Vehicles may
not be Adequate to Assure
Payment of Your Notes or
Your Certificates.....
If the trust must rely on recoveries to collect
the outstanding principal balance of a defaulted
contract, you could experience losses or payment
delays with respect to your notes or your
certificates. The amount recovered in connection
with the repossession and sale of a financed
vehicle is often less than the outstanding
principal balance of the related defaulted
contract. The market value of most motor vehicles
declines with age, particularly in the case of
new motor vehicles during the first year, and
repossession and sale expenses must be paid out
of the amount recovered. In addition, limitations
on the manner in which a motor vehicle may be
repossessed and laws requiring that the obligor
on a defaulted contract be given notice of the
default and an opportunity to cure the default or
to redeem the financed vehicle may delay the
recovery process. See "Material Legal Aspects of
the Transaction--Repossession of Vehicles"
beginning on page 86 of this prospectus and "--
Notice of Sale; Redemption Rights" beginning on
page 87 of this prospectus for a further
discussion of the limitations on the manner in
which motor vehicles may be repossessed and sold.
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<PAGE>
The risk that the amount recovered will be less
than the amount due may be increased with respect
to the contracts because CarMax Auto Superstores'
underwriting procedures allow creditworthy
obligors to finance amounts that exceed the value
of the related financed vehicles. See "The
Originator's Finance Operations--Underwriting
Procedures" beginning on page 22 of this
prospectus for a further discussion of the
circumstances under which the amount financed by
CarMax Auto Superstores might exceed the value of
the related financed vehicle.
Third Parties Could
Acquire Interests in the
Financed Vehicles that
Would Reduce the Funds
Available to Make Payments
on Your Notes or Your
Certificates..........
To facilitate servicing and to reduce
administrative burden and expense, the servicer
will act as custodian of the contracts and the
contracts will not be segregated or otherwise
marked to reflect their transfer to the trust. In
the absence of a notation on the contracts
reflecting the interest of the trust, a third
party could acquire an interest in one or more of
the contracts that would be superior to the
interest of the trust. If that were to happen,
payments received on or in respect of those
contracts, including amounts recovered in
connection with the repossession and sale of the
related financed vehicles, would not be available
to make payments on the notes or the
certificates. See "Material Legal Aspects of the
Transaction--Interest in Contracts" beginning on
page 84 of this prospectus for a further
discussion of the trust's interest in the
contracts.
A Bankruptcy of CarMax
Auto Superstores Could
Result in Losses or
Payment Delays With
Respect to Your Notes or
Your Certificates..........
CarMax Auto Superstores will represent and
warrant in the purchase agreement that the
transfer of the contracts from CarMax Auto
Superstores to CarMax Auto Receivables is a sale
rather than a financing. If CarMax Auto
Superstores were to become the subject of a
bankruptcy proceeding, however, the bankruptcy
court could conclude that:
13
<PAGE>
. the transfer of the contracts from CarMax Auto
Superstores to CarMax Auto Receivables should
be characterized as a financing and that the
contracts should be included as part of CarMax
Auto Superstores' bankruptcy estate; or
. the transfer of the contracts from CarMax Auto
Superstores to CarMax Auto Receivables should
be characterized as a sale but the assets and
liabilities of CarMax Auto Receivables should
be consolidated with the assets and liabilities
of CarMax Auto Superstores for purposes of the
bankruptcy proceeding.
If a bankruptcy court were to reach either of
these conclusions, you could experience losses or
payment delays with respect to your notes or your
certificates because:
. the trustees would not be permitted to exercise
remedies against CarMax Auto Superstores on
your behalf without the permission of the
bankruptcy court;
. the bankruptcy court could require the trustees
to accept property in exchange for the
contracts that has less value than the
contracts or could reduce the amount of
collateral held by the trust;
. a tax or government lien on property of CarMax
Auto Superstores that arose before the transfer
of the contracts to CarMax Auto Receivables
could be paid from amounts received on or in
respect of the contracts before those amounts
were used to make payments on your notes or
your certificates; and
. the trustees might not have a perfected
security interest in one or more of the
financed vehicles or amounts collected on or in
respect of the contracts held by CarMax Auto
Superstores at the time of the commencement of
the bankruptcy proceeding.
CarMax Auto Receivables has taken steps in
structuring the transaction described in this
prospectus to reduce the risk that a bankruptcy
court would conclude that the transfer of the
contracts from CarMax Auto Superstores to CarMax
Auto Receivables should be characterized as a
financing rather than a sale or that the assets
and liabilities of CarMax Auto Receivables should
be consolidated with
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<PAGE>
the assets and liabilities of CarMax Auto
Superstores for purposes of a bankruptcy
proceeding. See "Material Legal Aspects of the
Transaction--Bankruptcy Matters" beginning on
page 89 of this prospectus for a further
discussion of the possibility that the transfer
of the contracts from CarMax Auto Superstores to
CarMax Auto Receivables would be characterized as
a financing rather than a sale. See "Description
of CarMax Auto Superstores and CarMax Auto
Receivables--CarMax Auto Receivables" beginning
on page 41 of this prospectus for a further
discussion of the possibility that the assets and
the liabilities of CarMax Auto Receivables would
be consolidated with the assets and liabilities
of CarMax Auto Superstores.
Contract Prepayments could
Require You to Reinvest
Your Principal Earlier
than Expected at a Lower
Rate of Return........
The contracts can be prepaid in full or in part
at any time by the related obligor without
penalty. In addition, prepayments can occur as a
result of rebates of extended warranty contract
costs and insurance premiums, liquidations due to
obligor payment defaults, receipts of proceeds
from physical damage, credit life and credit
disability insurance policies and payments made
by CarMax Auto Superstores or the servicer in
connection with breaches of representations and
warranties. If prepayments on the contracts are
more rapid than expected, you may have to
reinvest principal earlier than expected at a
rate of interest that is less than the rate of
interest on the notes or the certificates. The
rate of prepayment on the contracts may be
influenced by a variety of economic, social,
legal and other factors. These factors include,
but are not limited to, inflation rates, interest
rates offered for other loan products, changes in
consumer confidence, changes in employment status
and restrictions on transfers of financed
vehicles. See "Weighted Average Life of the
Offered Securities" beginning on page 32 of this
prospectus for a further discussion of contract
prepayments.
15
<PAGE>
The Geographic
Concentration of the
Contracts Could Result in
Losses or Payment Delays
with Respect to Your Notes
or Your Certificates.......
As of September 30, 1999, %, %, %, %,
%, % and % of the contracts, based on
outstanding principal balance, related to
obligors with mailing addresses in Georgia,
Texas, Florida, Illinois, North Carolina,
Maryland and Virginia, respectively. As a result
of this geographic concentration, economic,
social, legal and other factors affecting these
states could cause the number of delinquent or
defaulted contracts or the rate of prepayments on
the contracts to increase or could cause the
amount recovered with respect to defaulted
contracts to decrease. These factors include, but
are not limited to:
. unemployment rates: for example, if a material
number of obligors located in one or more
concentration states were to lose their jobs,
the number of delinquent or defaulted contracts
could increase;
. changes in consumer debt levels: for example,
if uncertain economic conditions in one or more
concentration states were to cause a material
number of obligors located in those states to
begin prepaying outstanding loans, the rate of
prepayments on the contracts could increase;
. the enactment of new laws that further regulate
the motor vehicle lending industry: for
example, if one or more concentration states
were to enact legislation imposing additional
restrictions on the repossession and sale of
financed vehicles, the amount recovered with
respect to defaulted contracts governed by the
laws of those states could decrease.
. natural disasters: for example, if a hurricane
or other natural disaster affecting one or more
concentration states were to materially
adversely affect commercial and financial
activities in those states, the number of
delinquent or defaulted contracts could
increase.
If the contracts experience higher delinquencies
or losses as a result of these factors, or if the
amount recovered with respect to defaulted
contracts decreases as a result of these factors,
the funds available on any payment date
16
<PAGE>
may not be sufficient to pay in full the monthly
interest and monthly principal due to the
noteholders or the certificateholders on that
payment date and you may experience payment
delays or losses with respect to your notes or
your certificates. If prepayments on the
contracts are more rapid than expected as a
result of these factors, you may have to reinvest
principal earlier than expected at a rate of
interest that is less than the rate of interest
on the notes or the certificates.
The Insurer may Control
the Declaration and
Consequences of an Event
of Default Under the
Undenture.............
If an event of default shall have occurred and be
continuing under the indenture and a default
shall not have occurred and be continuing under
the insurance policy, the insurer, rather than
the indenture trustee or the noteholders, will
control whether the notes are declared
immediately due and payable and which rights or
remedies under the indenture are exercised
following that declaration. The remedies
available under the indenture following an event
of default include the sale of all or a portion
of the property of the trust and the distribution
of the sale proceeds to the noteholders and the
certificateholders in accordance with the
indenture. In addition, if an event of default
shall have occurred and be continuing under the
indenture and a default shall not have occurred
and be continuing under the insurance policy, the
insurer may elect to prepay the notes or, if the
notes have been paid in full, the certificates in
whole or in part. If the notes or the
certificates are prepaid through the distribution
of sale proceeds or directly by the insurer, you
may have to reinvest principal earlier than
expected at a rate of interest that is less than
the rate of interest on the notes or the
certificates. See "Description of the Indenture--
Rights Upon Event of Default" beginning on page
66 of this prospectus for a further discussion of
default remedies under the indenture.
17
<PAGE>
Computer Program Problems
Beginning in the Year 2000
Could Result in Payment
Delays with Respect to
Your Notes or Your
Certificates..........
A number of existing computer systems use two
rather than four digits to identify a year. These
systems could fail or produce erroneous results
during transition from the year 1999 to the year
2000 and thereafter. The servicer has completed a
year 2000 conversion project designed to ensure
that its computerized information systems will be
able to process accurately information that may
be date sensitive. The servicer has also
identified its key third-party business partners
and is coordinating with them to address
potential year 2000 issues. The payment of
interest and principal on your notes or your
certificates could be delayed if the servicer,
the owner trustee, the indenture trustee or The
Depository Trust Company were to experience
problems with their computer systems relating to
the year 2000. See "The Originator's Finance
Operations--Year 2000 Compliance" beginning on
page 27 of this prospectus for a further
discussion of the year 2000 problem.
18
<PAGE>
The remaining portions of this prospectus include a number of capitalized
terms that have meanings not evident from their context and that cannot be
defined concisely when they are first used. The glossary beginning on page 109
of this prospectus contains the definitions of these capitalized terms.
DESCRIPTION OF THE TRUST
Formation of the Trust
The CarMax Auto Owner Trust 1999-1 will be formed as a statutory business
trust under the laws of the State of Delaware under a trust agreement between
CarMax Auto Receivables and First Union Trust Company, National Association, as
owner trustee. See "Description of the Trust Agreement" beginning on page 74 of
this prospectus for a further discussion of the trust agreement.
The property of the trust will include a pool of simple interest retail
installment sale contracts originated by CarMax Auto Superstores in the
ordinary course of business in connection with the sale of new and used motor
vehicles and payments due or received on or in respect of the contracts after
the Cutoff Date. The principal balance of the contracts was $ as of the
Cutoff Date. See "Description of the Contract Pool" beginning on page 29 of
this prospectus for a further discussion of the contract pool.
Issuance of the Securities
The notes will be issued on or about October , 1999 under an indenture
between the trust and Bankers Trust Company, as indenture trustee. The
principal balance of the notes will equal $ on the date of issuance.
CarMax Auto Receivables cannot assure you that a secondary market for the notes
will develop or, if a secondary market does develop, that it will continue or
be sufficiently liquid to allow you to resell your notes. See "Description of
the Notes" beginning on page 43 of this prospectus for a further discussion of
the notes. See "Description of the Indenture" beginning on page 65 of this
prospectus for a further discussion of the indenture.
The certificates will be issued on or about October , 1999 under the trust
agreement. The principal balance of the certificates will equal $ on the
date of issuance. CarMax Auto Receivables cannot assure you that a secondary
market for the certificates will develop or, if a secondary market does
develop, that it will continue or be sufficiently liquid to allow you to resell
your certificates. See "Description of the Certificates" beginning on page 46
of this prospectus for a further discussion of the certificates.
CarMax Auto Receivables is offering the notes and the certificates for sale
by this prospectus.
On the closing date, each class of notes and the certificates must be rated
in the highest applicable category by Moody's Investors Service, Inc. and
Standard & Poor's, a division of
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<PAGE>
The McGraw-Hill Companies, Inc. A rating is not a recommendation to buy, sell
or hold securities and may be subject to revision or withdrawal at any time by
the assigning rating agency. A rating does not comment as to market price or
suitability for a particular investor. The ratings of the offered securities
address the likelihood of the payment of principal and interest on the offered
securities pursuant to their terms. CarMax Auto Receivables cannot assure you
that any rating will remain for a given period of time or that any rating will
not be lowered or withdrawn entirely by a rating agency.
The Trust Property
The property of the trust will include:
. the contracts;
. amounts received on or in respect of the contracts after the Cutoff
Date;
. security interests in the vehicles financed under the contracts;
. any proceeds from claims on or refunds of premiums with respect to
various physical damage, theft, credit life and credit disability
insurance policies relating to the financed vehicles or the related
obligors;
. funds on deposit in the collection account, the note payment
account, the certificate payment account and the reserve account;
. an unconditional and irrevocable insurance policy issued by MBIA
Insurance Corporation guaranteeing payments of monthly interest and
monthly principal on the notes and the certificates and payments of
the monthly servicing fee to the servicer;
. rights under the purchase agreement to cause CarMax Auto Superstores
to repurchase contracts affected materially and adversely by
breaches of the representations and warranties of CarMax Auto
Superstores made in the purchase agreement; and
. rights under the sale and servicing agreement to cause the servicer
to purchase contracts affected materially and adversely by breaches
of the representations and warranties of the servicer made in the
sale and servicing agreement.
The trust will not acquire any other assets, and it is not anticipated that
the trust will have any need for additional capital resources. Because the
trust will have no operating history upon its formation and will not engage in
any business other than acquiring and holding the trust property and issuing
and distributing payments on the notes and the certificates, no historical or
pro forma financial information with respect to the trust is included in this
prospectus. The servicer will file with the SEC, promptly after the closing
date, a current report on Form 8-K containing audited financial statements and
other required information with respect to the trust. The servicer will file
with the SEC all other reports required with respect to the trust under the
Securities Exchange Act of 1934, as amended.
20
<PAGE>
THE ORIGINATOR'S FINANCE OPERATIONS
First North American Credit
CarMax Auto Superstores is a leading retailer of new and used motor
vehicles in the United States. CarMax Auto Superstores sells motor vehicles
through 35 stores in 10 states and provides its customers with a wide range of
related services, including the financing of vehicle purchases through its own
financing unit, FNAC, and through third parties, and the sale of extended
service contracts and automotive electronic products. The outstanding principal
balance of all motor vehicle retail installment sale contracts originated
through FNAC was $ as of September 30, 1999.
Underwriting Procedures
FNAC credit applications are accepted at all CarMax Auto Superstores
locations. Each application requires that the applicant provide current
information regarding his or her employment history, bank accounts, income,
debts, credit references and other factors that are relevant to an assessment
of creditworthiness. This information is entered into a local terminal and
transmitted electronically to FNAC for review. In addition, FNAC obtains one or
more credit reports from major credit reporting agencies summarizing each
applicant's credit history and payment habits, including such items as open
accounts, delinquent payments, bankruptcies, repossessions, lawsuits and
judgments. FNAC uses credit scoring models developed for FNAC by Fair Issac &
Co. to assess objectively an applicant's creditworthiness and to help FNAC
quantify credit risk and implement risk adjusted pricing. The credit scoring
models, in use since September 1993, are statistically derived from prior
credit granting experience and analyze predictive information from the credit
applications and credit bureau reports to generate a numerical credit score for
each applicant. This numerical credit score indicates the risk associated with
extending credit to the applicant. The accuracy and effectiveness of the models
are periodically validated by one or more independent third parties, and the
models are periodically updated to include current statistical data.
The majority of all credit applications are accepted or declined
automatically. If an applicant meets the minimum credit score requirements
using the credit scoring models, the related application is immediately
approved. If the applicant does not meet these requirements, the related
application is declined. The credit scoring models are also used to identify
irregularities in an application or credit file. If FNAC receives an
application deemed to be irregular or incomplete or an applicant requests that
an application be manually reviewed, that application will be reviewed by an
experienced credit underwriter. FNAC's credit underwriters manually approve or
decline applications in accordance with credit policies established by senior
management.
Each installment sale contract originated by FNAC in connection with the
sale of a new or used motor vehicle is secured by that vehicle. The maximum
loan amount for each financed vehicle is determined based upon the
creditworthiness of the related obligor and is between 90% and 120% of the
selling price of the financed vehicle, including sales tax,
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<PAGE>
license fees and title fees. In most cases, the selling price does not exceed
the manufacturer's suggested retail price, in the case of a new vehicle, or the
"average blue book value" published by Kelley Blue Book Co., a standard
reference source for dealers in used cars, in the case of a used vehicle. The
amount financed is often less than the maximum loan amount, however, depending
upon the credit needs of the obligor. Furthermore, in each case where the
amount financed exceeds the value of the related financed vehicle, FNAC has
determined that the creditworthiness of the related obligor supports the
additional loan amount. FNAC also finances service and extended warranty
contracts purchased with respect to financed vehicles.
FNAC believes that the resale value of a new vehicle purchased by an
obligor will decline below the manufacturer's suggested retail price and, in
some cases, may decline for a period of time below the principal balance
outstanding on the related installment sale contract. FNAC also believes that
the resale value of a used vehicle purchased by an obligor will decline, but
believes that the amount of the decline, expressed as a percentage of the
resale value of the vehicle at the time of purchase, will be less than the
amount of the decline, expressed as a percentage of the manufacturer's
suggested retail price, in the resale value of a new vehicle. FNAC regularly
reviews the quality of its installment sale contracts and periodically conducts
quality audits to ensure compliance with its established policies and
procedures.
Collection Procedures
FNAC measures delinquencies by the number of days elapsed from the date a
payment is due under an installment sale contract. FNAC considers a contract to
be delinquent when the related obligor fails to make a scheduled payment on or
before the related due date. If a partial payment is received that is less than
the regular monthly payment by more than five dollars, or such other nominal
amount as may be determined by senior management, and that deficiency is not
cured on or before the related due date, the account will be considered
delinquent. FNAC mails a computer-generated delinquency notice to all
delinquent obligors when their contracts become 11 days delinquent. FNAC also
uses an automated delinquency monitoring system, which assigns delinquent
contracts to different categories of collection priority based on the level of
delinquency.
FNAC manages its delinquencies using software that offers the ability to
alter collections strategy according to individual account behavior and
historical performance. Account risk is determined through the analysis of
behavioral factors, such as credit risk at the initiation of the loan, the
number of payments made, the level of historical delinquency and the number of
times the obligor has failed to keep payment arrangements. FNAC reviews its
collections strategy on a daily basis and uses optimization techniques to
evaluate its collections strategy.
FNAC's collection efforts are divided into specific areas depending upon
the level of delinquency. Accounts that are fewer than 30 days past due are
assigned to the Early Collections Group. The collectors in this group attempt
to contact delinquent obligors by telephone or letter based on the level of
delinquency and the history of the account. In
22
<PAGE>
addition, FNAC's customer service representatives are trained to handle
accounts that are fewer than 30 days past due when receiving incoming calls.
Accounts that reach a level of delinquency of greater than 30 days past due are
assigned to the Late Collections Group, where they are reviewed by senior-level
collectors who analyze each account to determine collateral risk. If a
collector is unable to confirm payment on an account prior to 45 days
delinquency, or if a collector determines that the collateral securing an
account is at risk, the collector will recommend repossession of the related
vehicle. All repossession recommendations must be reviewed and accepted by a
member of management before being forwarded to the repossession department in
the Specialty Collections Group.
Once a vehicle is in FNAC's possession, the related obligor has a
redemption period during which he may redeem the vehicle by paying off the
related contract in full or by paying off all past due amounts. In either case,
the obligor is also required to pay to FNAC the reasonable expenses incurred by
FNAC in repossessing, holding and preparing the financed vehicle for
disposition and arranging for its sale. In those states in which the Uniform
Commercial Code governs the redemption of financed vehicles, the obligor must
be given reasonable notice of the date, time and place of any proposed public
sale of a repossessed vehicle, or the date after which any proposed private
sale of a repossessed vehicle may be held, and may redeem the vehicle at any
time prior to sale. In most states in which laws other than the UCC govern the
redemption of financed vehicles, the obligor must be given a specified period
of time, usually between 10 and 30 days, to redeem a repossessed vehicle. At
the conclusion of the redemption period, FNAC sells the vehicle and the
remaining principal balance is charged off. All repossession activities are
carried out in accordance with applicable state law and related procedures
adopted by FNAC. Other departments in the Specialty Collections Group include
recovery collections, remarketing, skip tracing, legal and bankruptcy.
In general, FNAC charges off a contract on the earliest of:
. the last business day of the month during which any payment, or any
part of any payment, due under the contract becomes 120 days or more
delinquent, whether or not FNAC has repossessed the motor vehicle
securing the contract;
. if FNAC has repossessed the motor vehicle securing the contract, the
last business day of the month during which the motor vehicle is
liquidated; and
. the last business day of the month during which FNAC determines in
accordance with its customary practices that the contract is
uncollectible.
FNAC may extend the due date for a current or past due payment for up to 30
days if the related contract has been in existence for at least six months and
at least six monthly payments have been made. The total number of extensions an
obligor may receive equals the number of years in the original term of the
related contract, except that no more than two extensions will be granted
during any 12-month period. FNAC will grant extensions only with respect to
amounts that are fewer than 30 days past due and only if all other past due
amounts are paid in full. In general, if a contract has been confirmed or
reaffirmed in a bankruptcy proceeding and the related obligor has thereafter
made three consecutive monthly
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<PAGE>
payments, FNAC will return the contract to current status. All exceptions to
the extension policy must be approved by FNAC's senior management.
Physical Damage Insurance
In general, each installment sale contract requires the related obligor to
obtain physical damage insurance covering loss or damage to the related
financed vehicle. FNAC tracks the status of insurance and attempts to cause
obligors to reinstate insurance if the insurance is allowed to lapse. CarMax
Auto Receivables cannot assure you, however, that each financed vehicle will at
all times be covered by physical damage insurance.
Allocation of Payments
The contracts will be simple interest contracts. A simple interest contract
provides for equal monthly payments that are applied, first, to will be
correspondingly greater. Conversely, if an obligor pays a fixed monthly
installment under a simple interest contract after its contractual due date,
the portion of the payment allocable to interest for the period since the
preceding payment will be greater than it would have been had the payment been
made when due, and the portion of the payment applied to reduce the principal
balance of the contract will be correspondingly less, in which case a larger
portion of the principal balance may be due on the final scheduled payment
date. If a contract is liquidated or a financed vehicle is repossessed, amounts
recovered are applied first to unpaid interest and principal and any applicable
late charges or other fees and then to the expenses of repossession.
Delinquency and Credit Loss Experience
The following tables set forth delinquency and loss information with
respect to the motor vehicle retail installment sale contracts originated by
CarMax Auto Superstores. CarMax Auto Receivables cannot assure you that the
delinquency and loss experience of the contract pool will be comparable to that
set forth below.
24
<PAGE>
Delinquency Experience
<TABLE>
<CAPTION>
At September 30, At September 30,
1999 1998 At December 31, 1998 At December 31, 1997 At December 31, 1996
---------------- ---------------- ---------------------- ---------------------- ----------------------
Number of Number of Number of Number of Number of
Contracts Amount Contracts Amount Contracts Amount Contracts Amount Contracts Amount
--------- ------ --------- ------ --------- ------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Contract
Portfolio......... 52,129 $528,585,348 26,272 $259,517,771 14,803 $147,637,677
Delinquencies as a
Percentage
of Total Contract
Portfolio
31-60 Days...... 0.97% 0.76% 1.23% 0.85% 1.34% 1.09%
61-90 Days...... 0.23% 0.17% 0.39% 0.18% 0.43% 0.36%
91 Days or
More............ 0.11% 0.06% 0.23% 0.08% 0.21% 0.16%
Total
Delinquencies as a
Percentage of
Total Contract
Portfolio......... 1.31% 0.99% 1.85% 1.11% 1.98% 1.61%
Total
Delinquencies..... 685 $ 5,243,832 485 $ 2,894,712 294 $ 2,371,184
</TABLE>
The amounts included in the delinquency experience table represent principal
amounts only. The delinquency periods included in the delinquency experience
table are calculated based on the number of days a payment is contractually
past due. All contracts are written off not later than the last business day
of the month during which they become 120 days delinquent. As a result, no
contract reported as delinquent in the delinquency experience table was more
than 119 days delinquent at September 30 or December 31, as applicable.
25
<PAGE>
Credit Loss Experience
<TABLE>
<CAPTION>
Eight Months Ended
September 30, Year Ended December 31,
------------------- ----------------------------------------
1999 1998 1998 1997 1996
--------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total Number of
Contracts Outstanding
at Period End.......... 52,129 26,272 14,803
Average Number of
Contracts Outstanding
During the Period...... 39,201 20,538 11,487
Outstanding Principal
Amount at Period End... $528,585,348 $259,517,771 $147,637,677
Average Outstanding
Principal Amount During
the Period (1)......... $392,753,294 $194,539,224 $117,361,052
Gross Charge-Offs (2)... $ 2,726,477 $ 2,110,135 $ 1,181,456
Recoveries (3).......... $ 808,926 $ 665,576 $ 272,884
Net Losses.............. $ 1,917,551 $ 1,444,559 $ 908,572
Net Losses as a
Percentage of the
Average Outstanding
Principal Amount....... 0.49% 0.74% 0.77%
</TABLE>
- --------
(1) The average outstanding principal amount for any period equals the average
of the monthly average outstanding principal amount of the retail
installment sale contracts during that period.
(2) The gross charge-offs for any period equal the total principal amount due
on all installment sale contracts determined to be uncollectible during
that period minus the total amount recovered during that period from the
repossession and sale of financed vehicles.
(3) The recoveries for any period equal the total amount recovered during that
period on installment sale contracts previously charged off, including the
fair market value of unsold vehicles repossessed during that period.
The percentages for the nine-month periods ended September 30, 1998 and
September 30, 1999 are annualized. The nine-month periods ended September 30
are not necessarily indicative of a full year's actual results.
Delinquency and Credit Loss Trends
As indicated in the delinquency experience table, delinquencies on CarMax
Auto Superstores' motor vehicle installment sale contract portfolio, based on
principal balances more than 30 days past due and expressed as a percentage of
the total contract portfolio, decreased from 1.61% at December 31, 1996 to
1.11% at December 31, 1997 to 0.99% at December 31, 1998 to % at September
30, 1999.
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<PAGE>
As indicated in the credit loss experience table, net losses on CarMax Auto
Superstores' motor vehicle installment sale contract portfolio, expressed as a
percentage of the average outstanding principal balance of the contracts,
decreased from 0.77% for the year ended December 31, 1996 to 0.74% for the year
ended December 31, 1997 to 0.49% for the year ended December 31, 1998 to %
for the nine months ended September 30, 1999.
CarMax Auto Superstores believes that this improvement in delinquency and
credit loss performance over the past three years is attributable to a number
of factors, including the following:
. consistent credit underwriting, provided by empirically derived
credit scoring models which help FNAC quantify credit risk and
implement risk adjusted pricing;
. consistent collateral quality, achieved through selective vehicle
acquisition and a thorough reconditioning process to meet CarMax
Auto Superstores' high mechanical, electrical and safety standards;
and
. innovative collection strategies, including the use of behavioral
models to manage the collection processes and periodic default risk
reviews through risk score updates on outstanding loans.
CarMax Auto Superstores' expectations with respect to delinquency and
credit loss trends constitute forward-looking statements and are subject to
important economic, social, legal and other factors that could cause actual
results to differ materially from those projected. These factors include, but
are not limited to, inflation rates, unemployment rates, changes in consumer
debt levels, changes in the market for used vehicles and the enactment of new
laws that further regulate the motor vehicle lending industry.
Year 2000 Compliance
A number of existing computer systems use two rather than four digits to
identify a year. Using two digits to define dates after January 1, 2000 could
result in system failures or miscalculations that disrupt operations including
a temporary inability to process transactions, process invoices or engage in
similar normal business activities. In addition to computer systems, any
equipment with embedded systems that involve date-sensitive functions are at
risk if two digits have been used rather than four. Embedded systems are
specialized microchips used to control, monitor or assist the operation of
electrical equipment.
In 1997, CarMax Auto Superstores, as part of the more wide-ranging year
2000 compliance efforts of its corporate parent, Circuit City Stores, Inc.,
began a year 2000 date conversion project to address any necessary code
changes, testing and implementation for its systems. This project includes
internally developed information technology systems, purchased and leased
software and hardware, embedded systems and electronic data interchange
transaction processing. CarMax Auto Superstores has employed internal
resources, including management information systems developers and operations
personnel, to reprogram or replace, where necessary, and test its software for
year 2000 compliance.
27
<PAGE>
CarMax Auto Superstores has completed its remediation, forward-date testing
and implementation efforts for its internally developed and externally
purchased systems. CarMax Auto Superstores has also completed replacement work
and enterprise-level testing. With regard to embedded systems, CarMax Auto
Superstores has identified 204 distinct makes and models used for environmental
controls, fire detection and monitoring, burglar detection and monitoring,
elevators, office equipment and uninterruptible power supplies. All of these
embedded systems have been vendor certified as capable of appropriate function
in year 2000 or are no longer in use by CarMax Auto Superstores.
CarMax Auto Superstores also has identified its key third-party business
partners and is coordinating with them to address potential year 2000 issues.
CarMax Auto Superstores has communicated with all key third-party business
partners, and no material potential problems have been identified. Risks and
business impacts have been assigned to all vendor products and services.
Current action statements and contingency plans have been developed by CarMax
Auto Superstores for products and services believed to be at high or medium
risk of non-compliance.
Because CarMax Auto Superstores' computer systems were developed in recent
years, CarMax Auto Superstores does not expect to incur any additional material
costs related to the year 2000 issue. The trust, the noteholders and the
certificateholders will not bear any of CarMax Auto Superstores' costs in
connection with year 2000 remediation.
With respect to year 2000 risks, CarMax Auto Superstores believes it has
identified all critical areas and is in the process of developing contingency
plans and conducting end-to-end testing for those critical areas identified.
Critical is defined as any business process or application failure that would
result in a material financial, legal or operational impact. If CarMax Auto
Superstores' remediation efforts and the remediation efforts of third parties
fail, which CarMax Auto Superstores believes is the most reasonably likely
worst case scenario, CarMax Auto Superstores' contingency plans include
performing processes manually while working to assess and correct any errors in
the current systems and possibly changing suppliers. These plans are intended
to enable CarMax Auto Superstores to continue operating even if a degree of
business interruption occurs on January 1, 2000. CarMax Auto Superstores
believes that the risks presented by the year 2000 issue are unique given the
pervasive nature of the problem and the higher likelihood that year 2000 risk
may present itself in multiple, simultaneous impacts. Accordingly, CarMax Auto
Superstores' contingency planning process is an ongoing one that will require
further modifications as CarMax Auto Superstores obtains additional
information.
The costs of the year 2000 project and the dates on which CarMax Auto
Superstores plans to complete its year 2000 modifications are based on
management's estimates, which were derived utilizing numerous assumptions of
future events including the continued availability of resources, third-party
modification plans and other factors. Year 2000 issues, however, present a
number of risks that are beyond CarMax Auto Superstores' reasonable
28
<PAGE>
control, such as the failure of utility companies to deliver electricity, the
failure of telecommunications companies to provide voice and data services, the
failure of financial institutions to process transactions and transfer funds
and the collateral effects on CarMax Auto Superstores of the effects of year
2000 issues on the economy in general or on CarMax Auto Superstores' business
partners and customers. Although CarMax Auto Superstores believes that its year
2000 compliance program is designed to appropriately identify and address those
year 2000 issues that are subject to its reasonable control, CarMax Auto
Superstores can make no assurance that its efforts will be fully effective or
that the year 2000 issues will not have a material adverse effect on its
ability to act as servicer.
DESCRIPTION OF THE CONTRACT POOL
Selection Criteria
The contracts were originated by CarMax Auto Superstores in the ordinary
course of business in connection with the sale of new and used motor vehicles.
The contracts were selected from CarMax Auto Superstores' portfolio of motor
vehicle retail installment sale contracts based on several criteria, including
that each contract:
. is secured by a new or used motor vehicle;
. had an original principal balance of not more than $50,000 and a
remaining principal balance as of the Cutoff Date of not less than
$500;
. 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 72 months and not less than three
months;
. is a simple interest contract;
. has a contract rate of interest of at least 5% and not more than
25%;
. provides for level monthly payments that fully amortize the amount
financed over the original term to maturity of the contract, except
that the period between the contract date and the first installment
date may be less than or greater than one month and the first and
last payments may be less than or minimally greater than the level
payments;
. relates to an obligor who has made at least two payments as of the
Cutoff Date;
. was not delinquent more than 30 days as of the Cutoff Date;
. is not secured by a financed vehicle that had been repossessed as of
the Cutoff Date;
. does not relate to an obligor that was the subject of a bankruptcy
proceeding as of the Cutoff Date;
. is evidenced by only one original document; and
. was not selected using selection procedures believed by CarMax Auto
Superstores or CarMax Auto Receivables to be adverse to the
noteholders or the certificateholders.
29
<PAGE>
Characteristics of the Contracts
The following tables set forth information with respect to the contracts as
of the Cutoff Date. If there is a material adverse change in the
characteristics of the contracts between the Cutoff Date and the date on which
the offering price for the notes and the certificates is determined, CarMax
Receivables will send you updated information with respect to the contracts. In
each case where information in the following tables is presented as a
percentage of the aggregate principal balance of the contracts or as a
percentage of the total number of contracts, the sum of the percentages
presented may be less than or greater than 100% due to rounding.
Composition of the Contracts
as of the Cutoff Date
<TABLE>
<CAPTION>
Number of Aggregate Original Weighted Average
Contracts Principal Balance Principal Balance Contract Rate
--------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
New Motor Vehicles...... $ $ %
Used Motor Vehicles.....
--- ------ ------ ---
All Contracts......... $ $ %
=== ====== ====== ===
</TABLE>
<TABLE>
<CAPTION>
Weighted Weighted Percentage of
Average Average Aggregate
Remaining Term Original Term Principal Balance
-------------- ------------- -----------------
<S> <C> <C> <C>
New Motor Vehicles............ months months %
Used Motor Vehicles...........
--------- --------- ---
All Contracts............... months months %
========= ========= ===
</TABLE>
As used in the composition table, weighted average remaining term and
weighted average original term are calculated based on the scheduled maturities
of the contracts and assuming no prepayments of the contracts.
Distribution of the Contracts by Remaining Term
as of the Cutoff Date
<TABLE>
<CAPTION>
Percentage of Percentage of
Number of Total Number of Aggregate Aggregate
Remaining Term Range Contracts Contracts Principal Balance Principal Balance
-------------------- --------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C>
1 to 12 months......... % $ %
13 to 24 months.........
25 to 36 months.........
37 to 48 months.........
49 to 60 months.........
61 to 72 months.........
--- --- ------- ---
Total................. % $ %
=== === ======= ===
</TABLE>
30
<PAGE>
Distribution of the Contracts by Obligor Mailing Address
as of the Cutoff Date
<TABLE>
<CAPTION>
Percentage of
Percentage of Aggregate
Number of Total Number of Aggregate Principal
Obligor Mailing Address Contracts Contracts Principal Balance Balance
----------------------- --------- --------------- ----------------- -------------
<S> <C> <C> <C> <C>
District of Columbia
(D.C.)................. % $ %
Florida.................
Georgia.................
Illinois................
Maryland................
North Carolina..........
South Carolina..........
Texas...................
Virginia................
Wisconsin...............
Other...................
--- --- ------ ---
Total................. % $ %
=== === ====== ===
</TABLE>
Each state included in the "other" category in the distribution by obligor
mailing address table accounted for less than 0.25% of the total number of
contracts and less than 0.25% of the aggregate principal balance of the
contracts as of the Cutoff Date.
Distribution of the Contracts by Financed Vehicle Model Year
as of the Cutoff Date
<TABLE>
<CAPTION>
Percentage of
Percentage of Aggregate
Number of Total Number of Aggregate Principal
Model Year Contracts Contracts Principal Balance Balance
---------- --------- --------------- ----------------- -------------
<S> <C> <C> <C> <C>
1988 and earlier.. % $ %
1989..............
1990..............
1991..............
1992..............
1993..............
1994..............
1995..............
1996..............
1997..............
1998..............
1999..............
2000..............
--- --- ------ ---
Total........... % $ %
=== === ====== ===
</TABLE>
31
<PAGE>
Distribution of the Contracts by Contract Rate
as of the Cutoff Date
<TABLE>
<CAPTION>
Percentage of
Percentage of Aggregate
Number of Total Number of Aggregate Principal
Contract Rate Range Contracts Contracts Principal Balance Balance
------------------- --------- --------------- ----------------- -------------
<S> <C> <C> <C> <C>
5.000 to 5.999%........ % $ %
6.000 to 6.999%........
7.000 to 7.999%........
8.000 to 8.999%........
9.000 to 9.999%........
10.000 to 10.999%.......
11.000 to 11.999%.......
12.000 to 12.999%.......
13.000 to 13.999%.......
14.000 to 14.999%.......
15.000 to 15.999%.......
16.000 to 16.999%.......
17.000 to 17.999%.......
More than 17.999%.......
---- ------ ------ ------
Total................. 100.00% $ 100.00%
==== ====== ====== ======
</TABLE>
WEIGHTED AVERAGE LIFE OF THE OFFERED SECURITIES
The weighted average life of the offered securities will be influenced by
the rate at which the principal balances of the contracts are paid. The
contracts can be prepaid in full or in part at any time by the related obligor
without penalty. In addition, prepayments can occur as a result of rebates of
extended warranty contract costs and insurance premiums, liquidations due to
obligor payment defaults, receipts of proceeds from physical damage, theft,
credit life and credit disability insurance policies and payments made by
CarMax Auto Superstores or the servicer in connection with breaches of
representations and warranties under the purchase agreement or the sale and
servicing agreement. The rate of prepayment on the contracts may be influenced
by a variety of economic, social, legal and other factors. These factors
include, but are not limited to, inflation rates, interest rates offered for
other loan products, changes in consumer confidence, changes in employment
status and restrictions on transfers of financed vehicles. In light of these
factors, CarMax Auto Receivables cannot assure you as to the amount of
principal payments to be made on the offered securities on any Payment Date or
that the offered securities will not be paid earlier than the applicable final
scheduled Payment Date. You will bear the risk of not being able to reinvest
early principal payments on the offered securities at yields at least equal to
the yield on your offered securities.
Prepayments on retail installment sale contracts, such as the contracts,
can be measured relative to a prepayment standard or model. The model used in
this prospectus is the ABS model. The ABS model represents an assumed rate of
prepayment each month relative to the original number of contracts in a pool.
The ABS model further assumes that all of the contracts are the same size and
amortize at the same rate and that each will be paid as
32
<PAGE>
scheduled or will be prepaid in full. For example, in a pool of contracts
originally containing 100 contracts, a 1.0% ABS percentage means that one
contract prepays in full each month. The ABS model, like any prepayment model,
does not claim to be either a description of historical prepayment experience
or a prediction of future prepayment experience.
The tables on pages 35 to 38 have been prepared on the basis of various
assumptions, including that:
.the contracts prepay in full at the specified monthly ABS percentage;
. each scheduled payment on the contracts is made on the last day of each
month and includes a full month of interest, and each month has 30 days;
. distributions on the notes and the certificates are paid in cash on each
Payment Date commencing November 15, 1999, and each Payment Date occurs
on the 15th day of a month;
.the closing date for the notes and the certificates occurs on October ,
1999;
.no defaults or delinquencies occur in the payment of any of the contracts;
. no contracts are repurchased due to a breach of any representation or
warranty or for any other reason; and
. the servicer exercises on the first possible Payment Date its right to
purchase from the trust all remaining contracts in the contract pool.
The tables indicate the projected weighted average life of the notes and
the certificates. The tables set forth:
. the percentage of the initial principal balance of each class of notes
that is projected to be outstanding after each of the Payment Dates
shown at specified ABS percentages; and
. the percentage of the initial principal balance of the certificates that
is projected to be outstanding after each of the Payment Dates shown at
specified ABS percentages.
The tables also assume that the contracts have been aggregated into
hypothetical pools with all of the contracts within each pool having the
following characteristics:
<TABLE>
<CAPTION>
Weighted Average Weighted Average
Cutoff Date Original Term Remaining Term
Principal Weighted Average to Maturity to Maturity
Pool Number Balance Contract Rate (in Months) (in Months)
----------- ----------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total...................
</TABLE>
The information included in the following tables consists of forward-
looking statements and involves risks and uncertainties that could cause actual
results to differ materially from those in the forward-looking statements.
These tables are provided to illustrate how the principal balances of the notes
and the certificates may decline. The actual characteristics and performance of
the contracts will differ from the assumptions used in constructing the tables,
however, and it is highly unlikely that the contracts will prepay at a constant
ABS
33
<PAGE>
percentage until maturity or that all of the contracts will prepay at the same
ABS percentage. In addition, the diverse terms of the contracts within each of
the hypothetical pools could produce slower or faster rates of principal
payments than indicated in the tables at the various specified ABS percentages.
Any difference between the assumptions and the actual characteristics,
performance and prepayment experience of the contracts will affect the weighted
average lives of the notes and the certificates.
IMPORTANT NOTICE REGARDING CALCULATION OF THE WEIGHTED AVERAGE LIFE AND THE
ASSUMPTIONS UPON WHICH THE TABLES ON PAGES 35 TO 38 ARE BASED
The weighted average life of each class of notes is determined by:
. multiplying the amount of each principal payment on that class by the
number of years from the closing date to the related Payment Date;
.adding the results; and
.dividing the sum by the initial principal balance of that class.
The weighted average life of the certificates is determined by:
. multiplying the amount of each principal payment on the certificates by
the number of years from the closing date to the related Payment Date;
.adding the results; and
.dividing the sum by the initial principal balance of the certificates.
The tables on pages 35 to 38 have been prepared based on, and should be
read in conjunction with, the assumptions described on page 33, including
the assumptions regarding the characteristics and performance of the
contracts. The assumed characteristics and performance of the contracts will
differ from the actual characteristics and performance of the contracts.
34
<PAGE>
Percent of Initial Note Balance at Various ABS Percentages
<TABLE>
<CAPTION>
Class A-1 Notes Class A-2 Notes
---------------------------- ----------------------------
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
------------------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date............
