AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 7, 1999
REGISTRATION NO. 333-79087
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
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
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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 LLP
901 EAST CARY STREET 919 THIRD AVENUE
RICHMOND, VIRGINIA 23219 NEW YORK, NEW YORK 10022
(804) 775-1000 (212) 735-3000
--------------------
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. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================================
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE TO BE OFFERING AGGREGATE REGISTRATION
REGISTERED REGISTERED PRICE PER UNIT (1) OFFERING PRICE (1) FEE
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
CLASS A-1 ASSET-BACKED NOTES $200,000 100% $200,000 $55.60 (2)
- --------------------------------------------------------------------------------------------------------------------
CLASS A-2 ASSET-BACKED NOTES $200,000 100% $200,000 $55.60 (2)
- --------------------------------------------------------------------------------------------------------------------
CLASS A-3 ASSET-BACKED NOTES $200,000 100% $200,000 $55.60 (2)
- --------------------------------------------------------------------------------------------------------------------
CLASS A-4 ASSET-BACKED NOTES $200,000 100% $200,000 $55.60 (2)
====================================================================================================================
ASSET-BACKED CERTIFICATES $200,000 100% $200,000 $55.60 (2)
====================================================================================================================
</TABLE>
(1) ESTIMATED SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE
PURSUANT TO RULE 457(O) UNDER THE SECURITIES ACT.
(2) PREVIOUSLY PAID.
--------------------
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.
<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>
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 9 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
Page
IMPORTANT NOTICE ABOUT
INFORMATION PRESENTED IN THIS
PROSPECTUS.....................................3
PROSPECTUS SUMMARY..................................4
RISK FACTORS........................................9
DESCRIPTION OF THE TRUST...........................17
THE ORIGINATOR'S FINANCE
OPERATIONS....................................19
First North American Credit...................19
Underwriting Procedures.......................19
Collection Procedures.........................20
Physical Damage Insurance.....................21
Allocation of Payments........................21
Delinquency and Credit Loss Experience........21
Delinquency and Credit Loss Trends............24
Year 2000 Compliance..........................25
DESCRIPTION OF THE CONTRACT POOL...................27
WEIGHTED AVERAGE LIFE OF THE
OFFERED SECURITIES............................31
ALLOCATION OF PRINCIPAL
BALANCES; MONTHLY REPORTS.....................40
USE OF PROCEEDS....................................40
DESCRIPTION OF CARMAX AUTO
SUPERSTORES AND CARMAX
AUTO RECEIVABLES..............................41
CarMax Auto Superstores.......................41
CarMax Auto Receivables.......................42
DESCRIPTION OF THE NOTES...........................44
Note Registration.............................44
Interest Payments.............................44
Principal Payments............................45
Optional Redemption...........................46
The Indenture Trustee.........................46
DESCRIPTION OF THE CERTIFICATES....................46
Certificate Registration......................46
Interest Payments.............................46
Principal Payments............................47
Optional Prepayment...........................47
The Owner Trustee.............................47
REGISTRATION OF THE OFFERED
SECURITIES....................................48
COLLECTIONS AND PAYMENTS...........................53
The Trust Accounts............................53
Page
Payment Sources...............................53
The Reserve Account...........................54
Subordination of the Certificates.............55
Payment Date Distributions -- Collection
Account...................................55
Payment Date Distributions -- Note
Payment Account...........................56
Payment Date Distributions -- Certificate
Payment Account...........................57
Application of Collection and Payment
Provisions to First Payment Date..........57
Statements to Noteholders.....................58
Statements to Certificateholders..............59
DESCRIPTION OF THE INSURER........................60
DESCRIPTION OF THE INSURANCE
POLICY........................................62
REPORTS TO SECURITYHOLDERS.........................62
DESCRIPTION OF THE INDENTURE.......................63
DESCRIPTION OF THE TRUST
AGREEMENT.....................................70
DESCRIPTION OF THE PURCHASE
AGREEMENT AND THE SALE
AND SERVICING AGREEMENT.......................73
MATERIAL LEGAL ASPECTS OF THE
TRANSACTION...................................79
MATERIAL FEDERAL INCOME TAX
CONSEQUENCES..................................85
ERISA CONSIDERATIONS...............................95
UNDERWRITING.......................................97
LEGAL MATTERS......................................99
EXPERTS............................................99
WHERE YOU CAN FIND MORE
INFORMATION..................................100
GLOSSARY..........................................101
ANNEX A: GLOBAL CLEARANCE,
SETTLEMENT AND TAX
DOCUMENTATION PROCEDURES.....................106
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION
PRESENTED IN THIS PROSPECTUS
This prospectus describes the specific terms of the notes and the
certificates, including:
o the amount and other terms, including interest rates, for each
class of notes and for the certificates;
o the timing of interest and principal payments;
o information about the contracts;
o information about the credit enhancement for each class of notes
and for the certificates;
o the credit ratings for each class of notes and for the
certificates; and
o 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>
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 , , , , ,
1999 1999 1999 1999 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
</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:
o 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;
o amounts received on or in respect of the contracts after , 1999;
o security interests in the vehicles financed under the contracts;
o any proceeds from claims on or refunds of premiums with respect to
insurance policies relating to the financed vehicles or the related
obligors;
o funds on deposit in a collection account, a note payment account, a
certificate payment account and a reserve account;
o 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;
o 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
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o 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, Glen Allen, Virginia 23060, and its telephone number is (804)
747-0422.
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 owner trustee 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.
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 owner trustee 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 , 1999. Interest will be payable on each payment date to
noteholders and certificateholders of record as of the day before that payment
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<PAGE>
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:
o the principal balance of the notes as of the day preceding that payment
date; and
o 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:
o the principal balance of the certificates as of the day preceding that
payment date; and
o 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.
PAYMENT SOURCES
On each payment date, payments on the notes and the certificates will be made
from the following sources:
o obligor payments received with respect to the contracts during the
preceding month;
o liquidation proceeds received with respect to the contracts during the
preceding month;
o interest earned on funds on deposit in the collection account;
o payments made by CarMax Auto Superstores or the servicer in connection with
the required repurchase or purchase of contracts;
o amounts withdrawn on that payment date from the reserve account; and
o amounts paid on that payment date under the insurance policy.
CREDIT ENHANCEMENT
The notes will benefit from the following sources of credit enhancement:
o amounts available to be paid under the insurance policy;
o 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
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o the subordination of the certificates.
The certificates will benefit from the following sources of credit enhancement:
o amounts available to be paid under the insurance policy; and
o 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:
o 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
o 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.
THE RESERVE ACCOUNT
On the closing date, the servicer will establish with the 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 Superstores 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:
o the amount collected on or in respect of the contracts during the preceding
month EXCEEDS
o 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:
o to the servicer, the monthly servicing fee for the preceding month PLUS
any overdue monthly servicing fees for previous months;
o to the noteholders, monthly interest and monthly principal for that payment
date PLUS any overdue monthly interest for previous payment dates;
o to the certificateholders, monthly interest and monthly principal for that
payment date PLUS any overdue monthly interest for previous payment dates;
and
o 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.
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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, the certificateholders
will not be entitled to receive monthly interest until the notes have been paid
in full.
[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 85
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 95 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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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.
<TABLE>
<S> <C>
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 60 of this prospectus and "Description of
the Insurance Policy" beginning on page 62 of this
prospectus for a further discussion of the insurer and the
insurance policy.
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
</TABLE>
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<TABLE>
<S> <C>
sufficient on any payment date to assure payment of your
notes or your certificates. If the contracts experience
higher losses than were projected in connection with the
rating of the notes and 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 54 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 connection with the rating of the notes, the funds available on any
payment date may not be sufficient to pay in full the monthly interest 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
</TABLE>
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<TABLE>
<S> <C>
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 55 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 81 of this
prospectus and "-- Notice of Sale; Redemption Rights"
beginning on page 81 of this prospectus for a further
discussion of the limitations on the manner in which motor
vehicles may be repossessed and sold.
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 19 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 CONTRACTS 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
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
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 79 of
this prospectus for a further discussion of the trust's
interest in the contracts.
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 certificates of title for the financed vehicles
will not be marked to reflect the trust's security interests
in the financed vehicles. In the absence of a notation on
the certificates of title reflecting the interest of the
trust, the trust may not have a perfected security interest
in one or more of the financed vehicles in some states and a
third party could acquire an interest in one or more of the
financed vehicles that would be superior to the interest of
the trust. If that were to happen, amounts received in
connection with a sale or other disposition of those
financed vehicles would not be available to make payments on
the notes or the certificates. See "Material Legal Aspects
of the Transaction -- Security Interest in Vehicles"
beginning on page 79 of this prospectus for a further
discussion of the trust's security interest in the financed
vehicles.
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:
o 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
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
o 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:
o the trustees would not be permitted to exercise remedies against
CarMax Auto Superstores on your behalf without the permission of
the bankruptcy court;
o 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;
o 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
o 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 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 83 of this
prospectus for a further discussion of the possibility that the transfer
of the contracts from CarMax Auto Superstores to CarMax Auto
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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 42 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 31 of
this prospectus for a further discussion of
contract prepayments.
THE GEOGRAPHIC CONCENTRATION OF
THE CONTRACTS COULD RESULT IN
LOSSES OR PAYMENT DELAYS WITH
RESPECT TO YOUR NOTES OR YOUR
CERTIFICATES . . . . . . . . . . . . . . . . . . . . As of , 1999, %,
%, %, %, %, %, %
and % of the contracts, based on outstanding
principal balance, related to obligors with mailing
addresses in Florida, Georgia, Illinois, Maryland,
North Carolina, Texas, Virginia and Wisconsin,
respectively. As a result of this geographic
concentration, economic, social, legal and other
factors affecting these states could have a
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
significant effect on the delinquency or credit
loss experience of the contracts and could
adversely affect the timing and amount of payments
on the notes and the certificates. These factors
include, but are not limited to:
o 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;
o 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;
o 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.
o 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.
THE INSURER MAY CONTROL THE DECLARATION
AND CONSEQUENCES OF AN EVENT OF DEFAULT
UNDER THE INDENTURE . . . . . . . . . . . . . . . . .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, 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
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
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 63 of this
prospectus for a further discussion of default
remedies under the indenture.
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 is in the
final stages of 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 expects its computerized information
systems to be year 2000 compliant by August 1999.
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 25 of
this prospectus for a further discussion of the
year 2000 problem.
</TABLE>
16
<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 101 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 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 70 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 27 of this prospectus for a
further discussion of the contract pool.
ISSUANCE OF THE SECURITIES
The notes will be issued on or about , 1999 under an indenture between
the owner trustee 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 44 of this prospectus for a further discussion of the notes.
See "Description of the Indenture" beginning on page 63 of this prospectus for a
further discussion of the indenture.
The certificates will be issued on or about , 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 must be rated in the highest
applicable category by Moody's Investors Service, Inc. and Standard & Poor's, a
division of The McGraw-Hill Companies, Inc., and the certificates must be rated
at least by Moody's and at least by Standard & Poor's. 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
17
<PAGE>
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:
o the contracts;
o amounts received on or in respect of the contracts after the
Cutoff Date;
o security interests in the vehicles financed under the contracts;
o 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;
o funds on deposit in the collection account, the note payment
account, the certificate payment account and the reserve account;
o 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;
o 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
o 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 periodic reports containing
detailed information as to the collection and payment activities of the trust.
18
<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 full 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 principal balance of
all motor vehicle retail installment sale contracts originated through FNAC was
$777,510,339.40 as of August 31, 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, 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.
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<PAGE>
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 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
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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:
o 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;
o 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
o 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 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
interest accrued to the date of payment, then to any applicable late charges,
then to principal due on the date of payment, then to any other fees due under
the contract and then to reduce further the outstanding principal balance of the
contract. Accordingly, if an obligor pays a fixed monthly installment before its
due date under a simple interest contract, the portion of the payment allocable
to interest for the period since the preceding payment will be less than it
would have been had the payment been made on the contractual due date, and the
portion of the payment applied to reduce the principal balance of the contract
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
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<PAGE>
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.
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<PAGE>
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
At August 31, At August 31, At December 31, At December 31,
1999 1998 1998 1997
---- ---- ---- ----
Number of Number of Number of Number of
Contracts Amount Contracts Amount Contracts Amount Contracts Amount
<S> <C>
Total Contract Portfolio 74,943 $777,510,339 44,043 $443,805,207 52,129 $528,585,348 26,272 $259,517,771
Delinquencies as a
Percentage of Total
Contract Portfolio
31-60 Days 0.72% 0.60% 0.91% 0.64% 0.97% 0.76% 1.23% 0.85%
61-90 Days 0.17% 0.13% 0.27% 0.10% 0.23% 0.17% 0.39% 0.18%
91 Days or More 0.08% 0.04% 0.15% 0.06% 0.11% 0.06% 0.23% 0.08%
Total Delinquencies as a
Percentage of Total
Contract Portfolio 0.97% 0.77% 1.33% 0.80% 1.31% 0.99% 1.85% 1.11%
Total Delinquencies 725 $ 5,947,704 582 $ 3,523,505 685 $5,243,832 485 $2,894,712
</TABLE>
<TABLE>
<CAPTION>
At December 31,
1996
----
Number of
Contracts Amount
<S> <C>
Total Contract Portfolio 14,803 $147,637,677
Delinquencies as a
Percentage of Total
Contract Portfolio
31-60 Days 1.34% 1.09%
61-90 Days 0.43% 0.36%
91 Days or More 0.21% 0.16%
Total Delinquencies as a
Percentage of Total
Contract Portfolio 1.98% 1.61%
Total Delinquencies 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 August 31 or December 31, as applicable.
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<PAGE>
CREDIT LOSS EXPERIENCE
<TABLE>
<CAPTION>
Eight Months Ended Year Ended December 31,
August 31,
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
<S> <C>
Total Number of
Contracts Outstanding
at Period End . . . . . . 74,943 44,043 52,129 26,272 14,803
Average Number of
Contracts Outstanding
During the Period. . . . 63,536 35,158 39,201 20,538 11,487
Outstanding Principal
Amount at Period End. . $ 777,510,339 $ 443,805,207 $ 528,585,348 $ 259,517,771 $ 147,637,677
Average Outstanding
Principal Amount During
the Period (1)............ $ 647,180,747 $ 345,110,526 $ 392,753,294 $ 194,539,224 $ 117,361,052
Gross Charge-Offs (2)..... $ 2,898,448 $ 1,527,782 $ 2,726,477 $ 2,110,135 $ 1,181,456
Recoveries (3)............ $ 1,059,007 $ 524,153 $ 808,926 $ 665,576 $ 272,884
Net Losses................ $ 1,839,441 $ 1,003,629 $ 1,917,551 $ 1,444,559 $ 908,572
Net Losses as a Percentage
of the Average Outstanding
Principal Amount.......... 0.43% 0.44% 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 eight-month periods ended August 31,
1998 and August 31, 1999 are annualized. The eight-month periods ended
August 31 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
24
<PAGE>
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 0.77% at August 31, 1999.
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 0.43% for the eight months
ended August 31, 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:
o consistent credit underwriting, provided by empirically derived
credit scoring models which help FNAC quantify credit risk and
implement risk adjusted pricing;
o 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
o 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.
25
<PAGE>
CarMax Auto Superstores has completed its remediation, forward-date
testing and implementation efforts for its internally developed and externally
purchased systems. Replacement work and enterprise-level testing is scheduled to
be completed by approximately August 1999. With regard to embedded systems,
CarMax Auto Superstores has identified many distinct makes and models used for
environmental controls, fire detection and monitoring, burglar detection and
monitoring, elevators, office equipment and uninterruptible power supplies. As
of June 30, 1999, approximately 70% of these embedded systems were believed to
be year 2000 compliant. The remaining 30% are expected to be compliant by
November 1999, except for low-impact embedded systems that will be left untested
because the cost of compliance testing is believed to far exceed the risk or
cost of an outage.
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 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.
26
<PAGE>
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:
o is secured by a new or used motor vehicle;
o 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;
o 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;
o is a simple interest contract;
o has a contract rate of interest of at least 5% and not more than
25%;
o 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;
o relates to an obligor who has made at least two payments as of the
Cutoff Date;
o was not delinquent more than 30 days as of the Cutoff Date;
o is not secured by a financed vehicle that had been repossessed as
of the Cutoff Date;
o does not relate to an obligor that was the subject of a bankruptcy
proceeding as of the Cutoff Date;
o is evidenced by only one original document; and
o was not selected using selection procedures believed by CarMax
Auto Superstores or CarMax Auto Receivables to be adverse to the
noteholders or the certificateholders.
27
<PAGE>
CHARACTERISTICS OF THE CONTRACTS
The following tables set forth information with respect to the
contracts as of the Cutoff Date. In each case where information 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.
<TABLE>
<CAPTION>
COMPOSITION OF THE CONTRACTS
AS OF THE CUTOFF DATE
Number of Aggregate Original Weighted Average
Contracts Principal Balance Principal Balance Contract Rate
--------- ----------------- ----------------- -------------
<S> <C>
New Motor Vehicles..... 1,920 $ 28,094,565 $ 34,414,838 8.96%
Used Motor Vehicles.... 59,077 588,483,271 747,147,564 10.93
------ ------------- ----------- -----
All Contracts.......... 60,997 $ 616,577,836 $ 781,562,402 10.58%
====== ============= =========== =====
Weighted Weighted Percentage of
Average Average Aggregate
Remaining Term Original Term Principal Balance
-------------- ------------- -----------------
New Motor Vehicles...... 60 months 61months 4.56%
Used Motor Vehicles..... 52 62 95.44
--------- -------- -----
All Contracts........... 47 months 58months 100.00%
========= ======== =======
</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.
<TABLE>
<CAPTION>
DISTRIBUTION OF THE CONTRACTS BY REMAINING TERM
AS OF THE CUTOFF DATE
Percentage of Percentage of
Remaining Number of Total Number of Aggregate Aggregate
Term Range Contracts Contracts Principal Balance Principal Balance
---------- --------- --------- ----------------- -----------------
<S> <C>
1 to 12 months........ 1,570 2.57% $ 3,608,794 0.59%
13 to 24 months........ 5,378 8.82 26,012,333 4.22
25 to 36 months........ 11,388 18.67 84,973,487 13.78
37 to 48 months........ 19,062 31.25 190,992,923 30.98
49 to 60 months........ 19,898 32.62 254,248,871 41.24
61 to 72 months........ 3,701 6.07 56,741,428 9.20
----- ----- ------------- -----
Total 60,997 100.00% $ 616,577,836 100.00%
====== ======= ============== =======
</TABLE>
28
<PAGE>
DISTRIBUTION OF THE CONTRACTS BY OBLIGOR MAILING ADDRESS
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Percentage of Percentage of
Obligor Number of Total Number of Aggregate Aggregate
Mailing Address Contracts Contracts Principal Balance Principal Balance
--------------- --------- ----------------- -----------------
<S> <C>
Florida................. 10,375 17.01% $103,054,833.05 16.71%
Georgia................. 11,417 18.72 111,058,579.87 18.01
Illinois................ 7,461 12.23 82,935,665.22 13.45
Maryland................ 5,454 8.94 59,328,348.69 9.62
North Carolina.......... 8,320 13.64 77,013,866.15 12.49
Texas................... 10,260 16.82 110,283,042.52 17.89
Virginia................ 5,173 8.48 47,733,456.62 7.74
Wisconsin............... 232 0.38 3,208,522.29 0.52
Other................... 2,305 3.78 21,961,522 3.56
------- ------ --------------- -------
Total........... 60,997 100.00% $616,577,835.98 100.00%
------ ====== =============== =======
</TABLE>
Each state included in the "other" category in the distribution by
obligor mailing address table accounted for less than % of the total number of
contracts and less than % 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
Number of Total Number of Aggregate Aggregate
Model Year Contracts Contracts Principal Balance Principal Balance
--------- --------- --------- ----------------- -----------------
<S> <C>
1988 and earlier........ 70 0.11% $ 234,634.11 0.04%
1989.................... 229 0.38 879,695.28 0.14
1990.................... 470 0.77 2,255,052.06 0.37
1991.................... 840 1.38 4,437,966.85 0.72
1992.................... 1,663 2.73 9,813,722.60 1.59
1993.................... 3,773 6.19 24,110,651.78 3.91
1994.................... 7,548 12.37 57,925,414.92 9.39
1995.................... 17,135 28.09 165,910,203.67 26.91
1996.................... 15,942 26.14 179,769,349.35 29.16
1997.................... 9,764 16.01 118,533,083.18 19.22
1998.................... 2,470 4.05 33,713,686.55 5.47
1999.................... 1,060 1.74 18,507,989.09 3.00
2000.................... 33 0.05 486,386.54 0.08
------ ------- --------------- -------
Total..... 60,997 100.00% $616,577,835.98 100.00%
====== ======= =============== =======
</TABLE>
29
<PAGE>
DISTRIBUTION OF THE CONTRACTS BY CONTRACT RATE
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
Percentage of Percentage of
Number of Total Number of Aggregate Principal Aggregate
Contract Rate Range Contracts Contracts Balance Principal Balance
- ------------------- --------- --------- ------- -----------------
<S> <C>
5.000 to 5.999%.... 1,009 1.65% $ 10,329,288 1.68%
6.000 to 6.999%.... 684 1.12 7,823,213 1.27
7.000 to 7.999%.... 4,471 7.33 53,980,596 8.75
8.000 to 8.999%.... 8,304 13.61 88,509,035 14.35
9.000 to 9.999%.... 18,629 30.54 190,277,196 30.86
10.000 to 10.999%.... 8,369 13.72 88,564,582 14.36
11.000 to 11.999%.... 4,145 6.80 42,529,466 6.90
12.000 to 12.999%.... 3,739 6.13 36,200,225 5.87
13.000 to 13.999%.... 3,267 5.36 28,843,850 4.68
14.000 to 14.999%.... 2,348 3.85 20,679,809 3.35
15.000 to 15.999%.... 2,339 3.83 22,352,944 3.63
16.000 to 16.999%.... 1,588 2.60 11,945,398 1.94
17.000 to 17.999%.... 1,224 2.01 8,497,035 1.38
More than 17.999%.... 881 1.44 6,045,199 0.98
------ ------- ----------- ------
Total 60,997 100.00% $ 616,577,836 100.00%
====== ======= =========== =======
</TABLE>
30
<PAGE>
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 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 34 to 39 have been prepared on the basis of various
assumptions, including that:
o the contracts prepay in full at the specified monthly ABS
percentage;
o 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;
o distributions on the notes and the certificates are paid in cash
on each Payment Date commencing , 1999, and each
Payment Date occurs on the 15th day of a month;
o the closing date for the notes and the certificates occurs on
, 1999;
o no defaults or delinquencies occur in the payment of any of the
contracts;
o no contracts are repurchased due to a breach of any representation
or warranty or for any other reason; and
o the servicer exercises on the first possible Payment Date its
right to purchase from the trust all remaining contracts in the
contract pool.
31
<PAGE>
The tables indicate the projected weighted average life of the notes
and the certificates. The tables set forth:
o 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
o 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
Pool Cutoff Date Weighted Average Original Term to Remaining Term to
Number Principal Balance Contract Rate Maturity (in Months) Maturity (in Months)
------ ----------------- ------------- -------------------- --------------------
<S> <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 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.
32
<PAGE>
IMPORTANT NOTICE REGARDING CALCULATION OF THE WEIGHTED AVERAGE
LIFE AND THE ASSUMPTIONS UPON WHICH THE TABLES ON PAGES 34 TO 39
ARE BASED
The weighted average life of each class of notes is determined by:
o multiplying the amount of each principal payment on that class
by the number of years from the closing date to the related
Payment Date;
o adding the results; and
o dividing the sum by the initial principal balance of that class.
The weighted average life of the certificates is determined by:
o multiplying the amount of each principal payment on the
certificates by the number of years from the closing date to the
related Payment Date;
o adding the results; and
o dividing the sum by the initial principal balance of the
certificates.
The tables on pages 34 to 39 have been prepared based on, and should
be read in conjunction with, the assumptions described on page 31, 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.
PERCENT OF INITIAL NOTE BALANCE
AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
Class A-1 Notes Class A-2 Notes
--------------- ---------------
<S> <C>
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
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....
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
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>
<CAPTION>
Class A-1 Notes Class A-2 Notes
--------------- ---------------
<S> <C>
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
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>
34
<PAGE>
PERCENT OF INITIAL NOTE BALANCE
AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
Class A-3 Notes Class A-4 Notes
--------------- ---------------
<S> <C>
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
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>
35
<PAGE>
<TABLE>
<CAPTION>
Class A-3 Notes Class A-4 Notes
--------------- ---------------
<S> <C>
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5% 1.0% 1.4% 1.6% 1.8% 2.5%
------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
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>
36
<PAGE>
PERCENT OF INITIAL CERTIFICATE BALANCE
AT VARIOUS ABS PERCENTAGES
Certificates
------------
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5%
------------ ---- ---- ---- ---- ----
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.......
37
<PAGE>
Class A-1 Notes
---------------
Payment Date 1.0% 1.4% 1.6% 1.8% 2.5%
------------ ---- ---- ---- ---- ----
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)
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 58 of this prospectus and "-- Statements to Certificateholders" beginning
on page 59 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.
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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.
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 , 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.
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CarMax Auto Superstores operates stores in the following markets:
Market Number of Stores
------ ----------------
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
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 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
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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
48 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 , 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:
o in the case of the class A-1 notes, % per annum;
o in the case of the class A-2 notes, % per annum;
o in the case of the class A-3 notes, % per annum; and
o 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:
o 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;
o the interest rate applicable to the class A-1 notes; and
o 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:
o the interest rate applicable to that class; and
o 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, the
certificateholders will not be entitled to receive payments of interest until
the notes have been paid in full.
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 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 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:
o , 200 for the class A-1 notes;
o , 200 for the class A-2 notes;
o , 200 for the class A-3 notes; and
o , 200 for the class A-4 notes.
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The certificateholders will not be entitled to receive payments of
principal 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 -- Termination of the Trust" beginning on page 78 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 63 of this
prospectus for a further discussion of the rights and duties of the indenture
trustee.
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 48 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 , 1999; PROVIDED, HOWEVER, that if an event of default shall
have occurred and be continuing under the indenture, the certificateholders will
not be entitled to receive payments of interest until the notes have been paid
in full. 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:
o % per annum; and
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o 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 payments of principal 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 31
of this prospectus for a further discussion of contract prepayments.
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 --
Termination of the Trust" beginning on page 78 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
73 of this prospectus for a further discussion of the rights and duties of the
owner trustee with respect to the certificates.
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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 50 of this prospectus
for a further discussion of Cedelbank and the Euroclear system.
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.
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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 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 106 of this
prospectus for additional information regarding clearance and settlement
procedures. See Annex A beginning on page 106 of this prospectus, "Material
Federal Income Tax Consequences -- Tax Consequences to Foreign Note Owners"
beginning on page 89 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 94 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.
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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 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.
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.
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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.
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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:
o the owner trustee 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 owner trustee or the indenture trustee,
as applicable, is unable to locate a qualified successor;
o the owner trustee or the indenture trustee, as applicable, elects,
at its option, to terminate the book-entry system through DTC; or
o 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.
Upon the occurrence of any of the events described in the preceding
paragraph, 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:
o 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;
o 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
o 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 54 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:
o CarMax Auto Superstores is the servicer;
o no event of servicing termination shall have occurred and be
continuing under the sale and servicing agreement; and
o each other 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 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.
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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 54 of this prospectus for a
further discussion of the reserve account and "Description of the Insurance
Policy" beginning on page 62 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 Superstores 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.
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 81 of this prospectus and "-- Notice of Sale;
Redemption Rights" beginning on page 81 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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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 and 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, the
certificateholders will not be entitled to receive Monthly Certificate Interest
until the notes have been paid in full. 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;
(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, 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;
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(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.
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 transferred to 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
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(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 transferred to 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.
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 transferred to 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
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The following chart describes the application of the collection and
payment provisions to the first Payment Date on , 1999:
,1999 The servicer receives monthly payments,
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.
,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.
,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.
,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:
o 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;
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o 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;
o the amount of that payment allocable to principal for each class
of notes;
o the monthly servicing fee payable to the servicer for that month;
o 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;
o the principal balance of the contracts as of the last day of that
month;
o 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;
o the aggregate purchase price for contracts repurchased by CarMax
Auto Receivables or purchased by the servicer during that month;
o 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
o 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:
o 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;
o 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;
o the amount of that payment allocable to Monthly Certificate
Principal for that Payment Date;
o the monthly servicing fee payable to the servicer for that month;
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o 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;
o the principal balance of the contracts as of the last day of that
month;
o 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;
o the aggregate purchase price for contracts repurchased by CarMax
Auto Receivables or purchased by the servicer during that month;
o 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
o 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
owner trustee 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. MBIA 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 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, changes in control
and transactions among affiliates. In addition, MBIA is required to maintain
contingency reserves on its liabilities in certain amounts and for certain
periods of time.
MBIA 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 set forth under the heading
"Description of the Insurer." In addition, MBIA 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 FINANCIAL INFORMATION
The consolidated financial statements of MBIA, 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 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 and its subsidiaries included in
documents filed by MBIA, Inc. pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities 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
determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities and generally accepted accounting
principles.
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Statutory Accounting Practices
------------------------------
December 31, 1998 June 30, 1999
----------------- -------------
(Audited) (Unaudited)
(in millions)
Admitted Assets........ $6,521 $6,807
Liabilities............ 4,231 4,468
Capital and Surplus.... 2,290 2,339
Generally Accepted Accounting Principles
----------------------------------------
December 31, 1998 June 30, 1999
----------------- -------------
(Audited) (Unaudited)
(in millions)
Assets.................... $7,488 $7,429
Liabilities............... 3,211 3,234
Shareholder's Equity...... 4,277 4,195
WHERE YOU CAN OBTAIN ADDITIONAL INFORMATION ABOUT MBIA
Copies of the financial statements of MBIA incorporated by reference in
this prospectus and copies of MBIA's 1998 year-end audited financial statements
prepared in accordance with statutory accounting practices are available,
without charge, from MBIA. The address of MBIA is 113 King Street, Armonk, New
York 10504. The telephone number of MBIA 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 "mission-critical" internally developed
systems, vendor software, hardware and certain third-party entities 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.
FINANCIAL STRENGTH RATINGS OF MBIA
Moody's rates the financial strength of MBIA "Aaa." Standard & Poor's
rates the financial strength of MBIA "AAA." Fitch IBCA, Inc. (formerly known as
Fitch Investors Service, L.P.) rates the financial strength of MBIA "AAA."
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Each rating of MBIA should be evaluated independently. The ratings
reflect the respective rating agency's current assessment of the
creditworthiness of MBIA 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 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. 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 55 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.
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.
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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:
o the trust shall fail to make any required interest payment on the
notes and that failure shall continue unremedied for five business
days;
o the trust shall fail to make any required principal payment on the
notes;
o 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;
o 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;
o an event of bankruptcy, insolvency, receivership or liquidation
shall occur with respect to the trust; or
o a claim shall be made under the insurance policy;
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 and the
certificates 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, the indenture trustee will
continue to submit claims under the insurance policy for any shortfalls in
amounts available to make required payments on the notes or the certificates. If
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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.
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 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 due and payable 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, 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:
o 100% of the noteholders consent to the sale;
o 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
o 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 indenture trustee
obtains the consent of the holders of notes evidencing not less
than 66-2/3% of the principal balance of the notes 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;
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(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 the rights or powers under the indenture at the request or
direction of any 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.
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:
o 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;
o 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 Code or applicable state
law, or assert any claim against any present or former holder of
notes or the certificates because of the payment of taxes levied
or assessed upon the trust;
o dissolve or liquidate in whole or in part;
o permit the validity or effectiveness of the indenture to be
impaired;
o 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;
o 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;
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o 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 or other liens arising by operation of
law;
o 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
o 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.
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:
o ceases to be eligible to continue as the trustee under the
indenture;
o is adjudged to be bankrupt or insolvent;
o comes under the charge of a receiver or other public officer; or
o 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:
o will perform those duties and only those duties that are
specifically set forth in the indenture;
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o 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
o 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.
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:
o 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;
o 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
o 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
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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.
SATISFACTION AND DISCHARGE OF INDENTURE
The indenture will be discharged with respect to the collateral
securing the notes:
o 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;
o 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
o 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
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:
o 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
o 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 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
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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:
o 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
o 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 that supplemental indenture:
o 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;
o impair the right to institute suit for the enforcement of the
provisions of the indenture regarding payment;
o 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;
o 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;
o 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;
o 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 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;
o 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
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o 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.
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:
o ceases to be eligible to continue as the trustee under the trust
agreement;
o is adjudged to be bankrupt or insolvent;
o comes under the charge of a receiver or other public officer; or
o 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
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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 indenture. The owner 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 owner trustee
will not be liable:
o 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;
o 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;
o 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
o for the default or misconduct of the servicer, the administrator,
CarMax Auto Receivables or the indenture trustee.
TERMINATION OF TRUST
If the insurance policy has been terminated and returned to the insurer
for cancellation, the trust agreement and the trust will terminate and be of no
further force or effect:
o 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
o 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 adding any
provisions to or changing in any manner or eliminating any of the provisions of
the trust agreement; PROVIDED, HOWEVER, that:
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o 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 to the certificates to be
withdrawn, reduced or qualified; and
o 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:
o 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 to the certificates to be
withdrawn, reduced or qualified; and
o 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, without the consent of all noteholders
and certificateholders affected by the amendment:
o 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 the contracts or distributions that are
required to be made on any note, or change the interest rate
applicable to any class of notes, without the consent of all
noteholders affected by the amendment;
o reduce the percentage of the principal balance of the notes the
consent of the holders of which is required for any amendment
without the consent of all noteholders affected by the amendment;
or
o adversely affect the ratings assigned by Moody's or Standard &
Poor's to any class of notes without the consent of the holders of
notes evidencing not less than 66-2/3% of the principal balance of
that class.
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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:
o the information provided by CarMax Auto Superstores with respect
to the contracts is correct in all material respects;
o 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;
o 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;
o 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
o 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 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 or, if CarMax Auto Superstores so elects, on or
before the last day of the preceding month. Each contract to be repurchased by
CarMax Auto Superstores must be repurchased on or before that last day for a
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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 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 as it deems 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
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 collect and retain any late
fees, prepayment charges, other administrative fees or other similar charges
allowed by applicable law with respect to the contracts and will be entitled to
reimbursement from the trust for various liabilities.
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.
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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,
1st Floor, 920 King Street, Wilmington, Delaware 19801-7475, Attention:
Corporate Trust Department.
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.
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.
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EVENTS OF SERVICING TERMINATION
The following events will constitute events of servicing termination
under the sale and servicing agreement:
o 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;
o 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;
o the servicer shall fail duly 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;
o 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 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; or
o an event of bankruptcy, insolvency, receivership or liquidation
shall occur with respect to the servicer.
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 or the owner 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
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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.
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.
Unless an Insurer Default shall have occurred and be continuing, the
insurer may, on behalf of the securityholders, 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, 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 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 certificateholder if the person requesting the amendment obtains
letters from Moody's and Standard & Poor's to the effect that the amendment
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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, 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 agreement
or of modifying in any manner the rights of the noteholders or the
certificateholders; PROVIDED, HOWEVER, that no amendment may, without the
consent of the holders of all of the outstanding notes:
o 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 adversely affected noteholders or
certificateholders;
o reduce the percentage of the principal balance of the notes or the
principal balance of the certificates that is required to consent
to any amendment to the sale and servicing agreement without the
consent of all adversely affected noteholders or
certificateholders; or
o adversely affect the rating of 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 the
notes 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.
TERMINATION OF THE TRUST
If the insurance policy has been terminated and returned to the insurer
for cancellation, the obligations of the servicer, CarMax Auto Receivables and
the owner trustee under the sale and servicing agreement and the trust agreement
will terminate upon the earlier to occur of:
o the maturity or other liquidation of the last contract in the
contract pool, the disposition of any amounts received upon
liquidation of any remaining contracts; and
o the payment to the certificateholders of all amounts required to
be paid to them under the sale and servicing agreement.
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,
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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.
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 interest without amendment of any lien noted on the
related certificate of title and the assignee succeeds by that assignment to the
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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 73 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 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
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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.
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,
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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.
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.
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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.
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
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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 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.
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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. McGuire, Woods, Battle & Boothe has prepared or reviewed the
statements included in the summary and is of the opinion that the statements, as
they relate to federal income tax matters, are correct in all material respects.
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.
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:
o the notes will be treated as debt for federal income tax purposes;
and
o 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
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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 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 %.
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:
o 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;
o events which have occurred before the end of the accrual period;
and
o 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.
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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 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
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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:
o 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;
o the note was issued on the date of its acquisition by the
beneficial owner; and
o 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 87 of
this prospectus and "-- Amortizable Bond Premium" beginning on page 87 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 BY
NOTEHOLDERS
The indenture permits the noteholders to waive any past default or
event of default under the indenture or to rescind an acceleration of the notes
in certain circumstances upon a vote of the holders of a specified percentage of
the principal balance of the notes. 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 63 of this prospectus, " -- Waiver of
Past Defaults" beginning on page 65 of this prospectus and " -- Modification of
Indenture" beginning on page 68 of this prospectus for a further discussion of
the circumstances under which the noteholders may rescind an acceleration of the
notes or waive any past default or event of default under the indenture 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-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
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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:
o 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
o 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:
o 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
o the gain is exempt under the provisions of an applicable income
tax treaty.
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.
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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.
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:
o 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;
o 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;
o prepayment premium payable to the beneficial owners for that
month; and
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o 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 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
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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.
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.
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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 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 owner trustee 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:
o the name, address and taxpayer identification number of the
nominee; and
o 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.
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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 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 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.
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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 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.
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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.
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:
Class A-1 Class A-2 Class A-3 Class A-4
Notes Notes Notes Notes Total
----- ----- ----- ----- -----
Bank of America
Securities LLC..........
First Union Capital
Markets Corp............
Goldman, Sachs & Co.....
Certificates
------------
Bank of America
Securities LLC..........
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.
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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.
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 sponsored by 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 $ .
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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.
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.
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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:
o all obligor payments received with respect to the contracts during
the preceding month;
o all liquidation proceeds received with respect to the contracts
during the preceding month;
o all interest earned on funds on deposit in the collection account
during the preceding month; and
o the aggregate purchase price for all contracts that became
Purchased Contracts during the preceding month.
"CUTOFF DATE" means , 1999.
"DEFAULTED CONTRACT" means a contract as to which any of the following
has occurred:
o 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;
o the servicer has repossessed and sold the related financed
vehicle; or
o 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:
o the principal balance of the certificates as of the day preceding
that Payment Date; and
o 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:
o the principal balance of the notes as of the day preceding that
Payment Date; and
o 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:
o 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
o 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 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 55 of this prospectus PLUS the Monthly Note Principal for that
Payment Date.
"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.
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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:
o direct obligations of, and obligations guaranteed by, the United
States or any agency or instrumentality of the United States;
o 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;
o 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;
o 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;
o commercial paper rated P-1 by Moody's or A-1+ by Standard & Poor's
at the time of the investment;
o guaranteed investment contracts issued by an insurance company or
other corporation acceptable to Moody's and Standard & Poor's;
o investments in money market funds having a rating of Aaa by
Moody's or AAAm by Standard & Poor's; and
o any other investment approved in advance in writing by Moody's and
Standard & Poor's.
"ELIGIBLE DEPOSIT ACCOUNT" means:
o a segregated account with the corporate trust department of the
indenture trustee;
o 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 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
104
<PAGE>
o 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.
"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:
o employee benefit plans, as defined in Section 3(3) of ERISA, that
are subject to Title I of ERISA;
o 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
o 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.
105
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"U.S. PERSON" means:
o a citizen or resident of the United States;
o 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;
o an estate the income of which is includible in gross income for
federal income tax purposes, regardless of its source; or
o 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.
106
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ANNEX A
GLOBAL CLEARANCE, SETTLEMENT AND
TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally-offered
securities to be issued from time to time will 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 the ordinary way
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 according to 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.
Non-U.S. holders of globally-offered securities will be subject to U.S.
withholding taxes unless those holders meet certain requirements and deliver
appropriate U.S. tax documents to the securities clearing organizations or their
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 "lock-up" or 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.
107
<PAGE>
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 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.
108
<PAGE>
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:
o 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;
o 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
o 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.
CERTAIN 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, or
registered debt issued by U.S.
Persons unless:
109
<PAGE>
o 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
o the beneficial owner takes one of the following steps to obtain
an exemption or reduced tax rate:
EXEMPTION FOR NON-U.S. PERSONS (FORM W-8). Beneficial owners of offered
securities that are non-U.S. Persons can obtain a complete exemption from the
withholding tax by filing a signed 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 (FORM
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an 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).
EXEMPTION OR REDUCED RATE FOR NON-U.S. PERSONS RESIDENT IN TREATY
COUNTRIES (FORM 1001). Non-U.S. Persons that are beneficial owners of the
globally-offered securities residing 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 the beneficial owner or his agent.
EXEMPTION FOR U.S. PERSON (FORM W-9). U.S. Persons 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.
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 FOR SPECIFIC TAX ADVICE CONCERNING YOUR HOLDING AND DISPOSING OF THE
GLOBALLY-OFFERED SECURITIES.
110
<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
Dated , 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
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.
- --------------------------------------------------------------------------------
111
<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.
SEC Registration Fee.......................................... $ *
Printing and Engraving........................................ *
Owner Trustee Fees............................................ *
Indenture Trustee Fees........................................ *
Legal Fees and Expenses....................................... *
Blue Sky Fees and Expenses.................................... *
Accountants' Fees and Expenses................................ *
Rating Agency Fees............................................ *
Miscellaneous Fees............................................ *
------
Total ..................................................... $ *
======
------------------
* 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 the (2) 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
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
Indenture Trustee.
4.3 -- Form of Indenture between the Owner Trustee, on
behalf of the Trust, and the Indenture Trustee
(including form of notes).
4.4 -- Form of Administration Agreement among CarMax
Auto Superstores, Inc., as administrator, the
Owner Trustee, on behalf of the Trust, and the
Indenture Trustee.
5.1 -- Form of Opinion of McGuire, Woods, Battle &
Boothe LLP with respect to legality.
8.1 -- Form of 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).
24.1 -- Powers of Attorney.**
----------------
* To be filed by amendment.
** Previously filed.
(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.
(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.
II-2
<PAGE>
(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. 2 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Richmond,
Commonwealth of Virginia, on September 7, 1999.
CARMAX AUTO RECEIVABLES LLC
as Seller (Registrant)
By: /s/ Michael T. Chalifoux
-------------------------------
Name: Michael T. Chalifoux
Title: President and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to Registration Statement has been signed on September 7,
1999 by the following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C>
/s/ Michael T. Chalifoux
- ------------------------------- President and Assistant Secretary September 7, 1999
Michael T. Chalifoux (Principal Executive Officer)
/s/ Philip J. Dunn
- ------------------------------- Vice President, Treasurer and September 7, 1999
Philip J. Dunn Secretary (Principal Financial
Officer and Principal Accounting
Officer)
CPD, INC.
By: /s/ Michael T. Chalifoux
-------------------------- Manager and Member September 7, 1999
Name: Michael T. Chalifoux
Title: President
CARMAX AUTO SUPERSTORES, INC.
By: /s/ Keith D. Browning
---------------------------- Member September 7, 1999
Name: Keith D. Browning
Title: Vice President, Chief Financial
Officer and Assistant Secretary
</TABLE>
II-4
EXHIBIT 4.1
- --------------------------------------------------------------------------------
CARMAX AUTO RECEIVABLES LLC,
as Depositor,
and
FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
as Owner Trustee
------------------------------
TRUST AGREEMENT
Dated as of September [__], 1999
------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions..................................................1
SECTION 1.2. Other Definitional Provisions................................4
ARTICLE II
ORGANIZATION OF THE TRUST
SECTION 2.1. Name.........................................................5
SECTION 2.2. Office.......................................................5
SECTION 2.3. Purposes and Powers..........................................5
SECTION 2.4. Appointment of Owner Trustee.................................6
SECTION 2.5. Initial Capital Contribution of Owner Trust
Estate.................................................6
SECTION 2.6. Declaration of Trust.........................................7
SECTION 2.7. [RESERVED]...................................................7
SECTION 2.8. Title to Trust Property......................................7
SECTION 2.9. Situs of Trust...............................................7
SECTION 2.10. Representations and Warranties of the
Depositor..............................................8
SECTION 2.11. Federal Income Tax Matters...................................9
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1. Initial Ownership...........................................10
SECTION 3.2. The Certificates............................................10
SECTION 3.3. Authentication of Certificates..............................11
SECTION 3.4. Registration of Certificates; Transfer and
Exchange of Certificates..............................11
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen
Certificates..........................................13
SECTION 3.6. Persons Deemed Owners.......................................14
SECTION 3.7. Access to List of Certificateholders' Names
and Addresses.........................................15
SECTION 3.8. Maintenance of Office or Agency.............................15
SECTION 3.9. Appointment of Paying Agent.................................15
SECTION 3.10. Book-Entry Certificates.....................................16
SECTION 3.11. Notices to Clearing Agency..................................17
SECTION 3.12. Definitive Certificates.....................................17
<PAGE>
ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1. Prior Notice to Certificateholders with
Respect to Certain Matters............................19
SECTION 4.2. Action by Certificateholders with Respect
to Certain Matters....................................20
SECTION 4.3. Action by Certificateholders with Respect
to Bankruptcy.........................................20
SECTION 4.4. Restrictions on Certificateholders' Power...................20
SECTION 4.5. Majority Control............................................20
ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1. Establishment of Certificate Payment
Account...............................................21
SECTION 5.2. Application of Trust Funds..................................21
SECTION 5.3. Method of Payment...........................................22
SECTION 5.4. No Segregation of Monies; No Interest.......................22
SECTION 5.5. Accounting and Reports to the Noteholders,
Certificateholders, the Internal
Revenue Service and Others............................22
SECTION 5.6. Signature on Returns; Tax Matters Partner...................23
ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1. General Authority...........................................24
SECTION 6.2. General Duties..............................................24
SECTION 6.3. Action upon Instruction.....................................24
SECTION 6.4. No Duties Except as Specified in this
Agreement or in Instructions..........................26
SECTION 6.5. No Action Except Under Specified Documents
or Instructions.......................................26
SECTION 6.6. Restrictions................................................26
ARTICLE VII
REGARDING THE OWNER TRUSTEE
SECTION 7.1. Acceptance of Trusts and Duties.............................27
SECTION 7.2. Furnishing of Documents.....................................28
SECTION 7.3. Representations and Warranties..............................28
SECTION 7.4. Reliance; Advice of Counsel.................................29
SECTION 7.5. Not Acting in Individual Capacity...........................30
SECTION 7.6. Owner Trustee Not Liable for Certificates
or Contracts..........................................30
SECTION 7.7. Owner Trustee May Own Certificates and Notes................30
<PAGE>
ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1. Owner Trustee's Fees and Expenses...........................31
SECTION 8.2. Indemnification.............................................31
SECTION 8.3. Payments to the Owner Trustee...............................31
ARTICLE IX
TERMINATION
SECTION 9.1. Termination of Trust Agreement..............................32
SECTION 9.2. Notification Regarding Bankruptcy of the
Depositor.............................................33
SECTION 9.3. Prepayment of the Certificates..............................33
ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1. Eligibility Requirements for Owner Trustee..................35
SECTION 10.2. Resignation or Removal of Owner Trustee.....................35
SECTION 10.3. Successor Owner Trustee.....................................36
SECTION 10.4. Merger or Consolidation of Owner Trustee....................37
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee...............37
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Supplements and Amendments..................................39
SECTION 11.2. No Legal Title to Owner Trust Estate
in Certificateholders.................................41
SECTION 11.3. Limitation on Rights of Others..............................41
SECTION 11.4. Notices.....................................................41
SECTION 11.5. Severability................................................42
SECTION 11.6. Separate Counterparts.......................................42
SECTION 11.7. Successors and Assigns......................................42
SECTION 11.8. Covenants of the Depositor..................................42
SECTION 11.9. No Petition.................................................42
SECTION 11.10. No Recourse.................................................43
SECTION 11.11. Headings....................................................43
SECTION 11.12. Governing Law...............................................43
EXHIBITS
Exhibit A Form of Certificate.........................................47
Exhibit B Form of Certificate of Trust................................55
<PAGE>
TRUST AGREEMENT, dated as of September [__], 1999 (as amended,
supplemented or otherwise modified and in effect from time to time, this
"Agreement"), between CARMAX AUTO RECEIVABLES LLC, a Virginia limited liability
company, as depositor (the "Depositor"), and FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION, a national banking association, as trustee and not in its
individual capacity (in such capacity, the "Owner Trustee").
WHEREAS, the parties hereto intend to create the "CarMax Auto Owner
Trust 1999-1" on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Depositor and the Owner
Trustee hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Except as otherwise specified herein or as
the context may otherwise require, the following terms shall have the respective
meanings set forth below for all purposes of this Agreement.
"Accountants" shall have the meaning specified in Section 5.5.
"Book-Entry Certificates" shall mean a beneficial interest in the
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.10.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code section 3801 et seq., as the same may be amended,
supplemented or otherwise modified and in effect from time to time.
"CarMax" shall mean CarMax Auto Superstores, Inc., a Virginia
corporation, and its successors and assigns.
"Certificate" shall mean a physical certificate evidencing the
beneficial interest of a Certificateholder in the property of the Trust,
substantially in the form of Exhibit A attached hereto. Such certificate shall
entitle the Holder thereof to distributions pursuant to this Agreement from
collections and other proceeds in respect of the Owner Trust Estate; provided,
however, that the Owner Trust Estate has been pledged to the Indenture Trustee
to secure payment of the Notes and that the rights of the Certificateholders to
receive distributions on the Certificates are subordinated to the rights of the
Noteholders as described in the Sale and Servicing Agreement and the Indenture.
<PAGE>
"Certificate of Trust" shall mean the Certificate of Trust in the form
of Exhibit B filed for the Trust pursuant to Section 3810(a) of the Business
Trust Statute.
"Certificate Owner" shall mean, with respect to any Book-Entry
Certificate, the Person who is the beneficial owner of such Book-Entry
Certificate as reflected on the books of the Clearing Agency or on the books of
a Person maintaining an account with such Clearing Agency (directly as a
Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Certificate Payment Account" shall have the meaning specified in
Section 5.1.
"Certificate Register" shall have the meaning specified in Section
3.4.
"Certificate Registrar" shall have the meaning specified in Section
3.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean the principal office of the Owner
Trustee at which at any particular time its corporate trust business shall be
administered, which office at date of execution of this Agreement is located at
One Rodney Square, 1st Floor, 920 King Street, Wilmington, Delaware 19801-7475,
Attention: Corporate Trust Department, or at such other address as the Owner
Trustee may designate from time to time by notice to the Certificateholders and
the Depositor, or the principal corporate trust office of any successor Owner
Trustee at the address designated by such successor Owner Trustee by notice to
the Certificateholders and the Depositor.
"Definitive Certificates" shall have the meaning specified in Section
3.10.
"Depositor" shall mean CarMax Auto Receivables LLC, a Virginia limited
liability company, in its capacity as depositor under this Agreement, and its
successors.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Expenses" shall have the meaning specified in Section 8.2.
"Final Payment Date" shall mean the [____________] Payment Date.
"Holder" or "Certificateholder" shall mean the Person in whose name a
Certificate is registered in the Certificate Register.
"Indemnified Parties" shall have the meaning specified in Section 8.2.
"Indenture" shall mean the Indenture, dated as of September [__],
1999, between the Trust and Bankers Trust Company, a New York banking
corporation, as indenture trustee, as amended, supplemented or otherwise
modified and in effect from time to time.
"Initial Certificate Balance" shall mean $[____________].
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in, to and under the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement.
"Owner Trustee" shall mean First Union Trust Company, National
Association, a national banking association, not in its individual capacity but
solely as owner trustee under this Agreement, and any successor Owner Trustee
under this Agreement.
"Paying Agent" shall mean the Owner Trustee or any other Person that
meets the eligibility standards for the Owner Trustee specified in Section 10.1
and is authorized by the Owner Trustee to make distributions from the
Certificate Payment Account, including payment of principal of or interest on
the Certificates, on behalf of the Trust.
"Plan" shall have the meaning specified in Section 3.4.
"Prepayment Date" shall mean the Payment Date specified by the
Servicer pursuant to Section 9.3(a).
"Prepayment Price" shall mean, in the case of a prepayment of
Certificates pursuant to Section 9.3(a), an amount equal to the Certificate
Balance plus accrued but unpaid interest to the date of payment.
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<PAGE>
"PTCE 95-60" shall have the meaning specified in Section 3.4.
"Record Date" shall mean, with respect to any Payment Date or
Prepayment Date, the close of business on the Business Day immediately preceding
such Payment Date or Prepayment Date; provided, however, that if Definitive
Certificates have been issued pursuant to Section 3.12, "Record Date" shall
mean, with respect to any Payment Date or Prepayment Date, the last day of the
calendar month preceding such Payment Date or Prepayment Date.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement, dated as of September [__], 1999, by and among the Owner Trustee, the
Seller and the Servicer, as amended, supplemented or otherwise modified and in
effect from time to time.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Transfer" shall have the meaning specified in Section 3.2.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. All references herein to
specific provisions of proposed or temporary Treasury Regulations shall include
analogous provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Void Transfer" shall have the meaning specified in Section 3.2.
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein
have the meanings assigned to them in the Sale and Servicing Agreement or, if
not defined therein, in the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
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<PAGE>
(c) As used in this Agreement and in any certificate or other
documents made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
assigned to them under generally accepted accounting principles. To the extent
that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. Article, Section and Exhibit
references contained in this Agreement are references to Articles, Sections and
Exhibits in or to this Agreement unless otherwise specified. The term
"including" shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(f) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein. References to a
Person are also to its permitted successors and assigns.
ARTICLE II
ORGANIZATION OF THE TRUST
SECTION 2.1. Name. The Trust shall be known as "CarMax Auto Owner
Trust 1999-1," in which name the Owner Trustee may conduct the business of the
Trust, make and execute contracts and other instruments on behalf of the Trust
and sue and be sued.
SECTION 2.2. Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address in the
State of Delaware as the Owner Trustee may designate by written notice to the
Certificateholders and the Depositor.
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<PAGE>
SECTION 2.3. Purposes and Powers. The purpose of the Trust is, and the
Trust shall have the power and authority, to engage solely in the following
activities:
(i) to issue the Notes pursuant to the Indenture, and the
Certificates pursuant to this Agreement, and to sell the Notes and the
Certificates upon the written order of the Depositor;
(ii) to use the proceeds of the sale of the Notes to fund the
Reserve Account, to pay the organizational, start-up and transactional
expenses of the Trust and to pay the balance to the Depositor pursuant to
the Sale and Servicing Agreement;
(iii) to pay interest on and principal of the Notes and the
Certificates.
(iv) to assign, grant, transfer, pledge, mortgage and convey the
Owner Trust Estate (other than the Certificate Payment Account and the
proceeds thereof) to the Indenture Trustee pursuant to the Indenture;
(v) to enter into and perform its obligations under the
Transaction Documents to which it is to be a party;
(vi) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish the
foregoing or are incidental thereto or connected therewith; and
(vii) subject to compliance with the Transaction Documents, to
engage in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions to
the Noteholders and the Certificateholders.
The Trust is hereby authorized to engage in the foregoing activities.
The Trust shall not engage in any activity other than in connection with the
foregoing or other than as required or authorized by the terms of this Agreement
or the other Transaction Documents.
SECTION 2.4. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein and in the
Business Trust Statute.
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<PAGE>
SECTION 2.5. Initial Capital Contribution of Owner Trust Estate. As of
September [__], 1999, the Depositor sold, assigned, transferred, conveyed and
set over to the Owner Trustee the sum of $1. The Owner Trustee hereby
acknowledges receipt in trust from the Depositor, as of such date, of the
foregoing contribution, which shall constitute the initial Owner Trust Estate
and shall be deposited in the Certificate Payment Account. The Depositor shall
pay organizational expenses of the Trust as they may arise or shall, upon the
request of the Owner Trustee, promptly reimburse the Owner Trustee for any such
expenses paid by the Owner Trustee.
SECTION 2.6. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Certificateholders,
subject to the obligations of the Trust under the Transaction Documents. It is
the intention of the parties hereto that (i) the Trust constitute a business
trust under the Business Trust Statute and that this Agreement constitute the
governing instrument of such business trust and (ii) solely for income and
franchise tax purposes, the Trust shall be treated (A) if it has one beneficial
owner, as a non-entity and (B) if it has more than one beneficial owner, as a
partnership, with the assets of the partnership being the Contracts and other
assets held by the Trust, the partners of the partnership being the
Certificateholders and the Notes constituting indebtedness of the partnership.
Unless otherwise required by the appropriate tax authorities, the Trust shall
file or cause to be filed annual or other necessary returns, reports and other
forms consistent with the characterization of the Trust either as a nonentity or
as a partnership for such tax purposes. Effective as of the date hereof, the
Owner Trustee shall have all rights, powers and duties set forth herein and in
the Business Trust Statute with respect to accomplishing the purposes of the
Trust. The Owner Trustee has filed the Certificate of Trust with the Secretary
of State.
SECTION 2.7. [RESERVED]
SECTION 2.8. Title to Trust Property. Legal title to the entirety of
the Owner Trust Estate shall be vested at all times in the Trust as a separate
legal entity, except where applicable law in any jurisdiction requires title to
any part of the Owner Trust Estate to be vested in a trustee or trustees, in
which case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
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<PAGE>
SECTION 2.9. Situs of Trust. The Trust shall be located and
administered in the State of Delaware. All bank accounts maintained by the Owner
Trustee on behalf of the Trust shall be located in the State of Delaware or the
State of New York. The Trust shall not have any employees in any state other
than the State of Delaware; provided, however, that nothing herein shall
restrict or prohibit the Owner Trustee from having employees within or without
the State of Delaware. Payments will be received by the Trust only in the State
of Delaware or the State of New York, and payments will be made by the Trust
only from the State of Delaware or the State of New York. The only office of the
Trust will be at the Corporate Trust Office in the State of Delaware.
SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor hereby represents and warrants to the Owner Trustee that:
(i) the Depositor is duly organized and validly existing as a
limited liability company in good standing under the laws of the
Commonwealth of Virginia, with power and authority to own its properties
and to conduct its business as such properties are currently owned and such
business is presently conducted;
(ii) the Depositor is duly qualified to do business as a foreign
limited liability company in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of property or the conduct of its business requires such qualifications;
(iii) the Depositor has the power and authority to execute and
deliver this Agreement and to carry out its terms, and the Depositor has
full power and authority to sell and assign the property to be sold and
assigned to, and deposited with, the Trust, the Depositor has duly
authorized such sale and assignment and deposit to the Trust by all
necessary limited liability company action and the execution, delivery and
performance of this Agreement has been duly authorized by the Depositor by
all necessary limited liability company action;
(iv) the consummation of the transactions contemplated by this
Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute
(with or without notice or lapse of time or both) a default under, the
articles of organization or operating agreement of the Depositor, or any
indenture, agreement or other instrument to which the Depositor is a party
or by which it is bound do not result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to the
Transaction Documents) and do not violate any law or, to the knowledge of
the Depositor, any order, rule or regulation applicable to the Depositor of
any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the
Depositor or its properties;
-8-
<PAGE>
(v) there are no proceedings or investigations pending or, to the
knowledge of the Depositor, threatened before any court, regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Depositor or its properties (i) asserting the
invalidity of this Agreement, the Indenture, any of the other Transaction
Documents, the Notes or the Certificates, (ii) seeking to prevent the
issuance of the Notes or the Certificates or the consummation of any of the
transactions contemplated by this Agreement, the Indenture or any of the
other Transaction Documents, (iii) seeking any determination or ruling that
might materially and adversely affect the performance by the Depositor of
its obligations under, or the validity or enforceability of, this Agreement
or (iv) which might adversely affect the federal income tax attributes, or
Applicable Tax State franchise or income tax attributes, of the Notes; and
(vi) the representations and warranties of the Depositor in
Section 3.1 of the Purchase Agreement are true and correct.
SECTION 2.11. Federal Income Tax Matters. The Certificateholders
acknowledge that it is their intent and that they understand it is the intent of
the Depositor and the Servicer that, for purposes of federal income, state and
local income and franchise tax and any other income taxes, the Trust will be
treated either as a "nonentity" under Treasury Regulation section 301.7701-3 or
as a partnership, and the Certificateholders (including the Depositor) will be
treated as partners in that partnership. The Depositor and the
Certificateholders by acceptance of a Certificate agree to such treatment and
agree to take no action inconsistent with such treatment. For each taxable year
(or portion thereof), other than periods in which there is only one
Certificateholder:
(i) amounts paid to the Depositor pursuant to Sections 4.7(a) and
4.7(d) of the Sale and Servicing Agreement for such year (or other period)
shall be treated as a guaranteed payment within the meaning of Section
707(c) of the Code; and
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(ii) all remaining net income or net loss, as the case may be, of
the Trust for such year (or other period) as determined for federal income
tax purposes (and each item of income, gain, credit, loss or deduction
entering into the computation thereof) shall be allocated to the
Certificateholders pro rata in accordance with the outstanding principal
balances of their respective Certificates. The Depositor is authorized to
modify the allocations in this paragraph if necessary or appropriate, in
its sole discretion, for the allocations to reflect fairly the economic
income, gain or loss to the Depositor or the Certificateholders or as
otherwise required by the Code.
ARTICLE III
TRUST CERTIFICATES AND TRANSFER OF INTERESTS
SECTION 3.1. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Certificates, the Depositor shall be the sole beneficiary of the Trust.
SECTION 3.2. The Certificates. The Certificates shall be issued in one
or more registered, definitive, physical certificates, in the form set forth in
Exhibit A, in minimum denominations of at least $1,000 and integral multiples of
$1,000 in excess thereof; provided, however, that a single Certificate may be
issued in a denomination equal to the Initial Certificate Balance less the
aggregate denominations of all other Certificates or a denomination less than
$1,000. No Certificate may be sold, transferred, assigned, participated, pledged
or otherwise disposed of (any such act, a "Transfer") to any Person except in
accordance with the provisions of Section 3.4, and any attempted Transfer in
violation of this section or Section 3.4 shall be null and void (each, a "Void
Transfer"). Notwithstanding the foregoing, following the delivery to the Owner
Trustee of an Opinion of Counsel to the effect that the elimination of
restrictions on transfer will not cause the Trust to be taxable as a corporation
for federal income tax purposes or for purposes of the tax laws of any
Applicable Tax State, this Agreement may be amended to modify or delete transfer
restrictions in accordance with such Opinion of Counsel.
The Certificates may be in printed or typewritten form and shall be
executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefits of this Agreement, notwithstanding
that such individuals or any of them shall have ceased to be so authorized prior
to the authentication and delivery of such Certificates or did not hold such
offices at the date of authentication and delivery of such Certificates.
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If Transfer of the Certificates is permitted pursuant to this Section
3.2 and Section 3.4, a transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of a Certificateholder hereunder upon such transferee's acceptance
of a Certificate duly registered in such transferee's name pursuant to Section
3.4.
SECTION 3.3. Authentication of Certificates. Concurrently with the
initial sale of the Contracts to the Trust pursuant to the Sale and Servicing
Agreement, the Owner Trustee shall cause the Certificates, in an aggregate
principal amount equal to the Initial Certificate Balance, to be executed on
behalf of the Trust, authenticated and delivered to or upon the written order of
the Depositor, signed by its manager, its president, any vice president, its
secretary or its treasurer, without further limited liability company action by
the Depositor, in authorized denominations. No Certificate shall entitle its
Holder to any benefit under this Agreement, or shall be valid for any purpose,
unless there shall appear on such Certificate a certificate of authentication
substantially in the form set forth in Exhibit A executed by the Owner Trustee
or [____________________], as the Owner Trustee's authenticating agent, by
manual signature, which authentication shall constitute conclusive evidence that
such Certificate shall have been duly authenticated and delivered hereunder. All
Certificates shall be dated the date of their authentication.
SECTION 3.4. Registration of Certificates; Transfer and Exchange of
Certificates.
(a) The Owner Trustee shall cause to be kept, at the office or agency
maintained pursuant to Section 3.8, a register (the "Certificate Register") in
which, subject to such reasonable regulations as it may prescribe, the Owner
Trustee shall provide for the registration of Certificates and the registration
of Transfers of Certificates. The Indenture Trustee initially shall be the
registrar (the "Certificate Registrar") for the purpose of registering
Certificates and Transfers of Certificates as herein provided. Upon any
resignation of any Certificate Registrar, the Owner Trustee shall promptly
appoint a successor or, if it elects not to make such an appointment, assume the
duties of Certificate Registrar.
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(b) No Transfer of a Certificate shall be made unless the Owner
Trustee shall have received a representation from the transferee of such
Certificate acceptable to and in form and substance satisfactory to the Owner
Trustee to the effect that:
(i) such transferee (A) is not an employee benefit plan or
arrangement subject to Section 406 of ERISA or a plan subject to Section
4975 of the Code (a "Plan"), nor a person acting on behalf of a Plan nor
using the assets of a Plan to effect such transfer, and (B) is not an
insurance company purchasing a Certificate with funds contained in an
"insurance company general account" (as defined in Section V(e) of
Prohibited Transaction Class Exemption 95-60 ("PTCE 95-60") as to which
there is a Plan with respect to which the amount of such general account's
reserves and liabilities for the contracts held by or on behalf of such
Plan and all other Plans maintained by the same employer (or affiliate
thereof as defined in Section V(a)(1) of PTCE 95-60) or by the same
employee organization exceed 10% of the total of all reserves and
liabilities of such general account (as such amounts are determined under
Section I(a) of PTCE 95-60) at the date of acquisition; or
(ii) such transferee is a Plan or is an insurance company
purchasing a Certificate with funds contained in an insurance company
general account, having delivered to the Owner Trustee and opinion of
counsel satisfactory to the Owner Trustee, which opinion of counsel shall
not be an expense of either the Owner Trustee or the Trust, addressed to
the Owner Trustee, to the effect that the purchase or holding of such
Certificate will not result in the assets of the Owner Trust Estate being
deemed to be "plan assets" and subject to the prohibited transaction
provisions of ERISA and the Code and will not subject the Owner Trustee to
any obligation in addition to those expressly undertaken in this Agreement
or to any liability; and
(iii) such transferee understands that any purported Transfer of
any Certificate (or any interest therein) in contravention of any of the
restrictions and conditions (including any violation of the representations
in paragraphs (i) and (ii)) in this Section 3.4 shall be a Void Transfer,
and the purported transferee in a Void Transfer shall not be recognized by
the Trust or any other Person as a Certificateholder for any purpose.