1 August, 1999............
2 September, 1999.........
3 October, 1999...........
4 November, 1999..........
5 December, 1999..........
6 January, 2000...........
7 February, 2000..........
8 March, 2000.............
9 April, 2000.............
10 May, 2000...............
11 June, 2000..............
12 July, 2000..............
13 August, 2000............
14 September, 2000.........
15 October, 2000...........
16 November, 2000..........
17 December, 2000..........
18 January, 2001...........
19 February, 2001..........
20 March, 2001.............
21 April, 2001.............
22 May, 2001...............
23 June, 2001..............
24 July, 2001..............
25 August, 2001............
26 September, 2001.........
27 October, 2001...........
28 November, 2001..........
29 December, 2001..........
30 January, 2002...........
31 February, 2002..........
32 March, 2002.............
33 April, 2002.............
34 May, 2002...............
35 June, 2002..............
36 July, 2002..............
37 August, 2002............
38 September, 2002.........
39 October, 2002...........
40 November, 2002..........
41 December, 2002..........
42 January, 2003...........
43 February, 2003..........
44 March, 2003.............
45 April, 2003.............
46 May, 2003...............
47 June, 2003..............
48 July, 2003..............
49 August, 2003............
50 September, 2003.........
51 October, 2003...........
52 November, 2003..........
53 December, 2003..........
54 January, 2004...........
55 February, 2004..........
56 March, 2004.............
57 April, 2004.............
58 May, 2004...............
59 June, 2004..............
Weighted Average Life
(In Years).............
</TABLE>
35
<PAGE>
Percent Of Initial Note Balance At Various ABS Percentages
<TABLE>
<CAPTION>
Class A-3 Notes Class A-4 Notes
---------------------------- ----------------------------
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
------------------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date............
1 August, 1999............
2 September, 1999.........
3 October, 1999...........
4 November, 1999..........
5 December, 1999..........
6 January, 2000...........
7 February, 2000..........
8 March, 2000.............
9 April, 2000.............
10 May, 2000...............
11 June, 2000..............
12 July, 2000..............
13 August, 2000............
14 September, 2000.........
15 October, 2000...........
16 November, 2000..........
17 December, 2000..........
18 January, 2001...........
19 February, 2001..........
20 March, 2001.............
21 April, 2001.............
22 May, 2001...............
23 June, 2001..............
24 July, 2001..............
25 August, 2001............
26 September, 2001.........
27 October, 2001...........
28 November, 2001..........
29 December, 2001..........
30 January, 2002...........
31 February, 2002..........
32 March, 2002.............
33 April, 2002.............
34 May, 2002...............
35 June, 2002..............
36 July, 2002..............
37 August, 2002............
38 September, 2002.........
39 October, 2002...........
40 November, 2002..........
41 December, 2002..........
42 January, 2003...........
43 February, 2003..........
44 March, 2003.............
45 April, 2003.............
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Class A-3 Notes Class A-4 Notes
----------------------- -----------------------
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
---------------------- --- --- --- --- --- --- --- --- --- ---
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
46 May, 2003.............
47 June, 2003............
48 July, 2003............
49 August, 2003..........
50 September, 2003.......
51 October, 2003.........
52 November, 2003........
53 December, 2003........
54 January, 2004.........
55 February, 2004........
56 March, 2004...........
57 April, 2004...........
58 May, 2004.............
59 June, 2004............
Weighted Average Life
(In Years)...........
</TABLE>
Percent Of Initial Certificate Balance At Various ABS Percentages
<TABLE>
<CAPTION>
Certificates
----------------------------
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5%
-------------------------------- ---- ---- ---- ---- ----
<C> <S> <C> <C> <C> <C> <C>
Closing Date....................
1 August, 1999....................
2 September, 1999.................
3 October, 1999...................
4 November, 1999..................
5 December, 1999..................
6 January, 2000...................
7 February, 2000..................
8 March, 2000.....................
9 April, 2000.....................
10 May, 2000.......................
11 June, 2000......................
12 July, 2000......................
13 August, 2000....................
14 September, 2000.................
15 October, 2000...................
16 November, 2000..................
17 December, 2000..................
18 January, 2001...................
19 February, 2001..................
20 March, 2001.....................
21 April, 2001.....................
22 May, 2001.......................
23 June, 2001......................
24 July, 2001......................
25 August, 2001....................
26 September, 2001.................
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Certificates
------------------------
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5%
------------------------------------------------- ---- ---- ---- ---- ----
<C> <S> <C> <C> <C> <C> <C>
27 October, 2001....................................
28 November, 2001...................................
29 December, 2001...................................
30 January, 2002....................................
31 February, 2002...................................
32 March, 2002......................................
33 April, 2002......................................
34 May, 2002........................................
35 June, 2002.......................................
36 July, 2002.......................................
37 August, 2002.....................................
38 September, 2002..................................
39 October, 2002....................................
40 November, 2002...................................
41 December, 2002...................................
42 January, 2003....................................
43 February, 2003...................................
44 March, 2003......................................
45 April, 2003......................................
46 May, 2003........................................
47 June, 2003.......................................
48 July, 2003.......................................
49 August, 2003.....................................
50 September, 2003..................................
51 October, 2003....................................
52 November, 2003...................................
53 December, 2003...................................
54 January, 2004....................................
55 February, 2004...................................
56 March, 2004......................................
57 April, 2004......................................
58 May, 2004........................................
59 June, 2004.......................................
Weighted Average Life
(In Years)......................................
</TABLE>
38
<PAGE>
ALLOCATION OF PRINCIPAL BALANCES; MONTHLY REPORTS
A portion of the principal balance of each class of notes will be allocated
to each holder of that class based on a pool factor for that class calculated
by the servicer prior to each Payment Date. The pool factor for each class of
notes as of the last day of any month will equal the remaining principal
balance of that class as of the following Payment Date, after giving effect to
all payments of principal to be made to the holders of that class on that
Payment Date, divided by the initial principal balance of that class. The pool
factor for each class of notes will be 1.0000000 as of the closing date and
thereafter will decline to reflect reductions in the principal balance of that
class. The portion of the principal balance of any class of notes allocable to
each holder of that class will equal the product of the original denomination
of the note held by that holder and the pool factor for that class at the time
of determination.
A portion of the principal balance of the certificates will be allocated to
each certificateholder based on a certificate pool factor calculated by the
servicer prior to each Payment Date. The certificate pool factor as of the last
day of any month will equal the remaining principal balance of the certificates
as of the following Payment Date, after giving effect to all payments of
principal to be made to the certificateholders on that Payment Date, divided by
the initial principal balance of the certificates. The certificate pool factor
will be 1.0000000 as of the closing date and thereafter will decline to reflect
reductions in the principal balance of the certificates. The portion of the
principal balance of the certificates allocable to each certificateholder will
equal the product of the original denomination of the certificate held by that
holder and the certificate pool factor at the time of determination.
The noteholders and the certificateholders will receive reports on or about
each Payment Date concerning payments received on the contracts, the principal
balance of the contracts, each pool factor for each class of notes and the
certificate pool factor. In addition, the noteholders and the
certificateholders of record during any calendar year will be furnished
information for tax reporting purposes not later than the latest date permitted
by law. See "Collections and Payments--Statements to Noteholders" beginning on
page 60 of this prospectus and "--Statements to Certificateholders" beginning
on page 61 of this prospectus for a further discussion of the information to be
furnished to securityholders.
USE OF PROCEEDS
On the closing date, CarMax Auto Receivables will transfer the contracts to
the trust in exchange for the net proceeds from the sale of the notes and the
certificates. CarMax Auto Receivables will apply the net proceeds from the sale
of the notes and the certificates to the purchase of the contracts from CarMax
Auto Superstores. CarMax Auto Superstores will use the proceeds from the sale
of the contracts to CarMax Auto Receivables to repay existing debt and for
general corporate purposes. The price the trust will pay to CarMax Auto
Receivables for the contracts will represent the net proceeds received from the
sale of the notes and the certificates. CarMax Auto Superstores will apply the
amounts received by it from CarMax Auto Receivables to pay down certificates
issued by it and owned by a commercial paper vehicle administered by an
affiliate of Banc of America Securities LLC.
39
<PAGE>
DESCRIPTION OF CARMAX AUTO SUPERSTORES
AND CARMAX AUTO RECEIVABLES
Carmax Auto Superstores
CarMax Auto Superstores is a leading retailer of new and used motor
vehicles in the United States. CarMax Auto Superstores opened its first store
in Richmond, Virginia in September 1993 and currently operates 35 stores in 10
states. CarMax Auto Superstores was incorporated in Virginia and is a wholly-
owned subsidiary of Circuit City Stores, Inc., the nation's largest retailer of
brand-name consumer electronics and major appliances and a leading retailer of
personal computers and music software. CarMax Auto Superstores was the first
used vehicle retailer to offer a large selection of quality used vehicles at
low, fixed prices using a customer-friendly sales process in an attractive,
modern sales facility. CarMax Auto Superstores has designed a strategy to
better serve the market by addressing the major sources of dissatisfaction with
traditional used car retailing and to maximize operating efficiencies with
sophisticated systems and standardized operating procedures and store formats.
CarMax Auto Superstores purchases, reconditions and sells used motor
vehicles at each of its stores, and sells new motor vehicles at 12 of its
stores under franchise agreements with various manufacturers. In addition,
CarMax Auto Superstores provides its customers with a full range of related
products and services, including the financing of vehicle purchases through
FNAC, the sale of extended service contracts and the sale of automotive
electronic products. In general, the used motor vehicles offered by CarMax Auto
Superstores are one to six years old with fewer than 60,000 miles and range in
price from $9,000 to $30,000. Each store also offers a limited selection of
used motor vehicles that are more than six years old or have more than 60,000
miles. These vehicles range in price from $3,000 to $12,000. All used vehicles
are thoroughly reconditioned to meet high mechanical, electrical, safety and
cosmetic standards and must pass a comprehensive inspection before being
offered for sale. All inspections are performed by qualified service
technicians, most of whom are certified by the National Institute for
Automotive Service Excellence.
CarMax Auto Superstores acquires a significant portion of its used-vehicle
inventory through its appraisal process in which it appraises and makes an
offer to purchase any properly documented vehicle from the public. CarMax Auto
Superstores also acquires a significant portion of its used vehicles through
auctions and, to a lesser extent, directly from other sources, including
wholesalers, dealers and fleet owners. AutoMation(R), a computerized database
which is the central feature of CarMax Auto Superstores' inventory management
and control system, enables each vehicle to be tracked throughout the sales
process. Using the information provided by AutoMation, and applying
sophisticated statistical modeling techniques, CarMax Auto Superstores is able
to optimize its inventory mix and display by store, anticipate future inventory
needs at each store, evaluate sales consultant performance and refine its
vehicle pricing strategy. CarMax Auto Superstores maintains strict inventory
aging policies under which it disposes of any vehicle that has not been sold at
retail within specified periods.
40
<PAGE>
CarMax Auto Superstores began offering on-site financing to its customers
through FNAC in September 1993 and currently originates installment sale
contracts at all of its stores. For the fiscal years ended February 28, 1995,
1996, 1997, 1998 and 1999, FNAC originated installment sale contracts
aggregating approximately $46 million, $98 million, $150 million, $315 million
and $615 million, respectively. Of the $ million of contracts in CarMax Auto
Superstores' servicing portfolio as of September 30, 1999, approximately %
represented contracts originated in connection with the sale of used motor
vehicles and approximately % represented contracts originated in connection
with the sale of new motor vehicles.
CarMax Auto Superstores operates stores in the following markets:
<TABLE>
<CAPTION>
Number of
Market Stores
------ ---------
<S> <C>
Washington D.C./Baltimore, Maryland............................. 4
Chicago, Illinois............................................... 4
Dallas, Texas................................................... 4
Atlanta, Georgia................................................ 3
South Florida................................................... 3
Houston, Texas.................................................. 3
Los Angeles, California......................................... 2
Orlando, Florida................................................ 2
Tampa, Florida.................................................. 2
Kenosha, Wisconsin.............................................. 2
Charlotte, North Carolina....................................... 1
Raleigh, North Carolina......................................... 1
Greenville, South Carolina...................................... 1
San Antonio, Texas.............................................. 1
Dulles, Virginia................................................ 1
Richmond, Virginia.............................................. 1
</TABLE>
CarMax Auto Superstores is not a party to any legal proceeding that could
reasonably be expected to have a material impact on the trust or the interests
of the securityholders.
Carmax Auto Receivables
CarMax Auto Receivables was organized on May 19, 1999 as a Virginia limited
liability company. CarMax Auto Receivables was organized for the limited
purpose of purchasing motor vehicle retail installment sale contracts from
CarMax Auto Superstores, transferring the contracts to the trust and other
third parties and conducting activities incidental to these limited purposes.
CarMax Auto Receivables has taken steps in structuring the transactions
described in this prospectus that are intended to ensure that the voluntary or
involuntary application for relief by CarMax Auto Superstores under the United
States Bankruptcy Code or any similar applicable state law will not result in
the consolidation of the assets and liabilities of CarMax Auto Receivables with
those of CarMax Auto Superstores. These steps include the creation of CarMax
Auto Receivables as a separate, limited-purpose company under articles
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of organization containing various limitations, including restrictions on the
nature of CarMax Auto Receivables' business, and restrictions on CarMax Auto
Receivables' ability to commence a voluntary case or proceeding under the
United States Bankruptcy Code or any similar applicable state law without the
unanimous affirmative vote of all of the directors of CarMax Auto Receivables'
corporate manager. CarMax Auto Receivables cannot assure you, however, that the
activities of CarMax Auto Receivables or the nature of its relationship with
CarMax Auto Superstores would not result in a court concluding that the assets
and liabilities of CarMax Auto Receivables should be consolidated with those of
CarMax Auto Superstores in a proceeding under the United States Bankruptcy Code
or any similar applicable state law.
CarMax Auto Receivables will receive at closing an opinion of McGuire,
Woods, Battle & Boothe LLP to the effect that it would not be a proper exercise
of equitable discretion for a court to disregard the separate existence of
CarMax Auto Superstores and CarMax Auto Receivables and to require the
consolidation of the assets and liabilities of CarMax Auto Receivables with
those of CarMax Auto Superstores if CarMax Auto Superstores were to become the
subject of a proceeding under the federal bankruptcy laws. McGuire, Woods,
Battle & Boothe will assume that CarMax Auto Receivables will follow procedures
in the conduct of its affairs that support its treatment as a separate legal
entity, including maintaining records and books of account separate from those
of CarMax Auto Superstores and refraining from holding itself out as having
agreed to pay, or being liable for, the debts of CarMax Auto Superstores.
CarMax Auto Receivables has represented that it will follow these and other
procedures related to maintaining its separate identity. If CarMax Auto
Receivables does not follow these procedures, CarMax Auto Receivables cannot
assure you that a court would not conclude that the assets and liabilities of
CarMax Auto Receivables should be consolidated with those of CarMax Auto
Superstores in a proceeding under the United States Bankruptcy Code or any
similar applicable state law. If a court were to reach that conclusion, or a
filing were made under the United States Bankruptcy Code or any similar
applicable state law by or against CarMax Auto Receivables, or if an attempt
were made to litigate the issue of consolidation, you could experience losses
or payment delays with respect to your notes or your certificates.
CarMax Auto Receivables is not a party to any legal proceeding that could
reasonably be expected to have a material impact on the trust or the interests
of the securityholders.
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DESCRIPTION OF THE NOTES
The notes will be issued under the indenture. The following summary
describes the material terms of the notes.
Note Registration
The notes will be available for purchase in denominations of $1,000 and
integral multiples of $1,000. The notes will initially be issued only in book-
entry form. See "Registration of the Offered Securities" beginning on page 47
of this prospectus for a further discussion of the book-entry registration
system.
Interest Payments
Interest will be payable on each class of notes monthly on each Payment
Date, commencing November 15, 1999. Interest will be payable on each Payment
Date to the noteholders of record as of the preceding Record Date.
The notes will bear interest at the following rates per annum:
. in the case of the class A-1 notes, % per annum;
. in the case of the class A-2 notes, % per annum;
. in the case of the class A-3 notes, % per annum; and
. in the case of the class A-4 notes, % per annum.
The interest payable on the class A-1 notes on the initial Payment Date
will equal $ . The interest payable on the class A-1 notes on each Payment
Date thereafter will equal the product of:
. the actual number of days elapsed during the period from and
including the preceding Payment Date to but excluding that Payment
Date divided by 360;
. the interest rate applicable to the class A-1 notes; and
. the principal balance of the class A-1 notes as of the preceding
Payment Date after giving effect to all principal payments made with
respect to the notes on that preceding Payment Date.
The interest payable on the class A-2 notes on the initial Payment Date
will equal $ . The interest payable on the class A-3 notes on the initial
Payment Date will equal $ . The interest payable on the class A-4 notes on
the initial Payment Date will equal $ . The interest payable on the class A-
2 notes, the class A-3 notes or the class A-4 notes, as applicable, on each
Payment Date thereafter will equal one-twelfth of the product of:
. the interest rate applicable to that class; and
. the principal balance of that class as of the preceding Payment Date
after giving effect to all principal payments made with respect to
the notes on that preceding Payment Date.
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Interest due but not paid on any class of notes on any Payment Date will be
due on the following Payment Date together with interest on the unpaid amount
at the interest rate applicable to that class to the extent permitted by law.
Each class of notes will have an equal right to receive its share of the
Monthly Note Interest for any Payment Date. If the amount available to pay
interest on the notes on any Payment Date is less than the aggregate amount of
interest, including overdue interest, payable on the notes on that Payment
Date, the available amount will be paid to the holders of each class of notes
pro rata based on the aggregate amount of interest, including overdue interest,
payable to that class on that Payment Date. If the notes have been declared
immediately due and payable following an event of default under the indenture,
amounts received on or in respect of the contracts or available to be withdrawn
from the reserve account will be applied on each Payment Date to pay principal
on the notes, and will not be available to pay Monthly Certificate Interest,
until the notes have been paid in full. The insurer will remain obligated to
pay Monthly Certificate Interest on each Payment Date in accordance with the
terms of the insurance policy following an acceleration of the notes.
Principal Payments
Principal will be payable on the notes monthly on each Payment Date in an
amount equal to the Monthly Note Principal for that Payment Date; provided,
however, that if the notes have been declared immediately due and payable
following the occurrence of an event of default under the indenture, the note
principal payable on that Payment Date will equal the lesser of the amount
available to be applied on that Payment Date with respect to note principal and
the principal balance of the notes. If the notes have been declared immediately
due and payable following the occurrence of an event of default under the
indenture, the amount available to be applied on any Payment Date with respect
to note principal will equal the Available Funds for that Payment Date plus any
amounts withdrawn from the reserve account or paid in respect of principal
under the insurance policy on that Payment Date, in each case to the extent not
needed to pay accrued but unpaid monthly servicing fees or accrued but unpaid
interest on the notes. If the notes have not been declared immediately due and
payable, Monthly Note Principal will be paid in the following order of
priority:
(1) to the holders of the class A-1 notes until the principal balance
of the class A-1 notes has been reduced to zero;
(2) to the holders of the class A-2 notes until the principal balance
of the class A-2 notes has been reduced to zero;
(3) to the holders of the class A-3 notes until the principal balance
of the class A-3 notes has been reduced to zero; and
(4) to the holders of the class A-4 notes until the principal balance
of the class A-4 notes has been reduced to zero;
provided, however, that, if the amount available to pay principal of the notes
on any Payment Date is less than the Monthly Note Principal for that Payment
Date, the available amount will be paid to the holders of each class of notes
pro rata based on the principal balance of that class as of that Payment Date.
If the notes have been declared immediately
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<PAGE>
due and payable following the occurrence of an event of default under the
indenture, the note principal payable on any Payment Date will be paid to the
holders of each class of notes pro rata based on the principal balance of that
class as of that Payment Date.
The final scheduled Payment Dates for the notes are as follows:
. , 200 for the class A-1 notes;
. , 200 for the class A-2 notes;
. , 200 for the class A-3 notes; and
. , 200 for the class A-4 notes.
The certificateholders will not be entitled to receive Monthly Certificate
Principal on any Payment Date until the notes have been paid in full.
Optional Redemption
The notes will be redeemed in full on any Payment Date on which the
servicer exercises its option to purchase all remaining contracts in the
contract pool from the trust. The redemption price payable to the holders of
each class of notes in connection with the exercise of this option will equal
the principal balance of that class as of the purchase date plus accrued but
unpaid interest on that principal balance at the interest rate applicable to
that class. See "Description of the Purchase Agreement and the Sale and
Servicing Agreement--Optional Purchase of Contracts" beginning on page 83 of
this prospectus for a further discussion of the circumstances under which the
servicer may exercise this option.
The Indenture Trustee
Bankers Trust Company will act as trustee under the indenture. The
indenture trustee is a New York banking corporation. The principal corporate
trust office of the indenture trustee is located at Four Albany Street, New
York, New York 10006, Attention: Corporate Trust and Agency Group--Structured
Finance. The indenture trustee will have various rights and duties with respect
to the notes. See "Description of the Indenture" beginning on page 65 of this
prospectus for a further discussion of the rights and duties of the indenture
trustee.
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<PAGE>
DESCRIPTION OF THE CERTIFICATES
The certificates will be issued under the trust agreement. The following
summary describes the material terms of the certificates.
Certificate Registration
The certificates will be available for purchase in denominations of $1,000
and integral multiples of $1,000. The certificates will initially be issued
only in book-entry form. See "Registration of the Offered Securities" beginning
on page 47 of this prospectus for a further discussion of the book-entry
registration system.
Interest Payments
Interest will be payable on the certificates monthly on each Payment Date,
commencing November 15, 1999; provided, however, that if the notes have been
declared immediately due and payable following the occurrence of an event of
default under the indenture, amounts received on or in respect of the contracts
or available to be withdrawn from the reserve account will be applied on each
Payment Date to pay principal on the notes, and will not be available to pay
Monthly Certificate Interest, until the notes have been paid in full. The
insurer will remain obligated to pay Monthly Certificate Interest on each
Payment Date in accordance with the terms of the insurance policy following an
acceleration of the notes. Interest will be payable on each Payment Date to the
certificateholders of record as of the preceding Record Date.
The interest payable on the certificates on the initial Payment Date will
equal $ . The interest payable on the certificates on each Payment Date
thereafter will equal one-twelfth of the product of:
. % per annum; and
. the principal balance of the certificates as of the preceding
Payment Date after giving effect to all principal payments made with
respect to the certificates on that preceding Payment Date.
Interest due but not paid on the certificates on any Payment Date will be
due on the following Payment Date together with interest on the unpaid amount
at the interest rate applicable to the certificates to the extent permitted by
law.
Principal Payments
Principal will be payable on the certificates monthly on each Payment Date
in an amount equal to the Monthly Certificate Principal for that Payment Date;
provided, however, that the certificateholders will not be entitled to receive
Monthly Certificate Principal on any Payment Date until the notes have been
paid in full.
The final scheduled Payment Date for the certificates is , 200 . The
date on which the certificates are paid in full is expected to be earlier than
the final scheduled Payment Date, however, and could be significantly earlier
depending upon the rate at which the principal balances of the contracts are
paid. See "Weighted Average Life of the Offered Securities" beginning on page
32 of this prospectus for a further discussion of contract prepayments.
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<PAGE>
Optional Prepayment
The certificates will be prepaid in full on any Payment Date on which the
servicer exercises its option to purchase all remaining contracts in the
contract pool from the trust. The price payable to the certificateholders in
connection with the exercise of this option will equal the principal balance of
the certificates as of the purchase date plus accrued but unpaid interest on
that principal balance at the interest rate applicable to the certificates. See
"Description of the Purchase Agreement and the Sale and Servicing Agreement--
Optional Purchase of Contracts" beginning on page 83 of this prospectus for a
further discussion of the circumstances under which the servicer may exercise
this option.
The Owner Trustee
First Union Trust Company, National Association, will act as owner trustee
under the trust agreement. The owner trustee is a national banking association.
The principal corporate trust office of the owner trustee is located at One
Rodney Square, 1st Floor, 920 King Street, Wilmington, Delaware 19801-7475,
Attention: Corporate Trust Department. The owner trustee will have various
rights and duties with respect to the certificates. See "Description of the
Purchase Agreement and the Sale and Servicing Agreement" beginning on page 76
of this prospectus for a further discussion of the rights and duties of the
owner trustee with respect to the certificates.
REGISTRATION OF THE OFFERED SECURITIES
Book-Entry Registration
Each class of offered securities initially will be represented by one or
more certificates, in each case registered in the name Cede & Co., the nominee
of The Depository Trust Company. Cede is expected to be the holder of record of
the offered securities. Unless and until the securities are issued is fully
registered, certificated form, no holder of an offered security will be
entitled to receive a physical certificate representing that offered security.
All references in this prospectus to actions by securityholders refer to
actions taken by DTC or its nominee, as the case may be, upon instructions from
the participants in the DTC system, and all references in this prospectus to
payments, notices, reports and statements to securityholders refer to
participants, notices, reports and statements to DTC or its nominee, as the
case may be, as the registered holder of the offered securities, for
distribution to securityholders in accordance with DTC's procedures. The
beneficial owners of the offered securities will not be recognized by the owner
trustee or the indenture trustee, as applicable, as securityholders, and the
beneficial owners of the offered securities will be permitted to exercise the
rights of securityholders only indirectly through DTC and its participating
organizations. The beneficial owners of the offered securities may hold offered
securities in Europe through Cedelbank or Euroclear, which in turn will hold
through DTC, if they participate in DTC, or indirectly through organizations
participating in DTC. See "--Cedelbank and Euroclear" beginning on page 51 of
this prospectus for a further discussion of Cedelbank and the Euroclear system.
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<PAGE>
The Depository Trust Company
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the provisions of Section 17A of the Securities Exchange Act
of 1934, as amended. DTC holds securities for its participating organizations
and facilitates the clearance and settlement among those organizations of
securities transactions, such as transfers and pledges, in deposited securities
through electronic book-entry changes in their accounts. The electronic book-
entry system eliminates the need for physical movement of securities. The
organizations that participate in DTC include securities brokers and dealers,
who may include the underwriters of the offered securities, banks, trust
companies, clearing corporations and other organizations. Indirect access to
the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with an organization participating in DTC, either directly or
indirectly. Transfers between organizations participating in DTC will occur in
accordance with DTC rules. The rules applicable to DTC and its participating
organizations are on file with the Securities and Exchange Commission.
Cedelbank and Euroclear will hold omnibus positions on behalf of their
respective participating organizations through customers' securities accounts
in the name of Cedelbank and Euroclear on the books of their respective
depositaries. The depositaries will in turn hold those positions in customers'
securities accounts in the depositaries' names on the books of DTC. Transfers
between organizations participating in Cedelbank and organizations
participating in the Euroclear system will occur in accordance with their
respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC in the United States, on the one hand, and directly or indirectly
through organizations participating in Cedelbank or the Euroclear system, on
the other, will be effected in DTC in accordance with DTC rules on behalf of
the relevant European international clearing system by its depositary; however,
these cross-market transactions will require delivery of instructions to the
relevant European international clearing system by the counterparty in that
system in accordance with its rules and procedures and within its established
deadlines. The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC and making or receiving payment in
accordance with normal procedures for same-day funds settlement applicable to
DTC. Organizations participating in Cedelbank or the Euroclear system may not
deliver instructions directly to the Cedelbank or Euroclear depositaries.
Because of time-zone differences, credits or securities in Cedelbank or
Euroclear as a result of a transaction with an organization participating in
DTC will be made during the subsequent securities settlement processing, dated
the business day following the DTC settlement date, and those credits or any
transactions in those securities settled during that
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<PAGE>
processing will be reported to the relevant organization participating in
Cedelbank or the Euroclear system on that business day. Cash received in
Cedelbank or the Euroclear system as a result of sales of securities by or
through an organization participating in Cedelbank or the Euroclear system to
an organization participating in DTC will be received with value on the DTC
settlement date but will be available in the relevant Cedelbank or Euroclear
cash account only as of the business day following settlement in DTC. See Annex
A beginning on page 114 of this prospectus for additional information regarding
clearance and settlement procedures. See Annex A beginning on page 114 of this
prospectus, "Material Federal Income Tax Consequences--Tax Consequences to
Foreign Note Owners" beginning on page 96 of this prospectus and "Material
Federal Income Tax Consequences--Tax Consequences to Holders of the
Certificates--Tax Consequences to Foreign Certificate Owners" beginning on page
101 of this prospectus for a discussion of tax documentation procedures
relating to the offered securities. The information contained in Annex A is an
integral part of this prospectus.
Purchases of offered securities under the DTC system must be made by or
through an organization participating in DTC, which organization will receive a
credit for the offered securities on DTC's records. The ownership interests of
the beneficial owners of the offered securities are in turn to be recorded on
the records of that organization or, in the case of a purchase made indirectly
through an organization participating in DTC, on the records of the indirect
participant. The beneficial owners of the offered securities will not receive
written confirmation from DTC of their purchase, but they are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the organization through which they
entered into the transaction. Transfers of ownership interests in the offered
securities are to be accomplished by entries made on the books of organizations
participating in DTC acting on behalf of the beneficial owners of the offered
securities.
To facilitate subsequent transfers, all offered securities deposited with
DTC by its participating organizations are registered in the name of Cede. The
deposit of offered securities with DTC and their registration in the name of
Cede effects no change in beneficial ownership. DTC has no knowledge of the
identity of the beneficial owners of the offered securities. DTC's records
reflect only the identity of the organizations participating in DTC to whose
accounts the offered securities are credited, which may or may not be the
beneficial owners of the offered securities. Those organizations will remain
responsible for keeping account of their holdings on behalf of their customers.
Because DTC can only act on behalf of its participating organizations, who
in turn act on behalf of organizations participating indirectly in DTC and
certain banks, the ability of the beneficial owners of the offered securities
to pledge those securities to persons or entities that do not participate in
the DTC system, or otherwise take action in respect of the offered securities,
may be limited due to lack of a physical certificate for the offered
securities.
Conveyance of notices and other communications by DTC to its participating
organizations, by those organizations to indirect participants in DTC, and by
direct or indirect participants in DTC to the beneficial owners of the offered
securities will be
49
<PAGE>
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Neither DTC nor Cede will
consent or vote with respect to the offered securities. Under its usual
procedures, DTC mails an omnibus proxy to the issuer as soon as possible after
the record date, which assigns Cede's consenting or voting rights to those
organizations participating in DTC to whose accounts the offered securities are
credited on the record date as identified in a listing attached to the omnibus
proxy. Principal and interest payments on the offered securities will be made
to DTC. DTC's practice is to credit the accounts of its participating
organizations on the Payment Date in accordance with their respective holdings
shown on DTC's records unless DTC has reason to believe that it will not
receive payment on the Payment Date. Payments by organizations participating in
DTC to the beneficial owners of the offered securities will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of those organizations and not of DTC,
the owner trustee, the indenture trustee or CarMax Auto Receivables, subject to
any statutory or regulatory requirements as may be in effect from time to time.
Payments of principal and interest to DTC is the responsibility of the owner
trustee or the indenture trustee, as applicable, disbursement of those payments
to organizations participating in DTC is the responsibility of DTC, and
disbursement of those payments to the beneficial owners of the offered
securities is the responsibility of those organizations or indirect
participants in DTC. Accordingly, the beneficial owners of the offered
securities may experience some delay in their receipt of principal and interest
payments.
DTC management is aware that some computer applications and systems used
for processing data were written using two digits rather than four to define
the applicable year, and therefore may not recognize a date using "00" as the
year 2000. This could result in the inability of these systems to properly
process transactions with dates during and after the year 2000. DTC has
developed and is implementing a program to address this problem so that its
applications and systems relating to the payment of distributions, including
principal and income payments, to securityholders, book-entry deliveries and
settlement of trades within DTC continue to function properly. This program
includes a technical assessment and a remediation plan, each of which is
complete. DTC plans to implement a testing phase of this program which is
expected to be completed within appropriate time frames.
In addition, DTC is contacting, and will continue to contact, third party
vendors that provide services to DTC to determine the extent of their year 2000
compliance, and DTC will develop contingency plans as it deems appropriate to
address failures in year 2000 compliance on the part of third party vendors.
However, there can be no assurance that the systems of third party vendors will
be timely converted and will not adversely affect the proper functioning of
DTC's services.
The information set forth in the preceding two paragraphs has been provided
by DTC for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind. CarMax Auto
Receivables makes no representations as to the accuracy or completeness of this
information.
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Cedelbank and Euroclear
Cedelbank, societe anonyme, is incorporated under the laws of Luxembourg as
a professional depository. Cedelbank holds securities for its participating
organizations and facilitates the clearance and settlement of securities
transactions between those organizations through electronic book-entry changes
in their accounts. The electronic book-entry system eliminates the need for
physical movement of certificates. Transactions may be settled by Cedelbank in
any of 28 currencies, including United States dollars. Cedelbank provides to
its participating organizations services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. Cedelbank interfaces with domestic markets in several
countries. As a registered bank in Luxembourg, Cedelbank is subject to
regulation by the Luxembourg Commission for the Supervision of the Financial
Sector. Organizations participating in Cedelbank are world-wide financial
institutions, including underwriters, securities brokers and dealers, banks,
trust companies, clearing corporations and other organizations and may include
the underwriters of the offered securities. Indirect access to Cedelbank is
also available to others, such as banks, brokers, dealers and trust companies,
that clear through or maintain a custodial relationship with an organization
participating in Cedelbank, either directly or indirectly.
The Euroclear system was created in 1968 to hold securities for
organizations participating in the Euroclear system and to clear and settle
transactions between those organizations through simultaneous electronic book-
entry delivery against payment. The electronic book-entry system eliminates the
need for physical movement of certificates and any risk from lack of
simultaneous transfers of securities and cash. Transactions may be settled
through the Euroclear system in any of 27 currencies, including United States
dollars. The Euroclear system includes various other services, including
securities lending and borrowing, and interfaces with domestic markets in
several countries under arrangements generally similar to the arrangements for
cross-market transfers with DTC.
The Euroclear system is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York under a contract with Euroclear Clearance
System, S.C., a Belgian cooperative corporation. All operations are conducted
by that office, and all Euroclear securities clearance accounts and Euroclear
cash accounts are maintained with that office, not Euroclear Clearance System,
S.C. Euroclear Clearance System, S.C. establishes policy for the Euroclear
system on behalf of organizations participating in the Euroclear system. Those
organizations include banks, including central banks, securities brokers and
dealers and other professional financial intermediaries and may include the
underwriters of the offered securities. Indirect access to the Euroclear system
is also available to other firms that clear through or maintain a custodial
relationship with organizations participating in the Euroclear system, either
directly or indirectly.
Morgan Guaranty is a New York banking corporation and a member bank of the
Federal Reserve System. Morgan Guaranty is regulated and examined by the Board
of Governors of the Federal Reserve System and the New York State Banking
Department. The Brussels, Belgium office of Morgan Guaranty is regulated and
examined by the Belgian Banking Commission.
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<PAGE>
The Terms and Conditions Governing Use of Euroclear, the related Operating
Procedures of the Euroclear system and applicable Belgian law govern the
securities clearance accounts and cash accounts maintained with the operator of
the Euroclear system, transfers of securities and cash within the Euroclear
system, withdrawal of securities and cash from the Euroclear system and
receipts of payments with respect to securities in the Euroclear system. All
securities in the Euroclear system are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The operator of the Euroclear system acts only on behalf of organizations
participating in the Euroclear system and has no record of or relationship with
persons holding through those organizations.
Distributions with respect to offered securities held through Cedelbank or
Euroclear will be credited to the cash accounts of organizations participating
in Cedelbank or Euroclear in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. These distributions will
be subject to tax reporting in accordance with relevant United States tax laws
and regulations. Cedelbank or the operator of the Euroclear system, as the case
may be, will take any other action permitted to be taken by a securityholder
under the sale and servicing agreement, the trust agreement or the indenture,
as applicable, on behalf of an organization participating in Cedelbank or the
Euroclear system only in accordance with its relevant rules and procedures and
subject to its depositary's ability to effect those actions on its behalf
through DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of the offered securities among
participants in DTC, Cedelbank and the Euroclear system, they are under no
obligation to perform or continue to perform these procedures, and these
procedures may be discontinued at any time.
Definitive Securities
The offered securities will be issued in fully registered, certificated
form to the beneficial owners of the offered securities or their respective
nominees, rather than to DTC or its nominee, only if:
. the administrator or the indenture trustee, as applicable,
determines that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to the
offered securities and the administrator or the indenture trustee,
as applicable, is unable to locate a qualified successor;
. CarMax Auto Receivables, as depositor, or the indenture trustee, as
applicable, elects, at its option, to terminate the book-entry
system through DTC; or
. after the occurrence of an event of servicing termination under the
sale and servicing agreement or an event of default under the
indenture, as applicable, the beneficial owners of the offered
securities representing at least a majority of the outstanding
principal amount of the applicable offered securities advise the
owner trustee or the indenture trustee, as applicable, through DTC
that the continuation of a book-entry system through DTC, or a
successor to DTC, is no longer in the best interests of the
beneficial owners of the offered securities.
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Upon the occurrence of any of the events described in the preceding
paragraph, the administrator, the owner trustee or the indenture trustee, as
applicable, will be required to notify the applicable beneficial owners of the
offered securities, through organizations participating in DTC, of the
availability of fully registered, certificated securities. Upon surrender by
DTC of the certificates representing the offered securities and the receipt of
instructions for re-registration, the owner trustee or the indenture trustee,
as applicable, will issue fully registered, certificated securities to the
beneficial owners of the offered securities. Each payment of interest and
principal on each fully registered, certificated security will be made by the
owner trustee or the indenture trustee, as applicable, on each Payment Date
directly to the holder in whose name that security was registered at the close
of business on the preceding Record Date; provided, however, that the final
payment on any fully registered, certificated security will be made only upon
presentation and surrender of that security at the office or agency specified
in the notice of final distribution mailed to the securityholders.
Each security issued in fully registered, certificated form will be
transferable and exchangeable at the offices of the owner trustee or the
indenture trustee, as applicable, or any security registrar appointed by the
owner trustee or the indenture trustee, as applicable. No service charge will
be imposed for any registration of transfer or exchange, but the owner trustee
or the indenture trustee, as applicable, may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
with any transfer or exchange.
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COLLECTIONS AND PAYMENTS
The Trust Accounts
The servicer will establish and maintain the following accounts:
. the collection account, an account in the name of the indenture
trustee, for the benefit of the noteholders, the certificateholders,
the servicer and the insurer, into which all payments made on or in
respect of the contracts and certain amounts withdrawn from the
reserve account or paid under the insurance policy will be
deposited;
. the note payment account, an account in the name of the indenture
trustee, for the benefit of the noteholders, into which all amounts
released from the collection account for payment to the noteholders
will be deposited and from which all payments to the noteholders
will be made; and
. the certificate payment account, an account in the name of the owner
trustee, for the benefit of the certificateholders, into which all
amounts released from the collection account for payment to the
certificateholders will be deposited and from which all payments to
the certificateholders will be made.
The servicer will also establish and maintain the reserve account. See "--
The Reserve Account" beginning on page 55 of this prospectus for a further
discussion of the reserve account.
The amounts on deposit in the collection account will be invested by the
indenture trustee in Eligible Investments. The collection account, the note
payment account and the certificate payment account must be maintained as
Eligible Deposit Accounts.
Payment Sources
The servicer will deposit all amounts received on or in respect of the
contracts, from whatever source, during each month into the collection account
not later than two business days after receipt of those amounts; provided,
however, that the servicer will not be required to deposit those amounts into
the collection account until the business day preceding the following Payment
Date at any time that and for so long as:
. CarMax Auto Superstores is the servicer;
. no event of servicing termination shall have occurred and be
continuing under the sale and servicing agreement; and
. the short-term unsecured debt of CarMax Auto Superstores is rated at
least P-1 by Moody's and at least A-1 by Standard & Poor's or each
condition to making deposits less frequently than daily as may be
specified by the insurer, Moody's and Standard & Poor's has been
satisfied.
Amounts received on or in respect of the contracts may be invested by the
servicer at its own risk and for its own benefit, pending deposit into the
collection account, and will not
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<PAGE>
be segregated from its own funds. The servicer may, in order to satisfy the
monthly remittance requirements, obtain a letter of credit or other security
for the benefit of the trust to secure timely remittances of collections on the
contracts and payment of the aggregate purchase price for contracts purchased
by the servicer.
On or before each Determination Date, the servicer will determine the
amount of Available Funds for the following Payment Date and the amount
required to be paid to the servicer, the noteholders, the certificateholders
and the insurer on that Payment Date. If the amount required to be paid on any
Payment Date exceeds the amount of Available Funds for that Payment Date, all
or a portion of that excess will be covered first through the withdrawal of
funds from the reserve account and then through a payment under the insurance
policy. See "--The Reserve Account" beginning on page 55 of this prospectus for
a further discussion of the reserve account and "Description of the Insurance
Policy" beginning on page 64 of this prospectus for a further discussion of the
insurance policy.
The Reserve Account
The servicer will establish and maintain with the indenture trustee, for
the benefit of the noteholders, the certificateholders, the servicer and the
insurer, a reserve account into which excess collections on the contracts will
be deposited and from which amounts may be withdrawn to pay monthly servicing
fees to the servicer and to make required payments on the notes and the
certificates. CarMax Auto Receivables will deposit $ in the reserve account
on the closing date. On each Payment Date, the servicer will deposit in the
reserve account the amount, if any, by which the Available Funds for that
Payment Date exceed the amount which the trust is required to pay on that
Payment Date to the noteholders, the certificateholders, the servicer and the
insurer. The amounts on deposit in the reserve account will be invested by the
servicer in Eligible Investments. The reserve account must be maintained as an
Eligible Deposit Account.
On each Determination Date, the servicer will determine the Required
Payment Amount and the Insurance Payment Amount for the following Payment Date.
If the sum of the Required Payment Amount and the Insurance Payment Amount for
any Payment Date exceeds the Available Funds for that Payment Date, the
indenture trustee will withdraw the amount of that excess, up to the amount on
deposit in the reserve account, from the reserve account and transfer the
amount withdrawn to the collection account.
If the amount on deposit in the reserve account on any Payment Date exceeds
the Required Reserve Account Amount for that Payment Date, after giving effect
to all required deposits to and withdrawals from the reserve account on that
Payment Date, that excess will be paid to CarMax Auto Receivables. Any amount
paid to CarMax Auto Receivables will no longer be an asset of the trust. On or
after the termination of the trust, CarMax Auto Receivables will be entitled to
receive any amounts remaining in the reserve account after all required
payments to the servicer and the insurer are made, after the payment of
expenses and distributions to the noteholders and the certificateholders and
after the insurance policy has been terminated and returned to the insurer for
cancellation.