Notwithstanding anything else to the contrary herein, any purported
Transfer of a Certificate to or on behalf of a Plan or to an insurance company
purchasing with funds from a general account not exempt pursuant to PTCE 95-60
without the delivery to the Owner Trustee of an opinion of counsel satisfactory
to the Owner Trustee as described in paragraph (ii) above shall be a Void
Transfer.
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To the extent permitted under applicable law (including, but not
limited to, ERISA), the Owner Trustee shall be under no liability to any Person
for any registration of transfer of any Certificate that is in fact not
permitted by this Section 3.4(b) or for taking any other action with respect to
such Holder under the provisions of this Agreement or the Sale and Servicing
Agreement so long as the transfer was registered by the Certificate Registrar or
the Owner Trustee in accordance with the foregoing requirements.
(c) Upon surrender for registration of Transfer of any Certificate at
the office or agency of the Owner Trustee to be maintained as provided in
Section 3.8, and upon compliance with any provisions of this Agreement relating
to such Transfer, the Owner Trustee shall execute and the Owner Trustee, or
[____________________], as the Owner Trustee's authenticating agent, shall
authenticate and deliver to the Certificateholder making such surrender, in the
name of the designated transferee or transferees, one or more new Certificates
in any authorized denomination, of a like aggregate principal amount. Each
Certificate presented or surrendered for registration of Transfer or exchange
shall be accompanied by a written instrument of transfer and accompanied by IRS
Form 4224 or W-9 in form satisfactory to the Owner Trustee and the Certificate
Registrar, duly executed by the Certificateholder or his attorney duly
authorized in writing. Each Certificate presented or surrendered for
registration of Transfer or exchange shall be canceled and subsequently disposed
of by the Certificate Registrar in accordance with its customary practice. No
service charge shall be made for any registration of Transfer or exchange of
Certificates, but the Owner Trustee or the Certificate Registrar may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any Transfer or exchange of Certificates.
(d) The provisions of this Section 3.4 and of this Agreement generally
are intended to prevent the Trust from being characterized as a "publicly traded
partnership" within the meaning of Section 7704 of the Code, in reliance on
Treasury Regulation sections 1.7704-1(e) and (h).
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates.
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(a) If (i) any mutilated Certificate is surrendered to the Certificate
Registrar, or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate, and (ii) there is delivered
to the Certificate Registrar and Owner Trustee such security or indemnity as may
be required by them to hold each of the Trust, the Certificate Registrar and the
Owner Trustee harmless, then, in the absence of notice to the Trust, the
Certificate Registrar or the Owner Trustee that such Certificate has been
acquired by a protected purchaser, the Owner Trustee shall execute and the Owner
Trustee, or [____________________], as the Owner Trustee's authenticating agent,
shall authenticate and deliver, in exchange for, or in lieu of, any such
mutilated, destroyed, lost or stolen Certificate, as the case may be, a
replacement Certificate, as the case may be, of like tenor and denomination;
provided, however, that if any such destroyed, lost or stolen Certificate, but
not a mutilated Certificate, shall have become or within seven (7) days of the
Owner Trustee's receipt of evidence to its satisfaction of such destruction,
loss or theft shall be due and payable, or shall have been called for prepayment
in whole pursuant to Section 9.3, instead of issuing a replacement Certificate,
the Owner Trustee may pay such destroyed, lost or stolen Certificate when so due
or payable or upon the Prepayment Date without surrender thereof. If, after the
delivery of such replacement Certificate or payment of a destroyed, lost or
stolen Certificate pursuant to the proviso to the preceding sentence, a
protected purchaser of the original Certificate in lieu of which such
replacement Certificate was issued presents for payment such original
Certificate, the Trust and the Owner Trustee shall be entitled to recover such
replacement Certificate (or such payment) from the Person to whom such
replacement Certificate was delivered or any Person taking such replacement
Certificate from such Person to whom such replacement Certificate was delivered
or any assignee of such Person, except a protected purchaser, and shall be
entitled to recover upon the security or indemnity provided therefor to the
extent of any loss, damage, cost or expense incurred by the Trust or the Owner
Trustee in connection therewith.
(b) Upon the issuance of any replacement Certificate under this
Section 3.5, the Trust may require the payment by the Holder of such Certificate
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with such issuance and any other reasonable expenses
(including the fees and expenses of the Owner Trustee) related thereto.
(c) Every replacement Certificate issued pursuant to this Section 3.5
in replacement of any mutilated, destroyed, lost or stolen Certificate shall
constitute an original additional contractual obligation of the Trust, whether
or not the mutilated, destroyed, lost or stolen Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Agreement equally and proportionately with any and all other Certificates duly
issued hereunder.
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(d) The provisions of this Section 3.5 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Certificates.
SECTION 3.6. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Owner Trustee, the Certificate
Registrar and any Paying Agent may treat the Person in whose name such
Certificate is registered in the Certificate Register (as of the day of
determination) as the owner of such Certificate for the purpose of receiving
distributions pursuant to Section 5.2 and for all other purposes whatsoever, and
none of the Owner Trustee, the Certificate Registrar or any Paying Agent shall
be bound by any notice to the contrary.
SECTION 3.7. Access to List of Certificateholders' Names and
Addresses. The Owner Trustee shall furnish or cause to be furnished to the
Servicer and the Depositor, or to the Indenture Trustee, within fifteen (15)
days after receipt by the Owner Trustee of a written request therefor from the
Servicer, the Depositor or the Indenture Trustee, as the case may be, a list, in
such form as the requesting party may reasonably require, of the names and
addresses of the Certificateholders as of the most recent Record Date. If three
or more Certificateholders or one or more Holders of Certificates evidencing not
less than 25% of the Certificate Balance apply in writing to the Owner Trustee,
and such application states that the applicants desire to communicate with other
Certificateholders with respect to their rights under this Agreement or under
the Certificates and such application is accompanied by a copy of the
communication that such applicants propose to transmit, then the Owner Trustee
shall, within five (5) Business Days after the receipt of such application,
afford such applicants access during normal business hours to the current list
of Certificateholders. Each Certificateholder, by receiving and holding a
Certificate, shall be deemed to have agreed not to hold any of the Depositor,
the Certificate Registrar or the Owner Trustee accountable by reason of the
disclosure of its name and address, regardless of the source from which such
information was derived.
SECTION 3.8. Maintenance of Office or Agency. The Owner Trustee shall
maintain in [the Borough of Manhattan, The City of New York], an office or
offices or agency or agencies where Certificates may be surrendered for
registration of Transfer or exchange and where notices and demands to or upon
the Owner Trustee in respect of the Certificates and the Transaction Documents
may be served. The Owner Trustee shall give prompt written notice to the
Depositor and to the Certificateholders of any change in the location of the
Certificate Registrar or any such office or agency.
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SECTION 3.9. Appointment of Paying Agent. The Paying Agent shall make
distributions to Certificateholders from the Certificate Payment Account
pursuant to Section 5.2 and shall report the amounts of such distributions to
the Owner Trustee. Any Paying Agent shall have the revocable power to withdraw
funds from the Certificate Payment Account for the purpose of making the
distributions referred to above. The Owner Trustee may revoke such power and
remove the Paying Agent if the Owner Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect. The Paying Agent shall initially be
[____________________], and any co-paying agent chosen by the Owner Trustee.
[____________________] shall be permitted to resign as Paying Agent upon thirty
(30) days' written notice to the Owner Trustee. In the event that
[____________________] shall no longer be the Paying Agent, the Owner Trustee,
with the consent of the Insurer, shall appoint a successor to act as Paying
Agent (which shall be a bank or trust company). The Owner Trustee shall cause
such successor Paying Agent or any additional Paying Agent appointed by the
Owner Trustee to execute and deliver to the Owner Trustee an instrument in which
such successor Paying Agent or additional Paying Agent shall agree with the
Owner Trustee that as Paying Agent, such successor Paying Agent or additional
Paying Agent will hold all sums, if any, held by it for payment to the
Certificateholders in trust for the benefit of the Certificateholders entitled
thereto until such sums shall be paid to such Certificateholders. The Paying
Agent shall return all unclaimed funds to the Owner Trustee and upon removal of
a Paying Agent such Paying Agent shall also return all funds in its possession
to the Owner Trustee. The provisions of Sections 7.1, 7.3 and 8.1 shall apply to
the Owner Trustee also in its role as Paying Agent, for so long as the Owner
Trustee shall act as Paying Agent and, to the extent applicable, to any other
paying agent appointed hereunder. Any reference in this Agreement to the Paying
Agent shall include any co-paying agent unless the context requires otherwise.
SECTION 3.10. Book-Entry Certificates. The Certificates, upon original
issuance, shall be issued as provided in Section 3.2 representing the Book-Entry
Certificates, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Trust. The Book-Entry Certificates
shall be registered initially on the Certificate Register in the name of Cede &
Co. , the nominee of the initial Clearing Agency, and no Certificate Owner
thereof shall receive a definitive Certificate representing such Certificate
Owner's interest in such Certificate, except as provided in Section 3.12. Unless
and until definitive, fully registered Certificates (the "Definitive
Certificates") have been issued to such Certificate Owners pursuant to Section
3.12:
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(i) the provisions of this Section 3.10 shall be in full force
and effect;
(ii) the Certificate Registrar and the Owner Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Agreement (including the payment of principal and interest on the
Certificates and the giving of instructions or directions hereunder) as the
sole Holder of the Certificates, and shall have no obligation to the
Certificate Owners;
(iii) to the extent that the provisions of this Section 3.10
conflict with any other provisions of this Agreement, the provisions of
this Section shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those established by
law and agreements between such Certificate Owners and the Clearing Agency
and/or the Clearing Agency Participants pursuant to the Depository
Agreement, and, unless and until Definitive Certificates are issued
pursuant to Section 3.12, the initial Clearing Agency shall make book-entry
transfers among the Clearing Agency Participants and receive and transmit
payments of principal of and interest on the Certificates to such Clearing
Agency Participants; and
(v) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Certificates
evidencing a specified percentage of the Certificate Balance, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Certificate Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Certificates and has
delivered such instructions to the Owner Trustee.
SECTION 3.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Certificateholders is required under this Agreement, unless
and until Definitive Certificates shall have been issued to such Certificate
Owners pursuant to Section 3.12, the Owner Trustee shall give all such notices
and communications specified herein to be given to Holders of the Certificates
to the Clearing Agency, and shall have no obligation to such Certificate Owners.
<PAGE>
SECTION 3.12. Definitive Certificates. If (i) the Depositor, the
Administrator or the Servicer advises the Owner Trustee in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Book-Entry Certificates and the Owner
Trustee or the Administrator is unable to locate a qualified successor, (ii) the
Depositor, at its option, advises the Owner Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (iii) after the
occurrence of an Event of Servicing Termination, Certificate Owners of the
Book-Entry Certificates representing beneficial interests aggregating not less
than 51% of the Certificate Balance advise the Owner Trustee and the Clearing
Agency in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interests of such Certificate Owners,
then the Clearing Agency shall notify all Certificate Owners and the Owner
Trustee of the occurrence of such event and of the availability of Definitive
Certificates to Certificate Owners requesting the same. Upon surrender to the
Owner Trustee of the typewritten Certificates representing the Book-Entry
Certificates by the Clearing Agency, accompanied by registration instructions,
the Depositor shall execute and the Owner Trustee shall authenticate the
Definitive Certificates in accordance with the instructions of the Clearing
Agency. None of the Trust, the Certificate Registrar or the Owner Trustee shall
be liable for any delay in delivery of such instructions and may conclusively
rely on, and shall be protected in relying on, such instructions. Upon the
issuance of Definitive Certificates, the Owner Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders.
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ARTICLE IV
ACTIONS BY OWNER TRUSTEE
SECTION 4.1. Prior Notice to Certificateholders with Respect to
Certain Matters. With respect to the following matters, the Owner Trustee shall
not take action unless (i) at least thirty (30) days before the taking of such
action, the Owner Trustee shall have notified the Certificateholders, the
Insurer and the Rating Agencies in writing of the proposed action and (ii) the
Insurer, if an Insurer Default shall not have occurred and be continuing, and
the Holders of Certificates evidencing not less than 51% of the Certificate
Balance shall not have notified the Owner Trustee in writing prior to the 30th
day after such notice is given that the Insurer and such Holders have withheld
consent or provided alternative direction:
(i) the initiation of any claim or lawsuit by the Trust (except
claims or lawsuits brought by the Servicer in connection with the
collection of the Contracts) and the settlement of any action, claim or
lawsuit brought by or against the Trust (except with respect to the
aforementioned claims or lawsuits for collection by the Servicer of the
Contracts);
(ii) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed under
the Business Trust Statute);
(iii) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is required;
(iv) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is not required and
such amendment materially adversely affects the interests of the
Certificateholders;
(v) the amendment, change or modification of the Sale and
Servicing Agreement or the Administration Agreement, except to cure any
ambiguity or to amend or supplement any provision in a manner or add any
provision that would not materially adversely affect the interests of the
Certificateholders; or
(vi) the appointment pursuant to the Indenture of a successor
Note Registrar, Paying Agent for the Notes or Indenture Trustee or pursuant
to this Agreement of a successor Certificate Registrar, or the consent to
the assignment by the Note Registrar, Paying Agent for the Notes or
Indenture Trustee or Certificate Registrar of its obligations under the
Indenture or this Agreement, as applicable.
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SECTION 4.2. Action by Certificateholders with Respect to Certain
Matters. The Owner Trustee may not, except upon the occurrence of an Event of
Servicing Termination subsequent to the payment in full of the Notes and in
accordance with the written direction of the Insurer, if an Insurer Default
shall not have occurred and be continuing, and the Holders of Certificates
evidencing not less than 51% of the Certificate Balance, (i) remove the Servicer
pursuant to Article VIII of the Sale and Servicing Agreement, (ii) appoint a
successor Servicer pursuant to Article VIII of the Sale and Servicing Agreement,
(iii) remove the Administrator pursuant to Section 9 of the Administration
Agreement, (iv) appoint a successor Administrator pursuant to Section 9 of the
Administration Agreement or (v) sell the Contracts after the termination of the
Indenture, except as expressly provided in the Transaction Documents.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to commence a voluntary proceeding in
bankruptcy relating to the Trust unless (i) the Notes have been paid in full and
(ii) the Insurer, if an Insurer Default shall not have occurred and be
continuing, and each Certificateholder approves of such commencement in advance
and delivers to the Owner Trustee a certificate certifying that such
Certificateholder reasonably believes that the Trust is insolvent.
SECTION 4.4. Restrictions on Certificateholders' Power. Neither the
Insurer nor the Certificateholders shall direct the Owner Trustee to take or
refrain from taking any action if such action or inaction would be contrary to
any obligation of the Trust or the Owner Trustee under this Agreement or any of
the other Transaction Documents or would be contrary to Section 2.3, nor shall
the Owner Trustee be obligated to follow any such direction, if given.
SECTION 4.5. Majority Control. Except as expressly provided herein,
any action that may be taken by the Certificateholders under this Agreement may
be taken by the Holders of Certificates evidencing not less than 51% of the
Certificate Balance. Except as expressly provided herein, any written notice of
the Certificateholders delivered pursuant to this Agreement shall be effective
if signed by Holders of Certificates evidencing not less than 51% of the
Certificate Balance at the time of the delivery of such notice.
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ARTICLE V
APPLICATION OF TRUST FUNDS; CERTAIN DUTIES
SECTION 5.1. Establishment of Certificate Payment Account. Pursuant to
Section 4.1(c) of the Sale and Servicing Agreement, there has been established
and there shall be maintained in the name of the Owner Trustee at an Eligible
Institution a segregated trust account designated as the Certificate Payment
Account (the "Certificate Payment Account"). The Certificate Payment Account
shall be held in trust for the benefit of the Certificateholders. Except as
expressly provided in Section 3.9, the Certificate Payment Account shall be
under the sole dominion and control of the Owner Trustee. All monies deposited
from time to time in the Certificate Payment Account pursuant to the Sale and
Servicing Agreement or the Indenture shall be applied as provided in this
Agreement and the Sale and Servicing Agreement or the Indenture.
SECTION 5.2. Application of Trust Funds. (a) On each Payment Date,
upon receipt of instructions from the Servicer pursuant to Section 4.9 of the
Sale and Servicing Agreement, the Owner Trustee shall, or shall cause the Paying
Agent to, apply the amount on deposit in the Certificate Payment Account on such
Payment Date to make the following distributions in the following order of
priority:
(i) to the Certificateholders, the Total Certificate Interest for
such Payment Date; and
(ii) to the Certificateholders, the Monthly Certificate Principal
for that Payment Date.
If the amount on deposit in the Certificate Payment Account on any
Payment Date is less than the amount described in clause (i) or (ii) above for
such Payment Date, the Owner Trustee shall pay the available amount to the
Holders of each Certificate pro rata based on the outstanding principal amount
of such Certificate as of such Payment Date.
(b) On each Payment Date, the Owner Trustee shall, or shall cause the
Paying Agent to, send to each Certificateholder the statement provided to the
Owner Trustee by the Servicer pursuant to Section 4.9 of the Sale and Servicing
Agreement with respect to such Payment Date.
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(c) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Certificateholder, such tax shall reduce
the amount otherwise distributable to the Certificateholder in accordance with
this Section 5.2. The Owner Trustee and each Paying Agent is hereby authorized
and directed to retain from amounts otherwise distributable to the
Certificateholders sufficient funds for the payment of any such withholding tax
that is legally owed by the Trust (but such authorization shall not prevent the
Owner Trustee from contesting any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The amount of any withholding tax imposed with respect to a
Certificateholder shall be treated as cash distributed to such Certificateholder
at the time it is withheld by the Trust and remitted to the appropriate taxing
authority. If there is a possibility that withholding tax is payable with
respect to a distribution (such as a distribution to a non-U.S.
Certificateholder), the Owner Trustee may, in its sole discretion, withhold such
amounts in accordance with this Section 5.2. If a Certificateholder wishes to
apply for a refund of any such withholding tax, the Owner Trustee shall
reasonably cooperate with such Certificateholder in making such claim so long as
such Certificateholder agrees to reimburse the Owner Trustee for any
out-of-pocket expenses incurred.
SECTION 5.3. Method of Payment. Subject to Section 9.1(c),
distributions required to be made to Certificateholders on any Payment Date
shall be made to each Certificateholder of record on the preceding Record Date
either by wire transfer, in immediately available funds, to the account of such
Holder at a bank or other entity having appropriate facilities therefor, if (i)
such Certificateholder shall have provided to the Certificate Registrar
appropriate written instructions at least five (5) Business Days prior to such
Payment Date, or (ii) such Certificateholder is the Depositor or, if not, by
check mailed to such Certificateholder at the address of such Holder appearing
in the Certificate Register. Notwithstanding the foregoing, the final
distribution in respect of any Certificate (whether on the Final Payment Date or
otherwise) will be payable only upon presentation and surrender of such
Certificate at the office or agency maintained for that purpose by the Owner
Trustee pursuant to Section 3.8.
SECTION 5.4. No Segregation of Monies; No Interest. Subject to
Sections 5.1 and 5.2, monies received by the Owner Trustee hereunder need not be
segregated in any manner except to the extent required by law, the Indenture or
the Sale and Servicing Agreement and may be deposited under such general
conditions as may be prescribed by law, and the Owner Trustee shall not be
liable for any interest thereon.
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SECTION 5.5. Accounting and Reports to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. The Owner Trustee
shall, based on information provided by the Depositor, (i) maintain (or cause to
be maintained) the books of the Trust on the basis of a fiscal year ending
February 28 or 29, as applicable, and based on the accrual method of accounting,
(ii) deliver to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information as may be required (including
Schedule K-1) to enable such Certificateholder to prepare its federal and state
income tax returns, (iii) file such tax returns relating to the Trust (including
a partnership information return, IRS Form 1065) and make such elections as may
from time to time be required or appropriate under any applicable state or
federal statute or rule or regulation thereunder so as to maintain the Trust's
characterization as a partnership for federal income tax purposes, (iv) cause
such tax returns to be signed in the manner required by law and (v) collect or
cause to be collected any withholding tax as described in and in accordance with
Section 5.2(c) with respect to income or distributions to Certificateholders.
The Owner Trustee shall elect under Section 1278 of the Code to include in
income currently any market discount that accrues with respect to the Contracts.
The Owner Trustee shall not make the election provided under Section 754 of the
Code.
The Owner Trustee may satisfy its obligations with respect to this
Section 5.5 by retaining, at the expense of the Depositor, a firm of independent
public accountants (the "Accountants") chosen by the Depositor which shall
perform the filing obligations of the Owner Trustee hereunder. The Owner Trustee
may require the Accountants to provide to the Owner Trustee, on or before
[____________], 1999, a letter in form and substance satisfactory to the Owner
Trustee as to whether any federal tax withholding on Certificates is then
required and, if required, the procedures to be followed with respect thereto to
comply with the requirements of the Code. The Accountants shall be required to
update such letter in each instance that any additional tax withholding is
subsequently required or any previously required tax withholding shall no longer
be required. The Owner Trustee shall be deemed to have discharged its
obligations pursuant to this Section 5.5 upon its retention of the Accountants,
and the Owner Trustee shall not have any liability with respect to the default
or misconduct of the Accountants.
SECTION 5.6. Signature on Returns; Tax Matters Partner.
(a) The Depositor, as general partner for income tax purposes, shall
sign, on behalf of the Trust, the tax returns of the Trust.
(b) The Depositor shall be designated the "tax matters partner" of the
Trust pursuant to Section 6231(a)(7)(A) of the Code and applicable Treasury
Regulations.
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ARTICLE VI
AUTHORITY AND DUTIES OF OWNER TRUSTEE
SECTION 6.1. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Transaction Documents to which the Trust is
to be a party and each certificate or other document attached as an exhibit to
or contemplated by the Transaction Documents to which the Trust is to be a party
and any amendment or other agreement, in each case in such form as the Depositor
shall approve, as evidenced conclusively by the Owner Trustee's execution
thereof and the Depositor's execution of this Agreement, and to direct the
Indenture Trustee to authenticate and deliver Notes in the aggregate principal
amount of $[____________] (comprised of $[____________] in aggregate principal
amount of Class A-1 Notes, $[____________] in aggregate principal amount of
Class A-2 Notes, $[____________] in aggregate principal amount of Class A-3
Notes and $[____________] in aggregate principal amount of Class A-4 Notes). In
addition to the foregoing, the Owner Trustee is authorized to take all actions
required of the Trust pursuant to the Transaction Documents. The Owner Trustee
is further authorized from time to time to take such action on behalf of the
Trust as is permitted by the Transaction Documents and which the Servicer or the
Administrator recommends with respect to the Transaction Documents, except to
the extent that this Agreement expressly requires the consent of
Certificateholders for such action.
SECTION 6.2. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the other Transaction Documents to which the
Trust is a party and to administer the Trust in the interest of the
Certificateholders, subject to the lien of the Indenture and in accordance with
the provisions of this Agreement and the other Transaction Documents.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Transaction
Documents to the extent the Administrator is required in the Administration
Agreement to perform any act or to discharge such duty of the Owner Trustee or
the Trust hereunder or under any other Transaction Document, and the Owner
Trustee shall not be held liable for the default or failure of the Administrator
to carry out its obligations under the Administration Agreement.
SECTION 6.3. Action upon Instruction.
(a) Subject to Article IV, and in accordance with the terms of the
Transaction Documents, the Certificateholders may, by written instruction,
direct the Owner Trustee in the management of the Trust.
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(b) The Owner Trustee shall not be required to take any action
hereunder or under any Transaction Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action
is likely to result in liability on the part of the Owner Trustee or is contrary
to the terms hereof or of any other Transaction Document or is otherwise
contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or any
other Transaction Document, the Owner Trustee shall promptly give notice (in
such form as shall be appropriate under the circumstances) to the Insurer and
the Certificateholders requesting instruction as to the course of action to be
adopted, and to the extent the Owner Trustee acts in good faith in accordance
with any written instruction of the Insurer or the Certificateholders received,
the Owner Trustee shall not be liable on account of such action to any Person.
If the Owner Trustee shall not have received appropriate instruction within ten
(10) days of such notice (or within such shorter period of time as reasonably
may be specified in such notice or may be necessary under the circumstances) it
may, but shall be under no duty to, take or refrain from taking such action, not
inconsistent with this Agreement or the other Transaction Documents, as it shall
deem to be in the best interests of the Certificateholders, and shall have no
liability to any Person for such action or inaction.
(d) In the event the Owner Trustee is unsure as to the application of
any provision of this Agreement or any other Transaction Document or any such
provision is ambiguous as to its application, or is, or appears to be, in
conflict with any other applicable provision, or in the event that this
Agreement permits any determination by the Owner Trustee or is silent or is
incomplete as to the course of action that the Owner Trustee is required to take
with respect to a particular set of facts, the Owner Trustee may give notice (in
such form as shall be appropriate under the circumstances) to the Insurer and
the Certificateholders requesting instruction and, to the extent that the Owner
Trustee acts or refrains from acting in good faith in accordance with any such
instruction received, the Owner Trustee shall not be liable, on account of such
action or inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within ten (10) days of such notice (or within such
shorter period of time as reasonably may be specified in such notice or may be
necessary under the circumstances) it may, but shall be under no duty to, take
or refrain from taking such action not inconsistent with this Agreement or the
other Transaction Documents, as it shall deem to be in the best interests of the
Certificateholders and shall have no liability to any Person for such action or
inaction.
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SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee or the Trust is a party, except as expressly provided
by the terms of this Agreement or in any document or written instruction
received by the Owner Trustee pursuant to Section 6.3, and no implied duties or
obligations shall be read into this Agreement or any other Transaction Document
against the Owner Trustee. The Owner Trustee shall have no responsibility for
filing any financing or continuation statement in any public office at any time
or otherwise to perfect or maintain the perfection of any security interest or
lien granted to it hereunder or to prepare or file any Securities and Exchange
Commission filing for the Trust or to record this Agreement or any other
Transaction Document. The Owner Trustee shall, however, at its own cost and
expense, promptly take all action as may be necessary to discharge any lien
(other than the lien of the Indenture) on any part of the Owner Trust Estate
that results from actions by, or claims against, the Owner Trustee that are not
related to the ownership or the administration of the Owner Trust Estate.
SECTION 6.5. No Action Except Under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the other
Transaction Documents to which the Trust or the Owner Trust is a party and (iii)
in accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.3.
SECTION 6.6. Restrictions. The Owner Trustee shall not take any action
(i) that is inconsistent with the purposes of the Trust set forth in Section 2.3
or (ii) that, to the actual knowledge of the Owner Trustee, would (A) affect the
treatment of the Notes as indebtedness for federal income or Virginia income or
franchise tax purposes, (B) be deemed to cause a taxable exchange of the Notes
for federal income or Virginia income or franchise tax purposes or (C) cause the
Trust or any portion thereof to be taxable as an association or publicly traded
partnership taxable as a corporation for federal income or Virginia income or
franchise tax purposes. The Certificateholders shall not direct the Owner
Trustee to take action that would violate the provisions of this Section 6.6.
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ARTICLE VII
REGARDING THE OWNER TRUSTEE
SECTION 7.1. Acceptance of Trusts and Duties. The Owner Trustee
accepts the trusts hereby created and agrees to perform its duties hereunder
with respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all monies actually received by it constituting
part of the Owner Trust Estate upon the terms of this Agreement to which the
Trust or Owner Trustee is a party and the other Transaction Documents. The Owner
Trustee shall not be answerable or accountable hereunder or under any other
Transaction Document under any circumstances, except (i) for its own willful
misconduct, bad faith or negligence or (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.3 expressly made by the Owner
Trustee, in its individual capacity. In particular, but not by way of limitation
(and subject to the exceptions set forth in the preceding sentence):
(i) the Owner Trustee shall 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;
(ii) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken in good faith by it in accordance with
the provisions of this Agreement at the instructions of any
Certificateholder, the Indenture Trustee, the Depositor, the Administrator
or the Servicer;
(iii) no provision of this Agreement or any other Transaction
Document shall require the Owner Trustee to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers hereunder or
under any other Transaction Document if the Owner Trustee shall have
reasonable grounds to believe that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured or
provided to it;
(iv) under no circumstances shall the Owner Trustee be liable for
indebtedness evidenced by or arising under any of the Transaction
Documents, including the principal of and interest on the Notes or the
Certificates.
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(v) the Owner Trustee shall not be responsible for or in respect
of the validity or sufficiency of this Agreement or for the due execution
hereof by the Depositor or for the form, character, genuineness,
sufficiency, value or validity of any of the Owner Trust Estate or for or
in respect of the validity or sufficiency of the other Transaction
Documents, other than the certificate of authentication on the
Certificates, and the Owner Trustee shall in no event assume or incur any
liability, duty, or obligation to any Noteholder or to any
Certificateholder, other than as expressly provided for herein and in the
other Transaction Documents;
(vi) the Owner Trustee shall not be liable for the default or
misconduct of the Servicer, the Administrator, the Depositor or the
Indenture Trustee under any of the Transaction Documents or otherwise, and
the Owner Trustee shall have no obligation or liability to perform the
obligations of the Trust under this Agreement or the other Transaction
Documents that are required to be performed by the Administrator under the
Administration Agreement, the Servicer under the Sale and Servicing
Agreement or the Indenture Trustee under the Indenture; and
(vii) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any other Transaction
Document, at the request, order or direction of any of the
Certificateholders, unless such Certificateholders have offered to the
Owner Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities that may be incurred by the Owner Trustee therein
or thereby. The right of the Owner Trustee to perform any discretionary act
enumerated in this Agreement or any other Transaction Document shall not be
construed as a duty, and the Owner Trustee shall not be answerable other
than for its willful misconduct, bad faith or negligence in the performance
of any such act.
SECTION 7.2. Furnishing of Documents. The Owner Trustee shall furnish
to the Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Transaction Documents.
SECTION 7.3. Representations and Warranties. The Owner Trustee, in its
individual capacity, hereby represents and warrants to the Depositor, for the
benefit of the Certificateholders, that:
(i) it is a banking corporation duly organized and validly
existing in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement;
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(ii) it has taken all corporate action necessary to authorize the
execution and delivery by it of this Agreement, and this Agreement will be
executed and delivered by one of its officers who is duly authorized to
execute and deliver this Agreement on its behalf; and
(iii) neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof will
contravene any federal or Delaware law, governmental rule or regulation
governing the banking or trust powers of the Owner Trustee or any judgment
or order binding on it, or constitute any default under its charter
documents or by-laws or any indenture, mortgage, contract, agreement or
instrument to which it is a party or by which any of its properties may be
bound.
SECTION 7.4. Reliance; Advice of Counsel.
(a) The Owner Trustee may rely upon, shall be protected in relying
upon, and shall incur no liability to anyone in acting upon any signature,
instrument, notice, resolution, request, consent, order, certificate, report,
opinion, bond or other document or paper believed by it to be genuine and
believed by it to be signed by the proper party or parties. The Owner Trustee
may accept a certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such
resolution has been duly adopted by such body and that the same is in full force
and effect. As to any fact or matter the method of the determination of which is
not specifically prescribed herein, the Owner Trustee may for all purposes
hereof rely on a certificate, signed by the president or any vice president or
by the treasurer or other authorized officers of the relevant party, as to such
fact or matter and such certificate shall constitute full protection to the
Owner Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the other
Transactions Documents, the Owner Trustee (i) may act directly or through its
agents or attorneys pursuant to agreements entered into with any of them, and
the Owner Trustee shall not be liable for the conduct or misconduct of such
agents or attorneys if such agents or attorneys shall have been selected by the
Owner Trustee with reasonable care and (ii) may consult with counsel,
accountants and other skilled Persons to be selected with reasonable care and
employed by it. The Owner Trustee shall not be liable for anything done,
suffered or omitted in good faith by it in accordance with the written opinion
or advice of any such counsel, accountants or other such Persons and not
contrary to this Agreement or any other Transaction Document.
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SECTION 7.5. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created, First Union Trust
Company, National Association, acts solely as Owner Trustee hereunder and not in
its individual capacity, and all Persons having any claim against the Owner
Trustee by reason of the transactions contemplated by this Agreement or any
other Transaction Document shall look only to the Owner Trust Estate for payment
or satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Certificates or Contracts.
The recitals contained herein and in the Certificates (other than the signature
and countersignature of the Owner Trustee on the Certificates) shall be taken as
the statements of the Depositor, and the Owner Trustee assumes no responsibility
for the correctness thereof. The Owner Trustee makes no representations as to
the validity or sufficiency of this Agreement, any other Transaction Document or
the Certificates (other than the signature and countersignature of the Owner
Trustee on the Certificates) or the Notes, or of any Contract or related
documents. The Owner Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Contract, or the perfection and priority of any security interest created by
any Contract in any Financed Vehicle or the maintenance of any such perfection
and priority, or for or with respect to the sufficiency of the Owner Trust
Estate or its ability to generate the payments to be distributed to
Certificateholders under this Agreement or the Noteholders under the Indenture,
including, without limitation, the existence, condition and ownership of any
Financed Vehicle, the existence and enforceability of any insurance thereon, the
existence and contents of any Contract on any computer or other record thereof,
the validity of the assignment of any Contract to the Trust or any intervening
assignment, the completeness of any Contract, the performance or enforcement of
any Contract, the compliance by the Depositor or the Servicer with any warranty
or representation made under any Transaction Document or in any related
document, or the accuracy of any such warranty or representation or any action
of the Indenture Trustee, the Administrator or the Servicer or any subservicer
taken in the name of the Owner Trustee.
SECTION 7.7. Owner Trustee May Own Certificates and Notes. The Owner
Trustee, in its individual or any other capacity, may become the owner or
pledgee of Certificates or Notes and may deal with the Depositor, the Servicer,
the Administrator and the Indenture Trustee in banking transactions with the
same rights as it would have if it were not Owner Trustee.
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ARTICLE VIII
COMPENSATION OF OWNER TRUSTEE
SECTION 8.1. Owner Trustee's Fees and Expenses. The Owner Trustee
shall receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between the Depositor and the
Owner Trustee, and the Owner Trustee shall be reimbursed by the Depositor for
its other reasonable expenses hereunder, including the reasonable compensation,
expenses and disbursements of such agents, representatives, experts and counsel
as the Owner Trustee may employ in connection with the exercise and performance
of its rights and its duties hereunder.
SECTION 8.2. Indemnification. The Depositor shall be liable as prime
obligor for, and shall indemnify the Owner Trustee and its successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and against,
any and all liabilities, obligations, losses, damages, taxes, claims, actions
and suits, and any and all reasonable costs, expenses and disbursements
(including reasonable legal fees and expenses) of any kind and nature whatsoever
(collectively, "Expenses") which may at any time be imposed on, incurred by, or
asserted against the Owner Trustee or any other Indemnified Party in any way
relating to or arising out of this Agreement, the other Transaction Documents,
the Owner Trust Estate, the administration of the Owner Trust Estate or the
action or inaction of the Owner Trustee hereunder; provided, however, that the
Depositor shall not be liable for or required to indemnify an Indemnified Party
from and against Expenses arising or resulting from any of the matters described
in the third sentence of Section 7.1. The Depositor will in no event be entitled
to make any claim upon the Trust Property for the payment or reimbursement of
any Expenses. The indemnities contained in this Section 8.2 shall survive the
resignation or termination of the Owner Trustee or the termination of this
Agreement. In the event of any claim, action or proceeding for which indemnity
will be sought pursuant to this Section 8.2, the Owner Trustee's choice of legal
counsel shall be subject to the approval of the Depositor, which approval shall
not be unreasonably withheld.
SECTION 8.3. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
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ARTICLE IX
TERMINATION
SECTION 9.1. Termination of Trust Agreement.
(a) This Agreement (other than the provisions of Article VIII) and the
Trust shall terminate and be of no further force or effect (i) upon the payment
to the Noteholders, the Certificateholders and the Insurer of all amounts
required to be paid to them pursuant to the terms of the Indenture, the Sale and
Servicing Agreement, the Insurance Agreement and Article V or (ii) on the
Payment Date next succeeding 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; provided,
however, in each case, that the Policy shall have been terminated in accordance
with its terms and returned to the Insurer for cancellation. The bankruptcy,
liquidation, dissolution, death or incapacity of any Certificateholder shall not
operate to terminate this Agreement or the Trust, entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or proceeding in any court for a partition or winding up of all
or any part of the Trust or Owner Trust Estate or otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b) No Certificateholder shall be entitled to revoke or terminate the
Trust.
(c) Notice of any termination of the Trust, specifying the Payment
Date upon which the Certificateholders shall surrender their Certificates to the
Paying Agent for payment of the final distribution and cancellation, shall be
given by the Owner Trustee by letter to Certificateholders mailed within five
(5) Business Days of receipt of notice of such termination from the Servicer,
stating (i) the Payment Date upon or with respect to which final payment of the
Certificates shall be made upon presentation and surrender of the Certificates
at the office of the Paying Agent therein specified, (ii) the amount of any such
final payment and (iii) that the Record Date otherwise applicable to such
Payment Date is not applicable, payments being made only upon presentation and
surrender of the Certificates at the office of the Paying Agent therein
specified. The Owner Trustee shall give such notice to the Certificate Registrar
(if other than the Owner Trustee) and the Paying Agent at the time such notice
is given to Certificateholders. Upon presentation and surrender of the
Certificates, the Paying Agent shall cause to be distributed to the
Certificateholders amounts distributable on such Payment Date pursuant to
Section 5.2. In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six (6) months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a
second written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates and
the cost thereof shall be paid out of the funds and other assets that shall
remain subject to this Agreement. Subject to applicable escheat laws, any funds
remaining in the Trust after exhaustion of such remedies shall be distributed by
the Owner Trustee to the Depositor.
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(d) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
SECTION 9.2. Notification Regarding Bankruptcy of the Depositor.
Promptly after the occurrence of any Insolvency Event with respect to the
Depositor, (i) the Depositor shall give the Owner Trustee, the Indenture Trustee
and the Insurer written notice of such Insolvency Event, (ii) the Owner Trustee
shall, upon receipt of such written notice from the Depositor, give prompt
written notice to the Certificateholders and the Indenture Trustee of the
occurrence of such event and (iii) the Indenture Trustee shall, upon receipt of
such written notice from the Depositor or the Owner Trustee, give prompt written
notice to the Noteholders of the occurrence of such event.
SECTION 9.3. Prepayment of the Certificates.
(a) The Certificates are subject to prepayment in whole, but not in
part, at the direction of the Servicer pursuant to Section 9.1(a) of the Sale
and Servicing Agreement, on any Payment Date on which the Servicer exercises its
option to purchase the assets of the Trust pursuant to such Section 9.1(a), and
the amount paid by the Servicer shall be treated as collections of payments on
the Contracts and applied to pay the unpaid principal amount of the Notes plus
accrued but unpaid interest thereon and the Certificate Balance plus accrued but
unpaid interest thereon. The Owner Trustee shall furnish or cause the Servicer
to furnish notice of such prepayment to the Rating Agencies, the Insurer and the
Certificateholders. If the Certificates are to be prepaid pursuant to this
Section 9.3(a), the Owner Trustee shall furnish or cause the Servicer to furnish
notice of such election to the Owner Trustee not later than twenty (20) days
prior to the Prepayment Date and the Trust shall deposit the Prepayment Price in
the Certificate Payment Account by 10:00 A.M. (New York City time) on the
Prepayment Date, whereupon the Certificates shall be due and payable on the
Prepayment Date.
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(b) Notice of prepayment of the Certificates under Section 9.3(a)
shall be given by the Owner Trustee by first-class mail, postage prepaid, or by
facsimile mailed or transmitted promptly following receipt of notice from the
Trust or the Servicer pursuant to Section 9.3(a), but not later than ten (10)
days prior to the applicable Prepayment Date, to each Holder of the Certificates
as of the close of business on the Record Date preceding the applicable
Prepayment Date, at such Holder's address or facsimile number appearing in the
Certificate Register.
All notices of prepayment shall state:
(i) the Prepayment Date;
(ii) the Prepayment Price; and
(iii) the place where the Certificates are to be surrendered for
payment of the Prepayment Price (which shall be the office or agency of the
Owner Trustee to be maintained as provided in Section 3.8).
Notice of prepayment of the Certificates shall be given by the Owner
Trustee in the name and at the expense of the Trust. Any failure to give notice
of prepayment, or any defect therein, to any Holder of any Certificate shall
not, however, impair or affect the validity of the prepayment of any other
Certificate.
(c) The Certificates to be prepaid shall, following notice of
prepayment as required by Section 9.3(b), become due and payable on the
Prepayment Date at the Prepayment Price and (unless the Trust shall default in
the payment of the Prepayment Price) no interest shall accrue on the Prepayment
Price for any period after the date to which accrued interest is calculated for
purposes of calculating the Prepayment Price. Following payment in full of the
Prepayment Price, this Agreement and the Trust shall terminate.
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ARTICLE X
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
SECTION 10.1. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times (i) be a corporation satisfying the provisions of
Section 3807(a) of the Business Trust Statute, (ii) be authorized to exercise
corporate trust powers, (iii) have a combined capital and surplus of at least
$50,000,000 and be subject to supervision or examination by federal or state
authorities and (iv) have (or have a parent that has) a long-term debt rating of
investment grade by each of the Rating Agencies or otherwise be acceptable to
each of the Rating Agencies. If such corporation shall publish reports of
condition at least annually, pursuant to law or to the requirements of the
aforesaid supervising or examining authority, then for the purpose of this
Section 10.1 the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Owner Trustee shall cease
to be eligible in accordance with the provisions of this Section 10.1, the Owner
Trustee shall resign immediately in the manner and with the effect specified in
Section 10.2.
SECTION 10.2. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Administrator and the Insurer. Upon
receiving such notice of resignation, the Administrator shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee. If no successor Owner Trustee shall have been so
appointed and have accepted appointment within thirty (30) days after the giving
of such notice of resignation, the resigning Owner Trustee may petition any
court of competent jurisdiction for the appointment of a successor Owner
Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Administrator, or if at any time the Owner
Trustee shall be legally unable to act, or shall be adjudged bankrupt or
insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then the Administrator may remove the Owner
Trustee. If the Administrator shall remove the Owner Trustee under the authority
of the immediately preceding sentence, the Administrator shall promptly appoint
a successor Owner Trustee (acceptable to the Insurer) by written instrument, in
duplicate, one copy of which instrument shall be delivered to the removed Owner
Trustee and one copy to the successor Owner Trustee.
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Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to this Section 10.2 shall not become effective
until acceptance of appointment by the successor Owner Trustee pursuant to
Section 10.3 and payment of all fees and expenses owed to the outgoing Owner
Trustee. The Administrator shall provide notice of such resignation or removal
of the Owner Trustee to the Certificateholders, the Indenture Trustee, the
Noteholders and each of the Rating Agencies.
SECTION 10.3. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Administrator and to its predecessor Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon the resignation or removal of
the predecessor Owner Trustee shall become effective and such successor Owner
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor under
this Agreement, with like effect as if originally named as Owner Trustee. The
predecessor Owner Trustee shall, upon payment of its fees and expenses, deliver
to the successor Owner Trustee all documents, statements and monies held by it
under this Agreement, and the Administrator and the predecessor Owner Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully and certainly vesting and confirming in the
successor Owner Trustee all such rights, powers, duties and obligations.
No successor Owner Trustee shall accept appointment as provided in
this Section 10.3 unless, at the time of such acceptance, such successor Owner
Trustee shall be eligible pursuant to Section 10.1.
Any successor Owner Trustee appointed pursuant to this Section 10.3
shall file an amendment to the Certificate of Trust with the Secretary of State
reflecting the name and principal place of business of such successor in the
State of Delaware.
Upon acceptance of appointment by a successor Owner Trustee pursuant
to this Section 10.3, the Administrator shall mail notice of such appointment to
all Certificateholders, the Indenture Trustee, the Noteholders and the Rating
Agencies. If the Administrator shall fail to mail such notice within ten (10)
days after acceptance of appointment by the successor Owner Trustee, the
successor Owner Trustee shall cause such notice to be mailed at the expense of
the Administrator.
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SECTION 10.4. Merger or Consolidation of Owner Trustee.
(a) If the Owner Trustee consolidates with, merges or converts into,
or transfers all or substantially all its corporate trust business or assets to,
another corporation or banking association, the resulting, surviving or
transferee corporation or banking association without any further act shall be
the successor Owner Trustee; provided, however, that such corporation or banking
association must be otherwise qualified and eligible under Section 10.1. The
Owner Trustee shall provide the Rating Agencies with prior written notice of any
such transaction.
(b) If at the time such successor or successors by consolidation,
merger or conversion to the Owner Trustee shall succeed to the trusts created by
this Agreement any of the Certificates shall have been authenticated but not
delivered, any such successor to the Owner Trustee may adopt the certificate of
authentication of any predecessor trustee and deliver such Certificates so
authenticated, and in case at that time any of the Certificates shall not have
been authenticated, any such successor to the Owner Trustee may authenticate
such Certificates either in the name of any predecessor trustee or in the name
of the successor to the Owner Trustee. In all such cases such certificates shall
have the full force which the Certificates or this Agreement provide that the
certificate of the Owner Trustee shall have.
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Agreement, at any
time, for the purpose of meeting any legal requirement of any jurisdiction in
which any part of the Owner Trust Estate or any Financed Vehicle may at the time
be located, the Administrator and the Owner Trustee acting jointly shall have
the power and may execute and deliver an instrument to appoint one or more
Persons approved by the Owner Trustee to act as co-trustee or co-trustees,
jointly with the Owner Trustee, or separate trustee or separate trustees, of all
or any part of the Owner Trust Estate, and to vest in such Person or Persons, in
such capacity and for the benefit of the Certificateholders, such title to the
Owner Trust Estate, or any part thereof, and, subject to the other provisions of
this Section 10.5, such powers, duties, obligations, rights and trusts as the
Administrator and the Owner Trustee may consider necessary or desirable. If the
Administrator shall not have joined in such appointment within fifteen (15) days
after the receipt by it of a request so to do, the Owner Trustee alone shall
have the power to make such appointment. No co-trustee or separate trustee under
this Agreement shall be required to meet the terms of eligibility as a successor
trustee under Section 10.1 and no notice of the appointment of any co-trustee or
separate trustee shall be required under Section 10.3.
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(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred or imposed upon and
exercised or performed by the Owner Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee shall not be authorized to act separately without the Owner
Trustee joining in such act), except to the extent that under any law of
any jurisdiction in which any particular act or acts are to be performed
the Owner Trustee shall be incompetent or unqualified to perform such act
or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Owner Trust Estate or any portion
thereof in any such jurisdiction) shall be exercised and performed singly
by such separate trustee or co-trustee, but solely at the direction of the
Owner Trustee;
(ii) no trustee under this Agreement shall be personally liable
by reason of any act or omission of any other trustee under this Agreement;
and
(iii) the Administrator and the Owner Trustee acting jointly may
at any time accept the resignation of or remove any separate trustee or
co-trustee.
(c) Any notice, request or other writing given to the Owner Trustee
shall be deemed to have been given to each of the then separate trustees and
co-trustees as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article X. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability of, or affording protection
to, the Owner Trustee. Each such instrument shall be filed with the Owner
Trustee and a copy thereof given to the Administrator.
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(d) Any separate trustee or co-trustee may at any time constitute the
Owner Trustee its agent or attorney-in-fact with full power and authority, to
the extent permitted by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Supplements and Amendments.
(a) This Agreement may be amended from time to time by the Depositor
and the Owner Trustee, with prior written notice to the Rating Agencies and the
Insurer, without the consent of any of the Noteholders or the Certificateholders
and with the consent of the Insurer (if no Insurer Default shall have occurred
and be continuing) to cure any ambiguity, to correct or supplement any provision
herein that may be inconsistent with any other provision herein or for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions in this Agreement; provided, however, that (i) such action
shall not, as evidenced by an Opinion of Counsel satisfactory to the Owner
Trustee and the Indenture Trustee, adversely affect in any material respect the
interests of any Noteholder, any Certificateholder or the Insurer and (ii) an
Opinion of Counsel shall be furnished to the Owner Trustee and the Indenture
Trustee to the effect that such amendment (A) will not materially adversely
affect the federal or any Applicable Tax State income or franchise taxation of
any outstanding Note or Certificate or any Holder thereof and (B) will not cause
the Trust to be taxable as a corporation for federal or any Applicable Tax State
income or franchise tax purposes.
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(b) This Agreement may be amended from time to time by the Depositor
and the Owner Trustee, with prior written notice to the Rating Agencies and the
Insurer, with the consent of the Insurer (if no Insurer Default shall have
occurred and be continuing) and with the consent of the Holders (as defined in
the Indenture) of Notes evidencing not less than 51% of the Note Balance and the
consent of the Holders of Certificates evidencing not less than 51% of the
Certificate Balance, for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Agreement or modifying
in any manner the rights of the Noteholders or the Certificateholders; provided,
however, that, subject to the express rights of the Insurer under the
Transaction Documents, no such amendment shall (i) 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 the Contracts or
distributions that are required to be made on any Note or Certificate, or change
any Note Interest Rate, or (ii) reduce the aforesaid percentage of the Note
Balance and the Certificate Balance required to consent to any such amendment,
without the consent of all the Noteholders and Certificateholders affected
thereby or (iii) adversely affect the ratings of any Class of Notes by the
Rating Agencies without the consent of the Holders (as defined in the Indenture)
of Notes evidencing not less than 66 2/3% of the aggregate principal amount of
the then outstanding Notes of such Class; and, provided further, that (i) such
action shall not, as evidenced by an Opinion of Counsel satisfactory to the
Owner Trustee and the Indenture Trustee, adversely affect in any material
respect the interests of any Noteholder, any Certificateholder or the Insurer
and (ii) an Opinion of Counsel shall be furnished to the Indenture Trustee and
the Owner Trustee to the effect that such amendment (A) will not materially
adversely affect the federal or any Applicable Tax State income or franchise
taxation of any outstanding Note or Certificate or any Holder thereof and (B)
will not cause the Trust to be taxable as a corporation for federal or any
Applicable Tax State income or franchise tax purposes.
(c) Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Indenture Trustee and each
of the Rating Agencies.
(d) It shall not be necessary for the consent of the
Certificateholders, the Noteholders or the Indenture Trustee pursuant to this
Section 11.1 to approve the particular form of any proposed amendment or
consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of
Certificateholders provided for in this Agreement or in any other Transaction
Document) and of evidencing the authorization of the execution thereof by
Certificateholders shall be subject to such reasonable requirements as the Owner
Trustee may prescribe.
(e) Promptly after the execution of any amendment to the Certificate
of Trust, the Owner Trustee shall file such amendment or cause such amendment to
be filed with the Secretary of State.
(f) The Owner Trustee may, but shall not be obligated to, enter into
any such amendment that affects the Owner Trustee's own rights, duties,
liabilities or immunities under this Agreement or otherwise.
-40-
<PAGE>
(g) Prior to the execution of any amendment to this Agreement or any
amendment to any other agreement to which the Trust is a party, the Owner
Trustee shall be entitled to receive and shall be fully protected in relying
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent in
this Agreement to the execution and delivery of such amendment have been
satisfied.
SECTION 11.2. No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their undivided beneficial interest
therein only in accordance with Articles V and IX. No transfer, by operation of
law or otherwise, of any right, title or interest of the Certificateholders in
and to their beneficial interest in the Owner Trust Estate shall operate to
terminate this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Owner
Trust Estate.
SECTION 11.3. Limitation on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Owner Trustee, the Depositor, the
Administrator, the Certificateholders, the Servicer and, to the extent expressly
provided herein, the Indenture Trustee and the Noteholders, and nothing in this
Agreement or in the Certificates, whether express or implied, shall be construed
to give to any other Person any legal or equitable right, remedy or claim in the
Owner Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 11.4. Notices. All demands, notices and other communications
under this Agreement shall be in writing, personally delivered, sent by
telecopier, overnight courier or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (i) in the
case of the Owner Trustee, at the Corporate Trust Office, (ii) in the case of
the Depositor, at the following address: 4900 Cox Road, Glen Allen, Virginia
23060, Attention: Treasury Department, (iii) in the case of the Indenture
Trustee, at the Corporate Trust Office (as defined in the Indenture), (iv) in
the case of Moody's, at the following address: Moody's Investors Service, Inc.,
ABS Monitoring Department, 99 Church Street, New York, New York 10007, (v) in
the case of Standard & Poor's, at the following address: Standard & Poor's, a
division of The McGraw-Hill Companies, Inc., 55 Water Street, 43rd Floor, New
York, New York 10041, Attention: Asset Backed Surveillance Department, and (vi)
in the case of the Insurer, at the following address: MBIA Insurance
Corporation, 113 King Street, Armonk, New York 10504, Attention: Insured
Portfolio Management, Structured Finance. Any notice required or permitted to be
mailed to a Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register. Any
notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder shall receive such notice.
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<PAGE>
SECTION 11.5. Severability. If any provision of this Agreement or the
Certificates shall be held for any reason whatsoever invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions of this Agreement and the Certificates shall not in any way be
affected or impaired thereby.
SECTION 11.6. Separate Counterparts. This Agreement may be executed in
any number of counterparts, each of which counterparts when so executed shall be
deemed to be an original, and all of which counterparts shall together
constitute but one and the same instrument.
SECTION 11.7. Successors and Assigns. All covenants and agreements in
this Agreement and the Certificates shall be binding upon, and inure to the
benefit of, the Depositor, the Owner Trustee and its successors and each
Certificateholder and its successors and permitted assigns, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by a Certificateholder shall bind the successors and assigns of such
Certificateholder.
SECTION 11.8. Covenants of the Depositor. The Depositor shall not at
any time institute against the Trust, or join in any institution against the
Trust of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Certificates, the Notes, this Agreement or any of the other Transaction
Documents.
SECTION 11.9. No Petition. The Owner Trustee (not in its individual
capacity but solely as Owner Trustee), by entering into this Agreement, each
Certificateholder, by accepting a Certificate, and the Indenture Trustee and
each Noteholder, by accepting the benefits of this Agreement, hereby covenant
and agree that they will not at any time institute against the Depositor or the
Trust, or join in any institution against the Depositor or the Trust of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Certificates, the
Notes, this Agreement or any of the other Transaction Documents.
-42-
<PAGE>
SECTION 11.10. No Recourse. Each Certificateholder, by accepting a
Certificate, acknowledges that the Certificates represent beneficial interests
in the Trust only and do not represent interests in or obligations of the
Depositor, the Servicer, the Administrator, the Owner Trustee, the Indenture
Trustee or any Affiliate thereof, and no recourse may be had against such
parties or their assets, except as may be expressly set forth or contemplated in
this Agreement, the Certificates or the other Transaction Documents.
SECTION 11.11. Headings. The Article and Section headings herein and
the Table of Contents are for convenience only and shall not define or limit any
of the terms or provisions hereof.
SECTION 11.12. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of Delaware and the obligations, rights
and remedies of the parties under this Agreement shall be determined in
accordance with such laws.
-43-
<PAGE>
IN WITNESS WHEREOF, the Depositor and the Owner Trustee have
caused this Agreement to be duly executed by their respective officers,
thereunto duly authorized and duly attested, all as of the day and year first
above written.
CARMAX AUTO RECEIVABLES LLC,
as Depositor
By:______________________________
Name:
Title:
FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION,
not in its individual capacity but
solely as Owner Trustee
By:______________________________
Name:
Title:
-44-
<PAGE>
STATE OF )
) ss. :
COUNTY OF )
The foregoing instrument was acknowledged before me this
[____] day of September, 1999, by [____________________], as
[____________________] of CARMAX AUTO RECEIVABLES LLC, a Virginia limited
liability company.
------------------------
Notary Public in and for
the State of [____________]
[SEAL]
My commission expires: [____________]
-45-
<PAGE>
STATE OF )
) ss. :
COUNTY OF )
The foregoing instrument was acknowledged before me this
[____] day of September, 1999, by [____________________], as
[____________________] of FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a
national banking association, as Owner Trustee of CARMAX AUTO OWNER TRUST
1999-1, a Delaware business trust.
------------------------
Notary Public in and for
the State of [____________]
[SEAL]
My commission expires: [____________]
-46-
<PAGE>
EXHIBIT A
NUMBER $[ ]
R-[ ]
THIS CERTIFICATE IS NOT TRANSFERABLE
EXCEPT UNDER THE LIMITED CONDITIONS
SPECIFIED IN THE TRUST AGREEMENT
SEE REVERSE FOR CERTAIN DEFINITIONS
THE PRINCIPAL OF THIS CERTIFICATE IS DISTRIBUTABLE AS SET FORTH IN THE
TRUST AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS CERTIFICATE AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CARMAX AUTO OWNER TRUST 1999-1
ASSET BACKED CERTIFICATE
evidencing a beneficial interest in the property of the Trust, as defined below,
which property includes a pool of retail installment sales contracts secured by
new and used motor vehicles sold to CarMax Auto Receivables LLC by CarMax Auto
Superstores, Inc. and sold by CarMax Auto Receivables LLC to the Trust. The
property of the Trust (other than the Certificate Payment Account and the
proceeds thereof) has been pledged to the Indenture Trustee pursuant to the
Indenture to secure the payment of the Notes issued thereunder.
(This Certificate does not represent an interest in or obligation of CarMax Auto
Superstores, Inc., CarMax Auto Receivables LLC or any of their respective
affiliates, except to the extent described below.)
THIS CERTIFIES THAT [ ] is the registered owner of a [ ] DOLLARS AND
[ ] CENTS nonassessable, fully-paid, beneficial interest in Certificates of
CarMax Auto Owner Trust 1999-1 (the "Trust") formed by CarMax Auto Receivables
LLC, a Virginia limited liability company (the "Depositor"). The Certificates
have an aggregate Initial Certificate Balance of $[ ].
-47-
<PAGE>
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
Dated: [____________], 1999
FIRST UNION TRUST COMPANY, FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION, NATIONAL ASSOCIATION,
as Owner Trustee or as Owner Trustee
By:________________________ By:________________________
Authorized Officer as Authenticating Agent
By:________________________
Authorized Officer
The Trust was created pursuant to a Trust Agreement, dated as of
September [__], 1999 (as amended, supplemented or otherwise modified and in
effect from time to time, the "Trust Agreement"), by and between the Depositor
and First Union Trust Company, National Association, as owner trustee (the
"Owner Trustee"), a summary of certain of the pertinent provisions of which is
set forth below. To the extent not otherwise defined herein, the capitalized
terms used herein have the meanings assigned to them in the Trust Agreement or
the Sale and Servicing Agreement, dated as of September [__], 1999 (as amended,
supplemented or otherwise modified and in effect from time to time, the "Sale
and Servicing Agreement"), by and among the Trust, the Depositor, as seller (in
such capacity, the "Seller"), and CarMax Auto Superstores, Inc., as servicer
(the "Servicer"), as applicable.
-48-
<PAGE>
This Certificate is one of the duly authorized Certificates designated
as "Asset Backed Certificates" (herein called the "Certificates"). This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such Holder
is bound. The property of the Trust includes (i) a pool of retail installment
sales contracts for new and used motor vehicles and certain rights and
obligations thereunder (the "Contracts"); (ii) monies due or received thereunder
on or after the related Cutoff Date; (iii) the security interests in the
Financed Vehicles granted by Obligors pursuant to the Contracts and any other
interest of the Trust in the Financed Vehicles; (iv) all rights to receive
proceeds with respect to the Contracts from claims on any physical damage,
theft, credit life or disability insurance policies covering the Financed
Vehicles or Obligors; (v) all of the Seller's rights to the Contract Files; (vi)
the Trust Accounts, the Certificate Payment Account and the Reserve Account and
all amounts, securities, investments in financial assets and other property
deposited in or credited to any of the foregoing and all proceeds thereof; (vii)
all of the Seller's rights under the Purchase Agreement, including the right of
the Seller to cause CarMax Auto Superstores, Inc. to repurchase Contracts from
the Seller; (viii) payments and proceeds with respect to the Contracts held by
the Servicer; (ix) all property, guarantees and other collateral securing a
Contract (other than a Contract repurchased by the Servicer or purchased by the
Seller); (x) all rebates of premiums and other amounts relating to insurance
policies and other items financed under the Contracts in effect as of the
related Cutoff Date; and (xi) all present and future claims, demands, causes of
action and chooses in action in respect of any or all of the foregoing and all
payments on or under and all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing, including all proceeds of the conversion
thereof, voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel
paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights
to payment of any and every kind and other forms of obligations and receivables,
instruments and other property which at any time constitute all or part of or
are included in the proceeds of any of the foregoing. THE RIGHTS OF THE TRUST IN
THE FOREGOING PROPERTY OF THE TRUST (OTHER THAN THE CERTIFICATE PAYMENT ACCOUNT
AND THE PROCEEDS THEREOF) HAVE BEEN PLEDGED TO THE INDENTURE TRUSTEE TO SECURE
THE PAYMENT OF THE NOTES.
Under the Trust Agreement, there will be distributed on the fifteenth
day of each month or, if such fifteenth day is not a Business Day, the next
Business Day (each, a "Payment Date"), commencing [____________] 15, 1999, to
the Person in whose name this Certificate is registered at the close of business
on the fourteenth day of such calendar month (the "Record Date") such
Certificateholder's percentage interest in the amount to be distributed to
Certificateholders on such Payment Date; provided, however, that principal will
be distributed to the Certificateholders on each Payment Date (to the extent of
funds remaining after the Total Servicing Fee, all required payments on Notes
and any required deposit to the Reserve Account have been made on such Payment
Date). Notwithstanding the foregoing, following the occurrence and during the
continuation of an Event of Default under the Indenture which has resulted in an
acceleration of the Notes or following certain events of insolvency with respect
to the Depositor, no distributions of principal or interest will be made on the
Certificates until all the Notes have been paid in full.
-49-
<PAGE>
THE HOLDER OF THIS CERTIFICATE ACKNOWLEDGES AND AGREES THAT ITS RIGHTS
TO RECEIVE DISTRIBUTIONS IN RESPECT OF THIS CERTIFICATE ARE SUBORDINATED TO THE
RIGHTS OF THE NOTEHOLDERS AS DESCRIBED IN THE SALE AND SERVICING AGREEMENT, THE
INDENTURE AND THE TRUST AGREEMENT.
It is the intent of the Depositor, the Servicer and the
Certificateholders that, for purposes of federal income, state and local income
tax and any other income taxes, the Trust will be treated as a partnership and
the Certificateholders (including the Depositor) will be treated as partners in
that partnership. The Depositor and the other Certificateholders by acceptance
of a Certificate, agree to treat, and to take no action inconsistent with the
treatment of, the Certificates for such tax purposes as partnership interests in
the Trust.
Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the Depositor or the Trust, or join in any institution against the Depositor or
the Trust of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States federal or
state bankruptcy or similar law in connection with any obligations relating to
the Notes, the Certificates, the Trust Agreement or any of the other Transaction
Documents.
Distributions on this Certificate will be made as provided in the
Trust Agreement by the Owner Trustee or the Paying Agent by wire transfer or
check mailed to the Certificateholder of record in the Certificate Register
without the presentation or surrender of this Certificate or the making of any
notation hereon. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Owner Trustee of the pendency of such distribution
and only upon presentation and surrender of this Certificate at the office or
agency maintained for the purpose by the Owner Trustee in [the Borough of
Manhattan, The City of New York].
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
-50-
<PAGE>
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Certificate shall not entitle the Holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.
This Certificate shall be construed in accordance with the laws of the
State of Delaware, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
In WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Certificate to be duly executed.
CARMAX AUTO OWNER TRUST 1999-1
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Owner Trustee
By:________________________________
Authorized Officer
-51-
<PAGE>
[REVERSE OF CERTIFICATE]
The Certificates do not represent an obligation of, or an interest in,
the Depositor, the Servicer, the Administrator, the Owner Trustee or any
Affiliates of any of them and no recourse may be had against such parties or
their assets, except as may be expressly set forth or contemplated herein, in
the Trust Agreement or in the other Transaction Documents. In addition, this
Certificate is not guaranteed by any governmental agency or instrumentality and
is limited in right of payment to certain collections with respect to the
Contracts (and certain other amounts), all as more specifically set forth herein
and in the Sale and Servicing Agreement. A registration statement, which
includes each of the Trust Agreement and the Sale and Servicing Agreement as
exhibits thereto, has been filed with the Securities and Exchange Commission
with respect to the Certificates and to the Notes of the Trust issued
concurrently with this Certificate.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the consent of the Holders
of the Notes and the Holders of the Certificates each voting as a class
evidencing not less than a majority of the principal amount of the then
outstanding Notes and the Certificate Balance, respectively. Any such consent by
the Holder of this Certificate shall be conclusive and binding on such Holder
and on all future Holders of this Certificate and of any Certificate issued upon
the registration of Transfer hereof or in exchange herefor or in lieu hereof
whether or not notation of such consent is made upon this Certificate. The Trust
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the Holders of any of the Certificates.
This Certificate may be Transferred only under the circumstances
described in Section 3.4 of the Trust Agreement. Any attempted Transfer in
contravention of the restrictions and conditions of Section 3.4 of the Trust
Agreement shall be null and void. As provided in the Trust Agreement, the
Transfer of this Certificate is registerable in the Certificate Register upon
surrender of this Certificate for registration of Transfer at the offices or
agencies of the Certificate Registrar maintained by the Owner Trustee in [the
Borough of Manhattan, The City of New York], ACCOMPANIED BY THE WRITTEN
REPRESENTATIONS REQUIRED BY THE TRUST AGREEMENT and a written instrument of
transfer in form satisfactory to the Certificate Registrar duly executed by the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate interest in the Trust will be issued to the designated
transferee. The initial Certificate Registrar appointed under the Trust
Agreement is [the Indenture Trustee].
-52-
<PAGE>
This Certificate may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding this
Certificate, the Holder hereof shall be deemed to have represented and warranted
that it is not a Benefit Plan.
Except for Certificates issued to the Depositor, the Certificates are
issuable only as registered Certificates without coupons in denominations of
$1,000 and in integral multiples of $1,000 in excess thereof. Certificates are
exchangeable for new Certificates of authorized denominations evidencing the
same aggregate denomination, as requested by the Holder surrendering the same.
No service charge will be made for any such registration of Transfer or
exchange, but the Owner Trustee or the Certificate Registrar may require payment
of a sum sufficient to cover any tax or governmental charge payable in
connection therewith.
The Owner Trustee, the Certificate Registrar and any agent of the
Owner Trustee or the Certificate Registrar may treat the Person in whose name
this Certificate is registered as the owner hereof for all purposes, and none of
the Owner Trustee, the Certificate Registrar or any such agent shall be affected
by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement
and the Trust created thereby shall terminate upon the payment to the
Noteholders and the Certificateholders of all amounts required to be paid to
them pursuant to the Indenture, the Trust Agreement and the Sale and Servicing
Agreement and any remaining assets of the Trust shall be distributed to the
Depositor, in its capacity as Depositor. The Servicer of the Contracts may at
its option purchase the assets of the Trust at a price specified in the Sale and
Servicing Agreement, and such purchase of the Contracts and other property of
the Trust will effect early retirement of the Notes and the Certificates;
however, such right of purchase is exercisable only as of the last day of any
Collection Period as of which the Pool Balance is less than or equal to 10% of
the Initial Pool Balance.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the Holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
-53-
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
____________________________________________________________________ Attorney to
transfer said Certificate on the books of the Certificate Registrar, with full
power of substitution in the premises.
Dated:
_________________________________*/
Signature Guaranteed:
_________________________________*/
*/ NOTICE: The signature to this assignment must correspond with the name
as it appears upon the face of the within Certificate in every particular,
without alteration, enlargement or any change whatever. Such signature must be
guaranteed by a member firm of the New York Stock Exchange or a commercial bank
or trust company.
-54-
<PAGE>
EXHIBIT B
[FORM OF CERTIFICATE OF TRUST]
CERTIFICATE OF TRUST OF
CARMAX AUTO OWNER TRUST 1999-1
This Certificate of Trust of CARMAX AUTO OWNER TRUST 1999-1 (the
"Trust") is being duly executed and filed by the Undersigned as trustee, to form
a business trust under the Delaware Business Trust Act (12 Del. Code, section
3801 et seq.) (the "Act").
1. Name. The name of the business trust formed hereby is CARMAX AUTO
OWNER TRUST 1999-1.
2. Delaware Trustee. The name and business address of the trustee of
the Trust in the State of Delaware is First Union Trust Company, National
Association, One Rodney Square, 1st Floor, 920 King Street, Wilmington, Delaware
19801-7475, Attention: Corporate Trust Department.
3. Effective Date. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust in accordance with Section 3811 of
the Act.
FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
as trustee
By:________________________
Name:
Title:
EXHIBIT 4.2
- --------------------------------------------------------------------------------
CARMAX AUTO RECEIVABLES LLC,
as Seller,
CARMAX AUTO SUPERSTORES, INC.,
as Servicer,
and
CARMAX AUTO OWNER TRUST 1999-1
------------------------------
SALE AND SERVICING AGREEMENT
Dated as of September [__], 1999
------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.......................................................1
SECTION 1.2 Other Definitional Provisions....................................18
ARTICLE II
TRUST PROPERTY
SECTION 2.1 Conveyance of Trust Property.....................................19
SECTION 2.2 Representations and Warranties of the Seller
as to the Contracts...........................................20
SECTION 2.3 Repurchase by Seller upon Breach.................................24
SECTION 2.4 Custody of Contract Files........................................25
SECTION 2.5 Duties of Servicer as Custodian..................................26
SECTION 2.6 Instructions; Authority to Act...................................27
SECTION 2.7 Custodian's Indemnification......................................27
SECTION 2.8 Effective Period and Termination.................................27
ARTICLE III
ADMINISTRATION AND SERVICING OF CONTRACTS AND OTHER TRUST PROPERTY
SECTION 3.1 Duties of Servicer...............................................28
SECTION 3.2 Collection and Allocation of Contract Payments...................29
SECTION 3.3 Realization upon Contracts.......................................30
SECTION 3.4 Physical Damage Insurance........................................30
SECTION 3.5 Maintenance of Security Interests in Financed Vehicles...........30
SECTION 3.6 Amendment of Contract Terms......................................30
SECTION 3.7 Purchase by Servicer upon Breach.................................31
SECTION 3.8 Servicing Compensation...........................................31
SECTION 3.9 Servicer's Certificate...........................................31
SECTION 3.10 Annual Statement as to Compliance; Notice of
Event of Servicing Termination.....................32
SECTION 3.11 Annual Independent Certified Public Accountants'
Reports............................................33
SECTION 3.12 Access to Certain Documentation and Information
Regarding Contracts................................33
SECTION 3.13 Reports to the Commission........................................34
SECTION 3.14 Reports to Rating Agencies.......................................34
<PAGE>
ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO NOTEHOLDERS AND CERTIFICATEHOLDERS
SECTION 4.1 Accounts.........................................................34
SECTION 4.2 Collections......................................................36
SECTION 4.3 Application of Collections.......................................36
SECTION 4.4 [RESERVED].......................................................37
SECTION 4.5 Additional Deposits..............................................37
SECTION 4.6 Determination Date Calculations; Application
of Total Available Funds...........................37
SECTION 4.7 Reserve Account..................................................40
SECTION 4.8 Net Deposits.....................................................41
SECTION 4.9 Statements to Noteholders and
Certificateholders.................................42
SECTION 4.10 Control of Securities............................................43
SECTION 4.11 Policy Matters...................................................43
ARTICLE V
[RESERVED]
ARTICLE VI
THE SELLER
SECTION 6.1 Representations and Warranties of Seller.........................44
SECTION 6.2 Liability of Seller; Indemnities.................................46
SECTION 6.3 Merger or Consolidation of, or Assumption of
the Obligations of, Seller.........................47
SECTION 6.4 Limitation on Liability of Seller and Others.....................48
SECTION 6.5 Seller May Own Notes or Certificates.............................49
ARTICLE VII
THE SERVICER
SECTION 7.1 Representations and Warranties of Servicer.......................49
SECTION 7.2 Liability of Servicer; Indemnities...............................51
SECTION 7.3 Merger or Consolidation of, or Assumption of
the Obligations of, Servicer.......................52
SECTION 7.4 Limitation on Liability of Servicer and Others...................53
SECTION 7.5 Servicer Not to Resign...........................................53
SECTION 7.6 Servicer May Own Notes or Certificates...........................54
<PAGE>
ARTICLE VIII
SERVICING TERMINATION
SECTION 8.1 Events of Servicing Termination..................................54
SECTION 8.2 Indenture Trustee to Act; Appointment of
Successor Servicer.................................57
SECTION 8.3 Effect of Servicing Transfer.....................................57
SECTION 8.4 Notification to Noteholders and
Certificateholders.................................58
SECTION 8.5 Waiver of Past Events of Servicing Termination...................58
ARTICLE IX
TERMINATION
SECTION 9.1 Optional Purchase of All Contracts...............................59
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1 Amendment.......................................................60
SECTION 10.2 Protection of Title to Trust....................................62
SECTION 10.3 Governing Law...................................................64
SECTION 10.4 Notices.........................................................64
SECTION 10.5 Severability of Provisions......................................65
SECTION 10.6 Assignment......................................................65
SECTION 10.7 Further Assurances..............................................65
SECTION 10.8 No Waiver; Cumulative Remedies..................................65
SECTION 10.9 Third-Party Beneficiaries.......................................65
SECTION 10.10 Actions by Noteholder or Certificateholders.....................66
SECTION 10.11 Counterparts....................................................66
SECTION 10.12 Agent for Service...............................................66
SECTION 10.13 No Bankruptcy Petition..........................................66
SECTION 10.14 Limitation of Liability of Owner Trustee
and Indenture Trustee..............................67
SCHEDULES
SCHEDULE 1 Schedule of Initial Contracts
SCHEDULE 2 Location of Contract Files
EXHIBITS
EXHIBIT A Form of Servicer's Certificate
EXHIBIT B Form of Statement to Noteholders
EXHIBIT C Form of Statement to Certificateholders
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SALE AND SERVICING AGREEMENT, dated as of September [__], 1999
(as amended, supplemented or otherwise modified and in effect from time to time,
this "Agreement"), by and among CARMAX AUTO OWNER TRUST 1999-1, a Delaware
business trust (the "Trust"), CARMAX AUTO RECEIVABLES LLC, a Virginia limited
liability company (the "Seller"), and CARMAX AUTO SUPERSTORES, INC., a Virginia
corporation (the "Servicer").
WHEREAS, the Trust desires to purchase certain motor vehicle
retail installment sale contracts originated by CarMax Auto Superstores, Inc. in
the ordinary course of business and sold to the Seller as of the date hereof;
WHEREAS, the Seller is willing to sell such contracts to the
Trust as of the date hereof; and
WHEREAS, CarMax Auto Superstores, Inc. is willing to service
such contracts on behalf of the Trust;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, whenever
capitalized shall have the following meanings:
"Additional Certificate Interest" shall mean, for any Payment
Date, the sum of (i) all accrued but unpaid Monthly Certificate Interest for
previous Payment Dates plus (ii) to the extent permitted by law, interest on
such accrued but unpaid Monthly Certificate Interest at the Certificate Rate.
"Additional Note Interest" shall mean, for any Payment Date
and any class of Notes, the sum of (i) all accrued but unpaid Monthly Note
Interest for previous Payment Dates for such class plus (ii) to the extent
permitted by law, interest on such accrued but unpaid Monthly Note Interest at
the Note Rate applicable to such class.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under direct or
indirect common control with such Person. For purposes of this definition,
"control" when used with respect to any Person shall mean the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
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"Amount Financed" shall mean, with respect to any Contract,
the aggregate amount advanced under such Contract toward the purchase price of
the Financed Vehicle and any related costs.
"Applicable Tax State" shall mean, as of any date of
determination,(i) any state in which the Owner Trustee maintains the Corporate
Trust Office, (ii) any state in which the Owner Trustee maintains its principal
executive offices and (iii) any state in which the Servicer regularly conducts
servicing and collection activities(other than purely ministerial activities)
with respect to a material portion of the Contracts.
"APR" shall mean, with respect to any Contract, the annual
percentage rate of interest stated in such Contract.
"Authorized Officer" shall mean any officer within the
Corporate Trust Office of the Indenture Trustee, including any vice president,
assistant vice president, secretary, assistant secretary, financial services
officer or any other officer of the Indenture Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer of the Indenture
Trustee to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
"Available Funds" shall mean, for any Payment Date, (i) all
Obligor payments received with respect to the Contracts during the preceding
Collection Period, (ii) all Liquidation Proceeds received with respect to the
Contracts during the preceding Collection Period, (iii) all interest earned on
funds on deposit in the Collection Account during the preceding Collection
Period, (iv) the Purchase Amount for all Contracts that became Purchased
Contracts during the preceding Collection Period and (v) all prepayments
received with respect to the Contracts during the preceding Collection Period
attributable to any refunded item included in the Amount Financed (including
amounts received as a result of rebates of extended warranty contract costs and
insurance premiums and proceeds received under physical damage, credit life and
credit disability insurance policies); provided, however, that Available Funds
for any Payment Date shall not include any payments or other amounts (including
Liquidation Proceeds) received with respect to any Purchased Contract the
Purchase Amount for which was included in Available Funds for a previous Payment
Date.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions or trust companies in New York,
New York, Wilmington, Delaware or Richmond, Virginia are authorized or obligated
by law, executive order or governmental decree to remain closed.
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"CarMax" shall mean CarMax Auto Superstores, Inc., a Virginia
corporation, and its successors and assigns.
"Certificate" shall have the meaning specified in the Trust
Agreement.
"Certificate Balance" shall mean, at any time, as the context
may require, (i) with respect to all of the Certificates, an amount equal to,
initially, the Initial Certificate Balance and, thereafter, an amount equal to
the Initial Certificate Balance as reduced from time to time by all amounts
allocable to principal previously distributed to the Certificateholders or (ii)
with respect to any Certificate, an amount equal to, initially, the initial
denomination of such Certificate and, thereafter, an amount equal to such
initial denomination as reduced from time to time by all amounts allocable to
principal previously distributed in respect of such Certificate; provided,
however, that in determining whether the Holders of Certificates evidencing the
requisite percentage of the Certificate Balance have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any other
Transaction Document, Certificates owned by the Trust, any other obligor upon
the Certificates, the Seller, the Servicer or any Affiliate of any of the
foregoing Persons shall be disregarded and deemed to be excluded from the
Certificate Balance (unless such Persons own 100% of the Certificate Balance of
the Certificates), except that, in determining whether the Indenture Trustee or
the Owner Trustee shall be protected in relying on any such request, demand,
authorization, direction, notice, consent or waiver, only Certificates that a
Responsible Officer of the Indenture Trustee or the Owner Trustee, as
applicable, knows to be so owned shall be so disregarded; and, provided further,
that Certificates that have been pledged in good faith may be regarded as
included in the Certificate Balance if the pledgee establishes to the
satisfaction of the Indenture Trustee or the Owner Trustee, as applicable, the
pledgee's right so to act with respect to such Certificates and that the pledgee
is not the Trust, any other obligor upon the Certificates, the Seller, the
Servicer or any Affiliate of any of the foregoing Persons.
"Certificate Final Payment Date" shall mean the [____________]
Payment Date.
"Certificate Payment Account" shall mean the account
established and maintained as such pursuant to Section 4.1(c).
"Certificate Pool Factor" shall mean (i) as of the Closing
Date, 1.0000000 and (ii) as of the close of business on the last day of any
Collection Period ending after the Closing Date, a seven-digit decimal figure
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equal to the Certificate Balance as of such last day (after giving effect to any
reductions of the Certificate Balance to be made on the following Payment Date)
divided by the Initial Certificate Balance.
"Certificate Rate" shall mean [____]% per annum.
"Certificateholder" shall have the meaning specified in the
Trust Agreement.
"Class A-1 Final Payment Date" shall mean the [____________]
Payment Date.
"Class A-1 Monthly Interest" shall mean (i) for the initial
Payment Date, $[____________], and (ii) for any Payment Date thereafter, the
product of (A) the actual number of days elapsed during the period from and
including the preceding Payment Date to but excluding such Payment Date divided
by 360, (B) the Class A-1 Rate and (C) the outstanding principal balance of the
Class A-1 Notes as of the preceding Payment Date (after giving effect to all
payments of principal made to the Holders of the Class A-1 Notes on or before
such preceding Payment Date).
"Class A-1 Notes" shall mean the [____]% Class A-1
Asset-Backed Notes issued by the Trust pursuant to the Indenture in the initial
aggregate principal amount of $[____________].
"Class A-1 Rate" shall mean [____]% per annum.
"Class A-2 Final Payment Date" shall mean the [____________]
Payment Date.
"Class A-2 Monthly Interest" shall mean (i) for the initial
Payment Date, $[____________], and (ii) for any Payment Date thereafter,
one-twelfth of the product of (A) the Class A-2 Rate and (B) the outstanding
principal balance of the Class A-2 Notes as of the preceding Payment Date (after
giving effect to all payments of principal made to the Holders of the Class A-2
Notes on or before such preceding Payment Date).
"Class A-2 Notes" shall mean the [____]% Class A-2
Asset-Backed Notes issued by the Trust pursuant to the Indenture in the initial
aggregate principal amount of $[____________].
"Class A-2 Rate" shall mean [____]% per annum.
"Class A-3 Final Payment Date" shall mean the [____________]
Payment Date.
"Class A-3 Monthly Interest" shall mean (i) for the initial
Payment Date, $[____________], and (ii) for any Payment Date thereafter,
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one-twelfth of the product of (A) the Class A-3 Rate and (B) the outstanding
principal balance of the Class A-3 Notes as of the preceding Payment Date (after
giving effect to all payments of principal made to the Holders of the Class A-3
Notes on or before such preceding Payment Date).
"Class A-3 Notes" shall mean the [____]% Class A-3
Asset-Backed Notes issued by the Trust pursuant to the Indenture in the initial
aggregate principal amount of $[____________].
"Class A-3 Rate" shall mean [____]% per annum.
"Class A-4 Final Payment Date" shall mean the [____________]
Payment Date.
"Class A-4 Monthly Interest" shall mean (i) for the initial
Payment Date, $[____________], and (ii) for any Payment Date thereafter,
one-twelfth of the product of (A) the Class A-4 Rate and (B) the outstanding
principal balance of the Class A-4 Notes as of the preceding Payment Date (after
giving effect to all payments of principal made to the Holders of the Class A-4
Notes on or before such preceding Payment Date).
"Class A-4 Notes" shall mean the [____]% Class A-4
Asset-Backed Notes issued by the Trust pursuant to the Indenture in the initial
aggregate principal amount of $[____________].
"Class A-4 Rate" shall mean [____]% per annum.
"Closing Date" shall mean [____________], 1999.
"Collection Account" shall mean the account established and
maintained as such pursuant to Section 4.1(a).
"Collection Period" shall mean each calendar month during the
term of this Agreement or, in the case of the initial Collection Period, the
period from but excluding the Cutoff Date to and including the last day of the
month [following the month] in which the Cutoff Date occurs.
"Commission" shall mean the Securities and Exchange
Commission.
"Computer Tape" shall mean any computer tape or compact disk
generated by the Seller which provides information relating to the Contracts and
which was used by the Seller in selecting the Contracts transferred to the Trust
hereunder on the Closing Date.
"Contract" shall mean a motor vehicle retail installment sale
contract identified on the Contract Schedule (as such contract may be amended,
supplemented or otherwise modified and in effect from time to time).
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"Contract File" shall mean, with respect to any Contract, the
electronic entries, documents, instruments and writings with respect to such
Contract specified in Section 2.4.
"Contract Schedule" shall mean the list identifying the
Contracts attached as Schedule 1 to this Agreement (which list may be in the
form of microfiche or compact disk).
"Corporate Trust Office" shall mean, as applicable, (i) the
principal office of the Indenture Trustee at which at any particular time its
corporate trust business shall be administered, which office at the date of the
execution of this Agreement is located at Four Albany Street, New York, New York
10006, Attention: Corporate Trust and Agency Group - Structured Finance, or at
such other address as the Indenture Trustee may designate from time to time by
notice to the Noteholders, the Owner Trustee and the Seller, or the principal
corporate trust office of any successor Indenture Trustee at the address
designated by such successor Indenture Trustee by notice to the Noteholders, the
Owner Trustee and the Seller or (ii) the principal office of the Owner Trustee
at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at One Rodney Square, 1st Floor, 920 King Street, Wilmington, Delaware
19801-7475, Attention: Corporate Trust Department, or at such other address as
the Owner Trustee may designate from time to time by notice to the
Certificateholders, the Indenture Trustee and the Seller, or the principal
corporate trust office of any successor Owner Trustee at the address designated
by such successor Owner Trustee by notice to the Certificateholders, the
Indenture Trustee and the Seller.
"Cutoff Date" shall mean [___________], 1999.
"Defaulted Contract" shall mean a Contract as to which (i) any
payment, or any part of any payment, due under such Contract has become 120 days
or more delinquent (whether or not the Servicer has repossessed the related
Financed Vehicle), (ii) the Servicer has repossessed and sold the related
Financed Vehicle or (iii) the Servicer has determined in accordance with its
customary practices that such Contract is uncollectible; provided, however, that
a Contract shall not be classified as a Defaulted Contract until the last
Business Day of the Collection Period during which one of the foregoing events
first occurs; and, provided further, that a Purchased Contract shall not be
deemed to be a Defaulted Contract.
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"Depositor" shall mean the Seller, in its capacity as
Depositor under the Trust Agreement.
"Determination Date" shall mean the sixth day preceding each
Payment Date or, if such sixth day is not a Business Day, the following Business
Day, commencing on [____________], 1999.
"Eligible Investments" shall mean, on any date of
determination, book-entry securities, negotiable instruments or securities
represented by instruments in bearer or registered form with maturities not
exceeding the next Payment Date which evidence:
(i) direct obligations of, and obligations fully
guaranteed by, the United States of America or any agency or
instrumentality thereof the obligations of which are backed by the full
faith and credit of the United States of America;
(ii) demand deposits, time deposits, bankers' acceptances
or certificates of deposit of any depository institution or trust
company incorporated under the laws of the United States of America or
any state thereof (or any domestic branch of a foreign bank) and
subject to supervision and examination by federal or state banking or
depository institution authorities; provided, however, that, at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other
than such obligations the rating of which is based on the credit of a
Person other than such depository institution or trust company) thereof
shall have a rating from each of the Rating Agencies in the highest
investment category granted thereby;
(iii) repurchase obligations with respect to any security
that is a direct obligation of, or fully guaranteed by, the United
States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the
United States of America, in either case entered into with a depository
institution or trust company (acting as principal) described in clause
(ii) above;
(iv) short-term corporate securities bearing interest or
sold at a discount issued by any corporation incorporated under the
laws of the United States of America or any state thereof; provided,
however, that, at the time of the investment or contractual commitment
to invest therein, the short-term unsecured debt obligations (other
than such obligations the rating of which is based on the credit of a
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Person other than such corporation) thereof shall have a rating from
each of the Rating Agencies in the highest investment category granted
thereby;
(v) commercial paper having, at the time of the
investment or contractual commitment to invest therein, a rating from
each of the Rating Agencies in the highest investment category granted
thereby;
(vi) guaranteed investment contracts issued by an
insurance company or other corporation acceptable to the Rating
Agencies;
(vii) investments in money market funds having a rating
from each of the Rating Agencies in the highest investment category
granted thereby (including funds for which the Indenture Trustee or the
Owner Trustee or any of their respective Affiliates is investment
manager or advisor); and
(viii) any other investment with respect to which the Trust
or the Servicer has received written notification from the Rating
Agencies that the acquisition of such investment will not result in a
withdrawal or downgrading of the ratings on any class of Notes or the
Certificates.
"Eligible Institution" shall mean the corporate trust
department of the Indenture Trustee or any other depository institution
organized under the laws of the United States of America or any state thereof or
the District of Columbia or incorporated under the laws of a foreign
jurisdiction with a branch or agency located in the United States of America or
any state thereof or the District of Columbia qualified to take deposits and
subject to supervision and examination by federal or state banking authorities
which at all times has either a long-term unsecured debt rating of at least Baa3
from Moody's or a long-term unsecured debt rating, a short-term unsecured debt
rating or a certificate of deposit rating acceptable to the Rating Agencies and
whose deposits are insured by the Federal Deposit Insurance Corporation.
"Eligible Servicer" shall mean a Person which, at the time of
its appointment as Servicer, (i) has a net worth of not less than $50,000,000,
(ii) is servicing a portfolio of motor vehicle retail installment sale contracts
and/or motor vehicle loans, (iii) is legally qualified, and has the capacity, to
service the Contracts, (iv) has demonstrated the ability to service a portfolio
of motor vehicle retail installment sale contracts and/or motor vehicle loans
similar to the Contracts professionally and competently in accordance with
standards of skill and care that are consistent with prudent industry standards
and (v) is qualified and entitled to use pursuant to a license or other written
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agreement, and agrees to maintain the confidentiality of, the software which the
Servicer uses in connection with performing its duties and responsibilities
under this Agreement or obtains rights to use, or develops at its own expense,
software which is adequate to perform its duties and responsibilities under this
Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Event of Servicing Termination" shall mean an event specified
in Section 8.1.
"Final Order" shall mean a final, non-appealable order of a
court exercising jurisdiction in an Insolvency Proceeding with respect to the
Seller, the Servicer or the Depositor to the effect that all or any portion of
any payment made to the Noteholders or the Certificateholders must be returned
prior to the Termination Date (as defined in the Policy) as a voidable
preference under the United States Bankruptcy Code (11 U.S.C.), as amended from
time to time.
"Final Payment Date" shall mean, as applicable, the Class A-1
Final Payment Date, the Class A-2 Final Payment Date, the Class A-3 Final
Payment Date or the Class A-4 Final Payment Date.
"Final Scheduled Maturity Date" shall mean [____________],
200[_].
"Financed Vehicle" shall mean a new or used motor vehicle,
together with all accessions thereto, securing an Obligor's indebtedness under a
Contract.
"Fiscal Agent" shall have the meaning specified in the Policy.
"Fiscal Year" shall mean the period commencing on March 1 of
any year and ending on February 28 (or February 29, if applicable) of the
following year.
"Holder" shall mean a Noteholder or a Certificateholder, as
the case may be.
"Indenture" shall mean the Indenture, dated as of September
[__], 1999, between the Trust and the Indenture Trustee, as the same may be
amended, supplemented or otherwise modified and in effect from time to time.
"Indenture Trustee" shall mean Bankers Trust Company, a New
York banking corporation, not in its individual capacity but solely as Indenture
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Trustee under the Indenture, its successors in interest and any successor
trustee under the Indenture.
"Initial Certificate Balance" shall mean, as the context may
require, (i) with respect to all of the Certificates, $[____________], or (ii)
with respect to any Certificate, an amount equal to the initial denomination of
such Certificate.
"Initial Note Balance" shall mean, as the context may require,
(i) with respect to all of the Notes, $[____________], or (ii) with respect to
any Note, an amount equal to the initial denomination of such Note.
"Initial Reserve Account Deposit" shall mean $[____________].
"Insolvency Event" shall mean, with respect to any Person, (i)
the making by such Person of a general assignment for the benefit of creditors,
(ii) the filing by such Person of a voluntary petition in bankruptcy, (iii) such
Person being adjudged a bankrupt or insolvent, or having had entered against
such Person an order for relief in any bankruptcy or insolvency proceeding, (iv)
the filing by such Person of a petition or answer seeking reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation, (v) the filing by such Person of an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against such Person in any proceeding specified
in clause (vii) below, (vi) seeking, consenting to or acquiescing in the
appointment of a trustee, receiver or liquidator of such Person or of all or any
substantial part of the assets of such Person or (vii) the failure to obtain
dismissal within 60 days of the commencement of any proceeding against such
Person seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or regulation,
or the entry of any order appointing a trustee, liquidator or receiver of such
Person of all or any substantial portion of the assets of such Person.
"Lien" shall mean a security interest, lien, charge, pledge,
equity or encumbrance of any kind, other than tax liens, mechanics' or
materialmen's liens, judicial liens and any liens that may attach to a Financed
Vehicle by operation of law.
"Liquidation Proceeds" shall mean all amounts received by the
Servicer with respect to any Defaulted Contract, net of the sum of (i) any
expenses incurred by the Servicer in connection with collection of such Contract
and the disposition of the related Financed Vehicle (to the extent determinable
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by the Servicer and not previously reimbursed) plus (ii) any amounts required by
law to be remitted to the related Obligor.
"Monthly Certificate Interest" shall mean (i) for the initial
Payment Date, $[____________], and (ii) for any Payment Date thereafter,
one-twelfth of the product of (A) the Certificate Rate and (B) the Certificate
Balance as of the immediately preceding Payment Date (after giving effect to all
payments of principal made to the Certificateholders on or before such preceding
Payment Date).
"Monthly Certificate Principal" shall mean, for any Payment
Date on or after which the Notes have been paid in full, the lesser of (i) the
Certificate Balance as of the day preceding such Payment Date and (ii) the
amount necessary to reduce the Certificate Balance as of the day preceding such
Payment Date to the Pool Balance as of the last day of the preceding Collection
Period; provided, however, that the Monthly Certificate Principal for the
Certificate Final Payment Date shall equal the greater of (i) the amount
otherwise calculated pursuant to this definition and (ii) the amount necessary
to reduce the outstanding principal balance of the Certificates to zero.
"Monthly Note Interest" shall mean, for any Payment Date, the
sum of the Class A-1 Monthly Interest, the Class A-2 Monthly Interest, the Class
A-3 Monthly Interest and the Class A-4 Monthly Interest, in each case for such
Payment Date.
"Monthly Note Principal" shall mean, for any Payment Date, the
lesser of (i) the Note Balance as of the day preceding such Payment Date and
(ii) the amount necessary to reduce the sum of the Note Balance plus the
Certificate Balance as of the day preceding such Payment Date to the Pool
Balance as of the last day of the preceding Collection Period; provided,
however, that the Monthly Note Principal for the Final Payment Date for any
class of Notes shall equal the greater of (i) the amount otherwise calculated
pursuant to this definition and (ii) the amount necessary to reduce the
outstanding principal balance of the Notes of such class to zero.
"Monthly Remittance Condition" shall have the meaning
specified in Section 4.2.
"Monthly Servicing Fee" shall mean, for any Collection Period,
the fee payable to the Servicer for services rendered during such Collection
Period as determined pursuant to Section 3.8.
"Moody's" shall mean Moody's Investors Service, Inc., and its
successors.
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"Net Losses" shall mean, with respect to any Collection
Period, the excess, if any, of (i) the aggregate Principal Balance of all
Contracts that became Defaulted Contracts during such Collection Period over
(ii) the aggregate Liquidation Proceeds received by the Servicer during such
Collection Period.
"Note Balance" shall mean, at any time, as the context may
require, (i) with respect to all of the Notes, an amount equal to, initially,
the Initial Note Balance and, thereafter, an amount equal to the Initial Note
Balance as reduced from time to time by all amounts allocable to principal
previously distributed to the Noteholders or (ii) with respect to any Note, an
amount equal to, initially, the initial denomination of such Note and,
thereafter, an amount equal to such initial denomination as reduced from time to
time by all amounts allocable to principal previously distributed in respect of
such Note; provided, however, that in determining whether the Holders of Notes
evidencing the requisite percentage of the Note Balance have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or under
any other Transaction Document, Notes owned by the Trust, any other obligor upon
the Notes, the Seller, the Servicer or any Affiliate of any of the foregoing
Persons shall be disregarded and deemed to be excluded from the Note Balance
(unless such Persons own 100% of the Note Balance), except that, in determining
whether the Indenture Trustee or the Owner Trustee shall be protected in relying
on any such request, demand, authorization, direction, notice, consent or
waiver, only Notes that a Responsible Officer of the Indenture Trustee or the
Owner Trustee, as applicable, knows to be so owned shall be so disregarded; and,
provided further, that Notes that have been pledged in good faith may be
regarded as included in the Note Balance if the pledgee establishes to the
satisfaction of the Indenture Trustee or the Owner Trustee, as applicable, the
pledgee's right so to act with respect to such Notes and that the pledgee is not
the Trust, any other obligor upon the Notes, the Seller, the Servicer or any
Affiliate of any of the foregoing Persons.
"Note Payment Account" shall mean the account established and
maintained as such pursuant to Section 4.1(b).
"Note Pool Factor" shall mean, with respect to any class of
Notes, (i) as of the Closing Date, 1.0000000 and (ii) as of the close of
business on the last day of any Collection Period ending after the Closing Date,
a seven-digit decimal figure equal to the outstanding principal balance of such
class as of such last day (after giving effect to any reductions of such
outstanding principal balance to be made on the following Payment Date) divided
by the original outstanding principal balance of such class.
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"Note Rate" shall mean, as applicable, the Class A-1 Rate, the
Class A-2 Rate, the Class A-3 Rate or the Class A-4 Rate.
"Noteholder" shall mean a Person in whose name a Note is
registered on the Note Register.
"Obligor" shall mean the purchaser or co-purchasers of a
Financed Vehicle purchased in whole or in part by the execution and delivery of
a Contract or any other Person who owes or may be liable for payments under a
Contract.
"Officer's Certificate" shall mean a certificate signed by the
chairman, the president, any executive vice president, senior vice president,
vice president or the treasurer of the Seller or the Servicer, as the case may
be, and delivered to the Owner Trustee and the Indenture Trustee.
"Opinion of Counsel" shall mean one or more written opinions
of counsel who may, except as otherwise expressly provided in this Agreement, be
an employee of, or outside counsel to, the Seller or the Servicer and who shall
be acceptable to the Indenture Trustee, the Owner Trustee or the Rating
Agencies, as applicable.
"Owner Trust Estate" shall have the meaning specified in the
Trust Agreement.
"Owner Trustee" shall mean First Union Trust Company, National
Association, a national banking association, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement, its successors in interest
and any successor trustee under the Trust Agreement.
"Payment Date" shall mean the 15th day of each month or, if
such 15th day is not a Business Day, the following Business Day, commencing on
[____________], 1999.
"Person" shall mean a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, limited liability partnership, trust,
unincorporated organization, or government or any agency or political
subdivision thereof, or any other entity of whatever nature.
"Policy Claim Amount" shall have the meaning specified in
Section 4.6(b)(ii).
"Pool Balance" shall mean, as of the last day of any
Collection Period, the aggregate Principal Balance of the Contracts as of such
last day.
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"Principal Balance" shall mean, with respect to any Contract
as of any date, the Amount Financed under such Contract minus the sum of (i)
that portion of all Scheduled Payments actually received on or prior to such
date allocable to principal using the Simple Interest Method (to the extent
collected) plus (ii) any rebates of extended warranty contract costs or physical
damage, credit life or credit disability insurance premiums included in the
Amount Financed plus (iii) any full or partial prepayment applied to reduce the
unpaid principal balance of such Contract; provided, however, that (i) the
Principal Balance of a Defaulted Contract shall be zero as of the last day of
the Collection Period during which it became a Defaulted Contract and (ii) the
Principal Balance of a Purchased Contract shall be zero as of the date on which
the related Purchase Amount is remitted by the Seller or the Servicer.
"Purchase Agreement" shall mean the Purchase Agreement, dated
as of September [__], 1999, between the Seller and CarMax, as the same may be
amended, supplemented or otherwise modified and in effect from time to time.
"Purchase Amount" shall mean, with respect to any Payment Date
and any Contract to be repurchased by the Seller or purchased by the Servicer on
such Payment Date, an amount equal to the sum of (i) the Principal Balance of
such Contract plus (ii) the amount of accrued but unpaid interest on such
Principal Balance at the related APR to but excluding such Payment Date.
"Purchased Contract" shall mean a Contract as to which payment
of the Purchase Amount has been made by the Seller pursuant to Section 2.3 or
the Servicer pursuant to Section 3.7 or 9.1.
"Rating Agencies" shall mean Moody's and Standard & Poor's and
their respective successors; provided, however, that if no such organization or
successor is any longer in existence, Rating Agency shall mean a nationally
recognized statistical rating organization or other comparable Person designated
by the Trust, notice of which designation shall have been given to the Indenture
Trustee, the Owner Trustee and the Servicer.
"Rating Agency Condition" shall mean, with respect to any
action, that each Rating Agency shall have been given prior notice thereof and
shall have notified the Seller, the Servicer, the Owner Trustee and the
Indenture Trustee in writing that such action will not result in a reduction or
withdrawal of the then current rating of any class of Notes or the Certificates.
"Record Date" shall mean, with respect to any Payment Date,
the close of business on the Business Day preceding such Payment Date; provided,
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however, that if Definitive Notes have been issued, Record Date shall mean, with
respect to any Payment Date, the last day of the calendar month preceding such
Payment Date.
"Relevant UCC" shall mean the Uniform Commercial Code as in
effect from time to time in any relevant jurisdiction.
"Required Payment Amount" shall have, for any Payment Date,
the meaning specified for such Payment Date in Section 4.6(a).
"Required Rating" shall mean a short-term unsecured debt
rating of P-1 by Moody's and A-1+ by Standard & Poor's.
"Required Reserve Account Amount" shall mean, for any Payment
Date, the greater of (i) $[____________] and (ii) [____]% of the Pool Balance as
of the last day of the preceding Collection Period (or, in the case of the first
Payment Date, as of the Closing Date); [provided, however, that the Required
Reserve Account Amount for any Payment Date on which a Trigger Event (as defined
in the Insurance Agreement) has occurred and is continuing shall equal the
Policy Amount]; and, provided further, that the Required Reserve Account Amount
for any Payment Date shall not exceed the sum of the Note Balance plus the
Certificate Balance as of such Payment Date (after giving effect to all payments
of principal made to the Noteholders and the Certificateholders on such Payment
Date).
"Reserve Account" shall mean the account established and
maintained as such pursuant to Section 4.7(a).
"Reserve Account Amount" shall mean, for any Payment Date, the
amount on deposit in and available for withdrawal from the Reserve Account on
such Payment Date (after giving effect to all deposits to and withdrawals from
the Reserve Account on the preceding Payment Date, or, in the case of the first
Payment Date, the Closing Date), including, without limitation, all interest and
other income (net of losses and investment expenses) earned on such amount
during the Collection Period during which such preceding Payment Date occurs.
"Reserve Account Deficiency" shall have, for any Payment Date,
the meaning specified for such Payment Date in Section 4.6(b).
"Reserve Account Draw Amount" shall have the meaning specified
in Section 4.6(b).
"Reserve Account Property" shall have the meaning specified in
Section 4.7(a).
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"Responsible Officer" shall mean (i) in the case of the
Indenture Trustee, any officer within the Corporate Trust Department of the
Indenture Trustee with direct responsibility for the administration of the
Indenture and also, with respect to a particular matter, any other officer of
the Indenture Trustee to whom such matter is referred because of such officer's
knowledge of and familiarity with such matter or other similar matters and (ii)
in the case of the Owner Trustee, any officer within the Corporate Trust
Department of the Owner Trustee with direct responsibility for the
administration of the Trust Agreement or this Agreement and also, with respect
to a particular matter, any other officer of the Owner Trustee to whom such
matter is referred because of such officer's knowledge of and familiarity with
such matter or other similar matters.
"Scheduled Payment" shall mean, for any Contract, each payment
required to be made by the related Obligor in accordance with the terms of such
Contract (after giving effect to any deferral of payments pursuant to Section
3.2 or any rescheduling of payments as a result of any Insolvency Event with
respect to such Obligor).
"Seller" shall mean CarMax Auto Receivables LLC, a Virginia
limited liability company, in its capacity as seller of the Contracts under this
Agreement, and its successors in such capacity.
"Servicer" shall mean CarMax, in its capacity as servicer of
the Contracts under this Agreement, and its successors in such capacity.
"Servicer's Certificate" shall have the meaning specified in
Section 3.9.
"Servicing Officer" shall mean any officer of the Servicer
involved in, or responsible for, the administration and servicing of the
Contracts whose name appears on a list of servicing officers attached to an
Officer's Certificate furnished on the Closing Date to the Owner Trustee and the
Indenture Trustee by the Servicer, as such list may be amended from time to time
by the Servicer in writing.
"Servicing Rate" shall mean 1.00% per annum.
"Simple Interest Contract" shall mean any Contract under which
each payment is allocated between principal and interest in accordance with the
Simple Interest Method.
"Simple Interest Method" shall mean the method of allocating a
fixed level payment between principal and interest, pursuant to which a portion
of such payment is allocated to interest in an amount equal to the product of
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the APR of the related Contract multiplied by the unpaid Principal Balance of
such Contract multiplied by the period of time (expressed as a fraction of a
year, based on the actual number of days in the applicable calendar month and a
365-day year) elapsed since the preceding payment was made and the remainder of
such payment is allocated to principal.
"Standard & Poor's" shall mean Standard & Poor's, a division
of The McGraw-Hill Companies, Inc., and its successors.
"Total Available Funds" shall mean, for any Payment Date, the
sum of (i) the Available Funds for such Payment Date plus (ii) the Reserve
Account Draw Amount, if any, for such Payment Date plus (iii) the Policy Claim
Amount, if any, for such Payment Date.
"Total Certificate Interest" shall mean, for any Payment Date,
the sum of (i) the Monthly Certificate Interest for such Payment Date plus (ii)
the Additional Certificate Interest for such Payment Date.
"Total Note Interest" shall mean, for any Payment Date and any
class of Notes, the sum of (i) the Monthly Note Interest for such Payment Date
for such class plus (ii) the Additional Note Interest for such Payment Date for
such class.
"Total Servicing Fee" shall mean, for any Collection Period,
the sum of (i) the Monthly Servicing Fee for such Collection Period plus (ii)
all accrued but unpaid Monthly Servicing Fees for previous Collection Periods.
"Trust" shall mean the CarMax Auto Owner Trust 1999-1, a
Delaware business trust.
"Trust Accounts" shall have the meaning specified in Section
4.1(c).
"Trust Agreement" shall mean the Trust Agreement, dated as of
September [__], 1999, between the Seller and the Owner Trustee, as the same may
be amended, supplemented or otherwise modified and in effect from time to time.
"Trust Officer" shall mean (i) in the case of the Indenture
Trustee, any officer within the Corporate Trust Department of the Indenture
Trustee with direct responsibility for the administration of the Indenture and
also, with respect to a particular matter, any other officer of the Indenture
Trustee to whom such matter is referred because of such officer's knowledge of
and familiarity with such matter or other similar matters and (ii) in the case
of the Owner Trustee, any officer within the Corporate Trust Department of the
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Owner Trustee with direct responsibility for the administration of the Trust
Agreement and also, in the case of the Owner Trustee, any officer within the
Corporate Trust Department of the Owner Trustee with direct responsibility for
the administration of the Trust Agreement or this Agreement and also, with
respect to a particular matter, any other officer of the Owner Trustee to whom
such matter is referred because of such officer's knowledge of and familiarity
with such matter or other similar matters
"Trust Property" shall mean, as of any date of determination,
the Contracts and other related property sold, transferred, assigned and
otherwise conveyed by the Seller to the Trust pursuant to Section 2.1(a).
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined
herein have the meanings assigned to them in the Indenture.
(b) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
assigned to them under generally accepted accounting principles. To the extent
that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. Article, Section,
Schedule and Exhibit references contained in this Agreement are references to
Articles, Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified. The term "including" shall mean "including without
limitation."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the masculine
as well as to the feminine and neuter genders of such terms.
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(f) Any agreement, instrument or statute defined or referred
to herein or in any instrument or certificate delivered in connection herewith
means such agreement, instrument or statute as from time to time amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
ARTICLE II
TRUST PROPERTY
SECTION 2.1. Conveyance of Trust Property.
(a) In consideration of the Trust's delivery to, or upon the
written order of, the Seller of authenticated Notes and Certificates, in
authorized denominations in aggregate principal amounts equal to the Initial
Note Balance and the Initial Certificate Balance, respectively, the Seller
hereby irrevocably sells, transfers, assigns and otherwise conveys to the Trust,
without recourse (subject to the obligations herein), all right, title and
interest of the Seller, whether now owned or hereafter acquired, in, to and
under the following:
(i) the Contracts;
(ii) all amounts received on or in respect of the
Contracts after the Cutoff Date;
(iii) the security interests in the Financed Vehicles;
(iv) any proceeds from claims on or refunds of premiums
with respect to physical damage, theft, credit life and credit
disability insurance policies relating to the Financed Vehicles or the
related Obligors;
(v) the Contract Files;
(vi) funds on deposit in the Collection Account, the Note
Payment Account, the Certificate Payment Account, and the Reserve
Account;
(vii) rights under the Purchase Agreement to cause CarMax
to repurchase contracts affected materially and adversely by breaches
of the representations and warranties of CarMax made in the Purchase
Agreement;
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(viii) rights under this Agreement to cause the Servicer to
purchase Contracts affected materially and adversely by breaches of the
representations and warranties of the Servicer made in this Agreement;
and
(ix) all present and future claims, demands, causes of
action and choses in action in respect of any or all of the foregoing
and all payments on or under and all proceeds of every kind and nature
whatsoever in respect of any or all of the foregoing, including all
proceeds of the conversion thereof, voluntary or involuntary, into cash
or other liquid property, all cash proceeds, accounts, accounts
receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of
any and every kind and other forms of obligations and receivables,
instruments and other property which at any time constitute all or part
of or are included in the proceeds of any of the foregoing.
(b) The Seller and the Trust intend that the transfer of the
Trust Property contemplated by Section 2.1(a) constitute a sale of the Trust
Property, conveying good title to the Trust Property, from the Seller to the
Trust. If such transfer is deemed to be a pledge to secure the payment of the
Notes and the Certificates, however, the Seller hereby grants to the Trust a
first priority security interest in all of the Seller's right, title and
interest in, to and under the Trust Property, and all proceeds thereof, to
secure the payment of the Notes and the Certificates, and in such event, this
Agreement shall constitute a security agreement under applicable law.
(c) The sale, transfer, assignment and conveyance of the Trust
Property made under Section 2.1(a) shall not constitute and is not intended to
result in an assumption by the Trust of any obligation of the Seller to the
Obligors or any other Person in connection with the Contracts and the other
Trust Property or any agreement, document or instrument related thereto.
SECTION 2.2. Representations and Warranties of the Seller as
to the Contracts. The Seller makes the following representations and warranties
as to the Contracts on which the Trust shall be deemed to have relied in
accepting the Contracts. The representations and warranties speak as of the
execution and delivery of this Agreement, except to the extent otherwise
provided, but shall survive the sale, transfer, assignment and conveyance of the
Contracts to the Trust pursuant to this Agreement and the pledge of the
Contracts to the Indenture Trustee pursuant to the Indenture.
(a) Characteristics of Contracts. Each Contract (i) has been
originated by CarMax in the ordinary course of business in connection with the
sale of a new or used motor vehicle, has been fully and properly executed by the
parties thereto and has been purchased by the Seller from CarMax, (ii) has
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created a valid, binding and enforceable security interest in favor of CarMax in
the related Financed Vehicle, which security interest has been validly assigned
by CarMax to the Seller, by the Seller to the Trust and by the Trust to the
Indenture Trustee, (iii) contains customary and enforceable provisions such that
the rights and remedies of the holder thereof are adequate for realization
against the collateral of the benefits of the security, (iv) provides for level
monthly payments that fully amortize the Amount Financed by maturity (except
that the period between the date of such Contract and the date of the first
Scheduled Payment may be less than or greater than one month and the amount of
the first and last Scheduled Payments may be less than or greater than the level
payments) and yield interest at the related APR, (v) provides for, in the event
that such Contract is prepaid, a prepayment that fully pays the Principal
Balance of such Contract with interest at the related APR through the date of
payment, (vi) is a retail installment sale contract, (vii) is secured by a new
or used motor vehicle, (viii) is a Simple Interest Contract and (ix) relates to
an Obligor who has made at least two payments under such Contract as of the
Cutoff Date.
(b) Contract Schedule. The information set forth in the
Contract Schedule was true and correct in all material respects as of the
opening of business on the Cutoff Date, and no selection procedures believed to
be adverse to the Noteholders and/or the Certificateholders were utilized in
selecting the Contracts from those retail installment sale contracts which met
the criteria contained herein and in the Purchase Agreement. The information set
forth in the compact disk or other listing regarding the Contracts made
available to the Trust and its assigns (which compact disk or other listing is
required to be delivered as specified herein) is true and correct in all
material respects.
(c) Compliance with Law. Each Contract and the sale of the
related Financed Vehicle complied, at the time such Contract was originated and
complies, as of the Closing Date, in all material respects with all requirements
of applicable federal, state and local laws, and regulations thereunder,
including, without limitation, usury laws, the Federal Truth-in-Lending Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Credit
Billing Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's
Regulations B, M and Z, the Soldiers' and Sailors' Civil Relief Act of 1940 and
state adaptations of the Uniform Consumer Credit Code.
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(d) Binding Obligation. Each Contract represents the genuine,
legal, valid and binding payment obligation in writing of the related Obligor,
enforceable by the holder thereof in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity.
(e) No Government Obligor. No Contract is due from the United
States of America or any state thereof or from any agency, department or
instrumentality of the United States of America or any state thereof.
(f) Security Interest in Financed Vehicles. Immediately prior
to the transfer of the Contracts by CarMax to the Seller, each Contract was
secured by a valid, binding and enforceable first priority perfected security
interest in favor of CarMax in the related Financed Vehicle and, at such time as
enforcement of such security interest is sought, there shall exist a valid,
binding and enforceable first priority perfected security interest in such
Financed Vehicle for the benefit of the Seller and the Trust, respectively
(subject to any statutory or other lien arising by operation of law after the
Closing Date which may be prior to such security interest).
(g) Contracts in Force. No Contract has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released in whole
or in part from the Lien granted by the related Contract.
(h) No Waiver. No provision of a Contract has been waived in
such a manner that such Contract fails to meet all of the representations and
warranties made by the Seller in this Section 2.2 with respect thereto.
(i) No Defenses. No right of rescission, setoff, counterclaim
or defense has been asserted or threatened with respect to any Contract.
(j) No Liens. To the best of the Seller's knowledge, no liens
or claims have been filed for work, labor or materials relating to any Financed
Vehicle that are prior to, or equal or coordinate with, the security interest in
such Financed Vehicle created by the related Contract.
(k) No Default; Repossession. No default, breach, violation or
event permitting acceleration under the terms of any Contract has occurred, no
continuing condition that with notice or the lapse of time or both would
constitute a default, breach, violation or event permitting acceleration under
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the terms of any Contract has arisen and no Financed Vehicle has been
repossessed as of the Cutoff Date.
(l) Title. The Seller intends that the transfer of the
Contracts contemplated by Section 2.1(a) constitute a sale of the Contracts from
the Seller to the Trust and that the beneficial interest in, and title to, the
Contracts not be part of the Seller's estate in the event of the filing of a
bankruptcy petition by or against the Seller under any bankruptcy law. The
Seller has not sold, transferred, assigned or pledged any Contract to any Person
other than the Trust. Immediately prior to the transfer of the Contracts
contemplated by Section 2.1(a), the Seller had good and marketable title to the
Contracts free and clear of all Liens, encumbrances, security interests and
rights of others and, immediately upon such transfer, the Trust shall have good
and marketable title to the Contracts, free and clear of all Liens,
encumbrances, security interests and rights of others. The transfer of the
Contracts contemplated by Section 2.1(a) has been perfected by all necessary
action under the Relevant UCC.
(m) Valid Assignment. No Contract has been originated in, or
is subject to the laws of, any jurisdiction under which the sale, transfer,
assignment and conveyance of such Contract under this Agreement or the pledge of
such Contract under the Indenture is unlawful, void or voidable. The Seller has
not entered into any agreement with any account debtor that prohibits, restricts
or conditions the assignment of the Contracts.
(n) All Filings Made. All filings (including, without
limitation, filings under the Relevant UCC) necessary in any jurisdiction to
give the Trust a first priority perfected security interest in the Contracts and
to give the Indenture Trustee a first priority perfected security interest in
the Contracts have been made or will be made on or prior to the Closing Date.
(o) Chattel Paper. Each Contract constitutes "chattel paper"
as defined in the Relevant UCC.
(p) One Original. There is only one original executed copy of
each Contract.
(q) Principal Balance. Each Contract 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.
(r) No Bankrupt Obligors. As of the Cutoff Date, no Contract
was due from an Obligor that was the subject of a proceeding under the
Bankruptcy Code of the United States or was bankrupt.
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(s) New and Used Vehicles. As of the Cutoff Date,
approximately [__]% of the Pool Balance related to Contracts secured by new
Financed Vehicles and approximately [__]% of the Pool Balance related to
Contracts secured by used Financed Vehicles.
(t) Origination. Each Contract was originated after
[___________], 19[__].
(u) Term to Maturity. Each Contract 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 70 months and not less
than three months.
(v) Weighted Average Maturity. The weighted average remaining
term to maturity of the Contracts as of the Cutoff Date was [____] months.
(w) Annual Percentage Rate. Each Contract has an APR of at
least 5% and not more than 25%.
(x) Location of Contract Files. The Contract Files are
maintained at the location listed in Schedule 2 to this Agreement.
(y) Simple Interest Method. All payments with respect to the
Contracts have been allocated consistently in accordance with the Simple
Interest Method.
(z) No Delinquent Contracts. As of the Cutoff Date, no
Contract was 31 or more days past due.
(aa) Prospectus Data. The tabular and numerical data contained in
the Prospectus (as defined in the Purchase Agreement) relating to the
characteristics of the Contracts is true and correct in all material respects.
(bb) Insurance. CarMax, in accordance with its customary
procedures, has determined whether or not each Obligor has obtained physical
damage insurance (which insurance shall not be force placed insurance) covering
the related Financed Vehicle.
SECTION 2.3. Repurchase by Seller upon Breach. The Seller, the
Servicer or the Owner Trustee, as the case may be, shall inform the other
parties to this Agreement, the Indenture Trustee and CarMax promptly, in
writing, upon the discovery of any breach or failure to be true of the
representations and warranties made by the Seller pursuant to Section 2.2. If
such breach or failure shall not have been cured by the close of business on the
last day of the Collection Period which includes the thirtieth (30th) day after
the date on which the Seller becomes aware of, or receives written notice from
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the Servicer or the Owner Trustee of, such breach or failure, and such breach or
failure materially and adversely affects the interest of the Trust in a
Contract, the Seller shall repurchase such Contract from the Trust on the
Payment Date immediately following such Collection Period. In consideration of
the repurchase of a Contract hereunder, the Seller shall remit the Purchase
Amount of such Contract in the manner specified in Section 4.5. The sole remedy
of the Trust, the Owner Trustee, the Indenture Trustee, the Noteholders and the
Certificateholders with respect to a breach or failure to be true of the
representations and warranties made by the Seller pursuant to Section 2.2 shall
be to require the Seller to repurchase Contracts pursuant to this Section 2.3
and to enforce the obligation of CarMax to repurchase Contracts pursuant to the
Purchase Agreement. Neither the Owner Trustee nor the Indenture Trustee shall
have any duty to conduct an affirmative investigation as to the occurrence of
any condition requiring the repurchase of any Contract pursuant to this Section
2.3 or the eligibility of any Contract for purposes of this Agreement.
SECTION 2.4. Custody of Contract Files. To assure uniform
quality in servicing the Contracts and to reduce administrative costs, the
Trust, upon the execution and delivery of this Agreement, hereby revocably
appoints the Servicer as its agent, and the Servicer hereby accepts such
appointment, to act as custodian on behalf of the Trust and the Indenture
Trustee of the following documents or instruments, which are hereby
constructively delivered to the Indenture Trustee, as pledgee of the Trust
pursuant to the Indenture with respect to each Contract (collectively, a
"Contract File"):
(i) the original, executed copy of such Contract;
(ii) the original credit application with respect to such
Contract fully executed by the related Obligor or a photocopy thereof
or a record thereof on a computer file or disc or on microfiche;
(iii) the original certificate of title for the related
Financed Vehicle or such other documents that the Servicer or CarMax
shall keep on file, in accordance with its customary practices and
procedures, evidencing the security interest of CarMax in such Financed
Vehicle;
(iv) documents evidencing the commitment of the related
Obligor to maintain physical damage insurance covering the related
Financed Vehicle; and
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(v) any and all other documents (including any computer
file or disc or microfiche) that the Servicer or the Seller shall keep
on file, in accordance with its customary practices and procedures,
relating to such Contract, the related Obligor or the related Financed
Vehicle.
On the Closing Date, the Servicer shall deliver an Officer's
Certificate to the Trust and the Indenture Trustee confirming that the Servicer
has received, on behalf of the Trust and the Indenture Trustee, all the
documents and instruments necessary for the Servicer to act as the agent of the
Trust and the Indenture Trustee for the purposes set forth in this Section 2.4,
including the documents referred to herein, and the Trust, the Owner Trustee and
the Indenture Trustee are hereby authorized to rely on such Officer's
Certificate.
SECTION 2.5. Duties of Servicer as Custodian.
(a) Safekeeping. The Servicer, in its capacity as custodian,
shall hold the Contract Files for the benefit of the Trust and the Indenture
Trustee and maintain such accurate and complete accounts, records and computer
systems pertaining to each Contract File as shall enable the Servicer and the
Trust to comply with the terms and provisions of this Agreement and the
Indenture Trustee to comply with the terms and conditions of the Indenture. In
performing its duties as custodian, the Servicer shall act with reasonable care,
using that degree of skill and attention that the Servicer exercises with
respect to the files relating to comparable motor vehicle retail installment
sale contracts that the Servicer services for itself or others. The Servicer
shall conduct, or cause to be conducted, in accordance with its customary
practices and procedures, periodic audits of the Contract Files held by it under
this Agreement, and of the related accounts, records and computer systems, in
such a manner as shall enable the Trust or the Indenture Trustee to verify the
accuracy of the Servicer's record keeping. The Servicer shall promptly report to
the Owner Trustee and the Indenture Trustee any failure on its part to hold the
Contract Files and maintain its accounts, records and computer systems as herein
provided and promptly take appropriate action to remedy any such failure.
Nothing herein shall be deemed to require an initial review or any periodic
review by the Trust, the Owner Trustee or the Indenture Trustee of the Contract
Files, and none of the Trust, the Owner Trustee or the Indenture Trustee shall
be liable or responsible for any action or failure to act by the Servicer in its
capacity as custodian hereunder.
(b) Maintenance of and Access to Records. The Servicer shall
maintain each Contract File at the location listed in Schedule 2 to this
Agreement or at such other location as shall be specified to the Trust, the
Insurer and the Indenture Trustee by written notice not later than ninety (90)
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days after any change in location. The Servicer shall make available to the
Trust and the Indenture Trustee, or its duly authorized representatives,
attorneys or auditors, a list of locations of the Contract Files, the Contract
Files, and the related accounts, records, and computer systems maintained by the
Servicer, at such times as the Trust or the Indenture Trustee shall instruct.
(c) Release of Documents. As soon as practicable after
receiving written instructions from the Indenture Trustee, the Servicer shall
release any document in the Contract Files to the Indenture Trustee, the
Indenture Trustee's agent or the Indenture Trustee's designee, as the case may
be, at such place as the Indenture Trustee may reasonably designate.
(d) Title to Contracts. The Servicer shall not at any time
have or in any way attempt to assert any interest in any Contract held by it as
custodian hereunder or in the related Contract File other than for collecting or
enforcing such Contract for the benefit of the Trust. The entire equitable
interest in such Contract and the related Contract File shall at all times be
vested in the Trust.
SECTION 2.6. Instructions; Authority to Act. The Servicer
shall be deemed to have received proper instructions with respect to the
Contract Files upon its receipt of written instructions signed by an Authorized
Officer. A certified copy of excerpts of authorizing resolutions of the Board of
Directors of the Indenture Trustee shall constitute conclusive evidence of the
authority of any such Authorized Officer to act and shall be considered in full
force and effect until receipt by the Servicer of written notice to the contrary
given by the Indenture Trustee.
SECTION 2.7. Custodian's Indemnification. The Servicer, in its
capacity as custodian, shall indemnify and hold harmless the Trust, the Owner
Trustee and the Indenture Trustee and each of their respective officers,
directors, employees and agents from and against any and all liabilities,
obligations, losses, compensatory damages, payments, costs or expenses
(including legal fees if any) of any kind whatsoever that may be imposed on,
incurred or asserted against the Trust, the Owner Trustee or the Indenture
Trustee or any of their respective officers, directors, employees and agents as
the result of any act or omission by the Servicer relating to the maintenance
and custody of the Contract Files; provided, however, that the Servicer shall
not be liable hereunder to the Owner Trustee to the extent that such
liabilities, obligations, losses, compensatory damages, payments, costs or
expenses result from the willful misfeasance, bad faith or negligence of the
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Owner Trustee and shall not be liable hereunder to the Indenture Trustee to the
extent that such liabilities, obligations, losses, compensatory damages,
payments, costs or expenses result from the willful misfeasance, bad faith or
negligence of the Indenture Trustee.
SECTION 2.8. Effective Period and Termination. The Servicer's
appointment as custodian shall become effective as of the Cutoff Date and shall
continue in full force and effect until terminated pursuant to this Section 2.8.
If the Servicer shall resign as Servicer under Section 7.5, or if all of the
rights and obligations of the Servicer shall have been terminated under Section
8.1, the appointment of the Servicer as custodian hereunder may be terminated by
the Trust, with the consent of the Indenture Trustee and the Insurer, or by the
Holders of Notes evidencing not less than 25% of the Note Balance or, with the
consent of the Holders of Notes evidencing not less than 25% of the Note
Balance, by the Owner Trustee or by the Holders of Certificates evidencing not
less than 25% of the Certificate Balance, in the same manner as the Indenture
Trustee or such Holders may terminate the rights and obligations of the Servicer
under Section 8.1. As soon as practicable after any termination of such
appointment, the Servicer shall deliver, or cause to be delivered, the Contract
Files and the related accounts and records maintained by the Servicer to the
Indenture Trustee, the Indenture Trustee's agent or the Indenture Trustee's
designee, as the case may be, at such place as the Indenture Trustee may
reasonably designate.
ARTICLE III
ADMINISTRATION AND SERVICING OF CONTRACTS AND
OTHER TRUST PROPERTY
SECTION 3.1. Duties of Servicer. The Servicer shall administer
the Contracts with reasonable care. The Servicer's duties shall include, but not
be limited to, the collection and posting of all payments, responding to
inquiries by Obligors on the Contracts, or by federal, state or local
governmental authorities, investigating delinquencies, reporting tax information
to Obligors, furnishing monthly and annual statements to the Owner Trustee and
the Indenture Trustee with respect to distributions and providing collection and
repossession services in the event of Obligor default. In performing its duties
as Servicer hereunder, the Servicer shall exercise that degree of skill and
attention that the Servicer exercises with respect to all comparable motor
vehicle retail installment sale contracts that it services for itself or others.
Subject to the foregoing and to Section 3.2, the Servicer shall follow its
customary standards, policies, practices and procedures in performing its duties
hereunder as Servicer. Without limiting the generality of the foregoing, the
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Servicer is hereby authorized and empowered to execute and deliver, on behalf of
itself, the Trust, the Owner Trustee, the Indenture Trustee, the
Certificateholders, the Noteholders or any one or more of them, any and all
instruments of satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the Contracts
or the Financed Vehicles, all in accordance with this Agreement; provided,
however, that, notwithstanding the foregoing, the Servicer shall not, except
pursuant to an order from a court of competent jurisdiction, release an Obligor
from payment of any unpaid amount under any Contract or waive the right to
collect the unpaid balance (including accrued interest) of any Contract from the
related Obligor, except in connection with a de minimis deficiency which the
Servicer would not attempt to collect in accordance with its customary
procedures, in which event the Servicer shall indemnify the Trust for such
deficiency. If the Servicer shall commence a legal proceeding to enforce a
Contract, the Owner Trustee shall thereupon be deemed to have automatically
assigned such Contract to the Servicer, which assignment shall be solely for
purposes of collection. If in any enforcement suit or legal proceeding it shall
be held that the Servicer may not enforce a Contract on the ground that it shall
not be a real party in interest or a holder entitled to enforce such Contract,
the Owner Trustee shall, at the Servicer's expense and direction, take steps to
enforce such Contract, including bringing suit in its name or the names of the
Indenture Trustee, the Certificateholders, the Noteholders or any of them. The
Owner Trustee shall execute and deliver to the Servicer any powers of attorney
and other documents as shall be prepared by the Servicer and reasonably
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. The Servicer, at its expense, shall obtain on
behalf of the Trust or the Owner Trustee all licenses, if any, required by the
laws of any jurisdiction to be held by the Trust or the Owner Trustee in
connection with ownership of the Contracts and shall make all filings and pay
all fees as may be required in connection therewith during the term hereof.
SECTION 3.2. Collection and Allocation of Contract Payments.
The Servicer shall make reasonable efforts to collect all payments called for
under the terms and provisions of the Contracts as and when the same shall
become due and otherwise act with respect to the Contracts and the other Trust
Property in such manner as will, in the reasonable judgment of the Servicer,
maximize the amount to be received by the Trust with respect thereto and in
accordance with the standard of care required by Section 3.1. The Servicer shall
allocate collections on or in respect of the Contracts between principal and
interest in accordance with the customary servicing practices and procedures it
follows with respect to all comparable motor vehicle retail installment sale
contracts that it services for itself or others. The Servicer shall not increase
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or decrease the number or amount of any Scheduled Payment, the Amount Financed
under any Contract or the APR of any Contract, or extend, rewrite or otherwise
modify the payment terms of any Contract; provided, however, that the Servicer
may extend the due date for one or more payments due on any Contract for
credit-related reasons that would be acceptable to the Servicer with respect to
comparable motor vehicle retail installment sale contracts that it services for
itself or others and in accordance with its customary standards, policies,
practices and procedures if the cumulative extensions with respect to any
Contract shall not cause the term of such Contract to extend beyond the Final
Scheduled Maturity Date. If the Servicer fails to comply with the provisions of
the preceding sentence, the Servicer shall be required to purchase each Contract
affected thereby for the related Purchase Amount, in the manner specified in
Section 3.7, as of the close of the Collection Period during which such failure
occurs. The Servicer may, in its discretion (but only in accordance with its
customary standards, policies, practices and procedures), waive any late payment
charge or any other fee that may be collected in the ordinary course of
servicing a Contract.
SECTION 3.3. Realization upon Contracts. The Servicer shall
use reasonable efforts on behalf of the Trust, in accordance with the standard
of care required under Section 3.1, to repossess or otherwise convert the
ownership of each Financed Vehicle securing a Defaulted Contract. In taking such
action, the Servicer shall follow such customary practices and procedures as it
shall deem necessary or advisable in its servicing of comparable motor vehicle
retail installment sale contracts and as are otherwise consistent with the
standard of care required under Section 3.1. The Servicer shall be entitled to
recover all reasonable expenses incurred by it in the course of repossessing and
liquidating a Financed Vehicle into cash proceeds, but only out of the cash
proceeds of such Financed Vehicle and any deficiency obtained from the related
Obligor. If a Financed Vehicle shall have suffered damage, the Servicer shall
not expend funds in connection with the repair or the repossession of such
Financed Vehicle unless it shall determine in its discretion that such repair
and/or repossession will increase the Liquidation Proceeds received with respect
to the related Contract.
SECTION 3.4. Physical Damage Insurance. The Servicer shall
follow its customary practices and procedures to determine whether or not each
Obligor shall have maintained physical damage insurance covering the related
Financed Vehicle.