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CarMax Auto Receivables intends for the amount on deposit in the reserve
account to increase over time up to the Required Reserve Account Amount. CarMax
Auto Receivables cannot assure you that the amount on deposit in the reserve
account will increase to the Required Reserve Account Amount, however, or that
the amount on deposit in the reserve account will be sufficient on any Payment
Date to pay in full the Monthly Note Interest, Monthly Note Principal, Monthly
Certificate Interest and Monthly Certificate Principal due on that Payment
Date. If the amount on deposit in the reserve account is reduced to zero and
there is a default under the insurance policy, the trust's sole source of funds
will be payments received on or in respect of the contracts, including amounts
recovered in connection with the repossession and sale of financed vehicles
that secure Defaulted Contracts. In addition, because the market value of most
motor vehicles declines with age and because of limitations on the manner in
which motor vehicles may be repossessed and sold, the servicer may not recover
the entire amount due on a Defaulted Contract if the related financed vehicle
is repossessed and sold. If the amount on deposit in the reserve account is
reduced to zero and there is a default under the insurance policy, you could
experience losses or payment delays with respect to your notes or your
certificates. See "Material Legal Aspects of the Transaction--Repossession of
Vehicles" beginning on page 86 of this prospectus and "--Notice of Sale;
Redemption Rights" beginning on page 87 of this prospectus for a further
discussion of the limitations on the manner in which motor vehicles may be
repossessed and sold.
Subordination of the Certificates
The certificateholders will not be entitled to receive Monthly Certificate
Interest on any Payment Date until the noteholders have received Monthly Note
Interest on that Payment Date. In addition, the certificateholders will not be
entitled to receive Monthly Certificate Principal on any Payment Date until the
notes have been paid in full. If the notes have been declared immediately due
and payable following the occurrence of an event of default under the
indenture, amounts received on or in respect of the contracts or available to
be withdrawn from the reserve account will be applied on each Payment Date to
pay principal on the notes, and will not be available to pay Monthly
Certificate Interest, until the notes have been paid in full. The insurer will
remain obligated to pay Monthly Certificate Interest on each Payment Date in
accordance with the terms of the insurance policy following an acceleration of
the notes. The subordination of the certificates is intended to enhance the
likelihood that amounts owed on the notes will be paid in full.
Payment Date Distributions--Collection Account
On each Payment Date, the indenture trustee will apply or cause to be
applied the Available Funds for that Payment Date, plus any amounts withdrawn
from the reserve account or paid under the insurance policy on that Payment
Date, to make the following payments in the following order of priority:
(1) to the servicer, the monthly servicing fee for the preceding
month plus any overdue monthly servicing fees for previous months;
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<PAGE>
(2) to the note payment account, the Monthly Note Interest for that
Payment Date plus any overdue Monthly Note Interest for previous Payment
Dates plus interest on any overdue Monthly Note Interest payable to any
class of notes at the interest rate applicable to that class;
(3) if the notes have not been declared immediately due and payable
following an event of default under the indenture, to the certificate
payment account, the Monthly Certificate Interest for that Payment Date
plus any overdue Monthly Certificate Interest for previous Payment Dates
plus interest on any overdue Monthly Certificate Interest at the interest
rate applicable to the certificates;
(4) to the note payment account, the Monthly Note Principal for that
Payment Date; provided, however, that if the notes have been declared
immediately due and payable following the occurrence of an event of
default under the indenture, the amount to be deposited in the note
payment account pursuant to this clause (4) will equal the lesser of the
amount available to be applied on that Payment Date pursuant to this
clause (4) and the principal balance of the notes;
(5) if the notes have been declared immediately due and payable
following an event of default under the indenture, to the certificate
payment account, the Monthly Certificate Interest for that Payment Date
plus any overdue Monthly Certificate Interest for previous Payment Dates
plus interest on any overdue Monthly Certificate Interest at the interest
rate applicable to the certificates;
(6) to the certificate payment account, the Monthly Certificate
Principal for that Payment Date;
(7) to the insurer, the premium payable under the insurance agreement
for that Payment Date plus any overdue premiums payable under the
insurance agreement for previous Payment Dates;
(8) to the insurer, the aggregate amount of any unreimbursed payments
under the insurance policy, to the extent payable to the insurer under the
insurance agreement, plus accrued interest on any unreimbursed payments
under the insurance policy at the rate provided in the insurance agreement
plus any other amounts due to the insurer under the insurance agreement
and the insurance policy;
(9) to the reserve account, the amount, if any, by which the Required
Reserve Account Amount for that Payment Date exceeds the amount on deposit
in the reserve account on that Payment Date after giving effect to all
required withdrawals from the reserve account on that Payment Date; and
(10) to CarMax Auto Receivables, any remaining amount of Available
Funds.
If the notes have been declared immediately due and payable following the
occurrence of an event of default under the indenture, any amount paid under
the insurance policy with respect to Monthly Certificate Interest and Monthly
Certificate Principal will be deposited directly in the certificate payment
account.
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<PAGE>
Payment Date Distributions--Note Payment Account
On each Payment Date preceding the date on which the notes are declared
immediately due and payable following the occurrence of an event of default
under the indenture, the indenture trustee will apply or cause to be applied
the amount on deposit in the note payment account on that Payment Date to make
the following payments in the following order of priority:
(1) to the holders of each class of notes, the portion of the Monthly
Note Interest payable to that class for that Payment Date plus any overdue
Monthly Note Interest payable to that class for previous Payment Dates
plus interest on any overdue Monthly Note Interest payable to that class
at the interest rate applicable to that class;
(2) to the holders of the class A-1 notes, the Monthly Note Principal
for that Payment Date until the class A-1 notes have been paid in full;
(3) following payment in full of the class A-1 notes, to the holders
of the class A-2 notes, the Monthly Note Principal for that Payment Date
until the class A-2 notes have been paid in full;
(4) following payment in full of the class A-2 notes, to the holders
of the class A-3 notes, the Monthly Note Principal for that Payment Date
until the class A-3 notes have been paid in full; and
(5) following payment in full of the class A-3 notes, to the holders
of the class A-4 notes, the Monthly Note Principal for that Payment Date
until the class A-4 notes have been paid in full.
If the amount on deposit in the note payment account on any Payment Date
preceding the date on which the notes are declared immediately due and payable
is less than the amount described in clause (1) above for that Payment Date,
the available amount will be paid to the holders of each class of notes pro
rata based on the aggregate amount of interest, including overdue interest,
payable to that class on that Payment Date.
On each Payment Date following the date on which the notes are declared
immediately due and payable following the occurrence of an event of default
under the indenture, the indenture trustee will apply or cause to be applied
the amount on deposit in the note payment account on that Payment Date to make
the following payments in the following order of priority:
(1) to the holders of each class of notes, the portion of the Monthly
Note Interest payable to that class for that Payment Date plus any overdue
Monthly Note Interest payable to that class for previous Payment Dates
plus interest on any overdue Monthly Note Interest payable to that class
at the interest rate applicable to that class; and
(2) to the holders of each class of notes, the amount remaining on
deposit in the note payment account on that Payment Date pro rata based on
the principal balance of that class as of that Payment Date.
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<PAGE>
If the amount on deposit in the note payment account on any Payment Date is
less than the amount described in clause (1) above for that Payment Date, the
available amount will be paid to the holders of each class of notes pro rata
based on the aggregate amount of interest, including overdue interest, payable
to that class on that Payment Date.
Payment Date Distributions--Certificate Payment Account
On each Payment Date, the owner trustee will apply or cause to be applied
the amount on deposit in the certificate payment account on that Payment Date
to make the following payments in the following order of priority:
(1) to the certificateholders, the Monthly Certificate Interest for
that Payment Date plus any overdue Monthly Certificate Interest for
previous Payment Dates plus interest on any overdue Monthly Certificate
Interest at the interest rate applicable to the certificates; and
(2) to the certificateholders, the Monthly Certificate Principal for
that Payment Date until the certificates have been paid in full.
As an administrative convenience, the servicer will be permitted to deposit
the amounts received on or in respect of the contracts for any month net of
distributions to be made to the servicer on the following Payment Date. The
servicer will account to the indenture trustee, the owner trustee, the
noteholders and the certificateholders, however, as if all deposits and
distributions were made individually.
Application of Collection and Payment Provisions to First Payment Date
The following chart describes the application of the collection and payment
provisions to the first Payment Date on November 15, 1999:
October 1 through
The servicer receives monthly payments,
October 31, 1999....... prepayments and other amounts in respect of the
contracts and deposits them in the collection
account. The servicer may deduct the monthly
servicing fee to be received on the following
Payment Date from these deposits.
November 9, 1999
(Determination Date)........ On or before this date, the servicer delivers a
certified report to the indenture trustee and
the owner trustee setting forth the amounts to
be distributed on the following Payment Date
and the amount of any deficiencies. If
necessary, the indenture trustee notifies the
insurer of any payments required under the
insurance policy.
November 12, 1999
(Record Date)............... Distributions on the following Payment Date are
made to noteholders and certificateholders of
record at the close of business on this date.
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November 15, 1999
(Payment Date).............. The indenture trustee applies Available Funds
to make all required payments to the servicer
and the insurer and to make all required
deposits to the note payment account and the
certificate payment account. If Available Funds
are not sufficient to make various required
payments, the indenture trustee withdraws funds
from the reserve account, up to the amount on
deposit in the reserve account, to cover the
deficiency. If Available Funds and withdrawals
from the reserve account are not sufficient to
pay the monthly servicing fee, Monthly Note
Interest, Monthly Note Principal, Monthly
Certificate Interest and Monthly Certificate
Principal in full, the insurer makes a payment
under the insurance policy to cover the
deficiency. The indenture trustee applies
amounts on deposit in the note payment account
to make all required payments to the
noteholders. The owner trustee applies amounts
on deposit in the certificate payment account
to make all required payments to the
certificateholders.
Statements to Noteholders
On or before each Payment Date, the servicer will prepare and forward to
the indenture trustee a statement, to be included with the payment to be made
to each noteholder on that Payment Date, setting forth for that Payment Date or
the preceding month, as applicable, the following information:
. the amount of that payment allocable to Monthly Note Interest for
that Payment Date, overdue Monthly Note Interest for previous
Payment Dates and interest on overdue Monthly Note Interest, in each
case for each class of notes;
. the aggregate amount for each class of notes of Monthly Note
Interest for that Payment Date and overdue Monthly Note Interest for
previous Payment Dates due but not paid on that Payment Date;
. the amount of that payment allocable to principal for each class of
notes;
. the monthly servicing fee payable to the servicer for that month;
. the principal balance and the pool factor for each class of notes as
of that Payment Date and the principal balance of the notes as of
that Payment Date, in each case after giving effect to all payments
of principal made on that Payment Date;
. the principal balance of the contracts as of the last day of that
month;
. the amount on deposit in the reserve account, after giving effect to
all required deposits to and withdrawals from the reserve account on
that Payment Date;
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. the aggregate purchase price for contracts repurchased by CarMax
Auto Receivables or purchased by the servicer during that month;
. the number and aggregate principal balance of contracts that were
31-60 days, 61-90 days or 91 days or more delinquent as of the last
day of that month; and
. the net losses on the contracts for that month.
In addition, within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of the trust, the
indenture trustee will mail to each person who was a registered noteholder at
any time during that calendar year a statement containing information to be
used by that person in preparing its federal income tax returns.
Statements to Certificateholders
On or before each Payment Date, the servicer will prepare and forward to
the owner trustee a statement, to be included with the payment to be made to
each certificateholder on that Payment Date, setting forth for that Payment
Date or the preceding month, as applicable, the following information:
. the amount of that payment allocable to Monthly Certificate Interest
for that Payment Date, overdue Monthly Certificate Interest for
previous Payment Dates and interest on overdue Monthly Certificate
Interest;
. the aggregate amount of Monthly Certificate Interest for that
Payment Date and overdue Monthly Certificate Interest for previous
Payment Dates due but not paid on that Payment Date;
. the amount of that payment allocable to Monthly Certificate
Principal for that Payment Date;
. the monthly servicing fee payable to the servicer for that month;
. the principal balance of the certificates and the certificate pool
factor as of that Payment Date, in each case after giving effect to
all payments of Monthly Certificate Principal made on that Payment
Date;
. the principal balance of the contracts as of the last day of that
month;
. the amount on deposit in the reserve account, after giving effect to
all required deposits to and withdrawals from the reserve account on
that Payment Date;
. the aggregate purchase price for contracts repurchased by CarMax
Auto Receivables or purchased by the servicer during that month;
. the number and aggregate principal balance of contracts that were
31-60 days, 61-90 days or 91 days or more delinquent as of the last
day of that month; and
. the net losses on the contracts for that month.
In addition, within the prescribed period of time for tax reporting
purposes after the end of each calendar year during the term of the trust, the
administrator will mail to each person who was a registered certificateholder
at any time during that calendar year a statement containing information to be
used by that person in preparing its federal income tax returns.
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DESCRIPTION OF THE INSURER
MBIA Insurance Corporation
MBIA Insurance Corporation is the principal operating subsidiary of MBIA
Inc., a New York Stock Exchange listed company. MBIA Inc. is not obligated to
pay the debts of or claims against MBIA Insurance Corporation. MBIA Insurance
Corporation is domiciled in the State of New York and licensed to do business
in and subject to regulation under the laws of all 50 states, the District of
Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern
Mariana Islands, the Virgin Islands of the United States and the Territory of
Guam. MBIA Insurance Corporation has two European branches, one in the Republic
of France and the other in the Kingdom of Spain. New York has laws prescribing
minimum capital requirements, limiting classes and concentrations of
investments and requiring the approval of policy rates and forms. State laws
also regulate the amount of both the aggregate and individual risks that may be
insured, the payment of dividends by MBIA Insurance Corporation, changes in
control and transactions among affiliates. In addition, MBIA Insurance
Corporation is required to maintain contingency reserves on its liabilities in
certain amounts and for certain periods of time.
MBIA Insurance Corporation does not accept any responsibility for the
accuracy or completeness of this prospectus or any information or disclosure
contained in this prospectus, or omitted from this prospectus, other than with
respect to the accuracy of the information regarding MBIA Insurance Corporation
set forth under the heading "Description of the Insurer." In addition, MBIA
Insurance Corporation makes no representations regarding the notes or the
certificates or the advisability of investing in the notes or the certificates.
The insurance policy is not covered by the Property/Casualty Insurance
Security Fund specified in Article 76 of the New York Insurance Law.
MBIA Insurance Corporation Financial Information
The consolidated financial statements of MBIA Insurance Corporation, a
wholly owned subsidiary of MBIA Inc., and its subsidiaries as of December 31,
1998 and December 31, 1997 and for each of the three years in the period ended
December 31, 1998, prepared in accordance with generally accepted accounting
principles, included in the Annual Report on Form 10-K of MBIA Inc. for the
year ended December 31, 1998 and the consolidated financial statements of MBIA
Insurance Corporation and its subsidiaries as of June 30, 1999 and for the six
month periods ended June 30, 1999 and June 30, 1998 included in the Quarterly
Report on Form 10-Q of MBIA Inc. for the period ended June 30, 1999, are
incorporated by reference into this prospectus and shall be deemed to be a part
of this prospectus. Any statement contained in a document incorporated by
reference in this prospectus shall be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus or
in any other subsequently filed document which also is incorporated by
reference in this prospectus modifies or supersedes that statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this prospectus.
All financial statements of MBIA Insurance Corporation and its subsidiaries
included in documents filed by MBIA Inc. pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities
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Exchange Act of 1934, as amended, subsequent to the date of this prospectus and
prior to the termination of the offering of the notes and the certificates
shall be deemed to be incorporated by reference into this prospectus and to be
a part of this prospectus from the respective dates of filing those documents.
The tables below present selected financial information of MBIA Insurance
Corporation determined in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities and generally
accepted accounting principles.
<TABLE>
<CAPTION>
Statutory Accounting
Practices
------------------------
December 31, June 30,
1998 1999
------------ -----------
(Audited) (Unaudited)
(in millions)
<S> <C> <C>
Admitted Assets.................................. $6,521 $6,807
Liabilities...................................... 4,231 4,468
Capital and Surplus.............................. 2,290 2,339
</TABLE>
<TABLE>
<CAPTION>
Generally Accepted
Accounting Principles
------------------------
December 31, June 30,
1998 1999
------------ -----------
(Audited) (Unaudited)
(in millions)
<S> <C> <C>
Assets........................................... $7,488 $7,429
Liabilities...................................... 3,211 3,234
Shareholder's Equity............................. 4,277 4,195
</TABLE>
Where You Can Obtain Additional Information About MBIA
Copies of the financial statements of MBIA Insurance Corporation
incorporated by reference in this prospectus and copies of MBIA Insurance
Corporation's 1998 year-end audited financial statements prepared in accordance
with statutory accounting practices are available, without charge, from MBIA
Insurance Corporation. The address of MBIA Insurance Corporation is 113 King
Street, Armonk, New York 10504. The telephone number of MBIA Insurance
Corporation is (914) 273-4545.
Year 2000 Readiness Disclosure
MBIA Inc. is actively managing a high-priority year 2000 program. MBIA Inc.
has established an independent year 2000 testing lab in its Armonk
headquarters, with a committee of business unit managers overseeing the
project. MBIA Inc. has a budget of $1.13 million for its 1998-2000 year 2000
efforts. Expenditures are proceeding as anticipated, and MBIA Inc. does not
expect the project budget to materially exceed this amount. MBIA Inc. has
initiated a comprehensive year 2000 plan that includes assessment, remediation,
testing and contingency planning. This plan covers important internally
developed systems, vendor software, hardware and third-party entities,
including financial institutions and the telephone company, through which MBIA
Inc. conducts its business. Testing to date indicates that functions critical
to the financial guarantee business, both domestic and international, were year
2000-ready as of December 31, 1998. Additional testing will continue throughout
1999.
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Financial Strength Ratings of MBIA Insurance Corporation
Moody's rates the financial strength of MBIA Insurance Corporation "Aaa."
Standard & Poor's rates the financial strength of MBIA Insurance Corporation
"AAA." Fitch IBCA, Inc. (formerly known as Fitch Investors Service, L.P.) rates
the financial strength of MBIA Insurance Corporation "AAA."
Each rating of MBIA Insurance Corporation should be evaluated
independently. The ratings reflect the respective rating agency's current
assessment of the creditworthiness of MBIA Insurance Corporation and its
ability to pay claims on its policies of insurance. Any further explanation as
to the significance of the above ratings may be obtained only from the
applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the offered
securities, and the ratings may be subject to revision or withdrawal at any
time by the rating agencies. Any downward revision or withdrawal of any of the
above ratings may have an adverse effect on the market price of the offered
securities. MBIA Insurance Corporation does not guaranty the market price of
the offered securities, nor does it guaranty that the ratings on the offered
securities will not be revised or withdrawn.
DESCRIPTION OF THE INSURANCE POLICY
On the closing date, MBIA Insurance Corporation, as insurer, will issue an
insurance policy for the benefit of the noteholders and the certificateholders
under which the insurer will unconditionally and irrevocably guarantee the
payment of the monthly servicing fee, Monthly Note Interest, Monthly Note
Principal, Monthly Certificate Interest and Monthly Certificate Principal for
each Payment Date. The insurer will pay any amount payable under the insurance
policy no later than 12:00 noon, Eastern Time, on the later of the related
Payment Date and the second business day following receipt by the insurer of a
notice specifying the Policy Claim Amount for that Payment Date. All amounts
paid under the insurance policy will be deposited in the collection account;
provided, however, that, if the notes have been declared immediately due and
payable following an event of default under the indenture, amounts paid under
the insurance policy with respect to Monthly Certificate Interest and Monthly
Certificate Principal will be deposited directly in the certificate payment
account. The insurance policy will be issued under an insurance and
reimbursement agreement among CarMax Auto Receivables, CarMax Auto Superstores,
in its individual capacity and as seller and servicer, and the insurer.
The insurer will be entitled to receive on each Payment Date, from the
Available Funds for that Payment Date plus any amounts withdrawn from the
reserve account on that Payment Date, the premium payable under the insurance
agreement for that Payment Date, the aggregate amount of any unreimbursed
payments under the insurance policy and various other amounts, in each case as
described under "--Payment Date Distributions--Collection Account" beginning on
page 56 of this prospectus. The insurer will not be entitled to reimbursement
of any amounts paid under the insurance policy from the noteholders or the
certificateholders. The insurer will have no obligations to the noteholders,
the certificateholders, the indenture trustee or the owner trustee other than
its obligations under the insurance policy.
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REPORTS TO SECURITYHOLDERS
Unless and until the notes or the certificates, as applicable, are issued
in fully registered, certificated form, the indenture trustee will provide
monthly and annual statements concerning the trust and the offered securities
to Cede, the nominee of DTC, as registered holder of the offered securities.
These statements will not constitute financial statements prepared in
accordance with generally accepted accounting principles. A copy of the most
recent monthly or annual statement concerning the trust and the offered
securities may be obtained by contacting the servicer at CarMax Auto
Superstores, Inc., c/o Circuit City Stores, Inc., 9954 Mayland Drive, Richmond,
Virginia 23233, Attention: Treasury Department, telephone: (804) 527-4000. See
"Registration of the Offered Securities--Definitive Securities" beginning on
page 52 of this prospectus for a further discussion of the limited
circumstances under which the notes or the certificates will be issued in fully
registered, certificated form.
DESCRIPTION OF THE INDENTURE
The following summary describes the material terms of the indenture. A form
of the indenture has been filed as an exhibit to the registration statement of
which this prospectus forms a part.
Events of Default
The following events will constitute events of default under the indenture:
. the trust shall fail to make any required interest payment on the
notes and that failure shall continue unremedied for five business
days;
. the trust shall fail to make any required principal payment on the
notes;
. the trust shall fail to observe or perform any material covenant or
agreement in the indenture and that failure shall continue
unremedied for 60 days after written notice of that failure shall
have been given to the trust by the indenture trustee or the insurer
or to the trust and the indenture trustee by the holders of notes
evidencing not less than 25% of the principal balance of the notes;
. any representation or warranty of the trust made in the indenture or
in any certificate delivered under the indenture shall prove to have
been incorrect in any material respect as of the time when made and
that breach shall continue unremedied for 30 days after written
notice of that breach shall have been given to the trust by the
indenture trustee or the insurer or to the trust and the indenture
trustee by the holders of notes evidencing not less than 25% of the
principal balance of the notes;
. an event of bankruptcy, insolvency, receivership or liquidation
shall occur with respect to the trust; or
. a claim shall be made under the insurance policy;
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provided, however, that, unless an Insurer Default shall have occurred and be
continuing, neither the indenture trustee nor the noteholders may declare an
event of default under the indenture. If an Insurer Default shall not have
occurred and be continuing, an event of default will occur under the indenture
only upon delivery by the insurer to the indenture trustee of notice that an
event of default has occurred under the indenture.
Rights Upon Event of Default
If an event of default shall have occurred and be continuing under the
indenture and an Insurer Default shall not have occurred and be continuing, the
insurer may declare the notes to be immediately due and payable and cause the
indenture trustee to sell the property of the trust in whole or in part and to
distribute the proceeds of that sale in accordance with the indenture. The
insurer may not, however, cause the indenture trustee to sell the property of
the trust in whole or in part following an event of default under the indenture
if the proceeds of that sale would not be sufficient to pay in full the
principal amount of and accrued but unpaid interest on the notes unless the
event of default arose from a claim being made under the insurance policy or
from an event of bankruptcy, insolvency, receivership or liquidation with
respect to the trust. If an event of default shall have occurred and be
continuing under the indenture and an Insurer Default shall not have occurred
and be continuing, the insurer, at its option, may elect to prepay all or any
portion of the principal amount of and accrued but unpaid interest on the notes
and, if the notes have been paid in full, the certificates. The indenture
trustee will continue to submit claims under the insurance policy with respect
to the notes and the certificates following an event of default under the
indenture.
If an event of default shall have occurred and be continuing under the
indenture, other than an event of default arising solely as a result of a claim
being made under the insurance policy, and an Insurer Default shall have
occurred and be continuing, the indenture trustee or the holders of notes
evidencing not less than 66 2/3% of the principal balance of the notes may
declare the notes to be immediately due and payable. Any declaration of
acceleration by the indenture trustee or the noteholders may be rescinded by
the holders of notes evidencing not less than 66 2/3% of the principal balance
of the notes at any time before a judgment or decree for payment of the amount
due has been obtained by the indenture trustee if the trust has deposited with
the indenture trustee an amount sufficient to pay all principal of and interest
on the notes as if the event of default giving rise to the declaration of
acceleration had not occurred and all events of default under the indenture,
other than the nonpayment of principal of the notes that has become due solely
as a result of the acceleration, have been cured or waived.
If the notes have been declared immediately due and payable by the
indenture trustee or the noteholders following an event of default under the
indenture, the indenture trustee may institute proceedings to collect amounts
due, exercise remedies as a secured party, including foreclosure or sale of the
property of the trust, or elect to maintain the property of the trust and
continue to apply proceeds from the property of the trust as if there had been
no declaration of acceleration. The indenture trustee may not, however, sell
the property of the trust following an event of default under the indenture,
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other than a default for five or more business days in the payment of interest
on the notes or a default in the payment of principal of the notes, unless:
. 100% of the noteholders consent to the sale;
. the proceeds of the sale are sufficient to pay in full the principal
amount of and accrued but unpaid interest on the notes and all
amounts due to the insurer under the insurance agreement and the
insurance policy; or
. the indenture trustee determines that the property of the trust
would not be sufficient on an ongoing basis to make all payments on
the notes as those payments would have become due had the notes not
been declared due and payable and the holders of notes evidencing
not less than 66 2/3% of the principal balance of the notes consent
to the sale.
The indenture trustee may, but need not, obtain and rely upon an opinion of an
independent accountant or investment banking firm as to the sufficiency of the
property of the trust to pay principal of and interest on the notes on an
ongoing basis.
If the property of the trust is sold at the direction of the indenture
trustee or the noteholders under the circumstances described in the preceding
paragraph, the indenture trustee will apply or cause to be applied the
proceeds of that sale to make the following payments in the following order of
priority:
(1) to the indenture trustee, all amounts due to the indenture trustee
as compensation under the terms of the indenture;
(2) to the servicer, all accrued but unpaid monthly servicing fees;
(3) to the noteholders, all accrued but unpaid interest on the notes;
(4) to the noteholders, the principal balance of the notes;
(5) to the certificateholders, all accrued but unpaid interest on the
certificates; and
(6) to the certificateholders, the principal balance of the
certificates.
Any remaining amounts will be distributed first to the insurer for amounts
due to the insurer under the insurance agreement and the insurance policy and
then to CarMax Auto Receivables.
If an event of default shall have occurred and be continuing under the
indenture, subject to the provisions of the indenture relating to the duties
of the indenture trustee, the indenture trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request or
direction of the noteholders if the indenture trustee reasonably believes that
it will not be adequately indemnified against the costs, expenses and
liabilities which might be incurred by it in complying with that request or
direction.
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Waiver of Past Defaults
The insurer, if an Insurer Default shall not have occurred and be
continuing, or the holders of notes evidencing not less than 51% of the
principal balance of the notes, with the consent of the insurer if an Insurer
Default shall not have occurred and be continuing, may, on behalf of all
noteholders, waive any past default or event of default under the indenture
prior to the acceleration of the notes, other than a default in payment of
principal of or interest on any of the notes or in respect of any covenant or
other provision in the indenture that cannot be modified or amended without the
unanimous consent of the noteholders.
Covenants
The trust will not:
. except as expressly permitted by the purchase agreement, the trust
agreement, the sale and servicing agreement or the indenture, sell,
transfer, exchange or otherwise dispose of any of the assets of the
trust;
. claim any credit on or make any deduction from the interest or
principal payable in respect of the notes or the certificates, other
than amounts withheld under the Internal Revenue Code or applicable
state law, or assert any claim against any present or former holder
of notes or certificates because of the payment of taxes levied or
assessed upon the trust;
. dissolve or liquidate in whole or in part;
. permit the validity or effectiveness of the indenture to be
impaired;
. permit any person to be released from any covenants or obligations
with respect to the notes under the indenture except as may be
expressly permitted by the indenture;
. permit the creation of any lien with respect to any of the assets of
the trust, other than the lien of the indenture and except for tax
liens, mechanics' liens and other liens arising by operation of law;
. permit the lien of the indenture not to constitute a valid, first
priority security interest in the assets of the trust, except for
tax liens, mechanics' liens and other liens arising by operation of
law;
. engage in any activities other than financing, acquiring, owning,
pledging and managing the contracts as contemplated by the purchase
agreement, the trust agreement, the sale and servicing agreement and
the indenture and activities incidental to those activities; or
. incur, assume or guarantee any indebtedness other than indebtedness
evidenced by the notes or indebtedness otherwise permitted by the
purchase agreement, the trust agreement, the sale and servicing
agreement or the indenture.
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Replacement of Indenture Trustee
The insurer, if an Insurer Default shall not have occurred and be
continuing, or the holders of notes evidencing not less than 51% of the
principal balance of the notes, with the consent of the insurer if an Insurer
Default shall not have occurred and be continuing, may remove the indenture
trustee without cause by notifying the indenture trustee and the trust of that
removal and, following that removal, may appoint a successor indenture trustee.
Any successor indenture trustee must at all times satisfy the requirements of
Section 310(a) of the Trust Indenture Act of 1939, as amended, and must have a
combined capital and surplus of at least $50,000,000 and a long-term debt
rating of investment grade by Moody's and Standard & Poor's or otherwise
acceptable to Moody's and Standard & Poor's.
The indenture trustee may resign at any time by notifying the trust and the
noteholders of that resignation. The trust will be required to remove the
indenture trustee if the indenture trustee:
. ceases to be eligible to continue as the trustee under the
indenture;
. is adjudged to be bankrupt or insolvent;
. comes under the charge of a receiver or other public officer; or
. otherwise becomes incapable of acting.
Upon the resignation or required removal of the indenture trustee, or the
failure of the noteholders to appoint a successor trustee following the removal
of the indenture trustee without cause, the trust, with the consent of the
insurer if an Insurer Default shall not have occurred and be continuing, will
be required promptly to appoint a successor trustee under the indenture.
Duties of Indenture Trustee
Except upon the occurrence and during the continuation of an event of
default under the indenture, the indenture trustee:
. will perform those duties and only those duties that are
specifically set forth in the indenture;
. may, in the absence of bad faith, rely on certificates or opinions
furnished to the indenture trustee which conform to the requirements
of the indenture as to the truth of the statements and the
correctness of the opinions expressed in those certificates or
opinions; and
. will examine any certificates and opinions which are specifically
required to be furnished to the indenture trustee under the
indenture to determine whether or not they conform to the
requirements of the indenture.
Upon the occurrence and during the continuation of an event of default
under the indenture, the indenture trustee will be required to exercise the
rights and powers vested in it by the indenture and use the same degree of care
and skill in the exercise of those rights and powers as a prudent person would
exercise or use under the circumstances in the conduct of that person's own
affairs.
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Compensation; Indemnification
The trust will pay to the indenture trustee from time to time reasonable
compensation for its services, reimburse the indenture trustee for all
expenses, advances and disbursements reasonably incurred and indemnify the
indenture trustee for, and hold it harmless against, any and all losses,
liabilities or expenses, including attorneys' fees, incurred by it in
connection with the performance of its duties under the indenture. The
indenture trustee will not be indemnified against any loss, liability or
expense incurred by it through its own willful misconduct, negligence or bad
faith, except that the indenture trustee will not be liable:
. for any error of judgment made by it in good faith unless it is
proved that the indenture trustee was negligent in ascertaining the
pertinent facts;
. for any action it takes or omits to take in good faith in accordance
with directions received by it from the noteholders in accordance
with the terms of the indenture; or
. for interest on any money received by it except as the indenture
trustee and the trust may agree in writing.
The indenture trustee will not be deemed to have knowledge of any event of
default under the indenture unless a responsible officer of the indenture
trustee has actual knowledge of the default or has received written notice of
the default in accordance with the indenture.
Access to Noteholder List
If the notes are issued in fully registered, certificated form and the
indenture trustee is not the registrar for the notes, the trust will furnish or
cause to be furnished to the indenture trustee, within five days after each
Record Date, a list of the names and addresses of the noteholders as of that
Record Date. In addition, if the notes are issued in fully registered,
certificated form and the indenture trustee is not the registrar for the notes,
the trust will furnish or cause to be furnished to the indenture trustee,
within 20 days after receipt by the indenture trustee of a written request for
a list of the names and addresses of the noteholders, a list of the names and
addresses of the noteholders as of a date not more than ten days before the
date that list is furnished.
Annual Compliance Statement; Annual Report
The trust will file annually with the indenture trustee a written statement
as to the fulfillment of its obligations under the indenture. The indenture
trustee will mail annually to all noteholders a brief report relating to its
eligibility and qualification to continue as indenture trustee, any amounts
advanced by it under the indenture, the amount, interest rate and maturity date
of any material indebtedness owing by the trust to the indenture trustee in its
individual capacity, the property and funds physically held by the indenture
trustee and any action taken by the indenture trustee that materially affects
the notes and that has not previously been reported.
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Satisfaction and Discharge of Indenture
The indenture will be discharged with respect to the collateral securing
the notes:
. upon delivery to the indenture trustee for cancellation of all the
notes or, if all notes not delivered to the indenture trustee for
cancellation have become due and payable, upon deposit with the
indenture trustee of funds sufficient for the payment in full of the
principal amount of and accrued but unpaid interest on the notes;
. upon delivery to the indenture trustee of an officer's certificate
and an opinion of counsel, which may be internal counsel to CarMax
Auto Receivables or the servicer, stating that all conditions
precedent provided for in the indenture relating to the satisfaction
and discharge of the indenture have been satisfied; and
. upon delivery to the indenture trustee of an opinion of counsel,
which may be internal counsel to CarMax Auto Receivables or the
servicer, to the effect that the satisfaction and discharge of the
indenture will not cause any noteholder to be treated as having sold
or exchanged its notes for purposes of Section 1001 of the Internal
Revenue Code.
Modification of Indenture
The owner trustee, on behalf of the trust, and the indenture trustee may,
without the consent of the noteholders but with the consent of the insurer if
an Insurer Default shall not have occurred and be continuing, with prior
written notice to the insurer, Moody's and Standard & Poor's, enter into one or
more supplemental indentures for the purpose of adding to the covenants of the
trust, curing any ambiguity, correcting or supplementing any provision of the
indenture which may be inconsistent with any other provision of the indenture
or this prospectus or making any other provision with respect to matters or
questions arising under the indenture which will not be inconsistent with other
provisions of the indenture; provided, however, that:
. the proposed action will not, as evidenced by an opinion of counsel,
which may be internal counsel to CarMax Auto Receivables or the
servicer, materially adversely affect the interests of the insurer
or any noteholder or, as confirmed by Moody's and Standard & Poor's,
cause the then current rating assigned to any class of notes to be
withdrawn, reduced or qualified; and
. an opinion of counsel, which may be internal counsel to CarMax Auto
Receivables or the servicer, is delivered to the effect that the
proposed action will not materially adversely affect the taxation of
any note or certificate, or any noteholder or certificateholder, or
adversely affect the tax status of the trust.
The owner trustee, on behalf of the trust, and the indenture trustee may,
with the consent of the holders of notes evidencing not less than 51% of the
principal balance of the notes, and with the consent of the insurer if an
Insurer Default shall not have occurred and
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be continuing, with prior written notice to the insurer, Moody's and Standard &
Poor's, enter into one or more supplemental indentures for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of the indenture or of modifying in any manner the rights of the
noteholders; provided, however, that:
. the proposed action will not, as evidenced by an opinion of counsel,
which may be internal counsel to CarMax Auto Receivables or the
servicer, materially adversely affect the interests of the insurer
or any noteholder or, as confirmed by Moody's and Standard & Poor's,
cause the then current rating assigned to any class of notes to be
withdrawn, reduced or qualified; and
. an opinion of counsel, which may be internal counsel to CarMax Auto
Receivables or the servicer, is delivered to the effect that the
proposed action will not materially adversely affect the taxation of
any note or certificate, or any noteholder or certificateholder, or
adversely affect the tax status of the trust; and,
provided further, that no supplemental indenture may, without the consent of
the insurer and all noteholders affected by the supplemental indenture:
. change the final Payment Date for any class of notes or the due date
of any installment of principal of or interest on any note or reduce
the principal amount of any note, the interest rate specified for
any note or the redemption price with respect to any note, change
the provisions of the indenture relating to the application of
collections on, or the proceeds of the sale of, the assets of the
trust to payment of principal of or interest on the notes, or change
any place of payment where, or the coin or currency in which, any
note or any interest on any note is payable;
. impair the right to institute suit for the enforcement of the
provisions of the indenture regarding payment;
. reduce the percentage of the principal balance of the notes the
consent of the holders of which is required for any supplemental
indenture or for any waiver of compliance with the provisions of the
indenture or of the defaults under the indenture and their
consequences as provided in the indenture;
. modify or alter the provisions of the indenture regarding the voting
of notes held by the trust, CarMax Auto Receivables, the servicer,
an affiliate of any of them or any obligor on the notes;
. reduce the percentage of the principal balance of the notes the
consent of the holders of which is required to direct the indenture
trustee to sell the assets of the trust if the proceeds of that sale
would be insufficient to pay in full the principal amount of and
accrued but unpaid interest on the notes and the certificates;
. modify any provision of the indenture specifying a percentage of the
principal balance of the notes necessary to amend the indenture, the
trust agreement or the sale and servicing agreement except to
increase any percentage specified in the
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indenture or to provide that additional provisions of the indenture,
the trust agreement or the sale and servicing agreement cannot be
modified or waived without the consent of the holders of each
outstanding note affected by the modification or waiver;
. modify any provisions of the indenture in such a manner as to affect
the calculation of the amount of any payment of interest or
principal due on any note on any Payment Date or to affect the
rights of the noteholders to the benefit of any provisions for the
mandatory redemption of the notes contained in the indenture; or
. permit the creation of any lien ranking prior to or on a parity with
the lien of the indenture with respect to any of the assets of the
trust or, except as otherwise permitted or contemplated in the
indenture, terminate the lien of the indenture on any collateral or
deprive any noteholder of the security afforded by the lien of the
indenture.
Administration Agreement
CarMax Auto Receivables, as administrator, the owner trustee, on behalf of
the trust, and the indenture trustee will enter into an administration
agreement under which the administrator will agree to provide notices and to
perform other obligations under the indenture. The administrator will be
entitled to a monthly administrative fee as compensation for the performance of
its obligations under the administration agreement, which fee will be paid by
the servicer. A form of the administration agreement has been filed as an
exhibit to the registration statement of which this prospectus forms a part.
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DESCRIPTION OF THE TRUST AGREEMENT
The following summary describes the material terms of the trust agreement.
A form of the trust agreement has been filed as an exhibit to the registration
statement of which this prospectus forms a part.
Formation of Trust; Issuance of Certificates
On the closing date, CarMax Auto Receivables will form the trust and
appoint the owner trustee as trustee of the trust. The owner trustee will,
concurrently with the transfer of the contracts to the trust under the sale and
servicing agreement, issue the certificates.
Replacement of Owner Trustee
The owner trustee may resign at any time by notifying the administrator of
that resignation. The administrator may remove the owner trustee if the owner
trustee:
. ceases to be eligible to continue as the trustee under the trust
agreement;
. is adjudged to be bankrupt or insolvent;
. comes under the charge of a receiver or other public officer; or
. otherwise becomes incapable of acting.
Upon the resignation or removal of the owner trustee, the administrator
will be required promptly to appoint a successor trustee under the trust
agreement.
Duties of Owner Trustee
The owner trustee will agree to administer the trust in the interest of the
certificateholders, subject to the lien of the indenture, and in accordance
with the provisions of the trust agreement. The owner trustee will not be
required to take any action that it has reasonably determined is likely to
result in liability on the part of the owner trustee or that is contrary to the
terms of the trust agreement or applicable law. The owner trustee will not be
liable for any error of judgment made in good faith by a responsible officer of
the owner trustee, unless it is proved that the owner trustee was negligent in
ascertaining the pertinent facts, and will not be liable with respect to any
action taken or omitted to be taken in good faith by the owner trustee in
accordance with the provisions of the trust agreement at the instructions of
the certificateholders, the indenture trustee, CarMax Auto Receivables, the
administrator or the servicer.
Compensation; Indemnification
CarMax Auto Receivables will pay to the owner trustee from time to time
reasonable compensation for its services, reimburse the owner trustee for all
expenses, advances and disbursements reasonably incurred and indemnify the
owner trustee for, and hold it harmless against, any and all losses,
liabilities or expenses, including attorneys' fees, incurred by it in
connection with the performance of its duties under the trust agreement. The
owner trustee
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will not be indemnified against any loss, liability or expense incurred by it
through its own willful misconduct, negligence or bad faith, except that the
owner trustee will not be liable:
. for any error of judgment made by it in good faith unless it is
proved that the owner trustee was negligent in ascertaining the
pertinent facts;
. for any action it takes or omits to take in good faith in accordance
with directions received by it from the certificateholders, the
indenture trustee, CarMax Auto Receivables, the administrator or the
servicer;
. for indebtedness evidenced by or arising under the trust agreement
or any of the related documents, including the principal of or
interest on the notes or the certificates; or
. for the default or misconduct of the servicer, the administrator,
CarMax Auto Receivables, the indenture trustee or any agent or
attorney selected by the owner trustee with reasonable care.
Termination of Trust
If the insurance policy has been terminated and returned to the insurer for
cancellation, the trust agreement, except for provisions relating to
compensation, reimbursement and indemnification of the owner trustee, and the
trust will terminate and be of no further force or effect:
. upon the payment to the noteholders and the certificateholders of
all amounts required to be paid to them under the purchase
agreement, the trust agreement, the sale and servicing agreement and
the indenture; or
. on the Payment Date following the month which is one year after the
maturity or other liquidation of the last contract and the
disposition of any amounts received upon liquidation of any property
remaining in the trust.
Amendment of Trust Agreement
The owner trustee, on behalf of the trust, and CarMax Auto Receivables may,
without the consent of the noteholders or the certificateholders but with the
consent of the insurer if an Insurer Default shall not have occurred and be
continuing, with prior written notice to the insurer, Moody's and Standard &
Poor's, amend the trust agreement for the purpose of curing any ambiguity,
correcting or supplementing any provision of the trust agreement which may be
inconsistent with any other provision of the trust agreement or this prospectus
or adding any provisions to or changing in any manner or eliminating any of the
provisions of the trust agreement which will not be inconsistent with other
provisions of the trust agreement; provided, however, that:
. the proposed action will not, as evidenced by an opinion of counsel,
which may be internal counsel to CarMax Auto Receivables or the
servicer, materially adversely affect the interests of the insurer,
any noteholder or any certificateholder or, as confirmed by Moody's
and Standard & Poor's, cause the
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then current rating assigned to any class of notes or the
certificates to be withdrawn, reduced or qualified; and
. an opinion of counsel, which may be internal counsel to CarMax Auto
Receivables or the servicer, is delivered to the effect that the
proposed action will not materially adversely affect the taxation of
any note or certificate, or any noteholder or certificateholder, or
adversely affect the tax status of the trust.