SECTION 3.5. Maintenance of Security Interests in Financed
Vehicles. The Servicer shall take such steps, in accordance with the standard of
care required under Section 3.1, as are necessary to maintain perfection of the
security interest created by each Contract in the related Financed Vehicle. The
Trust hereby authorizes the Servicer, and the Servicer hereby agrees, to take
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such steps as are necessary to re-perfect such security interest on behalf of
the Trust and the Indenture Trustee in the event the Servicer receives notice
of, or otherwise has actual knowledge of, the fact that such security interest
is not perfected as a result of the relocation of a Financed Vehicle or for any
other reason. The Servicer shall not release, in whole or in part, any security
interest in a Financed Vehicle created by the related Contract except as
permitted herein or in accordance with its customary standards, policies,
practices and procedures.
SECTION 3.6. Amendment of Contract Terms. The Servicer shall
not impair in any material respect the rights of the Trust, the Owner Trustee,
the Indenture Trustee, the Certificateholders or the Noteholders in the
Contracts or, except as permitted under Section 3.2, otherwise amend or alter
the terms of the Contracts if, as a result of such amendment or alteration, the
interests of the Trust, the Owner Trustee, the Indenture Trustee, the
Certificateholders or the Noteholders hereunder would be materially adversely
affected.
SECTION 3.7. Purchase by Servicer upon Breach. The Seller, the
Servicer or the Owner Trustee, as the case may be, shall inform the other
parties to this Agreement and the Indenture Trustee promptly, in writing, upon
the discovery of any breach of Section 3.2, 3.5 or 3.6. If such breach shall not
have been cured by the close of business on the last day of the Collection
Period which includes the thirtieth (30th) day after the date on which the
Servicer becomes aware of, or receives written notice from the Seller or the
Owner Trustee of, such breach, and such breach materially and adversely affects
the interest of the Trust in a Contract, the Servicer shall purchase such
Contract from the Trust on the Payment Date following such Collection Period;
provided, however, that, with respect to a breach of Section 3.2, the Servicer
shall purchase the affected Contract from the Trust at the end of the Collection
Period in which such breach occurs. In consideration of the purchase of a
Contract hereunder, the Servicer shall remit the Purchase Amount of such
Contract in the manner specified in Section 4.5. The sole remedy of the Trust,
the Owner Trustee, the Indenture Trustee, the Noteholders and the
Certificateholders with respect to a breach of Section 3.2, 3.5 or 3.6 shall be
to require the Servicer to purchase Contracts pursuant to this Section 3.7.
Neither the Owner Trustee nor the Indenture Trustee shall have any duty to
conduct an affirmative investigation as to the occurrence of any condition
requiring the purchase of any Contract pursuant to this Section 3.7.
SECTION 3.8. Servicing Compensation. The Servicer shall
receive the Monthly Servicing Fee for servicing the Contracts. The Monthly
Servicing Fee for any Collection Period shall equal the product of one-twelfth
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(1/12) of the Servicing Rate and the Pool Balance as of the last day of the
preceding Collection Period. The Servicer shall pay all expenses incurred by it
in connection with its activities hereunder (including fees and expenses of the
Owner Trustee and the Indenture Trustee (and any custodian appointed by the
Owner Trustee and the Indenture Trustee) and independent accountants, taxes
imposed on the Servicer and expenses incurred in connection with distributions
and reports to the Certificateholders and the Noteholders), except expenses
incurred in connection with realizing upon Contracts under Section 3.3.
SECTION 3.9. Servicer's Certificate. On or before the
Determination Date immediately preceding each Payment Date, the Servicer shall
deliver to the Owner Trustee, each Paying Agent, the Insurer, the Indenture
Trustee and the Seller, with a copy to the Rating Agencies, a certificate of a
Servicing Officer substantially in the form of Exhibit A to this Agreement (a
"Servicer's Certificate") and attached to a Servicer's report containing all
information necessary to make the transfers and distributions pursuant to
Sections 4.5, 4.6 and 4.7, together with the written statements to be furnished
by the Owner Trustee to the Certificateholders pursuant to Section 4.9 and by
the Indenture Trustee to the Noteholders pursuant to Section 4.9 and pursuant to
Section 6.6 of the Indenture. The Servicer shall separately identify (by account
number) in a written notice to the Owner Trustee, the Insurer and the Indenture
Trustee the Contracts to be repurchased by the Seller or to be purchased by the
Servicer, as the case may be, on the related Payment Date, and, upon request of
one of the foregoing parties, each Contract which became a Defaulted Contract
during the related Collection Period. The Servicer shall deliver to the Rating
Agencies any information, to the extent it is available to the Servicer, that
the Rating Agencies reasonably request in order to monitor the Trust.
SECTION 3.10. Annual Statement as to Compliance; Notice of
Event of Servicing Termination.
(a) On or before May 31 of each year (commencing with the year
2000), the Servicer shall deliver to the Owner Trustee, the Insurer and the
Indenture Trustee an Officer's Certificate stating, as to the officer signing
such Officer's Certificate, that:
(i) a review of the activities of the Servicer during
the preceding Fiscal Year (or, in the case of the Officer's Certificate
to be delivered in the year 2000, during the period beginning on the
Closing Date and ending on February 29, 2000) and of its performance
under this Agreement has been made under such officer's supervision;
and
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(ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this
Agreement throughout such Fiscal Year (or, in the case of the Officer's
Certificate to be delivered in the year 2000, such period) or, if there
has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and
status thereof.
A copy of such certificate may be obtained by any
Certificateholder by a request in writing to the Owner Trustee, or by any
Noteholder or Person certifying that it is a Note Owner by a request in writing
to the Indenture Trustee, in either case addressed to the applicable Corporate
Trust Office. Upon the telephone request of the Owner Trustee, the Indenture
Trustee shall promptly furnish the Owner Trustee a list of Noteholders as of the
date specified by the Owner Trustee.
(b) The Servicer shall deliver to the Owner Trustee, the
Insurer, the Indenture Trustee and the Rating Agencies, promptly after having
obtained knowledge thereof, but in no event later than five (5) Business Days
thereafter, an Officer's Certificate specifying any event which constitutes or,
with the giving of notice or lapse of time or both, would become an Event of
Servicing Termination.
SECTION 3.11. Annual Independent Certified Public Accountants'
Reports. On or before May 31 of each year (commencing with the year 2000), the
Servicer shall cause a firm of independent certified public accountants (who may
also render other services to the Servicer, the Seller or CarMax) to deliver to
the Owner Trustee and the Indenture Trustee a report addressed to the Board of
Directors of the Servicer with respect to the preceding Fiscal Year (or, in the
case of the report to be delivered in the year 2000, with respect to the period
beginning on the Closing Date and ending on December 31, 1999) to the effect
that (i) such firm has audited the financial statements of the Servicer and
issued its report thereon, (ii) such firm has audited the reports delivered by
the Servicer pursuant to Section 3.9 and the records relating to the servicing
of the Contracts and the distributions on the Notes and the Certificates under
this Agreement, (iii) such audit was made in accordance with generally accepted
auditing standards and (iv) except as described in the report, such audit
disclosed no exceptions or errors in the records relating to motor vehicle loans
serviced for others. Such report shall also indicate that the firm is
independent with respect to the Seller and the Servicer within the meaning of
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the Code of Professional Ethics of the American Institute of Certified Public
Accountants. A copy of such report may be obtained by any Certificateholder by a
request in writing to the Owner Trustee, or by any Noteholder or Person
certifying that it is a Note Owner by a request in writing to the Indenture
Trustee, in either case addressed to the applicable Corporate Trust Office.
SECTION 3.12. Access to Certain Documentation and Information
Regarding Contracts. The Servicer shall provide the Certificateholders, the
Indenture Trustee, the Insurer and the Noteholders with access to the Contract
Files in the cases where the Certificateholders, the Indenture Trustee, the
Insurer or the Noteholders shall be required by applicable statutes or
regulations to have access to such documentation. Such access shall be afforded
without charge, but only upon reasonable request and during normal business
hours at the offices of the Servicer. Nothing in this Section 3.12 shall affect
the obligation of the Servicer to observe any applicable law prohibiting
disclosure of information regarding the Obligors, and the failure of the
Servicer to provide access to information as a result of such obligation shall
not constitute a breach of this Section 3.12. Each Certificateholder or
Noteholder, by its acceptance of a Certificate or Note, as the case may be, and
the Insurer shall be deemed to have agreed to keep any information obtained by
it pursuant to this Section 3.12 confidential, except as may be required by
applicable law.
SECTION 3.13. Reports to the Commission. The Servicer shall,
on behalf of the Trust, cause to be filed with the Commission any periodic
reports required to be filed under the provisions of the Exchange Act, and the
rules and regulations of the Commission thereunder. The Seller shall, at its
expense, cooperate in any reasonable request made by the Servicer in connection
with such filings.
SECTION 3.14. Reports to Rating Agencies. The Servicer shall
deliver to each Rating Agency, at such address as such Rating Agency may
request, a copy of all reports or notices furnished or delivered pursuant to
this Article III and a copy of any amendments, supplements or modifications to
this Agreement and any other information reasonably requested by such Rating
Agency to monitor this transaction.
ARTICLE IV
DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO NOTEHOLDERS
AND CERTIFICATEHOLDERS
SECTION 4.1. Accounts.
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(a) The Servicer shall establish, on or before the Closing
Date, and maintain in the name of the Indenture Trustee at an Eligible
Institution (which shall initially be the Indenture Trustee a segregated trust
account designated as the Collection Account) (the "Collection Account"). The
Collection Account shall be held in trust for the benefit of the Insurer, the
Noteholders and the Certificateholders. The Collection Account shall be under
the sole dominion and control of the Indenture Trustee; provided, however, that
the Servicer may make deposits to and direct the Indenture Trustee in writing to
make withdrawals from the Collection Account in accordance with this Agreement,
the Indenture and the Trust Agreement. All monies deposited from time to time in
the Collection Account pursuant to this Agreement shall be held by the Indenture
Trustee as part of the Trust Property and shall be applied as provided in this
Agreement. All deposits to and withdrawals from the Collection Account shall be
made only upon the terms and conditions of the Transaction Documents.
If the Servicer is required to remit collections on a daily
basis pursuant to the first sentence of Section 4.2, all amounts held in the
Collection Account shall, to the extent permitted by applicable law, rules and
regulations, be invested, as directed in writing by the Servicer, by the bank or
trust company then maintaining the Collection Account in Eligible Investments
that mature not later than the Business Day preceding the Payment Date following
the Collection Period to which such amounts relate. All such Eligible
Investments shall be held to maturity. If the Collection Account is no longer to
be maintained at the Indenture Trustee, the Servicer shall, with the Indenture
Trustee's assistance as necessary, cause the Collection Account to be moved to
an Eligible Institution within ten (10) Business Days (or such longer period not
to exceed thirty (30) calendar days as to which each Rating Agency may consent).
The Servicer shall promptly notify the Indenture Trustee and the Owner Trustee
of any change in the account number or location of the Collection Account.
(b) The Servicer shall establish, on or before the Closing
Date, and maintain in the name of the Indenture Trustee at an Eligible
Institution (which shall initially be the Indenture Trustee) a segregated trust
account designated as the Note Payment Account (the "Note Payment Account"). The
Note Payment Account shall be held in trust for the benefit of the Noteholders.
The Note Payment Account shall be under the sole dominion and control of the
Indenture Trustee; provided, however, that the Servicer may make deposits to and
direct the Indenture Trustee in writing to make withdrawals from the Note
Payment Account in accordance with this Agreement and the Indenture. All monies
deposited from time to time in the Note Payment Account pursuant to this
Agreement and the Indenture shall be held by the Indenture Trustee as part of
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the Trust Property and shall be applied as provided in this Agreement and the
Indenture. The amounts on deposit in the Note Payment Account shall not be
invested. If the Note Payment Account is no longer to be maintained at the
Indenture Trustee, the Servicer shall, with the Indenture Trustee's assistance
as necessary, cause the Note Payment Account to be moved to an Eligible
Institution within ten (10) Business Days (or such longer period not to exceed
thirty (30) calendar days as to which each Rating Agency may consent). The
Servicer shall promptly notify the Indenture Trustee and the Owner Trustee of
any change in the account number or location of the Note Payment Account.
(c) The Servicer shall establish, on or before the Closing
Date, and maintain in the name of the Owner Trustee at an Eligible Institution
(which shall initially be the Owner Trustee) a segregated trust account
designated as the Certificate Payment Account (the "Certificate Payment
Account"). The Certificate Payment Account shall be held in trust for the
benefit of the Certificateholders. The Certificate Payment Account shall be
under the sole dominion and control of the Owner Trustee; provided, however,
that the Servicer may direct the Indenture Trustee in writing to make deposits
to the Certificate Payment Account in accordance with this Agreement and the
Indenture and may direct the Owner Trustee to make withdrawals from the
Certificate Payment Account in accordance with this Agreement and the Trust
Agreement. All monies deposited from time to time in the Certificate Payment
Account pursuant to this Agreement and the Indenture shall be held by the Owner
Trustee as part of the Trust Property and shall be applied as provided in this
Agreement and the Trust Agreement. The amounts on deposit in the Certificate
Payment Account shall not be invested. If the Certificate Payment Account is no
longer to be maintained at the Owner Trustee, the Servicer shall, with the Owner
Trustee's assistance as necessary, cause the Certificate Payment Account to be
moved to an Eligible Institution within ten (10) Business Days (or such longer
period not to exceed thirty (30) calendar days as to which each Rating Agency
may consent). The Servicer shall promptly notify the Indenture Trustee and the
Owner Trustee of any change in the account number or location of the Certificate
Payment Account.
SECTION 4.2. Collections. The Servicer shall remit to the
Collection Account all amounts received by the Servicer on or in respect of the
Contracts (including Liquidation Proceeds but excluding payments with respect to
Purchased Contracts) as soon as practicable and in no event after the close of
business on the second Business day after such receipt; provided, however, that
for so long as (i) CarMax is the Servicer, (ii) no Event of Servicing
Termination shall have occurred and be continuing and (iii) (A) the short-term
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unsecured debt of CarMax shall be rated at least P-1 by Moody's and at least A-1
by Standard & Poor's or (B) the Rating Agency Condition shall have been
satisfied and the written consent of the Insurer shall have been obtained (each,
a "Monthly Remittance Condition"), the Servicer may remit any such amounts
received during any Collection Period to the Collection Account in immediately
available funds on the Business Day preceding the Payment Date following such
Collection Period. The Owner Trustee and the Indenture Trustee shall not be
deemed to have knowledge of any event or circumstance under clause (ii) or (iii)
of the definition of Monthly Remittance Condition that would require daily
remittance by the Servicer to the Collection Account unless the Owner Trustee or
the Indenture Trustee, as applicable, has received notice of such event or
circumstance from the Seller or the Servicer in an Officer's Certificate or
written notice from the Insurer, if no Insurer Default shall have occurred and
be continuing, the Holders of Notes evidencing not less than 25% of the Note
Balance or from the Holders of Certificates evidencing not less than 25% of the
Certificate Balance or a Responsible Officer of the Owner Trustee or the
Indenture Trustee, as applicable, has actual knowledge of such event or
circumstance.
SECTION 4.3. Application of Collections. For purposes of this
Agreement, all amounts received on or in respect of a Contract during any
Collection Period (including Liquidation Proceeds but excluding payments with
respect to Purchased Contracts) shall be applied by the Servicer, as of the last
day of such Collection Period, to interest and principal on such Contract in
accordance with the Simple Interest Method.
SECTION 4.4. [RESERVED].
SECTION 4.5. Additional Deposits. The Seller and the Servicer
shall deposit or cause to be deposited in the Collection Account the aggregate
Purchase Amount with respect to Purchased Contracts pursuant to Section 2.3, 3.7
or 9.1. All such deposits with respect to a Collection Period shall be made in
immediately available funds no later than 5:00 p.m., New York City time, on the
Business Day preceding the Payment Date following such Collection Period.
SECTION 4.6. Determination Date Calculations; Application of
Total Available Funds.
(a) On each Determination Date, the Servicer shall calculate
the following amounts:
(i) the Available Funds for the following Payment Date;
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(ii) the Total Servicing Fee for the preceding Collection
Period;
(iii) the Total Note Interest for each class of Notes for
the following Payment Date;
(iv) the Total Certificate Interest for the following
Payment Date;
(v) the Monthly Note Principal for the following Payment
Date;
(vi) the Monthly Certificate Principal for the following
Payment Date;
(vii) the Insurance Premium for the following Payment Date
plus any overdue Insurance Premiums for previous Payment Dates;
(viii) the aggregate amount of any unreimbursed payments
under the Policy to the extent payable to the Insurer under the Insurance
Agreement plus accrued interest on any unreimbursed payments under the
Policy at the rate provided in the Insurance Agreement plus any other
amounts due the Insurer under the Insurance Agreement and the Policy;
(ix) the sum of the amounts described in clauses (ii)
through (vi) above (the "Required Payment Amount"); and
(x) the sum of the amounts described in clauses (vii) and
(viii) above (the "Insurance Payment Amount").
(b) On each Determination Date, the Servicer shall calculate
the following amounts:
(i) the lesser of (A) the amount, if any, by which
the sum of the Required Payment Amount plus the Insurance Payment
Amount for the following Payment Date exceeds the Available Funds for
such Payment Date and (B) the Reserve Account Amount for such Payment
Date (before giving effect to any deposits to or withdrawals from the
Reserve Account on such Payment Date) (such lesser amount, the "Reserve
Account Draw Amount");
(ii) the amount, if any, by which the Required Payment
Amount for the following Payment Date exceeds the sum of the Available
Funds for such Payment Date plus the Reserve Account Draw Amount for
such Payment Date (such excess, the "Policy Claim Amount");
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(iii) the Reserve Account Amount for the following Payment
Date (after giving effect to the withdrawal of the Reserve Account Draw
Amount for such Payment Date); and
(iv) the amount, if any, by which the Required Reserve
Account Amount for the following Payment Date exceeds the Reserve
Account Amount for such Payment Date (after giving effect to the
withdrawal of the Reserve Account Draw Amount for such Payment Date)
(such excess, the "Reserve Account Deficiency").
On each Payment Date, the Servicer shall instruct the
Indenture Trustee to transfer the Reserve Account Draw Amount, if any, for such
Payment Date from the Reserve Account to the Collection Account.
(c) If the Servicer determines on any Determination Date that
the Available Funds for the following Payment Date and the Reserve Account Draw
Amount for such Payment Date will be insufficient to pay in full the Required
Payment Amount for such Payment Date, the Servicer shall deliver to the
Indenture Trustee, with a copy to the Insurer, the Owner Trustee and the Fiscal
Agent, no later than 2:00 p.m., New York City time, on such Determination Date,
a written notice specifying the Policy Claim Amount for such Payment Date. The
Indenture Trustee shall, no later than 12:00 p.m., New York City time, on the
fourth Business Day prior to such Payment Date, make a claim under the Policy
for such Policy Claim Amount by delivering to the Insurer and the Fiscal Agent,
with a copy to the Servicer, a Notice for Payment (as defined in the Policy) for
such Policy Claim Amount. In making any such claim, the Indenture Trustee shall
comply with all the terms and conditions of the Policy. The Indenture Trustee
shall, upon receipt, deposit such Policy Claim Amount in the Collection Account.
(d) On each Payment Date, the Servicer shall instruct the
Indenture Trustee to apply the Total Available Funds for such Payment Date to
make the following payments and deposits in the following order of priority:
(i) to the Servicer, the Total Servicing Fee for the
preceding Collection Period;
(ii) to the Note Payment Account, the Total Note Interest
for such Payment Date;
(iii) if the Notes have not been declared immediately due
and payable, to the Certificate Payment Account, the Total Certificate
Interest for such Payment Date;
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(iv) to the Note Payment Account, the Monthly Note
Principal for such Payment Date; provided, however, that if the Notes
have been declared immediately due and payable following the occurrence
of an Event of Default (as defined in the Indenture), the amount to be
deposited in the Note Payment Account pursuant to this clause (iv)
shall equal the lesser of the amount of Total Available Funds available
to be applied on such Payment Date pursuant to this clause (iv) and the
outstanding Principal Balance of the Notes;
(v) if the Notes have been declared immediately due and
payable following the occurrence of an Event of Default (as defined in
the Indenture), to the Certificate Payment Account, the Total
Certificate Interest for such Payment Date;
(vi) to the Certificate Payment Account, the Monthly
Certificate Principal for such Payment Date;
(vii) to the Insurer, the Insurance Premium for such
Payment Date plus any overdue Insurance Premiums for previous Payment
Dates;
(viii) to the Insurer, the aggregate amount of any
unreimbursed payments under the Policy to the extent payable to the
Insurer under the Insurance Agreement plus accrued interest on any
unreimbursed payments under the Policy at the rate provided in the
Insurance Agreement plus any other amounts due the Insurer under the
Insurance Agreement and the Policy;
(ix) to the Reserve Account, the Reserve Account
Deficiency, if any, for such Payment Date; and
(x) to the Seller, any remaining amount of Total
Available Funds.
SECTION 4.7. Reserve Account.
(a) The Seller shall establish, on or before the Closing Date,
and maintain in the name of the Indenture Trustee at an Eligible Institution
(which shall initially be the Indenture Trustee) a segregated trust account
designated as the Reserve Account (the "Reserve Account"). The Reserve Account
shall be held in trust for the benefit of the Noteholders, the
Certificateholders and the Insurer. The Reserve Account shall be under the sole
dominion and control of the Indenture Trustee; provided, however, that the
Servicer may make deposits to and direct the Indenture Trustee in writing to
make withdrawals from the Reserve Account in accordance with this Agreement and
the Indenture. On the Closing Date, the Seller shall deposit the Initial Reserve
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Account Deposit into the Reserve Account from the net proceeds of the sale of
the Notes. The Reserve Account and all amounts, securities, investments,
financial assets and other property deposited in or credited to the Reserve
Account (the "Reserve Account Property") has been conveyed by the Seller to the
Trust pursuant to Section 2.1(a). Pursuant to the Indenture, the Trust will
pledge all of its right, title and interest in, to and under the Reserve Account
and the Reserve Account Property to the Insurer and to the Indenture Trustee on
behalf of the Noteholders to secure its obligations under the Notes and the
Indenture.
(b) The Reserve Account Property shall, to the extent
permitted by applicable law, rules and regulations, be invested, as directed in
writing by the Servicer, by the bank or trust company then maintaining the
Reserve Account in Eligible Investments that mature not later than the Business
Day preceding the next Payment Date. All such Eligible Investments shall be held
to maturity. All interest and other income (net of losses and investment
expenses) on funds on deposit in the Reserve Account shall, at the written
direction of the Servicer, be paid to the Seller on any Payment Date to the
extent that funds on deposit therein, as certified by the Servicer, exceed the
Required Reserve Account Amount. If the Reserve Account is no longer to be
maintained at the Indenture Trustee, the Servicer shall, with the Indenture
Trustee's assistance as necessary, cause the Reserve Account to be moved to an
Eligible Institution within ten (10) Business Days (or such longer period not to
exceed thirty (30) calendar days as to which each Rating Agency may consent).
The Servicer shall promptly notify the Insurer, the Indenture Trustee and the
Owner Trustee of any change in the account number or location of the Reserve
Account.
(c) With respect to any Reserve Account Property:
(i) any Reserve Account Property that is a "financial
asset" as defined in Section 8-102(a)(9) of the UCC shall be physically
delivered to, or credited to an account in the name of, the Eligible
Institution maintaining the Reserve Account, in accordance with such
institution's customary procedures such that such institution
establishes a "securities entitlement" in favor of the Indenture
Trustee with respect thereto;
(ii) any Reserve Account Property that is held in deposit
accounts shall be held solely in the name of the Indenture Trustee at
one or more depository institutions having the Required Rating and each
such deposit account shall be subject to the exclusive custody and
control of the Indenture Trustee and the Indenture Trustee shall have
sole signature authority with respect thereto; and
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(iii) except for any deposit accounts specified in clause
(ii) above, the Reserve Account shall only be invested in securities or
in other assets which the Eligible Institution maintaining the Reserve
Account agrees to treat as "financial assets" as defined in Section
8-102(a)(9) of the UCC.
(d) If the Reserve Account Amount for any Payment Date (after
giving effect to the withdrawal of the Reserve Account Draw Amount for such
Payment Date) exceeds the Required Reserve Account Amount for such Payment Date,
the Servicer shall instruct the Indenture Trustee in writing to distribute the
amount of such excess to the Seller. The Indenture Trustee and the Owner Trustee
hereby release, on each Payment Date, their security interest in, to and under
Reserve Account Property distributed to the Seller.
(e) If the Note Balance and the Certificate Balance, and all
other amounts owing or to be distributed hereunder or under the Indenture or the
Trust Agreement to the Noteholders, the Certificateholders or the Insurer, have
been paid in full and the Trust has been terminated, any remaining Reserve
Account Property shall be distributed to the Seller.
SECTION 4.8. Net Deposits. As an administrative convenience,
unless the Servicer is required to remit collections on a daily basis pursuant
to the first sentence of Section 4.2, the Seller and the Servicer may make any
remittance pursuant to this Article IV with respect to a Collection Period net
of distributions to be made to the Seller or the Servicer with respect to such
Collection Period; provided, however, that such obligations shall remain
separate obligations, no party shall have a right of offset and each such party
shall account for all of the above described remittances and distributions as if
the amounts were deposited and/or transferred separately.
SECTION 4.9. Statements to Noteholders and Certificateholders.
On or prior to each Payment Date, the Servicer shall provide to the Indenture
Trustee (with copies to the Rating Agencies and each Paying Agent), for the
Indenture Trustee to forward to each Noteholder of record as of the most recent
Record Date and to the Owner Trustee (with copies to the Rating Agencies, the
Insurer and each Paying Agent) for the Owner Trustee to forward to each
Certificateholder of record as of the most recent Record Date, a statement in
substantially the form of Exhibit B to this Agreement or Exhibit C to this
Agreement, as applicable. Each such statement shall set forth at least the
following information as to the Notes and the Certificates (to the extent
applicable) with respect to the distribution to be made on such Payment Date:
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(i) the amount of such distribution allocable to
principal for each class of Notes and for the Certificates;
(ii) the amount of such distribution allocable to interest
for each class of Notes and for the Certificates;
(iii) the Total Servicing Fee for the preceding Collection
Period;
(iv) the aggregate outstanding principal balance of each
class of Notes, the Note Pool Factor with respect to each class of
Notes, the Certificate Balance and the Certificate Pool Factor, in each
case as of the close of business on the last day of the preceding
Collection Period (after giving effect to payments allocated to
principal reported under clause (i) above);
(v) the Pool Balance as of the close of business on the
last day of the preceding Collection Period;
(vi) the Reserve Account Amount on such Payment Date
(after giving effect to all deposits to or withdrawals from the Reserve
Account on such Payment Date);
(vii) the aggregate Purchase Amount of Contracts
repurchased by the Seller or purchased by the Servicer, if any, with
respect to the preceding Collection Period;
(viii) 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 the preceding Collection Period; and
(ix) the Net Losses with respect to the preceding
Collection Period.
SECTION 4.10. Control of Securities Accounts. Notwithstanding
anything else contained herein, the Trust agrees that each of the Collection
Account, the Note Payment Account and the Reserve Account will only be
established at an Eligible Institution that agrees substantially as follows: (i)
it will comply with "entitlement orders" (as defined in Section 8-102(a)(8) of
the UCC) relating to such accounts issued by the Indenture Trustee without
further consent by the Trust; (ii) until the termination of the Indenture, it
will not enter into any other agreement relating to any such account pursuant to
which it agrees to comply with entitlement orders of any Person other than the
Indenture Trustee; and (iii) all assets delivered or credited to it in
connection with such accounts and all investments thereof will be promptly
credited to such accounts.
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SECTION 4.11. Policy Matters.
(a) The Indenture Trustee hereby agrees on behalf of the
Noteholders (and each Noteholder, by its acceptance of its Notes, hereby agrees)
for the benefit of the Insurer that the Indenture Trustee shall recognize that
to the extent the Insurer makes a payment under the Policy, either directly or
indirectly (as by paying through the Indenture Trustee), to the Noteholders, the
Insurer will be entitled to be subrogated to the rights of the Noteholders to
the extent of such payment made under the Policy. Any rights of subrogation
acquired by the Insurer as a result of any payment made under the Policy shall,
in all respects, be subordinate and junior in right of payment to the prior
indefeasible payment in full of all amounts due the Indenture Trustee on account
of payments due under the Notes.
(b) The Owner Trustee hereby agrees on behalf of the
Certificateholders (and each Certificateholder, by its acceptance of its
Certificates, hereby agrees) for the benefit of the Insurer that the Indenture
Trustee shall recognize that to the extent the Insurer makes a payment under the
Policy, either directly or indirectly (as by paying through the Indenture
Trustee), to the Certificateholders, the Insurer will be entitled to be
subrogated to the rights of the Certificateholders to the extent of such payment
made under the Policy. Any rights of subrogation acquired by the Insurer as a
result of any payment made under the Policy shall, in all respects, be
subordinate and junior in right of payment to the prior indefeasible payment in
full of all amounts due the Indenture Trustee on account of payments due under
the Certificates.
(c) The Indenture Trustee, for itself and on behalf of the
Noteholders, hereby agrees that the Insurer may at any time during the
continuation of any proceeding relating to a Final Order direct all matters
relating to such Final Order, including, without limitation, the direction of
any appeal of any order relating to such Final Order and the posting of any
surety, supersedeas or performance bond pending any such appeal. In addition and
without limitation of the foregoing, the Insurer shall be subrogated, to the
extent of any payments made under the Policy, to the rights of CarMax, the
Servicer, the Seller, the Trust, the Indenture Trustee and the Noteholders in
the conduct of any preference claim, including, without limitation, all rights
of any party to any adversarial proceeding or action with respect to any court
order issued in connection with any such preference claim.
(d) The Owner Trustee, for itself and on behalf of the
Certificateholders, hereby agrees that the Insurer may at any time during the
continuation of any proceeding relating to a Final Order direct all matters
relating to such Final Order, including, without limitation, the direction of
any appeal of any order relating to such Final Order and the posting of any
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surety, supersedeas or performance bond pending any such appeal. In addition and
without limitation of the foregoing, the Insurer shall be subrogated, to the
extent of any payments made under the Policy, to the rights of CarMax, the
Servicer, the Seller, the Trust, the Owner Trustee and the Certificateholders in
the conduct of any preference claim, including, without limitation, all rights
of any party to any adversarial proceeding or action with respect to any court
order issued in connection with any such preference claim.
ARTICLE V
[RESERVED]
ARTICLE VI
THE SELLER
SECTION 6.1. Representations and Warranties of Seller. The
Seller makes the following representations and warranties on which the Trust
shall be deemed to have relied in accepting the Trust Property. The
representations and warranties speak as of the execution and delivery of this
Agreement and shall survive the sale, transfer, assignment and conveyance of the
Trust Property to the Trust pursuant to this Agreement and the pledge of the
Trust Property to the Indenture Trustee pursuant to the Indenture:
(a) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a limited liability company in good
standing under the laws of the Commonwealth of Virginia, has the power,
authority and legal right to own its properties and to conduct its business as
such properties are currently owned and such business is currently conducted,
and has the power, authority and legal right to acquire, own and sell the
Contracts.
(b) Due Qualification. The Seller is duly qualified to do
business as a foreign limited liability company in good standing and has
obtained all necessary licenses and approvals in each jurisdiction in which the
failure to so qualify or to obtain such licenses and approvals would, in the
reasonable judgment of the Seller, materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, the Trust Agreement, any of
the other Transaction Documents, the Contracts, the Notes or the Certificates.
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(c) Power and Authority. The Seller has the power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Transaction Documents to which it is a party. The Seller has the
power and authority to sell, assign, transfer and convey the property to be
transferred to and deposited with the Trust and has duly authorized such
transfer and deposit by all necessary limited liability company action, and the
execution, delivery and performance of this Agreement and the other Transaction
Documents to which the Seller is a party have been duly authorized by the Seller
by all necessary limited liability company action.
(d) Valid Transfer; Binding Obligation. This Agreement effects
a valid sale, transfer, assignment and conveyance to the Trust of the Contracts
and the other Trust Property enforceable against creditors of and purchasers
from the Seller. This Agreement and the other Transaction Documents to which the
Seller is a party constitute legal, valid and binding obligations of the Seller,
enforceable against the Seller in accordance with their terms, subject, as to
enforceability, to applicable bankruptcy, insolvency, reorganization,
conservatorship, receivership, liquidation and other similar laws and to general
equitable principles.
(e) No Violation. The execution, delivery and performance by
the Seller of this Agreement and the other Transaction Documents to which the
Seller is a party, the consummation of the transactions contemplated hereby and
thereby and the fulfillment of the terms hereof and thereof will not conflict
with, result in a breach of any of the material terms and provisions of or
constitute (with or without notice or lapse of time or both) a default under the
articles of organization or operating agreement of the Seller or any material
indenture, agreement, mortgage, deed of trust or other instrument to which the
Seller is a party or by which the Seller is bound or to which any of its
properties are subject, or result in the creation or imposition of any lien upon
any of its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument (other than pursuant to this
Agreement), or violate any law, order, rule or regulation applicable to the
Seller or its properties of any federal or state regulatory body, court,
administrative agency or other governmental instrumentality having jurisdiction
over the Seller or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of the Seller, threatened, against the Seller
before any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Seller or its
properties (i) asserting the invalidity of this Agreement, the Indenture, the
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Trust Agreement, any of the other Transaction Documents, the Notes or the
Certificates, (ii) seeking to prevent the issuance of the Notes or the
Certificates or the consummation of any of the transactions contemplated by this
Agreement, the Indenture, the Trust Agreement or any of the other Transaction
Documents, (iii) seeking any determination or ruling that, in the reasonable
judgment of the Seller, would materially and adversely affect the performance by
the Seller of its obligations under, or the validity or enforceability of, this
Agreement, the Indenture, the Trust Agreement, any of the other Transaction
Documents, the Contracts, the Notes or the Certificates, or (iv) that, in the
reasonable judgment of the Seller, would adversely affect the federal or
Applicable Tax State income, excise, franchise or similar tax attributes of the
Notes or the Certificates.
SECTION 6.2. Liability of Seller; Indemnities.
(a) The Seller shall be liable in accordance herewith only to
the extent of the obligations specifically undertaken by the Seller under this
Agreement.
(b) The Seller shall indemnify, defend and hold harmless the
Trust, the Owner Trustee and the Indenture Trustee from and against any taxes
that may at any time be asserted against any such Person with respect to, and as
of the date of, the transfer of the Contracts to the Trust or the issuance and
original sale of the Notes or the Certificates, including any sales, gross
receipts, general corporation, tangible personal property, privilege or license
taxes (but, in the case of the Trust, not including any taxes asserted with
respect to ownership of the Contracts or federal or other Applicable Tax State
income taxes arising out of the transactions contemplated by this Agreement and
the other Transaction Documents), and all costs and expenses in defending
against such taxes.
(c) The Seller shall indemnify, defend and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Noteholders and the
Certificateholders from and against any loss, liability or expense incurred by
reason of (i) the Seller's willful misfeasance, bad faith or gross negligence in
the performance of its duties under this Agreement or any other Transaction
Document to which it is a party or by reason of a reckless disregard of its
obligations and duties under this Agreement or any other Transaction Document to
which it is a party and (ii) the Seller's violation of federal or state
securities laws in connection with the registration or the sale of the Notes or
the Certificates.
(d) The Seller shall indemnify, defend and hold harmless the
Owner Trustee and the Indenture Trustee and their respective officers,
directors, employees and agents from and against all costs, expenses, losses,
claims, damages and liabilities arising out of or incurred in connection with
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the acceptance or performance of the trusts and duties contained herein and in
the Trust Agreement, in the case of the Owner Trustee, and in the Indenture, in
the case of the Indenture Trustee, except to the extent that such cost, expense,
loss, claim, damage or liability (i) shall be due to the willful misfeasance,
bad faith or gross negligence (except for errors in judgment) of the Owner
Trustee or the Indenture Trustee, as applicable, (ii) in the case of the Owner
Trustee, shall arise from the breach by the Owner Trustee of any of its
representations or warranties set forth in the Trust Agreement, (iii) in the
case of the Indenture Trustee, shall arise from the breach by the Indenture
Trustee of any of its representations and warranties set forth in the Indenture
or (iv) relates to any tax other than the taxes with respect to which either the
Seller or the Servicer shall be required to indemnify the Owner Trustee or the
Indenture Trustee, as applicable.
(e) The Seller shall pay any and all taxes levied or assessed
upon all or any part of the Owner Trust Estate.
Indemnification under this Section 6.2 shall survive the
resignation or removal of the Owner Trustee or the Indenture Trustee and the
termination of this Agreement and shall include reasonable fees and expenses of
counsel and expenses of litigation. If the Seller shall have made any indemnity
payments pursuant to this Section 6.2 and the Person to or on behalf of whom
such payments are made thereafter shall collect any of such amounts from others,
such Person shall promptly repay such amounts to the Seller, without interest.
SECTION 6.3. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. Any Person (i) into which the Seller shall be merged or
consolidated, (ii) resulting from any merger, conversion or consolidation to
which the Seller shall be a party or (iii) that shall succeed by purchase and
assumption to all or substantially all of the business of the Seller, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Seller under this Agreement, shall be the
successor to the Seller under this Agreement without the execution or filing of
any other document or any further act on the part of any of the parties to this
Agreement; provided, however, that (x) the Seller shall have delivered to the
Owner Trustee and the Indenture Trustee an Officer's Certificate and an Opinion
of Counsel each stating that such merger, conversion, consolidation or
succession and such agreement of assumption comply with this Section 6.3 and (y)
the Seller shall have delivered to the Owner Trustee and the Indenture Trustee
an Opinion of Counsel either (A) stating that, in the opinion of such counsel,
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all financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary to fully preserve and protect the
interest of the Trust and the Indenture Trustee, respectively, in the Contracts
and the other Trust Property, and reciting the details of such filings, or (B)
stating that, in the opinion of such counsel, no such action shall be necessary
to fully preserve and protect such interest. The Seller shall provide notice of
any merger, conversion, consolidation or succession pursuant to this Section 6.3
to the Rating Agencies. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance with clauses
(x) and (y) above shall be conditions to the consummation of the transactions
referred to in clauses (i), (ii) and (iii) above.
SECTION 6.4. Limitation on Liability of Seller and Others.
(a) Neither the Seller nor any of the directors, officer,
employees or agents of the Seller shall be under any liability to the Trust, the
Noteholders or the Certificateholders for any action taken or for refraining
from the taking of any action pursuant to this Agreement or for errors in
judgment; provided, however, that this provision shall not protect the Seller or
any such Person against any liability that would otherwise be imposed by reason
of willful misfeasance or bad faith in the performance of duties or by reason of
reckless disregard of obligations and duties under this Agreement, or by reason
of negligence in the performance of duties under this Agreement (except for
errors in judgment). The Seller, and its directors, officers, employees and
agents, may rely in good faith on the advice of counsel or on any document of
any kind prima facie properly executed and submitted by any Person in respect of
any matters arising under this Agreement.
(b) The Seller shall not be under any obligation to appear in,
prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement and that in its opinion may involve it in any
expense or liability.
SECTION 6.5. Seller May Own Notes or Certificates. The Seller,
and any Affiliate of the Seller, may, in its individual or any other capacity,
become the owner or pledgee of Notes or Certificates with the same rights as it
would have if it were not the Seller or an Affiliate of the Seller, except as
otherwise expressly provided herein (including in the definitions of "Note
Balance" and "Certificate Balance") or in the other Transaction Documents.
Except as otherwise expressly provided herein (including the definition of
"Certificate Balance" and "Note Balance") or in the other Transaction Documents,
Notes and Certificates so owned by or pledged to the Seller or such Affiliate
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shall have an equal and proportionate benefit under the provisions of this
Agreement and the other Transaction Documents, without preference, priority or
distinction as among the Notes and the Certificates.
ARTICLE VII
THE SERVICER
SECTION 7.1. Representations and Warranties of Servicer. The
Servicer makes the following representations and warranties on which the Trust
shall be deemed to have relied in accepting the Trust Property. The
representations and warranties speak as of the execution and delivery of this
Agreement and shall survive the sale, transfer, assignment and conveyance of the
Trust Property to the Trust pursuant to this Agreement and the pledge of the
Trust Property to the Indenture Trustee pursuant to the Indenture:
(a) Organization and Good Standing. The Servicer has been duly
organized and is validly existing as a corporation in good standing under the
laws of the state of its incorporation, has the power, authority and legal right
to own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted and has the power,
authority and legal right to acquire, own, sell and service the Contracts and to
hold the Contract Files as custodian on behalf of the Trust.
(b) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals in each jurisdiction in which the failure to so
qualify or to obtain such licenses and approvals would, in the reasonable
judgment of the Seller, materially and adversely affect the performance by the
Seller of its obligations under, or the validity or enforceability of, this
Agreement, the Indenture, the Trust Agreement, any of the other Transaction
Documents, the Contracts, the Notes or the Certificates.
(c) Power and Authority. The Servicer has the power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Transaction Documents to which it is a party, and the execution,
delivery and performance of this Agreement and the other Transaction Documents
to which the Servicer is a party have been duly authorized by the Servicer by
all necessary corporate action.
(d) Binding Obligation. This Agreement and the other
Transaction Documents to which the Servicer is a party constitute legal, valid
and binding obligations of the Servicer, enforceable against the Servicer in
accordance with their terms, subject, as to enforceability, to applicable
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bankruptcy, insolvency, reorganization, conservatorship, receivership,
liquidation and other similar laws and to general equitable principles.
(e) No Violation. The execution, delivery and performance by
the Servicer of this Agreement and the other Transaction Documents to which the
Servicer is a party, the consummation of the transactions contemplated hereby
and thereby and the fulfillment of the terms hereof and thereof will not
conflict with, result in a breach of any of the material terms and provisions of
or constitute (with or without notice or lapse of time or both) a default under
the articles of incorporation or bylaws of the Servicer or any material
indenture, agreement, mortgage, deed of trust or other instrument to which the
Servicer is a party or by which the Servicer is bound or to which any of its
properties are subject, or result in the creation or imposition of any lien upon
any of its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, or violate any law, order, rule or
regulation applicable to the Servicer or its properties of any federal or state
regulatory body, court, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of the Servicer, threatened, against the Servicer
before any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Servicer or its
properties (i) asserting the invalidity of this Agreement, (ii) seeking to
prevent the consummation of any of the transactions contemplated by this
Agreement or (iii) seeking any determination or ruling that, in the reasonable
judgment of the Servicer would materially and adversely affect the performance
by the Servicer of its obligations under, or the validity or enforceability of,
this Agreement or the Contracts.
SECTION 7.2. Liability of Servicer; Indemnities.
(a) The Servicer shall be liable in accordance herewith only
to the extent of the obligations specifically undertaken by the Servicer under
this Agreement.
(b) The Servicer shall indemnify, defend and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders and the Seller from and against all costs, expenses, losses,
claims, damages and liabilities arising out of or incurred in connection with
the use, ownership or operation by the Servicer or any Affiliate of the Servicer
of a Financed Vehicle.
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(c) The Servicer shall indemnify, defend and hold harmless the
Trust, the Owner Trustee and the Indenture Trustee from and against any taxes
that may at any time be asserted against any such Person with respect to the
transactions contemplated in this Agreement or the other Transaction Documents,
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Trust, not
including any taxes asserted with respect to, and as of the date of, the
transfer of the Contracts to the Trust or the issuance and original sale of the
Notes or the Certificates or asserted with respect to ownership of the Contracts
or federal or other Applicable Tax State income taxes arising out of the
transactions contemplated by this Agreement and the other Transaction
Documents), and all costs and expenses in defending against such taxes.
(d) The Servicer shall indemnify, defend and hold harmless the
Trust, the Owner Trustee, the Indenture Trustee, the Noteholders, the
Certificateholders and the Seller from and against any loss, liability or
expense incurred by reason of (i) the Servicer's willful misfeasance, bad faith
or gross negligence in the performance of its duties under this Agreement or any
other Transaction Document to which it is a party or by reason of a reckless
disregard of its obligations and duties under this Agreement or any other
Transaction Document to which it is a party.
(e) The Servicer shall indemnify, defend and hold harmless the
Owner Trustee and the Indenture Trustee and their respective officers,
directors, employees and agents from and against all costs, expenses, losses,
claims, damages and liabilities arising out of or incurred in connection with
the acceptance or performance of the trusts and duties contained herein and in
the Trust Agreement, in the case of the Owner Trustee, and in the Indenture, in
the case of the Indenture Trustee, except to the extent that such cost, expense,
loss, claim, damage or liability (i) shall be due to the willful misfeasance,
bad faith or gross negligence (except for errors in judgment) of the Owner
Trustee or the Indenture Trustee, as applicable, (ii) in the case of the Owner
Trustee, shall arise from the breach by the Owner Trustee of any of its
representations or warranties set forth in the Trust Agreement, (iii) in the
case of the Indenture Trustee, shall arise from the breach by the Indenture
Trustee of any of its representations and warranties set forth in the Indenture
or (iv) relates to any tax other than the taxes with respect to which either the
Seller or the Servicer shall be required to indemnify the Owner Trustee or the
Indenture Trustee, as applicable.
(f) For purposes of this Section 7.2, in the event of a
termination of the rights and obligations of CarMax (or any successor Servicer)
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as Servicer pursuant to Section 8.1 or a resignation by CarMax (or any successor
Servicer) as Servicer pursuant to Section 7.5, CarMax (or any successor
Servicer) shall be deemed to be the Servicer pending appointment of a successor
Servicer (other than the Indenture Trustee) pursuant to Section 8.2.
Indemnification under this Section 7.2 by CarMax (or any successor Servicer) as
Servicer, with respect to the period such Person was (or was deemed to be) the
Servicer, shall survive the termination of such Person as Servicer or a
resignation by such Person as Servicer as well as the resignation or removal of
the Owner Trustee or the Indenture Trustee and the termination of this Agreement
and shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer shall have made any indemnity payments pursuant to
this Section 7.2 and the Person to or on behalf of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to the Servicer, without interest.
SECTION 7.3. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Any Person (i) into which the Servicer shall be merged
or consolidated, (ii) resulting from any merger, conversion or consolidation to
which the Servicer shall be a party or (iii) that shall succeed by purchase and
assumption to all or substantially all of the business of the Servicer, which
Person in any of the foregoing cases is an Eligible Servicer and executes an
agreement of assumption to perform every obligation of the Servicer under this
Agreement, shall be the successor to the Servicer under this Agreement without
the execution or filing of any other document or any further act on the part of
any of the parties to this Agreement; provided, however, that (x) the Servicer
shall have delivered to the Owner Trustee and the Indenture Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such merger, conversion,
consolidation or succession and such agreement of assumption comply with this
Section 7.3 and (y) the Servicer shall have delivered to the Owner Trustee and
the Indenture Trustee an Opinion of Counsel either (A) stating that, in the
opinion of such counsel, all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary to fully
preserve and protect the interest of the Trust and the Indenture Trustee,
respectively, in the Contracts and the other Trust Property, and reciting the
details of such filings, or (B) stating that, in the opinion of such counsel, no
such action shall be necessary to fully preserve and protect such interest. The
Servicer shall provide notice of any merger, conversion, consolidation or
succession pursuant to this Section 7.3 to the Rating Agencies. Notwithstanding
anything herein to the contrary, the execution of the foregoing agreement of
assumption and compliance with clauses (x) and (y) above shall be conditions to
the consummation of the transactions referred to in clauses (i), (ii) and (iii)
above.
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SECTION 7.4. Limitation on Liability of Servicer and Others.
(a) Neither the Servicer nor any of the directors, officers,
employees or agents of the Servicer shall be under any liability to the Trust,
the Noteholders or the Certificateholders for any action taken or for refraining
from the taking of any action pursuant to this Agreement or for errors in
judgment; provided, however, that this provision shall not protect the Servicer
or any such Person against any liability that would otherwise be imposed by
reason of willful misfeasance or bad faith in the performance of duties or by
reason of reckless disregard of obligations and duties under this Agreement, or
by reason of negligence in the performance of duties under this Agreement
(except for errors in judgment). The Servicer, and its directors, officers,
employees and agents, may rely in good faith on the advice of counsel or on any
document of any kind prima facie properly executed and submitted by any Person
in respect of any matters arising under this Agreement.
(b) The Servicer shall not be under any obligation to appear
in, prosecute or defend any legal action that shall not be incidental to its
duties to service the Contracts in accordance with this Agreement and that in
its opinion may involve it in any expense or liability; provided, however, that
the Servicer may undertake any reasonable action that it may deem necessary or
desirable in respect of this Agreement and the rights and duties of the parties
to this Agreement and the interests of the Noteholders and the
Certificateholders under this Agreement. In such event, the legal expenses and
costs of such action and any liability resulting therefrom shall be expenses,
costs and liabilities of the Servicer.
SECTION 7.5. Servicer Not to Resign. Subject to the provisions
of Section 7.3, the Servicer shall not resign from its obligations and duties
under this Agreement except upon a determination that the performance of its
duties is no longer permissible under applicable law. Any such determination
permitting the resignation of the Servicer shall be evidenced by an Opinion of
Counsel to such effect delivered to the Owner Trustee and the Indenture Trustee.
No such resignation shall become effective until the Indenture Trustee or a
successor Servicer shall have (i) assumed the obligations and duties of the
Servicer in accordance with Section 8.2 and (ii) become the Administrator under
the Administration Agreement pursuant to Section 8 thereof.
SECTION 7.6. Servicer May Own Notes or Certificates. The
Servicer, and any Affiliate of the Servicer, may, in its individual or any other
capacity, become the owner or pledgee of Notes or Certificates with the same
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rights as it would have if it were not the Servicer or an Affiliate of the
Servicer, except as otherwise expressly provided herein (including in the
definitions of "Note Balance" and "Certificate Balance") or in the other
Transaction Documents. Except as otherwise expressly provided herein (including
in the definitions of "Note Balance" and "Certificate Balance") or in the other
Transaction Documents, Notes and Certificates so owned by or pledged to the
Servicer or such Affiliate shall have an equal and proportionate benefit under
the provisions of this Agreement and the other Transaction Documents, without
preference, priority or distinction as among the Notes and the Certificates.
ARTICLE VIII
SERVICING TERMINATION
SECTION 8.1. Events of Servicing Termination.
(a) The occurrence of any one of the following events shall
constitute an event of servicing termination hereunder (each, an "Event of
Servicing Termination"):
(i) any failure by the Servicer to deliver to the Owner
Trustee or the Indenture Trustee the Servicer's Certificate for any
Collection Period, which failure shall continue unremedied beyond the
earlier of three (3) Business Days following the date such Servicer's
Certificate was required to be delivered and the related Payment Date,
or any failure by the Servicer to make any required payment or deposit
under this Agreement, which failure shall continue unremedied beyond
the earlier of five (5) Business Days following the date such payment
or deposit was due and, in the case of a payment or deposit to be made
no later than a Payment Date, such Payment Date; or
(ii) any failure by the Servicer duly to observe or
perform in any material respect any other covenant or agreement in this
Agreement, which failure shall materially and adversely affect the
rights of the Noteholders or the Certificateholders and shall continue
unremedied for a period of sixty (60) days after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Servicer by the Owner Trustee, the
Indenture Trustee or the Insurer or to the Owner Trustee, the Indenture
Trustee, the Seller and the Servicer by the Holders of Notes evidencing
not less than 25% of the Note Balance or, if the Notes have been paid
in full, by the Holders of Certificates evidencing not less than 25% of
the Certificate Balance; or
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(iii) any representation or warranty of the Servicer made
in this Agreement or in any certificate delivered pursuant hereto or in
connection herewith, other than any representation and warranty
relating to a Contract that has been purchased by the Servicer, proving
to have been incorrect in any material respect as of the time when the
same shall have been made, and the circumstance or condition in respect
of which such representation or warranty was incorrect shall not have
been eliminated or otherwise cured for a period of thirty (30) days
after the date on which written notice of such circumstance or
condition, requiring the same to be eliminated or cured, 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
Note Balance or, if the Notes have been paid in full, by the Holders of
Certificates evidencing not less than 25% of the Certificate Balance;
or
(iv) the entry of a decree or order by a court or agency
or supervisory authority of competent jurisdiction for the appointment
of a conservator, receiver, liquidator or trustee for the Seller or the
Servicer in any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceeding, or for the
winding up or liquidation of its affairs, which decree or order
continues unstayed and in effect for a period of sixty (60) consecutive
days; or
(v) the consent by the Seller or the Servicer to the
appointment of a conservator, receiver, liquidator or trustee in any
bankruptcy, insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceeding of or relating to the Seller or the
Servicer or relating to substantially all of its property, the
admission in writing by the Seller or the Servicer of its inability to
pay its debts generally as they become due, the filing by the Seller or
the Servicer of a petition to take advantage of any applicable
bankruptcy, insolvency or reorganization statute, the making by the
Seller or the Servicer of an assignment for the benefit of its
creditors or the voluntary suspension by the Seller or the Servicer of
payment of its obligations; or
(vi) the failure by the Servicer to be an Eligible
Servicer.
If an Event of Servicing Termination shall have occurred,
then, and in each and every case and for so long as such Event of Servicing
Termination shall not have been remedied, the Indenture Trustee or the Owner
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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 Note Balance or, if the Notes have been paid in full, the Owner
Trustee or the Holders of Certificates evidencing not less than 51% of the
Certificate Balance, by notice then given in writing to the Servicer (with a
copy to the Indenture Trustee and the Owner Trustee if given by the Noteholders
or the Certificateholders), may terminate all of the rights and obligations of
the Servicer under this Agreement. On or after the receipt by the Servicer of
such written notice, all authority and power of the Servicer under this
Agreement, whether with respect to the Notes, the Certificates, the Trust
Property or otherwise, shall pass to and be vested in the Indenture Trustee or a
successor Servicer appointed under Section 8.2 and, without limitation, the
Indenture Trustee and the Owner Trustee shall be authorized and empowered to
execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer and endorsement of the
Contract Files, the certificates of title to the Financed Vehicles or otherwise.
The Servicer shall cooperate with the Indenture Trustee, the Owner Trustee and
such successor Servicer in effecting the termination of its responsibilities and
rights as Servicer under this Agreement, including the transfer to the Indenture
Trustee or such successor Servicer for administration of all cash amounts that
are at the time held by the Servicer for deposit or thereafter shall be received
with respect to a Contract, all Contract Files and all information or documents
that the Indenture Trustee or such successor Servicer may require. In addition,
the Servicer shall transfer its electronic records relating to the Contracts to
the successor Servicer in such electronic form as the successor Servicer may
reasonably request. All reasonable costs and expenses incurred by the successor
Servicer, including allowable compensation of employees and overhead costs, in
connection with the transfer of servicing shall be paid by the outgoing Servicer
(or by the initial Servicer if the outgoing Servicer is the Indenture Trustee
acting on an interim basis) upon presentation of reasonable documentation of
such costs and expenses.
(b) The Indenture Trustee and the Owner Trustee shall have no
obligation to notify the Noteholders, the Certificateholders or any other Person
of the occurrence of any event specified in Section 8.1(a) prior to the
continuance of such event through the end of any cure period specified in
Section 8.1(a).
SECTION 8.2. Indenture Trustee to Act; Appointment of
Successor Servicer. Upon the resignation of the Servicer pursuant to Section 7.5
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or the termination of the Servicer pursuant to Section 8.1, the Indenture
Trustee shall be the successor in all respects to the Servicer in its capacity
as Servicer under this Agreement and shall be subject to all the obligations and
duties placed on the Servicer by the terms and provisions of this Agreement. As
compensation therefor, the Indenture Trustee shall be entitled to such
compensation (whether payable out of the Collection Account or otherwise) as the
Servicer would have been entitled to under this Agreement if no such resignation
or termination had occurred, except that all collections on or in respect of the
Contracts shall be deposited in the Collection Account within two (2) Business
Days of receipt and shall not be retained by the Servicer. Notwithstanding the
above, the Indenture Trustee may, if it shall be unwilling so to act, or shall,
if it is legally unable so to act, appoint, or petition a court of competent
jurisdiction to appoint, an Eligible Servicer as the successor to the terminated
Servicer under this Agreement, subject to the approval of the Insurer, unless an
Insurer Default shall have occurred and be continuing. In connection with such
appointment, the Indenture Trustee may make such arrangements for the
compensation of such successor Servicer out of collections on or in respect of
the Contracts as it and such successor shall agree, which, in no event, shall be
greater than that payable to CarMax as Servicer hereunder. The Indenture Trustee
and such successor shall take such action, consistent with this Agreement, as
shall be necessary to effectuate any such succession. The Indenture Trustee
shall not be relieved of its duties as successor Servicer under this Section 8.2
until a newly appointed Servicer shall have assumed the obligations and duties
of the terminated Servicer under this Agreement.
SECTION 8.3. Effect of Servicing Transfer.
(a) After a transfer of servicing hereunder, the Indenture
Trustee or successor Servicer shall notify the Obligors to make directly to the
successor Servicer payments that are due under the Contracts after the effective
date of such transfer.
(b) Except as provided in Section 8.2, after a transfer of
servicing hereunder, the outgoing Servicer shall have no further obligations
with respect to the administration, servicing, custody or collection of the
Contracts and the successor Servicer shall have all of such obligations, except
that the outgoing Servicer will transmit or cause to be transmitted directly to
the successor Servicer for its own account, promptly on receipt and in the same
form in which received, any amounts or items held by the outgoing Servicer
(properly endorsed where required for the successor Servicer to collect any such
items) received as payments upon or otherwise in connection with the Contracts.
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(c) Any successor Servicer shall provide the Seller and the
Insurer with access to the Contract Files and to the successor Servicer's
records (whether written or automated) with respect to the Contract Files. Such
access shall be afforded without charge, but only upon reasonable request and
during normal business hours at the offices of the successor Servicer. Nothing
in this Section 8.3 shall affect the obligation of the successor Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Obligors, and the failure of the Servicer to provide access to information as a
result of such obligation shall not constitute a breach of this Section 8.3.
SECTION 8.4. Notification to Noteholders and
Certificateholders. Upon any notice of an Event of Servicing Termination or upon
any termination of, or any appointment of a successor to, the Servicer pursuant
to this Article VIII, the Indenture Trustee shall give prompt written notice
thereof to the Noteholders and the Owner Trustee shall give prompt written
notice thereof to the Certificateholders and to the Rating Agencies.
SECTION 8.5. Waiver of Past Events of Servicing Termination.
The Holders of Notes evidencing not less than 51% of the Note Balance or, if the
Notes have been paid in full, the Holders of Certificates evidencing not less
than 51% of the Certificate Balance may, on behalf of all Noteholders and
Certificateholders, as applicable, waive any Event of Servicing Termination and
its consequences, except an event resulting from the failure to make 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 this Agreement; provided, however, that no Event of Servicing Termination
shall be waived without the consent of the Insurer if such waiver would
reasonably be expected to have a material adverse effect upon the rights of the
Insurer; and, provided further, that the Insurer, if no Insurer Default shall
have occurred and be continuing, in its discretion may waive any Event of
Servicing Termination. Upon any such waiver of an Event of Servicing
Termination, such event shall cease to exist, and shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other event or impair any right arising therefrom, except to the
extent expressly so waived.
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ARTICLE IX
TERMINATION
SECTION 9.1. Optional Purchase of All Contracts.
(a) If, as of the last day of any Collection Period, the Pool
Balance shall be less than or equal to 10% of the Initial Pool Balance, the
Servicer shall have the option to purchase on the following Payment Date the
Owner Trust Estate, other than the Collection Account, the Note Payment Account,
the Certificate Payment Account or the Reserve Account. To exercise such option,
the Servicer shall notify the Owner Trustee, the Indenture Trustee and the
Insurer no later than twenty days prior to the Payment Date on which such
repurchase is to be effected and shall deposit into the Collection Account on
such Payment Date an amount equal to the aggregate Purchase Amount for the
Contracts, plus the appraised value of any other Trust Property, other than the
Collection Account, the Note Payment Account, the Certificate Payment Account or
the Reserve Account, such value to be determined by an appraiser mutually agreed
upon by the Servicer, the Owner Trustee, the Indenture Trustee and the Insurer;
provided, however, that the Servicer shall not be permitted to exercise such
option unless the amount to be deposited in the Collection Account pursuant to
this Section 9.1(a) is at least equal to the sum of the Note Balance plus all
accrued but unpaid interest (including any overdue interest) on the Notes plus
the Certificate Balance plus all accrued but unpaid interest (including any
overdue interest) on the Certificates plus all amounts due the Insurer under the
Insurance Agreement and the Policy. Upon such payment, the Servicer shall
succeed to and own all interests in and to the Trust. The Purchase Amount for
such Payment Date, plus, to the extent necessary, all amounts in the Reserve
Account, shall be used to make payments in full to the Noteholders, the
Certificateholders and the Insurer in the manner set forth in Article IV.
(b) If, at the time the Servicer exercises its purchase option
hereunder, the Servicer's long-term unsecured debt has a rating lower than
investment grade by the Rating Agencies, the Servicer shall deliver to the Owner
Trustee and the Indenture Trustee on such Payment Date (i) a letter from an
Independent investment bank or an Independent public accountant to the effect
that the price paid by the Servicer for the Contracts at the time of transfer
pursuant to such purchase option represented a fair market price for such
Contracts or (ii) a letter from the Rating Agencies to the effect that no such
letter is required.
(c) Following the satisfaction and discharge of the Indenture
and the payment in full of the principal of and interest on the Notes, the
Certificateholders shall succeed to the rights of the Noteholders hereunder and
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the Indenture Trustee shall continue to carry out its obligations hereunder with
respect to the Certificateholders, including, without limitation, making
distributions from the Collection Account in accordance with Section 4.6(d) and
making withdrawals from the Reserve Account in accordance with Sections 4.6(b)
and 4.7.
ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Amendment.
(a) This Agreement may be amended from time to time by the
Seller, the Servicer and the Owner Trustee, with the consent of the Indenture
Trustee, but without the consent of any of the Noteholders or the
Certificateholders, to cure any ambiguity, to correct or supplement any
provision in this Agreement that may be inconsistent with any other provisions
in this Agreement or any offering document used in connection with the initial
offer and sale of the Notes or Certificates or to add, change or eliminate any
other provisions with respect to matters or questions arising under this
Agreement that are not inconsistent with the provisions of this Agreement;
provided, however, that such amendment shall not, as evidenced by an Opinion of
Counsel delivered to the Owner Trustee, the Indenture Trustee and the Insurer,
materially and adversely affect the interests of any Noteholder or any
Certificateholder. Any such amendment shall be deemed not to materially and
adversely affect the interests of any Noteholder or Certificateholder if the
Rating Agency Condition is satisfied or the Person requesting the amendment
obtains an Opinion of Counsel satisfactory to the Indenture Trustee and the
Owner Trustee to that effect.
(b) This Agreement may also be amended from time to time by
the Seller, the Servicer and the Owner Trustee, with the consent of the
Indenture Trustee, the consent of the Holders of Notes evidencing not less than
51% of the Note Balance and the consent of the Holders of Certificates
evidencing not less than 51% of the Certificate Balance, for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, or of modifying in any manner the rights of the
Noteholders or the Certificateholders; provided, however, that no such amendment
shall (i) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, or change the allocation or priority of, collections 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 Note Rate
applicable to any class of Notes, the Certificate Rate or the Required Reserve
Account Amount, without the consent of all adversely affected Noteholders or
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Certificateholders, (ii) reduce the percentage required to consent to any such
amendment, without the consent of the Holders of all Notes and Certificates
affected thereby or (iii) adversely affect the rating of any class of Notes or
the Certificates by the Rating Agencies without the consent of the Holders of
Notes evidencing not less than 66-2/3% of the aggregate outstanding principal
balance of the Notes of such class or the Holders of Certificates evidencing not
less than 66 2/3% of the Certificate Balance, as applicable.
(c) Prior to the execution of any amendment or consent
pursuant to Section 10.1(b), the Servicer shall provide written notification of
the substance of such amendment or consent to each Rating Agency and the
Insurer. No amendment to this Agreement shall be effective without the consent
of the Insurer, unless an Insurer Default shall have occurred and be continuing,
if such proposed amendment would reasonably be expected to have a material
adverse effect upon the rights of the Insurer.
(d) Promptly after the execution of any amendment or consent
pursuant to Section 10.1(b), the Owner Trustee shall furnish written
notification of the substance of such amendment or consent to each
Certificateholder, the Indenture Trustee and each of the Rating Agencies. It
shall not be necessary for the consent of the Noteholders or the
Certificateholders pursuant to Section 10.1(b) to approve the particular form of
any proposed amendment or consent, but it shall be sufficient if such consent
shall approve the substance thereof. The manner of obtaining such consents (and
any other consents of the Noteholders and the Certificateholders provided for in
this Agreement) and of evidencing the authorization of the execution thereof by
the Noteholders and the Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee and the Indenture Trustee may prescribe.
(e) Prior to the execution of any amendment pursuant to
Section 10.1, the Owner Trustee and the Indenture Trustee shall be entitled to
receive and rely upon (i) an Opinion of Counsel stating that the execution of
such amendment (A) is authorized or permitted by this Agreement, (B) will not
materially adversely affect the federal or any Applicable Tax State income or
franchise taxation of any Outstanding Note or Certificate or any Holder thereof
and (C) will not cause the Trust to be taxable as a corporation for federal or
any Applicable Tax State income or franchise tax purposes and (ii) an Officer's
Certificate of the Servicer that all conditions precedent provided for in this
Agreement to the execution of such amendment have been complied with. The Owner
Trustee or the Indenture Trustee may, but shall not be obligated to, enter into
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any such amendment which affects such Owner Trustee's or Indenture Trustee's own
rights, duties or immunities under this Agreement or otherwise.
SECTION 10.2. Protection of Title to Trust.
(a) The Seller or the Servicer, or both, shall execute and
file such financing statements and cause to be executed and filed such
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Trust and the Indenture Trustee for the benefit of the Noteholders in the
Contracts and the proceeds thereof. The Seller or the Servicer, or both, shall
deliver (or cause to be delivered) to the Owner Trustee and the Indenture
Trustee file-stamped copies of, or filing receipts for, any document filed as
provided above as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name,
identity or corporate structure in any manner that would make any financing
statement or continuation statement filed by the Seller or the Servicer in
accordance with Section 10.2(a) seriously misleading within the meaning of
Section 9-402(7) of the Relevant UCC, unless it shall have given the Owner
Trustee and the Indenture Trustee at least sixty (60) days' prior written notice
thereof and shall have promptly filed such amendments to previously filed
financing statements or continuation statements or such new financing statements
as may be necessary to continue the perfection of the interest of the Trust and
the Indenture Trustee for the benefit of the Noteholders in the Contracts and
the proceeds thereof.
(c) The Seller and the Servicer shall give the Owner Trustee
and the Indenture Trustee at least sixty (60) days' prior written notice of any
relocation of its principal executive office if, as a result of such relocation,
the applicable provisions of the Relevant UCC would require the filing of any
amendment to any previously filed financing statement or continuation statement
or of any new financing statement and shall promptly file any such amendment,
continuation statement or any new financing statement. The Servicer shall at all
times maintain each office from which it shall service Contracts, and its
principal executive office, within the United States of America.
(d) The Servicer shall maintain accounts and records as to
each Contract accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Contract, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Contract and the amounts from time to time deposited in the Collection Account
and the Reserve Account in respect of such Contract.
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(e) The Servicer shall maintain its computer systems so that,
from and after the time of the transfer of the Contracts to the Trust pursuant
to this Agreement, the Servicer's master computer records (including any back-up
archives) that refer to a Contract shall indicate clearly the interest of the
Trust and the Indenture Trustee in such Contract and that such Contract is owned
by the Trust and has been pledged to the Indenture Trustee pursuant to the
Indenture. Indication of the Trust's and the Indenture Trustee's interest in a
Contract shall be deleted from or modified on the Servicer's computer systems
when, and only when, such Contract shall have been paid in full or repurchased
by the Seller or purchased by the Servicer.
(f) If at any time the Seller or the Servicer shall propose to
sell, grant a security interest in or otherwise transfer any interest in any
motor vehicle retail installment sale contract to any prospective purchaser,
lender or other transferee, the Servicer shall give to such prospective
purchaser, lender or other transferee computer tapes, compact disks, records or
print-outs (including any restored from back-up archives) that, if they shall
refer in any manner whatsoever to any Contract, shall indicate clearly that such
Contract has been sold and is owned by the Trust and has been pledged to the
Indenture Trustee (unless such Contract has been paid in full or repurchased by
the Seller or purchased by the Servicer).
(g) The Servicer shall permit the Owner Trustee, the Indenture
Trustee and their respective agents at any time during normal business hours to
inspect, audit and make copies of and abstracts from the Servicer's records
regarding any Contract.
(h) Upon request, the Servicer shall furnish to the Owner
Trustee and the Indenture Trustee, within ten (10) Business Days, a list of all
Contracts (by contract number and name of Obligor) then held as part of the
Trust, together with a reconciliation of such list to the Contract Schedule and
to each of the Servicer's Certificates furnished before such request indicating
removal of Contracts from the Trust.
(i) The Servicer shall deliver to the Owner Trustee and the
Indenture Trustee:
(1) promptly after the execution and delivery of
each amendment to any financing statement, an Opinion of
Counsel either (A) stating that, in the opinion of such
Counsel, all financing statements and continuation statements
have been executed and filed that are necessary fully to
preserve and protect the interest of the Trust and the
Indenture Trustee in the Contracts, and reciting the details
of such filings or referring to prior Opinions of Counsel in
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which such details are given, or (B) stating that, in the
opinion of such Counsel, no such action shall be necessary to
preserve and protect such interest; and
(2) within ninety (90) days after the beginning
of each calendar year (beginning with the year 2000), an
Opinion of Counsel, dated as of a date during such 90-day
period, either (A) stating that, in the opinion of such
Counsel, all financing statements and continuation statements
have been executed and filed that are necessary fully to
preserve and protect the interest of the Trust and the
Indenture Trustee in the Contracts, and reciting the details
of such filings or referring to prior Opinions of Counsel in
which such details are given, or (B) stating that, in the
opinion of such Counsel, no such action shall be necessary to
preserve and protect such interest.
Each Opinion of Counsel referred to in clause (i)(1) or (i)(2)
above shall specify any action necessary (as of the date of such opinion) to be
taken in the following year to preserve and protect such interest.
(j) The Seller shall, to the extent required by applicable
law, cause the Notes to be registered with the Commission pursuant to Section
12(b) or Section 12(g) of the Exchange Act within the time periods specified in
such sections.
SECTION 10.3. Governing Law. This Agreement shall be
construed in accordance with the laws of the State of New York and the
obligations, rights and remedies of the parties under this Agreement shall be
determined in accordance with such laws.
SECTION 10.4. Notices. All demands, notices and other
communications under this Agreement shall be in writing, personally delivered,
sent by telecopier, overnight courier or mailed by certified mail, return
receipt requested, and shall be deemed to have been duly given upon receipt (i)
in the case of the Seller, at the following address: 4900 Cox Road, Glen Allen,
Virginia 23060, Suite [__] Attention: Treasury Department,(ii) in the case of
the Servicer, at the following address: 4900 Cox Road, Glen Allen, Virginia
23060, Attention: Treasury Department, (iii) in the case of the Owner Trustee,
at the related Corporate Trust Office, (iv) in the case of the Indenture
Trustee, at the related Corporate Trust Office, (v) in the case of Moody's, at
the following address: Moody's Investors Service, Inc., ABS Monitoring
Department, 99 Church Street, New York, New York 10007, and (vi) in the case of
Standard & Poor's, at the following address: Standard & Poor's, a division of
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The McGraw-Hill Companies, Inc., 55 Water Street, New York, New York 10041,
Attention: Asset Backed Surveillance Department, and (vi) in the case of the
Insurer, at the following address: MBIA Insurance Corporation, 113 King Street,
Armonk, New York 10504, Attention: Insured Portfolio Management, Structured
Finance.
SECTION 10.5. Severability of Provisions. If any one or more
of the covenants, agreements, provisions or terms of this Agreement shall be for
any reason whatsoever held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement, or of the Notes or the
Certificates, or the rights of the Holders thereof.
SECTION 10.6. Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Sections 7.3 and 8.2 and as
provided in the provisions of this Agreement concerning the resignation of the
Servicer, this Agreement may not be assigned by the Seller or the Servicer
without the prior written consent of the Owner Trustee, the Indenture Trustee,
the Holders of Notes evidencing not less than 66-2/3% of the Note Balance and
the Holders of Certificates evidencing not less than 66-2/3% of the Certificate
Balance.
SECTION 10.7. Further Assurances. The Seller and the Servicer
agree to do and perform, from time to time, any and all acts and to execute any
and all further instruments required or reasonably requested by the Owner
Trustee or the Indenture Trustee more fully to effect the purposes of this
Agreement, including, without limitation, the execution of any financing
statements or continuation statements relating to the Contracts for filing under
the provisions of the Relevant UCC of any applicable jurisdiction.
SECTION 10.8. No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Owner Trustee, the
Indenture Trustee, the Noteholders or the Certificateholders, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
provided in this Agreement are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.
SECTION 10.9. Third-Party Beneficiaries. This Agreement shall
inure to the benefit of and be binding upon the parties hereto, the Noteholders,
the Certificateholders, the Insurer and their respective successors and
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<PAGE>
permitted assigns. Except as otherwise provided in this Article X, no other
Person shall have any right or obligation hereunder. The parties hereto hereby
acknowledge and consent to the pledge of this Agreement by the Trust to the
Indenture Trustee for the benefit of the Noteholders pursuant to the Indenture.
SECTION 10.10. Actions by Noteholder or Certificateholders.
(a) Wherever in this Agreement a provision is made that an
action may be taken or a notice, demand or instruction given by the Noteholders
or the Certificateholders, such action, notice or instruction may be taken or
given by any Noteholder or any Certificateholder, as applicable, unless such
provision requires a specific percentage of the Noteholders or the
Certificateholders.
(b) Any request, demand, authorization, direction, notice,
consent, waiver or other act by a Noteholder or a Certificateholder shall bind
such Noteholder or Certificateholder and every subsequent Holder of such Note or
Certificate issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done or omitted to be done by
the Owner Trustee, the Indenture Trustee or the Servicer in reliance thereon,
whether or not notation of such action is made upon such Note or Certificate.
SECTION 10.11. Counterparts. For the purpose of facilitating
the execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
SECTION 10.12. Agent for Service. The agent for service of the
Seller and the Servicer in respect of this Agreement shall be [_____________],
CarMax Auto Superstores, Inc., 4900 Cox Road, Glen Allen, Virginia 23060.
SECTION 10.13. No Bankruptcy Petition. The Owner Trustee, the
Indenture Trustee, the Trust and the Servicer each covenants and agrees that,
prior to the date which is one year and one day after the payment in full of all
securities issued by the Seller or by a trust for which the Seller was the
depositor, which securities were rated by any nationally recognized statistical
rating organization, it will not institute against, or join any other Person in
instituting against, the Seller any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other proceedings under any federal or
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<PAGE>
state bankruptcy or similar law. This Section 10.13 shall survive the
resignation or removal of the Owner Trustee under the Trust Agreement and the
Indenture Trustee under the Indenture and shall survive the termination of the
Trust Agreement and the Indenture.
SECTION 10.14. Limitation of Liability of Owner Trustee and
Indenture Trustee.
(a) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by the Owner Trustee not in its individual
capacity but solely in its capacity as Owner Trustee of the Trust, and in no
event shall the Owner Trustee in its individual capacity have any liability for
the representations, warranties, covenants, agreements or other obligations of
the Trust hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely to
the assets of the Trust. For all purposes of this Agreement, in the performance
of its duties or obligations hereunder or in the performance of any duties or
obligations of the Trust hereunder, the Owner Trustee shall be subject to, and
entitled to the benefits of, the terms and provisions of Articles VI, VII and
VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been accepted by the Indenture Trustee not in its individual
capacity but solely as Indenture Trustee, and in no event shall the Indenture
Trustee in its individual capacity have any liability for the representations,
warranties, covenants, agreements or other obligations of the Trust hereunder or
in any of the certificates, notices or agreements delivered pursuant hereto, as
to all of which recourse shall be had solely to the assets of the Trust.
IN WITNESS WHEREOF, the Seller, the Servicer and the Owner
Trustee have caused this Agreement to be duly executed by their respective
officers, thereunto duly authorized, all as of the day and year first above
written.
CARMAX AUTO RECEIVABLES LLC,
as Seller
By:______________________________
Name:
Title:
CARMAX AUTO SUPERSTORES, INC.,
as Servicer
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<PAGE>
By:______________________________
Name:
Title:
CARMAX AUTO OWNER TRUST 1999-1
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
not in its individual capacity
but solely as Owner Trustee
By:______________________________
Name:
Title:
Accepted and agreed:
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
By:______________________________
Name:
Title:
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<PAGE>
Schedule 1
Contract Schedule
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<PAGE>
Schedule 2
Location of Contract Files
225 Chastain Meadows Court
Kennesaw, Georgia 30144
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EXHIBIT 4.3
- --------------------------------------------------------------------------------
CARMAX AUTO OWNER TRUST 1999-1,
as Issuer,
and
BANKERS TRUST COMPANY,
as Indenture Trustee
------------------------------
INDENTURE
Dated as of September [__], 1999
------------------------------
$[____________] [____]% Class A-1 Asset-Backed Notes
$[____________] [____]% Class A-2 Asset-Backed Notes
$[____________] [____]% Class A-3 Asset-Backed Notes
$[____________] [____]% Class A-4 Asset-Backed Notes
- --------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE TABLE(1)
TIA Indenture
Section Section
310 (a)(1). . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(a)(3). . . . . . . . . . . . . . . . . . . . . . . . . 6.10
(a)(4). . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5). . . . . . . . . . . . . . . . . . . . . . . . . 6.11
(b). . . . . . . . . . . . . . . . . . . . . . . . .6.8;6.11
(c). . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311 (a). . . . . . . . . . . . . . . . . . . . . . . . . . .6.12
(b). . . . . . . . . . . . . . . . . . . . . . . . . . .6.12
(c). . . . . . . . . . . . . . . . . . . . . . . . . . .N.A.
312 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
313 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4
(b)(1). . . . . . . . . . . . . . . . . . . . . . . . . 7.4
(b)(2). . . . . . . . . . . . . . . . . . . . . . . 7.4;11.5
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3
314 (a). . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3
(b). . . . . . . . . . . . . . . . . . . . . . . . . . 11.15
(c)(1). . . . . . . . . . . . . . . . . . . . . . . . . 11.1
(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . 11.1
(c)(3). . . . . . . . . . . . . . . . . . . . . . . . . 11.1
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1
(b) . . . . . . . . . . . . . . . . . . . . . . . . 6.5;11.5
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . .6.1
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . .6.1
(e). . . . . . . . . . . . . . . . . . . . . . . . . . .5.13
316 (a)(last sentence) . . . . . . . . . . . . . . . . . . . 1.1
(a)(1)(A). . . . . . . . . . . . . . . . . . . . . . . .5.11
(a)(1)(B). . . . . . . . . . . . . . . . . . . . . . . .5.12
(a)(2). . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 5.7
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . N.A
317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
(b). . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3
318 (a). . . . . . . . . . . . . . . . . . . . . . . . . . .11.7
_______________________
(1) Note: This Cross Reference Table shall not, for any purpose, be deemed to be
part of this Indenture.
(2) N.A. means Not Applicable.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions..................................................2
SECTION 1.2. Incorporation by Reference of Trust
Indenture Act.............................12
SECTION 1.3. Rules of Construction.......................................12
ARTICLE II
THE NOTES
SECTION 2.1. Form........................................................13
SECTION 2.2. Execution, Authentication and Delivery......................14
SECTION 2.3. Temporary Notes.............................................14
SECTION 2.4. Tax Treatment...............................................15
SECTION 2.5. Registration; Registration of Transfer and
Exchange..................................15
SECTION 2.6. Mutilated, Destroyed, Lost or Stolen Notes..................17
SECTION 2.7. Persons Deemed Owners.......................................18
SECTION 2.8. Payments 18
SECTION 2.9. Cancellation................................................22
SECTION 2.10. Release of Collateral.......................................22
SECTION 2.11. Book-Entry Notes............................................22
SECTION 2.12. Notices to Clearing Agency..................................23
SECTION 2.13. Definitive Notes ...........................................24
SECTION 2.14. Authenticating Agents ......................................24
ARTICLE III
COVENANTS
SECTION 3.1. Payment Covenant............................................25
SECTION 3.2. Maintenance of Office or Agency.............................25
SECTION 3.3. Money for Payments To Be Held in Trust......................26
SECTION 3.4. Existence...................................................27
SECTION 3.5. Protection of Trust Estate .................................28
SECTION 3.6. Opinions as to Trust Estate.................................28
SECTION 3.7. Performance of Obligations; Servicing
of Contracts..............................29
SECTION 3.8. Negative Covenants..........................................31
SECTION 3.9. Annual Statement as to Compliance...........................32
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain
Terms.....................................33
SECTION 3.11. Successor or Transferee.....................................35
SECTION 3.12. No Other Business ..........................................35
SECTION 3.13. No Borrowing................................................36
SECTION 3.14. Servicer's Obligations......................................36
<PAGE>
SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities...............................36
SECTION 3.16. Capital Expenditures........................................36
SECTION 3.17. Restricted Payments.........................................36
SECTION 3.18. Notice of Events of Default.................................36
SECTION 3.19. Removal of Administrator....................................37
SECTION 3.20. Further Instruments and Acts................................37
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture.....................37
SECTION 4.2. Satisfaction, Discharge and Defeasance of the
Notes.....................................38
SECTION 4.3. Application of Trust Money..................................39
SECTION 4.4. Repayment of Monies Held by Paying Agent....................40
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default...........................................40
SECTION 5.2. Acceleration of Maturity; Rescission and
Annulment.................................42
SECTION 5.3. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee..........43
SECTION 5.4. Remedies....................................................46
SECTION 5.5. Optional Preservation of the Contracts......................47
SECTION 5.6. Limitation of Suits.........................................48
SECTION 5.7. Unconditional Rights of Noteholders To Receive
Principal and Interest.....................49
SECTION 5.8. Restoration of Rights and Remedies..........................49
SECTION 5.9. Rights and Remedies Cumulative..............................49
SECTION 5.10. Delay or Omission Not a Waiver..............................49
SECTION 5.11. Control by Noteholders......................................50
SECTION 5.12. Waiver of Past Defaults.....................................50
SECTION 5.13. Undertaking for Costs.......................................51
SECTION 5.14. Waiver of Stay or Extension Laws............................51
SECTION 5.15. Action on Notes.............................................51
SECTION 5.16. Performance and Enforcement of Certain
Obligations...............................52
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1. Duties of Indenture Trustee.................................53
SECTION 6.2. Rights of Indenture Trustee.................................55
SECTION 6.3. Individual Rights of Indenture Trustee......................56
SECTION 6.4. Indenture Trustee's Disclaimer..............................56
SECTION 6.5. Notice of Defaults..........................................56
SECTION 6.6. Reports by Indenture Trustee to Holders.....................56
SECTION 6.7. Compensation and Indemnity..................................56
SECTION 6.8. Replacement of Indenture Trustee............................57
<PAGE>
SECTION 6.9. Successor Indenture Trustee by Merger.......................58
SECTION 6.10. Appointment of Co-Indenture Trustee or
Separate Indenture Trustee................59
SECTION 6.11. Eligibility; Disqualification...............................60
SECTION 6.12. Preferential Collection of Claims Against
Issuer....................................61
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1. Issuer To Furnish Indenture Trustee Names
and Addresses of Noteholders..............61
SECTION 7.2. Preservation of Information; Communications
to Noteholders............................61
SECTION 7.3. Reports by Issuer...........................................62
SECTION 7.4. Reports by Indenture Trustee................................62
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1. Collection of Money.........................................63
SECTION 8.2. Trust Accounts..............................................63
SECTION 8.3. General Provisions Regarding Accounts.......................64
SECTION 8.4. Release of Trust Estate.....................................65
SECTION 8.5. Opinion of Counsel..........................................65
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent
of Noteholders............................66
SECTION 9.2. Supplemental Indentures with Consent of
Noteholders...............................67
SECTION 9.3. Execution of Supplemental Indentures........................69
SECTION 9.4. Effect of Supplemental Indenture............................70
SECTION 9.5. Conformity with Trust Indenture Act.........................70
SECTION 9.6. Reference in Notes to Supplemental Indentures...............70
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1. Redemption..................................................71
SECTION 10.2. Form of Redemption Notice...................................71
SECTION 10.3. Notes Payable on Redemption Date............................72
<PAGE>
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Compliance Certificates and Opinions, etc...................72
SECTION 11.2. Form of Documents Delivered to Indenture
Trustee...................................74
SECTION 11.3. Acts of Noteholders.........................................75
SECTION 11.4. Notices, etc., to Indenture Trustee, Issuer
and Rating Agencies.......................76
SECTION 11.5. Notices to Noteholders; Waiver..............................77
SECTION 11.6. Alternate Payment and Notice Provisions.....................77
SECTION 11.7. Conflict with Trust Indenture Act...........................78
SECTION 11.8. Effect of Headings and Table of Contents....................78
SECTION 11.9. Successors and Assigns......................................78
SECTION 11.10. Separability................................................78
SECTION 11.11. Benefits of Indenture.......................................78
SECTION 11.12. Legal Holiday...............................................78
SECTION 11.13. Governing Law...............................................79
SECTION 11.14. Counterparts................................................79
SECTION 11.15. Recording of Indenture......................................79
SECTION 11.16. Trust Obligation............................................79
SECTION 11.17. No Petition.................................................79
SECTION 11.18. Inspection..................................................80
SECTION 11.19. Certain Matters Regarding the Insurer.......................80
Exhibit A-1 Form of Class A-1 Note
Exhibit A-2 Form of Class A-2 Note
Exhibit A-3 Form of Class A-3 Note
Exhibit A-4 Form of Class A-4 Note
Exhibit B Form of Opinion of Counsel
<PAGE>
INDENTURE, dated as of September [__], 1999 (as amended,
supplemented or otherwise modified and in effect from time to time, this
"Indenture"), between CARMAX AUTO OWNER TRUST 1999-1, a Delaware business trust
(the "Issuer"), and BANKERS TRUST COMPANY, a New York banking corporation, not
in its individual capacity but solely as indenture trustee (in such capacity,
the "Indenture Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the holders of the Issuer's
[____]% Class A-1 Asset-Backed Notes (the "Class A-1 Notes"), [____]% Class A-2
Asset-Backed Notes (the "Class A-2 Notes"), [____]% Class A-3 Asset-Backed Notes
(the "Class A-3 Notes") and [____]% Class A-4 Asset-Backed Notes (the "Class A-4
Notes" and, collectively with the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee on the
Closing Date, as Indenture Trustee for the benefit of the Holders of the Notes,
all of the Issuer's right, title and interest in, to and under, whether now
owned or existing or hereafter acquired or arising (i) the Contracts; (ii) all
amounts received on or in respect of the Contracts after the Cutoff Date; (iii)
the security interests in the Financed Vehicles granted by the Obligors pursuant
to the Contracts; (iv) all proceeds from claims on or refunds of premiums with
respect to any physical damage, credit life or credit disability insurance
policies covering the Financed Vehicles or the Obligors; (v) all of the Seller's
rights to the Contract Files; (vi) the Collection Account, the Reserve Account
and the Note Payment Account and all amounts, securities, financial assets,
investments and other property deposited in or credited to any of the foregoing
and all proceeds thereof; (vii) all of the Seller's rights under the Purchase
Agreement, including the right of the Seller to cause CarMax Auto Superstores,
Inc. to repurchase Contracts from the Seller; (viii) all of the Issuer's rights
under the Sale and Servicing Agreement, including the right of the Owner Trustee
to cause the Servicer to purchase Contracts from the Issuer; and (ix) all
present and future claims, demands, causes of action and choses in action in
respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and other
property which at any time constitute all or part of or are included in the
proceeds of any of the foregoing (collectively, the "Collateral").
<PAGE>
The foregoing Grant is made in trust to secure the payment of
principal of and interest on, and any other amounts owing in respect of, the
Notes, equally and ratably without prejudice, priority or distinction, and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture.
The Indenture Trustee, as Indenture Trustee on behalf of the
Holders of the Notes, acknowledges such Grant, accepts the trusts under this
Indenture in accordance with the provisions of this Indenture and agrees to
perform its duties required in this Indenture to the best of its ability to the
end that the interests of the Holders of the Notes may be adequately and
effectively protected.
ARTICLE I
DEFINITIONS; INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
(a) Except as otherwise specified herein or as the context may
otherwise require, the following terms shall have the respective meanings set
forth below for all purposes of this Indenture.
"Act" shall have the meaning specified in Section 11.3(a).
"Administration Agreement" shall mean the Administration
Agreement, dated as of September [__], 1999, by and among the Administrator, the
Issuer and the Indenture Trustee, as the same may from time to time be amended,
supplemented or otherwise modified and in effect.
"Administrator" shall mean CarMax, or any successor
Administrator under the Administration Agreement.
"Authenticating Agent" shall have the meaning specified in
Section 2.14.
"Authorized Officer" shall mean, with respect to the Issuer,
any officer of the Owner Trustee who is authorized to act for or on behalf of
the Owner Trustee in matters relating to the Issuer and who is identified on the
list of Authorized Officers delivered by the Owner Trustee to the Indenture
Trustee on the Closing Date (as such list may be modified or supplemented from
time to time thereafter) and, for so long as the Administration Agreement is in
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<PAGE>
full force and effect, any officer of the Administrator who is authorized to act
for the Administrator in matters relating to the Issuer and to be acted upon by
the Administrator pursuant to the Administration Agreement.
"Book-Entry Notes" shall mean a beneficial interest in the
Notes, ownership and transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.11.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banking institutions or trust companies in New York,
New York, Wilmington, Delaware or Richmond, Virginia are authorized or obligated
by law, executive order or governmental decree to remain closed.
"CarMax" shall mean CarMax Auto Superstores, Inc., a Virginia
corporation, and its successors and assigns.
"Certificate of Trust" shall have the meaning specified in the
Trust Agreement.
"Class" shall mean a class of Notes, which may be the Class
A-1 Notes, the Class A-2 Notes, the Class A-3 Notes or the Class A-4 Notes.
"Class A-1 Final Payment Date" shall mean the [____________]
Payment Date.
"Class A-1 Noteholder" shall mean the Person in whose name a
Class A-1 Note is registered on the Note Register.
"Class A-1 Notes" shall mean the [____]% Class A-1
Asset-Backed Notes issued by the Issuer pursuant to this Indenture in the
initial aggregate principal amount of $[____________].
"Class A-1 Rate" shall mean [____]% per annum.
"Class A-2 Final Payment Date" shall mean the [____________]
Payment Date.
"Class A-2 Noteholder" shall mean the Person in whose name a
Class A-2 Note is registered on the Note Register.
"Class A-2 Notes" shall mean the [____]% Class A-2
Asset-Backed Notes issued by the Issuer pursuant to this Indenture in the
initial aggregate principal amount of $[____________].
"Class A-2 Rate" shall mean [____]% per annum.
"Class A-3 Final Payment Date" shall mean the [____________]
Payment Date.
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<PAGE>
"Class A-3 Noteholder" shall mean the Person in whose name a
Class A-3 Note is registered on the Note Register.
"Class A-3 Notes" shall mean the [____]% Class A-3
Asset-Backed Notes issued by the Issuer pursuant to this Indenture in the
initial aggregate principal amount of $[____________].
"Class A-3 Rate" shall mean [____]% per annum.
"Class A-4 Final Payment Date" shall mean the [____________]
Payment Date.
"Class A-4 Noteholder" shall mean the Person in whose name a
Class A-4 Note is registered on the Note Register.
"Class A-4 Notes" shall mean the [____]% Class A-4
Asset-Backed Notes issued by the Issuer pursuant to this Indenture in the
initial aggregate principal amount of $[____________].
"Class A-4 Rate" shall mean [____]% per annum.
"Clearing Agency" shall mean an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" shall mean a broker, dealer,
bank, other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities deposited
with the Clearing Agency.
"Closing Date" shall mean September [__], 1999.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the Treasury Regulations promulgated thereunder.
"Collateral" shall have the meaning specified in the Granting
Clause of this Indenture.
"Commission" shall mean the Securities and Exchange
Commission.
"Corporate Trust Office" shall mean the principal office of
the Indenture Trustee at which at any particular time its corporate trust
business shall be administered, which office at date of execution of this
Indenture is located at Four Albany Street, New York, New York 10006, Attention:
Corporate Trust and Agency Group - Structured Finance, or at such other address
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<PAGE>
as the Indenture Trustee may designate from time to time by notice to the
Noteholders and the Issuer, or the principal corporate trust office of any
successor Indenture Trustee at the address designated by such successor
Indenture Trustee by notice to the Noteholders and the Issuer.
"Default" shall mean any event that, with notice or the lapse
of time or both, would become an Event of Default.
"Definitive Notes" shall have the meaning specified in Section
2.11.
"Event of Default" shall have the meaning specified in Section
5.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Executive Officer" shall mean, with respect to any
corporation or limited liability company, as applicable, the Chief Executive
Officer, the Chief Operating Officer, the Chief Financial Officer, the
President, any Executive Vice President, any Senior Vice President, any Vice
President, the Secretary or the Treasurer of such corporation or limited
liability company, and, with respect to any partnership, any general partner of
such partnership.
"Final Payment Date" shall mean all or any of the Class A-1
Final Payment Date, the Class A-2 Final Payment Date, the Class A-3 Final
Payment Date and the Class A-4 Final Payment Date as the context requires.
"Fiscal Year" shall mean the period commencing on March 1 of
any year and ending on February 28 (or February 29, if applicable) of the
following year.
"Grant" shall mean to mortgage, pledge, bargain, sell,
warrant, alienate, remise, release, convey, assign, transfer, create, and to
grant a lien upon and a security interest in and right of set-off against, and
to deposit, set over and confirm pursuant to this Indenture. A Grant of the
Collateral or of any other agreement or instrument shall include all rights,
powers and options (but none of the obligations) of the granting party
thereunder, including the immediate and continuing right to claim for, collect,
receive and give receipt for principal and interest payments in respect of the
Collateral and all other monies payable thereunder, to give and receive notices
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and other communications, to make waivers or other agreements, to exercise all
rights and options, to bring Proceedings in the name of the granting party or
otherwise, and generally to do and receive anything that the granting party is
or may be entitled to do or receive thereunder or with respect thereto.
"Holder" or "Noteholder" shall mean the Person in whose name a
Note is registered in the Note Register.
"Indenture Trustee" shall mean Bankers Trust Company, a New
York banking corporation, not in its individual capacity but solely as Indenture
Trustee under this Indenture, and any successor indenture trustee under this
Indenture.
"Independent" shall mean, when used with respect to any
specified Person, that such Person (i) is in fact independent of the Issuer, any
other obligor on the Notes, the Seller, the Servicer and any Affiliate of any of
the foregoing Persons, (ii) does not have any direct financial interest or any
material indirect financial interest in the Issuer, any such other obligor, the
Seller, the Servicer or any Affiliate of any of the foregoing Persons and (iii)
is not connected with the Issuer, any such other obligor, the Seller, the
Servicer or any Affiliate of any of the foregoing Persons as an officer,
employee, promoter, underwriter, trustee, partner, director or person performing
similar functions.
"Independent Certificate" shall mean a certificate or opinion
to be delivered to the Indenture Trustee under the circumstances described in,
and otherwise complying with, the applicable requirements of Section 11.1, made
by an Independent appraiser or other expert appointed by an Issuer Order and
approved by the Indenture Trustee in the exercise of reasonable care, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Insurance Agreement" shall mean the Insurance and
Reimbursement Agreement, dated as of the Closing Date, by and among the Seller,
the Servicer, the Issuer, the Indenture Trustee and the Insurer, as the same may
be amended, supplemented or otherwise modified and in effect from time to time.
"Insurance Premium" shall have the meaning specified in the
Premium Side Letter Agreement.
"Insurer" shall mean MBIA Insurance Corporation, a corporation
domiciled in New York, and its successors.
"Insurer Default" shall mean a default by the Insurer under
the Policy (after giving effect to any applicable cure period).
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"Issuer" shall mean CarMax Auto Owner Trust 1999-1 or any
successor to CarMax Auto Owner Trust 1999-1 and, for purposes of any provision
contained herein and required by the TIA, each other obligor on the Notes.
"Issuer Order" shall mean a written order signed in the name
of the Issuer by an Authorized Officer of the Issuer and delivered to the
Indenture Trustee.
"Issuer Request" shall mean a written request signed in the
name of the Issuer by an Authorized Officer of the Issuer and delivered to the
Indenture Trustee.
"Moody's" shall mean Moody's Investors Service, Inc., and its
successors.
"Net Principal Policy Amount" shall mean, as of any date, the
sum of the Note Balance plus the Certificate Balance, in each case as of the
Closing Date, minus all amounts drawn on the Policy or withdrawn from the
Reserve Account and applied on or before that date to pay principal to the
Noteholders or the Certificateholders.
"Note Balance" shall mean, at any time, the aggregate
principal amount of all Notes Outstanding at such time.
"Note Depository Agreement" shall mean the agreement dated
September [__], 1999, among the Issuer, the Indenture Trustee and The Depository
Trust Company, as the initial Clearing Agency, relating to the Notes.
"Note Interest Rate" shall mean, in the case of the Class A-1
Notes, the Class A-1 Rate, in the case of the Class A-2 Notes, the Class A- 2
Rate, in the case of the Class A-3 Notes, the Class A-3 Rate, and in the case of
the Class A-4 Notes, the Class A-4 Rate.
"Note Owner" shall mean, with respect to any Book-Entry Note,
the Person who is the beneficial owner of such Book-Entry Note as reflected on
the books of the Clearing Agency or on the books of a Person maintaining an
account with such Clearing Agency (directly as a Clearing Agency Participant or
as an indirect participant, in each case in accordance with the rules of such
Clearing Agency).
"Note Register" shall have the meaning specified in Section
2.5.
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"Note Registrar" shall have the meaning specified in Section
2.5.
"Noteholders" shall mean the Class A-1 Noteholders, the Class
A-2 Noteholders, the Class A-3 Noteholders and the Class A-4 Noteholders,
collectively.
"Notes" shall mean the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes and the Class A-4 Notes, collectively.
"Officer's Certificate" shall mean a certificate signed by an
Authorized Officer of the Issuer and delivered to the Indenture Trustee, which
certificate shall comply with the applicable requirements of Section 11.1.
"Opinion of Counsel" shall mean one or more written opinions
of counsel who may, except as otherwise expressly provided in this Indenture, be
an employee of, or outside counsel to, the Issuer, the Seller or the Servicer
and who shall be acceptable to the Indenture Trustee, which opinion or opinions
shall be addressed to the Indenture Trustee as Indenture Trustee, shall comply
with any applicable requirements of Section 11.1 and shall be in form and
substance satisfactory to the Indenture Trustee.
"Outstanding" shall mean, as of the date of determination, all
Notes theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar
or delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money
in the necessary amount has been theretofore deposited with the
Indenture Trustee or any Paying Agent in trust for the Holders of such
Notes; provided, however, that if such Notes are to be redeemed, notice
of such redemption must have been duly given pursuant to this Indenture
or provision for such notice must have been made in a manner
satisfactory to the Indenture Trustee; and
(iii) Notes in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a protected purchaser;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Notes Outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder or under any
Transaction Document, Notes owned by the Issuer, any other obligor upon the
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Notes, the Seller, the Servicer or any Affiliate of any of the foregoing Persons
shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Indenture Trustee shall be protected in relying on any
such request, demand, authorization, direction, notice, consent or waiver, only
Notes that a Responsible Officer knows to be so owned shall be so disregarded.
Notes so owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Indenture
Trustee the pledgee's right so to act with respect to such Notes and that the
pledgee is not the Issuer, any other obligor upon the Notes, the Seller, the
Servicer or any Affiliate of any of the foregoing Persons.
"Owner Trustee" shall mean First Union Trust Company, National
Association, a national banking association, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement, and any successor owner
trustee under the Trust Agreement.
"Paying Agent" shall mean the Indenture Trustee or any other
Person that meets the eligibility standards for the Indenture Trustee specified
in Section 6.11 and is authorized by the Issuer to make payments to and
distributions from the Collection Account and the Note Payment Account,
including payment of principal of or interest on the Notes, on behalf of the
Issuer.
"Payment Date" shall mean the 15th day of each month, or if
such 15th day is not a Business Day, the following Business Day, commencing on
[____________], 1999.
"Policy" shall mean the irrevocable financial guaranty
insurance policy dated as of September [__], 1999, issued by the Insurer to the
Indenture Trustee for the benefit of the Noteholders and the Certificateholders
and having a maximum amount available to be drawn with respect to any Payment
Date equal to the Policy Amount for such Payment Date.
"Policy Amount" shall mean, for any Payment Date:
(A) the sum of:
(w) the Total Servicing Fee for the
preceding Collection Period;
(x) the Total Note Interest for such
Payment Date;
(y) the Total Certificate Interest for
such Payment Date; and
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(z) the lesser of (i) the sum of the
Note Balance plus the Certificate Balance, in each case as of
such Payment Date (after giving effect to any distribution of
Available Funds or funds withdrawn from the Reserve Account to
pay principal to the Noteholders or the Certificateholders on
or before such Payment Date) and (ii) the Net Principal Policy
Amount (after giving effect to any distribution of Available
Funds or funds withdrawn from the Reserve Account to pay
principal to the Noteholders or the Certificateholders on or
before such Payment Date).
less:
(B) the amount on deposit in and available for
withdrawal from the Reserve Account on such Payment Date.
"Predecessor Note" shall mean, with respect to any particular
Note, every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note. Any Note authenticated and delivered under
Section 2.6 in lieu of a mutilated, lost, destroyed or stolen Note shall be
deemed, for purposes of this definition, to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Premium Side Letter Agreement" shall have the meaning
specified in the Insurance Agreement.
"Proceeding" shall mean any suit in equity, action at law or
other judicial or administrative proceeding.
"Rating Agency" shall mean Standard & Poor's or Moody's or, if
Standard & Poor's and Moody's cease to exist, any nationally recognized
statistical rating organization or other comparable Person designated by the
Issuer, notice of which designation shall have been given to the Indenture
Trustee, the Owner Trustee and the Servicer.
"Rating Agency Condition" shall mean, with respect to any
action, that each Rating Agency shall have notified the Seller, the Servicer,
the Indenture Trustee and the Owner Trustee that such action shall not result in
a reduction or withdrawal of the then current rating assigned to any Class of
Notes.
"Record Date" shall mean, with respect to any Payment Date or
Redemption Date, the close of business on the Business Day preceding such
Payment Date or Redemption Date; provided, however, that if Definitive Notes
have been issued pursuant to Section 2.13, Record Date shall mean, with respect
to any Payment Date or Redemption Date, the last day of the preceding Collection
Period.
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"Redemption Date" shall mean the Payment Date specified by the
Servicer pursuant to Section 10.1 on which date the Indenture Trustee shall
withdraw any amount remaining in the Reserve Account and deposit the portion of
such amount payable to the Noteholders in the Note Payment Account.
"Redemption Price" shall mean, in the case of a redemption of
Notes pursuant to Section 10.1, an amount equal to the unpaid principal amount
of the Notes redeemed plus accrued and unpaid interest thereon.
"Responsible Officer" shall mean any officer within the
Corporate Trust Department of the Indenture Trustee with direct responsibility
for the administration of this Indenture and also, with respect to a particular
matter, any other officer of the Indenture Trustee to whom such matter is
referred because of such officer's knowledge of and familiarity with such matter
or other similar matters.
"Sale and Servicing Agreement" shall mean the Sale and
Servicing Agreement, dated as of September [__], 1999, by and among the Issuer,
the Seller, the Servicer, and the Owner Trustee as the same may be amended,
supplemented or otherwise modified and in effect from time to time.
"Seller" shall mean CarMax Auto Receivables LLC, a Virginia
limited liability company, in its capacity as seller under the Sale and
Servicing Agreement, and its successors in such capacity.
"Servicer" shall mean CarMax, in its capacity as servicer
under the Sale and Servicing Agreement, and any Successor Servicer.
"Standard & Poor's" shall mean Standard & Poor's, a division
of The McGraw-Hill Companies, Inc., and its successors.
"State" shall mean any of the fifty states of the United
States of America or the District of Columbia.
"Successor Servicer" shall have the meaning specified in
Section 3.7(e).
"Transaction Documents" shall mean the Purchase Agreement, the
Sale and Servicing Agreement, the Trust Agreement, the Certificate of Trust,
this Indenture, the Administration Agreement, the Note Depository Agreement and
the other documents and certificates delivered in connection therewith, in each
case as the same may from time to time be amended, supplemented or otherwise
modified and in effect.
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"Trust Accounts" shall mean the Collection Account, the Note
Payment Account and the Certificate Payment Account.
"Trust Estate" shall mean all money, instruments, rights and
other property that are subject or intended to be subject to the lien and
security interest of this Indenture for the benefit of the Noteholders
(including, but not limited to, all property and interests Granted to the
Indenture Trustee), including all proceeds thereof.
"Trust Indenture Act" or "TIA" shall mean the Trust Indenture
Act of 1939, as amended.
(b) Except as otherwise specified herein or as the context may
otherwise require, capitalized terms used but not otherwise defined herein have
the respective meanings set forth in, or incorporated by reference into, the
Sale and Servicing Agreement for all purposes of this Indenture.
SECTION 1.2. Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, that provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Indenture securities" shall mean the Notes.
"Indenture security holder" shall mean a Noteholder.
"Indenture to be qualified" shall mean this Indenture.
"Indenture trustee" or "Institutional trustee" shall mean the
Indenture Trustee.
"Obligor on the indenture securities" shall mean the Issuer
and any other obligor on the Notes.
All other TIA terms used in this Indenture that are defined in
the TIA, defined by TIA reference to another statute or defined by Commission
rule have the respective meanings assigned to them by such definitions.
SECTION 1.3. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
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(iii) "or" is not exclusive;
(iv) "including" means including without limitation;
(v) words in the singular include the plural and words
in the plural include the singular;
(vi) any agreement, instrument or statute defined or
referred to herein or in any instrument or certificate delivered in
connection herewith means such agreement, instrument or statute as from
time to time amended, modified or supplemented and includes (in the
case of agreements or instruments) references to all attachments
thereto and instruments incorporated therein; and
(vii) references to a Person are also to its permitted
successors and assigns.
ARTICLE II
THE NOTES
SECTION 2.1. Form.
(a) The Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes, together with the Indenture Trustee's
certificates of authentication, shall be substantially in the form set forth in
Exhibit A-1, Exhibit A-2, Exhibit A-3 and Exhibit A-4, respectively, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may, consistently herewith, be determined by the officers executing such Notes,
as evidenced by their execution thereof. Any portion of the text of any Note may
be set forth on the reverse thereof, with an appropriate reference thereto on
the face of the Note.
(b) The Definitive Notes shall be typewritten, printed,
lithographed or engraved, or produced by any combination of these methods (with
or without steel engraved borders), all as determined by the officers executing
such Notes, as evidenced by their execution of such Notes.
(c) Each Note shall be dated the date of its authentication.
The terms of the Notes set forth in Exhibits A-1 through A-4 hereto are part of
the terms of this Indenture and are incorporated herein by reference.
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SECTION 2.2. Execution, Authentication and Delivery.
(a) The Notes shall be executed on behalf of the Issuer by any
of its Authorized Officers. The signatures of any such Authorized Officer on the
Notes may be manual or facsimile.
(b) Notes bearing the manual or facsimile signature of
individuals who were at any time Authorized Officers of the Issuer shall bind
the Issuer, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices on the date of such Notes.
(c) The Indenture Trustee shall, upon Issuer Order,
authenticate and deliver the Class A-1 Notes for original issue in an aggregate
principal amount of $[____________], the Class
A-2 Notes for original issue in an aggregate principal amount
of $[____________], the Class A-3 Notes for original issue in an aggregate
principal amount of $[____________] and the Class A-4 Notes for original issue
in an aggregate principal amount of $[____________]. The aggregate principal
amounts of Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and Class A-4 Notes
outstanding at any time may not exceed those respective amounts except as
provided in Section 2.6.
(d) Each Note shall be dated the date of its authentication.
The Notes shall be issuable as registered Notes in minimum denominations of
$1,000 and integral multiples thereof.
(e) No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Note a certificate of authentication substantially in the form provided for
herein executed by the Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall be conclusive
evidence, and the only evidence, that such Note has been duly authenticated and
delivered hereunder.
SECTION 2.3. Temporary Notes.
(a) Pending the preparation of Definitive Notes, the Issuer
may execute, and upon receipt of an Issuer Order the Indenture Trustee shall
authenticate and deliver, temporary Notes that are printed, lithographed,
typewritten, mimeographed or otherwise produced of the tenor of the Definitive
Notes in lieu of which they are issued and with such variations not inconsistent
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with the terms of this Indenture as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.
(b) If temporary Notes are issued, the Issuer shall cause
Definitive Notes to be prepared without unreasonable delay. After the
preparation of Definitive Notes, the temporary Notes shall be exchangeable for
Definitive Notes upon surrender of the temporary Notes at the office or agency
of the Issuer to be maintained as provided in Section 3.2, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes, the
Issuer shall execute, and the Indenture Trustee shall authenticate and deliver
in exchange therefor, a like principal amount of Definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as Definitive Notes.
SECTION 2.4. Tax Treatment. The Issuer has entered into this
Indenture, and the Notes shall be issued, with the intention that, for federal,
state and local income and franchise tax purposes, the Notes shall qualify as
indebtedness of the Issuer secured by the Trust Estate. The Issuer, by entering
into this Indenture, and each Noteholder, by its acceptance of a Note (and each
Note Owner by its acceptance of an interest in the applicable Book-Entry Note),
agree to treat the Notes as indebtedness of the Issuer for federal, state and
local income and franchise tax purposes.
SECTION 2.5. Registration; Registration of Transfer and
Exchange.
(a) The Issuer shall cause to be kept a register (the "Note
Register") in which, subject to such reasonable regulations as it may prescribe,
the Issuer shall provide for the registration of Notes and the registration of
transfers of Notes. The Indenture Trustee initially shall be the registrar (the
"Note Registrar") for the purpose of registering Notes and transfers of Notes as
herein provided. Upon any resignation of any Note Registrar, the Issuer shall
promptly appoint a successor or, if it elects not to make such an appointment,
assume the duties of Note Registrar.
(b) If a Person other than the Indenture Trustee is appointed
by the Issuer as Note Registrar, (i) the Issuer shall give the Indenture Trustee
prompt written notice of the appointment of such Note Registrar and of the
location, or any change in the location, of the Note Register, (ii) the
Indenture Trustee shall have the right to inspect the Note Register at all
reasonable times and to obtain copies thereof and (iii) the Indenture Trustee
shall have the right to rely upon a certificate executed on behalf of the Note
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Registrar by an Executive Officer thereof as to the names and addresses of the
Holders of the Notes and the principal amounts and number of such Notes.
(c) Upon surrender for registration of transfer of any Note at
the office or agency of the Issuer to be maintained as provided in Section 3.2,
if the requirements of Section 8-401 or 8A-401, as applicable, of the Relevant
UCC are met, the Issuer shall execute, and the Indenture Trustee shall
authenticate and deliver to the Noteholder making such surrender, in the name of
the designated transferee or transferees, one or more new Notes of the same
Class in any authorized denomination, of a like aggregate principal amount. The
Indenture Trustee may rely upon the Administrator with respect to the
determination of whether the requirements of Section 8-401 or 8A-401, as
applicable, of the Relevant UCC are met.
(d) At the option of the Noteholder, Notes may be exchanged
for other Notes of the same Class in any authorized denominations, of a like
aggregate principal amount, upon surrender of the Notes to be exchanged at such
office or agency. Whenever any Notes are so surrendered for exchange, if the
requirements of Section 8-401 or 8A-401, as applicable, of the Relevant UCC are
met, the Issuer shall execute, and the Indenture Trustee shall authenticate and
deliver to the Noteholder making such exchange, the Notes which such Noteholder
is entitled to receive. The Indenture Trustee may rely upon the Administrator
with respect to the determination of whether the requirements of Section 8-401
or 8A-401, as applicable, of the Relevant UCC are met.
(e) All Notes issued upon any registration of transfer or
exchange of Notes shall be the valid obligations of the Issuer, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the Notes
surrendered upon such registration of transfer or exchange.
(f) All Notes presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in form satisfactory to the Indenture Trustee duly
executed by, the Holder thereof or such Holder's attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar.
(g) No service charge shall be made to a Holder for any
registration of transfer or exchange of Notes, but the Issuer may require
payment by such Holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Notes, other than exchanges pursuant to Section 2.3 or
9.6 not involving any transfer.
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(h) The Issuer shall not be required to make, and the Note
Registrar need not register, transfers or exchanges of Notes selected for
redemption or Notes with respect to which the due date for any payment will
occur within 15 days.
SECTION 2.6. Mutilated, Destroyed, Lost or Stolen Notes.
(a) If (i) any mutilated Note is surrendered to the Indenture
Trustee, or the Indenture Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, and (ii) there is delivered to the
Indenture Trustee such security or indemnity as may be required by it to hold
the Issuer and the Indenture Trustee harmless, then, in the absence of notice to
the Issuer, the Note Registrar or the Indenture Trustee that such Note has been
acquired by a protected purchaser, and provided that the requirements of Section
8-405 or 8A-405, as applicable, of the Relevant UCC are met, the Issuer shall
execute and the Indenture Trustee shall authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note of the same Class; provided, however, that if any such
destroyed, lost or stolen Note, but not a mutilated Note, shall have become or
within seven (7) days of the Indenture Trustee's receipt of evidence to its
satisfaction of such destruction, loss or theft shall be due and payable, or
shall have been called for redemption in whole pursuant to Section 10.1, instead
of issuing a replacement Note of the same Class, the Issuer may pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. The Indenture Trustee may rely upon the
Administrator with respect to the determination of whether the requirements of
Section 8-405 or 8A-405, as applicable, of the Relevant UCC are met. If, after
the delivery of such replacement Note or payment of a destroyed, lost or stolen
Note pursuant to the proviso to the preceding sentence, a protected purchaser of
the original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer and the Indenture Trustee shall be
entitled to recover such replacement Note (or such payment) from the Person to
whom such replacement Note was delivered or any Person taking such replacement
Note from such Person to whom such replacement Note was delivered or any
assignee of such Person, except a protected purchaser, and shall be entitled to
recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in
connection therewith.
(b) Upon the issuance of any replacement Note under this
Section 2.6, the Issuer may require the payment by the Holder of such Note of a
sum sufficient to cover any tax or other governmental charge that may be imposed
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in connection with such issuance and any other reasonable expenses (including
the fees and expenses of the Indenture Trustee) related thereto.
(c) Every replacement Note issued pursuant to this Section 2.6
in replacement of any mutilated, destroyed, lost or stolen Note shall constitute
an original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
(d) The provisions of this Section 2.6 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.7. Persons Deemed Owners. Prior to due presentation
of a Note for registration of transfer, the Issuer, the Indenture Trustee and
any agent of the Issuer or the Indenture Trustee may treat the Person in whose
name such Note is registered in the Note Register (as of the day of
determination) as the owner of such Note for the purpose of receiving payments
of principal of and interest on such Note and for all other purposes whatsoever,
whether or not such Note shall be overdue, and none of the Issuer, the Indenture
Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by
any notice to the contrary.
SECTION 2.8. Payments.
(a) On each Payment Date, upon receipt of instructions from
the Servicer pursuant to Section 4.6(d) of the Sale and Servicing Agreement, the
Indenture Trustee shall apply or cause to be applied the amount on deposit in
the Collection Account on such Payment Date to make the following payments in
the following order of priority:
(i) to the Servicer, the Total Servicing Fee for the
preceding Collection Period;
(ii) to the Note Payment Account, the Total Note Interest
for such Payment Date;
(iii) if the Notes have not been declared immediately due
and payable, to the Certificate Payment Account, the Total Certificate
Interest for such Payment Date;
(iv) to the Note Payment Account, the Monthly Note
Principal for such Payment Date; provided, however, that if the Notes
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have been declared immediately due and payable following the occurrence
of an Event of Default, the amount to be deposited in the Note Payment
Account pursuant to this clause (iv) shall equal the lesser of the
amount of Total Available Funds available to be applied on such Payment
Date pursuant to this clause (iv) and the outstanding principal balance
of the Notes;
(v) if the Notes have been declared immediately due and
payable following the occurrence of an Event of Default, to the
Certificate Payment Account, the Total Certificate Interest for such
Payment Date;
(vi) to the Certificate Payment Account, the Monthly
Certificate Principal for such Payment Date;
(vii) to the Insurer, the Insurance Premium for such
Payment Date plus any overdue Insurance Premiums for previous Payment
Dates;
(viii) to the Insurer, the aggregate amount of any
unreimbursed payments under the Policy to the extent payable to the
Insurer under the Insurance Agreement plus accrued interest on any
unreimbursed payments under the Policy at the rate provided in the
Insurance Agreement plus any other amounts due the Insurer under the
Insurance Agreement and the Policy;
(ix) to the Reserve Account, the Reserve Account
Deficiency, if any, for such Payment Date; and
(x) to the Seller, any remaining amount of Total
Available Funds.
(b) The principal of each Note shall be payable in
installments on each Payment Date in an aggregate amount (unless the Notes have
been declared immediately due and payable in accordance with Section 5.2
following the occurrence of an Event of Default) for all Classes of Notes equal
to the Monthly Note Principal for such Payment Date. On each Payment Date
(unless the Notes have been declared immediately due and payable in accordance
with Section 5.2 following the occurrence of an Event of Default), upon receipt
of instructions from the Servicer pursuant to Section 4.6(d) of the Sale and
Servicing Agreement, the Indenture Trustee shall apply or cause to be applied
the amount on deposit in the Note Payment Account on such Payment Date to make
the following payments in the following order of priority:
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(i) to the Holders of each Class of Notes, the portion of
the Total Note Interest payable to such Class for such Payment Date;
(ii) to the Class A-1 Noteholders, the Monthly Note
Principal for that Payment Date until the principal amount of the Class
A-1 Notes has been paid in full;
(iii) following payment in full of the Class A-1 Notes, to
the Class A-2 Noteholders, the Monthly Note Principal for that Payment
Date until the principal amount of the Class A-2 Notes has been paid in
full;
(iv) following payment in full of the Class A-2 Notes, to
the Class A-3 Noteholders, the Monthly Note Principal for that Payment
Date until the principal amount of the Class A-3 Notes has been paid in
full; and
(v) following payment in full of the Class A-3 Notes, to
the Class A-4 Noteholders, the Monthly Note Principal for that Payment
Date until the principal amount of the Class A-4 Notes has been paid in
full.
If the amount on deposit in the Note Payment Account on any
Payment Date is less than the amount described in clause (i) above for such
Payment Date, the Indenture Trustee shall pay the available amount to the
Holders of each Class of Notes pro rata based on the Total Note Interest payable
to such Class on such Payment Date. If the amount available to pay principal of
the Notes on any Payment Date is less than the Monthly Note Principal for such
Payment Date, the Indenture Trustee shall pay the available amount to the
Holders of each Class of Notes pro rata based on the outstanding principal
amount of such Class as of such Payment Date.
(c) The principal amount of the Class A-1 Notes, to the extent
not previously paid, shall be due on the Class A-1 Final Payment Date, the
principal amount of the Class A-2 Notes, to the extent not previously paid,
shall be due on the Class A-2 Final Payment Date, the principal amount of the
Class A-3 Notes, to the extent not previously paid, shall be due on the Class
A-3 Final Payment Date and the principal amount of the Class A-4 Notes, to the
extent not previously paid, shall be due on the Class A-4 Final Payment Date.
(d) The Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes shall accrue interest at the Class A-1 Rate, the
Class A-2 Rate, the Class A-3 Rate and the Class A-4 Rate, respectively, and
such interest shall be due and payable on each Payment Date. Interest on the
Class A-1 Notes shall be calculated on the basis of the actual number of days
elapsed and a 360-day year. Interest on the Class A-2 Notes, the Class A-3 Notes
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and the Class A-4 Notes shall be calculated on the basis of a 360-day year of
twelve 30-day months. Subject to Section 3.1, any installment of interest or
principal, if any, payable on any Note that is punctually paid or duly provided
for by the Issuer on the applicable Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered on the
related Record Date by check mailed first-class postage prepaid to such Person's
address as it appears on the Note Register on such Record Date; provided,
however, that, unless Definitive Notes have been issued pursuant to Section
2.13, with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payment shall be made by wire transfer in immediately available funds to the
account designated by such nominee, and except for the final installment of
principal payable with respect to such Note on a Payment Date or on the related
Final Payment Date (and except for the Redemption Price for any Note called for
redemption in whole pursuant to Section 10.1(a) or (b)), which shall be payable
as provided below. The funds represented by any such checks returned undelivered
shall be held in accordance with Section 3.3. The Indenture Trustee shall pay
all Total Note Interest for any Payment Date to the Holders of the Notes on the
related Record Date even if a portion of such Total Note Interest relates to an
earlier Payment Date.
(e) All principal and interest payments on a Class of Notes
shall be made pro rata to the Holders of such Class. The Indenture Trustee
shall, before the Payment Date on which the Issuer expects to pay the final
installment of principal of and interest on any Note, notify the Holder of such
Note as of the related Record Date of such final installment. Such notice shall
be mailed or transmitted by facsimile and shall specify that such final
installment shall be payable only upon presentation and surrender of such Note
and shall specify the place where such Note may be presented and surrendered for
payment of such installment. Notices in connection with redemption of Notes
shall be mailed to Noteholders as provided in Section 10.2.
(f) Notwithstanding the foregoing, the entire unpaid principal
amount of the Notes shall be due and payable, if not previously paid, on the
date on which the Notes have been declared immediately due and payable in
accordance with Section 5.2 following the occurrence of an Event of Default. On
each Payment Date following acceleration of the Notes, upon receipt of
instructions from the Servicer pursuant to Section 4.6(d) of the Sale and
Servicing Agreement, the Indenture Trustee shall apply or cause to be applied
the amount on deposit in the Note Payment Account on such Payment Date to make
the following payments in the following order of priority:
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(i) to the Holders of each Class of Notes, the portion of
the Total Note Interest payable to such Class for such Payment Date;
and
(ii) to the Holders of each Class of Notes, the amount
remaining on deposit in the Note Payment Account on such Payment Date
pro rata based on the outstanding principal amount of such Class as of
such Payment Date.
If the amount on deposit in the Note Payment Account
(including the Reserve Account Draw Amount) on any Payment Date following
acceleration of the Notes is less than the amount described in clause (i) above
for such Payment Date, the Indenture Trustee shall pay the available amount to
the Holders of each Class of Notes pro rata based on the Total Note Interest
payable to such Class on such Payment Date.
SECTION 2.9. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption in whole pursuant to Section
10.1(a) or (b) shall, if surrendered to any Person other than the Indenture
Trustee, be delivered to the Indenture Trustee and shall be promptly canceled by
the Indenture Trustee. The Issuer may at any time deliver to the Indenture
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Issuer may have acquired in any manner whatsoever, and all
Notes so delivered shall be promptly canceled by the Indenture Trustee. No Notes
shall be authenticated in lieu of or in exchange for any Notes canceled as
provided in this Section 2.9, except as expressly permitted by this Indenture.
All canceled Notes may be held or disposed of by the Indenture Trustee in
accordance with its standard retention or disposal policy as in effect at the
time unless the Issuer shall direct by an Issuer Order that they be destroyed or
returned to it, provided that such Issuer Order is timely and the Notes have not
been previously disposed of by the Indenture Trustee.
SECTION 2.10. Release of Collateral. Subject to Section 11.1
and the terms of the Transaction Documents, the Indenture Trustee shall release
property from the lien of this Indenture only upon receipt of an Issuer Request
accompanied by an Officer's Certificate, an Opinion of Counsel and Independent
Certificates in accordance with TIA Sections 314(c) and 314(d)(1) or an Opinion
of Counsel in lieu of such Independent Certificates to the effect that the TIA
does not require any such Independent Certificates. If the Commission shall
issue an exemptive order under TIA Section 304(d) modifying the Owner Trustee's
obligations under TIA Sections 314(c) and 314(d)(1), the Indenture Trustee shall
release property from the lien of this Indenture in accordance with the
conditions and procedures set forth in such exemptive order.
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SECTION 2.11. Book-Entry Notes. The Notes, upon original
issuance, shall be issued in the form of typewritten Notes representing the
Book-Entry Notes, to be delivered to The Depository Trust Company, the initial
Clearing Agency, by, or on behalf of, the Issuer. The Book-Entry Notes shall be
registered initially on the Note Register in the name of Cede & Co. , the
nominee of the initial Clearing Agency, and no Note Owner thereof shall receive
a definitive Note representing such Note Owner's interest in such Note, except
as provided in Section 2.13. Unless and until definitive, fully registered Notes
(the "Definitive Notes") have been issued to such Note Owners pursuant to
Section 2.13:
(i) the provisions of this Section 2.11 shall be in full
force and effect;
(ii) the Note Registrar and the Indenture Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Indenture (including the payment of principal of and interest on the
Notes and the giving of instructions or directions hereunder) as the
sole Holder of the Notes, and shall have no obligation to the Note
Owners;
(iii) to the extent that the provisions of this Section
2.11 conflict with any other provisions of this Indenture, the
provisions of this Section shall control;
(iv) the rights of Note Owners shall be exercised only
through the Clearing Agency and shall be limited to those established
by law and agreements between such Note Owners and the Clearing Agency
and/or the Clearing Agency Participants pursuant to the Note Depository
Agreement; unless and until Definitive Notes are issued pursuant to
Section 2.13, the initial Clearing Agency shall make book-entry
transfers among the Clearing Agency Participants and receive and
transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions
to be taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the principal amount of the Notes
or any Class of Notes Outstanding, the Clearing Agency shall be deemed
to represent such percentage only to the extent that it has received
instructions to such effect from Note Owners and/or Clearing Agency
Participants owning or representing, respectively, such required
percentage of the beneficial interest in the Notes or such Class of
Notes and has delivered such instructions to the Indenture Trustee.
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SECTION 2.12. Notices to Clearing Agency. Whenever a notice or
other communication to the Noteholders is required under this Indenture, unless
and until Definitive Notes shall have been issued to such Note Owners pursuant
to Section 2.13, the Indenture Trustee shall give all such notices and
communications specified herein to be given to Holders of the Notes to the
Clearing Agency, and shall have no obligation to such Note Owners.
SECTION 2.13. Definitive Notes. If (i) the Issuer, the
Administrator or the Servicer advises the Indenture Trustee in writing that the
Clearing Agency is no longer willing or able to properly discharge its
responsibilities with respect to the Book-Entry Notes and the Indenture Trustee
or the Administrator is unable to locate a qualified successor, (ii) the
Administrator, at its option, advises the Indenture Trustee in writing that it
elects to terminate the book-entry system through the Clearing Agency or (iii)
after the occurrence of an Event of Default or an Event of Servicing
Termination, Note Owners of the Book-Entry Notes representing beneficial
interests aggregating not less than 51% of the principal amount of such Notes
advise the Indenture Trustee and the Clearing Agency in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of such Note Owners, then the Clearing Agency shall notify
all Note Owners and the Indenture Trustee of the occurrence of such event and of
the availability of Definitive Notes to Note Owners requesting the same. Upon
surrender to the Indenture Trustee of the typewritten Notes representing the
Book-Entry Notes by the Clearing Agency, accompanied by registration
instructions, the Issuer shall execute and the Indenture Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Indenture Trustee
shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Notes, the Indenture Trustee shall recognize the
Holders of the Definitive Notes as Noteholders.
SECTION 2.14. Authenticating Agents. The Indenture Trustee may
appoint one or more Persons (each, an "Authenticating Agent") with power to act
on its behalf and subject to its direction in the authentication of Notes in
connection with issuance, transfers and exchanges under Sections 2.2, 2.3, 2.5
and 2.6, as fully to all intents and purposes as though each such Authenticating
Agent had been expressly authorized by those Sections to authenticate such
Notes. For all purposes of this Indenture, the authentication of Notes by an
Authenticating Agent pursuant to this Section 2.14 shall be deemed to be the
authentication of Notes "by the Indenture Trustee. "
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Any corporation into which any Authenticating Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, consolidation or conversion to which any
Authenticating Agent shall be a party, or any corporation succeeding to all or
substantially all of the corporate trust business of any Authenticating Agent,
shall be the successor of such Authenticating Agent hereunder, without the
execution or filing of any further act on the part of the parties hereto or such
Authenticating Agent or such successor corporation.
Any Authenticating Agent may at any time resign by giving
written notice of resignation to the Indenture Trustee and the Owner Trustee.
The Indenture Trustee may at any time terminate the agency of any Authenticating
Agent by giving written notice of termination to such Authenticating Agent and
the Owner Trustee. Upon receiving such notice of resignation or upon such a
termination, the Indenture Trustee may appoint a successor Authenticating Agent
and shall give written notice of any such appointment to the Owner Trustee.
The Administrator agrees to pay to each Authenticating Agent
from time to time reasonable compensation for its services. The provisions of
Sections 2.9 and 6.4 shall be applicable to any Authenticating Agent.
ARTICLE III
COVENANTS
SECTION 3.1. Payment Covenant. The Issuer shall duly and
punctually pay the principal of and interest, if any, on the Notes in accordance
with the terms of the Notes and this Indenture. Amounts properly withheld under
the Code by any Person from a payment to any Noteholder of interest and/or
principal shall be considered as having been paid by the Issuer to such
Noteholder for all purposes of this Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Issuer shall
maintain in the Borough of Manhattan, The City of New York, an office or agency
where Notes may be surrendered for registration of transfer or exchange, and
where notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Indenture
Trustee to serve as its agent for the foregoing purposes. The Issuer shall give
prompt written notice to the Indenture Trustee of the location, and of any
change in the location, of any such office or agency. If, at any time, the
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Issuer shall fail to maintain any such office or agency or shall fail to furnish
the Indenture Trustee with the address thereof, such surrenders, notices and
demands may be made or served at the Corporate Trust Office, and the Issuer
hereby appoints the Indenture Trustee as its agent to receive all such
surrenders, notices and demands.
SECTION 3.3. Money for Payments To Be Held in Trust.
(a) As provided in Section 8.2, all payments of amounts due
and payable with respect to the Notes that are to be made from amounts withdrawn
from the Trust Accounts shall be made on behalf of the Issuer by the Indenture
Trustee or by another Paying Agent, and no amounts so withdrawn from the Trust
Accounts shall be paid over to the Issuer, except as provided in this Section
3.3.
(b) On or before each Payment Date and Redemption Date, the
Issuer shall deposit or cause to be deposited in the Note Payment Account an
aggregate sum sufficient to pay the amounts then becoming due under the Notes,
such sum to be held in trust for the benefit of the Persons entitled thereto,
and (unless the Paying Agent is the Indenture Trustee) shall promptly notify the
Indenture Trustee of its action or failure so to act.
(c) The Issuer shall cause each Paying Agent other than the
Indenture Trustee to execute and deliver to the Indenture Trustee an instrument
in which such Paying Agent shall agree with the Indenture Trustee (and if the
Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the
provisions of this Section 3.3, that such Paying Agent shall:
(i) hold all sums held by it for the payment of amounts
due with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by
the Issuer (or any other obligor upon the Notes) of which it has actual
knowledge in the making of any payment required to be made with respect
to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee, forthwith
pay to the Indenture Trustee all sums so held in trust by such Paying
Agent;
(iv) immediately resign as a Paying Agent and forthwith
pay to the Indenture Trustee all sums held by it in trust for payment
of the Notes if at any time it ceases to meet the standards required to
be met by a Paying Agent at the time of its appointment; and
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(v) comply with all requirements of the Code and any
state or local tax law with respect to the withholding from any
payments made by it on the Notes of any applicable withholding taxes
imposed thereon and with respect to any applicable reporting
requirements in connection therewith.