The owner trustee, on behalf of the trust, and CarMax Auto Receivables may,
with the consent of the holders of notes evidencing not less than 51% of the
principal balance of the notes and the holders of certificates evidencing not
less than 51% of principal balance of the certificates, and with the consent of
the insurer if an Insurer Default shall not have occurred and be continuing,
with prior written notice to the insurer, Moody's and Standard & Poor's, amend
the trust agreement for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of the trust agreement or of
modifying in any manner the rights of the noteholders or the
certificateholders; provided, however, that:
. the proposed action will not, as evidenced by an opinion of counsel,
which may be internal counsel to CarMax Auto Receivables or the
servicer, materially adversely affect the interests of the insurer,
any noteholder or any certificateholder or, as confirmed by Moody's
and Standard & Poor's, cause the then current rating assigned to any
class of notes or the certificates to be withdrawn, reduced or
qualified; and
. an opinion of counsel, which may be internal counsel to CarMax Auto
Receivables or the servicer, is delivered to the effect that the
proposed action will not materially adversely affect the taxation of
any note or certificate, or any noteholder or certificateholder, or
adversely affect the tax status of the trust; and,
provided further, that no amendment may:
. increase or reduce in any manner the amount of, or accelerate or
delay the timing of, or change the allocation or priority of,
collections of payments on or in respect of the contracts or
distributions that are required to be made for the benefit of the
noteholders or the certificateholders, or change the interest rate
applicable to any class of notes or the interest rate applicable to
the certificates without the consent of all noteholders and
certificateholders adversely affected by the amendment;
. reduce the percentage of the principal balance of the notes or the
principal balance of the certificates the consent of the holders of
which is required for any amendment to the trust agreement without
the consent of all noteholders and certificateholders adversely
affected by the amendment; or
. adversely affect the rating assigned by Moody's or Standard & Poor's
to any class of notes or the certificates without the consent of the
holders of notes evidencing not less than 66 2/3% of the principal
balance of that class or the holders of certificates evidencing not
less than 66 2/3% of the principal balance of the certificates, as
applicable.
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DESCRIPTION OF THE PURCHASE AGREEMENT
AND THE SALE AND SERVICING AGREEMENT
The following summary describes the material terms of the purchase
agreement and the sale and servicing agreement. A form of the purchase
agreement and a form of the sale and servicing agreement have been filed as
exhibits to the registration statement of which this prospectus forms a part.
Transfer of Contracts
On the closing date, CarMax Auto Superstores will sell its entire right in
the contracts, including its security interests in the financed vehicles, to
CarMax Auto Receivables under the purchase agreement, and CarMax Auto
Receivables will transfer its entire right in the contracts, including its
security interests in the financed vehicles, to the trust under the sale and
servicing agreement. Each contract will be identified in a schedule appearing
as an exhibit to the purchase agreement and the sale and servicing agreement.
The indenture trustee and the owner trustee will, concurrently with the
transfer of the contracts to the trust, execute, authenticate and deliver the
notes and the certificates to CarMax Auto Receivables in exchange for the
contracts.
In the purchase agreement, CarMax Auto Superstores will represent and
warrant to CarMax Auto Receivables that:
. the information provided by CarMax Auto Superstores with respect to
the contracts is correct in all material respects;
. each obligor under a contract has obtained or agreed to obtain and
has agreed to maintain physical damage insurance covering the
related financed vehicle in accordance with CarMax Auto Superstores'
normal requirements;
. as of the closing date, the contracts were free and clear of all
security interests, liens, charges and encumbrances, other than the
lien of CarMax Auto Receivables, and no offsets, defenses or
counterclaims against CarMax Auto Superstores or CarMax Auto
Receivables had been asserted or threatened with respect to the
contracts;
. as of the closing date, each contract was secured by a first
perfected security interest in the related financed vehicle in favor
of CarMax Auto Superstores, as registered lienholder, or CarMax Auto
Superstores had taken all necessary action with respect to each
contract to secure a first perfected security interest in the
related financed vehicle; and
. each contract complied in all material respects, as of the date on
which it was originated and as of the closing date, with applicable
federal and state laws, including, without limitation, consumer
credit, truth in lending, equal credit opportunity and disclosure
laws.
CarMax Auto Superstores will agree under the purchase agreement to
repurchase from CarMax Auto Receivables any contract as to which CarMax Auto
Superstores has breached
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a representation or warranty if that breach materially and adversely affects
the interest of CarMax Auto Receivables or its assignee in that contract and
CarMax Auto Superstores has not cured that breach on or before the last day of
the month following the discovery by or notice to CarMax Auto Superstores of
that breach. Each contract to be repurchased by CarMax Auto Superstores must be
repurchased on or before that last day for a price equal to the outstanding
principal balance of that contract plus accrued interest on that balance at the
applicable contract rate to the date of repurchase. CarMax Auto Receivables
will assign to the trust under the sale and servicing agreement certain of its
rights under the purchase agreement, including its right to cause CarMax Auto
Superstores to repurchase contracts as to which there has been a breach of a
representation or warranty. The repurchase obligation of CarMax Auto
Superstores under the purchase agreement, as assigned to the trust under the
sale and servicing agreement, will constitute the sole remedy available to the
noteholders, the indenture trustee, the certificateholders or the owner trustee
for any uncured breach of a representation or warranty contained in the
purchase agreement.
Servicing Procedures
The servicer will agree under the sale and servicing agreement to service,
manage, maintain custody of and collect amounts due under the contracts. The
servicer will agree to make reasonable efforts to collect all payments due
under the contracts and will, consistent with the sale and servicing agreement,
follow the collection practices and procedures it follows with respect to
comparable motor vehicle retail installment sale contracts that it owns or
services for others. The servicer will continue to follow its normal collection
practices and procedures to the extent necessary or advisable to realize upon
any contracts with respect to which the servicer determines that eventual
payment in full is unlikely. The servicer may sell the financed vehicle
securing any defaulted contract at a public or private sale or take any other
action permitted by applicable law.
The servicer may, in its sole discretion but consistent with its normal
practices and procedures, extend or modify the payment schedule applicable to
any contract; provided, however, that if the extension of a payment schedule
causes a contract to remain outstanding on the final scheduled Payment Date for
the certificates, the servicer will agree under the sale and servicing
agreement to purchase that contract as of the last day of the month preceding
that final scheduled Payment Date. The purchase obligation of the servicer
under the sale and servicing agreement will constitute the sole remedy
available to the noteholders, the indenture trustee, the certificateholders or
the owner trustee for any extension of a payment schedule that causes a
contract to remain outstanding on the final scheduled Payment Date for the
certificates.
Servicing Compensation
The servicer will be entitled to receive a monthly fee for servicing the
contracts. The monthly servicing fee for any month will equal the product of
one-twelfth of 1.00% per annum and the principal balance of the contracts as of
the first day of that month. The servicer will also be entitled to
reimbursement from the trust for various liabilities.
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The monthly servicing fee will compensate the servicer for performing the
functions of a third-party servicer of motor vehicle retail installment sale
contracts as agent for the trust, including collecting and posting all
payments, responding to inquiries of obligors on the contracts, investigating
delinquencies, sending payment coupons to obligors and overseeing collateral in
cases of obligor default. The monthly servicing fee will also compensate the
servicer for administering the contract pool, including accounting for
collections, furnishing monthly and annual statements to the indenture trustee
and the owner trustee with respect to distributions and generating federal
income tax information for the trust and for the noteholders and the
certificateholders. The monthly servicing fee also will reimburse the servicer
for taxes, accounting fees, outside auditor fees, data processing costs and
other costs incurred in connection with administering the contract pool.
Evidence of Compliance
The sale and servicing agreement will provide that a firm of independent
public accountants will furnish annually to the indenture trustee and the owner
trustee a statement as to compliance by the servicer during the preceding
twelve months with applicable standards relating to the servicing of the
contracts. The sale and servicing agreement will also provide for delivery to
the indenture trustee and the owner trustee each year of a certificate signed
by an officer of the servicer stating that the servicer has fulfilled its
obligations under the sale and servicing agreement throughout the preceding
twelve months or, if there has been a default in the fulfillment of any
obligation, describing that default. The servicer will agree to give the
indenture trustee and the owner trustee notice of the occurrence of an event of
servicing termination under the sale and servicing agreement. Copies of these
statements and certificates may be obtained by the noteholders and the
certificateholders by a request in writing addressed to the indenture trustee
at Four Albany Street, New York, New York 10006, Attention: Corporate Trust and
Agency Group--Structured Finance, or to the owner trustee at One Rodney Square,
920 King Street, Suite 102, Wilmington, Delaware 19801, Attention: Corporate
Trust Administration.
Resignation; Merger or Consolidation
The sale and servicing agreement will provide that CarMax Auto Superstores
may not resign from its obligations and duties as servicer except upon a
determination that its performance of its duties as servicer is no longer
permissible under applicable law. Any resignation by CarMax Auto Superstores
will become effective only when the indenture trustee or a successor servicer
has assumed CarMax Auto Superstores' servicing obligations and duties under the
sale and servicing agreement.
Any corporation or other entity into which CarMax Auto Superstores may be
merged or consolidated, or any corporation or other entity resulting from any
merger or consolidation to which CarMax Auto Superstores is a party, or any
corporation or other entity succeeding to the motor vehicle financing and
contract servicing business of CarMax Auto Superstores, which corporation or
other entity assumes the obligations of the servicer, will be the successor to
the servicer under the sale and servicing agreement.
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Limitation on Liability
The sale and servicing agreement will provide that neither the servicer nor
any of its directors, officers, employees or agents will be under any liability
to the trust, the noteholders or the certificateholders for taking any action
or for refraining from taking any action under the sale and servicing agreement
or for errors in judgment; provided, however, that neither the servicer nor any
of its directors, officers, employees or agents will be protected against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of the servicer's duties or by
reason of reckless disregard of its obligations and duties under the sale and
servicing agreement. In addition, the sale and servicing agreement will provide
that the servicer is under no obligation to appear in, prosecute or defend any
legal action that is not incidental to its servicing responsibilities under the
sale and servicing agreement and that, in its opinion, may cause it to incur
any expense or liability.
Events of Servicing Termination
The following events will constitute events of servicing termination under
the sale and servicing agreement:
. the servicer shall fail to make any required payment or deposit
under the sale and servicing agreement and that failure shall
continue unremedied beyond the earlier of five business days
following the date that payment or deposit was due and, in the case
of a payment or deposit to be made no later than a Payment Date,
that Payment Date;
. the servicer shall fail to deliver to the indenture trustee or the
owner trustee, as applicable, the monthly report relating to the
payment of amounts on deposit in the collection account, the note
payment account or the certificate payment account and that failure
shall continue unremedied beyond the earlier of three business days
following the date that report was due and the related Payment Date;
. the servicer shall fail to observe or perform in any material
respect any other covenant or agreement in the sale and servicing
agreement and that failure shall materially and adversely affect the
rights of the noteholders or the certificateholders and shall
continue unremedied for 60 days after written notice of that failure
shall have been given to the servicer by the indenture trustee, the
owner trustee or the insurer or to the servicer, the indenture
trustee and the owner trustee by the holders of notes evidencing not
less than 25% of the principal balance of the notes or, if the notes
have been paid in full, by the holders of certificates evidencing
not less than 25% of the principal balance of the certificates;
. any representation or warranty of the servicer made in the sale and
servicing agreement or in any certificate delivered under the sale
and servicing agreement, other than any representation or warranty
relating to a contract that has been
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purchased by the servicer, shall prove to have been incorrect in any
material respect as of the time when made and that breach shall
continue unremedied for 30 days after written notice of that breach
shall have been given to the servicer by the indenture trustee, the
owner trustee or the insurer or to the servicer, the indenture
trustee and the owner trustee by the holders of notes evidencing not
less than 25% of the principal balance of the notes or, if the notes
have been paid in full, by the holders of certificates evidencing
not less than 25% of the principal balance of the certificates;
. an event of bankruptcy, insolvency, receivership or liquidation
shall occur with respect to the servicer; or
. the servicer shall cease to be eligible to continue as servicer
under the sale and servicing agreement.
Rights Upon Event of Servicing Termination
If an event of servicing termination shall have occurred and be continuing
under the sale and servicing agreement, the indenture trustee or the owner
trustee, upon direction to do so by the insurer, unless an Insurer Default
shall have occurred and be continuing, or the holders of notes evidencing not
less than 51% of the principal balance of the notes or, if the notes have been
paid in full, the holders of certificates evidencing not less than 51% of the
principal balance of the certificates, may terminate all of the rights and
obligations of the servicer under the sale and servicing agreement, whereupon
the indenture trustee or a successor servicer appointed by the insurer or, with
the consent of the insurer, the indenture trustee will succeed to all of the
responsibilities, duties and liabilities of the servicer under the sale and
servicing agreement and will be entitled to similar compensation arrangements.
If, however, a bankruptcy trustee or similar official has been appointed for
the servicer, and no event of servicing termination other than that appointment
has occurred and is continuing under the sale and servicing agreement, that
trustee or similar official may have the power to prevent the indenture
trustee, the noteholders, the owner trustee or the certificateholders from
effecting a transfer of servicing. If the indenture trustee is unwilling or
unable to act as successor servicer, the insurer or, with the consent of the
insurer, the indenture trustee may appoint, or may petition a court of
competent jurisdiction to appoint, a successor servicer with assets of at least
$50,000,000 and whose regular business includes the servicing of motor vehicle
retail installment sale contracts. The indenture trustee may arrange for
compensation to be paid to the successor servicer, which in no event may be
greater than the servicing compensation paid to the servicer under the sale and
servicing agreement.
The insurer will also be entitled to appoint a successor servicer, to
redirect payments made on or in respect of the contracts to the indenture
trustee and to cause the title documents for the financed vehicles to be
amended upon the occurrence of various additional events involving a failure of
performance by the servicer, a material misrepresentation made by the servicer
under the insurance agreement or a material adverse change in the performance
of the contracts.
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Waiver of Past Defaults
The holders of notes evidencing not less than 51% of the principal balance
of the notes or, if the notes have been paid in full, the holders of
certificates evidencing not less than 51% of the principal balance of the
certificates may, on behalf of all noteholders and certificateholders, waive
any default by the servicer in the performance of its obligations under the
sale and servicing agreement and all consequences of that default, except a
default in making any required deposits to or payments from the collection
account, the note payment account, the certificate payment account or the
reserve account in accordance with the sale and servicing agreement; provided,
however, that the provisions of the sale and servicing agreement cannot be
waived without the consent of the insurer if the waiver would reasonably be
expected to have a materially adverse effect upon the rights of the insurer. No
waiver of a default by the servicer in the performance of its obligations under
the sale and servicing agreement will impair the rights of the noteholders, the
certificateholders or the insurer with respect to subsequent events of
servicing termination under the sale and servicing agreement.
The insurer, if an Insurer Default shall not have occurred and be
continuing, may, on behalf of all noteholders and certificateholders, waive any
default by the servicer in the performance of its obligations under the sale
and servicing agreement and all consequences of that default.
Amendment of the Sale and Servicing Agreement
The sale and servicing agreement may be amended from time to time by CarMax
Auto Receivables, the servicer and the owner trustee, on behalf of the trust,
with the consent of the indenture trustee but without the consent of the
noteholders or the certificateholders, to cure any ambiguity, to correct or
supplement any provision in the sale and servicing agreement that may be
inconsistent with any other provisions in the sale and servicing agreement or
this prospectus or to add, change or eliminate any other provisions with
respect to matters or questions arising under the sale and servicing agreement
that are not inconsistent with the provisions of the sale and servicing
agreement; provided, however, that no amendment to the sale and servicing
agreement may materially and adversely affect the interests of any noteholder
or any certificateholder. Any amendment will be deemed not to materially and
adversely affect the interests of any noteholder or any certificateholder if
the person requesting the amendment obtains letters from Moody's and Standard &
Poor's to the effect that the amendment would not result in a downgrading or
withdrawal of the ratings then assigned to the notes or the certificates by
Moody's and Standard & Poor's or an opinion of counsel satisfactory to the
indenture trustee and the owner trustee to that effect.
The sale and servicing agreement may also be amended from time to time by
CarMax Auto Receivables, the servicer and the owner trustee, on behalf of the
trust, with the consent of the indenture trustee, the consent of the holders of
notes evidencing not less than 51% of the principal balance of the notes and
the holders of certificates evidencing not less than 51% of the principal
balance of the certificates, for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the sale and
servicing
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agreement or of modifying in any manner the rights of the noteholders or the
certificateholders; provided, however, that no amendment may:
. increase or reduce in any manner the amount of, or accelerate or
delay the timing of, or change the allocation or priority of,
collections of payments on or in respect of the contracts or
distributions that are required to be made for the benefit of the
noteholders or the certificateholders, or change the interest rate
applicable to any class of notes, the interest rate applicable to
the certificates or the Required Reserve Account Amount, without the
consent of all noteholders and certificateholders adversely affected
by the amendment;
. reduce the percentage of the principal balance of the notes or the
principal balance of the certificates the consent of the holders of
which is required for any amendment to the sale and servicing
agreement without the consent of all noteholders and
certificateholders adversely affected by the amendment; or
. adversely affect the rating assigned by Moody's or Standard & Poor's
to any class of notes or the certificates without the consent of the
holders of notes evidencing not less than 66 2/3% of the principal
balance of that class or the holders of certificates evidencing not
less than 66 2/3% of the principal balance of the certificates, as
applicable.
No amendment to the sale and servicing agreement will be permitted unless
an opinion of counsel is delivered to the indenture trustee to the effect that
the proposed amendment will not adversely affect the tax status of the trust.
No amendment to the sale and servicing agreement will be permitted without the
consent of the insurer, unless an Insurer Default shall have occurred and be
continuing, if the proposed amendment would reasonably be expected to have a
materially adverse effect upon the rights of the insurer.
Optional Purchase of Contracts
In order to avoid excessive administrative expense, the servicer will be
permitted, at its option, to purchase all remaining contracts in the contract
pool from the trust as of any Payment Date if the principal balance of the
contracts as of the close of business on the last day of any previous month was
10% or less of the initial principal balance of the contracts; provided,
however, that the purchase price paid by the servicer for the remaining
contracts must equal or exceed the principal balance of the notes and the
certificates as of the purchase date plus accrued but unpaid interest on that
principal balance as of the purchase date plus all amounts due to the insurer
under the insurance agreement and the insurance policy. The exercise of this
right will effect the early retirement of the notes and the certificates.
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MATERIAL LEGAL ASPECTS OF THE TRANSACTION
Interest in Contracts
The contracts constitute "chattel paper" under the Uniform Commercial Code.
In most cases, a sale of chattel paper is treated under the UCC in a manner
similar to a transaction creating a security interest in chattel paper. CarMax
Auto Superstores and CarMax Auto Receivables will cause financing statements to
be filed with the appropriate governmental authorities to perfect the interest
of CarMax Auto Receivables and the trust, as the case may be, in the contracts.
Under the sale and servicing agreement, the servicer will hold the
contracts as custodian for the indenture trustee and the trust following the
transfer of the contracts to the trust. CarMax Auto Receivables will take such
action as is required to perfect the rights of the indenture trustee and the
trust in the contracts. The contracts will not, however, be segregated or
otherwise marked to reflect their transfer to the trust. If, through
inadvertence or otherwise, a third party purchases or takes a security interest
in the contracts for new value in the ordinary course of business and takes
possession of the contracts without actual knowledge of the trust's interest,
that purchaser or secured party will acquire an interest in the contracts that
is superior to the interest of the trust.
Under the sale and servicing agreement, the servicer will be obligated from
time to time to take such actions as are necessary to protect and perfect the
trust's interest in the contracts and the proceeds of the contracts.
Security Interest in Vehicles
The contracts evidence the credit sale of motor vehicles. The contracts
also constitute personal property security agreements and include grants of
security interests in the financed vehicles under the UCC. In most states, the
perfection of a security interest in a motor vehicle is governed by the motor
vehicle registration laws of the state in which the vehicle is located. In all
of the states where CarMax Auto Superstores currently originates contracts, a
security interest in a motor vehicle is perfected by notation of the secured
party's lien on the vehicle's certificate of title. In the case of the financed
vehicles, the lien is or will be perfected in the name of CarMax Auto
Superstores, as registered lienholder. The terms of each contract prohibit the
sale or transfer of the related financed vehicle without the consent of the
registered lienholder.
On the closing date, CarMax Auto Superstores will assign its security
interests in the financed vehicles to CarMax Auto Receivables under the
purchase agreement and CarMax Auto Receivables will assign its security
interests in the financed vehicles to the trust under the sale and servicing
agreement. To facilitate servicing and to reduce administrative burden and
expense, the certificates of title for the financed vehicles will not be marked
to reflect the security interests of CarMax Auto Receivables or the trust in
the financed vehicles.
In most states, an assignment of a security interest in a motor vehicle
such as the assignment made under the sale and servicing agreement is effective
to convey that security
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interest without amendment of any lien noted on the related certificate of
title and the assignee succeeds by that assignment to the assignor's rights as
secured party. In several states in which the contracts were originated, the
laws governing certificates of title are silent on the question of the effect
of an assignment on the continued validity and perfection of a security
interest in a motor vehicle. In those states in which a security interest in
personal property is perfected by a central filing, however, the related UCC
provides that a security interest continues to be valid and perfected even
though the security interest has been assigned to a third party and no
amendments or other filings are made to reflect the assignment. An official
comment to the UCC states that this rule should control a security interest in
a motor vehicle which is perfected by the notation of the lien on the related
certificate of title. Although the comment does not have the force of law,
official comments are typically given substantial weight by the courts.
The other states in which the contracts were originated have statutory
provisions that address or could be interpreted as addressing assignments. In
general, however, these statutory provisions either do not require compliance
with the procedure outlined to insure the continued validity and perfection of
the lien or are ambiguous on the issue of whether the procedure must be
followed. Under the official comment noted above, if these procedures for
noting an assignee's name on a certificate of title are determined to be merely
permissive in nature, the procedures would not have to be followed as a
condition to the continued validity and perfection of the security interest.
By not identifying the trust as the secured party on the certificates of
title for the financed vehicles, the security interests of the trust in the
financed vehicles could be defeated through fraud or negligence. In the absence
of fraud or forgery by the vehicle owner or the registered lienholder, or
administrative error by state or local agencies, the notation of CarMax Auto
Superstores' lien on the certificates of title should be sufficient to protect
the trust against the rights of a subsequent purchaser of a financed vehicle or
a subsequent lender who takes a security interest in a financed vehicle. If
there are any financed vehicles as to which CarMax Auto Superstores has failed
to obtain a perfected security interest, the security interest of CarMax Auto
Superstores would be subordinate to, among others, subsequent purchasers of
those financed vehicles and holders of perfected security interests in those
financed vehicles. Any failure to obtain a perfected security interest would
constitute a breach of a representation and warranty under the purchase
agreement and would create an obligation of CarMax Auto Superstores to
repurchase the related contract, unless the breach were cured in a timely
manner. See "Description of the Purchase Agreement and the Sale and Servicing
Agreement--Transfer of Contracts" beginning on page 77 of this prospectus for a
further discussion of the representations and warranties made by CarMax Auto
Superstores in the purchase agreement.
Under the laws of most states, including most of the states in which the
contracts have been originated, a perfected security interest in a motor
vehicle continues for four months after the vehicle is moved to a state other
than the state which issued the related certificate of title and thereafter
until the vehicle owner re-registers the vehicle in the new state. A majority
of states require surrender of a certificate of title to re-register a vehicle.
Because
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CarMax Auto Superstores will have its lien noted on the certificates of title
for the financed vehicles and the servicer will retain possession of the
certificates of title issued by most states in which contracts were originated,
the servicer would ordinarily learn of an attempt to re-register a financed
vehicle. As a result, the trust would ordinarily have the opportunity to re-
perfect its security interest in the financed vehicle in the new state. In
states that do not require a certificate of title for registration of a motor
vehicle, re-registration could defeat perfection.
In the ordinary course of servicing contracts, the servicer takes steps to
effect re-perfection upon receipt of notice of re-registration or information
from the obligor as to relocation. Similarly, when an obligor sells a financed
vehicle, the servicer must surrender possession of the related certificate of
title or will receive notice of the sale as a result of the notation of CarMax
Auto Superstores' lien on the certificate of title and accordingly will have an
opportunity to require satisfaction of the related contract before release of
the lien. Under the sale and servicing agreement, the servicer is obligated to
take appropriate steps, at its own expense, to maintain perfection of the
security interests in the financed vehicles.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over a security interest in
the motor vehicle, even if that security interest is perfected. In some states,
a perfected security interest in a motor vehicle may take priority over liens
for repairs.
CarMax Auto Superstores will represent and warrant in the purchase
agreement and the sale and servicing agreement that, as of the date of issuance
of the notes and the certificates, the security interest in each financed
vehicle is prior to all other present liens upon and security interests in that
financed vehicle, other than tax liens, mechanics' liens and other liens that
arise by operation of law. CarMax Auto Superstores is not required to give
notice to the indenture trustee or the owner trustee, or to the noteholders or
the certificateholders, if a tax lien, mechanics' lien or other permitted lien
arises with respect to a financed vehicle during the term of a contract.
Repossession of Vehicles
If an obligor defaults under a motor vehicle retail installment sale
contract, the holder of that contract has all of the remedies of a secured
party under the UCC, except where specifically limited by other state laws. The
remedy employed by the servicer in most cases of default is self-help
repossession and is accomplished simply by taking possession of the financed
vehicle. The self-help repossession remedy is available under the UCC in most
of the states in which contracts have been originated as long as the
repossession can be accomplished without a breach of the peace. In cases where
the obligor objects or raises a defense to repossession, or if otherwise
required by applicable state law, a court order must be obtained from the
appropriate state court prior to initiating repossession. The vehicle must then
be repossessed in accordance with that order.
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Notice of Sale; Redemption Rights
If an obligor defaults under a motor vehicle retail installment sale
contract, some jurisdictions require that the obligor be notified of the
default and be given a time period within which the obligor may cure the
default prior to repossession. In most states, this right of reinstatement may
be exercised on a limited number of occasions during any one-year period.
The UCC and other state laws require the secured party to provide an
obligor with reasonable notice of the date, time and place of any public sale
and the date after which any private sale of the collateral may be held. In
most states, the obligor has the right to redeem the collateral prior to actual
sale by paying the secured party the unpaid principal balance of the obligation
plus reasonable expenses for repossessing, holding and preparing the collateral
for disposition and arranging for its sale, and, to the extent provided in the
related retail installment sale contract, and as permitted by law, reasonable
attorneys' fees.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of any financed vehicle will be applied first to the
expenses of resale and repossession and then to the satisfaction of the related
contract. If the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment may be sought. The deficiency judgment
would be a personal judgment against the obligor for the shortfall, however,
and a defaulting obligor can be expected to have very little capital or sources
of income available following repossession. Therefore, in many cases, it may
not be useful to seek a deficiency judgment or, if one is obtained, it may be
settled at a significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
lender to remit the surplus to any holder of a lien with respect to the vehicle
or, if no lienholder exists, to remit the surplus to the former owner of the
vehicle.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance. These laws include the Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Federal Trade Commission Act, the Fair Credit Billing Act,
the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B and Z,
state adaptations of the National Consumer Act and of the Uniform Consumer
Credit Code and state motor vehicle retail installment sales acts, and other
similar laws. In addition, state laws impose finance charge ceilings and other
restrictions on consumer transactions and require contract disclosures in
addition to those required under federal law. These requirements impose
specific statutory liabilities upon creditors who fail to comply with their
provisions. In some cases, this liability could affect an assignee's ability to
enforce consumer finance contracts such as the contracts.
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The so-called "Holder-in-Due-Course" Rule of the Federal Trade Commission,
most of the provisions of which are duplicated by the Uniform Consumer Credit
Code, other state statutes or state common law, has the effect of subjecting a
seller to all claims and defenses that the obligor in the transaction could
assert against the seller of the goods. Liability under the FTC rule is limited
to the amounts paid by the obligor under the contract, and the holder of the
contract may also be unable to collect any balance remaining due from the
obligor. Most of the contracts will be subject to the requirements of the FTC
rule. Accordingly, the owner trustee, as holder of the contracts, will be
subject to any claims or defenses that the obligor of the related financed
vehicle may assert against the seller of the vehicle. These claims, to the
extent based on the FTC rule, are limited to a maximum liability equal to the
amounts paid by the obligor on the contract. Claims not based on the FTC rule,
such as assignee direct liability for Truth-In-Lending Act violations apparent
on the face of the required disclosure statement, may not be so limited.
Under most state motor vehicle dealer licensing laws, dealers of motor
vehicles are required to be licensed to sell motor vehicles at retail sale. In
addition, with respect to used vehicles, the Federal Trade Commission's Rule on
Sale of Used Vehicles requires that all sellers of used vehicles prepare,
complete and display a "Buyer's Guide" which explains the warranty coverage for
those vehicles. Furthermore, Federal Odometer Regulations promulgated under the
Motor Vehicle Information and Cost Savings Act requires that all sellers of
used vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if
either a Buyer's Guide or Odometer Disclosure Statement was not provided to the
purchaser of a vehicle, the purchaser may be able to assert a defense against
the seller of the vehicle. If an obligor under the contracts were successful in
asserting any claim or defense of this type, the claim or defense would
constitute a breach of a representation and warranty under the purchase
agreement and would create an obligation of CarMax Auto Superstores to
repurchase the related contract, unless the breach were cured in a timely
manner.
Courts have applied general equitable principles to secured parties
pursuing repossession or litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. In most cases, courts have upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by
the creditor do not involve sufficient state action to afford constitutional
protection to the consumers.
CarMax Auto Superstores will represent and warrant in the purchase
agreement that each contract complies with all requirements of law in all
material respects. Accordingly, if an obligor has a claim against the trust for
violation of any law and the claim materially and adversely affects the trust's
interest in a contract, the violation would constitute a breach of a
representation and warranty under the purchase agreement and would create an
obligation of CarMax Auto Superstores to repurchase the related contract,
unless the breach were cured in a timely manner.
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Other Limitations
In addition, tax and various other statutory liabilities, such as
liabilities to the Pension Benefit Guaranty Corporation, if any, relating to
the underfunding of pension plans of CarMax Auto Superstores or its affiliates,
could be asserted against CarMax Auto Receivables. To the extent that any of
these liabilities arise after the transfer of the contracts to the trust, the
trust's interest in the contracts would be prior to the interest of the
claimant with respect to any of these liabilities. The existence of a claim
against CarMax Auto Receivables, however, could permit the claimant to subject
CarMax Auto Receivables to an involuntary proceeding under the United States
Bankruptcy Code or any similar applicable state law.
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a lender to
realize upon collateral or enforce a deficiency judgment. For example, in a
Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
lender from repossessing a motor vehicle and, as part of the rehabilitation
plan, reduce the amount of the secured indebtedness to the market value, as
determined by the court, of the vehicle at the time of bankruptcy, leaving the
party providing financing as a general unsecured creditor for the remainder of
the indebtedness. A bankruptcy court may also reduce the monthly payments due
under a contract or change the rate of interest and time of repayment of the
indebtedness.
Bankruptcy Matters
CarMax Auto Superstores will represent and warrant to CarMax Auto
Receivables in the purchase agreement that the sale of the contracts by CarMax
Auto Superstores to CarMax Auto Receivables is a sale of the contracts to
CarMax Auto Receivables. Notwithstanding this representation and warranty, if
CarMax Auto Superstores were to become a debtor in a bankruptcy case and a
creditor or trustee-in-bankruptcy of the applicable debtor or the debtor were
to take the position that the sale of contracts to CarMax Auto Receivables
should instead be treated as a pledge of the contracts to secure a loan to
CarMax Auto Superstores, delays in payments of amounts received on or in
respect of the contracts to the noteholders and the certificateholders could
occur or, should the court rule in favor of any trustee, debtor or creditor,
reductions in the amounts of payments could result. If the transfer of the
contracts to CarMax Auto Receivables is treated as a pledge instead of a sale,
a tax or government lien on property of CarMax Auto Superstores that arose
before the transfer of the contracts to CarMax Auto Receivables may have
priority over the trust's interest in the contracts. If the transfer of the
contracts from CarMax Auto Superstores to CarMax Auto Receivables is treated as
a sale, the contracts would not be part of CarMax Auto Superstores' bankruptcy
estate and would not be available to the bankrupt entity's creditors.
CarMax Auto Receivables will receive at closing an opinion of McGuire,
Woods, Battle & Boothe to the effect that, if CarMax Auto Superstores were to
become the subject of a voluntary or involuntary case under the United Stated
Bankruptcy Code subsequent to the transfer of the contracts to CarMax Auto
Receivables on the closing date, the transfer of the contracts by CarMax Auto
Superstores to CarMax Auto Receivables under the purchase
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agreement would be characterized as a sale of the contracts from CarMax Auto
Superstores to CarMax Auto Receivables and the contracts and the proceeds of
the contracts would not form part of CarMax Auto Superstores' bankruptcy estate
under Section 541 of the United State Bankruptcy Code. McGuire, Woods, Battle &
Boothe will assume that CarMax Auto Superstores and CarMax Auto Receivables
will account for and otherwise treat the transfer of the contracts as a sale
and that, except for CarMax Auto Superstores' obligation to repurchase
contracts as to which there has been a breach of a representation or warranty
under the purchase agreement, CarMax Auto Receivables will have no recourse to
CarMax Auto Superstores with respect to the contracts. In addition, McGuire,
Woods, Battle & Boothe will assume that CarMax Auto Superstores did not
transfer the contracts with the intent to hinder, delay or defraud any person
or entity and received reasonably equivalent value and fair consideration for
the contracts and that neither CarMax Auto Superstores nor CarMax Auto
Receivables is insolvent or expects to become insolvent as a result of the
transfer. If these assumptions are incorrect, CarMax Auto Receivables cannot
assure you that a court would not conclude that the transfer of the contracts
should be characterized as a financing rather than a sale in a proceeding under
the United States Bankruptcy Code or any similar applicable state law. If a
court were to reach that conclusion or an attempt were made to litigate this
issue, you could experience losses or payment delays with respect to your notes
or your certificates.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material federal income tax
consequences of the purchase, ownership and disposition of the notes and the
certificates. The summary is based upon current provisions of the Internal
Revenue Code of 1986, as amended, existing and proposed Treasury regulations
under the Internal Revenue Code, current administrative rulings, judicial
decisions and other applicable authorities in effect as of the date of this
prospectus, all of which are subject to change, possibly with retroactive
effect. There can be no assurance that the Internal Revenue Service will not
challenge the conclusions reached in the summary, and no ruling from the IRS
has been or will be sought on any of the issues discussed.
The following summary does not deal with all aspects of federal income
taxation that may be relevant to the beneficial owners of the offered
securities in light of their personal investment circumstances nor, except for
limited discussions of particular topics, to those beneficial owners of the
offered securities subject to special treatment under the federal income tax
laws, such as banks and other financial institutions, dealers in securities,
insurance companies and tax-exempt organizations. The following summary is
directed to the beneficial owners of the offered securities who hold the notes
or the certificates as "capital assets" within the meaning of Section 1221 of
the Internal Revenue Code. CarMax Auto Receivables suggests that you consult
your own tax advisers in determining the federal, state, local and foreign tax
consequences to you of the purchase, ownership and disposition of the offered
securities.
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Tax Treatment of the Notes and the Trust Under Federal Income Tax Law
Tax Status of the Notes and the Trust. McGuire, Woods, Battle & Boothe is
of the opinion that, under existing law and based on the assumption that the
terms of the trust agreement and the related documents will be complied with:
. the notes will be treated as debt for federal income tax purposes;
and
. the trust will not be classified as an association or publicly
traded partnership taxable as a corporation for federal income tax
purposes.
CarMax Auto Receivables, the owner trustee and the indenture trustee have
agreed, and the beneficial owners of the notes will agree by their purchase of
notes, to treat the notes for federal, state and local income and franchise tax
purposes as indebtedness of the trust.
Stated Interest. Stated interest on the notes will be taxable as ordinary
income for federal income tax purposes when received or accrued in accordance
with the related beneficial owner's method of tax accounting.
Original Issue Discount. A note will be treated as issued with Original
Issue Discount if the excess of the note's "stated redemption price at
maturity" over the issue price equals or exceeds a de minimis amount equal to
0.25% of the note's stated redemption price at maturity multiplied by the
number of complete years, based on the anticipated weighted average life of a
note, to its maturity.
In most cases, OID, if any, will equal the difference between the stated
redemption price at maturity of a note and its issue price. The beneficial
owner of a note must include OID in gross income as ordinary interest income as
it accrues under a method that takes into account the economic accrual of the
OID, in most cases in advance of the receipt of the cash representing that
income. The amount of OID on a note will be considered to be zero if it is less
than a de minimis amount.
In most cases, the issue price of a note for purposes of computing OID will
be the initial offering price at which a substantial amount of the notes are
sold. The trust intends to treat the issue price as including the amount paid
by the beneficial owner of the note for accrued interest that relates to a
period prior to the closing date. The "stated redemption price at maturity" is
the sum of all payments on the note other than any "qualified stated interest"
payments. A qualified stated interest payment is any one of a series of
payments equal to the product of the principal balance of the note and a single
fixed rate of interest, or a qualified variable rate of interest, that is
unconditionally payable at least annually.
The beneficial owner of a note issued with OID must include in gross
income, for all days during its taxable year on which it holds the note, the
sum of the "daily portions" of the OID. The daily portions are computed by
allocating to each day during a taxable year a pro rata portion of the OID that
accrued during the relevant accrual period. The amount of OID that will accrue
during an accrual period is the excess, if any, of the sum of the present value
of all payments remaining to be made on the note as of the close of the accrual
period and the payments during the accrual period of amounts included in the
stated redemption price at maturity of the note over the "adjusted issue price"
of the note at the beginning of
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the accrual period. In the case of an obligation the principal on which is
subject to prepayment as a result of prepayments on the underlying collateral,
such as the notes, OID is computed by taking into account the prepayment rate
assumed in pricing the obligation. The prepayment assumption that will be used
in determining the rate of accrual of OID, premium and market discount, if any,
will be determined assuming an ABS percentage of 1.5%. An "accrual period" is
the period over which OID accrues, and may be of any length, provided that each
accrual period is no longer than one year and each scheduled payment of
interest or principal occurs on either the last day or the first day of an
accrual period. The trust intends to report OID on the basis of an accrual
period that corresponds to the interval between Payment Dates. The adjusted
issue price of a note is the sum of its issue price PLUS prior accruals of OID,
reduced by the total payments made with respect to the note in all prior
periods, other than qualified stated interest payments. The present value of
the remaining payments is determined on the basis of three factors:
. the original yield to maturity of the note, determined on the basis
of compounding at the end of each accrual period and properly
adjusted for the length of the accrual period;
. events which have occurred before the end of the accrual period; and
. the assumption that the remaining payments will be made in
accordance with the prepayment rate assumed in pricing the note.
The effect of this method is to increase the portions of OID required to be
included in income by a beneficial owner of the notes to take into account
prepayments on the contracts at a rate that exceeds the prepayment rate assumed
in pricing the notes, and to decrease, but not below zero for any period, the
portions of OID required to be included in income by a beneficial owner of the
notes to take into account prepayments with respect to the contracts at a rate
that is slower than the prepayment rate assumed in pricing the notes. Although
OID will be reported to beneficial owners of the notes based on the prepayment
rate assumed in pricing the notes, no representation is made to the beneficial
owners that the contracts will be prepaid at that rate or at any other rate.
The beneficial owner of a note that acquires the note for an amount that
exceeds the note's stated redemption price at maturity will not include any OID
in gross income. The beneficial owner of a note that acquires the note for an
amount that is less than the note's stated redemption price at maturity will be
required to include OID in gross income, but if the beneficial owner purchases
the note for an amount that exceeds its adjusted issue price, the beneficial
owner will be entitled to reduce the amount of OID otherwise includible in
income in each period by the amount of OID multiplied by a fraction, the
numerator of which is the excess of the beneficial owner's adjusted basis in
the note immediately after purchase over the adjusted issue price of the note,
and the denominator of which is the excess of all amounts remaining to be paid
on the note after the purchase date, other than qualified stated interest
payments, over the adjusted issue price of the note.
Market Discount. The notes, whether or not issued with OID, will be subject
to the "market discount rules" of the Internal Revenue Code. If the beneficial
owner of a note
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purchases the note at a market discount and thereafter recognizes gain upon a
disposition or receives payments of principal, the lesser of that gain or
principal payment or the accrued market discount will be taxed as ordinary
interest income. A note will have been purchased at a market discount if the
purchase price of the note is less than its stated redemption price at maturity
or, if the notes were issued with OID, is less than its original issue price
plus the amount of OID accrued prior to its purchase. In general, the accrued
market discount will be the total market discount on the note multiplied by a
fraction, the numerator of which is the number of days the beneficial owner
held the note and the denominator of which is the number of days from the date
the beneficial owner acquired the note until the maturity date of the note. The
beneficial owner may elect, however, to determine accrued market discount under
the constant-yield method.
Limitations imposed by the Internal Revenue Code which are intended to
match deductions with the taxation of income may defer deductions for interest
on indebtedness incurred or continued, or short-sale expenses incurred, to
purchase or carry a note with accrued market discount. The beneficial owner of
a note may elect to include market discount in gross income as it accrues and,
if the beneficial owner makes that election, is exempt from this rule. An
election by a taxpayer to include market discount in gross income as it accrues
will apply to all debt instruments acquired by the taxpayer on or after the
first day of the first taxable year to which the election applies. The adjusted
basis of a note subject to the election will be increased to reflect market
discount included in gross income, which increase will reduce any gain or
increase any loss on a sale or other taxable disposition.
Amortizable Bond Premium. In general, if the beneficial owner of a note
purchases the note for an amount in excess of the amount payable upon the
maturity of the note, the beneficial owner will be considered to have purchased
the note with "amortizable bond premium" equal to the amount of that excess.
The beneficial owner may elect to amortize the bond premium as an offset to
interest income and not as a separate deduction item as it accrues under a
constant-yield method over the remaining term of the note. The beneficial
owner's tax basis in the note will be reduced by the amount of the amortized
bond premium. An election to amortize bond premium as an offset to interest
income will apply to all debt instruments, other than instruments the interest
on which is excludible from gross income, held by the beneficial owner at the
beginning of the first taxable year for which the election applies or
thereafter acquired and is irrevocable without the consent of the IRS. Bond
premium on a note held by a beneficial owner who does not elect to amortize the
premium will decrease the gain or increase the loss otherwise recognized on the
disposition of the note.
Total Accrual Election. As an alternative to separately accruing stated
interest, OID, de minimis OID, market discount, de minimis market discount,
unstated interest, premium and acquisition premium, the beneficial owner of a
note may elect to include all income that accrues on the note using the
constant yield method. If the beneficial owner makes this election, income on
the note will be calculated as though:
. the issue price of the note was equal to the beneficial owner's
adjusted basis in the note immediately after the note was acquired
by the beneficial owner;
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. the note was issued on the date of its acquisition by the beneficial
owner; and
. none of the interest payments on the note was a "qualified stated
interest payment."
The beneficial owner of a note may make this election for a note that has
premium or market discount, respectively, only if the beneficial owner makes,
or has previously made, an election to amortize bond premium or to include
market discount in income currently. See "--Market Discount" beginning on page
92 of this prospectus and "--Amortizable Bond Premium" beginning on page 93 of
this prospectus for a further discussion of these elections.
Disposition of Notes. In general, the beneficial owner of the a note will
recognize gain or loss on the sale or retirement of the note equal to the
difference between the amount realized on the sale or retirement and the
beneficial owner's adjusted tax basis in the note. The gain or loss will be
capital gain or loss, except to the extent attributable to OID not previously
accrued or to accrued but unpaid interest or as provided under the market
discount rules, and will be long-term capital gain or loss if the note was held
for more than one year. In general, a beneficial owner's adjusted tax basis in
a note will be its cost, increased by the amount of any OID, market discount
and gain previously included in income with respect to the note, and reduced by
the amount of any payment on the note that is not a qualified stated interest
payment and the amount of bond premium previously amortized with respect to the
note. In addition, if the rules applicable to prepayable obligations apply, any
OID that has not accrued at the time of the payment in full of a note will be
treated as ordinary income.
Tax Consequences of Waivers of Events of Default and Amendments of Notes
The indenture permits the waiver of past defaults or events of default
under the indenture and the recision of an acceleration of the notes in certain
circumstances. Any waiver or recision, or any amendment of the terms of the
notes, could be treated, for federal income tax purposes, as a constructive
exchange of the notes by the noteholders for new notes upon which gain or loss
would be recognized. See "Description of the Indenture--Rights Upon Event of
Default" beginning on page 66 of this prospectus, "--Waiver of Past Defaults"
beginning on page 68 of this prospectus and "--Modification of Indenture"
beginning on page 71 of this prospectus for a further discussion of the
circumstances under which an acceleration of the notes may be rescinded or a
past default or event of default under the indenture may be waived and the
circumstances under which the terms of the notes may be amended.
Information Reporting and Backup Withholding of Taxes by Indenture Trustee
The indenture trustee will be required to report annually to the IRS, and
to each beneficial owner of the notes, the amount of interest paid on the notes
and the amount withheld for federal income taxes, if any, for each calendar
year, except as to recipients who are not subject to the reporting requirements
because of their status as corporations, tax-
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exempt organizations, qualified pension or profit-sharing trusts, individual
retirement account, or nonresident aliens who provide certification as to their
status. Each beneficial owner of the notes, other than beneficial owners who
are not subject to the reporting requirements, will be required to provide,
under penalties of perjury, a certificate containing the beneficial owner's
name, address and correct federal taxpayer identification number and a
statement that the beneficial owner is not subject to backup withholding. If a
non-exempt beneficial owner fails to provide the required certification or if
the IRS notifies the indenture trustee or the trust that the beneficial owner
has provided an incorrect federal taxpayer identification number or is
otherwise subject to backup withholding, the indenture trustee will be required
to withhold, or cause to be withheld, 31% of the interest otherwise payable to
the beneficial owner, and remit the withheld amounts to the IRS as a credit
against the beneficial owner's federal income tax liability.
Tax Consequences to Foreign Note Owners
In general, interest paid or accrued to a beneficial owner of the notes
that is a Foreign Person and that is not effectively connected with the conduct
of a trade or business in the United States by the Foreign Person will be
considered "portfolio interest" and will not be subject to United States
federal income tax or withholding tax, as long as the Foreign Person:
. is not actually or constructively a "10 percent shareholder" of the
trust, CarMax Auto Superstores or CarMax Auto Receivables or a
"controlled foreign corporation" with respect to which the trust,
CarMax Auto Superstores or CarMax Auto Receivables is a "related
person" within the meaning of the Internal Revenue Code; and
. provides an appropriate statement, signed under penalties of
perjury, certifying that it is a Foreign Person and providing its
name and address.
If the information in the statement provided by the Foreign Person changes,
the Foreign Person must so inform the indenture trustee within 30 days of the
change. In general, the statement must be provided in the year a payment occurs
or in either of the two preceding years. If interest paid or accrued to a
Foreign Person is not effectively connected with the conduct of a trade or
business in the United States by the Foreign Person and is not portfolio
interest, then it is subject to United States federal income and withholding
tax at a rate of 30 percent unless reduced or eliminated under the provisions
of an applicable income tax treaty.
Any capital gain realized on the sale or other taxable disposition of a
note by a Foreign Person will be exempt from United States federal income and
withholding tax, provided that:
. the gain is not effectively connected with the conduct of a trade or
business in the United States by the Foreign Person and, in the case
of an individual Foreign Person, the Foreign Person is not present
in the United States for 183 days or more in the taxable year and
certain other requirements are met; or
. the gain is exempt under the provisions of an applicable income tax
treaty.
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In general, if the interest, gain or income on a note beneficially owned by
a Foreign Person is effectively connected with the conduct of a trade or
business in the United States by the Foreign Person, the Foreign Person,
although exempt from withholding tax if a duly executed Form 4224 is furnished,
will be subject to United States federal income tax on the interest, gain or
income at regular federal income tax rates. In addition, if the Foreign Person
is a foreign corporation, it may be subject to a branch profits tax under the
Internal Revenue Code equal to 30 percent of its "effectively connected
earnings and profits" for the taxable year, as adjusted for certain items,
unless it qualifies for a lower rate under the provisions of an applicable
income tax treaty.
Recent Treasury regulations could affect the procedures to be followed by a
Foreign Person in complying with the United States federal withholding, backup
withholding and information reporting rules. In general, the regulations will
be effective for payments made after December 31, 2000. CarMax Auto Receivables
suggests that you consult your own tax advisors regarding the effect, if any,
of the regulations on your purchase, ownership and disposition of the notes.
Tax Consequences to Holders of the Certificates
Treatment of the Trust as a Partnership. CarMax Auto Receivables and the
servicer will agree, and the beneficial owners of the certificates will agree
by their purchase of certificates, to treat the trust as a partnership for
purposes of federal and state income tax, franchise tax and any other tax
measured in whole or in part by income, with the assets of the partnership
being the assets held by the trust, the partners of the partnership being the
beneficial owners of the certificates and CarMax Auto Receivables, in its
capacity as recipient of distributions from the reserve account, and the notes
being debt of the partnership. However, the proper characterization of the
arrangement involving the trust, the certificates, the notes, CarMax Auto
Receivables and the servicer is not clear because there is no authority on
transactions closely comparable to the transaction described in this
prospectus.
A variety of alternative characterizations are possible. For example,
because the certificates have some features characteristic of debt, the
certificates might be considered debt of CarMax Auto Receivables or the trust.
This characterization would not result in materially adverse tax consequences
to beneficial owners of the certificates as compared to the consequences from
treatment of the certificates as equity interests in a partnership. The
following discussion assumes that the certificates represent equity interests
in a partnership.
Partnership Taxation. As a partnership, the trust will not be subject to
federal income tax. Rather, each certificate Owner will be required to
separately take into account the holder's allocated share of income, gains,
losses, deductions and credits of the trust. The trust's income will consist
primarily of interest and finance charges earned on the contracts, including
appropriate adjustments for market discount, OID and bond premium, and any gain
upon collection or disposition of contracts. The trust's deductions will
consist primarily of interest accruing with respect to the notes, servicing and
other fees, and losses or deductions upon collection or disposition of
contracts.
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Allocation of Partnership Income, Expenses and Losses. The tax items of a
partnership are allocable to its partners in accordance with the Internal
Revenue Code, Treasury regulations and the partnership agreement. If the trust
is treated as a partnership, the trust agreement will be treated as the
partnership agreement. The trust agreement will provide, in general, that the
beneficial owners of the certificates will be allocated taxable income of the
trust for each month equal to the sum of:
. the interest that accrues on the certificates in accordance with
their terms for that month, including interest accruing at the rate
applicable to the certificates for that month and interest on
amounts previously due on the certificates but not yet distributed;
. any trust income attributable to discount on the contracts that
corresponds to any excess of the principal amount of the
certificates over their initial issue price;
. prepayment premium payable to the beneficial owners for that month;
and
. any other amounts of income payable to the beneficial owners for
that month.
This allocation will be reduced by any amortization by the trust of premium
on the contracts that corresponds to any excess of the issue price of the
certificates over their principal amount. All remaining taxable income of the
trust will be allocated to CarMax Auto Receivables. Based on the economic
arrangement of the parties, this approach for allocating trust income should be
permissible under applicable Treasury regulations, although no assurance can be
given that the IRS would not require a greater amount of income to be allocated
to the beneficial owners of the certificates. Moreover, even under the
foregoing method of allocation, the beneficial owners of the certificates might
be allocated income even though the trust might not have sufficient cash to
make current cash distributions of an amount equal to the amount of that
income. Thus, cash basis holders may in effect be required to report income
from the certificates on the accrual basis and the beneficial owners of the
certificates may become liable for taxes on trust income even if they have not
received cash from the trust to pay those taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
beneficial owners of the certificates but beneficial owners may be purchasing
certificates at different times and at different prices, beneficial owners may
be required to report on their tax returns taxable income that is greater or
less than the amount reported to them by the trust.
In general, all of the taxable income allocated to the beneficial owner of
a certificate that is a pension, profit sharing or employee benefit plan or
other tax-exempt entity, including an individual retirement account, will
constitute "unrelated business taxable income" taxable to the beneficial owner
under the Internal Revenue Code.
Servicing fees and other expenses of the trust will be separately allocated
to the beneficial owners of the certificates and CarMax Auto Receivables rather
than deducted by the trust. To the extent these fees and expenses are allocated
to the beneficial owners, an individual taxpayer's share of expenses of the
trust, including fees to the servicer but excluding interest expense, will be
miscellaneous itemized deductions and thus allowable as a deduction only to the
extent that in the aggregate all these expenses exceed two percent of
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the individual taxpayer's adjusted gross income. Furthermore, certain otherwise
allowable itemized deductions will be reduced, but not by more than 80%, by an
amount equal to 3% of the individual's adjusted gross income in excess of a
statutorily defined threshold. Therefore, any of these deductions otherwise
allocable to an individual certificate Owner might be disallowed in whole or in
part and might result in the certificate Owner being taxed on an amount of
income that exceeds the amount of cash actually distributed to the certificate
Owner over the life of the trust.
Any net loss of the trust will be allocated first to CarMax Auto
Receivables and then to the beneficial owners of the certificates in the
priorities set forth in the trust agreement to the extent of their respective
adjusted capital accounts.
The trust intends to make all tax calculations relating to income and
allocations to the beneficial owners of the certificates on an aggregate basis.
If the IRS were to require that these calculations be made separately for each
contract, the trust might incur additional expenses, but CarMax Auto
Receivables believes that there would not be a material adverse effect on the
beneficial owners of the certificates.
Discount and Premium. CarMax Auto Receivables believes that the contracts
were not issued with OID, and, therefore, the trust should not have OID income.
However, the purchase price paid by the trust for the contracts may be greater
or less than the remaining principal balance of the contracts at the time of
purchase. If so, the contracts will have been acquired at a premium or
discount, as the case may be.
If the trust acquires the contracts at a market discount or premium, the
trust will elect to include that discount in income currently as it accrues
over the life of the contracts or to offset that premium against interest
income on the contracts. A portion of the market discount income or premium
deduction may be allocated to the beneficial owners of the certificates.
The trust intends to make all tax calculations relating to market discount
income and amortization of premium with respect to the contracts on an
aggregate basis. If the IRS were to require that these calculations be made
separately for each contract, the trust might incur additional expenses, but
CarMax Auto Receivables believes that there would not be a material adverse
effect on the beneficial owners of the certificates.
Section 708 Termination. Under Section 708 of the Internal Revenue Code,
the trust will be deemed to terminate for federal income tax purposes if 50% or
more of the capital and profits interests in the trust are sold or exchanged
within a 12-month period. If a termination occurs, the trust will be considered
to contribute its assets to a new partnership and, immediately thereafter, the
terminated partnership distributes interests in the new partnership to the
partners in liquidation of the terminated partnership, I.E., the trust, which
would not constitute a taxable sale or exchange. The trust will not comply with
certain technical requirements that might apply when a constructive termination
occurs. As a result, the trust may be subject to tax penalties and may incur
additional expenses if it is required to comply with those requirements.
Furthermore, the trust might not be able to comply due to lack of data.
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Disposition of Certificates. In general, capital gain or loss will be
recognized on a sale of certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the certificates
sold. With respect to noncorporate beneficial owners of the certificates,
capital gain or loss will be long-term, if the certificate has been held for
more than one year. Long-term capital gain tax rates provide a reduction as
compared with short-term capital gains, which are taxed at ordinary income
rates. In general, a beneficial owner's tax basis in a certificate will equal
the beneficial owner's cost increased by the beneficial owner's share of trust
income, includible in income, and decreased by any distributions received with
respect to the certificate. In addition, both the tax basis in the certificates
and the amount realized on a sale of a certificate would include the beneficial
owner's share of the notes and other liabilities of the trust. A beneficial
owner acquiring certificates at different prices may be required to maintain a
single aggregate adjusted tax basis in the certificates, and, upon sale or
other disposition of some of the certificates, allocate a portion of the
aggregate adjusted tax basis to the certificates sold rather than maintaining a
separate tax basis in each certificate for purposes of computing gain or loss
on a sale of that certificate.
In general, if the trust did not elect to include market discount in income
as it accrues, any gain on the sale of a certificate attributable to the
beneficial owner's share of unrecognized accrued market discount on the
contracts would be treated as ordinary income to the beneficial owner and would
give rise to special tax reporting requirements. The trust will elect to
include market discount in income as it accrues to avoid these special
reporting requirements.
In general, if the beneficial owner of a certificate is required to
recognize an aggregate amount of income, not including income attributable to
disallowed itemized deductions, over the life of the certificate that exceeds
the aggregate cash distributions with respect to the certificate, that excess
will give rise to a capital loss upon the retirement of the certificate.
Allocations Between Transferors and Transferees. In general, the trust's
taxable income and losses will be determined monthly and the tax items for a
particular calendar month will be apportioned among the beneficial owners of
the certificates in proportion to the principal amount of certificates owned by
them as of the close of the last day of that month. As a result, a purchaser of
certificates may be allocated tax items, which will affect its tax liability
and tax basis, attributable to periods before its purchase of the certificates.
The use of a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed, or only applies to
transfers of less than all of the partner's interest, taxable income or losses
of the trust might be reallocated among the beneficial owners of the
certificates. CarMax Auto Receivables is authorized to revise the trust's
method of allocation between transferors and transferees to conform to a method
permitted by future regulations.
Section 754 Election. If the beneficial owner of a certificate sells the
certificate at a profit, the purchaser will have a higher basis in the
certificate than the beneficial owner had. If the beneficial owner of a
certificate sells the certificate at a loss, the purchaser will have a
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lower basis in the certificate than the beneficial owner had. The tax basis of
the trust's assets will not be adjusted to reflect that higher or lower basis
unless the trust were to file an election under Section 754 of the Internal
Revenue Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the trust will not make this election. As a
result, the beneficial owners of the certificates might be allocated a greater
or lesser amount of trust income than would be appropriate based on their own
purchase price for the certificates if a Section 754 election had been made.
However, because any increase in taxable income will result in a higher tax
basis in the certificates, a lesser amount of taxable gain, or a higher taxable
loss, will result upon eventual disposition of the certificates.
Administrative Matters. The owner trustee is required to keep or have kept
complete and accurate books of the trust. These books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the trust is expected to be the calendar year. The administrator will file a
partnership information return (IRS Form 1065) with the IRS for each taxable
year of the trust and will report each certificate Owner's allocable share of
items of trust income and expense to holders and the IRS on Schedule K-1. The
trust will provide the Schedule K-1 information to nominees that fail to
provide the trust with the information statement described in the following
paragraph, and those nominees will be required to forward that information to
the beneficial owners of the certificates. In general, holders must file tax
returns that are consistent with the information return filed by the trust or
be subject to penalties unless the holder notifies the IRS of all
inconsistencies.
Under Section 6031 of the Internal Revenue Code, any person that holds
certificates as a nominee at any time during a calendar year is required to
furnish the trust with a statement containing information on the nominee, the
beneficial owners and the certificates so held. This information includes:
. the name, address and taxpayer identification number of the nominee;
and
. as to each beneficial owner, the name, address and taxpayer
identification number of the beneficial owner, whether the
beneficial owner is a U.S. Person, a tax-exempt entity or a foreign
government, an international organization or any wholly owned agency
or instrumentality of any of the foregoing and information on
certificates that were held, bought or sold on behalf of the
beneficial owner throughout the year.
In addition, brokers and financial institutions that hold certificates
through a nominee are required to furnish directly to the trust information as
to themselves and their ownership of certificates. A clearing agency registered
under Section 17A of the Securities Exchange Act is not required to furnish an
information statement to the trust. The information referred to above for any
calendar year must be furnished to the trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the trust
with the required information may be subject to penalties.
CarMax Auto Receivables will be designated as the tax matters partner in
the trust agreement and, as such, will be responsible for representing the
beneficial owners of the
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certificates in any dispute with the IRS. The Internal Revenue Code provides
for administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. In general, the statute of limitations for
partnership items does not expire before three years after the date on which
the partnership information return is filed. Any adverse determination
following an audit of the return of the trust by the appropriate taxing
authorities could result in an adjustment of the returns of the beneficial
owners of the certificates, and, under certain circumstances, a beneficial
owner may be precluded from separately litigating a proposed adjustment to the
items of the trust. An adjustment could also result in an audit of a beneficial
owner's returns and adjustments of items not related to the income and losses
of the trust.
Tax Consequences to Foreign Certificate Owners. Interest allocable to a
beneficial owner of the certificates that is a Foreign Person will not qualify
for the exemption for portfolio interest under Section 871(h) of the Internal
Revenue Code because the contracts will not be in "registered form" as that
term is defined in applicable Treasury regulations. As a result, the Foreign
Person will be subject to United States withholding tax on its allocable share
of interest or OID attributable to the underlying contracts, whether or not the
interest or OID is distributed, at a rate of 30 percent, unless reduced or
eliminated under the provisions of an applicable treaty or unless the Foreign
Person holds the certificates in connection with the conduct of a United States
trade or business. Foreign Persons holding certificates in connection with the
conduct of a United States trade or business will be subject to federal income
tax withholding at the rate of 35% for foreign holders taxable as corporations
and 39.6% for all other foreign holders. CarMax Auto Receivables suggests that
potential investors who are not U.S. Persons consult their own tax advisors
regarding the specific tax consequences of owning certificates.
Backup Withholding. In general, distributions made on the certificates and
proceeds from the sale of the certificates will be subject to a "backup"
withholding tax of 31% if the related certificate Owner fails to comply with
certain identification procedures, unless the holder is an exempt recipient
under applicable provisions of the Internal Revenue Code.
The federal income tax discussions set forth above may not apply to you
depending upon your particular tax situation. CarMax Auto Receivables suggests
that you consult your own tax advisors with respect to the tax consequences of
acquiring, holding and disposing of notes or certificates, including the tax
consequences under state, local, foreign and other tax laws and the possible
effects of changes in federal or other tax laws.
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ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended, and
Section 4975 of the Internal Revenue Code impose restrictions on Benefit Plans
and on persons, referred to as parties in interest under ERISA and disqualified
persons under the Internal Revenue Code, who have specified relationships to
Benefit Plans. Moreover, based on the reasoning of the United States Supreme
Court in John Hancock Mut. Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S.
Ct. 517 (1993), an insurance company's general account might be deemed to
include assets of a Benefit Plan investing in the general account, such as
through the purchase of an annuity contract, and the insurance company might be
treated as a party in interest or a disqualified person with respect to the
Benefit Plan by virtue of that investment. ERISA also imposes duties on persons
who are fiduciaries of Benefit Plans subject to ERISA, and ERISA and Section
4975 of the Internal Revenue Code prohibit certain transactions between a
Benefit Plan and parties in interest or disqualified persons with respect to
the Benefit Plan. Violations of these rules may result in the imposition of
excise taxes and other penalties and liabilities under ERISA and the Internal
Revenue Code.
Certain employee benefit plans, such as foreign plans, governmental plans,
as defined in Section 3(32) of ERISA, and certain church plans, as defined in
Section 3(33) of ERISA, are not subject to the restrictions of ERISA.
Accordingly, assets of these plans may be invested in the notes or the
certificates without regard to the ERISA restrictions, subject to the
provisions of any other applicable federal and state law. It should be noted,
however, that any governmental plan or church plan that is qualified and exempt
from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code is
subject to the prohibited transaction rules set forth in Section 503 of the
Internal Revenue Code.
Special Considerations for Benefit Plans
The United States Department of Labor has issued a regulation, 29 C.F.R.
Section 2510.3-101, concerning the definition of what constitutes the assets of
a Benefit Plan with respect to the Benefit Plan's investment in an entity for
purposes of the fiduciary responsibility provisions of Title I of ERISA and
Section 4975 of the Internal Revenue Code. Under the plan asset regulation, the
underlying assets and properties of corporations, partnerships, trusts and
certain other entities in which a Benefit Plan makes an "equity interest"
investment could be deemed to be assets of the investing Benefit Plan under
certain circumstances unless various exceptions apply. An "equity interest" is
defined under the plan asset regulation as an interest other than an instrument
that is treated as indebtedness under applicable local law and which has no
substantial equity features.
Investments in the Notes. CarMax Auto Receivables believes that the notes
should be treated as indebtedness without substantial equity features for
purposes of the plan asset regulation. However, without regard to whether the
notes are treated as an equity interest for those purposes, the acquisition or
holding of notes by or on behalf of a Benefit Plan could be considered to give
rise to a prohibited transaction if the trust, the owner trustee, the indenture
trustee, any certificateholder or any of their respective affiliates is or
becomes a party in interest or a disqualified person with respect to the
Benefit Plan. In that case, one or
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more exemptions from the prohibited transaction rules could be applicable
depending on the type and circumstances of the Benefit Plan fiduciary making
the decision to invest in any of the notes. Included among these exemptions
are: Prohibited Transaction Class Exemption 90-1, regarding investments by
insurance company pooled separate accounts; Prohibited Transaction Class
Exemption 91-38, regarding investments by bank collective investment funds;
Prohibited Transaction Class Exemption 84-14, regarding transactions effected
by "qualified professional asset managers"; Prohibited Transaction Class
Exemption 95-60, regarding investments by insurance company general accounts;
and Prohibited Transaction Class Exemption 96-23, regarding investments
effected by in-house asset managers. A violation of the prohibited transaction
rules may result in the imposition of an excise tax and other liabilities under
ERISA and the Internal Revenue Code unless one or more statutory or
administrative exemptions is available.
Investments in the Certificates. CarMax Auto Receivables believes that the
certificates should be treated as equity interests for purposes of the plan
asset regulation. Accordingly, if Benefit Plans were permitted to purchase
certificates, the trust could be deemed to hold plan assets, unless one of the
exceptions under the plan asset regulation were applicable to the certificates
and the trust. If certificates were acquired and held by a Benefit Plan, or
were acquired with plan assets of a Benefit Plan, and the assets of the trust
were deemed to be plan assets of the Benefit Plan under the plan asset
regulation, certain transactions involving the trust could be deemed to
constitute direct or indirect prohibited transactions under Section 406 of
ERISA and Section 4975 of the Internal Revenue Code with respect to the Benefit
Plan, unless exemptive relief were available. Because of the potential
prohibited transactions issues, certificates may not be purchased or held by or
on behalf of any Benefit Plan or any person investing plan assets of any
Benefit Plan. Each certificate Owner, by its acceptance of a certificate, will
be deemed to have represented and warranted that it is not a Benefit Plan and
that it is not purchasing the certificate on behalf of or with plan assets of
any Benefit Plan. CarMax Auto Receivables suggests that purchasers of
certificates that are insurance companies consult with their counsel to
determine whether the John Hancock decision affects their ability to purchase
the certificates.
CarMax Auto Receivables suggests that Benefit Plan fiduciaries considering
the purchase of notes or certificates consult their tax and/or legal advisors
regarding whether the assets of the trust would be considered plan assets, the
possibility of exemptive relief from the prohibited transaction rules and other
issues and their potential consequences.
Special Considerations Applicable to Insurance Company General Accounts
The Small Business Job Protection Act of 1996 added new Section 401(c) of
ERISA relating to the status of the assets of insurance company general
accounts under ERISA and Section 4975 of the Internal Revenue Code. Under
Section 401(c), the Department of Labor is required to issue final regulations
with respect to insurance policies issued on or before December 31, 1998 that
are supported by an insurer's general account. The general account regulations
are to provide guidance on which assets held by the insurer constitute "plan
assets" for purposes of the fiduciary responsibility provisions of ERISA and
Section 4975 of
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the Internal Revenue Code. Section 401(c) also provides that, except in the
case of avoidance of the general account regulations and actions brought by the
Secretary of Labor relating to various breaches of fiduciary duties that also
constitute breaches of state or federal criminal law, until the date that is 18
months after the general account regulations become final, no liability under
the fiduciary responsibility and prohibited transactions provisions of ERISA
and Section 4975 of the Internal Revenue Code may result on the basis of a
claim that the assets of the general account of an insurance company constitute
the plan assets of any Benefit Plan. The plan asset status of insurance company
separate accounts is unaffected by new Section 401(c) of ERISA, and separate
account assets continue to be treated as the plan assets of any Plan invested
in a separate account. CarMax Auto Receivables suggests that Benefit Plan
investors considering the purchase of any notes on behalf of an insurance
company general account consult their legal advisors regarding the effect of
the general account regulations on that purchase.
As of the date of this prospectus, the Department of Labor has issued
proposed regulations under Section 401(c). You should note that if the general
account regulations are adopted substantially in the form in which proposed,
those regulations may not exempt the assets of insurance company general
accounts from treatment as "plan assets" after December 31, 1998. The general
account regulations should not, however, adversely affect the applicability of
Prohibited Transaction Class Exemption 95-60, 60 Fed. Reg. 35925 (July 12,
1995), which exempts various transactions involving insurance company general
accounts.
General Investment Considerations
CarMax Auto Receivables suggests that, prior to making an investment in the
notes, prospective investors who are Benefit Plans consult with their legal
advisors concerning the impact of ERISA and the Internal Revenue Code and the
potential consequences of making an investment in any of the notes. Moreover,
each Benefit Plan fiduciary should take into account, among other
considerations, whether the fiduciary has the authority to make the investment,
the composition of the Benefit Plan's portfolio with respect to diversification
by type of asset, the Benefit Plan's funding objectives, the tax effects of the
investment and whether under the general fiduciary standards of investment
prudence and diversification an investment in any of the notes is appropriate
for the Benefit Plan, taking into account the overall investment policy of the
Benefit Plan and the composition of the Benefit Plan's investment portfolio.
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UNDERWRITING
Under the terms and subject to the conditions set forth in the underwriting
agreement for the sale of the offered securities, dated , 1999, CarMax
Auto Receivables has agreed to sell and each of the underwriters named in the
following table has severally agreed to purchase the principal amount of the
offered securities set forth below opposite its name:
<TABLE>
<CAPTION>
Class Class Class Class
A-1 Notes A-2 Notes A-3 Notes A-4 Notes Total
------------ --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
Banc of America Securities
LLC......................
First Union Capital
Markets Corp.............
Goldman, Sachs & Co.......
<CAPTION>
Certificates
------------
<S> <C> <C> <C> <C> <C>
Banc of America Securities
LLC......................
</TABLE>
In the underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth in the underwriting agreement, to purchase all
of the offered securities.
The underwriters propose to offer part of the offered securities directly
to you at the prices set forth on the cover page of this prospectus and part to
dealers at a price that represents a concession not in excess of % of the
denominations of the class A-1 notes, % of the denominations of the class A-2
notes, % of the denominations of the class A-3 notes, % of the denominations
of the class A-4 notes or % of the denominations of the certificates. The
underwriters may allow and the dealers may reallow a concession not in excess
of % of the denominations of the class A-1 notes, % of the denominations of
the class A-2 notes, % of the denominations of the class A-3 notes, % of the
denominations of the class A-4 notes or % of the denominations of the
certificates.
CarMax Auto Superstores and CarMax Auto Receivables have agreed to
indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended.
The underwriters have indicated that they intend to make a market in the
offered securities, as permitted by applicable laws and regulations. However,
the underwriters are not obligated to make a market in the offered securities
and any market-making in the offered securities may be discontinued at any time
in the sole discretion of the underwriters. Accordingly, the seller can give no
assurances regarding the liquidity of, or trading markets for, the offered
securities.
Until the distribution of the offered securities is completed, the rules of
the SEC may limit the ability of the underwriters and certain selling group
members to bid for and purchase the offered securities. As an exception to
these rules, the underwriters are permitted to engage in over-allotment
transactions, stabilizing transactions, syndicate covering transactions and
penalty bids with respect to the offered securities in accordance with
Regulation M under the Securities Exchange Act.
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Over-allotment transactions involve syndicate sales in excess of the
offering size, which create syndicate short positions. Stabilizing transactions
permit bids to purchase the offered securities as long as the stabilizing bids
do not exceed a specified maximum. Syndicate covering transactions involve
purchases of the offered securities in the open market after the distribution
has been completed in order to cover syndicate short positions. Penalty bids
permit the underwriters to reclaim a selling concession from a syndicate member
when the offered securities originally sold by the syndicate member are
purchased in a syndicate covering transaction.
These over-allotment transactions, stabilizing transactions, syndicate
covering transactions and penalty bids may cause the prices of the offered
securities to be higher than they would be in the absence of these
transactions. None of CarMax Auto Superstores, CarMax Auto Receivables, the
trust nor any of the underwriters makes any representation or prediction as to
the direction or magnitude of any effect that these transactions may have on
the price of the offered securities. In addition, none of CarMax Auto
Superstores, CarMax Auto Receivables, the trust nor any of the underwriters
represents that any of the underwriters will engage in any of these
transactions or that any of these transactions, once commenced, will not be
discontinued without notice.
In the ordinary course of their businesses, the underwriters and their
affiliates have engaged and may in the future engage in investment banking,
commercial banking and other advisory or commercial relationships with CarMax
Auto Superstores, CarMax Auto Receivables and their affiliates. Bank of
America, N.A., an affiliate of Banc of America Securities LLC, is also the
agent for a multi-seller asset backed commercial paper conduit program which
provides a receivables purchase facility for CarMax Auto Superstores.
CarMax Auto Receivables will receive proceeds of $ from the sale of the
notes , representing approximately % of the principal amount of the notes,
after paying the underwriting discount of $ , representing approximately % of
the principal amount of the notes. CarMax Auto Receivables will receive
proceeds of $ from the sale of the certificates, representing approximately
% of the principal amount of the certificates, after paying the underwriting
discount of $ , representing approximately % of the principal amount of the
certificates. Additional offering expenses are estimated to be $ .
LEGAL MATTERS
Certain legal matters relating to the offered securities will be passed
upon for CarMax Auto Receivables by McGuire, Woods, Battle & Boothe LLP,
Richmond, Virginia, and for the underwriters by Skadden, Arps, Slate, Meagher &
Flom LLP, New York, New York. Certain federal income tax consequences with
respect to the offered securities will be passed upon for CarMax Auto
Receivables by McGuire, Woods, Battle & Boothe LLP.
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EXPERTS
The consolidated balance sheets of MBIA Insurance Corporation and its
consolidated subsidiaries as of December 31, 1998 and December 31, 1997 and the
related consolidated statements of income, changes in shareholder's equity, and
cash flows for each of the three years in the period ended December 31, 1998,
incorporated by reference in this prospectus, have been incorporated in this
prospectus in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
CarMax Auto Receivables, as originator of the trust, filed a registration
statement relating to the notes and the certificates with the SEC. This
prospectus is part of the registration statement, but the registration
statement includes additional information about the notes and the certificates.
The servicer will file with the SEC all required periodic and special SEC
reports and other information about the trust. You may read and copy any
reports, statements or other information filed by or on behalf of the trust at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. You can request copies of these documents, upon payment of a duplicating
fee, by writing to the SEC. Please call the SEC at (800) SEC-0330 for further
information on the operation of the public reference room. The SEC filings made
by or on behalf of the trust are also available to the public on the SEC
Internet site at http://www.sec.gov.
The SEC allows CarMax Auto Receivables to incorporate by reference
information that CarMax Auto Receivables files with the SEC, which means that
CarMax Auto Receivables can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus. Information that CarMax Auto Receivables files
with the SEC after the date of this prospectus which is incorporated by
reference will automatically update the information in this prospectus. In all
cases, you should rely on the later information over different information
included in this prospectus. CarMax Auto Receivables incorporates by reference
any future annual, monthly and special SEC reports, proxy materials and all
other documents required under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act filed by or on behalf of the trust until the offering
of the notes and the certificates is terminated.
As a recipient of this prospectus, you may request a copy of any document
that CarMax Auto Receivables incorporates by reference, except the exhibits to
any document unless the exhibits are specifically incorporated by reference, at
no cost by writing or calling: CarMax Auto Superstores, Inc., c/o Circuit City
Stores, Inc., 9954 Mayland Drive, Richmond, Virginia 23233, Attention: Treasury
Department, telephone: (804) 527-4000.
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GLOSSARY
Collection and Payment Definitions
"Available Funds" means, for any Payment Date, the following:
. all obligor payments received with respect to the contracts during
the preceding month;
. all liquidation proceeds received with respect to the contracts
during the preceding month;
. all interest earned on funds on deposit in the collection account
during the preceding month; and
. the aggregate purchase price for all contracts that became Purchased
Contracts during the preceding month.
"Cutoff Date" means September 30, 1999.
"Defaulted Contract" means a contract as to which any of the following has
occurred:
. any payment, or any part of any payment, due under the contract has
become 120 days or more delinquent, whether or not the servicer has
repossessed the related financed vehicle;
. the servicer has repossessed and sold the related financed vehicle;
or
. the servicer has determined in accordance with its customary
practices that the contract is uncollectible;
provided, however, that a contract will not be classified as a Defaulted
Contract until the last day of the month during which one of these events
first occurs; and, provided further, that any contract which CarMax Auto
Receivables or the servicer is obligated to repurchase or purchase under the
sale and servicing agreement will not be deemed to be a Defaulted Contract.
"Determination Date" means the sixth day preceding each Payment Date or,
if the sixth day is not a business day, the following business day.
"Monthly Certificate Interest" means, for any Payment Date, the interest
payable on the certificates on that Payment Date.
"Monthly Certificate Principal" means, for any Payment Date on or after
which the notes have been paid in full, the lesser of:
. the principal balance of the certificates as of the day preceding
that Payment Date; and
. the amount necessary to reduce the principal balance of the
certificates as of the day preceding that Payment Date to the
principal balance of the contracts as of the last day of the
preceding month;
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provided, however, that Monthly Certificate Principal on the final scheduled
Payment Date for the certificates will equal the principal balance of the
certificates as of the day preceding that final scheduled Payment Date; and,
provided further, that, for the purpose of determining Monthly Certificate
Principal, the unpaid principal balance of a Defaulted Contract or a Purchased
Contract will be deemed to be zero on and after the last day of the month
during which that contract became a Defaulted Contract or a Purchased Contract.
"Monthly Note Interest" means, for any Payment Date, the sum of the
interest payable on the class A-1 notes, the class A-2 notes, the class A-3
notes and the class A-4 notes, in each case on that Payment Date:
"Monthly Note Principal" means, for any Payment Date, the lesser of:
. the principal balance of the notes as of the day preceding that
Payment Date; and
. the amount necessary to reduce the principal balance of the notes
and the certificates as of the day preceding that Payment Date to
the principal balance of the contracts as of the last day of the
preceding month;
provided, however, that the portion of the Monthly Note Principal payable to
the holders of any class of notes on the final scheduled Payment Date for that
class will equal the principal balance of that class as of the day preceding
that final scheduled Payment Date; and, provided further, that, for the purpose
of determining Monthly Note Principal, the unpaid principal balance of a
Defaulted Contract or a Purchased Contract will be deemed to be zero on and
after the last day of the month during which that contract became a Defaulted
Contract or a Purchased Contract.
"Payment Date" means the 15th day of each month or, if the 15th day is not
a business day, the following business day.
"Purchased Contract" means:
. a contract to be repurchased by CarMax Auto Superstores from CarMax
Auto Receivables because of a breach of a representation and
warranty under the purchase agreement; or
. a contract to be repurchased by CarMax Auto Receivables from the
trust because of a breach of a representation and warranty under the
sale and servicing agreement.
"Record Date" means, with respect to any Payment Date, the preceding
business day or, if the notes and the certificates have been issued in fully
registered, certificated form, the last business day of the preceding month.
"Required Payment Amount" means, for any Payment Date, the aggregate amount
to be applied on that Payment Date in accordance with clauses (1), (2), (3),
(5) and (6) under "--Payment Date Distributions--Collection Account" beginning
on page 56 of this prospectus plus the Monthly Note Principal for that Payment
Date.
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"Required Reserve Account Amount" means, for any Payment Date, the greater
of $ and % of the principal balance of the contracts as of the last day
of the preceding month; provided, however, that the Required Reserve Account
Amount for any Payment Date will not exceed the principal balance of the notes
and the certificates as of that Payment Date after giving effect to all
payments of principal made to the noteholders and the certificateholders on
that Payment Date.
Account Eligibility Definitions
"Eligible Investments" means investments acceptable to Moody's and Standard
& Poor's as being consistent with the ratings of the offered securities.
Eligible Investments will include:
. direct obligations of, and obligations guaranteed by, the United
States or any agency or instrumentality of the United States;
. demand and time deposits in or similar obligations of any depository
institution or trust company, including the indenture trustee or the
owner trustee or any agent of the indenture trustee or the owner
trustee, acting in their respective commercial capacities, rated P-1
by Moody's or A-1+ by Standard & Poor's or any other deposit which
is fully insured by the Federal Deposit Insurance Corporation;
. repurchase obligations with respect to any security issued or
guaranteed by the United States or any agency or instrumentality of
the United States entered into with a depository institution or
trust company, acting as principal, rated P-1 by Moody's or A-1+ by
Standard & Poor's;
. 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 of the United States, the short-term
unsecured obligations of which are rated P-1 by Moody's or A-1+ by
Standard & Poor's at the time of the investment;
. commercial paper rated P-1 by Moody's or A-1+ by Standard & Poor's
at the time of the investment;
. guaranteed investment contracts issued by an insurance company or
other corporation acceptable to Moody's and Standard & Poor's;
. investments in money market funds having a rating of Aaa by Moody's
or AAAm by Standard & Poor's; and
. any other investment approved in advance in writing by Moody's and
Standard & Poor's.
"Eligible Deposit Account" means:
. a segregated account with the corporate trust department of the
indenture trustee;
. a segregated account with a depository institution organized under
the laws of the United States or any state of the United States or
the District of Columbia, or any domestic branch of a foreign bank,
that has either a long-term unsecured
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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 Standard & Poor's, and
whose deposits are insured by the FDIC; or
. a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States
or any state of the United States or the District of Columbia, or
any domestic branch of a foreign bank, having corporate trust powers
and acting as trustee for funds deposited in the related account, so
long as any of the securities of that depository institution has a
credit rating from each of Moody's and Standard & Poor's in one of
its generic rating categories that signifies investment grade.
Insurance Policy Definitions
"Deficiency Amount" means, for any Payment Date, the amount, if any, by
which the Required Payment Amount for that Payment Date exceeds the sum of the
Available Funds for that Payment Date and the amount available to be withdrawn
from the reserve account on that Payment Date before giving effect to any
withdrawals from the reserve account on that Payment Date: provided, however,
that, if the notes have been declared immediately due and payable following an
event of default under the indenture, the Deficiency Amount for any Payment
Date will include an amount sufficient to pay in full the Monthly Certificate
Interest for that Payment Date.
"Insurance Payment Amount" means, for any Payment Date, the premium
payable under the insurance agreement for that Payment Date plus any overdue
premiums payable under the insurance agreement for previous Payment Dates plus
the aggregate amount of any unreimbursed payments under the insurance policy,
to the extent payable to the insurer under the insurance agreement, plus
accrued interest on any unreimbursed payments under the insurance policy at
the rate provided in the insurance agreement plus any other amounts due to the
insurer under the insurance agreement and the insurance policy.
"Insurer Default" means the insurer shall fail to make any payment
required under the insurance policy in accordance with its terms or an event
of bankruptcy, insolvency, receivership or liquidation shall occur with
respect to the insurer.
"Policy Claim Amount" means, for any Payment Date, the sum of the
Deficiency Amount for that Payment Date and the Preference Amount for that
Payment Date.
"Preference Amount" means, for any Payment Date, any amount previously
distributed to the noteholders or the certificateholders that a trustee in
bankruptcy of CarMax Auto Superstores or CarMax Auto Receivables is seeking to
recover as a voidable preference under the United States Bankruptcy Code
(11 U.S.C.), as amended from time to time, in accordance with a final, non-
appealable order of a court having competent jurisdiction.
Tax and ERISA Definitions
"Benefit Plans" means:
. employee benefit plans, as defined in Section 3(3) of ERISA, that
are subject to Title I of ERISA;
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. plans, as defined in Section 4975(e)(1) of the Internal Revenue
Code, that are subject to Section 4975 of the Internal Revenue Code,
including, without limitation, individual retirement accounts or
Keogh plans; and
. entities whose underlying assets include plan assets by reason of a
plan's investment in those entities, including, without limitation,
insurance company general accounts.
"Foreign Person" means any person other than a U.S. Person.
"U.S. Person" means:
. a citizen or resident of the United States;
. a corporation, partnership or other entity organized in or under the
laws of the United States, any state of the United States or the
District of Columbia, unless, in the case of a partnership, Treasury
regulations provide otherwise;
. an estate the income of which is includible in gross income for
federal income tax purposes, regardless of its source; or
. a trust if a United States court is able to exercise primary
supervision over the administration of the trust and one or more
U.S. Persons has authority to control all substantial decisions of
the trust.
112
<PAGE>
ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
The globally-offered securities to be issued from time to time will
initially be available only in book-entry form. Investors in the globally-
offered securities may hold those securities through any of DTC, Cedelbank or
Euroclear. The globally-offered securities will be tradeable as home market
instruments in both the European and U.S. domestic markets. Initial settlement
and all secondary trades will settle in same-day funds.
Secondary market trading between investors holding globally-offered
securities through Cedelbank and Euroclear will be conducted in accordance with
their normal rules and operating procedures and in accordance with conventional
eurobond practice.