(d) The Issuer may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other purpose, by
Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums
held in trust by such Paying Agent, such sums to be held by the Indenture
Trustee upon the same trusts as those upon which such sums were held by such
Paying Agent, and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further liability with
respect to such sums.
(e) Subject to applicable laws with respect to escheat of
funds, any money held by the Indenture Trustee or any Paying Agent in trust for
the payment of any amount due with respect to any Note and remaining unclaimed
for two (2) years after such amount has become due and payable shall be
discharged from such trust and be paid to the Issuer on Issuer Request, and the
Holder of such Note shall thereafter, as an unsecured general creditor, look
only to the Issuer for payment thereof (but only to the extent of the amounts so
paid to the Issuer), and all liability of the Indenture Trustee or such Paying
Agent with respect to such trust money shall thereupon cease; provided, however,
that the Indenture Trustee or such Paying Agent, before being required to make
any such repayment, shall at the expense and direction of the Issuer cause to be
published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in The City of New
York, notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than thirty (30) days from the date of such
publication, any unclaimed balance of such money then remaining shall be repaid
to the Issuer. The Indenture Trustee shall also adopt and employ, at the expense
and direction of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but have not been surrendered for
redemption in whole pursuant to Section 10.1 or whose right to or interest in
monies due and payable but not claimed is determinable from the records of the
Indenture Trustee or of any Paying Agent at the last address of record for each
such Holder).
SECTION 3.4. Existence. The Issuer shall keep in full effect
its existence, rights and franchises as a business trust under the laws of the
State of Delaware (unless it becomes, or any successor Issuer hereunder is or
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becomes, organized under the laws of any other State or of the United States of
America, in which case the Issuer shall keep in full effect its existence,
rights and franchises under the laws of such other jurisdiction) and shall
obtain and preserve its qualification to do business in each jurisdiction in
which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Collateral and each other
instrument or agreement included in the Trust Estate.
SECTION 3.5. Protection of Trust Estate. The Issuer shall from
time to time execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and shall take such other action necessary or
advisable to:
(i) maintain or preserve the lien and security interest
(and the priority thereof) of this Indenture or carry out more
effectively the purposes hereof;
(ii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the
rights of the Indenture Trustee and the Noteholders in the Trust Estate
against the claims of all Persons.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required to be executed pursuant to this Section 3.5.
SECTION 3.6. Opinions as to Trust Estate.
(a) On the Closing Date, the Issuer shall deliver to the
Indenture Trustee an Opinion of Counsel substantially in the form attached
hereto as Exhibit B.
(b) On or before March 31 of each year (commencing with the
year 2000), the Issuer shall deliver to the Indenture Trustee an Opinion of
Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording, filing, re-recording and refiling of
this Indenture, any indentures supplemental hereto and any other requisite
documents and with respect to the execution and filing of any financing
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statements and continuation statements as is necessary to maintain the lien and
security interest created by this Indenture and reciting the details of such
action or stating that, in the opinion of such counsel, no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe the recording, filing, re-recording and refiling of this
Indenture, any indentures supplemental hereto and any other requisite documents
and the execution and filing of any financing statements and continuation
statements that shall, in the opinion of such counsel, be required to maintain
the lien and security interest of this Indenture until March 31 in the following
year.
SECTION 3.7. Performance of Obligations; Servicing of
Contracts.
(a) The Issuer shall not take any action and shall use its
best efforts not to permit any action to be taken by others that would release
any Person from any of such Person's material covenants or obligations under any
instrument or agreement included in the Trust Estate or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture and the other Transaction Documents.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by a Person identified to the Indenture Trustee in an Officer's Certificate
shall be deemed to be action taken by the Issuer. Initially, the Issuer has
contracted with the Servicer and the Administrator to assist the Issuer in
performing its duties under this Indenture.
(c) The Issuer shall punctually perform and observe all of its
obligations and agreements contained in this Indenture, the other Transaction
Documents and the instruments and agreements included in the Trust Estate,
including, but not limited to, filing or causing to be filed all financing
statements and continuation statements required to be filed under the Relevant
UCC by the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Transaction Document or any provision
thereof without the consent of the Indenture Trustee or the Holders of Notes
evidencing not less than 51% of the Note Balance.
(d) If the Issuer shall have knowledge of the occurrence of an
Event of Servicing Termination under the Sale and Servicing Agreement, the
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Issuer shall promptly notify the Indenture Trustee, the Insurer and the Rating
Agencies thereof and shall specify in such notice the action, if any, the Issuer
is taking in respect of such default. If an Event of Servicing Termination shall
arise from the failure of the Servicer to perform any of its duties or
obligations under the Sale and Servicing Agreement with respect to the
Contracts, the Issuer shall take all reasonable steps available to it to remedy
such failure.
(e) As promptly as possible after the giving of notice of
termination to the Servicer of the Servicer's rights and powers pursuant to
Section 8.1 of the Sale and Servicing Agreement, the Issuer shall (subject to
the rights of the Indenture Trustee to direct such appointment pursuant to
Section 8.2 of the Sale and Servicing Agreement) appoint a successor servicer
acceptable to the Insurer (the "Successor Servicer"), and such Successor
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Indenture Trustee. In the event that a Successor Servicer has
not been appointed and has not accepted its appointment at the time when the
Servicer ceases to act as Servicer, the Indenture Trustee, without further
action, shall automatically be appointed the Successor Servicer. The Indenture
Trustee may resign as the Servicer by giving written notice of such resignation
to the Issuer and in such event shall be released from such duties and
obligations, such release not to be effective until the date a new servicer
enters into a servicing agreement with the Issuer as provided below. Upon
delivery of any such notice to the Issuer, the Issuer shall obtain a new
servicer as the Successor Servicer under the Sale and Servicing Agreement. Any
Successor Servicer (other than the Indenture Trustee) shall (i) be an
established financial institution having a net worth of not less than
$50,000,000 and whose regular business includes the servicing of installment
sale contracts and (ii) enter into a servicing agreement with the Issuer having
substantially the same provisions as the provisions of the Sale and Servicing
Agreement applicable to the Servicer. If, within thirty (30) days after the
delivery of the notice referred to above, the Issuer shall not have obtained
such a new servicer, the Indenture Trustee may appoint, or may petition a court
of competent jurisdiction to appoint, a Successor Servicer. In connection with
any such appointment, the Indenture Trustee may make such arrangements for the
compensation of such successor as it and such successor shall agree, subject to
the limitations set forth below and in the Sale and Servicing Agreement, and, in
accordance with Section 8.2 of the Sale and Servicing Agreement, the Issuer
shall enter into an agreement with such successor for the servicing of the
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Contracts (such agreement to be in form and substance satisfactory to the
Indenture Trustee). If the Indenture Trustee shall succeed to the Servicer's
duties as servicer of the Contracts as provided herein, it shall do so in its
individual capacity and not in its capacity as Indenture Trustee and,
accordingly, the provisions of Article VI shall be inapplicable to the Indenture
Trustee in its duties as the successor to the Servicer and the servicing of the
Contracts. In case the Indenture Trustee shall become successor to the Servicer
under the Sale and Servicing Agreement, the Indenture Trustee shall be entitled
to appoint as Servicer any one of its Affiliates; provided, however, that the
Indenture Trustee, in its capacity as the Servicer, shall be fully liable for
the actions and omissions of such Affiliate in such capacity as Successor
Servicer.
(f) Upon any termination of the Servicer's rights and powers
pursuant to Section 8.1 of the Sale and Servicing Agreement, the Issuer shall
promptly notify the Indenture Trustee and the Insurer of such termination. Upon
any appointment of a Successor Servicer by the Issuer, the Issuer shall promptly
notify the Indenture Trustee and the Insurer of such appointment, specifying in
such notice the name and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the
assignment granted to the Indenture Trustee under this Indenture or the rights
of the Indenture Trustee hereunder, the Issuer shall not, without the prior
written consent of the Insurer (if no Insurer Default shall have occurred an be
continuing), the Indenture Trustee and the Holders of not less than 51% of the
Note Balance, amend, modify, waive, supplement, terminate or surrender, or agree
to any amendment, modification, waiver, supplement, termination or surrender of,
the terms of any Collateral (except to the extent otherwise provided in the Sale
and Servicing Agreement or the other Transaction Documents).
SECTION 3.8. Negative Covenants. If any Notes are
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture, the
Trust Agreement, the Purchase Agreement or the Sale and Servicing
Agreement, sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Issuer, including those included in the
Trust Estate, unless directed to do so by the Indenture Trustee with
the prior written consent of the Insurer;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code or
applicable state law) or assert any claim against any present or former
Noteholder by reason of the payment of taxes levied or assessed upon
the Issuer;
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(iii) dissolve or liquidate in whole or in part;
(iv) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the Trust Estate or any part thereof or any interest therein or
the proceeds thereof (other than tax liens, mechanics' liens and other
liens that arise by operation of law, in each case on any of the
Financed Vehicles and arising solely as a result of an action or
omission of the related Obligor) or (C) permit the lien of this
Indenture not to constitute a valid first priority (other than with
respect to any such tax, mechanics' or other lien) security interest in
the Trust Estate;
(v) 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 this Indenture and activities incidental to such
activities; or
(vi) incur, assume or guarantee any indebtedness other
than the indebtedness evidenced by the Notes or indebtedness otherwise
permitted by the Purchase Agreement, the Trust Agreement, the Sale and
Servicing Agreement or this Indenture.
SECTION 3.9. Annual Statement as to Compliance. On or before
May 31 of each year (commencing with the year 2000), the Issuer shall deliver to
the Indenture Trustee and the Insurer an Officer's Certificate stating, as to
the Authorized Officer signing such Officer's Certificate, that:
(i) a review of the activities of the Issuer during the
preceding Fiscal Year (or, in the case of the Officer's Certificate to
be delivered in the year 2000, during the period beginning on the
Closing Date and ending on February 29, 2000) and of its performance
under this Indenture has been made under such Authorized Officer's
supervision; and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such preceding Fiscal Year
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(or, in the case of the Officer's Certificate to be delivered in the
year 2000, during the period beginning on the Closing Date and ending
on February 29, 2000) or, if there has been a default in its compliance
with any such condition or covenant, specifying each such default known
to such Authorized Officer and the nature and status thereof.
SECTION 3.10. Issuer May Consolidate, etc., Only on Certain
Terms.
(a) The Issuer shall not consolidate or merge with or into any
other Person, unless:
(i) the Person formed by or surviving such consolidation
or merger (if other than the Issuer) shall be a Person organized and
existing under the laws of the United States of America or any State
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Indenture Trustee, in form satisfactory
to the Indenture Trustee and the Insurer (if no Insurer Default shall
have occurred and be continuing), the due and punctual payment of the
principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture on the
part of the Issuer to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel
(and shall have delivered copies thereof to the Indenture Trustee) to
the effect that such transaction will not have any material adverse tax
consequence to the Issuer, any Noteholder or any Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture
Trustee an Officer's Certificate and an Opinion of Counsel each stating
that such consolidation or merger and such supplemental indenture
comply with this Article III and that all conditions precedent provided
for in this Indenture relating to such transaction have been complied
with (including any filing required by the Exchange Act); and
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(vii) if no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of
such consolidation or merger at least 20 Business Days prior to the
consummation of such consolidation or merger and shall have received
the prior written approval of the Insurer of such consolidation or
merger and the Issuer or the Person (if other than the Issuer) formed
by or surviving such consolidation or merger has a net worth,
immediately after such consolidation or merger, that is (A) greater
than zero and (B) not less than the net worth of the Issuer immediately
prior to giving effect to such consolidation or merger.
(b) Other than as specifically contemplated by the Transaction
Documents, the Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any other Person,
unless:
(i) the Person that acquires by conveyance or transfer
the properties or assets of the Issuer the conveyance or transfer of
which is hereby restricted (A) shall be a United States citizen or a
Person organized and existing under the laws of the United States of
America or any State, (B) shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Indenture Trustee,
in form satisfactory to the Indenture Trustee and the Insurer (if no
Insurer Default shall have occurred and be continuing), the due and
punctual payment of the principal of and interest on all Notes and the
performance or observance of every agreement and covenant of this
Indenture on the part of the Issuer to be performed or observed, all as
provided herein, (C) shall expressly agree by means of such
supplemental indenture that all right, title and interest so conveyed
or transferred shall be subject and subordinate to the rights of the
Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, shall expressly agree to indemnify, defend and
hold harmless the Issuer against and from any loss, liability or
expense arising under or related to this Indenture and the Notes and
(E) shall expressly agree by means of such supplemental indenture that
such Person (or if a group of Persons, then one specified Person) shall
make all filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
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(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel
(and shall have delivered copies thereof to the Indenture Trustee and
the Insurer) to the effect that such transaction will not have any
material adverse tax consequence to the Issuer, any Noteholder or any
Certificateholder;
(v) any action that is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Indenture
Trustee and the Insurer an Officer's Certificate and an Opinion of
Counsel each stating that such conveyance or transfer and such
supplemental indenture comply with this Article III and that all
conditions precedent provided for in this Indenture relating to such
transaction have been complied with (including any filing required by
the Exchange Act); and
(vii) if no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of
such transaction at least 20 Business Days prior to the consummation of
such transaction and shall have received the prior written approval of
the Insurer of such transaction and the Person that acquires by
conveyance or transfer the properties or assets of the Issuer has a net
worth, immediately after such transaction, that is (A) greater than
zero and (B) not less than the net worth of the Issuer immediately
prior to giving effect to such transaction.
SECTION 3.11. Successor or Transferee.
(a) Upon any consolidation or merger of the Issuer in
accordance with Section 3.10(a), the Person formed by or surviving such
consolidation or merger (if other than the Issuer) shall succeed to, and be
substituted for, and may exercise every right and power of, the Issuer under
this Indenture with the same effect as if such Person had been named as the
Issuer herein.
(b) Upon any conveyance or transfer of all the properties and
assets of the Issuer in accordance with Section 3.10(b), CarMax Auto Owner Trust
1999-1 shall be released from every covenant and agreement of this Indenture to
be observed or performed on the part of the Issuer with respect to the Notes
immediately upon the delivery of written notice to the Indenture Trustee and the
Insurer stating that CarMax Auto Owner Trust 1999-1 is to be so released.
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SECTION 3.12. No Other Business. The Issuer shall not engage
in any business other than financing, acquiring, owning and pledging the
Contracts in the manner contemplated by this Indenture and the other Transaction
Documents and activities incidental thereto.
SECTION 3.13. No Borrowing. The Issuer shall not issue,
incur, assume, guarantee or otherwise become liable, directly or indirectly, for
any indebtedness except for the Notes.
SECTION 3.14. Servicer's Obligations. The Issuer shall cause
the Servicer to comply with the Sale and Servicing Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities. Except as contemplated by this Indenture and the other Transaction
Documents, the Issuer shall not make any loan or advance or credit to, or
guarantee (directly or indirectly or by an instrument having the effect of
assuring another's payment or performance on any obligation or capability of so
doing or otherwise), endorse or otherwise become contingently liable, directly
or indirectly, in connection with the obligations, stocks or dividends of, or
own, purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not
make any expenditure (by long-term or operating lease or otherwise) for capital
assets (either realty or personalty).
SECTION 3.17. Restricted Payments. The Issuer shall not,
directly or indirectly, (i) make any distribution (by reduction of capital or
otherwise), whether in cash, property, securities or a combination thereof, to
the Owner Trustee or any owner of a beneficial interest in the Issuer or
otherwise with respect to any ownership or equity interest or security in or of
the Issuer or to the Servicer, (ii) redeem, purchase, retire or otherwise
acquire for value any such ownership or equity interest or security or (iii) set
aside or otherwise segregate any amounts for any such purpose; provided,
however, that the Issuer may make, or cause to be made, (A) payments to the
Servicer, the Owner Trustee and the Certificateholders as contemplated by, and
to the extent funds are available for such purpose under, the Sale and Servicing
Agreement or the Trust Agreement and (B) payments to the Indenture Trustee
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pursuant to Section 2(a)(ii) of the Administration Agreement. The Issuer shall
not, directly or indirectly, make payments to or distributions from the
Collection Account except in accordance with this Indenture and the other
Transaction Documents.
SECTION 3.18. Notice of Events of Default. The Issuer shall
give the Indenture Trustee, the Insurer and the Rating Agencies prompt written
notice of each Event of Default hereunder, each default on the part of the
Seller or the Servicer of its obligations under the Sale and Servicing Agreement
and each default on the part of CarMax or the Seller of its obligations under
the Purchase Agreement.
SECTION 3.19. Removal of Administrator. For so long as any
Notes are Outstanding, the Issuer shall not remove the Administrator without
cause unless the Rating Agency Condition shall have been satisfied in connection
therewith.
SECTION 3.20. Further Instruments and Acts. Upon request of
the Indenture Trustee or the Insurer, the Issuer shall execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1. Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect with respect to the Notes except
as to (i) rights of registration of transfer and exchange, (ii) substitution of
mutilated, destroyed, lost or stolen Notes, (iii) rights of Noteholders to
receive payments of principal thereof and interest thereon, (iv) Sections 3.3,
3.4, 3.5, 3.8, 3.10, 3.12, 3.13, 3.16 and 3.17, (v) the rights, obligations and
immunities of the Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 6.7 and the obligations of the Indenture Trustee
under Section 4.3), and (vi) the rights of Noteholders as beneficiaries hereof
with respect to the property so deposited with the Indenture Trustee payable to
all or any of them, and the Indenture Trustee, on demand of and at the expense
of the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when:
(A) either
(1) all Notes of all Classes theretofore
authenticated and delivered (other than (i) Notes that have been
destroyed, lost or stolen and that have been replaced or paid as
provided in Section 2.6 and (ii) Notes for whose payment money has
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theretofore been irrevocably deposited in trust or segregated and held
in trust by the Issuer and thereafter repaid to the Issuer or
discharged from such trust, as provided in Section 3.3) have been
delivered to the Indenture Trustee for cancellation and the Policy has
expired and has been returned to the Insurer for cancellation; or
(2) all Notes not theretofore delivered to the
Indenture Trustee for cancellation have become due and payable and the
Issuer has irrevocably deposited or caused to be irrevocably deposited
with the Indenture Trustee, in trust, cash or direct obligations of or
obligations guaranteed by the United States of America (which will
mature prior to the date needed), in an amount sufficient to pay and
discharge the entire indebtedness on such Notes when due on the
applicable Final Payment Date or Redemption Date (if Notes shall have
been called for redemption pursuant to Section 10.1(a)), as the case
may be;
(B) the Issuer has paid or caused to be paid all other sums
payable by the Issuer hereunder and under the other Transaction Documents;
(C) the Issuer has delivered to the Indenture Trustee and the
Insurer an Officer's Certificate, an Opinion of Counsel and (if required by the
TIA or the Indenture Trustee) an Independent Certificate from a firm of
certified public accountants, each meeting the applicable requirements of
Section 11.1(a) and, subject to Section 11.2, each stating that all conditions
precedent provided for in this Indenture relating to the satisfaction and
discharge of this Indenture have been complied with; and
(D) the Issuer has delivered to the Indenture Trustee an
Opinion of Counsel to the effect that the satisfaction and discharge of this
Indenture pursuant to this Section 4.1 will not cause any Noteholder to be
treated as having sold or exchanged any of its Notes for purposes of Section
1001 of the Code.
SECTION 4.2. Satisfaction, Discharge and Defeasance of the
Notes.
(a) Upon satisfaction of the conditions set forth in
subsection (b) below, the Issuer shall be deemed to have paid and discharged the
entire indebtedness on all the Notes Outstanding, and the provisions of this
Indenture, as it relates to such Notes, shall no longer be in effect (and the
Indenture Trustee, at the expense of the Issuer, shall execute proper
instruments acknowledging the same), except as to:
(i) the rights of the Noteholders to receive, from the
trust funds described in subsection (b)(i) hereof, payment of the
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principal of and interest on the Notes Outstanding at maturity of such
principal or interest;
(ii) the obligations of the Issuer with respect to the
Notes under Sections 2.5, 2.6, 3.2 and 3.3;
(iii) the obligations of the Issuer to the Indenture
Trustee under Section 6.7; and
(iv) the rights, powers, trusts and immunities of the
Indenture Trustee hereunder and the duties of the Indenture Trustee
hereunder.
(b) The satisfaction, discharge and defeasance of the Notes
pursuant to subsection (a) of this Section 4.2 is subject to the satisfaction of
all of the following conditions:
(i) the Issuer has deposited or caused to be deposited
irrevocably (except as provided in Section 4.4) with the Indenture
Trustee as trust funds in trust, specifically pledged as security for,
and dedicated solely to, the benefit of the Holders of the Notes,
which, through the payment of interest and principal in respect thereof
in accordance with their terms will provide, not later than one day
prior to the due date of any payment referred to below, money in an
amount sufficient, in the opinion of a nationally recognized firm of
independent certified public accountants expressed in a written
certification thereof delivered to the Indenture Trustee, to pay and
discharge the entire indebtedness on the Notes Outstanding, for
principal thereof and interest thereon to the date of such deposit (in
the case of Notes that have become due and payable) or to the maturity
of such principal and interest, as the case may be;
(ii) such deposit will not result in a breach or violation
of, or constitute an event of default under, any Transaction Document
or other agreement or instrument to which the Issuer is bound;
(iii) no Event of Default has occurred and is continuing on
the date of such deposit or on the ninety-first (91st) day after such
date;
(iv) the Issuer has delivered to the Indenture Trustee and
the Insurer an Opinion of Counsel to the effect that the satisfaction,
discharge and defeasance of the Notes pursuant to this Section 4.2 will
not cause any Noteholder to be treated as having sold or exchanged any
of its Notes for purposes of Section 1001 of the Code; and
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(v) the Issuer has delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel, each stating that all
conditions precedent provided for in this Indenture relating to the
defeasance contemplated by this Section 4.2 have been complied with.
SECTION 4.3. Application of Trust Money. All monies deposited
with the Indenture Trustee pursuant to Section 4.1 shall be held in trust and
applied by the Indenture Trustee, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying Agent,
as the Indenture Trustee may determine, to the Holders of the Notes for the
payment or redemption of which such monies have been deposited with the
Indenture Trustee, of all sums due and to become due thereon for principal and
interest, but such monies need not be segregated from other funds except to the
extent required herein or in the Sale and Servicing Agreement or required by
law.
SECTION 4.4. Repayment of Monies Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture with respect to
the Notes, all monies then held by any Paying Agent other than the Indenture
Trustee under the provisions of this Indenture with respect to such Notes shall,
upon demand of the Issuer, be paid to the Indenture Trustee to be held and
applied according to Section 3.3, and thereupon such Paying Agent shall be
released from all further liability with respect to such monies.
ARTICLE V
REMEDIES
SECTION 5.1. Events of Default. "Event of Default" means the
occurrence of any one of the following events (whatever the reason for such
event and whether such event shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any
Note when the same becomes due and payable and such default shall
continue for a period of five Business Days after notice thereof is
given to the Issuer by the Indenture Trustee, the Insurer or the
Servicer or to the Issuer and the Indenture Trustee by the Holders of
Notes evidencing not less than 25% of the Note Balance;
(ii) default in the payment of any principal due and
payable on any Class of Notes on the Final Payment Date for such Class,
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and such default shall continue for a period of five Business Days
after notice thereof is given to the Issuer by the Indenture Trustee,
the Insurer and the Servicer or to the Issuer and the Indenture Trustee
by the Holders of Notes evidencing not less than 25% of the Note
Balance;
(iii) default in the observance or performance of any
material covenant or agreement of the Issuer made in this Indenture
(other than a covenant or agreement a default in the observance or
performance of which is specifically dealt with elsewhere in this
Section 5.1), and such default shall continue or not be cured for a
period of sixty (60) days after there shall have been given, by
registered or certified mail, to the Issuer by the Indenture Trustee or
to the Issuer and the Indenture Trustee by the Holders of Notes
evidencing not less than 25% of the Note Balance, a written notice
specifying such default and requiring it to be remedied and stating
that such notice is a notice of Default hereunder;
(iv) any representation or warranty of the Issuer made in
this Indenture or in any certificate delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and the
circumstance or condition in respect of which such representation or
warranty was incorrect shall not have been eliminated or otherwise
cured for a period of thirty (30) days after there shall have been
given, by registered or certified mail, to the Issuer by the Indenture
Trustee or to the Issuer and the Indenture Trustee by the Holders of
Notes evidencing not less than 25% of the Note Balance, a written
notice specifying such incorrect representation or warranty and
requiring it to be remedied and stating that such notice is a notice of
Default hereunder;
(v) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of sixty (60)
consecutive days; or
(vi) the commencement by the Issuer of a voluntary case
under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Issuer to
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the entry of an order for relief in an involuntary case under any such
law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Trust Estate, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
any action by the Issuer in furtherance of any of the foregoing;
provided, however, that if no 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 no Insurer Default shall have occurred
and be continuing, an Event of Default shall occur only upon delivery by the
Insurer to the Indenture Trustee of notice of the occurrence of such Event of
Default. The failure to pay principal on any Class of Notes shall not result in
the occurrence of an Event of Default until the Final Maturity Date for such
Class of Notes.
The Issuer shall deliver to the Indenture Trustee, within five (5) days after
the occurrence of any event that, with notice or the lapse of time or both,
would become an Event of Default under clause (iii) or (iv), written notice of
such Default in the form of an Officer's Certificate, the status of such Default
and what action the Issuer is taking or proposes to take with respect to such
Default.
SECTION 5.2. Acceleration of Maturity; Rescission and
Annulment.
(a) If no Insurer Default shall have occurred and be
continuing, if an Event of Default shall have occurred and be continuing, then
the Insurer shall have the right, but not the obligation, upon prior written
notice to each Rating Agency, to declare the Notes to be immediately due and
payable by written notice to the Issuer, the Servicer and the Indenture Trustee,
and upon any such declaration the unpaid principal amount of the Notes, together
with accrued and unpaid interest thereon through the date of acceleration, shall
become immediately due and payable. The Indenture Trustee shall have no
discretion with respect to the acceleration of the Notes under the foregoing
circumstances. In the event of any such acceleration of the Notes, the Indenture
Trustee shall continue to make claims under the Policy with respect to the
Notes.
(b) If an Insurer Default has occurred and is continuing and
an Event of Default has occurred and is continuing, then and in every such case
the Indenture Trustee or the Holders of Notes evidencing not less than 66 2/3%
of the Note Balance may, upon prior written notice to each Rating Agency,
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declare the Notes to be immediately due and payable by written notice to the
Issuer (and to the Indenture Trustee if given by Noteholders), and upon any such
declaration the unpaid principal amount of the Notes, together with accrued and
unpaid interest thereon through the date of acceleration, shall become
immediately due and payable.
(c) At any time after a declaration of acceleration of
maturity has been made and before a judgment or decree for payment of the amount
due has been obtained by the Indenture Trustee as hereinafter provided in this
Article V, the Holders of Notes evidencing not less than 66 2/3% of the Note
Balance, by written notice to the Issuer and the Indenture Trustee, may rescind
and annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Indenture
Trustee a sum sufficient to pay all principal of and interest on the
Notes and all other amounts that would then be due hereunder or upon
the Notes if the Event of Default giving rise to such acceleration had
not occurred; and
(ii) all Events of Default, other than the nonpayment of
the principal of the Notes that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
(d) If an Event of Default has occurred and is continuing, the
Insurer may elect to prepay all or any portion of the Note Balance, plus accrued
but unpaid interest thereon to the date of payment; provided, however, that the
Insurer shall fulfill its obligations under the Policy.
(e) If an Event of Default has occurred and is continuing and
the Note Balance has been paid in full, the Insurer may elect to prepay all or
any portion of the Certificate Balance, plus accrued but unpaid interest thereon
to the date of payment; provided, however, that the Insurer shall fulfill its
obligations under the Policy.
SECTION 5.3. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee.
(a) If (i) default is made in the payment of any interest on
any Note when the same becomes due and payable, and such default continues for a
period of five (5) Business Days, or (ii) default is made in the payment of the
principal of any Note when the same becomes due and payable, the Issuer shall,
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upon demand of the Indenture Trustee, pay to the Indenture Trustee, for the
benefit of the Holders of the Notes, the amount then due and payable on the
Notes for principal and interest, with interest upon the overdue principal at
the applicable Note Interest Rate and, to the extent payment at such rate of
interest shall be legally enforceable, upon overdue installments of interest at
the applicable Note Interest Rate and in addition thereto such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel and other amounts due and owing to the
Indenture Trustee pursuant to Section 6.7.
(b) If the Issuer shall fail forthwith to pay such amounts
upon such demand, the Indenture Trustee, in its own name and as trustee of an
express trust, may institute a Proceeding for the collection of the sums so due
and unpaid, and may prosecute such Proceeding to judgment or final decree, and
may enforce the same against the Issuer or any other obligor upon the Notes and
collect in the manner provided by law out of the property of the Issuer or such
other obligor, wherever situated, the monies adjudged or decreed to be payable.
(c) If an Event of Default occurs and is continuing, the
Indenture Trustee may, as more particularly provided in Section 5.4, in its
discretion, proceed to protect and enforce its rights and the rights of the
Noteholders and the Insurer by such appropriate Proceedings as the Indenture
Trustee shall deem most effective to protect and enforce such rights, whether
for the specific enforcement of any covenant or agreement in this Indenture or
in aid of the exercise of any power granted herein or to enforce any other
proper remedy or legal or equitable right vested in the Indenture Trustee by
this Indenture or by law.
(d) If there shall be pending, relative to the Issuer or any
other obligor upon the Notes or any Person having or claiming an ownership
interest in the Trust Estate, Proceedings under Title 11 of the United States
Code or any other applicable federal or state bankruptcy, insolvency or other
similar law, or if a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or if there shall be pending any other comparable judicial
Proceedings relative to the Issuer or any other obligor upon the Notes, or to
the creditors or property of the Issuer or such other obligor, the Indenture
Trustee, irrespective of whether the principal of any Notes shall then be due
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and payable as therein expressed or by declaration or otherwise and irrespective
of whether the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section 5.3, shall be entitled and empowered, by intervention
in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect of the
Notes and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
(including any claim for reasonable compensation to the Indenture
Trustee and each predecessor Indenture Trustee, and their respective
agents, attorneys and counsel, and all other amounts due and owing to
the Indenture Trustee pursuant to Section 6.7) and of the Noteholders
allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations,
to vote on behalf of the Noteholders in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
(iii) to collect and receive any monies or other property
payable or deliverable on any such claims and to pay all amounts
received with respect to the claims of the Noteholders and of the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee or the Noteholders allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of the Noteholders to make
payments to the Indenture Trustee and, in the event that the Indenture Trustee
shall consent to the making of payments directly to the Noteholders, to pay to
the Indenture Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee and each predecessor Indenture Trustee,
and their respective agents, attorneys and counsel, and all other amounts due
and owing to the Indenture Trustee pursuant to Section 6.7.
(e) Nothing herein contained shall be deemed to authorize the
Indenture Trustee to authorize or consent to or vote for or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except, as aforesaid, to vote for the election
of a trustee in bankruptcy or similar Person.
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(f) All rights of action and of asserting claims under this
Indenture, or under any of the Notes, may be enforced by the Indenture Trustee
without the possession of any of the Notes or the production thereof in any
trial or other Proceedings relative thereto, and any such action or Proceedings
instituted by the Indenture Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture Trustee and their respective agents and attorneys, shall
be for the ratable benefit of the Holders of the Notes.
(g) In any Proceedings brought by the Indenture Trustee (and
also any Proceedings involving the interpretation of any provision of this
Indenture to which the Indenture Trustee shall be a party), the Indenture
Trustee shall be held to represent all the Noteholders, and it shall not be
necessary to make any Noteholder a party to any such Proceedings.
SECTION 5.4. Remedies.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall, at the direction of the Insurer (if no Insurer Default
has occurred and is continuing), or at the direction of the Holders of Notes
evidencing not less than 66 2/3% of the Note Balance (if an Insurer Default has
occurred and is continuing), take one or more of the following actions as so
directed (subject to Section 5.5):
(i) institute Proceedings in its own name and as trustee
of an express trust for the collection of all amounts then payable on
the Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon the Notes monies adjudged
due;
(ii) institute Proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect to the
Trust Estate;
(iii) exercise any remedies of a secured party under the
Relevant UCC and take any other appropriate action to protect and
enforce the rights and remedies of the Indenture Trustee and the
Noteholders; and
(iv) sell the Trust Estate or any portion thereof or
rights or interest therein at one or more public or private sales
called and conducted in any manner permitted by law;
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provided, however, that the Indenture Trustee may not sell or otherwise
liquidate the Trust Estate following an Event of Default, other than an Event of
Default described in Section 5.1(i) or (ii), unless (A) the Holders of 100% of
the Note Balance consent thereto, (B) the proceeds of such sale or liquidation
are sufficient to pay in full the outstanding principal balance of and all
accrued but unpaid interest on the outstanding Notes or (C) the Indenture
Trustee determines that the Trust Estate will not continue to provide sufficient
funds for the payment of principal of and interest on the Notes as they would
have become due if the Notes had not been declared due and payable, and the
Indenture Trustee obtains the consent of the Holders of Notes evidencing not
less than 66 2/3% of the Note Balance. In determining such sufficiency or
insufficiency with respect to clauses (B) and (C) above, the Indenture Trustee
may, but need not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust Estate for such purpose.
(b) If the Indenture Trustee collects any money or property
pursuant to this Section 5.4, it shall pay out such money or property in the
following order of priority:
(i) to the Indenture Trustee, all amounts due to the
Indenture Trustee as compensation pursuant to Section 6.7;
(ii) to the Servicer, all amounts due to the Servicer as
compensation pursuant to Section 3.8 of the Sale and Servicing
Agreement;
(iii) to the Noteholders, all accrued but unpaid interest
on the Notes;
(iv) to the Noteholders, the outstanding principal balance
of the Notes;
(v) to the Certificateholders, all accrued but unpaid
interest on the Certificates; and
(vi) to the Certificateholders, the outstanding principal
balance of the Certificates.
The Indenture Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 5.4. At least fifteen (15) days before such
record date, the Issuer shall mail to each Noteholder and the Indenture Trustee
a notice that states the record date, the payment date and the amount to be
paid.
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SECTION 5.5. Optional Preservation of the Contracts. If the
Notes have been declared to be due and payable under Section 5.2 following an
Event of Default, and such declaration and its consequences have not been
rescinded and annulled, the Indenture Trustee may, but need not, elect to
maintain possession of the Trust Estate and apply proceeds as if there had been
no declaration of acceleration; provided, however, that the Total Available
Funds shall be applied in accordance with such declaration of acceleration in
the manner specified in Section 4.6(d) of the Sale and Servicing Agreement. It
is the desire of the parties hereto and the Noteholders that there be at all
times sufficient funds for the payment of principal of and interest on the
Notes, and the Indenture Trustee shall take such desire into account when
determining whether or not to maintain possession of the Trust Estate. In
determining whether to maintain possession of the Trust Estate, the Indenture
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
SECTION 5.6. Limitation of Suits. No Holder of any Note shall
have any right to institute any Proceeding with respect to this Indenture or for
the appointment of a receiver or trustee, or for any other remedy hereunder,
unless:
(i) such Holder has previously given written notice
to the Indenture Trustee of a continuing Event of Default;
(ii) the Holders of Notes evidencing not less than 25% of
the Note Balance have made written request to the Indenture Trustee to
institute such Proceeding in respect of such Event of Default in its
own name as Indenture Trustee hereunder;
(iii) such Holder or Holders have offered to the Indenture
Trustee reasonable indemnity against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Indenture Trustee for sixty (60) days after its
receipt of such notice, request and offer of indemnity has failed to
institute such Proceedings;
(v) no direction inconsistent with such written
request has been given to the Indenture Trustee during such 60-day
period by the Holders of Notes evidencing not less than 51% of the Note
Balance; and
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(vi) an Insurer Default has occurred and is continuing.
It is understood and intended that no one or more Holders of
Notes shall have any right in any manner whatever by virtue of, or by availing
of, any provision of this Indenture to affect, disturb or prejudice the rights
of any other Holders of Notes or to obtain or to seek to obtain priority or
preference over any other Holders of Notes or to enforce any right under this
Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of Holders of
Notes, each evidencing less than 51% of the Note Balance, the Indenture Trustee
in its sole discretion may determine what action, if any, shall be taken,
notwithstanding any other provisions of this Indenture.
SECTION 5.7. Unconditional Rights of Noteholders To Receive
Principal and Interest. Notwithstanding any other provisions in this Indenture,
the Holder of any Note shall have the right, which is absolute and
unconditional, to receive payment of the principal of and interest, if any, on
such Note on or after the respective due dates thereof expressed in such Note or
in this Indenture (or, in the case of redemption, on or after the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
right shall not be impaired without the consent of such Holder.
SECTION 5.8. Restoration of Rights and Remedies. If the
Indenture Trustee, the Insurer or any Noteholder has instituted any Proceeding
to enforce any right or remedy under this Indenture and such Proceeding has been
discontinued or abandoned for any reason or has been determined adversely to the
Indenture Trustee, the Insurer or such Noteholder, then and in every such case
the Issuer, the Indenture Trustee, the Insurer and the Noteholders shall,
subject to any determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Indenture Trustee and the Noteholders shall continue as though
no such Proceeding had been instituted.
SECTION 5.9. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Indenture Trustee, the Insurer
or the Noteholders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
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existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.10. Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee, the Insurer or any Holder of any Note to
exercise any right or remedy accruing upon any Default or Event of Default shall
impair any such right or remedy or constitute a waiver of any such Default or
Event of Default or any acquiescence therein. Every right and remedy given by
this Article V or by law to the Indenture Trustee, the Insurer or the
Noteholders may be exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee, the Insurer or the Noteholders, as the case
may be.
SECTION 5.11. Control by Noteholders. The Holders of Notes
evidencing not less than 51% of the Note Balance shall have the right to direct
the time, method and place of conducting any Proceeding for any remedy available
to the Indenture Trustee with respect to the Notes or exercising any trust or
power conferred on the Indenture Trustee; provided, however, that:
(i) such direction shall not be in conflict with any rule
of law or with this Indenture;
(ii) subject to the express terms of Section 5.4, any
direction to the Indenture Trustee to sell or liquidate the Trust
Estate shall be by the Holders of Notes evidencing not less than 100%
of the Note Balance;
(iii) if the conditions set forth in Section 5.5 have been
satisfied and the Indenture Trustee elects to retain the Trust Estate
pursuant to such section, then any direction to the Indenture Trustee
by the Holders of Notes evidencing less than 100% of the Note Balance
to sell or liquidate the Trust Estate shall be of no force and effect;
and
(iv) the Indenture Trustee may take any other action
deemed proper by the Indenture Trustee that is not inconsistent with
such direction.
Notwithstanding the rights of Noteholders set forth in this
Section 5.11, subject to Section 6.1, the Indenture Trustee need not take any
action that it reasonably believes might involve it in costs, expenses and
liabilities for which it will not be adequately indemnified or might materially
adversely affect the rights of any Noteholders not consenting to such action.
SECTION 5.12. Waiver of Past Defaults. Prior to the
declaration of the acceleration of the maturity of the Notes as provided in
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Section 5.2, the Insurer (if no Insurer Default shall have occurred and be
continuing) or the Holders of Notes evidencing not less than 51% of the Note
Balance, with the consent of the Insurer (if no Insurer Default shall have
occurred and be continuing), may waive any past Default or Event of Default and
its consequences except a Default or Event of Default (i) in the payment of
principal of or interest on any of the Notes or (ii) in respect of a covenant or
provision hereof that cannot be amended, supplemented or modified without the
consent of all the Holders. Upon any such waiver, the Issuer, the Indenture
Trustee, the Insurer and the Holders shall be restored to their former positions
and rights hereunder, respectively, but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto. Upon any such waiver, such Default or Event of Default shall cease to
exist and be deemed to have been cured and not to have occurred, and any Event
of Default arising therefrom shall be deemed to have been cured and not to have
occurred, for every purpose of this Indenture, but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
SECTION 5.13. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Note by such Holder's acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Indenture, or in
any suit against the Indenture Trustee for any action taken, suffered or omitted
by it as Indenture Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorney's fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; provided,
however, that the provisions of this Section 5.13 shall not apply to (i) any
suit instituted by the Indenture Trustee, (ii) any suit instituted by any
Noteholder or group of Noteholders, in each case holding Notes evidencing in the
aggregate more than 10% of the Note Balance or (iii) any suit instituted by any
Noteholder for the enforcement of the payment of principal of or interest on any
Note on or after the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).
SECTION 5.14. Waiver of Stay or Extension Laws. The Issuer
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, or plead or in any manner whatsoever, claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, that may affect the covenants or the performance of
this Indenture, and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
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shall not hinder, delay or impede the execution of any power herein granted to
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 5.15. Action on Notes. The Indenture Trustee's right
to seek and recover judgment on the Notes or under this Indenture shall not be
affected by the seeking, obtaining or application of any other relief under or
with respect to this Indenture. Neither the lien of this Indenture nor any
rights or remedies of the Indenture Trustee or the Noteholders shall be impaired
by the recovery of any judgment by the Indenture Trustee against the Issuer or
by the levy of any execution under such judgment upon any portion of the Trust
Estate or upon any of the assets of the Issuer. Any money or property collected
by the Indenture Trustee shall be applied in accordance with Section 5.4(b).
SECTION 5.16. Performance and Enforcement of Certain
Obligations.
(a) Promptly following a request from the Indenture Trustee to
do so, and at the Administrator's expense, the Issuer shall take all such lawful
action as the Indenture Trustee may request to compel or secure the performance
and observance by the Seller and the Servicer, as applicable, of each of their
obligations to the Issuer under or in connection with the Sale and Servicing
Agreement or by the Seller of each of its obligations under or in connection
with the Purchase Agreement, and to exercise any and all rights, remedies,
powers and privileges lawfully available to the Issuer under or in connection
with the Sale and Servicing Agreement to the extent and in the manner directed
by the Indenture Trustee, including the transmission of notices of default on
the part of the Seller or the Servicer thereunder and the institution of legal
or administrative actions or proceedings to compel or secure performance by the
Seller or the Servicer of each of their obligations under the Sale and Servicing
Agreement.
(b) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the direction (which direction shall be in writing
or by telephone (confirmed in writing promptly thereafter)) of the Holders of
Notes evidencing not less than 66 2/3% of the Note Balance shall, exercise all
rights, remedies, powers, privileges and claims of the Issuer against the Seller
or the Servicer under or in connection with the Sale and Servicing Agreement or
against the Seller under or in connection with the Purchase Agreement, including
the right or power to take any action to compel or secure performance or
observance by the Seller or the Servicer, as the case may be, of each of their
obligations to the Issuer thereunder and to give any consent, request, notice,
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direction, approval, extension or waiver under the Sale and Servicing Agreement
or the Purchase Agreement, as the case may be, and any right of the Issuer to
take such action shall be suspended.
(c) Promptly following a request from the Indenture Trustee to
do so and at the Administrator's expense, the Issuer agrees to take all such
lawful action as the Indenture Trustee may request to compel or secure the
performance and observance by CarMax of each of its obligations to the Seller
under or in connection with the Purchase Agreement in accordance with the terms
thereof, and to exercise any and all rights, remedies, powers and privileges
lawfully available to the Issuer under or in connection with the Purchase
Agreement to the extent and in the manner directed by the Indenture Trustee,
including the transmission of notices of default on the part of the Seller
thereunder and the institution of legal or administrative actions or proceedings
to compel or secure performance by CarMax of each of its obligations under the
Purchase Agreement.
(d) If an Event of Default has occurred and is continuing, the
Indenture Trustee may, and at the direction (which direction shall be in writing
or by telephone (confirmed in writing promptly thereafter)) of the Holders of
Notes evidencing not less than 66 2/3% of the Note Balance shall, exercise all
rights, remedies, powers, privileges and claims of the Seller against CarMax
under or in connection with the Purchase Agreement, including the right or power
to take any action to compel or secure performance or observance by CarMax of
each of its obligations to the Seller thereunder and to give any consent,
request, notice, direction, approval, extension or waiver under the Purchase
Agreement, and any right of the Seller to take such action shall be suspended.
ARTICLE VI
THE INDENTURE TRUSTEE
SECTION 6.1. Duties of Indenture Trustee.
(a) If an Event of Default has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in it by this
Indenture and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
such Person's own affairs.
(b) Except during the continuance of an Event of Default:
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(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture and no implied covenants or obligations shall be read into
this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith on its part, the
Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Indenture Trustee and, if
required by the terms of this Indenture, conforming to the requirements
of this Indenture; provided, however, that the Indenture Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from liability
for its own negligent action, its own negligent failure to act or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section 6.1;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer unless it
is proved that the Indenture Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Indenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 5.11.
(d) Every provision of this Indenture that in any way relates
to the Indenture Trustee is subject to paragraphs (a), (b), (c) and (g) of this
Section 6.1.
(e) The Indenture Trustee shall not be liable for interest on
any money received by it except as the Indenture Trustee may agree in writing
with the Issuer.
(f) Money held in trust by the Indenture Trustee need not be
segregated from other funds except to the extent required by law or the terms of
this Indenture or the Sale and Servicing Agreement.
(g) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur financial liability
in the performance of any of its duties hereunder or in the exercise of any of
its rights or powers hereunder if the Indenture Trustee shall have reasonable
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grounds to believe that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured or provided to it.
(h) Every provision of this Indenture relating to the conduct
or affecting the liability of or affording protection to the Indenture Trustee
shall be subject to the provisions of this Section 6.1 and to the provisions of
the TIA.
(i) The Indenture Trustee shall not be charged with knowledge
of any Event of Default unless either (1) a Responsible Officer shall have
actual knowledge of such Event of Default or (2) written notice of such Event of
Default shall have been given to the Indenture Trustee in accordance with the
provisions of this Indenture.
SECTION 6.2. Rights of Indenture Trustee.
(a) The Indenture Trustee may rely on any document believed by
it to be genuine and to have been signed or presented by the proper Person.
(b) Before the Indenture Trustee acts or refrains from acting,
it may require an Officer's Certificate or an Opinion of Counsel. The Indenture
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on an Officer's Certificate or Opinion of Counsel unless it is
proved that the Indenture Trustee was negligent in such reliance.
(c) The Indenture Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian or nominee, and the Indenture Trustee
shall not be responsible for any misconduct or negligence on the part of, or for
the supervision of, any such agent, attorney, custodian or nominee appointed
with due care by it hereunder.
(d) The Indenture Trustee shall not be liable for any action
it takes or omits to take in good faith which it believes to be authorized or
within its rights or powers; provided, however, that such action or omission by
the Indenture Trustee does not constitute willful misconduct, negligence or bad
faith.
(e) The Indenture Trustee may consult with counsel, and the
advice or opinion of counsel with respect to legal matters relating to this
Indenture and the Notes shall be full and complete authorization and protection
from liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of such
counsel.
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(f) The Indenture Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture at the
request or direction of any of the Noteholders pursuant to this Indenture,
unless such Noteholders shall have offered to the Indenture Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.
(g) The Indenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture or other paper or document, but the Indenture Trustee, in
its discretion, may make such further inquiry or investigation into such facts
or matters as it may see fit, and, if the Indenture Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuer, personally or by agent or attorney.
SECTION 6.3. Individual Rights of Indenture Trustee. The
Indenture Trustee, in its individual or any other capacity, may become the owner
or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates
with the same rights it would have if it were not Indenture Trustee. Any Paying
Agent, Note Registrar, co-registrar or co-paying agent hereunder may do the same
with like rights.
SECTION 6.4. Indenture Trustee's Disclaimer. The Indenture
Trustee (i) shall not be responsible for, and makes no representation as to, the
validity or adequacy of this Indenture or the Notes and (ii) shall not be
accountable for the Issuer's use of the proceeds from the Notes or responsible
for any statement of the Issuer in this Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Indenture
Trustee's certificate of authentication.
SECTION 6.5. Notice of Defaults. If a Default occurs and is
continuing and if it is known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall mail to each Noteholder notice of such Default
within ninety (90) days after it occurs. Except in the case of a Default in
payment of principal of or interest on any Note (including payments pursuant to
the mandatory redemption provisions of such Note), the Indenture Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determines that withholding the notice is in the interests of
Noteholders.
SECTION 6.6. Reports by Indenture Trustee to Holders. The
Indenture Trustee shall deliver, within a reasonable period of time after the
end of each calendar year, to each Person who at any time during such calendar
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year was a Noteholder, such information as may be required to enable such Person
to prepare its federal and state income tax returns.
SECTION 6.7. Compensation and Indemnity.
(a) The Issuer shall, or shall cause the Administrator to, pay
to the Indenture Trustee from time to time reasonable compensation for its
services. The Indenture Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Issuer shall, or shall
cause the Administrator to, reimburse the Indenture Trustee for all reasonable
out-of-pocket expenses incurred or made by it, including costs of collection, in
addition to the compensation for its services; provided, however, that neither
the Issuer nor the Administrator need reimburse the Indenture Trustee for any
expense incurred through the Indenture Trustee's willful misconduct, negligence,
or bad faith. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall, or shall cause the Administrator to,
indemnify the Indenture Trustee against any and all loss, liability or expense
(including attorneys' fees) incurred by it in connection with the administration
of this trust and the performance of its duties hereunder; provided, however,
that neither the Issuer nor the Administrator need indemnify the Indenture
Trustee for any such loss, liability or expense incurred through the Indenture
Trustee's willful misconduct, negligence, or bad faith. The Indenture Trustee
shall notify the Issuer and the Administrator promptly of any claim for which it
may seek indemnity. Any failure by the Indenture Trustee to so notify the Issuer
and the Administrator shall not, however, relieve the Issuer or the
Administrator of its obligations hereunder. The Issuer shall, or shall cause the
Servicer to, defend any such claim, and the Indenture Trustee may have separate
counsel and the Issuer shall, or shall cause the Servicer to, pay the fees and
expenses of such counsel.
(b) The Issuer's payment obligations to the Indenture Trustee
pursuant to this Section 6.7 shall survive the resignation or removal of the
Indenture Trustee and the discharge of this Indenture. When the Indenture
Trustee incurs expenses after the occurrence of a Default specified in Section
5.1(v) or (vi) with respect to the Issuer, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable federal or state bankruptcy, insolvency or similar law.
SECTION 6.8. Replacement of Indenture Trustee.
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(a) No resignation or removal of the Indenture Trustee, and no
appointment of a successor Indenture Trustee, shall become effective until the
acceptance of appointment by the successor Indenture Trustee pursuant to this
Section 6.8. The Indenture Trustee may resign at any time by so notifying the
Issuer and the Insurer. The Holders of Notes evidencing not less than 51% of the
Note Balance may remove the Indenture Trustee without cause by so notifying the
Indenture Trustee, the Insurer and the Issuer and may appoint a successor
Indenture Trustee. The Issuer shall remove the Indenture Trustee if:
(i) the Indenture Trustee fails to comply with Section
6.11;
(ii) the Indenture Trustee is adjudged a bankrupt or
insolvent;
(iii) a receiver or other public officer takes charge of
the Indenture Trustee or its property; or
(iv) the Indenture Trustee otherwise becomes incapable of
acting.
If the Indenture Trustee resigns or is removed or if a vacancy
exists in the office of Indenture Trustee for any reason (the Indenture Trustee
in such event being referred to herein as the retiring Indenture Trustee), the
Issuer shall promptly appoint a successor Indenture Trustee acceptable to the
Insurer.
(b) Any successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee, the Insurer and
the Issuer. Upon delivery of such written acceptance, the resignation or removal
of the retiring Indenture Trustee shall become effective and the successor
Indenture Trustee shall have all the rights, powers and duties of the Indenture
Trustee under this Indenture. The successor Indenture Trustee shall mail a
notice of its succession to the Noteholders. The retiring Indenture Trustee
shall promptly transfer all property held by it as Indenture Trustee to the
successor Indenture Trustee.
(c) If a successor Indenture Trustee does not take office
within sixty (60) days after the retiring Indenture Trustee resigns or is
removed, the retiring Indenture Trustee, the Issuer or the Holders of Notes
evidencing not less than 51% of the Note Balance may petition any court of
competent jurisdiction for the appointment of a successor Indenture Trustee. If
the Indenture Trustee fails to comply with Section 6.11, any Noteholder may
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petition any court of competent jurisdiction for the removal of the Indenture
Trustee and the appointment of a successor Indenture Trustee.
(d) Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section 6.8, the Issuer's and the Administrator's obligations
under Section 6.7 shall continue for the benefit of the retiring Indenture
Trustee.
SECTION 6.9. Successor Indenture Trustee by Merger.
(a) If the Indenture Trustee consolidates with, merges or
converts into, or transfers all or substantially all its corporate trust
business or assets to, another corporation or banking association, the
resulting, surviving or transferee corporation or banking association without
any further act shall be the successor Indenture Trustee; provided, however,
that such corporation or banking association must be otherwise qualified and
eligible under Section 6.11. The Indenture Trustee shall provide the Rating
Agencies with prior written notice of any such transaction.
(b) If at the time such successor or successors by
consolidation, merger or conversion to the Indenture Trustee shall succeed to
the trusts created by this Indenture any of the Notes shall have been
authenticated but not delivered, any such successor to the Indenture Trustee may
adopt the certificate of authentication of any predecessor trustee and deliver
such Notes so authenticated, and in case at that time any of the Notes shall not
have been authenticated, any such successor to the Indenture Trustee may
authenticate such Notes either in the name of any predecessor trustee or in the
name of the successor to the Indenture Trustee. In all such cases such
certificates shall have the full force which the Notes or this Indenture provide
that the certificate of the Indenture Trustee shall have.
SECTION 6.10. Appointment of Co-Indenture Trustee or Separate
Indenture Trustee.
(a) Notwithstanding any other provisions of this Indenture, at
any time, for the purpose of meeting any legal requirement of any jurisdiction
in which any part of the Trust Estate may at the time be located, the Indenture
Trustee shall have the power and may execute and deliver an instrument to
appoint one or more Persons to act as a co-trustee or co-trustees, jointly with
the Indenture Trustee, or separate trustee or separate trustees, of all or any
part of the Trust Estate, and to vest in such Person or Persons, in such
capacity and for the benefit of the Noteholders, such title to the Trust Estate,
or any part hereof, and, subject to the other provisions of this Section 6.10,
such powers, duties, obligations, rights and trusts as the Indenture Trustee may
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consider necessary or desirable. No co-trustee or separate trustee under this
Indenture shall be required to meet the terms of eligibility as a successor
trustee under Section 6.11 and no notice of the appointment of any co-trustee or
separate trustee shall be required under Section 6.8.
(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Indenture Trustee shall be conferred or imposed
upon and exercised or performed by the Indenture Trustee and such
separate trustee or co-trustee jointly (it being understood that such
separate trustee or co-trustee shall not be authorized to act
separately without the Indenture Trustee joining in such act), except
to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed the Indenture Trustee shall
be incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the
holding of title to the Trust Estate or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate
trustee or co-trustee, but solely at the direction of the Indenture
Trustee;
(ii) no trustee under this Indenture shall be personally
liable by reason of any act or omission of any other trustee under this
Indenture; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co- trustee.
(c) Any notice, request or other writing given to the
Indenture Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall refer to
this Indenture and the conditions of this Article VI. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Indenture Trustee or separately, as may be provided therein,
subject to all the provisions of this Indenture, specifically including every
provision of this Indenture relating to the conduct of, affecting the liability
of, or affording protection to, the Indenture Trustee. Each such instrument
shall be filed with the Indenture Trustee.
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(d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee its agent or attorney-in-fact with full power
and authority, to the extent permitted by law, to do any lawful act under or in
respect of this Indenture on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Indenture Trustee, to the extent permitted by law, without the
appointment of a new or successor trustee.
SECTION 6.11. Eligibility; Disqualification. The Indenture
Trustee shall at all times satisfy the requirements of TIA Section 310(a). The
Indenture Trustee or its parent shall have a combined capital and surplus of at
least $50,000,000 as set forth in its most recent published annual report of
condition and shall have a long-term debt rating of investment grade by each of
the Rating Agencies or shall otherwise be acceptable to each of the Rating
Agencies. The Indenture Trustee shall comply with TIA Section 310(b).
SECTION 6.12. Preferential Collection of Claims Against
Issuer. The Indenture Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). An Indenture Trustee who
has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
SECTION 7.1. Issuer To Furnish Indenture Trustee Names and
Addresses of Noteholders. The Issuer shall furnish or cause to be furnished to
the Indenture Trustee (i) not more than five (5) days after each Record Date, a
list, in such form as the Indenture Trustee may reasonably require, of the names
and addresses of the Holders of Notes as of such Record Date and (ii) at such
other times as the Indenture Trustee may request in writing, within thirty (30)
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than ten (10) days prior to the time such list is
furnished; provided, however, that so long as the Indenture Trustee is the Note
Registrar or the Notes are issued as Book-Entry Notes, no such list shall be
required to be furnished.
SECTION 7.2. Preservation of Information; Communications to
Noteholders.
(a) The Indenture Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Indenture Trustee as provided
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in Section 7.1 and the names and addresses of the Holders of Notes received by
the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee
may destroy any list furnished to it as provided in Section 7.1 upon receipt of
a new list so furnished.
(b) Noteholders may communicate pursuant to TIA Section 312(b)
with other Noteholders with respect to their rights under this Indenture or
under the Notes.
(c) The Issuer, the Indenture Trustee and the Note Registrar
shall have the protection of TIA Section 312(c).
SECTION 7.3. Reports by Issuer.
(a) The Issuer shall:
(i) file with the Indenture Trustee, within fifteen (15)
days after the Issuer is required to file the same with the Commission,
copies of the annual reports and of the information, documents and
other reports (or copies of such portions of any of the foregoing as
the Commission may from time to time by rules and regulations
prescribe) that the Issuer may be required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Indenture Trustee and the Commission in
accordance with the rules and regulations prescribed from time to time
by the Commission such additional information, documents and reports
with respect to compliance by the Issuer with the conditions and
covenants of this Indenture as may be required from time to time by
such rules and regulations; and
(iii) supply to the Indenture Trustee (and the Indenture
Trustee shall transmit by mail to all Noteholders described in TIA
Section 313(c)) such summaries of any information, documents and
reports required to be filed by the Issuer pursuant to clauses (i) and
(ii) of this Section 7.3(a) and by the rules and regulations prescribed
from time to time by the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of
the Issuer shall correspond to the calendar year.
SECTION 7.4. Reports by Indenture Trustee.
(a) If required by TIA Section 313(a), within sixty (60) days
after each March 31, beginning with March 31, 2000, the Indenture Trustee shall
mail to each Noteholder as required by TIA Section 313(c) a brief report dated
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as of such date that complies with TIA Section 313(a). The Indenture Trustee
shall also comply with TIA Section 313(b).
(b) The Indenture Trustee shall file with the Commission and
each stock exchange, if any, on which the Notes are listed a copy of each report
mailed to Noteholders pursuant to this Indenture. The Issuer shall notify the
Indenture Trustee if and when the Notes are listed on any stock exchange.
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
SECTION 8.1. Collection of Money. Except as otherwise
expressly provided herein, the Indenture Trustee may demand payment or delivery
of, and shall receive and collect, directly and without intervention or
assistance of any fiscal agent or other intermediary, all money and other
property payable to or receivable by the Indenture Trustee pursuant to this
Indenture and the Sale and Servicing Agreement. The Indenture Trustee shall
apply all such money received by it as provided in this Indenture and the Sale
and Servicing Agreement. Except as otherwise expressly provided in this
Indenture, if any default occurs in the making of any payment or performance
under any agreement or instrument that is part of the Trust Estate, the
Indenture Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of appropriate
Proceedings. Any such action shall be without prejudice to any right to claim a
Default or Event of Default under this Indenture and any right to proceed
thereafter as provided in Article V.
SECTION 8.2. Trust Accounts.
(a) On or before the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Indenture Trustee, for
the benefit of the Insurer, the Noteholders and the Certificateholders, the
Collection Account as provided in Section 4.1 of the Sale and Servicing
Agreement. On or before each Payment Date, the Servicer shall deposit in the
Collection Account all amounts required to be deposited therein with respect to
the preceding Collection Period as provided in Section 4.2 of the Sale and
Servicing Agreement.
(b) On or before the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Insurer, the Indenture
Trustee, for the benefit of the Noteholders and the Certificateholders, the
Reserve Account as provided in Section 4.7 of the Sale and Servicing Agreement.
On each Payment Date, upon receipt of instructions from the Servicer pursuant to
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Section 4.6(d) of the Sale and Servicing Agreement, the Indenture Trustee shall
withdraw from the Reserve Account (up to the amount on deposit in the Reserve
Account) and deposit in the Collection Account the amount, if any, by which the
Required Payment Amount for such Payment Date exceeds the Available Funds for
such Payment Date.
(c) [RESERVED]
(d) On each Payment Date, the Indenture Trustee shall apply or
cause to be applied the amount on deposit in the Collection Account on such
Payment Date in accordance with Section 2.8(a).
(e) On or before the Closing Date, the Issuer shall cause the
Servicer to establish and maintain, in the name of the Indenture Trustee, for
the exclusive benefit of the Noteholders, the Note Payment Account as provided
in Section 4.1 of the Sale and Servicing Agreement. On each Payment Date, the
Indenture Trustee shall apply or cause to be applied the amount on deposit in
the Note Payment Account on such Payment Date in accordance with Section 2.8(b)
or (f), as applicable.
SECTION 8.3. General Provisions Regarding Accounts.
(a) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of the funds in the Trust Accounts
shall be invested by the Indenture Trustee at the direction of the Servicer in
Eligible Investments as provided in Sections 4.1 and 4.7 of the Sale and
Servicing Agreement. All income or other gain (net of losses and investment
expenses) from investments of monies deposited in the Trust Accounts shall be
withdrawn by the Indenture Trustee from such accounts and distributed (but only
under the circumstances set forth in the Sale and Servicing Agreement) as
provided in Sections 4.1 and 4.7 of the Sale and Servicing Agreement. The
Servicer shall not direct the Indenture Trustee to make any investment of any
funds or to sell any investment held in any of the Trust Accounts unless the
security interest Granted and perfected in such account will continue to be
perfected in such investment or the proceeds of such sale, in either case
without any further action by any Person, and, in connection with any direction
to the Indenture Trustee to make any such investment or sale, if requested by
the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an
Opinion of Counsel, acceptable to the Indenture Trustee, to such effect.
(b) Subject to Section 6.1(c), the Indenture Trustee shall not
in any way be held liable by reason of any insufficiency in any of the Trust
Accounts resulting from any loss on any Permitted Investment included therein,
except for losses attributable to the Indenture Trustee's failure to make
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payments on such Eligible Investments issued by the Indenture Trustee, in its
commercial capacity as principal obligor and not as trustee, in accordance with
their terms.
(c) If (i) the Servicer shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Indenture
Trustee by 11:00 A.M. (New York City time) (or such other time as may be agreed
upon by the Issuer and Indenture Trustee), on the Business Day preceding each
Payment Date, (ii) a Default or Event of Default shall have occurred and be
continuing with respect to the Notes but the Notes shall not have been declared
due and payable pursuant to Section 5.2 or (iii) the Notes shall have been
declared due and payable following an Event of Default, amounts collected or
receivable from the Trust Estate are being applied in accordance with Section
5.4 as if there had not been such a declaration, then the Indenture Trustee
shall, to the fullest extent practicable, invest and reinvest funds in the Trust
Accounts in one or more Eligible Investments.
SECTION 8.4. Release of Trust Estate.
(a) Subject to the payment of its fees and expenses pursuant
to Section 6.7, the Indenture Trustee may, and when required by the provisions
of this Indenture shall, execute instruments to release property from the lien
of this Indenture, or convey the Indenture Trustee's interest in the same, in a
manner and under circumstances that are not inconsistent with the provisions of
this Indenture. No party relying upon an instrument executed by the Indenture
Trustee as provided in this Article VIII shall be bound to ascertain the
Indenture Trustee's authority, inquire into the satisfaction of any conditions
precedent or see to the application of any monies.
(b) The Indenture Trustee shall, at such time as there are no
Notes Outstanding, the Policy has been terminated in accordance with its terms
and has been returned to the Insurer for cancellation and all sums due the
Indenture Trustee and the Insurer pursuant to Section 6.7 have been paid in
full, release any remaining portion of the Trust Estate that secured the Notes
from the lien of this Indenture and release to the Issuer or any other Person
entitled thereto any funds then on deposit in the Trust Accounts. The Indenture
Trustee shall release property from the lien of this Indenture pursuant to this
Section 8.4(b) only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1)
meeting the applicable requirements of Section 11.1.
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SECTION 8.5. Opinion of Counsel. The Indenture Trustee shall
receive at least seven (7) days notice when requested by the Issuer to take any
action pursuant to Section 8.4(a), accompanied by copies of any instruments
involved, and the Indenture Trustee shall also require, except in connection
with any action contemplated by Section 8.4(b), as a condition to such action,
an Opinion of Counsel, in form and substance satisfactory to the Indenture
Trustee, stating the legal effect of any such action, outlining the steps
required to complete such action, and concluding that all conditions precedent
to the taking of such action have been complied with and such action will not
materially and adversely impair the security for the Notes or the rights of the
Noteholders in contravention of the provisions of this Indenture; provided,
however, that such Opinion of Counsel shall not be required to express an
opinion as to the fair value of the Trust Estate. Counsel rendering any such
opinion may rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Indenture
Trustee in connection with any such action.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.1. Supplemental Indentures Without Consent of
Noteholders. The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, without the consent of the Holders of any Notes but with prior
notice to the Rating Agencies and the Insurer and with the consent of the
Insurer (if no Insurer Default shall have occurred and be continuing), at any
time and from time to time, enter into one or more indentures supplemental
hereto, in form satisfactory to the Indenture Trustee, for any of the following
purposes:
(i) to correct or amplify the description of any
property at any time subject to the lien of this Indenture, or better
to assure, convey and confirm unto the Indenture Trustee any property
subject or required to be subjected to the lien of this Indenture, or
to subject to the lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the
benefit of the Holders of the Notes, or to surrender any right or power
herein conferred upon the Issuer;
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(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Indenture Trustee;
(v) to cure any ambiguity, to correct or supplement
any provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture which will not be inconsistent
with other provisions of this Indenture;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA;
provided, however, that (i) such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Noteholder or the Insurer, (ii) the Rating Agency Condition shall have been
satisfied with respect to such action and (iii) such action shall not, as
evidenced by an Opinion of Counsel, cause the Issuer to be characterized for
federal income tax purposes as an association taxable as a corporation or
otherwise have any material adverse impact on the federal income taxation of any
Notes Outstanding or outstanding Certificates or any Noteholder or
Certificateholder. The Indenture Trustee is hereby authorized to join in the
execution of any such supplemental indenture and to make any further appropriate
agreements and stipulations that may be therein contained.