Secondary market trading between investors holding globally-offered
securities through DTC will be conducted in accordance with the rules and
procedures applicable to U.S. corporate debt obligations.
Secondary cross-market trading between Cedelbank or Euroclear and
organizations participating in DTC that hold offered securities will be
effected on a delivery-against-payment basis through the respective
depositaries of Cedelbank and Euroclear, in such capacity, and as DTC
participants.
Initial Settlement
All globally-offered securities will be held in book-entry form by DTC in
the name of Cede as nominee of DTC. Investors' interests in the globally-
offered securities will be represented through financial institutions acting on
their behalf as direct and indirect participants in DTC. As a result, Cedelbank
and Euroclear will hold positions on behalf of their participants through their
respective depositaries, which in turn will hold positions in accounts as DTC
participants.
Investors electing to hold globally-offered securities through DTC will
follow the settlement practices applicable to U.S. corporate debt obligations.
Investor securities custody accounts will be credited with their holdings
against payment in same-day funds on the settlement date.
Investors electing to hold globally-offered securities through Cedelbank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds, except that there will be no temporary global security
and no distribution compliance period. All globally-offered securities will be
credited to the securities custody accounts on the settlement date against
payment in same-day funds.
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Secondary Market Trading
Since the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading Between DTC Participants. Secondary market trading between
organizations participating in DTC will be settled using the procedures
applicable to U.S. corporate debt obligations in same-day funds.
Trading Between Cedelbank and/or Euroclear Participants. Secondary market
trading between organizations participating in Cedelbank or the Euroclear
system will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading Between DTC Seller and Cedelbank or Euroclear Purchaser. When
globally-offered securities are to be transferred from the account of an
organization participating in DTC to the account of an organization
participating in Cedelbank or the Euroclear system, the purchaser will send
instructions to Cedelbank or Euroclear through a Cedelbank participant or a
Euroclear system participant at least one business day prior to settlement.
Cedelbank or Euroclear will instruct the respective depositary to receive the
globally-offered securities against payment. Payment will include interest
accrued on the globally-offered securities from and including the last coupon
payment date to and excluding the settlement date, on the basis of actual days
elapsed and a 360-day year. Payment will then be made by the respective
depositary to the account of the DTC participant against delivery of the
globally-offered securities. After settlement has been completed, the globally-
offered securities will be credited to the respective clearing system and by
the clearing system, in accordance with its usual procedures, to the account of
the Cedelbank participant or the Euroclear system participant. The globally-
offered securities credit will appear the next day, European Time, and the cash
debit will be back-valued to, and the interest on the globally-offered
securities will accrue from, the value date, which would be the preceding day
when settlement occurred in New York. If settlement is not completed on the
intended value date, the Cedelbank or Euroclear cash debit will be valued
instead as of the actual settlement date.
Organizations participating in Cedelbank or the Euroclear system will need
to make available to the respective clearing systems the funds necessary to
process same-day funds settlement. The most direct means of doing so is to pre-
position funds for settlement, either from cash on hand or existing lines of
credit, as they would for any settlement occurring within Cedelbank or
Euroclear. Under this approach, they may take on credit exposure to Cedelbank
or Euroclear until the globally-offered securities are credited to their
accounts one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, organizations participating in Cedelbank or the Euroclear system can
elect not to pre-position funds and allow that credit line to be drawn upon to
finance settlement. Under this procedure, Cedelbank participants or Euroclear
system participants purchasing globally-offered securities would incur
overdraft charges for one day, assuming they cleared the
114
<PAGE>
overdraft when the securities were credited to their accounts. However,
interest on the globally-offered securities would accrue from the value date.
Therefore, in many cases the investment income on the globally-offered
securities earned during the one-day period may substantially reduce or offset
the amount of these overdraft charges, although this result will depend on the
particular cost of funds of the organization participating in Cedelbank or the
Euroclear system.
Since the settlement is taking place during New York business hours,
organizations participating in DTC can employ their usual procedures for
sending globally-offered securities to the respective depositary for the
benefit of organizations participating in Cedelbank or the Euroclear system.
The sale proceeds will be available to the DTC seller on the settlement date.
Thus, to the DTC participant, a cross-market transaction will settle no
differently than a trade between two DTC participants.
Trading Between Cedelbank or Euroclear Seller and DTC Purchaser. Due to
time zone differences in their favor, organizations participating in Cedelbank
or the Euroclear system may employ their customary procedures for transactions
in which globally-offered securities are to be transferred by the respective
clearing system, through the respective depositary, to an organization
participating in DTC. The seller will send instructions to Cedelbank or
Euroclear through a Cedelbank participant or Euroclear system participant at
least one business day prior to settlement. In these cases, Cedelbank or
Euroclear will instruct the respective depositary, as appropriate, to deliver
the globally-offered securities to the account of the DTC participant against
payment. Payment will include interest accrued on the globally-offered
securities from and including the last coupon payment date to and excluding the
settlement date, on the basis of actual days elapsed and a 360-day year. The
payment will then be reflected in the account of the Cedelbank participant or
the Euroclear system participant the following day, and receipt of the cash
proceeds in the account of the Cedelbank participant or Euroclear system
participant would be back-valued to the value date, which would be the
preceding day, when settlement occurred in New York. Should the Cedelbank
participant or Euroclear system participant have a line of credit with its
respective clearing system and elect to be in debit in anticipation of receipt
of the sale proceeds in its account, the back-valuation will extinguish any
overdraft charges incurred over that one-day period. If settlement is not
completed on the intended value date, receipt of the cash proceeds in the
account of the Cedelbank participant or Euroclear system participant would
instead be valued as of the actual settlement date.
Finally, day traders that use Cedelbank or Euroclear and that purchase
globally-offered securities from organizations participating in DTC for
delivery to organizations participating in Cedelbank or the Euroclear system
should note that these trades would automatically fail on the sale side unless
affirmative action were taken. At least three techniques should be readily
available to eliminate this potential problem:
. borrowing through Cedelbank or Euroclear for one day, until the
purchase side of the day trade is reflected in their Cedelbank or
Euroclear accounts, in accordance with the clearing system's
customary procedures;
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<PAGE>
. borrowing the globally-offered securities in the U.S. from a DTC participant
no later than one day prior to settlement, which would give the globally-
offered securities sufficient time to be reflected in their Cedelbank or
Euroclear accounts in order to settle the sale side of the trade; or
. staggering the value dates for the buy and sell sides of the trade so that
the value date for the purchase from the DTC participant is at least one day
prior to the value date for the sale to the Cedelbank participant or the
Euroclear system participant.
Material U.S. Federal Income Tax Documentation Requirements
A beneficial owner of globally-offered securities holding securities
through Cedelbank or Euroclear, or through DTC if the holder has an address
outside the U.S., will be subject to the 30% U.S. withholding tax that usually
applies to payments of interest, including original issue discount, on
registered debt issued by U.S. Persons unless:
. each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in the
chain of intermediaries between the beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements;
and
. the beneficial owner takes one of the following steps to obtain an exemption
or reduced tax rate:
Exemption For Non-U.S. Persons. Non-U.S. Persons that are beneficial owners
of the globally-offered securities can obtain a complete exemption from the
withholding tax by filing Form W-8, Certificate of Foreign Status. If the
information shown on Form W-8 changes, a new Form W-8 must be filed within 30
days of that change.
Exemption For Non-U.S. Persons With Effectively Connected Income. Non-U.S.
Persons, including non-U.S. corporations or banks with a U.S. branch, that are
beneficial owners of the globally-offered securities and for which the related
interest income is effectively connected with the conduct of a trade or
business in the United States can obtain a complete exemption from the
withholding tax by filing Form 4224, Exemption from Withholding of Tax on
Income Effectively Connected with the Conduct of a Trade or Business in the
United States. For payments made after December 31, 2000, Form 4224 will not
apply, and non-U.S. persons will be required to file a Form W-8 ECI to obtain
an exemption for interest payments that are effectively connected with the
conduct of a trade or business in the U.S.
Exemption or Reduced Rate For Non-U.S. Persons Resident in Treaty
Countries. Non-U.S. Persons that are beneficial owners of the globally-offered
securities and reside in a country that has a tax treaty with the United States
can obtain an exemption or reduced tax rate, depending on the treaty terms, by
filing Form 1001, Ownership, Exemption or Reduced Rate Certificate. If the
treaty provides only for a reduced rate, withholding tax will be imposed at
that rate unless the filer alternatively files Form W-8. Form 1001 may be filed
by
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<PAGE>
the beneficial owner or his agent. For payments made after December 31, 2000,
Form 1001 will not apply, and non-U.S. persons will be required to file a Form
W-8 BEN to claim the benefit of an applicable tax treaty.
Exemption For U.S. Persons. U.S. Persons that are beneficial owners of the
globally-offered securities can obtain a complete exemption from the
withholding tax by filing Form W-9, Payer's Request for Taxpayer Identification
Number and Certification.
U.S. Federal Income Tax Reporting Procedure. The beneficial owner of a
globally-offered security or, in the case of a Form 1001 or a Form 4224 filer,
his agent, files by submitting the appropriate form to the person through whom
he holds, which person would be the clearing agency in the case of persons
holding directly on the books of the clearing agency. Form W-8 and Form 1001
are effective for three calendar years and Form 4224 is effective for one
calendar year. For payments made after December 31, 2000, Form 4224 and Form
1001 will be replaced by Form W-8 ECI and Form W-8 BEN, respectively, each of
which will be effective from the date the form is signed through the end of the
third succeeding calendar year.
This summary does not deal with all aspects of U.S. federal income tax
withholding that may be relevant to foreign holders of the globally-offered
securities. CarMax Auto Receivables suggests that you consult your own tax
advisors with respect to the tax consequences of holding or disposing of the
globally-offered securities. The information contained in this Annex A is an
integral part of the prospectus to which it is attached and an integral part of
the registration statement of which that prospectus forms a part.
117
<PAGE>
Carmax Auto Owner Trust 1999-1
Carmax Auto Receivables LLC
Seller
Carmax Auto Superstores, Inc.
Servicer
$
$ % Class A-1 Asset-Backed Notes
$ % Class A-2 Asset-Backed Notes
$ % Class A-3 Asset-Backed Notes
$ % Class A-4 Asset-Backed Notes
$ % Asset-Backed Certificates
----------------
PROSPECTUS
----------------
You should rely only on the information contained or incorporated by reference
in this prospectus. CarMax Auto Receivables has not authorized anyone to
provide you with additional or different information. CarMax Auto Receivables
is not offering the notes or the certificates in any state in which the offer
is not permitted.
Dealers will deliver a prospectus when acting as underwriters of the notes and
the certificates and with respect to their unsold allotments or subscriptions.
In addition, all dealers selling the notes and the certificates will deliver a
prospectus until , 1999.
Underwriters of the Notes
Banc of America Securities LLC
First Union Capital Markets
Goldman, Sachs & Co.
Underwriter of the Certificates
Banc of America Securities LLC
Dated , 1999
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being registered hereunder
other than underwriting discounts and commissions.
<TABLE>
<S> <C>
SEC Registration Fee............................................... $ *
Printing and Engraving............................................. 65,000
Owner Trustee Fees................................................. 16,000
Indenture Trustee Fees............................................. 9,000
Legal Fees and Expenses............................................ 550,000
Blue Sky Fees and Expenses......................................... 10,000
Accountants' Fees and Expenses..................................... 18,000
Rating Agency Fees................................................. 270,000
Miscellaneous Fees................................................. 30,000
--------
Total............................................................ $ *
========
</TABLE>
- --------
* To be added by amendment.
All fees and expenses other than the SEC Registration Fee are estimated.
Item 15. Indemnification of Directors and Officers
The laws of the Commonwealth of Virginia pursuant to which the Registrant
is organized permit it to indemnify its manager and officers against certain
liabilities. The Articles of Organization of the Registrant provide for the
indemnification of each manager and officer (including former managers and
officers and each person who may have served at the request of the Registrant
as a director, manager or officer of any other legal entity and, in all such
cases, his or her heirs, executors and administrators) against liabilities
(including expenses) reasonably incurred by him or her in connection with any
actual or threatened action, suit or proceeding to which he or she may be made
a party by reason of his or her being or having been a director, manager or
officer of the Registrant, except in relation to any action, suit or proceeding
in which he or she has been adjudged liable because of willful misconduct or a
knowing violation of the criminal law.
The Registrant's officers are covered by officer's liability insurance
policies. Within the limits of their coverage, the policies insure (1) the
officers of the Registrant against certain losses resulting from claims against
them in their capacity as manager and officers to the extent that such losses
are not indemnified by the Registrant and (2) the Registrant to the extent that
it indemnifies officers for losses as permitted under the laws of the
Commonwealth of Virginia.
In the Underwriting Agreement, a proposed form of which is attached as
Exhibit 1.1 hereto, the Underwriters will agree to indemnify, under certain
conditions, the Registrant, its manager, certain of its officers and persons
who control the Registrant within the meaning of the Securities Act against
certain liabilities.
II-1
<PAGE>
Item 16. Exhibits and Financial Statements
(a) Exhibits
<TABLE>
<C> <S>
1.1 -- Form of Underwriting Agreement.
3.1 -- Articles of Organization.
3.2 -- Limited Liability Company Operating Agreement.
4.1 -- Form of Trust Agreement between CarMax Auto Receivables LLC, as
seller, and the Owner Trustee, on behalf of the Trust (including form
of certificates).*
4.2 -- Form of Sale and Servicing Agreement among CarMax Auto Receivables
LLC, as seller, CarMax Auto Superstores, Inc., as servicer, and the
Trust.*
4.3 -- Form of Indenture between the Trust and the Indenture Trustee
(including form of notes).*
4.4 -- Form of Administration Agreement among CarMax Auto Superstores, Inc.,
as administrator, the Trust and the Indenture Trustee.*
5.1 -- Opinion of McGuire, Woods, Battle & Boothe LLP with respect to
legality.**
8.1 -- Opinion of McGuire, Woods, Battle & Boothe LLP with respect to tax
matters.**
10.1 -- Form of Purchase Agreement between CarMax Auto Superstores, Inc., as
seller, and CarMax Auto Receivables LLC, as purchaser.*
10.2 -- Form of Financial Guaranty Insurance Policy issued by MBIA Insurance
Corporation for the benefit of the Indenture Trustee.*
23.1 -- Consent of McGuire, Woods, Battle & Boothe LLP (included in its
opinion filed as Exhibit 5.1).**
23.2 -- Consent of McGuire, Woods, Battle & Boothe LLP (included in its
opinion filed as Exhibit 8.1).**
23.3 -- Consent of PricewaterhouseCoopers LLP.
24.1 -- Powers of Attorney.*
25.1 -- Form T-1 of Indenture Trustee
</TABLE>
- --------
*Previously filed.
**To be filed by amendment.
(b) Financial Statements
All financial statements, schedules and historical financial information
have been omitted as they are not applicable.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(a) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(b) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered
in such names as required by the underwriters to permit prompt delivery to
each purchaser.
II-2
<PAGE>
(c) That, insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item
15 above, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d) That, for purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(e) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and that the security rating
requirement set forth in Transaction Requirement B.5 of Form S-3 will be met by
the time of the sale of the securities registered hereunder and has duly caused
this Amendment No. 3 to Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Richmond,
Commonwealth of Virginia, on October 1, 1999.
Carmax Auto Receivables LLC
as Seller (Registrant)
/s/ Michael T. Chalifoux
By: _________________________________
Name: Michael T. Chalifoux
Title: President and Assistant
Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 3 to Registration Statement has been signed on October 1,
1999 by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael T. Chalifoux President and Assistant October 1, 1999
______________________________________ Secretary (Principal
Michael T. Chalifoux Executive Officer)
/s/ Philip J. Dunn Vice President, Treasurer October 1, 1999
______________________________________ and Secretary (Principal
Philip J. Dunn Financial Officer and
Principal Accounting
Officer)
</TABLE>
CPD, Inc.
<TABLE>
<S> <C> <C>
/s/ Michael T. Chalifoux Manager and Member October 1, 1999
By: __________________________________
Name: Michael T. Chalifoux
Title: President
</TABLE>
Carmax Auto Superstores, Inc.
<TABLE>
<S> <C> <C>
/s/ Keith D. Browning Member October 1, 1999
By: __________________________________
Name: Keith D. Browning
Title: Vice President, Chief Financial
Officer and Assistant Secretary
</TABLE>
II-4
<PAGE>
EXHIBIT 1.1
$[ ]
CARMAX AUTO OWNER TRUST 1999-1
$[ ] [ ]% CLASS A-1 ASSET-BACKED NOTES
$[ ] [ ]% CLASS A-2 ASSET-BACKED NOTES
$[ ] [ ]% CLASS A-3 ASSET-BACKED NOTES
$[ ] [ ]% CLASS A-4 ASSET-BACKED NOTES
$[ ] [ ]% ASSET-BACKED CERTIFICATES
CARMAX AUTO RECEIVABLES, LLC
UNDERWRITING AGREEMENT
----------------------
[ ], 1999
Banc of America Securities LLC
As Representative
(the "Representative") of the
--------------
Several Underwriters
Bank of America Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255
Dear Sirs:
1. Introductory. Carmax Auto Receivables LLC, a Virginia limited
------------
liability company (the "Company"), proposes, subject to the terms and conditions
stated herein, to cause Carmax Auto Owner Trust 1999-1 (the "Trust") to issue
and sell $[ ] aggregate principal amount of [ ]% Class A-1
Asset Backed Notes (the "Class A-1 Notes"), $[ ]
aggregate principal amount of [ ]% Class A-2 Asset Backed Notes (the "Class
A-2 Notes"), $[ ] aggregate principal amount of [ ]%
Class A-3 Asset Backed Notes (the "Class A-3 Notes") and $[ ] aggregate
principal amount of [ ]% Class A-4 Asset Backed Notes (the "Class A-4
Notes"). The Notes will be issued pursuant to the indenture dated as of
[ ], 1999
<PAGE>
(the "Indenture"), between the Trust and Bankers Trust Company (the "Indenture
Trustee").
Concurrently with the issuance and sale of the Notes as contemplated
herein, the Trust will issue $[ ] aggregate principal amount of [
]% certificates of beneficial interest in the Trust (the "Certificates"), each
representing an interest in the property of the Trust. The Certificates will be
issued pursuant to the Trust Agreement, dated as of [ ], 1999 (the
"Trust Agreement"), between the Company and First Union Trust Company, National
Association, (the "Owner Trustee"). The Certificates will be subordinated to
the Notes.
Pursuant to an Insurance and Reimbursement Agreement dated as of [____],
1999, among the Company, the Servicer and MBIA Insurance Corporation (the
"Insurer"), the Insurer will issue a financial guaranty insurance policy (the
"Policy") which guarantees the timely payment of Monthly Note Principal, Monthly
Note Interest, Monthly Certificate Principal, Monthly Certificate Interest and
the payment of certain other amounts.
The assets of the Trust will include, among other things, (i) a pool of
motor vehicle retail installment sale contracts secured by new and used motor
vehicles to be conveyed to the Trust on the Closing Date (the "Contracts"), (ii)
amounts received on or in respect of the Contracts on or after the Cutoff Date,
and (iii) certain other property described in the Trust Agreement as part of the
Owner Trust Estate. The Contracts will be sold to the Trust by the Company and
be serviced for the Trust by Carmax Auto Superstores, Inc., a Virginia
corporation ("Carmax" or, in its capacity as servicer, the "Servicer") pursuant
to a Sale and Servicing Agreement, dated as of [ ], 1999
(the "Sale and Servicing Agreement"), among the Trust, the Company and the
Servicer. Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Sale and Servicing Agreement or, if not defined therein,
in the Indenture, the Trust Agreement or in the Purchase Agreement between the
Company and Carmax, dated as of [ ], 1999 (the "Purchase
Agreement"), the Administration Agreement among the Trust, Carmax and the
Indenture trustee (the "Administration Agreement", and together with the
Indenture, the Trust Agreement, the Sale and Servicing Agreement and the
Purchase Agreement, the "Basic Documents"). The Company hereby agrees with the
several Underwriters named in Schedule A hereto (the "Underwriters") as follows:
2. Representations and Warranties of the Company. The Company represents
---------------------------------------------
and warrants to, and agrees with, the several Underwriters that:
2
<PAGE>
(1) a Registration Statement on Form S-3 (File No. 333-79087),
including a prospectus and such amendments thereto as may have been
required to the date hereof, relating to the Notes and the Certificates has
been filed with the Securities and Exchange Commission (the "Commission").
Such Registration Statement, as amended, has become effective under the
Securities Act of 1933, as amended (the "Act"). No stop orders suspending
the effectiveness of the Registration Statement have been issued and no
procedures for that purpose have been instituted or, to the Company's
knowledge, threatened by the Commission. A prospectus setting forth the
terms of the offering, sale and plan of distribution of the Notes and the
Certificates and additional information concerning the Notes and the
Certificates, including the terms thereof, and the Contracts and other
property of the Trust has been prepared and will be filed timely pursuant
to Rule 424(b) of the Rules and Regulations of the Commission (the "Rules
and Regulations") following the execution of this Agreement. Such
Registration Statement, as from time to time amended and supplemented, is
referred to as the "Registration Statement" and the final form of
Prospectus included in the Registration Statement, as supplemented by the
form of Prospectus to be filed with the Commission pursuant to Rule 424(b),
is referred to as the "Prospectus" (the "Prospectus"). The conditions to
the use of a registration statement on Form S-3 under the Act, as set forth
in the General Instructions to Form S-3, and the conditions of Rule 415
under the Act, have been satisfied with respect to the Registration
Statement;
(2) as of the date of execution of this Agreement, the Registration
Statement and the Prospectus, except with respect to any modifications as
to which the Representative has agreed in writing, shall be in all
substantive respects in the form furnished to the Representative prior to
such date or, to the extent not completed on such date, shall contain only
such specific additional information and other changes which the Company
advised the Representative prior to such time, will be included or made
therein;
(3) on the effective date of the Registration Statement, the
Registration Statement and the Prospectus complied in all material respects
with the applicable requirements of the Act and the Rules and Regulations,
and did not include any untrue statement of a material fact or, in the case
of the Registration Statement, omit to state any material fact required to
be stated therein or necessary in order to make the statements therein not
misleading and,
3
<PAGE>
in the case of the Prospectus, omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading, and on the date hereof and on the
Closing Date (as defined in Section 3 hereof), the Registration Statement
and the Prospectus will comply in all material respects with the applicable
requirements of the Act and the Rules and Regulations, and neither of such
documents included or will include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; provided,
--------
however, that the foregoing does not apply to information contained in or
-------
omitted from either of the documents based upon written information
furnished to the Company by any Underwriter specifically for use in
connection with the preparation of the Registration Statement or the
Prospectus;
(4) the Company has been duly organized and is an existing limited
liability company in good standing under the laws of the Commonwealth of
Virginia, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus; and the
Company is duly qualified to do business as a foreign corporation and is in
good standing in all other jurisdictions in which its ownership or lease of
property or the conduct of its business requires such qualification, and
has obtained all necessary licenses and approvals (except with respect to
the state securities or "Blue Sky" laws of various jurisdictions) in each
jurisdiction in which failure to so qualify or obtain such licenses and
approvals would have a material adverse effect on the interests of
Noteholders or the Certificateholders under any of the Basic Documents or
under the Prospectus;
(5) the execution, delivery and performance by the Company of its
obligations under this Agreement, each of the Basic Documents, the Notes
and the Certificates, and the consummation by the Company of the
transactions provided for herein and therein, have been, or will have been
as of the Closing Date, duly authorized by the Company by all necessary
action on the part of the Company; and neither the execution and delivery
by the Company of such instruments, nor the performance by the Company of
the transactions herein or therein contemplated, nor the compliance by the
Company with the provisions hereof or thereof, will (i) conflict with or
result in a breach of any of the terms and provisions of, or constitute a
default under, any of the provisions of the Articles of Organization or
Operating Agreement of the Company, or (ii) conflict with any of the
provisions of any law, government rule, regulation,
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judgment, decree or order binding on the Company or its properties or (iii)
conflict with any of the provisions of any indenture, mortgage, contract or
other instrument to which the Company is a party or by which it is bound or
(iv) result in the creation or imposition of any lien, charge or
encumbrance upon any of its property pursuant to the terms of any such
indenture, mortgage, contract or other instrument other than pursuant to
the Basic Documents;
(6) no consent, approval, authorization or order of, or filing with,
any governmental agency or body or any court is required to be obtained or
made by the Company for the consummation of the transactions contemplated
by this Agreement or any of the Basic Documents in connection with the
issuance of the Notes or the Certificates and the sale by the Company of
Notes or the Certificates, except such as have been obtained and made under
the Act, such as may be required under state securities laws and the filing
of any financing statements required to perfect the interest of any of the
Company, the Trust or the Indenture Trustee in the Contracts and other
property conveyed to the Trust or pledged to secure obligations under any
of the Basic Documents, which financing statements will be filed in the
appropriate offices on or prior to the Closing Date;
(7) on the Closing Date, the Company will have directed the Owner
Trustee to execute and the Indenture Trustee to authenticate and issue the
Notes and when delivered and paid for pursuant to the Indenture and this
Agreement, the Notes will have been duly executed, authenticated, issued
and delivered and will constitute the valid and legally binding obligations
of the Trust, entitled to the benefits of the Indenture and be enforceable
in accordance with their terms;
(8) on the Closing Date, the Company will have directed the Owner
Trustee to execute and authenticate the Certificates and, when delivered
and paid for pursuant to the Trust Agreement and this Agreement, the
Certificates will have been duly executed, authenticated, issued and
delivered and will constitute valid and legally binding obligations of the
Trust, entitled to the benefits provided in the Trust Agreement and be
enforceable in accordance with their terms;
(9) the Company possesses adequate certificates, authorities and
permits issued by appropriate governmental agencies or bodies necessary to
conduct the business, as now operated by it or to be operated by it as
described in the Prospectus and has not received any notice of proceedings
relating to the
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revocation or modification of any such certificate, authority or permit
that, if determined adversely to the Company, would individually or in the
aggregate have a material adverse effect on the Company or on the Company's
ability to perform its obligations hereunder or under the Basic Agreements
to which it may be a party;
(10) except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting the Company or any of
its properties that, if determined adversely to the Company, would
individually or in the aggregate have a material adverse effect on the
condition (financial or other), business or results of operations of the
Company, or would materially and adversely affect the ability of the
Company to perform its obligations under this Agreement or any Basic
Documents to which it may be a party, or which are otherwise material in
the context of the issuance and sale of the Notes or the Certificates; and
no such actions, suits or proceedings are threatened or, to the Company's
knowledge, contemplated.
(11) as of the Closing Date, the representations and warranties of the
Company contained in the Basic Documents will be true and correct;
(12) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
therein, (i) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company, whether or not arising in the ordinary course of
business and (ii) there have been no transactions entered into by the
Company, other than those in the ordinary course of business, which are
material with respect to the Company;
(13) this Agreement and each of the Basic Documents to which the
Company is a party, has been duly authorized by the Company and, when duly
executed and delivered by the Company and the other parties thereto, will
constitute a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar laws affecting enforcement of creditors' rights
generally and except as enforcement thereof is subject to general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law);
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(14) this Agreement has been duly authorized, executed and delivered
by the Company;
(15) the Company's sale and delivery of the Contracts and other
property to the Trust will vest in the Trust all of the Company's right,
title and interest therein, subject to no prior lien, mortgage, security
interest, pledge, adverse claim, charge or other encumbrance;
(16) the Trust's pledge of the Collateral (as defined in the
Indenture) to the Indenture Trustee pursuant to the Indenture will vest in
the Indenture Trustee, for the benefit of the Noteholders, a first priority
perfected security interest therein, subject to no prior lien, mortgage,
security interest, pledge, adverse claim, charge or other encumbrance
except for any tax lien, mechanics' lien or other lien encumbrance arising
after the Closing Date that attaches by operation of law;
(17) the Contract Schedule created as of the Cut-off Date and made
available by the Servicer, will be complete and accurate as of the date
thereof and will include identifying descriptions of the Contracts listed
on Schedule I to the Purchase Agreement;
(18) the Notes and the Certificates conform, and will conform as of
the Closing Date, in all material respects to the descriptions thereof in
the Registration Statement and the Prospectus;
(19) any taxes, fees and other governmental charges in connection with
the execution, delivery and performance by the Company of this Agreement,
any of the Basic Documents, the Notes or the Certificates (except for
transfer, income or other taxes due upon the sale of the Notes or the
Certificates by the Underwriters or any subsequent purchasers) shall have
been paid or will be paid by or on behalf of the Company at or prior to the
Closing Date to the extent then due;
(20) the Company is not and, after giving effect to the offering and
sale of the Notes and the Certificates and the application of the proceeds
thereof as described in the Prospectus, neither the Company nor the Trust
will be required to be, registered as an "investment company" as defined in
the
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Investment Company Act of 1940, as amended (the "Investment Company Act").
3. Purchase, Sale and Delivery of Notes. On the basis of the
------------------------------------
representations warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and the Underwriters agree, severally and not jointly, to purchase
from the Company the respective principal amounts of each Class of the Notes set
forth opposite the names of the Underwriters on Schedule A hereto, at a purchase
price of, in the case of (i) the Class A-1 Notes, [ ]% of the principal
amount thereof; (ii) the Class A-2 Notes, [ ]% of the principal amount
thereof; (iii) the Class A-3 Notes, [ ]% of the principal amount thereof; [in
each case plus the accrued interest at the applicable Note Interest Rate from
___, 1999] and (iv) the Class A-4 Notes, [ ]% of the principal amount
thereof, plus in each case, accrual interest at the applicable Note Interest
Rate from [ ], 1999. On the basis of the representations warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company also agrees to sell and the Representative agrees to purchase
from the Company, the aggregate principal amount of the Certificates set forth
on Schedule A hereto at a purchase price of [ ]% of the principal amount
thereof.
The Company will deliver against payment of the purchase price, the Notes
of each Class and the Certificates, each in the form of one or more permanent
global securities in definitive form (the "Global Notes" or "Global
Certificates," as the case may be) [deposited with the Indenture Trustee] as
custodian for The Depository Trust Company ("DTC") and registered in the name of
Cede & Co., as nominee for DTC. Interests in any permanent Global Notes or
Global Certificates will be held only in book-entry form through DTC, except in
the limited circumstances described in the Prospectus. Payment for the Notes
and the Certificates shall be made by the Underwriters in Federal (same day)
funds by official check or checks at the offices of Mc-Guire, Woods, Battle &
Boothe LLP, 901 East Cary Street, Richmond, Virginia 23219 or by wire transfer
to an account in New York previously designated to the Representative by the
Company at 10:00 a.m., New York time, on [ ], 1999, or at
such other time not later than seven full business days thereafter as the
Representative and the Company determine, such time being herein referred to as
the "Closing Date", against delivery to [the Indenture Trustee] as custodian for
DTC of the Global Notes and the Global Certificates representing all of the
Notes and the Certificates. The Global Notes and the Global Certificates will
be made available for checking at the above office of McGuire Woods, Battle &
Boothe LLP at least 24 hours prior to the Closing Date.
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<PAGE>
4. Certain Agreements of the Company. The Company agrees with the
---------------------------------
several Underwriters that:
(1) so long as any Note or Certificate is outstanding, the Company
will furnish to the Representative by telecopier, overnight carrier service
or first-class mail as soon as practicable, (i) all documents distributed,
or caused to be distributed, by or on behalf of the Company or the Trust to
Noteholders or the Certificateholders (ii) all documents filed, or caused
to be filed, by or on behalf of the Company or the Trust with the
Commission pursuant to the 1934 Act, (iii) copies of any order or other
communication received from the Commission with respect to the Company, the
Notes or the Certificates and (iv) such other information in the possession
of the Company concerning the Trust or the Company as the Representative
from time to time may reasonably request.
(2) except as otherwise specified in this Agreement, the Company will
pay all expenses incident to the performance of its obligations under this
Agreement and will reimburse the Underwriters for any expenses reasonably
incurred by them in connection with qualification of the Notes or the
Certificates and determination of their eligibility for investment under
the laws of such jurisdictions as the Representative may designate and the
reproduction of memoranda relating thereto, for any fees charged by
investment rating agencies for the rating of such Notes or the
Certificates, for all reasonable out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Representative and, to
the extent previously agreed upon with the Representative, for reasonable
expenses incurred in distributing the Prospectus (including any amendments
and supplements thereto) to the Underwriters and the reasonable fees and
disbursements of the Underwriter's counsel;
(3) The Company will advise the Representative promptly of any
proposal to amend or supplement the Registration Statement or the
Prospectus, and will not effect such amendment or supplementation without
the Representative's consent; the Company will also advise the
Representative promptly of the institution by the Commission of any stop
order proceedings in respect of the Registration Statement and will use its
best efforts to prevent the issuance of any such stop order and to obtain
as son as possible its lifting, if issued
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<PAGE>
(4) If, at any time when the prospectus relating to the Notes or the
Certificates is required to be delivered under the Act in connection with
sales by any Underwriter or dealer, any event occurs as a result of which
the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it is necessary at any
time to amend the Prospectus to comply with the Act, the Company will
promptly notify the Representative of such event and will promptly prepare
and file with the Commission (subject to the Representative's prior
review), at its own expense, an amendment or supplement which will correct
such statement or omission, or an amendment which will effect such
compliance.
(5) The company will furnish to the Representative copies of the
Registration Statement (two of which will be signed and will include all
exhibits), each related preliminary prospectus, and, so long as delivery of
a prospectus relating to the Certificates or the Notes is required to be
delivered under the Act in connection with sales by any Underwriter or
dealer, the Prospectus and all amendments and supplements to such
documents, in each case as soon as available and in such quantities as the
Representative requests. (The Prospectus shall be so furnished on or prior
to 3:00 p.m., New York time, on the business day following the execution
and delivery of this Agreement.) All other such documents shall be so
furnished as soon as available. The Company will pay the expenses of
printing and distributing to the Underwriters all such documents.
(6) The Company will arrange for the qualification of the Notes for
offering and sale and the determination of their eligibility for investment
under the laws of such jurisdictions as the Representation designates and
will continue such qualifications in effect so long as required for the
distribution of the Notes.
(7) For a period from the date of this Agreement until the retirement
of the Notes (i) the Company will furnish to the Representative and, upon
request, to each of the other Underwriters, copies of each certificate and
the annual statements of compliance delivered to the Indenture Trustee or
the Insurer pursuant to Section 3.9 of the Indenture and Sections 3.9 and
3.10 of the Sale and Servicing Agreement and the annual independent
certified public accountant's servicing reports furnished to the Indenture
Trustee pursuant to
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Section 3.11 of the Sale and Servicing Agreement, by first -class mail as
soon as practicable after such statements and reports are furnished to the
Indenture Trustee, and (ii) such other forms of periodic certificates or
reports as may be delivered to the Indenture Trustee, the Owner Trustee,
the Insurer, the Noteholders or the Certificate-holders under the
Indenture, the Sale and Servicing Agreement or the Other Basic Documents.
(8) to the extent, if any, that (i) the ratings provided with respect
to the Notes or the Certificates by Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's, a division of The McGraw-Hill Companies
("Standard & Poor's" and, together with Moody's, the "Rating Agencies") or
(ii) the issuance of the Policy by the Insurer, is conditional upon the
furnishing of documents or the taking of any other action by the Company,
the Company shall furnish such documents and take any such other action.
(9) on or before the related Closing Date, the Company shall cause the
computer records of the Company and Carmax relating to the Contracts to be
marked to show the Trust's absolute ownership of the Contracts and the
proceeds thereof, and from and after the Closing Date, neither the Company
nor Carmax shall take any action inconsistent with the Trust's ownership of
such Contracts, other than as permitted by the Sale and Servicing
Agreement.
5. Conditions of the Obligations of the Underwriters. The obligations of
-------------------------------------------------
the several Underwriters to purchase and pay for the Notes and the Certificates
on the Closing Date will be subject to the accuracy of the representations and
warranties on the part of the Company herein, to the accuracy of the statements
of the Company's officers made pursuant to the provisions hereof, to the
performance by the Company of its obligations hereunder and to the following
additional conditions precedent:
(1) the Representative shall have received a letter, dated the date of
delivery thereof, of [KPMG Peat Marwick], in form and substance
satisfactory to the Representative and counsel for the Underwriters,
confirming that they are independent public accountants within the meaning
of the 1933 Act and the applicable Rules and Regulations and stating in
effect that (i) they have performed certain specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature set forth in the Registration Statement and
the Prospectus (and any supplements thereto), agrees with the accounting
records of Carmax and the Company, excluding any
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<PAGE>
questions of legal interpretation, and (ii) they have performed certain
specified procedures with respect to the Receivables;
(2) all actions required to be taken and all filings required to be
made by the Company under the Act prior to the Closing Date for the Notes
or the Certificates shall have been duly taken or made; and prior to the
Closing Date, no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Company,
threatened by the Commission;
(3) the Representative shall have received a copy of the
indemnification agreement, dated the date hereof, between the
Representative and the Servicer (the "Indemnification Agreement"), executed
by the Servicer and delivered to the Representative;
(4) the Policy, in form and substance satisfactory to the
Representative, shall have been issued by the Insurer and delivered to the
Indenture Trustee;
(5) the Representative shall have received an opinion of McGuire,
Woods, Battle & Boothe LLP, special counsel to the Company, dated the
Closing Date and satisfactory in form and substance to the Representative
and counsel for the Underwriters, to the effect that:
(1) the Company has been duly organized and is an existing
limited liability company in good standing under the laws of the
Commonwealth of Virginia, with full power and authority to own its
properties and conduct its business as described in the Prospectus;
the Company is duly qualified to do business and is in good standing
in each jurisdiction in which its ownership or lease of property or
the conduct of its business requires such qualification; and the
Company has full power and authority to enter into and perform its
obligations under this Agreement and the Basic Documents to which it
is a party, to direct the Owner Trustee to execute the Notes and the
Certificates and, the Indenture Trustee to authenticate the Notes, to
consummate the transactions contemplated hereby and thereby, and had
at all times, and at the Closing Date has, the power, authority and
legal right to acquire, own and sell the Contracts;
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(2) Carmax has been duly incorporated and is an existing
corporation in good standing under the laws of the Commonwealth of
Virginia, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus; Carmax is duly
qualified to do business and is in good standing in each jurisdiction
in which its ownership or lease of property or the conduct of its
business requires such qualification; and Carmax has full power and
authority to enter into and perform its obligations under the
Indemnification Agreement and the Basic Documents to which it is a
party and to consummate the transactions contemplated hereby and
thereby, and had at all times, and now has, the power, authority and
legal right to acquire, own, sell and service the Contracts;
(3) the direction by the Company to the Owner Trustee to execute
the Notes, and to the Indenture Trustee to authenticate the Notes, has
been duly authorized by the Company and, when the Notes have been duly
executed and authenticated by the Indenture Trustee in accordance with
the terms of the Indenture and delivered to and paid for by the
Underwriters pursuant to this Agreement, the Notes will be duly and
validly issued and outstanding and will be entitled to the benefits of
the Indenture;
(4) the direction by the Company to the Owner Trustee to execute
and authenticate the Certificates has been duly authorized by the
Company and, when the Certificates have been duly executed and
authenticated by the Owner Trustee in accordance with the terms of the
Trust Agreement and delivered to and paid for by the Representative
pursuant to this Agreement, the Certificates will be duly and validly
issued and outstanding and will be entitled to the benefits of the
Trust Agreement;
(5) this Agreement, the Indemnification Agreement and each Basic
Document to which the Company or Carmax is a party has been duly
authorized, executed and delivered by the Company or Carmax, as the
case may be, and constitutes the valid and binding obligation of the
Company or Carmax, as appropriate, subject, as to enforcement to (A)
bankruptcy, reorganization, insolvency, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights
generally, (B) general principles of equity (regardless of whether
enforcement is
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<PAGE>
sought in a proceeding in equity or at law), and the discretion of the
court before which any proceeding for such enforcement may be brought
and (C) possible judicial action giving effect to governmental actions
or foreign laws affecting creditors' rights;
(6) no consent, approval, authorization or order of, or filing
with any governmental agency or body or any court is required for the
execution, delivery and performance by the Company of this Agreement
and the Basic Documents to which it is a party, for the execution,
delivery and performance by Carmax of the Indemnification Agreement
and the Basic Documents to which it is a party or for the consummation
of the transactions contemplated by this Agreement, the
Indemnification Agreement or the Basic Documents, except for (i) the
filing of Uniform Commercial Code financing statements in Virginia
with respect to the sale of the Contracts from Carmax to the Company
pursuant to the Purchase Agreement and the filing of Uniform
Commercial Code financing statements in Virginia with respect to the
sale of the Trust property to the Trust pursuant to the Sale and
Servicing Agreement and the filing of a Uniform Commercial Code
financing statement in Delaware with respect to the grant by the Trust
of a security interest in the Collateral to the Indenture Trustee
pursuant to the Indenture, which financing statements will be filed in
the appropriate offices on or prior to the Closing Date; (ii) such as
have been obtained and made under the Act; and (iii) such as may be
required under state securities laws;
(7) the execution, delivery and performance of this Agreement
and the Basic Documents by the Company, the execution, delivery and
performance of the Indemnification Agreement and the Basic Documents
by Carmax and the consummation of any of the transactions contemplated
herein, in the Indemnification Agreement or the Basic Documents will
not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of
the property or assets of Carmax or the Company pursuant to the terms
of the Certificate of Incorporation or the By-Laws of Carmax or the
Articles of Organization or Operating Agreement of the Company or any
statute, rule, regulation or order of any governmental agency or body,
on any court having jurisdiction over Carmax or the Company or their
respective properties, or any agreement or instrument known to
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such counsel after due investigation to which Carmax or the Company is
a party or by which Carmax or the Company or any of their respective
properties is bound;
(8) such counsel has no reason to believe that any part of the
Registration Statement or any amendment thereto, as of its effective
date and as of such Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary in order to make the statements therein
not misleading or that the Prospectus and any amendment or supplement
thereto, as of its issue date and as of the Closing Date, contained
any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; the descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings, contracts
and other documents are accurate and fairly present the information
required to be shown; and such counsel does not know of any legal or
governmental proceedings required to be described in the Registration
Statement or the Prospectus which are not described as required or of
any contracts or documents of a character required to be described in
the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement which are not described and
filed as required; it being understood that such counsel need express
no opinion as to the financial statements or other financial data
contained in the Registration Statement or the Prospectus or as to the
statement, under the heading "DESCRIPTION OF THE INSURER";
(9) to the best knowledge of such counsel, after due inquiry,
there are no actions, proceedings or investigations pending to which
the Company or Carmax is a party or threatened before any court,
administrative agency or other tribunal having jurisdiction over
Carmax or the Company, (i) that are required to be disclosed in the
Registration Statement, (ii) asserting the invalidity of this
Agreement, the Indemnification Agreement, any Basic Document, the
Notes or the Certificates, (iii) seeking to prevent the issuance of
the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Indemnification
Agreement or the Basic Documents, (iv) which might materially and
adversely affect the
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performance by the Company or Carmax of its obligations under, or the
validity or enforceability of, this Agreement, the Indemnification
Agreement, any Basic Document, the Notes or the Certificates, or (v)
seeking adversely to affect the federal income tax attributes of the
Notes or the Certificates as described in the Prospectus under the
heading "MATERIAL FEDERAL INCOME TAX CONSEQUENCES";
(10) each of Carmax and the Company has obtained all necessary
licenses and approvals in each jurisdiction in which failure to
qualify or to obtain such license or approval would render any
Contract unenforceable by the Company, the Trust, the Owner Trustee or
the Indenture Trustee;
(11) this Agreement has been duly authorized, executed and
delivered by the Company; and the Indemnification Agreement has been
duly authorized, executed and delivered by Carmax;
(12) each Contract is a motor vehicle retail installment sales
contract that constitutes "chattel paper" as defined in Section 9-105
of the UCC in effect in the States of New York, and Delaware and in
the Commonwealth of Virginia;
(13) the provisions of the Sale and Servicing Agreement are
effective to create, in favor of the Owner Trustee, a valid security
interest (as such term is defined in Section 1-201 of the New York
UCC) in the Company's rights in the Contracts and proceeds thereof,
which security interest, if characterized as a transfer for security,
will secure a loan deemed to have been made to the Company in an
amount equal to all principal and interest due on the Notes and the
Certificates;
(14) the financing statement naming the Company as debtor and the
Trust as secured party is in appropriate form for filing in the
relevant filing office under the Virginia UCC. The Virginia UCC
governs the effect of perfection or non-perfection of the security
interest granted to the Trust pursuant to the Sale and Servicing
Agreement. Upon the filing of the Financing Statement in the relevant
filing office, the security interest in favor of the Owner Trustee in
the Contracts and proceeds thereof will be perfected, and no other
security interest of any other creditor of or purchaser from the
Company will be equal or prior
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to the security interest of the Owner Trustee in the Contracts and
proceeds thereof;
(15) the provisions of the Purchase Agreement are effective to
create, in favor of the Company, a valid security interest (as such
term is defined in Section 1-201 of the New York UCC) in Carmax's
rights in the Contracts and proceeds thereof, which security interest,
if characterized as a transfer for security, will secure a loan deemed
to have been made to Carmax in an amount equal to the principal and
interest due on the Notes and the Certificates;
(16) the financing statement naming Carmax as debtor and the
Company as secured party is in appropriate form for filing in the
relevant filing office under the Virginia UCC. The Virginia UCC
governs the effect of perfection or non-perfection of the security
interest granted to the Company pursuant to the Purchase Agreement.