SECTION 9.2. Supplemental Indentures with Consent of
Noteholders. The Issuer and the Indenture Trustee, when authorized by an Issuer
Order, may, with the consent of the Insurer (if no Insurer Default shall have
occurred and be continuing) and the Holders of Notes evidencing not less than
51% of the Note Balance and with prior notice to the Rating Agencies and the
Insurer, by Act of such Holders delivered to the Issuer and the Indenture
Trustee, at any time and from time to time, enter into one or more indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
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any manner or eliminating any of the provisions of, this Indenture or modifying
in any manner the rights of the Holders of the Notes under this Indenture;
provided, however, that (i) such action shall not, as evidenced by an Opinion of
Counsel, adversely affect in any material respect the interests of any
Noteholder or the Insurer, (ii) the Rating Agency Condition shall have been
satisfied with respect to such action and (iii) such action shall not, as
evidenced by an Opinion of Counsel, cause the Issuer to be characterized for
federal income tax purposes as an association taxable as a corporation or
otherwise have any material adverse impact on the federal income taxation of any
Notes Outstanding or outstanding Certificates or any Noteholder or
Certificateholder; and, provided further, that, subject to the express rights of
the Insurer under the Transaction Documents, no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Note affected
thereby:
(i) change any Final Payment Date or the date of payment
of any installment of principal of or interest on any Note, or reduce
the principal amount thereof, the interest rate thereon or the
Redemption Price with respect thereto, change the provisions of this
Indenture relating to the application of collections on, or the
proceeds of the sale of, the Trust Estate 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 the interest thereon is payable;
(ii) impair the right to institute suit for the
enforcement of the provisions of this Indenture requiring the
application of available funds, as provided in Article V, to the
payment of any amount due on the Notes on or after the respective due
dates thereof (or, in the case of redemption, on or after the
Redemption Date);
(iii) reduce the percentage of the Note Balance the consent
of the Holders of which is required for any such supplemental indenture
or for any waiver of compliance with certain provisions of this
Indenture or of certain defaults hereunder and their consequences as
provided in this Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Note Balance the consent
of the Holders of which is required to direct the Indenture Trustee to
sell or liquidate the Trust Estate pursuant to Section 5.4 if the
proceeds of such sale would be insufficient to pay in full the
principal amount of and accrued but unpaid interest on the Notes and
the Certificates;
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(vi) modify any provision of this Indenture specifying a
percentage of the principal amount of the Notes necessary to amend this
Indenture or the other Transaction Documents except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the other Transaction Documents cannot
be modified or waived without the consent of the Holders of each
Outstanding Note affected thereby;
(vii) modify any of the provisions of this 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 (including
the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of the Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(viii) permit the creation of any lien ranking prior to or
on a parity with the lien of this Indenture with respect to any part of
the Trust Estate or, except as otherwise permitted or contemplated
herein, terminate the lien of this Indenture on any such collateral at
any time subject hereto or deprive the Holder of any Note of the
security provided by the lien of this Indenture.
The Indenture Trustee may in its discretion determine whether
or not any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
The Indenture Trustee may in its discretion determine whether
or not any Notes would be affected by any supplemental indenture and any such
determination shall be conclusive upon the Holders of all Notes, whether
theretofore or thereafter authenticated and delivered hereunder. The Indenture
Trustee shall not be liable for any such determination made in good faith.
It shall not be necessary for any Act of Noteholders under
this Section 9.2 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof. Promptly after the execution by the Issuer and the Indenture Trustee of
any supplemental indenture pursuant to this Section 9.2, the Indenture Trustee
shall mail to the Holders of the Notes to which such amendment or supplemental
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indenture relates a notice setting forth in general terms the substance of such
supplemental indenture. Any failure of the Indenture Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
SECTION 9.3. Execution of Supplemental Indentures. In
executing, or permitting the additional trusts created by, any supplemental
indenture permitted by this Article IX or the modification thereby of the trusts
created by this Indenture, the Indenture Trustee shall be entitled to receive
and, subject to Sections 6.1 and 6.2, shall be fully protected in relying upon
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture and that all conditions precedent
in this Indenture to the execution and delivery of such supplemental indenture
have been satisfied. The Indenture Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Indenture Trustee's
own rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indenture. Upon the
execution of any supplemental indenture pursuant to the provisions hereof, this
Indenture shall be and shall be deemed to be modified and amended in accordance
therewith with respect to the Notes affected thereby, and the respective rights,
limitations of rights, obligations, duties, liabilities and immunities under
this Indenture of the Indenture Trustee, the Issuer and the Holders of the Notes
shall thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.5. Conformity with Trust Indenture Act. Every
amendment of this Indenture and every supplemental indenture executed pursuant
to this Article IX shall conform to the requirements of the Trust Indenture Act
as then in effect so long as this Indenture shall then be qualified under the
Trust Indenture Act.
SECTION 9.6. Reference in Notes to Supplemental Indentures.
Any Notes authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article IX may, and if required by the Indenture
Trustee shall, bear a notation in form approved by the Indenture Trustee as to
any matter provided for in such supplemental indenture. If the Issuer or the
Indenture Trustee shall so determine, new Notes so modified as to conform, in
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the opinion of the Indenture Trustee and the Issuer, to any such supplemental
indenture may be prepared and executed by the Issuer and authenticated and
delivered by the Indenture Trustee in exchange for Outstanding Notes.
ARTICLE X
REDEMPTION OF NOTES
SECTION 10.1. Redemption.
(a) The Notes are subject to redemption in whole, but not in
part, at the direction of the Servicer pursuant to Section 9.1(a) of the Sale
and Servicing Agreement, on any Payment Date on which the Servicer exercises its
option to purchase the assets of the Issuer pursuant to such Section 9.1(a), and
the amount paid by the Servicer shall be treated as collections in respect of
the Contracts and applied to pay the unpaid principal amount of the Notes plus
accrued and unpaid interest thereon and the Certificate Balance. The Issuer
shall furnish or cause the Servicer to furnish notice of such redemption to the
Rating Agencies and the Noteholders. If the Notes are to be redeemed pursuant to
this Section 10.1(a), the Issuer shall furnish or cause the Servicer to furnish
notice of such election to the Indenture Trustee not later than twenty (20) days
prior to the Redemption Date and the Issuer shall deposit the Redemption Price
of the Notes to be redeemed in the Note Payment Account by 10:00 A.M. (New York
City time) on the Redemption Date, whereupon all such Notes shall be due and
payable on the Redemption Date.
(b) In the event that the assets of the Issuer are sold
pursuant to Section 9.3 of the Trust Agreement, all amounts on deposit in the
Note Payment Account shall be paid to the Noteholders up to the unpaid principal
amount of the Notes and all accrued and unpaid interest thereon. If such amounts
are to be paid to Noteholders pursuant to this Section 10.1(b), the Issuer
shall, to the extent practicable, furnish or cause the Servicer to furnish
notice of such event to the Indenture Trustee not later than twenty (20) days
prior to the Redemption Date, whereupon all such amounts shall be payable on the
Redemption Date.
SECTION 10.2. Form of Redemption Notice. Notice of redemption
of the Notes under Section 10.1(a) shall be given by the Indenture Trustee by
first-class mail, postage prepaid, or by facsimile mailed or transmitted
promptly following receipt of notice from the Issuer or the Servicer pursuant to
Section 10.1(a), but not later than ten (10) days prior to the applicable
Redemption Date, to each Holder of the Notes as of the close of business on the
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Record Date preceding the applicable Redemption Date, at such Holder's address
or facsimile number appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where the Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of
the Issuer to be maintained as provided in Section 3.2).
Notice of redemption of the Notes shall be given by the
Indenture Trustee in the name and at the expense of the Issuer. Any failure to
give notice of redemption, or any defect therein, to any Holder of any Note
shall not, however, impair or affect the validity of the redemption of any other
Note.
SECTION 10.3. Notes Payable on Redemption Date. The Notes to
be redeemed shall, following notice of redemption as required by Section 10.2
(in the case of redemption pursuant to Section 10.1(a)), become due and payable
on the Redemption Date at the Redemption Price and (unless the Issuer shall
default in the payment of the Redemption Price) no interest shall accrue on the
Redemption Price for any period after the date to which accrued interest is
calculated for purposes of calculating the Redemption Price.
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ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Compliance Certificates and Opinions, etc.
(a) Upon any application or request by the Issuer to the
Indenture Trustee to take any action under any provision of this Indenture, the
Issuer shall furnish to the Indenture Trustee (i) an Officer's Certificate
stating that all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (ii) an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent, if any, have been complied with and (iii) (if required by the TIA) an
Independent Certificate from a firm of certified public accountants meeting the
applicable requirements of this Section 11.1, except that, in the case of any
such application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such
certificate or opinion has read or has caused to be read such covenant
or condition and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such
signatory, such signatory has made such examination or investigation as
is necessary to enable such signatory to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(iv) a statement as to whether, in the opinion of each
such signatory, such condition or covenant has been complied with.
(b) Prior to the deposit of any Collateral or other property
or securities with the Indenture Trustee that is to be made the basis for the
release of any property or securities subject to the lien of this Indenture, the
Issuer shall, in addition to any obligation imposed in Section 11.1(a) or
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elsewhere in this Indenture, deliver to the Indenture Trustee an Officer's
Certificate certifying or stating the opinion of each person signing such
certificate as to the fair value (within ninety (90) days of such deposit) to
the Issuer of the Collateral or other property or securities to be so deposited.
(c) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in Section 11.1(b), the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to the
same matters if the fair value to the Issuer of the property or securities to be
so deposited and of all other such property or securities made the basis of any
such withdrawal or release since the commencement of the then-current fiscal
year of the Issuer, as set forth in the certificates furnished pursuant to
Section 11.1(b) and this Section 11.1(c), is ten percent (10%) or more of the
Note Balance, but such a certificate need not be furnished with respect to any
property or securities so deposited if the fair value thereof to the Issuer as
set forth in the related Officer's Certificate is less than $25,000 or less than
one percent (1%) of the Note Balance.
(d) Whenever any property or securities are to be released
from the lien of this Indenture, the Issuer shall also furnish to the Indenture
Trustee an Officer's Certificate certifying or stating the opinion of each
person signing such certificate as to the fair value (within ninety (90) days of
such release) of the property or securities proposed to be released and stating
that in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions hereof.
(e) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or stating the opinion of
any signer thereof as to the matters described in Section 11.1(d), the Issuer
shall also furnish to the Indenture Trustee an Independent Certificate as to the
same matters if the fair value of the property or securities and of all other
property, other than property as contemplated by Section 11.1(f) or securities
released from the lien of this Indenture since the commencement of the
then-current calendar year, as set forth in the certificates required by Section
11.1(d) and this Section 11.1(e), is ten percent (10%) or more of the Note
Balance, but such a certificate need not be furnished in the case of any release
of property or securities if the fair value thereof as set forth in the related
Officer's Certificate is less than $25,000 or less than one percent (1%) of the
Note Balance.
(f) Notwithstanding Section 2.10 or any other provisions of
this Section 11.1, the Issuer may, without compliance with the requirements of
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the other provisions of this Section 11.1, (i) collect, liquidate, sell or
otherwise dispose of Contracts and Financed Vehicles as and to the extent
permitted or required by the Transaction Documents and (ii) make cash payments
out of the Trust Accounts as and to the extent permitted or required by the
Transaction Documents.
SECTION 11.2. Form of Documents Delivered to Indenture
Trustee.
(a) In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.
(b) Any certificate or opinion of an Authorized Officer of the
Issuer may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, one or
more officers of the Servicer, the Seller, the Administrator or the Issuer,
stating that the information with respect to such factual matters is in the
possession of the Servicer, the Seller, the Administrator or the Issuer, unless
such Authorized Officer or counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
(c) Where any Person is required to make, give or execute two
or more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
(d) Whenever in this Indenture, in connection with any
application or certificate or report to the Indenture Trustee, it is provided
that the Issuer shall deliver any document as a condition of the granting of
such application, or as evidence of the Issuer's compliance with any term
hereof, it is intended that the truth and accuracy, at the time of the granting
of such application or at the effective date of such certificate or report (as
the case may be), of the facts and opinions stated in such document shall in
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such case be conditions precedent to the right of the Issuer to have such
application granted or to the sufficiency of such certificate or report. The
foregoing shall not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or opinion contained
in any such document as provided in Article VI.
SECTION 11.3. Acts of Noteholders.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by the Noteholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by the Noteholders in person or by agents
duly appointed in writing, and except as herein otherwise expressly provided
such action shall become effective when such instrument or instruments are
delivered to the Indenture Trustee and, where it is hereby expressly required,
to the Issuer. Such instrument or instruments (and the action embodied therein
and evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.1) conclusive in
favor of the Indenture Trustee and the Issuer, if made in the manner provided in
this Section 11.3.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved in any manner that the Indenture
Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
of every Note issued upon the registration thereof or in exchange therefor or in
lieu thereof, in respect of anything done, omitted or suffered to be done by the
Indenture Trustee or the Issuer in reliance thereon, whether or not notation of
such action is made upon such Note.
SECTION 11.4. Notices, etc., to Indenture Trustee, Issuer and
Rating Agencies. Any request, demand, authorization, direction, notice, consent,
waiver or Act of Noteholders or other documents provided or permitted by this
Indenture shall be in writing and if such request, demand, authorization,
direction, notice, consent, waiver, Act of Noteholders is to be made upon, given
or furnished to or filed with:
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(i) the Indenture Trustee by any Noteholder or by the
Issuer, shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with the Indenture Trustee at its
Corporate Trust Office;
(ii) the Issuer by the Indenture Trustee or by any
Noteholder, shall be sufficient for every purpose hereunder if in
writing and mailed first-class, postage prepaid to the Issuer addressed
to: CarMax Auto Owner Trust 1999-1, in care of First Union Trust
Company, National Association, One Rodney Square, 1st Floor, 920 King
Street, Wilmington, Delaware 19801-7475, Attention: Corporate Trust
Department, with a copy to the Administrator at 4900 Cox Road, Glen
Allen, Virginia 23060, Attention: Treasury Department, or at any other
address previously furnished in writing to the Indenture Trustee by the
Issuer or the Administrator. The Issuer shall promptly transmit any
notice received by it from the Noteholders to the Indenture Trustee; or
(iii) the Insurer by the Indenture Trustee, the Servicer or
any Noteholder, shall be sufficient for every purpose hereunder if in
writing and mailed first-class, postage prepaid to the Insurer
addressed to MBIA Insurance Corporation, 113 King Street, Armonk, New
York 10504, Attention:
Insured Portfolio Management, Structured Finance.
Notices required to be given to the Rating Agencies by the
Issuer, the Indenture Trustee or the Owner Trustee shall be in writing,
personally delivered, telecopied or mailed by certified mail, return receipt
requested, to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., ABS Monitoring Department, 99 Church Street, New York,
New York 10007 and (ii) in case of Standard & Poor's, at the following address:
Standard & Poor's, a division of The McGraw-Hill Companies, 55 Water Street
(43rd Floor), New York, New York 10041, Attention: Asset Backed Surveillance
Department.
SECTION 11.5. Notices to Noteholders; Waiver.
(a) Where this Indenture provides for notice to Noteholders of
any event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class, postage prepaid to
each Noteholder affected by such event, at its address as it appears on the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such notice nor any
defect in any notice so mailed to any particular Noteholder shall affect the
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sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
(b) Where this Indenture provides for notice in any manner,
such notice may be waived in writing by any Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Noteholders shall be filed with
the Indenture Trustee, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such a waiver.
(c) If, by reason of the suspension of regular mail service as
a result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee shall be deemed to
be a sufficient giving of such notice.
(d) Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other rights or
obligations created hereunder, and shall not under any circumstance constitute a
Default or Event of Default.
SECTION 11.6. Alternate Payment and Notice Provisions.
Notwithstanding any provision of this Indenture or any of the Notes to the
contrary, the Issuer may enter into any agreement with any Holder of a Note
providing for a method of payment, or notice by the Indenture Trustee or any
Paying Agent to such Holder, that is different from the methods provided for in
this Indenture for such payments or notices. The Issuer shall furnish to the
Indenture Trustee a copy of each such agreement and the Indenture Trustee shall
cause payments to be made and notices to be given in accordance with such
agreements.
SECTION 11.7. Conflict with Trust Indenture Act. If any
provision hereof limits, qualifies or conflicts with another provision hereof
that is required to be included in this Indenture by any of the provisions of
the Trust Indenture Act, such required provision shall control. The provisions
of TIA Sections 310 through 317 that impose duties on any Person (including the
provisions automatically deemed included herein unless expressly excluded by
this Indenture) are a part of and govern this Indenture, whether or not
physically contained herein.
SECTION 11.8. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
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convenience of reference only and shall not define or limit any of the terms or
provisions hereof.
SECTION 11.9. Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Issuer shall bind its
successors and assigns, whether so expressed or not. All agreements of the
Indenture Trustee in this Indenture shall bind its successors, co-trustees and
agents.
SECTION 11.10. Severability. If any provision of this
Indenture or the Notes shall be invalid, illegal or unenforceable, the validity,
legality, and enforceability of the remaining provisions of this Indenture and
the Notes shall not in any way be affected or impaired thereby.
SECTION 11.11. Benefits of Indenture. Nothing in this
Indenture or in the Notes, express or implied, shall give to any Person, other
than the parties hereto and their successors hereunder, the Insurer, the
Noteholders, any other party secured hereunder and any other Person with an
ownership interest in any part of the Trust Estate, any benefit or any legal or
equitable right, remedy or claim under this Indenture.
SECTION 11.12. Legal Holiday. If the date on which any payment
is due shall not be a Business Day, then (notwithstanding any other provision of
the Notes or this Indenture) payment need not be made on such date but may be
made on the next succeeding Business Day with the same force and effect as if
made on the date on which nominally due, and no interest shall accrue for the
period from and after any such nominal date.
SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 11.14. Counterparts. This Indenture may be executed in
any number of counterparts, each of which counterparts when so executed shall be
deemed to be an original, and all of which counterparts shall together
constitute but one and the same instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is
subject to recording in any appropriate public recording office, such recording
shall be effected by the Issuer at its expense and shall be accompanied by an
Opinion of Counsel (which may be counsel to the Indenture Trustee or any other
counsel reasonably acceptable to the Indenture Trustee) to the effect that such
recording is necessary either for the protection of the Noteholders or any other
Person secured hereunder or for the enforcement of any right or remedy granted
to the Indenture Trustee under this Indenture.
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SECTION 11.16. Trust Obligation. No recourse may be taken,
directly or indirectly, with respect to the obligations of the Issuer, the Owner
Trustee or the Indenture Trustee on the Notes or under this Indenture or any
certificate or other writing delivered in connection herewith or therewith
against (i) the Indenture Trustee or the Owner Trustee in its individual
capacity, (ii) any holder of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the
Indenture Trustee or the Owner Trustee in its individual capacity, of any holder
of a beneficial interest in the Issuer, the Owner Trustee or the Indenture
Trustee or of any successor or assign of the Indenture Trustee or the Owner
Trustee in its individual capacity, except as any such Person may have expressly
agreed (it being understood that the Indenture Trustee and the Owner Trustee
have no such obligations in their individual capacities), and except that any
such partner, owner or beneficiary shall be fully liable, to the extent provided
by applicable law, for any unpaid consideration for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity. For
all purposes of this Indenture, in the performance of any duties or obligations
of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to
the benefits of, the terms and provisions of Article VI, VII and VIII of the
Trust Agreement.
SECTION 11.17. No Petition. The Indenture Trustee, by entering
into this Indenture, and each Noteholder or Note Owner, by accepting a Note or
beneficial interest in a Note, as the case may be, hereby covenant and agree
that they will not at any time institute against the Seller or the Issuer, or
join in any institution against the Seller or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
proceedings under any United States federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the other Transaction Documents.
SECTION 11.18. Inspection. The Issuer shall, with reasonable
prior notice, permit any representative of the Indenture Trustee or the Insurer,
during the Issuer's normal business hours, to examine the books of account,
records, reports and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by Independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees, and Independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Indenture Trustee shall and shall cause its representatives to hold in
confidence all such information except to the extent disclosure may be required
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by law (and all reasonable applications for confidential treatment are
unavailing) and except to the extent that the Indenture Trustee may reasonably
determine that such disclosure is consistent with its obligations hereunder.
SECTION 11.19. Certain Matters Regarding the Insurer. If no
Insurer Default shall have occurred and be continuing, the Insurer shall have
the right to exercise all rights, including voting rights, which the Noteholders
or the Certificateholders are entitled to exercise pursuant to this Indenture,
without any consent of such Noteholders or Certificateholders; provided,
however, that, without the consent of each Noteholder and Certificateholder
affected thereby, the Insurer shall not exercise such rights to amend this
Indenture in any manner that would (i) reduce the amount of, or delay the timing
of, collections of payments on the Contracts or distributions which are required
to be made on any Note or Certificate or (ii) alter the rights of any such
Holder to consent to such amendment.
Notwithstanding any provision of this Indenture to the
contrary, if an Insurer Default has occurred and is continuing, the Insurer
shall not have the right to take any action under this Indenture or to control
or direct the actions of the Issuer, the Seller, the Indenture Trustee or the
Owner Trustee pursuant to the terms of this Indenture, nor shall the consent of
the Insurer be required with respect to any action (or waiver of a right to take
action) to be taken by the Issuer, the Seller, the Indenture Trustee, the Owner
Trustee, the Noteholders or the Certificateholders; provided, however, that the
consent of the Insurer shall be required at all times with respect to any
amendment of this Indenture.
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IN WITNESS WHEREOF, the Issuer and the Indenture Trustee have
caused this Indenture to be duly executed by their respective officers,
thereunto duly authorized and duly attested, all as of the day and year first
above written.
CARMAX AUTO OWNER TRUST 1999-1
By: FIRST UNION TRUST COMPANY, NATIONAL
ASSOCIATION,
not in its individual capacity but
solely as Owner Trustee
By:______________________________
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
By:______________________________
Name:
Title:
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STATE OF )
) ss. :
COUNTY OF )
The foregoing instrument was acknowledged before me this
[____] day of September, 1999, by [____________________], as
[____________________] of FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, a
national banking association, as Owner Trustee of CARMAX AUTO OWNER TRUST
1999-1, a Delaware business trust.
------------------------
Notary Public in and for
the State of [____________]
[SEAL]
My commission expires: [____________]
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<PAGE>
STATE OF )
) ss. :
COUNTY OF )
The foregoing instrument was acknowledged before me this
[____] day of September, 1999, by [____________________], as
[____________________] of BANKERS TRUST COMPANY, a New York banking corporation.
------------------------
Notary Public in and for
the State of [____________]
[SEAL]
My commission expires: [____________]
EXHIBIT A-1
Form of Class A-1 Note
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $[ ]
No. R-[ ] CUSIP NO. [ ]
CARMAX AUTO OWNER TRUST 1999-1
[ ]% CLASS A-1 ASSET-BACKED NOTES
CarMax Auto Owner Trust 1999-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to Cede & Co. , or its
registered assigns, the principal sum of [ ] DOLLARS payable on each Payment
Date in the aggregate amount, if any, payable from the Note Payment Account in
respect of principal on the Class A-1 Notes pursuant to Section 2.8 of the
Indenture dated as of September [ ], 1999 (as amended, supplemented or otherwise
modified and in effect from time to time, the "Indenture"), between the Issuer
and Bankers Trust Company, a New York banking corporation, as Indenture Trustee
(in such capacity the "Indenture Trustee"); provided, however, that if not paid
prior to such date, the entire unpaid principal amount of this Class A-1 Note
shall be due and payable on the earlier of the [ ] Payment Date (the "Class A-1
Final Payment Date") and the Redemption Date, if any, pursuant to Section
10.1(a) or (b) of the Indenture. In addition, the unpaid principal amount of
this Class A-1 Note may be redeemed in whole but not in part on the Redemption
Date, if any, pursuant to Section 10.1(c) of the Indenture. Capitalized terms
used but not defined herein are defined in Article I of the Indenture, which
also contains rules as to construction that shall be applicable herein.
<PAGE>
The Issuer shall pay interest on this Class A-1 Note at the rate per
annum shown above on each Payment Date until the principal of this Class A-1
Note is paid or made available for payment, on the principal amount of this
Class A-1 Note outstanding on the preceding Payment Date (after giving effect to
all payments of principal made on the preceding Payment Date), subject to
certain limitations contained in Section 3.1 of the Indenture. Interest on this
Class A-1 Note will accrue for each Payment Date from and including the previous
Payment Date (or, in the case of the initial Payment Date or if no interest has
been paid, from the Closing Date) to but excluding such Payment Date. Interest
will be computed on the basis of actual days elapsed and a 360-day year. Such
principal of and interest on this Class A-1 Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Class A-1 Note are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts. All payments made by
the Issuer with respect to this Class A-1 Note shall be applied first to
interest due and payable on this Class A-1 Note as provided above and then to
the unpaid principal of this Class A-1 Note.
Reference is made to the further provisions of this Class A-1 Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Class A-1 Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Class
A-1 Note shall not be entitled to any benefit under the Indenture referred to on
the reverse hereof, or be valid or obligatory for any purpose.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: September [ ], 1999
CARMAX AUTO OWNER TRUST 1999-1,
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ___________________________
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: September [ ], 1999
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
By: ___________________________
Authorized Officer
<PAGE>
[REVERSE OF CLASS A-1 NOTE]
This Class A-1 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its [ ]% Class A-1 Asset- Backed Notes, which, together
with the [ ]% Class A-2 Asset-Backed Notes, the [ ]% Class A-3 Asset-Backed
Notes and the [ ]% Class A-4 Asset-Backed Notes (collectively, the "Notes"), are
issued under the Indenture, to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture.
The Class A-1 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the fifteenth
day of each month or, if any such day is not a Business Day, the next succeeding
Business Day, commencing [ ] 15, 1999.
As described above, the entire unpaid principal amount of this Class
A-1 Note shall be due and payable on the earlier of the Class A-1 Final Payment
Date and the Redemption Date, if any, pursuant to Section 10.1(a) or (b) of the
Indenture. In addition, the unpaid principal amount of this Class A-1 Note may
be redeemed in whole but not in part on the Redemption Date, if any, pursuant to
Section 10.1(c) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing and (i) the
Insurer (if no Insurer Default shall have occurred and be continuing) or (ii)
(if an Insurer Default shall have occurred and be continuing) the Indenture
Trustee or the Holders of the Notes representing not less than 66 2/3% of the
Note Balance have declared the Notes to be immediately due and payable in the
manner provided in Section 5.2 of the Indenture. All principal payments on the
Class A-1 Notes shall be made pro rata to the Holders entitled thereto.
Payments of interest on this Class A-1 Note due and payable on each
Payment Date, together with the installment of principal, if any, to the extent
not in full payment of this Class A-1 Note, shall be made by check mailed to the
<PAGE>
Person whose name appears as the Registered Holder of this Class A-1 Note (or
one or more Predecessor Notes) on the Note Register as of the close of business
on each Record Date, except that with respect to Class A-1 Notes registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co. ), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Such
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Class A-1 Note be submitted for notation of payment.
Any reduction in the principal amount of this Class A-1 Note (or any one or more
Predecessor Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this Class A-1 Note and of any Class A-1 Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Class A-1 Note on a Payment Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Registered Holder hereof as of the Record Date preceding such Payment
Date by notice mailed or transmitted by facsimile prior to such Payment Date,
and the amount then due and payable shall be payable only upon presentation and
surrender of this Class A-1 Note at the Indenture Trustee's Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in New York, New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-1 Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed, in whole but
not in part, in the manner and to the extent described in the Indenture and the
Sale and Servicing Agreement.
As provided in the Indenture, and subject to certain limitations set
forth therein, the transfer of this Class A-1 Note may be registered on the Note
Register upon surrender of this Class A-1 Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, and thereupon one or more new Class A-1 Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Class A-1 Note, but the transferor
may be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
<PAGE>
connection therewith, against (i) the Indenture Trustee or the Owner Trustee,
each in its individual capacity, (ii) any owner of a beneficial interest in the
Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Indenture Trustee or the Owner Trustee, each in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee
or the Indenture Trustee or of any successor or assign of the Indenture Trustee
or the Owner Trustee, each in its individual capacity, except as any such Person
may have expressly agreed and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller, or the Issuer, or join in any
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture and this Class A-1 Note is
issued with the intention that, for federal, state and local income, and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Class A-1 Note, the Issuer, the Indenture Trustee and any agent of the Issuer or
the Indenture Trustee may treat the Person in whose name this Class A-1 Note (as
of the day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Class A-1 Note be overdue, and none of the Issuer, the Indenture Trustee or
any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer and the Indenture Trustee with the consent of the Insurer (if
no Insurer Default shall have occurred and be continuing) and the Holders of
Notes representing not less than 51% of the Note Balance, voting as a group. The
Indenture also contains provisions permitting the Insurer (if no Insurer Default
shall have occurred and be continuing) or the Holders of Notes representing not
<PAGE>
less than 51% of the Note Balance, with the consent of the Insurer (if no
Insurer Default shall have occurred and be continuing), on behalf of the Holders
of all the Notes, to waive compliance by the Issuer with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Insurer or the Holder of this
Class A-1 Note (or any one or more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Class A-1 Note and
of any Class A-1 Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Class A-1 Note. The Indenture also permits the Issuer
and the Indenture Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of Holders of any Notes but with the
consent of the Insurer (if no Insurer Default shall have occurred and be
continuing).
The term "Issuer", as used in this Note, includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Class A-1 Note and the Indenture shall be governed by, and
construed in accordance with the laws of the State of New York, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture, and no provision of this Note or
of the Indenture, shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Transaction Documents, none of Bankers Trust Company, in its
individual capacity, First Union Trust Company, National Association, in its
individual capacity, any owner of a beneficial interest in the Issuer, or any of
their respective partners, beneficiaries, agents, officers, directors, employees
or successors or assigns shall be personally liable for, nor shall recourse be
had to any of them for, the payment of principal or of interest on this Class
<PAGE>
A-1 Note or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in the Indenture. The Holder of this
Note, by his acceptance hereof, agrees that, except as expressly provided in the
Transaction Documents, in the case of an Event of Default under the Indenture,
the Holder shall have no claim against any of the foregoing for any deficiency,
loss or claim therefrom; provided, however, that nothing contained herein shall
be taken to prevent recourse to, and enforcement against, the assets of the
Issuer for any and all liabilities, obligations and undertakings contained in
the Indenture or in this Class A-1 Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I. D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _________________, attorney, to transfer said Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated:
-------------------------*/
Signature Guaranteed:
-------------------------*/
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar.
<PAGE>
EXHIBIT A-2
Form of Class A-2 Note
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $[ ]
No. R-[ ] CUSIP NO. [ ]
CARMAX AUTO OWNER TRUST 1999-1
[ ]% CLASS A-2 ASSET-BACKED NOTES
CarMax Auto Owner Trust 1999-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to Cede & Co. , or its
registered assigns, the principal sum of [ ] DOLLARS payable on each Payment
Date in the aggregate amount, if any, payable from the Note Payment Account in
respect of principal on the Class A-2 Notes pursuant to Section 2.8 of the
Indenture dated as of September [ ], 1999 (as amended, supplemented or otherwise
modified and in effect from time to time, the "Indenture"), between the Issuer
and Bankers Trust Company, a New York banking corporation, as Indenture Trustee
(in such capacity the "Indenture Trustee"); provided, however, that if not paid
prior to such date, the entire unpaid principal amount of this Class A-2 Note
shall be due and payable on the earlier of the [ ] Payment Date (the "Class A-2
Final Payment Date") and the Redemption Date, if any, pursuant to Section
10.1(a) or (b) of the Indenture. In addition, the unpaid principal amount of
this Class A-2 Note may be redeemed in whole but not in part on the Redemption
Date, if any, pursuant to Section 10.1(c) of the Indenture. Capitalized terms
used but not defined herein are defined in Article I of the Indenture, which
also contains rules as to construction that shall be applicable herein.
<PAGE>
The Issuer shall pay interest on this Class A-2 Note at the rate per
annum shown above on each Payment Date until the principal of this Class A-2
Note is paid or made available for payment, on the principal amount of this
Class A-2 Note outstanding on the preceding Payment Date (after giving effect to
all payments of principal made on the preceding Payment Date), subject to
certain limitations contained in Section 3.1 of the Indenture. Interest on this
Class A-2 Note will accrue for each Payment Date from and including the 15th day
of the calendar month preceding each Payment Date (or, in the case of the
initial Payment Date or if no interest has been paid, from the Closing Date) to
but excluding the 15th day of the following calendar month. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Class A-2 Note shall be paid in the manner specified on
the reverse hereof.
The principal of and interest on this Class A-2 Note are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts. All payments made by
the Issuer with respect to this Class A-2 Note shall be applied first to
interest due and payable on this Class A-2 Note as provided above and then to
the unpaid principal of this Class A-2 Note.
Reference is made to the further provisions of this Class A-2 Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Class A-2 Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Class
A-2 Note shall not be entitled to any benefit under the Indenture referred to on
the reverse hereof, or be valid or obligatory for any purpose.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: September [ ], 1999
CARMAX AUTO OWNER TRUST 1999-1,
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ___________________________
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: September [ ], 1999
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
By: ___________________________
Authorized Officer
<PAGE>
[REVERSE OF CLASS A-2 NOTE]
This Class A-2 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its [ ]% Class A-2 Asset- Backed Notes, which, together
with the [ ]% Class A-1 Asset-Backed Notes, the [ ]% Class A-3 Asset-Backed
Notes and the [ ]% Class A-4 Asset-Backed Notes (collectively, the "Notes"), are
issued under the Indenture, to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture.
The Class A-2 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the fifteenth
day of each month or, if any such day is not a Business Day, the next succeeding
Business Day, commencing [ ] 15, 1999.
As described above, the entire unpaid principal amount of this Class
A-2 Note shall be due and payable on the earlier of the Class A-2 Final Payment
Date and the Redemption Date, if any, pursuant to Section 10.1(a) or (b) of the
Indenture. In addition, the unpaid principal amount of this Class A-2 Note may
be redeemed in whole but not in part on the Redemption Date, if any, pursuant to
Section 10.1(c) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing and (i) the
Insurer (if no Insurer Default shall have occurred and be continuing) or (ii)
(if an Insurer Default shall have occurred and be continuing) the Indenture
Trustee or the Holders of the Notes representing not less than 66 2/3% of the
Note Balance have declared the Notes to be immediately due and payable in the
manner provided in Section 5.2 of the Indenture. All principal payments on the
Class A-2 Notes shall be made pro rata to the Holders entitled thereto.
Payments of interest on this Class A-2 Note due and payable on each
Payment Date, together with the installment of principal, if any, to the extent
not in full payment of this Class A-2 Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Class A-2 Note (or
one or more Predecessor Notes) on the Note Register as of the close of business
on each Record Date, except that with respect to Class A-2 Notes registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co. ), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Such
checks shall be mailed to the Person entitled thereto at the address of such
<PAGE>
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Class A-2 Note be submitted for notation of payment.
Any reduction in the principal amount of this Class A-2 Note (or any one or more
Predecessor Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this Class A-2 Note and of any Class A-2 Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Class A-2 Note on a Payment Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Registered Holder hereof as of the Record Date preceding such Payment
Date by notice mailed or transmitted by facsimile prior to such Payment Date,
and the amount then due and payable shall be payable only upon presentation and
surrender of this Class A-2 Note at the Indenture Trustee's Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in New York, New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-2 Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed, in whole but
not in part, in the manner and to the extent described in the Indenture and the
Sale and Servicing Agreement.
As provided in the Indenture, and subject to certain limitations set
forth therein, the transfer of this Class A-2 Note may be registered on the Note
Register upon surrender of this Class A-2 Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, and thereupon one or more new Class A-2 Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Class A-2 Note, but the transferor
may be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
<PAGE>
connection therewith, against (i) the Indenture Trustee or the Owner Trustee,
each in its individual capacity, (ii) any owner of a beneficial interest in the
Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Indenture Trustee or the Owner Trustee, each in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee
or the Indenture Trustee or of any successor or assign of the Indenture Trustee
or the Owner Trustee, each in its individual capacity, except as any such Person
may have expressly agreed and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller, or the Issuer, or join in any
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture and this Class A-2 Note is
issued with the intention that, for federal, state and local income, and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Class A-2 Note, the Issuer, the Indenture Trustee and any agent of the Issuer or
the Indenture Trustee may treat the Person in whose name this Class A-2 Note (as
of the day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Class A-2 Note be overdue, and none of the Issuer, the Indenture Trustee or
any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer and the Indenture Trustee with the consent of the Insurer (if
no Insurer Default shall have occurred and be continuing) and the Holders of
Notes representing not less than 51% of the Note Balance, voting as a group. The
Indenture also contains provisions permitting the Insurer (if no Insurer Default
shall have occurred and be continuing) or the Holders of Notes representing not
less than 51% of the Note Balance, with the consent of the Insurer (if no
<PAGE>
Insurer Default shall have occurred and be continuing), on behalf of the Holders
of all the Notes, to waive compliance by the Issuer with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Insurer or the Holder of this
Class A-2 Note (or any one or more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Class A-2 Note and
of any Class A-2 Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Class A-2 Note. The Indenture also permits the Issuer
and the Indenture Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of Holders of any Notes but with the
consent of the Insurer (if no Insurer Default shall have occurred and be
continuing).
The term "Issuer", as used in this Note, includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Class A-2 Note and the Indenture shall be governed by, and
construed in accordance with the laws of the State of New York, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture, and no provision of this Note or
of the Indenture, shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Transaction Documents, none of Bankers Trust Company, in its
individual capacity, First Union Trust Company, National Association, in its
individual capacity, any owner of a beneficial interest in the Issuer, or any of
their respective partners, beneficiaries, agents, officers, directors, employees
or successors or assigns shall be personally liable for, nor shall recourse be
had to any of them for, the payment of principal or of interest on this Class
A-2 Note or performance of, or omission to perform, any of the covenants,
<PAGE>
obligations or indemnifications contained in the Indenture. The Holder of this
Note, by his acceptance hereof, agrees that, except as expressly provided in the
Transaction Documents, in the case of an Event of Default under the Indenture,
the Holder shall have no claim against any of the foregoing for any deficiency,
loss or claim therefrom; provided, however, that nothing contained herein shall
be taken to prevent recourse to, and enforcement against, the assets of the
Issuer for any and all liabilities, obligations and undertakings contained in
the Indenture or in this Class A-2 Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I. D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _________________, attorney, to transfer said Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated:
-----------------------------*/
Signature Guaranteed:
-----------------------------*/
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar.
<PAGE>
EXHIBIT A-3
Form of Class A-3 Note
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $[ ]
No. R-[ ] CUSIP NO. [ ]
CARMAX AUTO OWNER TRUST 1999-1
[ ]% CLASS A-3 ASSET-BACKED NOTES
CarMax Auto Owner Trust 1999-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to Cede & Co., or its
registered assigns, the principal sum of [ ] DOLLARS payable on each Payment
Date in the aggregate amount, if any, payable from the Note Payment Account in
respect of principal on the Class A-3 Notes pursuant to Section 2.8 of the
Indenture dated as of September [ ], 1999 (as amended, supplemented or otherwise
modified and in effect from time to time, the "Indenture"), between the Issuer
and Bankers Trust Company, a New York banking corporation, as Indenture Trustee
(in such capacity the "Indenture Trustee"); provided, however, that if not paid
prior to such date, the entire unpaid principal amount of this Class A-3 Note
shall be due and payable on the earlier of the [ ] Payment Date (the "Class A-3
Final Payment Date") and the Redemption Date, if any, pursuant to Section
10.1(a) or (b) of the Indenture. In addition, the unpaid principal amount of
this Class A-3 Note may be redeemed in whole but not in part on the Redemption
Date, if any, pursuant to Section 10.1(c) of the Indenture. Capitalized terms
used but not defined herein are defined in Article I of the Indenture, which
also contains rules as to construction that shall be applicable herein.
<PAGE>
The Issuer shall pay interest on this Class A-3 Note at the rate per
annum shown above on each Payment Date until the principal of this Class A-3
Note is paid or made available for payment, on the principal amount of this
Class A-3 Note outstanding on the preceding Payment Date (after giving effect to
all payments of principal made on the preceding Payment Date), subject to
certain limitations contained in Section 3.1 of the Indenture. Interest on this
Class A-3 Note will accrue for each Payment Date from and including the 15th day
of the calendar month preceding each Payment Date (or, in the case of the
initial Payment Date or if no interest has been paid, from the Closing Date) to
but excluding the 15th day of the following calendar month. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Class A-3 Note shall be paid in the manner specified on
the reverse hereof.
The principal of and interest on this Class A-3 Note are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts. All payments made by
the Issuer with respect to this Class A-3 Note shall be applied first to
interest due and payable on this Class A-3 Note as provided above and then to
the unpaid principal of this Class A-3 Note.
Reference is made to the further provisions of this Class A-3 Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Class A-3 Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Class
A-3 Note shall not be entitled to any benefit under the Indenture referred to on
the reverse hereof, or be valid or obligatory for any purpose.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: September [ ], 1999
CARMAX AUTO OWNER TRUST 1999-1,
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ___________________________
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: September [ ], 1999
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
By: ___________________________
Authorized Officer
<PAGE>
[REVERSE OF CLASS A-3 NOTE]
This Class A-3 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its [ ]% Class A-3 Asset- Backed Notes, which, together
with the [ ]% Class A-1 Asset-Backed Notes, the [ ]% Class A-2 Asset-Backed
Notes and the [ ]% Class A-4 Asset-Backed Notes (collectively, the "Notes"), are
issued under the Indenture, to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture.
The Class A-3 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-3 Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the fifteenth
day of each month or, if any such day is not a Business Day, the next succeeding
Business Day, commencing [ ], 1999.
As described above, the entire unpaid principal amount of this Class
A-3 Note shall be due and payable on the earlier of the Class A-3 Final Payment
Date and the Redemption Date, if any, pursuant to Section 10.1(a) or (b) of the
Indenture. In addition, the unpaid principal amount of this Class A-3 Note may
be redeemed in whole but not in part on the Redemption Date, if any, pursuant to
Section 10.1(c) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing and (i) the
Insurer (if no Insurer Default shall have occurred and be continuing) or (ii)
(if an Insurer Default shall have occurred and be continuing) the Indenture
Trustee or the Holders of the Notes representing not less than 66 2/3% of the
Note Balance have declared the Notes to be immediately due and payable in the
manner provided in Section 5.2 of the Indenture. All principal payments on the
Class A-3 Notes shall be made pro rata to the Holders entitled thereto.
Payments of interest on this Class A-3 Note due and payable on each
Payment Date, together with the installment of principal, if any, to the extent
not in full payment of this Class A-3 Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Class A-3 Note (or
one or more Predecessor Notes) on the Note Register as of the close of business
on each Record Date, except that with respect to Class A-3 Notes registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co. ), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Such
<PAGE>
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Class A-3 Note be submitted for notation of payment.
Any reduction in the principal amount of this Class A-3 Note (or any one or more
Predecessor Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this Class A-3 Note and of any Class A-3 Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Class A-3 Note on a Payment Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Registered Holder hereof as of the Record Date preceding such Payment
Date by notice mailed or transmitted by facsimile prior to such Payment Date,
and the amount then due and payable shall be payable only upon presentation and
surrender of this Class A-3 Note at the Indenture Trustee's Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in New York, New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-3 Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed, in whole but
not in part, in the manner and to the extent described in the Indenture and the
Sale and Servicing Agreement.
As provided in the Indenture, and subject to certain limitations set
forth therein, the transfer of this Class A-3 Note may be registered on the Note
Register upon surrender of this Class A-3 Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, and thereupon one or more new Class A-3 Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Class A-3 Note, but the transferor
may be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
<PAGE>
connection therewith, against (i) the Indenture Trustee or the Owner Trustee,
each in its individual capacity, (ii) any owner of a beneficial interest in the
Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Indenture Trustee or the Owner Trustee, each in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee
or the Indenture Trustee or of any successor or assign of the Indenture Trustee
or the Owner Trustee, each in its individual capacity, except as any such Person
may have expressly agreed and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller, or the Issuer, or join in any
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture and this Class A-3 Note is
issued with the intention that, for federal, state and local income, and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Class A-3 Note, the Issuer, the Indenture Trustee and any agent of the Issuer or
the Indenture Trustee may treat the Person in whose name this Class A-3 Note (as
of the day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Class A-3 Note be overdue, and none of the Issuer, the Indenture Trustee or
any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer and the Indenture Trustee with the consent of the Insurer (if
no Insurer Default shall have occurred and be continuing) and the Holders of
Notes representing not less than 51% of the Note Balance, voting as a group. The
<PAGE>
Indenture also contains provisions permitting the Insurer (if no Insurer Default
shall have occurred and be continuing) or the Holders of Notes representing not
less than 51% of the Note Balance, with the consent of the Insurer (if no
Insurer Default shall have occurred and be continuing), on behalf of the Holders
of all the Notes, to waive compliance by the Issuer with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Insurer or the Holder of this
Class A-3 Note (or any one or more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Class A-3 Note and
of any Class A-3 Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Class A-3 Note. The Indenture also permits the Issuer
and the Indenture Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of Holders of any Notes but with the
consent of the Insurer (if no Insurer Default shall have occurred and be
continuing).
The term "Issuer", as used in this Note, includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Class A-3 Note and the Indenture shall be governed by, and
construed in accordance with the laws of the State of New York, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture, and no provision of this Note or
of the Indenture, shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Transaction Documents, none of Bankers Trust Company, in its
individual capacity, First Union Trust Company, National Association, in its
individual capacity, any owner of a beneficial interest in the Issuer, or any of
their respective partners, beneficiaries, agents, officers, directors, employees
or successors or assigns shall be personally liable for, nor shall recourse be
had to any of them for, the payment of principal or of interest on this Class
<PAGE>
A-3 Note or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in the Indenture. The Holder of this
Note, by his acceptance hereof, agrees that, except as expressly provided in the
Transaction Documents, in the case of an Event of Default under the Indenture,
the Holder shall have no claim against any of the foregoing for any deficiency,
loss or claim therefrom; provided, however, that nothing contained herein shall
be taken to prevent recourse to, and enforcement against, the assets of the
Issuer for any and all liabilities, obligations and undertakings contained in
the Indenture or in this Class A-3 Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I. D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _________________, attorney, to transfer said Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated:
-----------------------------*/
Signature Guaranteed:
-----------------------------*/
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar.
<PAGE>
EXHIBIT A-4
Form of Class A-4 Note
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED $[ ]
No. R-[ ] CUSIP NO. [ ]
CARMAX AUTO OWNER TRUST 1999-1
[ ]% CLASS A-4 ASSET BACKED NOTES
CarMax Auto Owner Trust 1999-1, a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to Cede & Co., or its
registered assigns, the principal sum of [ ] DOLLARS payable on each Payment
Date in the aggregate amount, if any, payable from the Note Payment Account in
respect of principal on the Class A-4 Notes pursuant to Section 2.8 of the
Indenture dated as of September [ ], 1999 (as amended, supplemented or otherwise
modified and in effect from time to time, the "Indenture"), between the Issuer
and Bankers Trust Company, a New York banking corporation, as Indenture Trustee
(in such capacity the "Indenture Trustee"); provided, however, that if not paid
prior to such date, the entire unpaid principal amount of this Class A-4 Note
shall be due and payable on the earlier of the [ ] Payment Date (the "Class A-4
Final Payment Date") and the Redemption Date, if any, pursuant to Section
10.1(a) or (b) of the Indenture. In addition, the unpaid principal amount of
this Class A-4 Note may be redeemed in whole but not in part on the Redemption
Date, if any, pursuant to Section 10.1(c) of the Indenture. Capitalized terms
used but not defined herein are defined in Article I of the Indenture, which
also contains rules as to construction that shall be applicable herein.
<PAGE>
The Issuer shall pay interest on this Class A-4 Note at the rate per
annum shown above on each Payment Date until the principal of this Class A-4
Note is paid or made available for payment, on the principal amount of this
Class A-4 Note outstanding on the preceding Payment Date (after giving effect to
all payments of principal made on the preceding Payment Date), subject to
certain limitations contained in Section 3.1 of the Indenture. Interest on this
Class A-4 Note will accrue for each Payment Date from and including the 15th day
of the calendar month preceding each Payment Date (or, in the case of the
initial Payment Date or if no interest has been paid, from the Closing Date) to
but excluding the 15th day of the following calendar month. Interest will be
computed on the basis of a 360-day year of twelve 30-day months. Such principal
of and interest on this Class A-4 Note shall be paid in the manner specified on
the reverse hereof.
The principal of and interest on this Class A-4 Note are payable in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts. All payments made by
the Issuer with respect to this Class A-4 Note shall be applied first to
interest due and payable on this Class A-4 Note as provided above and then to
the unpaid principal of this Class A-4 Note.
Reference is made to the further provisions of this Class A-4 Note set
forth on the reverse hereof, which shall have the same effect as though fully
set forth on the face of this Class A-4 Note.
Unless the certificate of authentication hereon has been executed by
the Indenture Trustee whose name appears below by manual signature, this Class
A-4 Note shall not be entitled to any benefit under the Indenture referred to on
the reverse hereof, or be valid or obligatory for any purpose.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be
signed, manually or in facsimile, by its Authorized Officer, as of the date set
forth below.
Date: September [ ], 1999
CARMAX AUTO OWNER TRUST 1999-1,
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
not in its individual capacity but
solely as Owner Trustee under the
Trust Agreement
By: ___________________________
Authorized Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: September [ ], 1999
BANKERS TRUST COMPANY,
not in its individual capacity but
solely as Indenture Trustee
By: ___________________________
Authorized Officer
<PAGE>
[REVERSE OF CLASS A-4 NOTE]
This Class A-4 Note is one of a duly authorized issue of Notes of the
Issuer, designated as its [ ]% Class A-4 Asset- Backed Notes, which, together
with the [ ]% Class A-1 Asset-Backed Notes, the [ ]% Class A-2 Asset-Backed
Notes and the [ ]% Class A-3 Asset-Backed Notes (collectively, the "Notes"), are
issued under the Indenture, to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights and
obligations thereunder of the Issuer, the Indenture Trustee and the Holders of
the Notes. The Notes are subject to all terms of the Indenture.
The Class A-4 Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-4 Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the fifteenth
day of each month or, if any such day is not a Business Day, the next succeeding
Business Day, commencing [ ] 15, 1999.
As described above, the entire unpaid principal amount of this Class
A-4 Note shall be due and payable on the earlier of the Class A-4 Final Payment
Date and the Redemption Date, if any, pursuant to Section 10.1(a) or (b) of the
Indenture. In addition, the unpaid principal amount of this Class A-4 Note may
be redeemed in whole but not in part on the Redemption Date, if any, pursuant to
Section 10.1(c) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing and (i) the
Insurer (if no Insurer Default shall have occurred and be continuing) or (ii)
(if an Insurer Default shall have occurred and be continuing) the Indenture
Trustee or the Holders of the Notes representing not less than 66 2/3% of the
Note Balance have declared the Notes to be immediately due and payable in the
manner provided in Section 5.2 of the Indenture. All principal payments on the
Class A-4 Notes shall be made pro rata to the Holders entitled thereto.
Payments of interest on this Class A-4 Note due and payable on each
Payment Date, together with the installment of principal, if any, to the extent
not in full payment of this Class A-4 Note, shall be made by check mailed to the
Person whose name appears as the Registered Holder of this Class A-4 Note (or
one or more Predecessor Notes) on the Note Register as of the close of business
on each Record Date, except that with respect to Class A-4 Notes registered on
the Record Date in the name of the nominee of the Clearing Agency (initially,
such nominee to be Cede & Co. ), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Such
<PAGE>
checks shall be mailed to the Person entitled thereto at the address of such
Person as it appears on the Note Register as of the applicable Record Date
without requiring that this Class A-4 Note be submitted for notation of payment.
Any reduction in the principal amount of this Class A-4 Note (or any one or more
Predecessor Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this Class A-4 Note and of any Class A-4 Note
issued upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Class A-4 Note on a Payment Date, then the Indenture
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Registered Holder hereof as of the Record Date preceding such Payment
Date by notice mailed or transmitted by facsimile prior to such Payment Date,
and the amount then due and payable shall be payable only upon presentation and
surrender of this Class A-4 Note at the Indenture Trustee's Corporate Trust
Office or at the office of the Indenture Trustee's agent appointed for such
purposes located in New York, New York.
The Issuer shall pay interest on overdue installments of interest at
the Class A-4 Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed, in whole but
not in part, in the manner and to the extent described in the Indenture and the
Sale and Servicing Agreement.
As provided in the Indenture, and subject to certain limitations set
forth therein, the transfer of this Class A-4 Note may be registered on the Note
Register upon surrender of this Class A-4 Note for registration of transfer at
the office or agency designated by the Issuer pursuant to the Indenture, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the Holder hereof or
such Holder's attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar, and thereupon one or more new Class A-4 Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Class A-4 Note, but the transferor
may be required to pay a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any such registration of transfer
or exchange.
Each Noteholder or Note Owner, by its acceptance of a Note or, in the
case of a Note Owner, a beneficial interest in a Note, covenants and agrees that
no recourse may be taken, directly or indirectly, with respect to the
obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the
Notes or under the Indenture or any certificate or other writing delivered in
<PAGE>
connection therewith, against (i) the Indenture Trustee or the Owner Trustee,
each in its individual capacity, (ii) any owner of a beneficial interest in the
Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Indenture Trustee or the Owner Trustee, each in its individual
capacity, any holder of a beneficial interest in the Issuer, the Owner Trustee
or the Indenture Trustee or of any successor or assign of the Indenture Trustee
or the Owner Trustee, each in its individual capacity, except as any such Person
may have expressly agreed and except that any such partner, owner or beneficiary
shall be fully liable, to the extent provided by applicable law, for any unpaid
consideration for stock, unpaid capital contribution for stock, unpaid capital
contribution or failure to pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees by
accepting the benefits of the Indenture that such Noteholder or Note Owner will
not at any time institute against the Seller, or the Issuer, or join in any
institution against the Seller or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any United States
federal or state bankruptcy or similar law in connection with any obligations
relating to the Notes, the Indenture or the Transaction Documents.
The Issuer has entered into the Indenture and this Class A-4 Note is
issued with the intention that, for federal, state and local income, and
franchise tax purposes, the Notes will qualify as indebtedness of the Issuer
secured by the Trust Estate. Each Noteholder, by its acceptance of a Note (and
each Note Owner by its acceptance of a beneficial interest in a Note), agrees to
treat the Notes for federal, state and local income, single business and
franchise tax purposes as indebtedness of the Issuer.
Prior to the due presentment for registration of transfer of this
Class A-4 Note, the Issuer, the Indenture Trustee and any agent of the Issuer or
the Indenture Trustee may treat the Person in whose name this Class A-4 Note (as
of the day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Class A-4 Note be overdue, and none of the Issuer, the Indenture Trustee or
any such agent shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer and the Indenture Trustee with the consent of the Insurer (if
no Insurer Default shall have occurred and be continuing) and the Holders of
Notes representing not less than 51% of the Note Balance, voting as a group. The
<PAGE>
Indenture also contains provisions permitting the Insurer (if no Insurer Default
shall have occurred and be continuing) or the Holders of Notes representing not
less than 51% of the Note Balance, with the consent of the Insurer (if no
Insurer Default shall have occurred and be continuing), on behalf of the Holders
of all the Notes, to waive compliance by the Issuer with certain provisions of
the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Insurer or the Holder of this
Class A-4 Note (or any one or more Predecessor Notes) shall be conclusive and
binding upon such Holder and upon all future Holders of this Class A-4 Note and
of any Class A-4 Note issued upon the registration of transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent or
waiver is made upon this Class A-4 Note. The Indenture also permits the Issuer
and the Indenture Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of Holders of any Notes but with the
consent of the Insurer (if no Insurer Default shall have occurred and be
continuing).
The term "Issuer", as used in this Note, includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Indenture Trustee and the
Holders of Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Class A-4 Note and the Indenture shall be governed by, and
construed in accordance with the laws of the State of New York, and the
obligations, rights and remedies of the parties hereunder and thereunder shall
be determined in accordance with such laws.
No reference herein to the Indenture, and no provision of this Note or
of the Indenture, shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Transaction Documents, none of Bankers Trust Company, in its
individual capacity, First Union Trust Company, National Association, in its
individual capacity, any owner of a beneficial interest in the Issuer, or any of
their respective partners, beneficiaries, agents, officers, directors, employees
or successors or assigns shall be personally liable for, nor shall recourse be
had to any of them for, the payment of principal or of interest on this Class
<PAGE>
A-4 Note or performance of, or omission to perform, any of the covenants,
obligations or indemnifications contained in the Indenture. The Holder of this
Note, by his acceptance hereof, agrees that, except as expressly provided in the
Transaction Documents, in the case of an Event of Default under the Indenture,
the Holder shall have no claim against any of the foregoing for any deficiency,
loss or claim therefrom; provided, however, that nothing contained herein shall
be taken to prevent recourse to, and enforcement against, the assets of the
Issuer for any and all liabilities, obligations and undertakings contained in
the Indenture or in this Class A-4 Note.
<PAGE>
ASSIGNMENT
Social Security or taxpayer I. D. or other identifying number of assignee:
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto:
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints _________________, attorney, to transfer said Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated:
------------------------------*/
Signature Guaranteed:
------------------------------*/
*/ NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Note Registrar.
EXHIBIT 4.4
CARMAX AUTO OWNER TRUST 1999-1,
as Issuer,
CARMAX AUTO SUPERSTORES, INC.,
as Administrator,
and
BANKERS TRUST COMPANY,
as Indenture Trustee
-----------------------------
ADMINISTRATION AGREEMENT
Dated as of September [__], 1999
---------------------------
<PAGE>
ADMINISTRATION AGREEMENT, dated as of September [__], 1999 (as the
same may be amended, supplemented or otherwise modified and in effect from time
to time, this "Agreement"), by and among CARMAX AUTO OWNER TRUST 1999-1, a
Delaware business trust (the "Issuer"), CARMAX AUTO SUPERSTORES, INC., a
Virginia corporation, as administrator (in such capacity, the "Administrator"),
and BANKERS TRUST COMPANY, a New York banking corporation, not in its individual
capacity but solely as indenture trustee (in such capacity, the "Indenture
Trustee").
WHEREAS, the Issuer is issuing [____]% Class A-1 Asset-Backed Notes,
[____]% Class A-2 Asset-Backed Notes, [____]% Class A-3 Asset-Backed Notes and
[____]% Class A-4 Asset-Backed Notes (collectively, the "Notes") pursuant to the
Indenture, dated as of September [__], 1999 (as amended, supplemented or
otherwise modified and in effect from time to time, the "Indenture"), between
the Issuer and the Indenture Trustee;
WHEREAS, the Issuer has entered into certain agreements in connection
with the issuance of the Notes and the issuance of certain beneficial interests
in the Issuer, including (i) a Sale and Servicing Agreement, dated as of
September [__], 1999 (as amended, supplemented or otherwise modified and in
effect from time to time, the "Sale and Servicing Agreement"), among the Owner
Trustee, CarMax Auto Superstores, Inc., as servicer, and CarMax Auto Receivables
LLC, a Virginia limited liability company, as seller (in such capacity, the
"Seller"), (ii) a Letter of Representations, dated September [__], 1999 (as
amended, supplemented or otherwise modified and in effect from time to time, the
"Note Depository Agreement"), among the Issuer, the Indenture Trustee and The
Depository Trust Company relating to the Notes and (iii) the Indenture
(collectively with the Sale and Servicing Agreement and the Note Depository
Agreement, the "Related Agreements");
WHEREAS, pursuant to the Related Agreements, the Issuer and First
Union Trust Company, National Association, a national banking association, not
in its individual capacity but solely as owner trustee (in such capacity, the
"Owner Trustee"), are required to perform certain duties in connection with (i)
the Notes and the collateral pledged to secure the Notes pursuant to the
Indenture (the "Collateral") and (ii) the beneficial interests in the Issuer;
WHEREAS, the Issuer and the Owner Trustee desire to have the
Administrator perform certain of the duties of the Issuer and the Owner Trustee
referred to in the preceding clause and to provide such additional services
consistent with the terms of this Agreement and the Related Agreements as the
Issuer and the Owner Trustee may from time to time request; and
WHEREAS, the Administrator has the capacity to provide the services
required hereby and is willing to perform such services for the Issuer and the
Owner Trustee on the terms set forth herein;
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms used but not defined in
this Agreement shall have the respective meanings set forth in the Indenture.
SECTION 2. Duties of the Administrator.
(a) Duties with Respect to the Related Agreements.
---------------------------------------------
(i) The Administrator shall perform all its duties as
Administrator under the Note Depository Agreement. In addition, the
Administrator shall consult with the Owner Trustee regarding the
duties of the Issuer or the Owner Trustee under the Related
Agreements. The Administrator shall monitor the performance of the
Issuer and shall advise the Owner Trustee when action is necessary to
comply with the Issuer's or the Owner Trustee's duties under the
Related Agreements. The Administrator shall prepare for execution by
the Issuer or the Owner Trustee, or shall cause the preparation by
other appropriate persons of, all such documents, reports, filings,
instruments, certificates and opinions that it shall be the duty of
the Issuer or the Owner Trustee to prepare, file or deliver pursuant
to the Related Agreements. In furtherance of the foregoing, the
Administrator shall take all appropriate action that the Issuer or the
Owner Trustee is obligated to take pursuant to the Indenture,
including, without limitation, such of the foregoing as are required
with respect to the following matters under the Indenture (references
are to sections of the Indenture):
(A) the duty to cause the Note Register to be kept and to
give the Indenture Trustee notice of any appointment of a new
Note Registrar and the location, or change in location, of the
Note Register (Section 2.5);
(B) the notification of Noteholders of the final principal
payment on their Notes (Section 2.8(e));
(C) the preparation of or obtaining of the documents and
instruments required for authentication of the Notes and delivery
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<PAGE>
of the same to the Indenture Trustee (Section 2.2);
(D) the preparation, obtaining or filing of the instruments,
opinions, certificates and other documents required for the
release of collateral (Section 2.10);
(E) the maintenance of an office or agency in the Borough of
Manhattan, The City of New York, where Notes may be surrendered
for registration of transfer or exchange (Section 3.2);
(F) the duty to cause newly appointed Paying Agents, if any,
to deliver to the Indenture Trustee the instrument specified in
the Indenture regarding funds held in trust (Section 3.3);
(G) the direction to the Indenture Trustee to deposit monies
with Paying Agents, if any, other than the Indenture Trustee
(Section 3.3);
(H) the obtaining and preservation of the Issuer's
qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity
and enforceability of the Indenture, the Notes, the Collateral
and each other instrument or agreement included in the Trust
Estate (Section 3.4);
(I) the preparation of all supplements and amendments to the
Indenture and all financing statements, continuation statements,
instruments of further assurance and other instruments and the
taking of such other action as is necessary or advisable to
protect the Trust Estate (Section 3.5);
(J) the delivery of the Opinion of Counsel on the Closing
Date and the annual delivery of Opinions of Counsel as to the
Trust Estate, and the annual delivery of the Officer's
Certificate and certain other statements as to compliance with
the Indenture (Sections 3.6 and 3.9);
(K) the identification to the Indenture Trustee in an
Officer's Certificate of a Person with whom the Issuer has
contracted to perform its duties under the Indenture (Section
3.7(b));
(L) the notification of the Indenture Trustee and the Rating
Agencies of an Event of Servicing Termination under the Sale and
Servicing Agreement and, if such Event of Servicing Termination
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<PAGE>
arises from the failure of the Servicer to perform any of its
duties or obligations under the Sale and Servicing Agreement with
respect to the Contracts, the taking of all reasonable steps
available to remedy such failure (Section 3.7(d));
(M) the duty to cause the Servicer to comply with Sections
3.7, 3.9, 3.10, 3.11, 3.12, 3.13 and 3.14 and Article VII of the
Sale and Servicing Agreement (Section 3.14);
(N) the preparation and obtaining of documents and
instruments required for the conveyance or transfer by the Issuer
of its properties or assets (Section 3.10(b));
(O) the preparation and delivery of written notice to the
Indenture Trustee and the Rating Agencies of each Event of
Default under the Indenture and each default by the Seller or the
Servicer under the Sale and Servicing Agreement or by CarMax or
the Seller under the Purchase Agreement (Section 3.18);
(P) the monitoring of the Issuer's obligations as to the
satisfaction and discharge of the Indenture and the preparation
of an Officer's Certificate and the obtaining of the Opinion of
Counsel and the Independent Certificate relating thereto (Section
4.1);
(Q) the compliance with any written directive of the
Indenture Trustee with respect to the sale of the Trust Estate at
one or more public or private sales called and conducted in any
manner permitted by law if an Event of Default shall have
occurred and be continuing under the Indenture (Section 5.4);
(R) the preparation and delivery of written notice to the
Noteholders of the removal of the Indenture Trustee and the
appointment of a successor Indenture Trustee (Section 6.8);
(S) the preparation of any written instruments required to
confirm more fully the authority of any co-trustee or separate
trustee and any written instruments necessary in connection with
the resignation or removal of any co-trustee or separate trustee
(Sections 6.8 and 6.10);
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<PAGE>
(T) the furnishing to the Indenture Trustee of the names and
addresses of Noteholders during any period when the Indenture
Trustee is not the Note Registrar (Section 7.1);
(U) the preparation and, after execution by the Issuer,
filing with the Securities and Exchange Commission (the
"Commission"), any applicable state agencies and the Indenture
Trustee of documents required to be filed on a periodic basis
with, and summaries thereof as may be required by the rules and
regulations of, the Commission and any applicable state agencies
and the transmission of such summaries, as necessary, to the
Noteholders (Section 7.3);
(V) the opening of one or more accounts in the Issuer's
name, the preparation and delivery of Issuer Orders, Officer's
Certificates and Opinions of Counsel and all other actions
necessary with respect to the investment and reinvestment of
funds in the Collection Account and the Reserve Account (Sections
8.2 and 8.3);
(W) the preparation and delivery of an Issuer Request and
Officer's Certificate and the obtaining of an Opinion of Counsel
and Independent Certificates, if necessary, for the release of
the Trust Estate (Sections 8.4 and 8.5);
(X) the preparation and delivery of Issuer Orders and the
obtaining of an Opinion of Counsel with respect to the execution
of supplemental indentures and the mailing to the Noteholders of
notices with respect to such supplemental indentures (Sections
9.1, 9.2 and 9.3);
(Y) the execution and delivery of new Notes conforming to
any supplemental indenture (Section 9.6);
(Z) the duty to notify Noteholders of redemption of the
Notes or to cause the Indenture Trustee to provide such
notification (Section 10.2);
(AA) the preparation and delivery of Officer's Certificates
and the obtaining of an Opinion of Counsel and Independent
Certificates, if necessary, with respect to any requests by the
Issuer to the Indenture Trustee to take any action under the
Indenture (Section 11.1(a));
(BB) the preparation and delivery of Officer's Certificates
and the obtaining of Opinions of Counsel and Independent
-5-
<PAGE>
Certificates, if necessary, for the release of property from the
lien of the Indenture (Section 11.1(b));
(CC) the preparation and delivery of written notice to the
Rating Agencies, upon the failure of the Indenture Trustee to
give such notification, of the information required pursuant to
Section 11.4 of the Indenture (Section 11.4);
(DD) the preparation and delivery to the Noteholders and the
Indenture Trustee of any agreements with respect to alternate
payment and notice provisions (Section 11.6);
(EE) the recording of the Indenture, if applicable (Section
11.15); and
(FF) the preparation of Definitive Notes in accordance with
the instructions of the Clearing Agency (Section 2.13).