Upon the filing of the Financing Statement in the relevant filing
office, the security interest in favor of the Company in the Contracts
and proceeds thereof will be perfected, and no other security interest
of any other creditor of, or purchaser from Carmax will be equal or
prior to the security interest of the Company in the Contracts and
proceeds thereof;
(17) the financing statement naming the Trust as debtor and the
Indenture Trustee as secured party is in appropriate form for filing
in the relevant filing office under the Delaware UCC. The Delaware
UCC governs the effect of perfection or non-perfection of the security
interest granted to the Indenture Trustee pursuant to the Indenture.
Upon the filing of the Financing Statement in the relevant filing
office, the security interest in favor of the Indenture Trustee in the
Collateral will be perfected, and no other security interest of any
other creditor of or purchaser from the Trust will be equal or prior
to the security interest of the Indenture Trustee in the Collateral;
(18) the provisions of the Indenture are effective to create in
favor of the Indenture Trustee, a valid security interest (as such
term is defined in Section 1-201 of the New York UCCs) in the
Collateral and proceeds thereof to secure payment of the Notes;
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(19) the statements in the Prospectus under the caption "MATERIAL
LEGAL ASPECTS OF THE TRANSACTION", to the extent they constitute
matters of law or legal conclusions, are correct in all material
respects;
(20) the Trust Agreement is not required to be qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act");
(21) the Indenture has been duly qualified under the Trust
Indenture Act;
(22) the Registration Statement was declared effective under the
Act [as of the date specified in such opinion,] the Prospectus was
filed with the Commission pursuant to the subparagraph of Rule 424(b)
[specified in such opinion] on the date specified therein, and, to the
best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement or any part thereof has
been issued and no proceedings for that purpose have been instituted
or are pending or contemplated under the Act;
(23) assuming due authorization, execution and delivery by the
Indenture Trustee and the Owner Trustee, the Indenture constitutes the
legal, valid and binding agreement of the Trust enforceable against
the Trust in accordance with its terms (subject to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws affecting creditors' rights
generally from time to time in effect, and subject, as to
enforceability, to general principles of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at
law);
(24) neither the Trust nor the Company is and, after giving
effect to the issuance and sale of the Notes and the Certificates and
the application of the proceeds thereof, as described in the
Prospectus, neither the Trust nor the Company will be, an "investment
company" as defined in the Investment Company Act; and
(25) the Notes, the Certificates, the Purchase Agreement, the
Sale and Servicing Agreement, the Trust Agreement, the
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<PAGE>
Administration Agreement and the Indenture each conform in all
material respects with the descriptions thereof contained in the
Registration Statement and the Prospectus.
(6) The Representative shall have received an opinion of McGuire,
Woods, Battle & Boothe LLP, as special tax counsel for the Company, dated
the Closing Date and satisfactory in form and substance to the
Representative and counsel for the Underwriters, to the effect that for
federal income tax purposes (i) the Notes will be characterized as
indebtedness of the Trust, (ii) the Trust will not be classified as an
association or a publicly traded partnership taxable as a corporation and
(iii) the statements set forth in the Prospectus under the headings
"PROSPECTUS SUMMARY--ERISA CONSIDERATIONS", "ERISA CONSIDERATIONS",
"PROSPECTUS SUMMARY--Tax Status" and "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES", to the extent such statements constitute matters of law or
legal conclusions with respect thereto, are correct in all material
respects.
(7) the Representative shall have received an opinion of McGuire,
Woods, Battle and Boothe LLP, as special tax counsel for the Company, dated
the Closing Date and satisfactory in form and substance to the
Representative and counsel for the Underwriters, to the effect that (i) for
the franchise and income tax purposes of the Commonwealth of Virginia and
the State of Delaware, (A) the Trust will not be subject to entity level
taxation and (B) the Notes will be treated as indebtedness and (ii) holders
of the Certificates, who are not otherwise subject to taxation in the
Commonwealth of Virginia or the State of Delaware, will not be subject to
taxation on income from the Certificates solely by virtue of their
ownership of the Certificates.
(8) The Representative shall have received from Skadden, Arps, Slate,
Meagher & Flom LLP, counsel for the Underwriters, such opinion or opinions,
dated the Closing Date, with respect to the validity of the Notes, the
Certificates, the Registration Statement, the Prospectus and other related
matters as the Representative may require, and the Company shall have
furnished to such counsel such documents as it may request for the purpose
of enabling it to pass upon such matters.
(9) The Representative shall have received a certificate, dated the
Closing Date, of the Chairman of the Board, the President or any Vice-
President and a principal financial or accounting officer of each of the
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<PAGE>
Company and Carmax in which such officers, to the best of their knowledge
after reasonable investigation, shall state that: the representations and
warranties of the Company in this Agreement are true and correct; the
Company or Carmax, as applicable, has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date; the representations and warranties of the
Company or Carmax, as applicable, in the Basic Documents are true and
correct as of the dates specified in such agreements; the Company or
Carmax, as applicable, has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied under such agreements
at or prior to the Closing Date; no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission; and,
subsequent to the date of the Prospectus, there has been no material
adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company or Carmax,
whether or not arising in the ordinary course of business.
(10) The Representative shall have received an opinion of [
], counsel to the Indenture Trustee, dated the Closing Date and
satisfactory in form and substance to the Representative and counsel for
the Underwriters, to the effect that:
(1) the Indenture Trustee is a New York banking corporation duly
incorporated and validly existing under the laws of the State of New
York;
(2) the Indenture Trustee has the full corporate trust power to
accept the office of Indenture Trustee under the Indenture and to
enter into and perform its obligations under the Indenture the Sale
and Servicing Agreement and the Administration Agreement;
(3) the execution and delivery of the Indenture and the
Administration Agreement and the acceptance of the Sale and Servicing
Agreement and the performance by the Indenture Trustee of its
obligations under the Indenture, the Sale and Servicing Agreement and
the Administration Agreement have been duly authorized by all
necessary corporate action of the Indenture Trustee and each has been
duly executed and delivered on behalf of the Indenture Trustee;
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<PAGE>
(4) the execution, delivery and performance by the Indenture
Trustee of the Indenture and, on behalf of the Noteholder, of the
other Basic Documents to which it is a party does not require any
consent, approval or authorization of, or any registration or filing
with, any Delaware or United States federal governmental authority
having jurisdiction over the Indenture Trustee other than those
consents, approvals or authorizations as have been obtained.
(5) the Indenture, the Sale and Servicing Agreement and the
Administration Agreement constitute valid and binding obligations of
the Indenture Trustee enforceable against the Indenture Trustee in
accordance with their terms under the laws of the State of New York
and the federal law of the United States;
(6) the execution and delivery by the Indenture Trustee of the
Indenture and the Administration Agreement and the acceptance of the
Sale and Servicing Agreement do not require any consent, approval or
authorization of, or any registration or filing with, any Virginia,
New York or United States federal governmental authority, other than
the qualification of the Indenture Trustee under the Trust Indenture
Act;
(7) each of the Notes has been duly authenticated by the
Indenture Trustee;
(8) neither the consummation by the Indenture Trustee of the
transactions contemplated in the Sale and Servicing Agreement, the
Indenture or the Administration Agreement nor the fulfillment of the
terms thereof by the Indenture Trustee will conflict with, result in a
breach or violation of, or constitute a default under any law or the
charter, By-laws or other organizational documents of the Indenture
Trustee or the terms of any indenture or other agreement or instrument
known to such counsel and to which the Indenture Trustee or any of its
subsidiaries is a party or is bound or any judgement, order or decree
known to such counsel to be applicable to the Indenture Trustee or any
of its subsidiaries of any court, regulatory body, administrative
agency, governmental body or arbitrator having jurisdiction over the
Indenture Trustee or any of its subsidiaries;
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<PAGE>
(9) to such counsel's knowledge there is no action, suit or
proceeding pending or threatened against the Indenture Trustee (as
trustee under the Indenture or in its individual capacity) before or
by any governmental authority that if adversely decided, would
materially adversely affect the ability of the Indenture Trustee to
perform its obligations under the Indenture, the Sale and Servicing
Agreement or the Administration Agreement; and
(10) the execution, delivery and performance by the Indenture
Trustee of the Sale and Servicing Agreement, the Indenture and the
Administration Agreement will not subject any of the property or
assets of the Trust or any portion thereof, to any lien created by or
arising with respect the Indenture Trustee that are unrelated to the
transactions contemplated in such Agreements.
(11) The Representative shall have received an opinion of [ ],
counsel to the Owner Trustee, dated the Closing Date and satisfactory in
form and substance to the Representative and counsel for the Underwriters,
to the effect that:
(1) the Owner Trustee has been duly incorporated and is validly
existing as a national banking association in good standing under the
laws of the United States;
(2) the Owner Trustee has full corporate trust power and
authority to enter into and perform its obligations under the Trust
Agreement and, on behalf of the Trust, under the other Basic Documents
to which it is a party and has duly authorized, executed and delivered
such Basic Documents and such Basic Documents constitute the legal,
valid and binding agreements of the Owner Trustee, enforceable in
accordance with their terms (subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other
similar laws affecting creditors' rights generally form time to time
in effect, and subjects, as to enforceability, to general principles
of equity, regardless of whether such enforceability is considered in
a proceeding in equity or at law);
(3) the Certificates have been duly executed, authenticated and
delivered by the Owner Trustee as owner trustee and authenticating
22
<PAGE>
agent; each of the Notes has been duly executed and delivered by the
Owner Trustee, on behalf of the Trust;
(4) the execution and delivery by the Owner Trustee of the Trust
Agreement and, on behalf of the Trust, of the other Basic Documents to
which it is a party and the performance by the Owner Trustee of its
obligations thereunder do not conflict with, result in a breach or
violation of, or constitute a default under the [Articles of
Association or By-laws] of the Owner Trustee; and
(5) the execution, delivery and performance by the Indenture
Trustee of the Indenture and, on behalf of the Noteholder, of the
other Basic Documents to which it is a party does not require any
consent, approval or authorization of, or any registration or filing
with, any Delaware or United States federal governmental authority
having jurisdiction over the Indenture Trustee other than those
consents, approvals or authorizations as have been obtained.
(12) The Representative shall have received an opinion of McGuire,
Woods, Battle & Booth LLP, special counsel to the Company, dated the
Closing Date and satisfactory in form and substance to the Representative
and counsel for the Underwriters, to the effect that:
(1) the Trust has been duly formed and is validly existing as a
business trust under the Delaware Business Trust Act, 12 Del.C.
------
(S)3801 et seq. (the "Delaware Act");
-- ---
(2) the Trust has the power and authority under the Delaware Act
and the Trust Agreement to, and the Trust Agreement authorizes the
Owner Trustee to, execute, deliver and perform its obligations under
the Sale and Servicing Agreement, the Indenture, the Administration
Agreement, the Notes and the Certificates, and the Trust Act
authorizes the Owner Trustee to execute (and if appropriate
authenticate such documents;
(3) assuming that the Certificates have been duly authorized,
executed and authenticated by the Owner Trustee on behalf of the
Trust, when the Certificates have been issued and delivered in
accordance with
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<PAGE>
the instructions of the Company, the Certificates will be validly
issued and entitled to the benefits of the Trust Agreement; and
(4) under 12 Del. C. (S)3805(b), no creditor of any
------
Certificateholder (including creditors of the company in its capacity
as Certificateholder) shall have any right to obtain possession of, or
otherwise exercises legal or equitable remedies with respect to, the
property of the Trust except in accordance with the terms of the Trust
Agreement.
(13) The Representative shall have received an opinion of McGuire,
Woods, Battle & Boothe LLP, counsel to the Company, dated the Closing Date
and satisfactory in form and substance to the Representative and counsel
for the Underwriters, (i) with respect to the characterization of the
transfer of the Contracts by Carmax to the Company and (ii) to the effect
that should Carmax become the debtor in a case under the Bankruptcy Code,
and the Company would not otherwise properly be a debtor in a case under
the Bankruptcy Code, and if the matter were properly briefed and presented
to a court exercising bankruptcy jurisdiction, the court, exercising
reasonable judgment after full consideration of all relevant factors, would
not order, over the objection of the Certificateholders or the Noteholders,
the substantive consolidation of the assets and liabilities of the Company
with those of Carmax and such opinion shall be in substantially the form
previously discussed with the Representative and counsel for the
Underwriters and in any event satisfactory in form and in substance to the
Representative and counsel for the Underwriters.
(14) The Representative shall have received evidence satisfactory to
it and its counsel that, on or prior to the Closing Date, UCC-1 financing
statements have been or are being filed in the office of the (i) Virginia
State Corporation Commission of Commonwealth of Virginia reflecting the
transfer of the interest of Carmax in the Contracts and the proceeds
thereof to the Company and the transfer of the interest of the Company in
the Contracts and the proceeds thereof to the Trust and (ii) Secretary of
State of the State of Delaware reflecting the grant of the security
interest by the Trust in the Contracts and the proceeds thereof to the
Indenture Trustee.
(15) The Representative shall have receive an opinion of McGuire,
Woods, Battle & Boothe LLP, special counsel to the Company, dated the
Closing Date and satisfactory in form and substance to the Representative
and
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<PAGE>
the counsel for the Underwriters to the effect that (i) the provisions
of the Indenture are effective to create a valid security interest in favor
of the Indenture Trustee, to secure payment of the Notes, in all
"securities entitlements" (as defined in Section 8-102(a)(17) of the New
York UCC) with respect to "financial assets" (as defined in Section
8-102(a)(9) of the New York UCC) now or hereafter credited to the Reserve
Account (such securities entitlements, the "Securities Entitlements"), (ii)
the provisions of the control agreement for purposes of Article 8 of the
New York UCC are effective to perfect the security interest of the
Indenture Trustee in the Securities Entitlements and (iii) no security
interest of any other creditor of the Trust will be prior to the security
interest of the Indenture Trustee in such Securities Entitlements.
(16) Moody's and Standard & Poor's shall have rated (i) the Class A-1
Notes P-1 and A-1+, respectively, (ii) each of the Class A-2 Notes, Class
A-3 Notes, Class A-4 Notes Aaa and AAA, respectively, and (iii) the
Certificates Aaa and AAA, respectively.
(17) The Representative shall have received from McGuire, Woods,
Battle & Boothe LLP and each other counsel for the Company, a letter dated
the Closing Date to the effect that the Underwriters may rely upon each
opinion, rendered by such counsel to either Standard & Poor's or Moody's in
connection with the rating of any Class of the Notes or the Certificates as
if each such opinion were addressed to the Underwriters.
(18) The Representative shall have received from Shaw, Pittman, Dutts
& Trawbridge, counsel to the Insurer, to the effect that:
(1) the Insurer is a corporation validly existing, in good
standing and licensed to transact the business of surety and financial
guaranty insurance under the laws of the State of New York;
(2) the Insurer has the corporate power to execute and deliver,
and to take all action required of it under the indemnification
agreement between the Insurer and the Representative on behalf of the
Underwriters, dated as of [ ], 1999 (the "Indemnification
Agreements"), [the insurance and reimbursement agreement] [list other
relevant insurance documents];
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<PAGE>
(3) except as have already been obtained, no authorization,
consent, approval, license, formal exemption or declaration from, nor
any registration or filing with, any court or governmental agency or
body of the United States of America or the State of New York, which
if not obtained would affect or impair the validity or enforceability
of the [insurance and reimbursement agreement, the Indemnification
Agreement] [list other relevant insurance documents] against the
Insurer, is required in connection with the execution and delivery by
the Insurer of the [insurance and reimbursement agreement, the
Indemnification Agreement] [list other relevant insurance documents]
or in connection with the Insurer's performance of its obligations
thereunder;
(4) [insurance and reimbursement agreement, the Indemnification
Agreement] [list other relevant insurance documents] have been duly
authorized, executed and delivered by the Insurer, and assuming due
authorization, execution and delivery of the [insurance and
reimbursement agreement, the Indemnification Agreement] [list other
relevant insurance documents] by the parties thereto (other than the
Insurer), constitute the legally valid and binding obligations of the
Insurer, enforceable in accordance with their respective terms
subject, as to enforcement, to (1) bankruptcy, reorganization,
insolvency, moratorium and other similar laws relating to or affecting
the enforcement of creditors' rights generally, including, without
limitation, laws relating to fraudulent transfers or conveyances,
preferential transfers and equitable subordination, presently or from
time to time in effect and general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at
law), as such laws may be applied in any such proceeding with respect
to the Insurer and (2) the qualification that the remedy of specific
performance may be subject to equitable defenses and to the discretion
of the court before which any proceedings with respect thereto may be
brought; and
[ the guarantee is not required to be registered under the Securities
Act of 1933, as amended.]
In rendering such opinion, such counsel may rely as to matters of
fact, to the extent deemed proper and as stated therein, on certificates of
responsible officers of the Insurer and public officials.
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<PAGE>
The Company will furnish the Representative with such conformed copies of
such opinions, certificates, letters and documents as the Representative may
reasonably request.
The Representative may in its sole discretion waive on behalf of the
Underwriters compliance with any conditions to the obligations of the
Underwriters hereunder.
5. Indemnification and Contribution
--------------------------------
(19) The Company will indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of the
Act or the Exchange Act and the respective officers, directors and
employees of each such person, against any losses, claims, damages or
liabilities, joint or several, to which such Underwriter or such
controlling person may become subject, under the Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, the Prospectus or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
in order to make the statements therein not misleading; and will reimburse
each Underwriter and each such officer, director, employee or controlling
person for any legal or other expenses reasonably incurred by such
Underwriter and each such officer, director, employee or controlling person
in connection with investigating or defending any such loss, claim, damage,
liability or action, subject to the following proviso, as such expenses are
incurred; provided, however, that (i) the Company will not be liable in any
-------- -------
such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement in or omission or alleged omission made in any such documents in
reliance upon and in conformity with written information furnished to the
Company by an Underwriter specifically for use therein and (ii) such
indemnity with respect to any untrue statement or alleged untrue statement
or omission or alleged omission in the preliminary Prospectus shall not
inure to the benefit of any Underwriter (or any person controlling such
Underwriter) from whom the person asserting any such loss, claim, damage or
liability purchased the Notes or the Certificates which are the subject
thereof, if
27
<PAGE>
such person was not given or sent a copy of the Prospectus (excluding
documents incorporated therein by reference), at or prior to the
confirmation of the sale of such Notes or Certificates to such person in
any case where such delivery is required by the Act and the untrue
statement or alleged untrue statement or omission or alleged omission of a
material fact contained in the preliminary Prospectus and forming the basis
for the related cause of action was corrected in the final Prospectus. This
indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(20) Each Underwriter severally, and not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers who
have signed the Registration Statement and each person, if any, who
controls the Company within the meaning of the Act or the Exchange Act and
the respective officers, directors and employees of each such person
against any losses, claims, damages or liabilities to which the Company or
any such director, officer or controlling person may become subject, under
the Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written
information furnished to the Company by such Underwriter specifically for
use therein, and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person
in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred. This indemnity
agreement will be in addition to any liability that such Underwriter may
otherwise have.
(21) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify the indemnifying party of the commencement
thereof; but the omission and/or delay so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than in this Section unless such omission caused actual
prejudice to
28
<PAGE>
the party not notified; in case any such action is brought against any
indemnified party, and it notified the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and, to the extent that it may elect by written notice
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in
connection with defense thereof other than reasonable costs of
investigation. If the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties that are different from or additional to
those available to the indemnifying party, the indemnified party or parties
shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on
behalf of such indemnified party or parties. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm (in addition to local counsel, if
any) for all such indemnified parties. No indemnifying party may avoid its
duty to indemnify under this Section 5 if such indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of any judgement in,
any pending or threatened action in respect of which any indemnified party
is or could have been a party and indemnity could have been sought
hereunder by such indemnified party unless such settlement includes an
unconditional release of such indemnified party from all liability on all
claims that are the subject matter of such action. An indemnifying party
shall not be liable for any settlement of any claim effected without its
written consent.
(22) If recovery is not available under the foregoing indemnification
provisions of this Section for any reason other than as specified therein,
the parties entitled to indemnification by the terms thereof shall be
entitled to contribution for liabilities and expenses, except to the extent
that contribution is not permitted under Section 11(f) of the Act. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered (i) the relative benefit received by
the Company on the one hand
29
<PAGE>
and the Underwriters on the other hand from the offering of the Notes and
the Certificates or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand
and the Underwriters on the other hand in connection with the statement or
omission that resulted in such liabilities and expenses as well as any
other relevant equitable considerations. The relative benefits received by
the Company on the one hand and the Underwriters on the other hand shall be
deemed to be in the same proportion as the total net proceeds of the
offering of the Notes or the Certificates (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters in connection with the offering of
the Notes and the Certificates. The relative fault of the parties shall be
determined by reference to, among other things, the parties' relative
knowledge and access to information concerning the matter with respect to
which the claim was asserted, the opportunity to correct and prevent any
statement or omission, and any other equitable considerations appropriate
under the circumstances. The Company and the Underwriters agree that it
would not be equitable if the amount of such contribution were determined
by pro rata or per capita allocation (even if the Underwriters were treated
as one entity for such purpose). Notwithstanding the provisions of this
Section 5, no Underwriter shall be required to contribute any amount in
excess of the underwriting discount received by it.
6. Default of Underwriters. If any Underwriter or Underwriters
-----------------------
participating in an offering of Notes or Certificates default in their
obligations to purchase Notes or Certificates hereunder and the aggregate
principal amount of such Notes or the Certificates which such defaulting
Underwriter or Underwriters agreed, but failed, to purchase does not exceed 10%
of the total principal amount of the Notes or the Certificates, as the case may
be, the Representative may make arrangements satisfactory to the Company for the
purchase of such Notes or Certificates by other persons, including any of the
other Underwriters participating in such offering, but if no such arrangements
are made within a period of 36 hours after the Closing Date, the non-defaulting
Underwriters participating in such offering shall be obligated severally, in
proportion to their respective total commitments hereunder, to purchase the
Notes or the Certificates which such defaulting Underwriters agreed but failed
to purchase. If any Underwriter or Underwriters so default and the aggregate
principal amount of Notes or the Certificates with respect to which such default
or defaults occur is more than 10% of the total principal amount of the Notes or
the Certificates and arrangements satisfactory to the Representative and the
Company for the purchase of
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<PAGE>
such Notes or the Certificates by other persons are not made within 36 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter or the Company, except as provided in Section
4(b). As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section. Nothing herein will relieve a
defaulting Underwriter from liability for its default.
7. Termination of the Obligations of the Underwriters. The obligations
--------------------------------------------------
of the Underwriters to purchase the Notes or the Certificates on the Closing
Date shall be terminable by the Underwriters by written notice delivered to the
Company if at any time on or prior to the Closing Date (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
NASDAQ National market shall have been suspended or materially limited, or there
shall have been any setting of minimum prices for trading on such exchange of
the securities of Circuit City Stores, Inc. or any suspension of trading of the
securities of Circuit City Stores, Inc. on any exchange or in the over-the-
counter market, (ii) a general moratorium on commercial banking activities shall
have been declared by any applicable Federal or State authorities, (iii) there
shall have occurred any material outbreak or escalation of hostilities or other
calamity or crisis, the effect of which on the financial markets of the United
States is such as to make it, in the reasonable judgment of the Representative,
as representative of the Underwriters, impracticable to market the Notes or the
Certificates on the terms and in the manner contemplated in the Prospectus, (iv)
any public announcement that any "nationally recognized statistical rating
organization" (as defined for purposes of Rule 436(g) under the Securities Act)
has under surveillance or review its rating of the debt securities of any of
Circuit City Stores, Inc., the Company or the Servicer (other than an
announcement with positive implications of a possible upgrading and no
implication of a possible downgrading or such rating), or (v) any change or any
development involving a prospective change, materially and adversely affecting
(A) the Owner Trust Estate or the Collateral taken as whole or (B) the business
or properties of Circuit City Stores, Inc. the Company or Carmax occurs, which,
in the reasonable judgment of the Representative, as representative of the
Underwriters, in the case of either (A) or (B), makes it impracticable to market
the Notes or the Certificates on the terms and in the manner contemplated in the
Prospectus. If this Agreement is terminated pursuant to this Section, such
termination shall be without liability of any party to any other party.
8. Survival of Certain Representations and Obligations. The respective
---------------------------------------------------
indemnities, agreements, representations, warranties and other statements by the
Company or its officers and of the several Underwriters set forth in or made
pursuant
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<PAGE>
to this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
the Underwriters, the Company or any of their respective officers or directors
or any controlling person, and will survive delivery of and payment for the
Notes or the Certificates.
If this Agreement is terminated pursuant to Sections 6 or 7 or if for
any reason the purchase of the Notes or the Certificates by the Underwriters is
not consummated, the Company shall remain responsible for the expenses to be
paid or reimbursed by it pursuant to Section 4, and the obligations of the
Company and the Underwriters pursuant to Section 5 shall remain in effect.
9. Representation of the Underwriters. Each of the Underwriters
----------------------------------
represents and warrants to, and agrees with, the Company that (w) it has only
issued or passed on and shall only issue or pass on in the United Kingdom any
document received by it in connection with the issue of the Certificates to a
person who is of a kind described in Article 11(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1996 or who is a person to
whom the document may otherwise lawfully be issued or passed on, (x) it has
complied and shall comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
Certificates in, from or otherwise involving the United Kingdom and (y) if that
Underwriter is an authorized person under the Financial Services Act 1986, it
has only promoted and shall only promote (as that term is defined in Regulation
1.02 of the Financial Services (Promotion of Unregulated Schemes) Regulations
1991) to any person in the United Kingdom the scheme described in the Prospectus
if that person is of a kind described either in Section 76(2) of the Financial
Services Act 1986 or in Regulation 1.04 of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991.
10. Notices. All communications hereunder will be in writing and, if sent
-------
to an Underwriter, will be mailed, delivered or telecopied to Banc of America
Securities LLC, Bank of America Corporate Center, 100 North Tryon Street,
Charlotte, North Carolina 28255-0001, Attention: William A. Glenn, facsimile
number 704-[ ], or to such other address as the Representative may
designate in writing to the Company, or if sent to the Company, will be mailed,
delivered or telecopied to Carmax Auto Superstores, Inc., c/o Circuit City
Stores, Inc., 9954 Maryland Drive, Virginia 23233 Attention: [ ],
or to such other address specified by the Company; provided, however, that any
-------- -------
notice to an Underwriter pursuant to Section 5 will be mailed, delivered or
telecopied to such Underwriter at the address furnished by such Underwriter.
32
<PAGE>
11. Successors. This Agreement will inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and the
officers, directors and controlling persons referred to in Section 5 hereof, and
their successors and assigns, and no other person will have any right or
obligation hereunder.
12. Severability of Provisions. Any covenant, provision, agreement or
--------------------------
term of this Agreement that is prohibited or is held to be void or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof.
13. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall constitute an original, but all of which shall together constitute
one instrument.
14. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN
--------------
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
33
<PAGE>
If the foregoing is in accordance with your understanding of this
agreement, please sign and return to us a counterpart hereof, whereupon it will
become a binding agreement among the Company and the several Underwriters in
accordance with its terms. Alternatively, the execution of this Agreement by
the Company and its acceptance by or on behalf of the Underwriters may be
evidenced by an exchange of telecopied or other written communications.
Very truly yours,
CARMAX AUTO RECEIVABLES, LLC
as Company
By ____________________________________________
Name: [ ]
Title: [ ]
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BANC OF AMERICA SECURITIES LLC
as Representative of the
Several Underwriters
By ________________________________________________
Name: William A. Glenn
Title: Managing Director
34
<PAGE>
Schedule I
----------
Principal Amount
Banc of America Securities LLC of [ ]% Class A-1 Notes
-------------------------
First Union Capital Markets Corp. Goldman, Sachs & Co.
-------------------------
$[ ]
Total............................
Principal Amount
Banc of America Securities LLC of [ ]% Class A-3 Notes
-------------------------
First Union Capital Markets Corp. Goldman, Sachs & Co.
-------------------------
$[ ]
Total............................
Principal Amount
Banc of America Securities LLC of [ ]% Class A-4 Notes
-------------------------
First Union Capital Markets Corp. Goldman, Sachs & Co.
-------------------------
$[ ]
Total............................
I-1
<PAGE>
Schedule II
-----------
Banc of America Securities LLC Principal Amount
of [ ]% Certificates
----------------------
Total............................
----------------------
$[ ]
II-1
<PAGE>
Exhibit 3.1
ARTICLES OF ORGANIZATION
OF
CARMAX AUTO RECEIVABLES LLC
The undersigned, an individual, does hereby act as organizer in
adopting the following Articles of Organization for the purpose of organizing a
limited liability company pursuant to the Virginia Limited Liability Company
Act.
ARTICLE I
NAME
Section 1.01 Name. The name of the limited liability company is
----
CarMax Auto Receivables LLC (the "Company").
ARTICLE II
PURPOSE
Section 2.01 Purpose. The Company is organized to engage exclusively
-------
in the following business and financial activities: (i) to acquire, own, hold,
transfer, assign, pledge and otherwise deal with retail automotive installment
sale contracts originated or acquired by CarMax Auto Superstores, Inc. or its
affiliates (collectively, "CarMax"); (ii) to finance such activities pursuant to
------
trust agreements, pooling and servicing agreements, transfer and administration
agreements or other similar agreements (collectively, the "Financing Documents")
-------------------
providing for, among other things, the issuance of asset-backed notes, asset-
backed certificates and other types of securities; (iii) to acquire, own, hold,
transfer, assign, pledge and otherwise deal with such asset-backed notes, asset-
backed certificates and other types of securities and (iv) to engage in any
lawful act or activity and to exercise any power permitted to limited liability
companies organized under the Virginia Limited Liability Company Act that is
incidental to and necessary or appropriate to accomplish the foregoing.
ARTICLE III
MANAGEMENT
Section 3.01 Manager. Management of the Company is vested in a
-------
manager. No member is an agent of the Company for the purpose of its business
solely by reason of being a member. The initial manager of the Company is CPD,
Inc., a Virginia corporation (in such capacity, the "Manager").
<PAGE>
ARTICLE IV
REGISTERED OFFICE AND REGISTERED AGENT
Section 4.01 Registered Office and Registered Agent. The address of
--------------------------------------
the initial registered office of the Company, which is located in the City of
Richmond, Virginia, is 11 South 12th Street, Richmond, Virginia 23219. The
initial registered agent of the Company at such initial registered office is
Beverly L. Crump, a resident of Virginia and a member of the Virginia State Bar.
ARTICLE V
ORGANIZER
Section 5.02 Organizer. The name and address of the organizer are
---------
Peter E. Kane, One James Center, 901 East Cary Street, Richmond, Virginia 23219.
ARTICLE VI
INITIAL PRINCIPAL OFFICE
Section 6.01 Initial Principal Office. The mailing address of the
------------------------
initial principal office of the Company is 9954 Mayland Drive, Richmond,
Virginia 23233.
ARTICLE VII
LIMIT ON LIABILITY; INDEMNIFICATION
Section 7.01 Definitions. For purposes of this Article VII, the
-----------
following definitions shall apply:
(a) "Company" means the Company only and no predecessor entity or
-------
other legal entity.
(b) "expenses" includes counsel fees, expert witness fees and costs of
--------
investigation, litigation and appeal, as well as any amounts expended in
asserting a claim for indemnification.
(c) "liability" means the obligation to pay a judgment, settlement,
---------
penalty, fine or other such obligation, including, without limitation, any
excise tax assessed with respect to an employee benefit plan.
(d) "legal entity" means a corporation, limited liability company,
------------
partnership, joint venture, trust, employee benefit plan or other enterprise.
2
<PAGE>
(e) "proceeding" means any threatened, pending or completed action,
----------
suit, proceeding or appeal whether civil, criminal, administrative or
investigative and whether formal or informal.
Section 7.02 Limit on Liability. In every instance in which the
------------------
Virginia Limited Liability Company Act, as it exists on the date hereof or may
hereafter be amended or supplemented, permits the limitation or elimination of
liability of managers or officers of a limited liability company to the limited
liability company or its members, the manager and officers of the Company shall
not be liable to the Company or its members to the maximum extent permitted by
the Virginia Limited Liability Company Act.
Section 7.03 Indemnification of Managers and Officers. To the full
----------------------------------------
extent permitted and in the manner prescribed by the Virginia Limited Liability
Company Act and any other applicable law, the Company shall indemnify any
manager or officer of the Company who is, was or is threatened to be made a
party to any proceeding (including a proceeding by or in the right of the
Company or by or on behalf of its members) by reason of the fact that he, she or
it is or was a manager or officer of the Company or is or was serving, at the
request of the Company, as a director, manager, officer, employee or agent of
any other legal entity, or is a fiduciary of any employee benefit plan
established at the direction of the Company, against all liabilities and
reasonable expenses incurred in the proceeding except such liabilities and
expenses as are incurred because of such individual's willful misconduct or
knowing violation of the criminal law. Service as a director, manager or
officer of a legal entity controlled by the Company shall be deemed service at
the request of the Company. The determination that indemnification under this
Section 7.03 is permissible and the evaluation as to the reasonableness of
expenses in a specific case shall be made, in the case of a manager, as provided
by law, and, in the case of an officer, as provided in Section 7.04 of this
Article VII; provided, however, that if the manager of the Company has changed
-------- -------
after the date of the alleged conduct giving rise to a claim for
indemnification, such determination and evaluation shall, at the option of the
person claiming indemnification, be made by special legal counsel agreed upon by
the manager of the Company and such person. The Company shall make advances and
reimbursements for expenses incurred by any manager or officer of the Company in
a proceeding upon receipt of an undertaking from such manager or officer to
repay the same if it is ultimately determined that such manager or officer is
not entitled to indemnification. Such undertaking shall be an unlimited,
unsecured general obligation of such manager or officer and shall be accepted
without reference to such manager's
3
<PAGE>
or officer's ability to make repayment. The termination of a proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not of itself create a presumption that a manager or officer
acted in such a manner as to make such manager or officer ineligible for
indemnification.
Section 7.04 Indemnification of Others. The manager of the Company
-------------------------
is hereby empowered to cause the Company to indemnify or contract in advance to
indemnify any person not specified in Section 7.03 of this Article VII who is,
was or is threatened to be made a party to any proceeding by reason of the fact
that he or she is or was an employee or agent of the Company, or is or was
serving at the request of the Company as a director, manager, officer, employee
or agent of another legal entity, to the same extent as if such person were
specified as one to whom indemnification and advancement of expenses shall be
granted pursuant to Section 7.03 of this Article VII. The determination that
indemnification under this Section 7.04 is permissible, the authorization of
such indemnification and the evaluation as to the reasonableness of expenses in
a specific case shall be made as authorized from time to time by general or
specific action of the manager of the Company, which action may be taken before
or after a claim for indemnification is made, or as otherwise provided by law.
No person's rights under Section 7.03 of this Article VII shall be limited by
the provisions of this Section 7.04.
Section 7.05 Insurance. The Company may purchase and maintain
---------
insurance to indemnify it against all or any portion of the liability assumed by
the Company in accordance with this Article VII and may also purchase and
maintain insurance, in such amounts as the manager of the Company may determine,
on behalf of any person who is or was a manager, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
manager, officer, employee or agent of another legal entity, against any
liability asserted against or incurred by any such person in any such capacity
or arising from his status as such, whether or not the Company would have the
power to indemnify him against such liability under the provisions of this
Article VII; provided, however, that no person shall be entitled to
-------- -------
indemnification by the Company to the extent such person is indemnified by an
insurer or any other legal entity.
Section 7.06 Miscellaneous. The rights of each person entitled to
-------------
indemnification hereunder shall inure to the benefit of such person's
successors, assigns, heirs, executors and administrators. Special legal counsel
selected to make determinations under this Article VII may be counsel for the
Company. Indemnification pursuant to this Article VII shall not
4
<PAGE>
be exclusive of any other right of indemnification to which any person may be
entitled, including indemnification pursuant to a valid contract,
indemnification by legal entities other than the Company, and indemnification
under policies of insurance purchased and maintained by the Company or others;
provided, however, that no person shall be entitled to indemnification by the
- -------- -------
Company to the extent such person is indemnified by an insurer or any other
legal entity. No amendment, modification or repeal of this Article VII shall
diminish the rights provided hereunder to any person arising from conduct or
events occurring before the adoption of such amendment, modification or repeal.
The provisions of this Article VII shall not be deemed to preclude the Company
from entering into contracts otherwise permitted by law with any individuals or
legal entities, including those named above. If any provision of this Article
VII or its application to any person or circumstance is held invalid by a court
of competent jurisdiction, the invalidity shall not affect other provisions or
applications of this Article VII, and, to this end, the provisions of this
Article VII are severable. Reference herein to managers, officers, employees or
agents shall include former managers, officers, employees and agents.
ARTICLE VIII
INTERNAL AFFAIRS
Section 8.01 Internal Affairs. The Company will conduct its affairs
----------------
in accordance with the following provisions:
(a) At least one of the directors of the Manager (the "Independent
-----------
Director") shall at all times be a person who (i) is not and has not been within
- --------
a period of five years prior to such person's election (i) a direct or indirect
legal or beneficial owner of the Company or any Affiliate (as defined below),
(ii) a creditor, supplier, employee, officer, director, family member, manager
or contractor of the Company or any Affiliate (excluding, however, service as an
independent director of the Manager, the Company or any Affiliate) or (iii) a
person who controls (whether directly, indirectly or otherwise) the Company or
any Affiliate or any creditor, supplier, employee, officer, director, manager or
contractor of the Company or any Affiliate.
(b) The Company shall maintain its principal executive office separate
from the principal executive office of any Affiliate and shall conspicuously
identify such office as its office; provided, however, that such office may be
-------- -------
located in separately denoted space at the offices of any Affiliate for which
any overhead shall be allocated fairly and reasonably.
5
<PAGE>
(c) The Company shall maintain its financial statements, accounting
records, limited liability company records, books of account and other documents
separate from those of any Affiliate or other entity.
(d) The Company shall at all times hold itself out to the public
(including the creditors of any Affiliate) under the Company's own name as a
separate and distinct entity and shall use separate stationary, invoices and
checks.
(e) The Company shall observe all customary formalities regarding its
existence as a limited liability company, including holding meetings of or
obtaining the consent of its manager, as appropriate, and its members and
maintaining current and accurate minute books.
(f) All business transactions entered into by the Company with any
Affiliate shall be on terms and conditions that are not more or less favorable
to the Company than terms and conditions available at the time to the Company
for comparable transactions with unaffiliated persons and must be approved by
the board of directors of the Manager (including the Independent Director).
(g) The Company shall pay its own expenses, liabilities, indebtedness
and obligations, including all administrative expenses and salaries of its
employees, from its own separate assets and shall not guarantee or become
obligated for the debts of any other legal entity or natural person or hold out
its credit as being available to satisfy the obligations of others.
(h) The Company shall not pledge its assets for the benefit of any
legal entity or natural person other than pursuant to or as contemplated by the
Financing Documents.
(i) The Company shall separately identify, maintain and segregate its
assets and shall maintain its own bank accounts. Except as otherwise provided
in or contemplated by the Financing Documents, the Company shall not commingle
its funds with those of any other legal entity or natural person.
(j) The Company shall not take any action if, as a result of such
action, the Company would be required to register as an investment company under
the Investment Company Act of 1940, as amended.
(k) "Affiliate" means any entity other than the Company (i) which is a
---------
member of the Company, (ii) more than 50 percent of the outstanding voting
securities of which are owned
6
<PAGE>
beneficially, directly or indirectly, by any entity described in clause (i)
above or (iii) which controls or is controlled by any entity described in clause
(i) above (the terms "control" and "controlled by" having the meanings assigned
------- ----------
to them in Rule 405 under the Securities Act of 1933, as amended).
ARTICLE IX
LIMITATIONS ON ACTIONS
Section 9.01 Bankruptcy. The Company may not, without the
----------
affirmative vote of 100 percent of its members and the affirmative vote of 100
percent of the board of directors of the Manager (including the affirmative vote
of the Independent Director) institute proceedings to be adjudicated bankrupt or
insolvent, consent to the institution of bankruptcy or insolvency proceedings
against it, file a petition seeking, or consent to, reorganization or relief
under any applicable federal or state law relating to bankruptcy, consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or a substantial part of its property, make any
assignment for the benefit of creditors, admit in writing its inability to pay
its debts generally as they become due or take any action as a limited liability
company in furtherance of any such action. The Independent Director, each
member and the Manager shall not, with regard to any act, or failure to act, in
connection with any matter referred to in this Section 9.01, owe a fiduciary
duty or other obligation to any other member of the Company (except as may
specifically be required by the statutory or case law of any applicable
jurisdiction). The fiduciary duty or other obligation of the Independent
Director, each member or the Manager, as applicable, with regard to any such
act, or any such failure to act, shall instead be owed to the Company,
including, without limitation, the creditors of the Company. Each member of the
Company shall be deemed to have consented to the foregoing by virtue of such
member's purchase of membership interests of the Company, no further act or deed
of any such member being required to evidence such consent.
Section 9.02 Debt. The Company may not incur any debt other than
----
pursuant to or as contemplated by the Financing Documents.
Section 9.03 Amendments. The Company may not, without the prior
----------
written consent of each party to the Financing Documents, amend, alter, change
or repeal Article II, Article VIII, Article IX or Article X of these Articles of
Organization; provided, however, that any such amendment, alteration, change or
-------- -------
7
<PAGE>
repeal must be approved by 100 percent of the board of directors of the Manager
(including the Independent Director).
ARTICLE X
DURATION
Section 10.01 Duration. The Company shall be dissolved and its
--------
affairs wound up only upon the unanimous written consent of the members of the
----
Company. The Manager may not, without the affirmative vote of 100 percent of
the board of directors of the Manager (including the Independent Director),
consent to the dissolution of the Company. If at any time there are no members
of the Company, the Company shall not be dissolved and its affairs shall not be
wound up if, within 24 months after the occurrence of the event that caused the
dissociation of the last remaining member, the personal representative or
successor in interest, as applicable, of the last remaining member agrees in
writing to continue the Company until the admission of the personal
representative or successor in interest, as applicable, of such member or its
nominee or designee to the Company as a member, effective as of the occurrence
of the event that caused the dissociation of the last remaining member.
Section 10.01 Dissociation. A member of the Company shall be
------------
dissociated from the Company only upon the Company's having notice of such
----
member's express will to resign as a member on a later date specified by such
member in the notice or, if no later date is specified, the date of such notice.
The Manager may not, without the affirmative vote of 100 percent of the board of
directors of the Manager (including the Independent Director), resign as a
member of the Company. Without limitation, a member shall not be dissociated
---
from the Company upon such member's (a) becoming a debtor in bankruptcy, (b)
executing an assignment for the benefit of creditors, (c) seeking, consenting
to, or acquiescing in the appointment of a trustee, receiver, or liquidator of
such member or of all or substantially all of such member's property, or (d)
failing, within 90 days after the appointment, to have vacated or stayed the
appointment of a trustee, receiver or liquidator of such member or of all or
substantially all of such member's property obtained without such member's
consent or acquiescence, or failing within 90 days after the expiration of a
stay to have such appointment vacated.
/S/ Peter E. Kane
-----------------------------------
Peter E. Kane, Organizer
May 19, 1999
8
<PAGE>
Exhibit 3.2
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
CARMAX AUTO RECEIVABLES LLC
(A Virginia Limited Liability Company)
The undersigned members (the "Members") have caused the formation of CarMax
Auto Receivables LLC, a Virginia limited liability company (the "LLC"), pursuant
to the Articles of Organization dated as of May 19, 1999 and filed in the office
of the Virginia State Corporation Commission on May 19, 1999 in accordance with
the Virginia Limited Liability Company Act (as amended from time to time, the
"Act") and, in connection therewith, hereby agree as follows:
1. Definitions. Except as otherwise defined herein, all capitalized
-----------
terms used in this Limited Liability Company Operating Agreement (the
"Agreement") shall have the same meanings ascribed to them in the Articles of
Organization of the LLC, as the same shall be amended, supplemented or otherwise
modified and in effect from time to time.
2. Appointment and Powers of the Manager. The manager of the LLC (the
-------------------------------------
"Manager") is authorized on behalf of the LLC to do or cause to be done any
activity authorized by the Articles of Organization of the LLC. The initial
Manager of the LLC, as appointed in the Articles of Organization of the LLC, is
CPD, Inc., a Virginia corporation ("CPD"). For and in consideration of the
Manager's service as manager of the LLC, the LLC shall pay to the Manager such
compensation as the Manager and the Members (other than the Manager if the
Manager is also a Member) shall agree from time to time.
3. Restrictions on the Powers of the Manager. The Manager shall not have
-----------------------------------------
the authority to:
(a) cause the LLC to do any acts in violation of or in breach of the
Financing Documents or any other material agreement entered into by the
LLC;
(b) take any action in contravention of the Act, the Articles of
Organization of the LLC, or this Agreement;
(c) take any action that would make it impossible to carry on the
ordinary business of the LLC;
(d) admit any Person as a member of the LLC;
(e) knowingly perform any act that would subject the Members to loss
of limited liability in any jurisdiction; or
(f) take any action to amend or modify this Agreement.
<PAGE>
4. Duties and Obligations of the Manager.
-------------------------------------
(a) Subject to Section 3, the Manager shall take all action that may
be necessary or appropriate for the continuation of the LLC's valid
existence as a limited liability company under the laws of the Commonwealth
of Virginia (and each other jurisdiction in which such existence is
necessary to protect the limited liability of the Members or to enable the
LLC to conduct the business in which it is engaged).
(b) The Manager shall devote to the LLC such time as it shall deem
necessary to conduct the LLC's business and affairs in an appropriate
manner.
(c) The Manager shall use its best efforts, in the conduct of the
LLC's business and affairs, to put all persons with whom the LLC deals on
notice that the Members are not liable for the LLC's obligations, and all
agreements to which the LLC is a party shall include a statement to the
effect that the LLC is a limited liability company formed under the Act;
provided, however, the failure to include such a statement in an agreement
-------- -------
to which the LLC is a party shall not affect the LLC's power and authority
or authorization to enter into such agreement.
(d) The Manager shall prepare or cause to be prepared and shall file
or cause to be filed on or before the due date (or any extension thereof)
any federal, state or local tax returns required to be filed by the LLC.
The Manager shall cause the LLC to pay any taxes payable by the LLC;
provided, however, that the Manager shall not be required to cause the LLC
-------- -------
to pay any tax so long as the LLC is contesting in good faith and by
appropriate legal proceedings the validity, applicability or amount thereof
and such contest does not materially endanger any right or interest of the
LLC.
(e) The Manager shall, from time to time, submit or cause to be
submitted to any appropriate state securities administrator all documents,
papers, statistics and reports required to be filed with or submitted to
such state securities administrator.
(f) The Manager shall use its best efforts to cause the LLC to be
formed, reformed, or qualified to transact business, or be registered under
any applicable assumed or fictitious name statute or similar law in any
state in which the LLC then transacts business, if such formation,
reformation, qualification or registration is necessary or desirable in
order to protect the limited liability of the
2
<PAGE>
Members or to permit the LLC lawfully to transact its business.
5. Officers.
--------
(a) Appointment of Officers. The officers of the LLC (the "Officers")
-----------------------
shall be a President, one or more Vice Presidents, a Treasurer, a
Secretary, one or more Assistant Secretaries and such other officers as the
Manager shall approve from time to time in its sole discretion. Any two or
more offices may be held by the same person, and the Officers will hold
their offices until their successors are selected and appointed by the
Manager. The Officers are as follows:
Name Office
---- ------
Michael T. Chalifoux President and Assistant
Secretary
Philip J. Dunn Vice President, Treasurer and
Secretary
Keith D. Browning Vice President and Assistant
Secretary
(b) Delegation of Authority. Subject to Sections 2 and 3 of this
-----------------------
Agreement, the Officers shall have the authority to manage the day-to-day
affairs of the LLC on behalf of and under the supervision of the Manager.
The Officers shall act at all times in accordance with the instructions of
the Manager. The acts of the Officers shall bind the LLC to the extent
that such acts are within the scope of their authority. The Officers shall
be subject at all times to the direction of the Manager.
(c) President. In the absence of the Manager or in the event of the
---------
Manager's inability to act, the President shall act as the chief executive
officer of the LLC and shall be responsible for the general and active
management of the LLC subject to Subsection (b) of this Section 5. The
President shall also perform such duties and have such authority as may be
lawfully required of or conferred upon the President by the Manager.
(d) Vice President. In the absence of the President or in the event
--------------
of the President's inability to act, the Vice President shall perform the
duties of the President. The Vice President shall also perform such duties
and have such authority as may be lawfully required of or conferred upon
the Vice President by the Manager.
3
<PAGE>
(e) Treasurer. The Treasurer shall have charge of and be responsible
---------
for all securities, funds, receipts and disbursements of the LLC and shall
deposit or cause to be deposited, in the name of the LLC, all monies or
valuable effects in such banks, trust companies or other depositories as
shall, from time to time, be selected by or under authority granted by the
Manager; shall be custodian of the financial records of the LLC; shall keep
or cause to be kept full and accurate records of all receipts and
disbursements of the LLC in accordance with generally accepted accounting
practices and principles; and shall render to the President or the Manager,
whenever requested, an account of the financial condition of the LLC. The
Treasurer shall also perform such duties and have such authority as may be
lawfully required of or conferred upon the Treasurer by the Manager.
(f) Secretary and Assistant Secretaries. The Secretary shall be
-----------------------------------
responsible for filing legal documents and maintaining the records of the
LLC. The Secretary shall also perform such duties and have such authority
as may be lawfully required of or conferred upon the Secretary by the
Manager. In the absence of the Secretary or in the event of the
Secretary's inability to act, any Assistant Secretary shall perform the
duties of the Secretary.
6. Admission of Members, Capital Contributions, Membership Interests.
------------------------------------------------------------------
(a) Simultaneously with the execution and delivery of this Agreement,
CarMax Auto Superstores, Inc., a Virginia corporation ("CarMax Auto"),
shall be admitted as a Member of the LLC with a membership interest of
50.0%. The address of CarMax Auto is as follows:
CarMax Auto Superstores, Inc.
4900 Cox Road
Glen Allen, Virginia 23060
Attention: Keith D. Browning
(b) A capital contribution to the LLC in the amount of $100.00 shall
be made by CarMax Auto simultaneously with the execution and delivery of
this Agreement in consideration for its 50.0% membership interest.
(c) Simultaneously with the execution and delivery of this Agreement,
CPD, shall be admitted as a Member of the LLC with a membership interest of
50.0%. The address of CPD is as follows:
4
<PAGE>
CPD, Inc.
4900 Cox Road
Glen Allen, Virginia 23060
Attention: Michael T. Chalifoux
(d) A capital contribution to the LLC in the amount of $100.00 shall
be made by CPD simultaneously with the execution and delivery of this
Agreement in consideration for its 50.0% membership interest.
(e) The LLC shall maintain a capital account ("Capital Account") for
each Member and assignee of a Member. The value of each Capital Account
shall equal (i) the sum of the cash contributions to the account, the
agreed upon value of contributions of property to the account, and the
share of the profits of the LLC allocated to the account, less (ii) all
distributions made to the owner of the account and the share of the net
losses of the LLC allocated to the account. Capital Accounts shall be
maintained in accordance with the applicable provisions of the Internal
Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations
promulgated thereunder and shall not bear interest.
7. Additional Capital Contributions. The Members of the LLC shall not be
--------------------------------
required to make any additional capital contributions to the LLC. A Member may
make additional capital contributions to the LLC at any time, however, upon the
written consent of each other Member. To the extent that a Member makes an
additional capital contribution to or on behalf of the LLC, the Member Schedule
(defined below) shall be revised and the membership interests of the Members
adjusted accordingly. The provisions of this Agreement, including this Section
7, are intended solely for the benefit of the Members and the Manager and, to
the fullest extent permitted by applicable law, shall not be construed as
conferring any benefit upon any creditor of the LLC (and no such creditor of the
LLC shall be a third-party beneficiary of this Agreement), and no Member shall
have any duty or obligation to any creditor of the LLC to make any contribution
to the LLC or to issue any call for capital pursuant to this Agreement. CPD
hereby consents to the making of additional capital contributions to the LLC by
CarMax Auto in connection with the Financing Documents.
8. Member Schedule. The LLC shall maintain a schedule of all Members of
---------------
the LLC from time to time, their respective addresses and the membership
interests held by them (as the same may be amended, modified or supplemented
from time to time, the "Member Schedule"), a copy of which as of the date of
this Agreement is attached hereto as Schedule A. The Manager shall cause the
----------
Member Schedule to be updated from time to time as necessary to reflect
accurately the information therein.
5
<PAGE>
9. Limited Liability of Members. The debts, obligations and liabilities
----------------------------
of the LLC, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the LLC, and the Members shall not be
obligated for any such debts, obligations or liabilities of the LLC solely by
reason of their status as Members of the LLC.
10. Tax Matters.
-----------
(a) The books and records of the LLC shall be maintained on an accrual
basis. The LLC may report its operations for tax purposes on the accrual
method. The taxable year of the LLC shall end on the last day of February.
(b) CarMax Auto is hereby appointed as the "tax matters partner" of
the LLC pursuant to Section 6231(a)(7) of the Internal Revenue Code of
1986, as amended from time to time (the "Code"), with all powers granted to
a "tax matters partner" under the Code.
(c) The Members intend that the LLC be classified as a partnership for
federal income tax purposes, and this Agreement shall be interpreted
accordingly.
11. Allocations of Profits and Losses. On the last day of each taxable
---------------------------------
year and for the taxable year ending on such day, 99% of the profits and losses
(including items of deduction) of the LLC shall be allocated to CarMax Auto, and
1% of the profits and losses (including items of deduction) of the LLC shall be
allocated to CPD.
12. Distributions. Subject to applicable provisions of the Act or other
-------------
applicable law, the Manager shall have sole discretion regarding whether to make
any distributions and regarding the amounts and timing of any distributions to
Members, in each case subject to the retention and establishment of reserves of,
or payment to third parties of, such funds as the Manager deems necessary with
respect to the reasonable business needs of the LLC. Unless specifically
required otherwise by this Agreement, distributions to Members shall be made in
accordance with their respective positive Capital Account balances.
13. Liquidation. Upon dissolution of the LLC, the Manager shall proceed
-----------
diligently to wind up the affairs of the LLC and make final distributions as
provided herein and in the Act. The Manager shall pay, satisfy or discharge
from LLC funds all of the debts, liabilities and obligations of the LLC or
otherwise make adequate provision for payment and discharge thereof (including,
without limitation, the establishment of a cash fund for
6
<PAGE>
contingent liabilities in such amount and for such term as the Manager may
reasonably determine), and the Manager shall distribute all remaining assets of
the LLC to the Members in accordance with their respective Capital Accounts by
the end of the taxable year of the LLC in which the liquidation of the LLC
occurs (or, if later, 90 days after the date of the liquidation).
14. Term. This Agreement shall terminate upon the dissolution and winding
----
up of the affairs of the LLC.
15. Assignments. Each Member may assign or otherwise transfer in whole or
-----------
in part its membership interest in the LLC. If a Member assigns all or a part of
its membership interest in the LLC, the assignee shall be admitted to the LLC as
a member of the LLC upon such assignee's execution of an instrument signifying
its agreement to be bound by the terms and conditions of this Agreement, which
instrument may be a counterpart signature page to this Agreement.
16. Amendments. Except with respect to amendments required by law, this
----------
Agreement may be amended only in a writing signed by each Member existing at the
time of such amendment.
17. Headings. The headings in this Agreement are included solely for
--------
convenience and identification and are in no way intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision thereof.
18. Benefits of Agreement; No Third Party Rights. None of the provisions
--------------------------------------------
of this Agreement shall be for the benefit of or enforceable by any creditor of
the LLC or by any creditor of any Member. Nothing in this Agreement shall be
deemed to create any right in any person not a party hereto, and this Agreement
shall not be construed in any respect to be a contract in whole or in part for
the benefit of any third person.
19. Severability of Provisions. Each provision of this Agreement shall be
--------------------------
considered severable, and if for any reason any provision or provisions of this
Agreement are determined to be invalid, unenforceable or illegal under any
existing or future law, such invalidity, unenforceability or illegality shall
not impair the operation of or affect those provisions of this Agreement which
are valid, enforceable and legal.
20. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of the Commonwealth of Virginia.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original of this Agreement and
all of which together shall constitute one
7
<PAGE>
and the same instrument.
IN WITNESS WHEREOF, the undersigned Members have duly executed this
Agreement as of the 19th day of May, 1999.
CPD, INC.,
as Manager and a Member
By: /S/ Michael T. Chalifoux
-------------------------------
Name: Michael T. Chalifoux
Title: President
CARMAX AUTO SUPERSTORES, INC.,
as a Member
By: /S/ Keith D. Browning
--------------------------------
Name: Keith D. Browning
Title: Vice President, Chief
Financial Officer and
Assistant Secretary
8
<PAGE>
Schedule A
Members
-------
Membership Capital
Name and Address Interest Contribution
- ---------------- ---------- ------------
CarMax Auto Superstores, Inc. 50.0% $100.00
4900 Cox Road
Glen Allen, Virginia 23060
Attention: Keith D. Browning
CPD, Inc. 50.0% $100.00
4900 Cox Road
Glen Allen, Virginia 23060
Attention: Michael T. Chalifoux
9
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Form S-3 Registration
Statement of Carmax Auto Receivables LLC, relating to Carmax Auto Owner Trust,
1999-1, of our report dated February 2, 1999, on our audits of the consolidated
financial statements of MBIA Insurance Corporation and Subsidiaries as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998. We also consent to the reference to our Firm under the
caption "Experts".
/s/ PricewaterhouseCoopers LLP
October 1, 1999
<PAGE>
EXHIBIT 25.1
___________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT
TO SECTION 305(b)(2)__________
______________________________
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
FOUR ALBANY STREET, 10th FLOOR
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
Bankers Trust Company
Legal Department
130 Liberty Street, 31st Floor
New York, New York 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
_________________________________
CARMAX AUTO RECEIVABLES, VA 54-1942944
LLC
(Exact name of Registrants (State or other jurisdiction of (I.R.S. employer
as no.) identification
specified in its Charter) Incorporation or organization)
4900 COX ROAD
GLEN ALLEN, VIRGINIA 23060
(804) 747-0422
(Address, including zip code, and telephone number of Registrants principal
executive offices)
CARMAX AUTO OWNER TRUST 1999-1
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising authority to
which it is subject.
Name Address
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with Obligor.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
Item 3.-15. Not Applicable
Item 16. List of Exhibits.
Exhibit 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990, Certificate of Amendment of
the Organization Certificate of Bankers Trust Company dated
June 21, 1995 - Incorporated herein by reference to Exhibit
1 filed with Form T-1 Statement, Registration No. 33-65171,
Certificate of Amendment of the Organization Certificate of
Bankers Trust Company dated March 20, 1996, incorporate by
referenced to Exhibit 1 filed with Form T-1 Statement,
Registration No. 333-25843 and Certificate of Amendment of
the Organization Certificate of Bankers Trust Company dated
June 19, 1997, incorporated by reference to Exhibit 1 filed
with Form T-1 Statement, Registration No. 333-45229,
Certificate of Amendment of the Organization Certificate of
Bankers Trust Company dated March 26, 1998, copy attached
and Certificate of Amendment of the Organization Certificate
of Bankers Trust Company dated June 19, 1999, copy attached.
Exhibit 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2 filed with
Form T-1 Statement, Registration No. 33-21047.
Exhibit 3 - Authorization of the Trustee to exercise corporate
trust powers - Incorporated herein by reference to Exhibit 2
filed with Form T-1 Statement, Registration No. 33-21047.
<PAGE>
Exhibit 4 - Existing By-Laws of Bankers Trust Company, as amended
on June 22, 1999, copy attached.
-2-
<PAGE>
Exhibit 5 - Not applicable.
Exhibit 6 - Consent of Bankers Trust Company required by Section
321(b) of the Act. - Incorporated herein by reference to
Exhibit 4 filed with Form T-1 Statement, Registration No.
22-18864.
Exhibit 7 - The latest report of condition of Bankers Trust Company
dated as of March 31, 1999. Copy attached.
Exhibit 8 - Not Applicable.
Exhibit 9 - Not Applicable.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this statement
of eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in The City of New York, and State of New York, on this 1ST day
of October , 1999
BANKERS TRUST COMPANY
By: /s/Christopher D. Lew
---------------------
Christopher D. Lew
Assistant Treasurer
-4-
<PAGE>
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY Under Section
8005 of the Banking Law," dated June 19, 1997, providing for an increase in
authorized capital stock from $1,601,666,670 consisting of 100,166,667 shares
with a par value of $10 each designated as Common Stock and 600 shares with a
par value of $1,000,000 each designated as Series Preferred Stock to
$2,001,666,670 consisting of 100,166,667 shares with a par value of $10 each
designated as Common Stock and 1,000 shares with a par value of $1,000,000 each
designated as Series Preferred Stock.
Witness, my hand and official seal of the Banking Department at the City of New
York,
this 27th day of June in the Year of our Lord
---- ----
one thousand nine hundred and ninety-seven.
Manuel Kursky
-------------
Deputy Superintendent of Banks
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
_____________________________
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby
amended to increase the aggregate number of shares which the corporation shall
have authority to issue and to increase the amount of its authorized capital
stock in conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock outstanding,
which reads as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is One Billion, Six Hundred and One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($1,601,666,670), divided into
One Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-
Seven (100,166,667) shares with a par value of $10 each designated as
Common Stock and 600 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter to
have is Two Billion One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($2,001,666,670), divided into One Hundred
Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(100,166,667) shares with a par value of $10 each designated as Common
Stock and 1000 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE>
5. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this
19th day of June, 1997.
/s/ James T. Byrne, Jr.
-----------------------
James T. Byrne, Jr.
Managing Director
/s/ Lea Lahtinen
-----------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an
Assistant Secretary of Bankers Trust Company, the corporation described in the
foregoing certificate; that she has read the foregoing certificate and knows the
contents thereof, and that the statements herein contained are true.
/s/ Lea Lahtinen
----------------
Lea Lahtinen
Sworn to before me this 19th day
of June, 1997.
/s/ Sandra L. West
----------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
<PAGE>
BY-LAWS
JUNE 22, 1999
Bankers Trust Corporation
(Incorporated under the New York Business Corporation Law)
<PAGE>
1
BANKERS TRUST CORPORATION
-------------------------
BY-LAWS
-------------------------
ARTICLE I
SHAREHOLDERS
SECTION 1.01 Annual Meetings. The annual meetings of shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held on the third Tuesday in April of
each year, if not a legal holiday, and if a legal holiday then on the next
succeeding business day, at such hour as shall be designated by the Board of
Directors. If no other hour shall be so designated such meeting shall be held
at 3 P.M.
SECTION 1.02 Special Meetings. Special meetings of the shareholders, except
those regulated otherwise by statute, may be called at any time by the Board of
Directors, or by any person or committee expressly so authorized by the Board of
Directors and by no other person or persons.
SECTION 1.03 Place of Meetings. Meetings of shareholders shall be held at such
place within or without the State of New York as shall be determined from time
to time by the Board of Directors or, in the case of special meetings, by such
person or persons as may be authorized to call a meeting. The place in which
each meeting is to be held shall be specified in the notice of such meeting.
SECTION 1.04 Notice of Meetings. A copy of the written notice of the place,
date and hour of each meeting of shareholders shall be given personally or by
mail, not less than ten nor more than fifty days before the date of the meeting,
to each shareholder entitled to vote at such meeting. Notice of a special
meeting shall indicate that it is being issued by or at the direction of the
person or persons calling the meeting and shall also state the purpose or
purposes for which the meeting is called. Notice of any meeting at which is
proposed to take action which would entitle shareholders to receive payment for
their shares pursuant to statutory provisions must include a statement of that
purpose and to that effect. If mailed, such notices of the annual and each
special meeting are given when deposited in the United States mail, postage
prepaid, directed to the shareholder at his address as it appears in the record
of shareholders unless he shall have filed with the Secretary of the corporation
a written request that notices intended for him shall be mailed to some other
address, in which case it shall be directed to him at such other address.
SECTION 1.05 Record Date. For the purpose of determining the shareholders
entitled to notice of or to vote any meeting of shareholders or any adjournment
thereof, or to express consent to or dissent from any proposal without a
meeting, or for the purpose of determining shareholders entitled to receive
payment of any dividend or the allotment of any rights, or for the purpose of
any other action, the Board of Directors may fix, in advance, a date as the
record date for any such
<PAGE>
determination of shareholders. Such date shall not be more than fifty nor less
than ten days before the date of such meeting, nor more than fifty days prior to
any other action.
SECTION 1.06 Quorum. The presence, in person or by proxy, of the holders of a
majority of the shares entitled to vote thereat shall constitute a quorum at a
meeting of shareholders for the transaction of business, except as otherwise
provided by statute, by the Certificate of Incorporation or by the By-Laws. The
shareholders present in person or by proxy and entitled to vote at any meeting,
despite the absence of a quorum, shall have power to adjourn the meeting from
time to time, to a designated time and place, without notice other than by
announcement at the meeting, and at any adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
However, if after the adjournment the Board of Directors fixes a new record date
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record on the new record date entitled to notice.
SECTION 1.07 Notice of Shareholder Business at Annual Meeting. At an annual
meeting of shareholders, only such business shall be conducted as shall have
been brought before the meeting (a) by or at the direction of the Board of
Directors or (b) by any shareholder of the corporation who complies with the
notice procedures set forth in this Section 1.07. For business to be properly
brought before an annual meeting by a shareholder, the shareholder must have
given timely notice thereof in writing to the Secretary of the corporation. To
be timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation not less than thirty days nor
more than fifty days prior to the meeting; provided, however, that in the event
that less than forty days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be timely
must be received not later than the close of business on the tenth day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure was made. A shareholder's notice to the Secretary shall
set forth as to each matter the shareholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the corporation's books, of
the shareholder proposing such business, (c) the class and number of shares of
the corporation which are beneficially owned by the shareholder and (d) any
material interest of the shareholder in such business. Notwithstanding anything
in these By-Laws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Section 1.07
and Section 2.03. The Chairman of an annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions of this
Section 1.07 and Section 2.03, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01 Number and Qualifications. The business of the corporation shall
be managed by its Board of Directors. The number of directors constituting the
entire Board of Directors shall be not less than seven nor more than fifteen, as
shall be fixed from time to time by vote of a majority of the entire Board of
Directors. Each director shall be at least 21 years of age. Directors need not
be shareholders. No Officer-Director who shall have attained age 65, or earlier
relinquishes his responsibilities and title, shall be eligible to serve as a
director.
<PAGE>
SECTION 2.02 Election. At each annual meeting of shareholders, directors shall
be elected by a plurality of the votes to hold office until the next annual
meeting. Subject to the provisions of the statute, of the Certificate of
Incorporation and of the By-Laws, each director shall hold office until the
expiration of the term for which elected, and until his successor has been
elected and qualified.
SECTION 2.03 Nomination and Notification of Nomination. Subject to the rights
of holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, nominations for the election of
directors may be made by the Board of Directors or to any committee appointed by
the Board of Directors or by any shareholder entitled to vote in the election of
directors generally. However, any shareholder entitled to vote in the election
of directors generally may nominate one or more persons for election as
directors at a meeting only if written notice of such shareholder's intent to
make such nomination or nominations has been given, either by personal delivery
or by United States mail, postage prepaid, to the Secretary of the corporation
not later than (i) with respect to an election to be held at an annual meeting
of shareholders ninety days in advance of such meeting, and (ii) with respect to
an election to be held at a special meeting of shareholders for the election of
directors, the close of business on the seventh day following the date on which
notice of such meeting is first given to shareholders. Each such notice shall
set forth: (a) the name and address of the shareholder who intends to make the
nomination and of the person or persons to be nominated; (b) a representation
that the shareholder is a holder of record of stock of the corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (d) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a director of the corporation if
so elected. At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the Secretary
of the corporation that information required to be set forth in a shareholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a director of the corporation unless nominated in accordance
with the procedures set forth in the By-Laws. The Chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by these
By-Laws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
SECTION 2.04 Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at such places and times as may be fixed from time to
time by resolution of the Board and a regular meeting for the purpose of
organization and transaction of other business shall be held each year after the
adjournment of the annual meeting of shareholders.
SECTION 2.05 Special Meetings. The Chairman of the Board, the Chief Executive
Officer, the President, the Senior Vice Chairman or any Vice Chairman may, and
at the request of three directors shall, call a special meeting of the Board of
Directors, two days' notice of which shall be given in person or by mail,
telegraph, radio, telephone or cable. Notice of a special meeting need not be
given to any director who submits a signed waiver of notice whether before or
after the meeting, or who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to him.
<PAGE>
SECTION 2.06 Place of Meeting. The directors may hold their meetings, have one
or more offices, and keep the books of the corporation (except as may be
provided by law) at any place, either within or without the State of New York,
as they may from time to time determine.
SECTION 2.07 Quorum and Vote. At all meetings of the Board of Directors the
presence of one-third of the entire Board, but not less than two directors,
shall constitute a quorum for the transaction of business. Any one or more
members of the Board of Directors or of any committee thereof may participate in
a meeting of the Board of Directors or a committee thereof by means of a
conference telephone or similar communications equipment which allows all
persons participating in the meeting to hear each other at the same time.
Participation by such means shall constitute presence in person at such a
meeting. The vote of a majority of the directors present at the time of the
vote, if a quorum is present at such time, shall be the act of the Board of
Directors, except as may be otherwise provided by statute or the By-Laws.
SECTION 2.08 Vacancies. Newly created directorships resulting from increase in
the number of directors and vacancies in the Board of Directors, whether caused
by resignation, death, removal or otherwise, may be filled by vote of a majority
of the directors then in office, although less than a quorum exists.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
SECTION 3.01 Designation and Authority. The Board of Directors, by resolution
adopted by a majority of the entire Board, may designate from among its members
an Executive Committee and other committees, each consisting of three or more
directors. Each such committee, to the extent provided in the resolution or the
By-Laws, shall have all the authority of the Board, except that no such
committee shall have authority as to:
(i) the submission to shareholders of any action as to which
shareholders' authorization is required by law.
(ii) the filling of vacancies in the Board of Directors or any committee.
(iii) the fixing of compensation of directors for serving on the Board or
on any committee.
(iv) the amendment or appeal of the By-Laws, or the adoption of new By-
Laws.
(v) the amendment or repeal of any resolution of the Board which by its
terms shall not be so amendable or repealable.
The Board may designate one or more directors as alternate members of any such
committee, who may replace any absent member or members at any meeting of such
committee. Each such committee shall serve at the pleasure of the Board of
Directors.
SECTION 3.02 Procedure. Except as may be otherwise provided by statute, by the
By-Laws or by resolution of the Board of Directors, each committee may make
rules for the call and conduct of its meetings. Each committee shall keep a
record of its acts and proceedings and shall report the same from time to time
to the Board of Directors.
<PAGE>
ARTICLE IV
OFFICERS
SECTION 4.01 Titles and General. The Board of Directors shall elect from among
their number a Chairman of the Board and a Chief Executive Officer, and may also
elect a President, a Senior Vice Chairman, one or more Vice Chairmen, one or
more Executive Vice Presidents, one or more Senior Vice Presidents, one or more
Principals, one or more Vice Presidents, a Secretary, a Controller, a Treasurer,
a General Counsel, a General Auditor, and a General Credit Auditor, who need not
be directors. The officers of the corporation may also include such other
officers or assistant officers as shall from time to time be elected or
appointed by the Board. The Chairman of the Board or the Chief Executive
Officer or, in their absence, the President, the Senior Vice Chairman or any
Vice Chairman, may from time to time appoint assistant officers. All officers
elected or appointed by the Board of Directors shall hold their respective
offices during the pleasure of the Board of Directors, and all assistant
officers shall hold office at the pleasure of the Board or the Chairman of the
Board or the Chief Executive Officer or, in their absence, the President, the
Senior Vice Chairman or any Vice Chairman. The Board of Directors may require
any and all officers and employees to give security for the faithful performance
of their duties.
SECTION 4.02 Chairman of the Board. The Chairman of the Board shall preside at
all meetings of the shareholders and of the Board of Directors. Subject to the
Board of Directors, he shall exercise all the powers and perform all the duties
usual to such office and shall have such other powers as may be prescribed by
the Board of Directors or the Executive Committee or vested in him by the By-
Laws.
SECTION 4.03 Chief Executive Officer. The Board of Directors shall designate
the Chief Executive Officer of the corporation, which person may also hold the
additional title of Chairman of the Board, President, Senior Vice Chairman or
Vice Chairman. Subject to the Board of Directors, he shall exercise all the
powers and perform all the duties usual to such office and shall have such other
powers as may be prescribed by the Board of Directors or the Executive Committee
or vested in him by the By-Laws.
SECTION 4.04 Chairman of the Board, President, Senior Vice Chairman, Vice
Chairmen, Executive Vice Presidents, Senior Vice Presidents, Principals and Vice
Presidents. The Chairman of the Board or, in his absence or incapacity the
President or, in his absence or incapacity, the Senior Vice Chairman, the Vice
Chairmen, the Executive Vice Presidents, or in their absence, the Senior Vice
Presidents, in the order established by the Board of Directors shall, in the
absence or incapacity of the Chief Executive Officer perform the duties of the
Chief Executive Officer. The President, the Senior Vice Chairman, the Vice
Chairmen, the Executive Vice Presidents, the Senior Vice Presidents, the
Principals, and the Vice Presidents shall also perform such other duties and
have such other powers as may be prescribed or assigned to them, respectively,
from time to time by the Board of Directors, the Executive Committee, the Chief
Executive Officer, or the By-Laws.
SECTION 4.05 Controller. The Controller shall perform all the duties customary
to that office and except as may be otherwise provided by the Board of Directors
shall have the general supervision of the books of account of the corporation
and shall also perform such other duties and have such powers as may be
prescribed or assigned to him from time to time by the Board of Directors, the
Executive Committee, the Chief Executive Officer, or the By-Laws.
SECTION 4.06 Secretary. The Secretary shall keep the minutes of the meetings
of the Board of Directors and of the shareholders and shall have the custody of
the seal of the corporation. He
<PAGE>
shall perform all other duties usual to that office, and shall also perform
such other duties and have such powers as may be prescribed or assigned to him
from time to time by the Board of Directors, the Executive Committee, the
Chairman of the Board, the Chief Executive Officer, or the By-Laws.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 5.01 The corporation shall, to the fullest extent permitted by Section
721 of the New York Business Corporation Law, indemnify any person who is or was
made, or threatened to be made, a party to an action or proceeding, whether
civil or criminal, whether involving any actual or alleged breach of duty,
neglect or error, any accountability, or any actual or alleged misstatement,
misleading statement or other act or omission and whether brought or threatened
in any court or administrative or legislative body or agency, including an
action by or in the right of the corporation to procure a judgment in its favor
and an action by or in the right of any other corporation of any type or kind,
domestic or foreign, or any partnership, joint venture, trust, employee benefit
plan or other enterprise, which any director or officer of the corporation is
serving or served in any capacity at the request of the corporation by reason of
the fact that he, his testator or intestate, is or was a director or officer of
the corporation, or is serving or served such other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise in any capacity,
against judgments, fines, amounts paid in settlement, and costs, charges and
expenses, including attorneys' fees, or any appeal therein; provided, however,
that no indemnification shall be provided to any such person if a judgment or
other final adjudication adverse to the director or officer establishes that (i)
his acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 5.02 The corporation may indemnify any other person to whom the
corporation is permitted to provide indemnification or the advancement of
expenses by applicable law, whether pursuant to rights granted pursuant to, or
provided by, the New York Business Corporation Law or other rights created by
(i) a resolution of shareholders, (ii) a resolution of directors, or (iii) an
agreement providing for such indemnification, it being expressly intended that
these By-Laws authorize the creation of other rights in any such manner.
SECTION 5.03 The corporation shall, from time to time, reimburse or advance to
any person referred to in Section 5.01 the funds necessary for payment of
expenses, including attorneys' fees, incurred in connection with any action or
proceeding referred to in Section 5.01, upon receipt of a written undertaking by
or on behalf of such person to repay such amount(s) if a judgment or other final
adjudication adverse to the director or officer establishes that (i) his acts
were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 5.04 Any director or officer of the corporation serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the corporation, or (ii) any employee benefit plan
of the corporation or any corporation referred to in clause (i), in any capacity
shall be deemed to be doing so at the request of the corporation. In all other
cases, the provisions of this Article V will apply (i) only if the person
serving another corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise so
<PAGE>
served at the specific request of the corporation, evidenced by a written
communication signed by the Chairman of the Board, the Chief Executive Officer,
the President, the Senior Vice Chairman or any Vice Chairman, and (ii) only if
and to the extent that, after making such efforts as the Chairman of the Board,
the Chief Executive Officer, or the President shall deem adequate in the
circumstances, such person shall be unable to obtain indemnification from such
other enterprise or its insurer.
SECTION 5.05 Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of the
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 5.06 The right to be indemnified or to the reimbursement or advancement
of expenses pursuant to this Article V (i) is a contract right pursuant to which
the person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the corporation and the director or
officer, (ii) is intended to be retroactive and shall be available with respect
to events occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with respect to
events occurring prior thereto.
SECTION 5.07 If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the corporation
within thirty days after a written claim has been received by the corporation,
the claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its shareholders) to have made a
determination prior to the commencement of such action that indemnification of
or reimbursement or advancement of expenses to the claimant is proper in the
circumstances, nor an actual determination by the corporation (including its
Board of Directors, independent legal counsel, or its shareholders) that the
claimant is not entitled to indemnification or to the reimbursement or
advancement of expenses, shall be a defense to the action or create a
presumption that the claimant is not so entitled.
SECTION 5.08 A person who has been successful, on the merits or otherwise, in
the defense of a civil or criminal action or proceeding of the character
described in Section 5.01 shall be entitled to indemnification only as provided
in Sections 5.01 and 5.03, notwithstanding any provision of the New York
Business Corporation Law to the contrary.
ARTICLE VI
SEAL
SECTION 6.01 Corporate Seal. The corporate seal shall contain the name of the
corporation and the year and state of its incorporation. The seal may be
altered from time to time at the discretion of the Board of Directors.
<PAGE>
ARTICLE VII
SHARE CERTIFICATES
SECTION 7.01 Form. The certificates for shares of the corporation shall be in
such form as shall be approved by the Board of Directors and shall be signed by
the Chairman of the Board, the Chief Executive Officer, the President, the
Senior Vice Chairman or any Vice Chairman and the Secretary or an Assistant
Secretary, and shall be sealed with the seal of the corporation or a facsimile
thereof. The signatures of the officers upon the certificate may be facsimiles
if the certificate is countersigned by a transfer agent or registered by a
registrar other than the corporation itself or its employees.
ARTICLE VIII
CHECKS
SECTION 8.01 Signatures. All checks, drafts and other orders for the payment
of money shall be signed by such officer or officers or agent or agents as the
Board of Directors may designate from time to time.
ARTICLE IX
AMENDMENT
SECTION 9.01 Amendment of By-Laws. The By-Laws may be amended, repealed or
added to by vote of the holders of the shares at the time entitled to vote in
the election of any directors. The Board of Directors may also amend, repeal or
add to the By-Laws, but any By-Laws adopted by the Board of Directors may be
amended or repealed by the shareholders entitled to vote thereon as provided
herein. If any By-Law regulating an impending election of directors is adopted,
amended or repealed by the Board, there shall be set forth in the notice of the
next meeting of shareholders for the election of directors the By-Laws so
adopted, amended or repealed, together with concise statement of the changes
made.
ARTICLE X
SECTION 10.01 Construction. The masculine gender, when appearing in these By-
Laws, shall be deemed to include the feminine gender.
<PAGE>
I, Christopher D. Lew, Assistant Treasurer of Bankers Trust Company, New
York, New York, hereby certify that the foregoing is a complete, true and
correct copy of the By-Laws of Bankers Trust Company, and that the same are in
full force and effect at this date.
/s/ Christopher D. Lew
----------------------
Christopher D. Lew
Assistant Treasurer
DATED: October 1, 1999
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 03/31/99 ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006 11
FDIC Certificate No.: |0| 0| 6| 2| 3
</TABLE>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1999
All schedules are to be reported in thousands of dollars. Unless
otherwise indicated, reported the amount outstanding as of the
last business day of the quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
C400
---------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A): / / / / / / / / / /
a. Noninterest-bearing balances and currency and coin (1).................. 0081 1,695,000 1.a.
b. Interest-bearing balances (2)........................................... 0071 1,308,000 1.b.
2. Securities: / / / / / / / / / /
a. Held-to-maturity securities (from Schedule RC-B, column A).............. 1754 0 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)............ 1773 6,150,000 2.b.
3. Federal funds sold and securities purchased under agreements to resell 1350 29,512,000 3.
4. Loans and lease financing receivables: / / / / / / / / / /
a. Loans and leases, net of unearned income (from RCFD 2122 Schedule RC-C) RCFD 2122 18,869,000 / / / / / / / / / / 4.a.
b. LESS: Allowance for loan and leaselosses................................. RCFD 3123 571,000 / / / / / / / / / / 4.b.
c. LESS: Allocated transfer risk reserve.................................... RCFD 3128 0 / / / / / / / / / /
d. Loans and leases, net of unearned income, / / / / / / / / / /
allowance, and reserve (item 4.a minus 4.b and 4.c)...................... 2125 18,298,000 4.d.
5. Trading Assets (from schedule RC-D)......................................... 3545 34,815,000 5.
6. Premises and fixed assets (including capitalized leases).................... 2145 916,000 6.
7. Other real estate owned (from Schedule RC-M)................................ 2150 88,000 7.
8. Investments in unconsolidated subsidiaries and
associated companies (from Schedule RC-M)................................... 2130 883,000 8.
9. Customers' liability to this bank on acceptances outstanding................ 2155 307,000 9.
10. Intangible assets (from Schedule RC-M)...................................... 2143 302,000 10.
11. Other assets (from Schedule RC-F)........................................... 2160 4,645,000 11.
12. Total assets (sum of items 1 through 11) 2170 98,919,000 12.
-----------------------------
</TABLE>
__________________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE>
6. The foregoing amendment of the organization certificate was authorized
bd unanimous written consent signed by the holder of all outstanding shares
entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 18th
day of March, 1998.
/s/ James T. Byrne, Jr.
-----------------------------
James T. Byrne, Jr.
Managing Director and Secretary
/s/ Lea Lahtinen
-----------------------------
Lea Lahtinen
Vice President and Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is a Vice
President and an Assistant Secretary of Bankers Trust Company, the corporation
described in the foregoing certificate; that she has read the foregoing
certificate and knows the contents thereof, and that the statements herein
contained are true.
/s/ Lea Lahtinen
----------------------
Lea Lahtinen
Sworn to before me this 18th day
of March, 1998.
/s/ Sandra L. West
- -----------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 1998