(ii) The Administrator shall:
(A) pay the Indenture Trustee from time to time
reasonable compensation for all services rendered by the
Indenture Trustee under the Indenture (which compensation shall
not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(B) except as otherwise expressly provided in the
Indenture, reimburse the Indenture Trustee upon its request for
all reasonable expenses, disbursements and advances incurred or
made by the Indenture Trustee in accordance with any provision of
the Indenture (including the reasonable compensation, expenses
and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its
negligence or bad faith;
(C) indemnify the Indenture Trustee and its agents for,
and hold them harmless against, any loss, liability or expense
incurred without negligence or bad faith on their part arising
out of or in connection with the acceptance or administration of
the transactions contemplated by the Indenture, including the
reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance
of any of their powers or duties under the Indenture; and
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<PAGE>
(D) indemnify the Owner Trustee and its agents for, and
hold them harmless against, any loss, liability or expense
incurred without negligence or bad faith on their part arising
out of or in connection with the acceptance or administration of
the transactions contemplated by the Trust Agreement, including
the reasonable costs and expenses of defending themselves against
any claim or liability in connection with the exercise or
performance of any of their powers or duties under the Trust
Agreement.
(b) Additional Duties.
(i) In addition to the duties of the Administrator set forth
above, the Administrator shall perform such calculations and shall
prepare or shall cause the preparation by other appropriate persons
of, and shall execute on behalf of the Issuer or the Owner Trustee,
all such documents, reports, filings, instruments, certificates and
opinions that the Issuer or the Owner Trustee is obligated to prepare
pursuant to the Related Agreements or Section 5.5(i), (ii), (iii) or
(iv) of the Trust Agreement, and at the request of the Owner Trustee
shall take all appropriate action that the Issuer or the Owner Trustee
is obligated to take pursuant to the Related Agreements. In
furtherance of the foregoing, the Owner Trustee shall, on behalf of
itself and the Issuer, execute and deliver to the Administrator and to
each successor Administrator appointed pursuant to the terms hereof,
one or more powers of attorney substantially in the form of Exhibit A
hereto, appointing the Administrator the attorney-in-fact of the Owner
Trustee and the Issuer for the purpose of executing on behalf of the
Owner Trustee and the Issuer all such documents, reports, filings,
instruments, certificates and opinions. Subject to Section 6 of this
Agreement, and in accordance with the directions of the Owner Trustee,
the Administrator shall administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Related Agreements) as are not covered by any of the
foregoing provisions and as are expressly requested by the Owner
Trustee and are reasonably within the capability of the Administrator.
(ii) Notwithstanding anything in this Agreement or the
Related Agreements to the contrary, the Administrator shall be
responsible for promptly notifying the Owner Trustee in the event that
any withholding tax is imposed on the Issuer's payments (or
allocations of income) to a registered holder of the beneficial
interests in the Issuer as contemplated in Section 5.2(c) of the Trust
-7-
<PAGE>
Agreement. Any such notice shall specify the amount of any withholding
tax required to be withheld by the Owner Trustee pursuant to such
provision.
(iii) Notwithstanding anything in this Agreement or the
Transaction Documents to the contrary, the Administrator shall be
responsible for performance of the duties of the Issuer or the Owner
Trustee set forth in Section 5.5(i), (ii), (iii) and (iv) and Section
5.6(a) of the Trust Agreement with respect to, among other things,
accounting and reports to the beneficial owners of the interests in
the Issuer.
(iv) The Administrator shall deliver to the Owner Trustee,
on or before January 15, 2000, a certificate of an Authorized Officer
in form and substance satisfactory to the Owner Trustee as to whether
any tax withholding is then required and, if required, the procedures
to be followed with respect thereto to comply with the requirements of
the Code. The Administrator shall update such certificate if any
additional tax withholding is subsequently required or any previously
required tax withholding shall no longer be required.
(v) The Administrator shall perform the duties of the
Administrator specified in Section 10.2 of the Trust Agreement
required to be performed in connection with the resignation or removal
of the Owner Trustee, and any other duties expressly required to be
performed by the Administrator under the Trust Agreement or any other
Related Agreement.
(vi) In carrying out the foregoing duties or any of its
other obligations under this Agreement, the Administrator may enter
into transactions or otherwise deal with any of its affiliates;
provided, however, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer
and shall be, in the Administrator's opinion, no less favorable to the
Issuer than would be available from unaffiliated parties.
(c) Non-Ministerial Matters.
(i) The Administrator shall not take any action with respect
to matters that, in the reasonable judgment of the Administrator, are
non-ministerial unless within a reasonable time before the taking of
such action the Administrator shall have notified the Owner Trustee
and the Insurer (if an Insurer Default has not occurred and is
continuing) of the proposed action and the Owner Trustee shall not
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<PAGE>
have withheld consent, which consent shall not be unreasonably
withheld or delayed, or provided an alternative direction. For the
purpose of the preceding sentence, "non-ministerial" matters shall
include, without limitation:
(A) the amendment of or any supplement to the
Indenture;
(B) the initiation of any claim or lawsuit by the
Issuer or the compromise of any action, claim or lawsuit brought
by or against the Issuer (other than in connection with the
collection of the Contracts or Eligible Investments);
(C) the amendment, change or modification of the
Related Agreements;
(D) the appointment of successor Note Registrars,
successor Paying Agents or successor Indenture Trustees pursuant
to the Indenture, the appointment of successor Administrators or
Successor Servicers or the consent to the assignment by the Note
Registrar, the Paying Agent or the Indenture Trustee of its
obligations under the Indenture; and
(E) the removal of the Indenture Trustee.
(ii) Notwithstanding anything to the contrary in this
Agreement, the Administrator shall not be obligated to, and shall not,
(A) make any payments to the Noteholders under the Related Agreements
or (B) take any other action that the Issuer directs the Administrator
not to take on its behalf.
SECTION 3. Records. The Administrator shall maintain appropriate books
of account and records relating to services performed hereunder, which books of
account and records shall be accessible for inspection by the Issuer and the
Company at any time during normal business hours.
SECTION 4. Compensation. As compensation for the performance of the
Administrator's obligations under this Agreement, and as reimbursement for its
expenses related thereto, the Administrator shall be entitled to $500 per month,
which compensation shall be solely an obligation of the Seller.
SECTION 5. Additional Information To Be Furnished to the Issuer. The
Administrator shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer may reasonably request.
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<PAGE>
SECTION 6. Independence of the Administrator. For all purposes of this
Agreement, the Administrator shall be an independent contractor and shall not be
subject to the supervision of the Issuer or the Owner Trustee with respect to
the manner in which it accomplishes the performance of its obligations
hereunder. Unless expressly authorized by the Issuer, the Administrator shall
have no authority to act for or represent the Issuer or the Owner Trustee in any
way and shall not otherwise be deemed an agent of the Issuer or the Owner
Trustee.
SECTION 7. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Administrator and either the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 8. Other Activities of Administrator. Nothing contained in
this Agreement shall prevent the Administrator or its affiliates from engaging
in other businesses or, in its sole discretion, from acting in a similar
capacity as an administrator for any other person or entity even though such
person or entity may engage in business activities similar to those of the
Issuer, the Owner Trustee or the Indenture Trustee.
SECTION 9. Term of Agreement; Resignation and Removal of
Administrator.
(a) This Agreement shall continue in full force and effect until the
dissolution of the Issuer, upon which event this Agreement shall automatically
terminate.
(b) Subject to Sections 9(e) and 9(f), the Administrator may resign
its duties hereunder by providing the Issuer with at least sixty (60) days'
prior written notice.
(c) Subject to Sections 9(e) and 9(f), the Issuer may remove the
Administrator without cause by providing the Administrator with at least sixty
(60) days' prior written notice.
(d) Subject to Sections 9(e) and 9(f), at the sole option of the
Issuer, the Issuer may remove the Administrator immediately upon written notice
of termination from the Issuer to the Administrator if any of the following
events shall occur and be continuing:
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<PAGE>
(i) the Administrator shall default in the performance of
any of its duties under this Agreement and, after notice of such
default, shall not cure such default within ten (10) days (or, if such
default cannot be cured in such time, shall not give within ten (10)
days such assurance of cure as shall be reasonably satisfactory to the
Issuer);
(ii) a court having jurisdiction in the premises shall
enter a decree or order for relief, and such decree or order shall not
have been vacated within sixty (60) days, in respect of the
Administrator in any involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect or appoint a
receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official for the Administrator or any substantial part of
its property or order the winding-up or liquidation of its affairs; or
(iii) the Administrator shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, shall consent to the entry of an order for
relief in an involuntary case under any such law, shall consent to the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official for the Administrator or any
substantial part of its property, shall consent to the taking of
possession by any such official of any substantial part of its
property, shall make any general assignment for the benefit of
creditors or shall fail generally to pay its debts as they become due.
If any of the events specified in clauses (ii) or (iii) of this
Section 9(d) shall occur, the Administrator shall give written notice thereof to
the Issuer and the Indenture Trustee within seven (7) days after the occurrence
of such event.
(e) No resignation or removal of the Administrator pursuant to Section
9(d) shall be effective until (i) a successor Administrator shall have been
appointed by the Issuer and (ii) such successor Administrator shall have agreed
in writing to be bound by the terms of this Agreement in the same manner as the
Administrator is bound hereunder.
(f) The appointment of any successor Administrator shall be effective
only after satisfaction of the Rating Agency Condition with respect to the
proposed appointment.
(g) Subject to Section 9(e) and 9(f), the Administrator acknowledges
that upon the appointment of a Successor Servicer pursuant to the Sale and
Servicing Agreement the Administrator shall immediately resign and such
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<PAGE>
Successor Servicer shall automatically become the Administrator under this
Agreement.
SECTION 10. Action upon Termination, Resignation or Removal. Promptly
upon the effective date of termination of this Agreement pursuant to Section
9(a), the resignation of the Administrator pursuant to Section 9(b) or the
removal of the Administrator pursuant to Section 9(c) or (d), the Administrator
shall be entitled to be paid all fees and reimbursable expenses accruing to it
to the date of such termination, resignation or removal. The Administrator shall
forthwith upon such termination pursuant to Section 9(a) deliver to the Issuer
all property and documents of or relating to the Collateral then in the custody
of the Administrator. In the event of the resignation of the Administrator
pursuant to Section 9(b) or the removal of the Administrator pursuant to Section
9(c) or (d), the Administrator shall cooperate with the Issuer and take all
reasonable steps requested by the Issuer to assist the Issuer in making an
orderly transfer of the duties of the Administrator.
SECTION 11. Notices. All demands, notices and other communications
under this Agreement shall be in writing, personally delivered, sent by
telecopier, overnight courier or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (i) in the
case of the Issuer, to the CarMax Auto Owner Trust 1999-1 c/o the Owner Trustee
at the following address: One Rodney Square, 1st Floor, 920 King Street,
Wilmington, Delaware 19801-7475, Attention: Corporate Trust Department, (ii) in
the case of the Administrator, at the following address: 4900 Cox Road, Glen
Allen, Virginia 23060, Attention: Treasury Department, (iii) in the case of the
Indenture Trustee, at the following address: Four Albany Street, New York, New
York 10006, Attention: Corporate Trust and Agency Group - Structured Finance,
and (iv) in the case of the Insurer, at the following address: 113 King Street,
Armonk, New York 10504, Attention: Insured Portfolio Management, Structured
Finance, or, in each case, to such other address as any party shall have
provided to the other parties in writing.
SECTION 12. Amendments. This Agreement may be amended from time to
time by the Issuer, the Administrator and the Indenture Trustee, with the
written consent of the Insurer (if an Insurer Default has not occurred and is
continuing) and the Owner Trustee but without the consent of the Noteholders and
the Certificateholders, for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that such amendment shall not, as set forth in an Opinion of
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<PAGE>
Counsel satisfactory to the Indenture Trustee and the Owner Trustee, materially
and adversely affect the interest of any Noteholder or Certificateholder. This
Agreement may also be amended from time to time by the Issuer, the Administrator
and the Indenture Trustee, with the written consent of the Owner Trustee, the
Insurer (if an Insurer Default has not occurred and is continuing) and the
Holders of Notes evidencing at least 51% of the Note Balance and the Holders of
Certificates evidencing at least 51% of the Certificate Balance, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Agreement or of modifying in any manner the rights of the
Noteholders or the Certificateholders; provided, however, that no such amendment
may (i) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Contracts or distributions that are
required to be made for the benefit of the Noteholders or the Certificateholders
or (ii) reduce the aforesaid percentage of the Holders of Notes and Certificates
which are required to consent to any such amendment, without the consent of the
Insurer (if an Insurer Default has not occurred and is continuing) and the
Holders of all the outstanding Notes and Certificates. Notwithstanding the
foregoing, the Administrator may not amend this Agreement without the consent of
the Seller, which consent shall not be unreasonably withheld.
SECTION 13. Successors and Assigns. This Agreement may not be assigned
by the Administrator unless such assignment is previously consented to in
writing by the Issuer, the Owner Trustee and the Insurer (if an Insurer Default
has not occurred and is continuing) and the Rating Agency Condition has been
satisfied with respect to such assignment. An assignment with such consent and
satisfaction, if accepted by the assignee, shall bind the assignee hereunder in
the same manner as the Administrator is bound hereunder. Notwithstanding the
foregoing, this Agreement may be assigned by the Administrator without the
consent of the Issuer or the Owner Trustee to a corporation or other
organization that is a successor (by merger, consolidation or purchase of
assets) to the Administrator; provided, however, that such successor
organization executes and delivers to the Issuer, the Owner Trustee and the
Indenture Trustee an agreement in which such corporation or other organization
agrees to be bound hereunder by the terms of such assignment in the same manner
as the Administrator is bound hereunder. Subject to the foregoing, this
Agreement shall bind any successors or assigns of the parties hereto.
SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
-13-
<PAGE>
SECTION 15. Counterparts. This Agreement may be executed in two or
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which together shall constitute but one
and the same instrument.
SECTION 16. Severability. If any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality, and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby.
SECTION 17. Not Applicable to CarMax Auto Superstores, Inc. in Other
Capacities. Nothing in this Agreement shall affect any obligation CarMax Auto
Superstores, Inc. may have in any other capacity.
SECTION 18. Limitation of Liability of Owner Trustee and Indenture
Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by the Owner Trustee not in its individual
capacity but solely in its capacity as Owner Trustee of the Issuer, and in no
event shall the Owner Trustee in its individual capacity have any liability for
the representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder or in any of the certificates, notices or agreements
delivered pursuant hereto, as to all of which recourse shall be had solely to
the assets of the Issuer. For all purposes of this Agreement, in the performance
of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by the Indenture Trustee not in its individual
capacity but solely as Indenture Trustee, and in no event shall the Indenture
Trustee in its individual capacity have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer.
SECTION 19. Third-Party Beneficiary. The Owner Trustee is a
third-party beneficiary of this Agreement and is entitled to the rights and
benefits hereunder and may enforce the provisions hereof as if it were a party
hereto.
-14-
<PAGE>
SECTION 20. Successor Servicer and Administrator. The Administrator
shall undertake, as promptly as possible after the giving of notice of
termination to the Servicer of the Servicer's rights and powers pursuant to
Section 8.2 of the Sale and Servicing Agreement, to enforce the provisions of
such Section 8.2 with respect to the appointment of a successor Servicer. Such
successor Servicer shall, upon compliance with the last sentence of Section 8.2
of the Sale and Servicing Agreement, become the successor Administrator
hereunder; provided, however, that if the Indenture Trustee shall become such
successor Administrator, the Indenture Trustee shall not be required to perform
any obligations or duties or conduct any activities as successor Administrator
that would be prohibited by law and not within the banking and trust powers of
the Indenture Trustee. In such event, the Indenture Trustee may appoint a
sub-administrator to perform such obligations and duties.
SECTION 21. Nonpetition Covenants.
(a) Notwithstanding any prior termination of this Agreement, the
Seller, the Administrator, the Owner Trustee and the Indenture Trustee shall
not, prior to the date which is one year and one day after the termination of
this Agreement, acquiesce, petition or otherwise invoke or cause the Issuer to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement, the
Issuer, the Administrator, the Owner Trustee and the Indenture Trustee shall
not, prior to the date which is one year and one day after the termination of
this Agreement, acquiesce, petition or otherwise invoke or cause the Seller to
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Seller under any federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Seller or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Seller.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers, thereunto duly authorized, all as
of the day and year first above written.
CARMAX AUTO OWNER TRUST 1999-1
By: FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
not in its individual capacity but solely as
Owner Trustee
By: ___________________________
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity but solely as
Indenture Trustee
By: ___________________________
Name:
Title:
CARMAX AUTO SUPERSTORES, INC.,
as Administrator
By: ___________________________
Name:
Title:
-16-
<PAGE>
EXHIBIT A
POWER OF ATTORNEY
STATE OF DELAWARE )
)
COUNTY OF NEW CASTLE )
KNOW ALL MEN BY THESE PRESENTS, that FIRST UNION TRUST
COMPANY, NATIONAL ASSOCIATION, a national banking association, not in its
individual capacity but solely as owner trustee (the "Owner Trustee") for CarMax
Auto Owner Trust 1999-1, a Delaware business trust (the "Issuer"), does hereby
make, constitute and appoint CARMAX AUTO SUPERSTORES, INC., a Virginia
corporation (the "Administrator"), as administrator under the Administration
Agreement dated as of September [__], 1999 (the "Administration Agreement"),
among the Issuer, the Administrator and Bankers Trust Company, a New York
banking corporation, as Indenture Trustee, as the same may be amended from time
to time, and its agents and attorneys, as attorneys-in-fact to execute on behalf
of the Owner Trustee or the Issuer all such documents, reports, filings,
instruments, certificates and opinions as the Owner Trustee or the Issuer is
obligated to prepare, file or deliver pursuant to the Related Agreements or
pursuant to Section 5.5(i), (ii), (iii) or (iv) of the Trust Agreement,
including, without limitation, to appear for and represent the Owner Trustee and
the Issuer in connection with the preparation, filing and audit of federal,
state and local tax returns pertaining to the Issuer, and with full power to
perform any and all acts associated with such returns and audits that the Owner
Trustee could perform, including without limitation, the right to distribute and
receive confidential information, defend and assert positions in response to
audits, initiate and defend litigation, and to execute waivers of restrictions
on assessments of deficiencies, consents to the extension of any statutory or
regulatory time limit and settlements. All powers of attorney for this purpose
heretofore filed or executed by the Owner Trustee are hereby revoked. All
capitalized terms used but not defined in this power of attorney shall have the
respective meanings set forth in the Administration Agreement.
-17-
<PAGE>
EXECUTED this [____] day of [____________], 1999.
FIRST UNION TRUST COMPANY,
NATIONAL ASSOCIATION,
not in its individual capacity
but solely as Owner Trustee
By: ___________________________
Name:
Title:
STATE OF DELAWARE )
) ss. :
COUNTY OF NEW CASTLE )
BEFORE ME, the undersigned authority, a Notary Public in and
for said county and state, on this day personally appeared
[____________________], known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same was
the act of First Union Trust Company, National Association, a national banking
association, and that said person executed the same for the purpose and
consideration therein expressed, and in the capacities therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this [____] day of
[____________], 1999.
------------------------
Notary Public in and for
the State of [____________]
[SEAL]
My commission expires: [____________]
-18-
Exhibit 5.1 - Form of Opinion of McGuire, Woods, Battle & Boothe LLP - Legality
[LETTERHEAD OF MCGUIRE, WOODS, BATTLE & BOOTHE LLP]
September , 1999
CarMax Auto Receivables LLC
4900 Cox Road
Glen Allen, Virginia 23060
Registration Statement on Form S-3
Registration No. 333-79087
Ladies and Gentlemen:
We have acted as counsel to CarMax Auto Receivables LLC, a Virginia
limited liability company, as Seller, and CarMax Auto Superstores, Inc., a
Virginia corporation, as Servicer, in connection with the issuance by the CarMax
Auto Owner Trust 1999-1 (the "Issuer") of $[ ] aggregate principal
amount of [ ]% Class A-1 Asset-Backed Notes, $[ ] aggregate principal
amount of [ ]% Class A-2 Asset-Backed Notes, $[ ] aggregate principal
amount of [ ]% Class A-3 Asset-Backed Notes and $[ ] aggregate
principal amount of [ ]% Class A-4 Asset- Backed Notes (collectively, the
"Notes") and $[ ] aggregate principal amount of [ ]% Asset-Backed
Certificates (the "Certificates"). The Notes will be issued pursuant to an
Indenture dated as of September , 1999 (the "Indenture") between the Issuer
and Bankers Trust Company, as Indenture Trustee. The Certificates will be issued
pursuant to a Trust Agreement dated as of September , 1999 (the "Trust
Agreement") between CarMax Auto Receivables LLC, as Depositor, and First Union
Trust Company, National Association, as Owner Trustee. Terms not otherwise
defined herein have the meanings assigned to them in the Prospectus (as defined
below).
In connection with our engagement, we have examined and relied upon
the Registration Statement on Form S-3 registering the Notes and the
Certificates, Registration No. 333-79087, filed with the Securities and Exchange
Commission (the "SEC") on May 21, 1999, Amendment No. 1 thereto filed with the
SEC on July 21, 1999 and Amendment No. 2 thereto filed with the SEC on September
7, 1999 (collectively, the "Registration Statement"), including (i) the form of
Prospectus included therein (the "Prospectus"), (ii) the form of the Indenture,
(iii) the form of the Trust Agreement and (iv) such other documents as we have
deemed necessary for purposes of this opinion.
<PAGE>
We express no opinion as to the laws of any jurisdiction other than
the Commonwealth of Virginia, the State of Delaware, the State of New York
and the United States of America.
Based upon and subject to the foregoing, we are of the opinion
that, (i) when the Notes have been duly executed and authenticated in accordance
with the terms of the Indenture and delivered and sold as contemplated by the
Registration Statement, the Notes will be legally issued, fully paid and
non-assessable and will be enforceable in accordance with their terms subject to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity) and except
that rights to indemnification and contribution thereunder may be limited by
federal or state securities laws or public policy relating thereto and (ii) when
the Certificates have been duly executed and authenticated in accordance with
the terms of the Trust Agreement and delivered and sold as contemplated by the
Registration Statement, the Certificates will be legally issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to McGuire, Woods, Battle & Boothe
LLP under the captions "Description of CarMax Auto Superstores and CarMax Auto
Receivables -- CarMax Auto Receivables," "Material Legal Aspects of the
Transaction -- Bankruptcy Matters" and "Legal Matters" in the Prospectus. We do
not admit by giving this consent that we are in the category of persons whose
consent is required under Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
Exhibit 8.1 - Form of Opinion of McGuire, Woods, Battle & Boothe LLP - Tax
[LETTERHEAD OF MCGUIRE, WOODS, BATTLE & BOOTHE LLP]
September [ ], 1999
CarMax Auto Receivables LLC
4900 Cox Road
Glen Allen, Virginia 23060
Registration Statement on Form S-3
Registration No. 333-79087
Ladies and Gentlemen:
We have acted as special tax counsel to CarMax Auto Receivables LLC,
a Virginia limited liability company, as Seller, in connection with the issuance
by the CarMax Auto Owner Trust 1999-1 (the "Issuer") of
$[ ] aggregate principal amount of [ ]% Class A-1 Asset-Backed Notes,
$[ ] aggregate principal amount of [ ]% Class A-2 Asset-Backed Notes,
$[ ] aggregate principal amount of [ ]% Class A-3 Asset-Backed Notes
and $[ ] aggregate principal amount of [ ]% Class A-4 Asset-Backed
Notes (collectively, the "Notes") and $[ ] aggregate principal amount
of [ ]% Asset-Backed Certificates (the "Certificates"). The Notes will be
issued pursuant to an Indenture dated as of September [ ], 1999
(the "Indenture")between the Issuer and Bankers Trust Company, as Indenture
Trustee. The Certificates will be issued pursuant to a Trust Agreement dated as
of September [ ], 1999 (the "Trust Agreement") between CarMax Auto Receivables
LLC, as Depositor, and First Union Trust Company, National Association, as Owner
Trustee. Terms not otherwise defined herein have the meanings assigned to them
in the Prospectus (as defined below).
In connection with our engagement, we have examined and relied upon
the Registration Statement on Form S-3 registering the Notes and the
Certificates, Registration No. 333-79087, filed with the Securities and Exchange
Commission (the "SEC") on May 21, 1999, Amendment No. 1 thereto filed with the
SEC on July 21, 1999 and Amendment No. 2 thereto filed with the SEC on September
7, 1999 (collectively, the "Registration Statement"), including (i) the form of
prospectus included therein (the "Prospectus"), (ii) the form of the Indenture,
(iii) the form of the Trust Agreement, (iv) the form of the Purchase Agreement,
(v) the form of the Sale and Servicing Agreement and (vi) such other documents
as we have deemed necessary for purposes of this opinion.
The opinion expressed herein is based upon the Internal
<PAGE>
Revenue Code of 1986, as amended, (the "Code"), administrative rulings, judicial
decisions, proposed, temporary and final Treasury regulations and other
applicable authorities. The statutory provisions, regulations and
interpretations upon which such opinion is based are subject to change, and such
changes could apply retroactively. In addition, there can be no assurance that
positions contrary to those stated in our opinion will not be asserted by the
Internal Revenue Service.
Based upon and subject to the foregoing, we hereby confirm that the
statements set forth under the heading "Material Federal Income Tax
Consequences" in the Prospectus, insofar as such statements constitute matters
of law or legal conclusions with respect thereto and except to the extent
qualified therein, constitute our opinion as to the material federal income
tax consequences of the purchase, ownership and disposition of the Notes and the
Certificates, and we expressly adopt them as such.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to McGuire, Woods, Battle & Boothe
LLP under the caption "Material Federal Income Tax Consequences" in the
Prospectus. We do not admit by giving this consent that we are in the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended.
Very truly yours,
EXHIBIT 10.1
- --------------------------------------------------------------------------------
CARMAX AUTO SUPERSTORES, INC.,
as Seller,
and
CARMAX AUTO RECEIVABLES LLC,
as Purchaser
------------------------------
PURCHASE AGREEMENT
Dated as of September [__], 1999
------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PURCHASE AGREEMENT, dated as of September [__], 1999 (as amended,
supplemented or otherwise modified and in effect from time to time, this
"Agreement"), by and between CARMAX AUTO SUPERSTORES, INC., a Virginia
corporation (the "Seller"), and CARMAX AUTO RECEIVABLES LLC, a Virginia limited
liability company (the "Purchaser").
WHEREAS, in the regular course of its business, the Seller originates
motor vehicle retail installment sale contracts;
WHEREAS, the Seller wishes to sell to the Purchaser, and the Purchaser
wishes to purchase from the Seller, certain of such contracts and certain
related property;
WHEREAS, the Purchaser intends to transfer such contracts and such
related property to the CarMax Auto Owner Trust 1999-1, a Delaware business
trust (the "Trust"), pursuant to a Sale and Servicing Agreement dated as of
September [__], 1999 among the Owner Trustee, the Seller, as servicer, and the
Purchaser (as amended, supplemented or otherwise modified and in effect from
time to time, the "Sale and Servicing Agreement"); and
WHEREAS, the Seller agrees that all covenants and agreements made by
the Seller herein with respect to such contracts and such related property shall
also be for the benefit of the Trust;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. All capitalized terms used but not defined
in this Agreement shall have the respective meanings set forth in the Sale and
Servicing Agreement or, if not defined therein, in the Indenture. Except as
otherwise specified herein or as the context may otherwise require, the
following terms shall have the respective meanings set forth below for all
purposes of this Agreement.
"Assignment" shall mean a written assignment substantially in the form
attached as Exhibit A to this Agreement.
"Closing" shall have the meaning specified in Section 2.3.
<PAGE>
"Contract" shall mean a motor vehicle retail installment sale contract
identified on the Contract Schedule (as such contract may be amended,
supplemented or otherwise modified and in effect from time to time).
"Contract Schedule" shall mean the list identifying the Contracts
attached as Schedule 1 to this Agreement (which list may be in the form of
microfiche or compact disk).
"Indenture" shall mean the Indenture, dated as of September [__],
1999, between the Trust and the Indenture Trustee, as the same may be amended,
supplemented or otherwise modified and in effect from time to time.
"Indenture Trustee" shall mean Bankers Trust Company, a New York
banking corporation, not in its individual capacity but solely as Indenture
Trustee under the Indenture, its successors in interest and any successor
trustee under the Indenture.
"Officer's Certificate" shall mean a certificate signed by the
chairman, the president, any executive vice president, vice president or the
treasurer of the Seller and delivered to the Purchaser.
"Owner Trustee" shall mean First Union Trust Company, National
Association, a national banking association, not in its individual capacity but
solely as Owner Trustee under the Trust Agreement, its successors in interest
and any successor trustee under the Trust Agreement.
"Prospectus" shall have the meaning specified in the Underwriting
Agreement.
"Purchase Price" shall mean $[____________].
"Purchaser" shall mean CarMax Auto Receivables LLC, a Virginia limited
liability company, in its capacity as purchaser of the Contracts under this
Agreement, and its successors in such capacity.
"Relevant UCC" shall mean the Uniform Commercial Code as in effect
from time to time in any relevant jurisdiction.
"Seller" shall mean CarMax Auto Superstores, Inc., a Virginia
corporation, in its capacity as seller of the Contracts under this Agreement,
and its successors in such capacity.
"Trust Agreement" shall mean the Trust Agreement, dated as of
September [__], 1999, between the Purchaser and the Owner Trustee, as the same
may be amended, supplemented or otherwise modified and in effect from time to
time.
-2-
<PAGE>
"Underwriting Agreement" shall mean the Underwriting Agreement, dated
as of September [__], 1999, between Banc of America Securities LLC, as
representative of the several underwriters named therein, and the Purchaser, as
the same may be amended, supplemented or otherwise modified and in effect from
time to time.
ARTICLE II
PURCHASE AND SALE OF CONTRACTS
SECTION 2.1. Purchase and Sale of Contracts.
(a) On the Closing Date, and simultaneously with the transactions to
be consummated pursuant to the Trust Agreement, the Sale and Servicing Agreement
and the Indenture, the Seller shall irrevocably sell, transfer, assign and
otherwise convey to the Purchaser, without recourse (subject to the obligations
herein), all right, title and interest of the Seller, whether now owned or
hereafter acquired, in, to and under the following:
(i) the Contracts;
(ii) all amounts received on or in respect of the Contracts after
the Cutoff Date;
(iii) the security interests in the Financed Vehicles;
(iv) any proceeds from claims on or refunds of premiums with
respect to physical damage, theft, credit life and credit disability
insurance policies relating to the Financed Vehicles or the related
Obligors;
(v) the Contract Files; and
(vi) all present and future claims, demands, causes of action and
choses in action in respect of any or all of the foregoing and all payments
on or under and all proceeds of every kind and nature whatsoever in respect
of any or all of the foregoing, including all proceeds of the conversion
thereof, voluntary or involuntary, into cash or other liquid property, all
cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any
time constitute all or part of or are included in the proceeds of any of
the foregoing.
-3-
<PAGE>
(b) The Seller and the Purchaser intend that the transfer of the
Contracts and the related property contemplated by Section 2.1(a) constitute a
sale of the Contracts and such related property, conveying good title to the
Contracts and such related property, from the Seller to the Purchaser and that
the Contracts and such related property not be part of the Seller's estate in
the event of the filing of a bankruptcy petition by or against the Seller under
any bankruptcy law. If such transfer is deemed to be a pledge to secure the
payment of the Purchase Price, however, the Seller hereby grants to the
Purchaser a first priority security interest in all of the Seller's right, title
and interest in, to and under the Contracts and such related property, and all
proceeds thereof, to secure the payment of the Purchase Price, and in such
event, this Agreement shall constitute a security agreement under applicable
law.
SECTION 2.2. Payment of Purchase Price. In consideration for the
Contracts and the related property described in Section 2.1(a), the Purchaser
shall, on or before the Closing Date, pay to or upon the order of the Seller the
Purchase Price. An amount equal to $[____________] of the Purchase Price shall
be paid to the Seller in cash. The remainder of the Purchase Price shall be paid
by crediting the Seller with a contribution to the capital of the Purchaser.
SECTION 2.3. The Closing. The sale and purchase of the Contracts shall
take place at a closing (the "Closing") at the offices of McGuire, Woods, Battle
& Boothe LLP, 901 East Cary Street, Richmond, Virginia 23219 on the Closing
Date, simultaneously with the closings under:
(i) the Sale and Servicing Agreement, pursuant to which the
Purchaser will transfer all of its right, title and interest in, to and
under the Contracts and the related property described in Section 2.1(a) to
the Trust in exchange for the Notes and the Certificates;
(ii) the Indenture, pursuant to which the Trust will issue the
Notes and pledge all of its right, title and interest in, to and under the
Trust Property to secure the Notes;
(iii) the Trust Agreement, pursuant to which the Trust will issue
the Certificates; and
(iv) the Underwriting Agreement, pursuant to which the Purchaser
will sell to the underwriters named therein the Notes and the Certificates.
-4-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants to the Seller as of the date hereof and
as of the Closing Date:
(a) Organization and Good Standing. The Purchaser has been duly
organized and is validly existing as a limited liability company in good
standing under the laws of the Commonwealth of Virginia, has the power,
authority and legal right to own its properties and to conduct its business as
such properties are currently owned and such business is currently conducted and
has the power, authority and legal right to acquire and own the Contracts.
(b) Due Qualification. The Purchaser is duly qualified to do business
as a foreign limited liability company in good standing and has obtained all
necessary licenses and approvals in each jurisdiction in which the failure to so
qualify or to obtain such licenses and approvals would, in the reasonable
judgment of the Purchaser, materially and adversely affect the performance by
the Purchaser of its obligations under, or the validity or enforceability of,
this Agreement.
(c) Power and Authority. The Purchaser has the power and authority to
execute, deliver and perform its obligations under this Agreement, and the
execution, delivery and performance of this Agreement have been duly authorized
by the Purchaser by all necessary limited liability company action.
(d) Binding Obligation. This Agreement constitutes the legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, subject, as to enforceability, to applicable
bankruptcy, insolvency, reorganization, conservatorship, receivership,
liquidation and other similar laws and to general equitable principles.
(e) No Violation. The execution, delivery and performance by the
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof will not conflict
with, result in a breach of any of the material terms and provisions of or
constitute (with or without notice or lapse of time or both) a default under the
articles of organization or operating agreement of the Purchaser or any material
indenture, agreement, mortgage, deed of trust or other instrument to which the
Purchaser is a party or by which the Purchaser is bound or to which any of its
properties are subject, or result in the creation or imposition of any lien upon
any of its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument (other than pursuant to this
Agreement), or violate any law, order, rule or regulation applicable to the
Purchaser or its properties of any federal or state regulatory body, court,
administrative agency or other governmental instrumentality having jurisdiction
over the Purchaser or any of its properties.
-5-
<PAGE>
(f) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of the Purchaser, threatened, against the
Purchaser before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the Purchaser
or its properties (i) asserting the invalidity of this Agreement, (ii) seeking
to prevent the consummation of any of the transactions contemplated by this
Agreement or (iii) seeking any determination or ruling that, in the reasonable
judgment of the Purchaser, would materially and adversely affect the performance
by the Purchaser of its obligations under, or the validity or enforceability of,
this Agreement.
SECTION 3.2. Representations and Warranties of the Seller.
(a) The Seller hereby represents and warrants to the Purchaser as of
the date hereof and as of the Closing Date:
(i) Organization and Good Standing. The Seller has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the Commonwealth of Virginia, has the power, authority
and legal right to own its properties and to conduct its business as such
properties are currently owned and such business is currently conducted and
has the power, authority and legal right to acquire and own the Contracts.
(ii) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals in each jurisdiction in which the failure
to so qualify or to obtain such licenses and approvals would, in the
reasonable judgment of the Seller, materially and adversely affect the
performance by the Seller of its obligations under, or the validity or
enforceability of, this Agreement.
(iii) Power and Authority. The Seller has the power and authority
to execute, deliver and perform its obligations under this Agreement and
the Assignment, and the execution, delivery and performance of this
Agreement and the Assignment have been duly authorized by the Seller by all
necessary corporate action. The Seller has the power and authority to sell,
assign, transfer and convey the Contracts to the Purchaser and has duly
authorized such transfer by all necessary corporate action.
-6-
<PAGE>
(iv) Valid Transfer; Binding Obligation. This Agreement and the
Assignment effect a valid sale, transfer, assignment and conveyance to the
Purchaser of the Contracts enforceable against creditors of and purchasers
from the Seller. This Agreement and the Assignment constitute legal, valid
and binding obligations of the Seller, enforceable against the Seller in
accordance with their terms, subject, as to enforceability, to applicable
bankruptcy, insolvency, reorganization, conservatorship, receivership,
liquidation and other similar laws and to general equitable principles.
(v) No Violation. The execution, delivery and performance by the
Seller of this Agreement and the Assignment, the consummation of the
transactions contemplated hereby and thereby and the fulfillment of the
terms hereof and thereof will not conflict with, result in a breach of any
of the material terms and provisions of or constitute (with or without
notice or lapse of time or both) a default under the articles of
incorporation or bylaws of the Seller or any material indenture, agreement,
mortgage, deed of trust or other instrument to which the Seller is a party
or by which the Seller is bound or to which any of its properties are
subject, or result in the creation or imposition of any lien upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument (other than pursuant to this
Agreement), or violate any law, order, rule or regulation applicable to the
Seller or its properties of any federal or state regulatory body, court,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or any of its properties.
(vi) No Proceedings. There are no proceedings or investigations
pending, or, to the knowledge of the Seller, threatened, against the Seller
before any court, regulatory body, administrative agency or other tribunal
or governmental instrumentality having jurisdiction over the Seller or its
properties (i) asserting the invalidity of this Agreement or the
Assignment, (ii) seeking to prevent the consummation of any of the
transactions contemplated by this Agreement or the Assignment or (iii)
seeking any determination or ruling that, in the reasonable judgment of the
Seller, would materially and adversely affect the performance by the Seller
of its obligations under, or the validity or enforceability of, this
Agreement or the Assignment.
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(b) The Seller makes the following representations and warranties as
to the Contracts on which the Purchaser shall be deemed to have relied in
accepting the Contracts. The representations and warranties speak as of the
execution and delivery of this Agreement, except to the extent otherwise
provided, but shall survive the sale, transfer, assignment and conveyance of the
Contracts to the Purchaser pursuant to this Agreement, the sale, transfer,
assignment and conveyance of the Contracts to the Trust pursuant to the Sale and
Servicing Agreement and the pledge of the Contracts to the Indenture Trustee
pursuant to the Indenture.
(i) Characteristics of Contracts. Each Contract (A)has been
originated by the Seller in the ordinary course of business in connection
with the sale of a new or used motor vehicle and has been fully and
properly executed by the parties thereto, (B) has created a valid, binding
and enforceable security interest in favor of the Seller in the related
Financed Vehicle, (C) contains customary and enforceable provisions such
that the rights and remedies of the holder thereof are adequate for
realization against the collateral of the benefits of the security, (D)
provides for level monthly payments that fully amortize the Amount Financed
by maturity (except that the period between the date of such Contract and
the first Scheduled Payment may be less than or greater than one month and
the amount of the first and last Scheduled Payments may be less than or
greater than the level payments) and yield interest at the related APR, (E)
provides for, in the event that such Contract is prepaid, a prepayment that
fully pays the Principal Balance of such Contract with interest at the
related APR through the date of payment, (F) is a retail installment sale
contract, (G) is secured by a new or used motor vehicle, (H) is a Simple
Interest Contract and (I) relates to an Obligor who has made at least two
payments under such Contract as of the Cutoff Date.
(ii) Contract Schedule. The information set forth in the Contract
Schedule was true and correct in all material respects as of the opening of
business on the Cutoff Date, and no selection procedures believed to be
adverse to the Purchaser were utilized in selecting the Contracts from
those retail installment sale contracts which met the criteria contained
herein. The information set forth in the compact disk or other listing
regarding the Contracts made available to the Purchaser and its assigns
(which compact disk or other listing is required to be delivered as
specified herein) is true and correct in all material respects.
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(iii) Compliance with Law. Each Contract and the sale of the
related Financed Vehicle complied, at the time such Contract was originated
and complies, as of the Closing Date, in all material respects with all
requirements of applicable federal, state and local laws, and regulations
thereunder, including, without limitation, usury laws, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Credit Billing Act, the Fair Debt Collection
Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty
Act, the Federal Reserve Board's Regulations B, M and Z, the Soldiers' and
Sailors' Civil Relief Act of 1940 and state adaptations of the Uniform
Consumer Credit Code.
(iv) Binding Obligation. Each Contract represents the genuine,
legal, valid and binding payment obligation in writing of the related
Obligor, enforceable by the holder thereof in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
(v) No Government Obligor. No Contract is due from the United
States of America or any state thereof or from any agency, department or
instrumentality of the United States of America or any state thereof.
(vi) Security Interest in Financed Vehicles. Immediately prior to
the transfer of the Contracts by the Seller to the Purchaser, each Contract
was secured by a valid, binding and enforceable first priority perfected
security interest in favor of the Seller in the related Financed Vehicle
and, at such time as enforcement of such security interest is sought, there
shall exist a valid, binding and enforceable first priority perfected
security interest in such Financed Vehicle for the benefit of the Purchaser
or its assigns (subject to any statutory or other lien arising by operation
of law after the Closing Date which may be prior to such security
interest).
(vii) Contracts in Force. No Contract has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released in
whole or in part from the Lien granted by the related Contract.
(viii) No Waiver. No provision of a Contract has been waived in
such a manner that such Contract fails to meet all of the representations
and warranties made by the Seller in this Section 3.2(b) with respect
thereto.
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(ix) No Defenses. No right of rescission, setoff, counterclaim or
defense has been asserted or threatened with respect to any Contract.
(x) No Liens. To the best of the Seller's knowledge, no liens or
claims have been filed for work, labor or materials relating to any
Financed Vehicle that are prior to, or equal or coordinate with, the
security interest in such Financed Vehicle created by the related Contract.
(xi) No Default; Repossession. No default, breach, violation or
event permitting acceleration under the terms of any Contract has occurred,
no continuing condition that with notice or the lapse of time or both would
constitute a default, breach, violation or event permitting acceleration
under the terms of any Contract has arisen and no Financed Vehicle has been
repossessed as of the Cutoff Date.
(xii) Title. The Seller intends that the transfer of the
Contracts contemplated by Section 2.1(a) constitute a sale of the Contracts
from the Seller to the Purchaser and that the beneficial interest in, and
title to, the Contracts not be part of the Seller's estate in the event of
the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. The Seller has not sold, transferred, assigned or pledged
any Contract to any Person other than the Purchaser. Immediately prior to
the transfer of the Contracts contemplated by Section 2.1(a), the Seller
had good and marketable title to the Contracts free and clear of all Liens,
encumbrances, security interests and rights of others and, immediately upon
such transfer, the Purchaser shall have good and marketable title to the
Contracts, free and clear of all Liens, encumbrances, security interests
and rights of others. The transfer of the Contracts contemplated by Section
2.1(a) has been perfected by all necessary action under the Relevant UCC.
(xiii) Valid Assignment. No Contract has been originated in, or
is subject to the laws of, any jurisdiction under which the sale, transfer,
assignment and conveyance of such Contract under this Agreement or the
pledge of such Contract under the Indenture is unlawful, void or voidable.
The Seller has not entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of the Contracts.
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(xiv) All Filings Made. All filings (including, without
limitation, filings under the Relevant UCC) necessary in any jurisdiction
to give the Purchaser a first priority perfected security interest in the
Contracts have been made or will be made on or prior to the Closing Date.
(xv) Chattel Paper. Each Contract constitutes "chattel paper" as
defined in the Relevant UCC.
(xvi) One Original. There is only one original executed copy of
each Contract.
(xvii) Principal Balance. Each Contract 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.
(xviii) No Bankrupt Obligors. As of the Cutoff Date, no Contract
was due from an Obligor that was the subject of a proceeding under the
Bankruptcy Code of the United States or was bankrupt.
(xix) New and Used Vehicles. As of the Cutoff Date, approximately
[__]% of the Pool Balance related to Contracts secured by new Financed
Vehicles and approximately [__]% of the Pool Balance related to Contracts
secured by used Financed Vehicles.
(xx) Origination. Each Contract was originated after
[___________], 19[__].
(xxi) Term to Maturity. Each Contract 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 70 months
and not less than three months.
(xxii) Weighted Average Maturity. The weighted average remaining
term to maturity of the Contracts as of the Cutoff Date was [____] months.
(xxiii) Annual Percentage Rate. Each Contract has an APR of at
least 5% and not more than 25%.
(xxiv) Location of Contract Files. The Contract Files are
maintained at the location listed in Schedule 2 to this Agreement.
(xxv) Simple Interest Method. All payments with respect to the
Contracts have been allocated consistently in accordance with the Simple
Interest Method.
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(xxvi) No Delinquent Contracts. As of the Cutoff Date, no
Contract was 30 or more days past due.
(xxvii) Prospectus Data. The tabular and numerical data contained
in the Prospectus relating to the characteristics of the Contracts is true
and correct in all material respects.
(xxviii) Insurance. The Seller, in accordance with its customary
procedures, has determined whether or not each Obligor has obtained
physical damage insurance (which insurance shall not be force placed
insurance) covering the related Financed Vehicle.
ARTICLE IV
CONDITIONS
SECTION 4.1. Conditions to Obligation of the Purchaser. The obligation
of the Purchaser to purchase the Contracts for the Seller on the Closing Date is
subject to the satisfaction of the following conditions:
(i) Representations and Warranties True. The representations and
warranties of the Seller contained herein shall be true and correct on the
Closing Date with the same effect as if then made, and the Seller shall
have performed all obligations to be performed by it hereunder on or before
the Closing Date.
(ii) Computer Files Marked. The Seller shall, at its own expense,
on or before the Closing Date, indicate in its computer files that the
Contracts have been sold to the Purchaser pursuant to this Agreement and
deliver to the Purchaser the Contract Schedule certified by an officer of
the Seller to be true, correct and complete.
(iii) Execution of Assignment. The Seller shall, on or before the
Closing Date, execute and deliver the Assignment.
(iv) Evidence of UCC Filing. The Seller shall record and file, at
its own expense, on or within ten (10) days after the Closing Date, a UCC-1
financing statement in each jurisdiction in which such filing is required
by applicable law, executed by the Seller, as seller or debtor, and naming
the Purchaser, as purchaser or secured party, naming the Contracts and the
related property described in Section 2.1(a) as collateral, meeting the
requirements of the laws of each such jurisdiction and in such manner as is
necessary to perfect the sale, transfer, assignment and conveyance of the
Contracts to the Purchaser. The Seller shall deliver a file-stamped copy,
or other evidence satisfactory to the Purchaser of such filing, to the
Purchaser within ten (10) days after the Closing Date.
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(v) Other Documents. The Seller shall have delivered to the
Purchaser such other documents as the Purchaser may reasonably request.
(iv) Other Transactions. The transactions contemplated by the
Sale and Servicing Agreement, the Indenture, the Trust Agreement and the
Underwriting Agreement shall be consummated on the Closing Date.
SECTION 4.2. Conditions to Obligation of the Seller. The obligation of
the Seller to sell the Contracts to the Purchaser on the Closing Date is subject
to the satisfaction of the following conditions:
(i) Representations and Warranties True. The representations and
warranties of the Purchaser contained herein shall be true and correct on
the Closing Date with the same effect as if then made, and the Purchaser
shall have performed all obligations to be performed by it hereunder on or
before the Closing Date.
(ii) Purchase Price. The Purchaser shall have delivered to the
Seller, on or before the Closing Date, the Purchase Price as provided in
Section 2.2.
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as follows; provided, that to the
extent that any provision of this Article V conflicts with any provision of the
Sale and Servicing Agreement, the Sale and Servicing Agreement shall govern:
SECTION 5.1. Protection of Right, Title and Interest.
(a) The Seller shall execute and file such financing statements and
cause to be executed and filed such continuation statements, all in such manner
and in such places as may be required by law fully to preserve, maintain and
protect the interest of the Purchaser in the Contracts and the proceeds thereof.
The Seller shall deliver (or cause to be delivered) to the Purchaser
file-stamped copies of, or filing receipts for, any document filed as provided
above as soon as available following such filing.
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(b) The Seller shall not change its name, identity or corporate
structure in any manner that would make any financing statement or continuation
statement filed by the Seller in accordance with Section 5.1(a) seriously
misleading within the meaning of Section 9-402(7) of the Relevant UCC, unless it
shall have given the Purchaser at least sixty (60) days' prior written notice
thereof and shall have promptly filed such amendments to previously filed
financing statements or continuation statements or such new financing statements
as may be necessary to continue the perfection of the interest of the Purchaser
in the Contracts and the proceeds thereof.
(c) The Seller shall give the Purchaser at least sixty (60) days'
prior written notice of any relocation of its principal executive office if, as
a result of such relocation, the applicable provisions of the Relevant UCC would
require the filing of any amendment to any previously filed financing statement
or continuation statement or of any new financing statement and shall promptly
file any such amendment, continuation statement or any new financing statement.
The Seller shall at all times maintain each office from which it shall service
Contracts, and its principal executive office, within the United States of
America.
(d) The Seller shall maintain accounts and records as to each Contract
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Contract, including payments and recoveries made and
payments owing (and the nature of each) and (ii) reconciliation between payments
or recoveries on (or with respect to) each Contract.
(e) The Seller shall maintain its computer systems so that, from and
after the time of the transfer of the Contracts to the Purchaser pursuant to
this Agreement, the Seller's master computer records (including any back-up
archives) that refer to a Contract shall indicate clearly that such Contract is
owned by the Purchaser (or, upon transfer of the Contracts to the Trust, by the
Trust). Indication of the Purchaser's ownership of a Contract shall be deleted
from or modified on the Seller's computer systems when, and only when, such
Contract shall have been paid in full or repurchased by the Seller.
(f) If at any time the Seller shall propose to sell, grant a security
interest in or otherwise transfer any interest in any motor vehicle retail
installment sale contract to any prospective purchaser, lender or other
transferee, the Seller shall give to such prospective purchaser, lender or other
transferee computer tapes, compact disks, records or print-outs (including any
restored from back-up archives) that, if they shall refer in any manner
whatsoever to any Contract, shall indicate clearly that such Contract has been
sold and is owned by the Purchaser (or, upon transfer of the Contracts to the
Trust, the Trust), unless such Contract has been paid in full or repurchased by
the Seller.
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(g) The Seller shall permit the Purchaser and its agents at any time
during normal business hours to inspect, audit and make copies of and abstracts
from the Seller's records regarding any Contract.
(h) Upon request, the Seller shall furnish to the Purchaser, within
ten (10) Business Days, a list of all Contracts (by contract number and name of
Obligor) then owned by the Purchaser, together with a reconciliation of such
list to the Contract Schedule.
SECTION 5.2. Other Liens or Interests. Except for the conveyances
hereunder, the Seller shall not sell, pledge, assign or transfer any Contract to
any other Person, or grant, create, incur, assume or suffer to exist any Lien on
any interest therein, and the Seller shall defend the right, title, and interest
of the Purchaser in, to and under the Contracts against all claims of third
parties claiming through or under the Seller.
SECTION 5.3. Costs and Expenses. The Seller shall pay all reasonable
costs and expenses incurred in connection with the perfection of the Purchaser's
right, title and interest in, to and under the Contracts.
SECTION 5.4. Indemnification.
(a) The Seller shall indemnify, defend and hold harmless the Purchaser
from and against all costs, expenses, losses, claims, damages and liabilities
arising out of or resulting from the failure of a Contract to be originated in
compliance with all requirements of law and for any breach of any of the
Seller's representations and warranties contained herein.
(b) The Seller shall indemnify, defend and hold harmless the Purchaser
from and against all costs, expenses, losses, claims, damages and liabilities
arising out of or resulting from the use, ownership or operation by the Seller
or any Affiliate of the Seller of a Financed Vehicle.
(c) The Seller shall indemnify, defend and hold harmless the Purchaser
from and against any taxes that may at any time be asserted against the
Purchaser with respect to, and as of the date of, the transfer of the Contracts
pursuant to this Agreement, including any sales, gross receipts, general
corporation, tangible personal property, privilege or license taxes (but not
including any taxes asserted with respect to ownership of the Contracts or
federal or other Applicable Tax State income taxes arising out of the
transactions contemplated by this Agreement), and all costs and expenses in
defending against such taxes.
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(d) The Seller shall indemnify, defend and hold harmless the Purchaser
from and against any loss, liability or expense incurred by reason of the
Seller's willful misfeasance, bad faith or gross negligence in the performance
of its duties under this Agreement or by reason of a reckless disregard of its
obligations and duties under this Agreement.
(e) The Seller shall indemnify, defend and hold harmless the Purchaser
from and against all costs, expenses, losses, claims, damages and liabilities
arising out of or incurred in connection with the acceptance or performance by
the Seller, in its capacity as servicer, of its obligations and duties under the
Sale and Servicing Agreement, except to the extent that such cost, expense,
loss, claim, damage or liability shall be due to the Purchaser's willful
misfeasance, bad faith or gross negligence (other than errors in judgment).
SECTION 5.5. Sale. The Seller agrees to treat the transfer of the
Contracts and the related property contemplated by Section 2.1(a) for all
purposes (including, without limitation, tax and financial accounting purposes)
as an absolute transfer on all relevant books, records, tax returns, financial
statements and other applicable documents.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Obligations of Seller. The obligations of the Seller
under this Agreement shall not be affected by reason of any invalidity,
illegality or irregularity of any Contract.
SECTION 6.2. Repurchase of Contracts. If any representation or
warranty of the Seller contained in Section 3.2(b) shall be breached or shall
fail to be true, and such breach or failure shall not have been cured by the
close of business on the last day of the Collection Period which includes the
thirtieth (30th) day after the date on which the Seller becomes aware of, or
receives written notice from the Purchaser, the Indenture Trustee, the Owner
Trustee, the Noteholders or the Certificateholders of, such breach or failure,
and such breach or failure materially and adversely affects the interest of the
Purchaser or the Trust in a Contract, the Seller shall repurchase such Contract
from the Purchaser or the Trust on the Payment Date immediately following such
Collection Period. In consideration of the repurchase of a Contract hereunder,
the Seller shall remit the Purchase Amount of such Contract to the Purchaser or
the Trust, as applicable. The sole remedy of the Purchaser, the Trust, the
Indenture Trustee, the Owner Trustee, the Noteholders and the Certificateholders
with respect to a breach or failure to be true of the representations and
warranties made by the Seller pursuant to Section 3.2(b) shall be to require the
Seller to repurchase Contracts pursuant to this Section 6.2.
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SECTION 6.3. Purchaser's Assignment of Repurchased Contracts. If the
Seller repurchases a Contract pursuant to Section 6.2, the Purchaser shall
assign, without recourse, representation or warranty, to the Seller all the
Purchaser's right, title and interest in, to and under such Contract and all
security and documents relating thereto.
SECTION 6.4. Related Transactions.
(a) The Seller acknowledges that the Purchaser will, pursuant to the
Sale and Servicing Agreement, sell, transfer, assign and convey the Contracts to
the Trust on the Closing Date and assign its rights under this Agreement to the
Owner Trustee for the benefit of the Noteholders, the Certificateholders and the
Insurer. The Seller acknowledges that the representations and warranties
contained in this Agreement and the rights of the Purchaser under this
Agreement, including, without limitation, under Sections 6.2 and 6.3, are
intended to benefit the Trust, the Noteholders, the Certificateholders and the
Insurer. The Seller hereby consents to such transfer and assignment.
(b) The Seller acknowledges that the Trust will, pursuant to the
Indenture, pledge the Contracts and its rights under this Agreement to the
Indenture Trustee for the benefit of the Noteholders and the Insurer. The Seller
acknowledges that the representations and warranties contained in this Agreement
and the rights of the Purchaser under this Agreement, including, without
limitation, under Sections 6.2 and 6.3, are intended to benefit the Noteholders
and the Insurer. The Seller hereby consents to such pledge.
SECTION 6.5. Amendment. This Agreement may be amended from time to
time by a written amendment duly executed and delivered by the Seller and the
Purchaser; provided, however, that any such amendment that materially adversely
affects the rights of the Noteholders or the Certificateholders under the
Indenture, the Sale and Servicing Agreement or the Trust Agreement must be
consented to by the Holders of Notes evidencing not less than 51% of the Note
Balance and the Holders of Certificates evidencing not less than 51% of the
Certificate Balance; and, provided further, that no amendment to this Agreement
shall be effective without the consent of the Insurer, unless an Insurer Default
shall have occurred and be continuing, if such proposed amendment would
reasonably be expected to have a material adverse effect on the rights of the
Insurer.
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SECTION 6.6. Accountants' Letters.
(a) The Seller shall cause a firm of independent certified public
accountants (who may also render other services to the Seller) to perform
certain procedures regarding the characteristics of the Contracts described in
the Contract Schedule and to compare those characteristics to the information
with respect to the Contracts contained in the Prospectus. The Seller shall
cooperate with the Purchaser and such accountants in making available all
information and taking all steps reasonably necessary to permit such accountants
to complete such procedures and to deliver the letters required of them under
the Underwriting Agreement.
(b) The Seller shall cause a firm of independent certified public
accountants (who may also render other services to the Seller) to deliver to the
Purchaser a letter, dated the date of the Prospectus, in the form previously
agreed to by the Seller and the Purchaser, with respect to the financial and
statistical information contained in the Prospectus under the captions
"Delinquency Experience" and "Credit Loss Experience" and with respect to such
other information as may be agreed in the forms of such letters.
SECTION 6.7. Notices. All demands, notices and other communications
under this Agreement shall be in writing, personally delivered, sent by
telecopier, overnight courier or mailed by certified mail, return receipt
requested, and shall be deemed to have been duly given upon receipt (i) in the
case of the Seller, at the following address: 4900 Cox Road, Glen Allen,
Virginia 23060, Attention: Treasury Department, and (ii) in the case of the
Purchaser, at the following address: 4900 Cox Road, Glen Allen, Virginia 23060,
Attention: Treasury Department.
SECTION 6.8. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Purchaser, any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
provided in this Agreement are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.
SECTION 6.9. Costs and Expenses. The Seller shall pay all expenses
incident to the performance of its obligations under this Agreement and all
reasonable out-of-pocket costs and expenses of the Purchaser, excluding fees and
expenses of counsel, in connection with the perfection as against third parties
of the Purchaser's right, title and interest in, to and under the Contracts and
the enforcement of any obligation of the Seller hereunder.
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SECTION 6.10. Representations of Seller and Purchaser. The respective
agreements, representations, warranties and other statements by the Seller and
the Purchaser set forth in or made pursuant to this Agreement shall remain in
full force and effect and shall survive the Closing.
SECTION 6.11. Confidential Information. The Purchaser shall not use or
disclose to any Person the names and addresses of the Obligors, except in
connection with the enforcement of the Purchaser's rights hereunder, under the
Contracts, under the Sale and Servicing Agreement or as required by law.
SECTION 6.12. Governing Law. This Agreement shall be construed in
accordance with the laws of the State of New York, and the obligations, rights
and remedies of the parties under this Agreement shall be determined in
accordance with such laws.
SECTION 6.13. Agreements of Purchaser.
(a) The Purchaser will not commingle any of its assets with those of
the Seller or the ultimate parent of the Purchaser.
(b) The Purchaser will maintain separate limited liability company
records and books of account from those of the Seller or the ultimate parent of
the Purchaser.
(c) The Purchaser will conduct its business from an office separate
from the Seller or the ultimate parent of the Purchaser.
SECTION 6.14. No Bankruptcy Petition. The Seller covenants and agrees
that, prior to the date which is one year and one day after the payment in full
of all securities issued by the Purchaser or by a trust for which the Purchaser
was the depositor, which securities were rated by any nationally recognized
statistical rating organization, it will not institute against, or join any
other Person in instituting against, the Purchaser any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding or any other
proceeding under any federal or state bankruptcy or similar law.
SECTION 6.15. Counterparts. This Agreement may be executed in two or
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
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IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
CARMAX AUTO SUPERSTORES, INC.,
as Seller
By:________________________________
Name:
Title:
CARMAX AUTO RECEIVABLES LLC,
as Purchaser
By:________________________________
Name:
Title:
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EXHIBIT A
FORM OF ASSIGNMENT
For value received, in accordance with the Purchase Agreement dated as
of September [__], 1999, between the undersigned and CARMAX AUTO RECEIVABLES LLC
(the "Purchaser") (as amended, supplemented or otherwise modified and in effect
from time to time, the "Purchase Agreement"), the undersigned does hereby sell,
assign, transfer and otherwise convey unto the Purchaser, without recourse
(subject to the obligations in the Purchase Agreement), all right, title and
interest of the undersigned, whether now owned or hereafter acquired, in, to and
under the following:
(i) the Contracts;
(ii) all amounts received on or in respect of the Contracts after
the Cutoff Date;
(iii) the security interests in the Financed Vehicles;
(iv) any proceeds from claims on or refunds of premiums with
respect to physical damage, theft, credit life and credit disability
insurance policies relating to the Financed Vehicles or the related
Obligors;
(v) the Contract Files; and
(vi) all present and future claims, demands, causes of action and
choses in action in respect of any or all of the foregoing and all payments
on or under and all proceeds of every kind and nature whatsoever in respect
of any or all of the foregoing, including all proceeds of the conversion
thereof, voluntary or involuntary, into cash or other liquid property, all
cash proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any
time constitute all or part of or are included in the proceeds of any of
the foregoing.
The foregoing sale does not constitute and is not intended to result
in any assumption by the Purchaser of any obligation of the undersigned to the
Obligors, insurers or any other Person in connection with the Contracts, the
related Contract Files, any insurance policies or any agreement or instrument
relating to any of them. This Assignment is made pursuant to and upon the
representations, warranties and agreements on the part of the undersigned
contained in the Purchase Agreement and is to be governed by the Purchase
Agreement. All capitalized terms used but not defined in this Assignment shall
have the respective meanings set forth in, or incorporated by reference into,
the Purchase Agreement.
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IN WITNESS WHEREOF, the undersigned has caused this Assignment
to be duly executed as of September [__], 1999.
CARMAX AUTO SUPERSTORES, INC.
By:________________________________
Name:
Title:
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Schedule 1
Contract Schedule
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Schedule 2
Location of Contract Files
--------------------------
225 Chastain Meadows Court
Kennesaw, Georgia 30144
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EXHIBIT 10.2
MBIA INSURANCE CORPORATION
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
September [__], 1999
Policy No. [__________]
Re: CarMax Auto Owner Trust 1999-1, Class A-1, Class A-2,
Class A-3 and Class A-4 Asset-Backed Notes (collectively,
the "Notes") and Asset-Backed Certificates (the
"Certificates" and, together with the Notes, the
"Securities");
Insured
Obligation: Obligation of CarMax Auto Owner Trust 1999-1 (the
"Trust") to pay the servicing fee with respect to the
Trust and to pay interest on and the principal of the
Securities.
Beneficiary: Bankers Trust Company, as indenture trustee under the
Agreement (as defined below) (together with any successor
trustee duly appointed and qualified under the Agreement)
(the "Indenture Trustee").
MBIA INSURANCE CORPORATION ("MBIA"), for consideration received, hereby
unconditionally and irrevocably guarantees to the Beneficiary, subject only to
the terms of this Policy (the "Policy"), payment of the Insured Obligation. MBIA
agrees to pay to the Beneficiary:
(x) with respect to any Payment Date, the Total Servicing Fee for the
preceding Collection Period (after giving effect to any distribution of
Available Funds or funds withdrawn from the Reserve Account to pay the servicing
fee to the Servicer on such Payment Date);
(y) with respect to any Payment Date, the Total Note Interest and the
Total Certificate Interest for such Payment Date (after giving effect to any
distribution of Available Funds or funds withdrawn from the Reserve Account to
pay interest to the Noteholders or the Certificateholders on such Payment Date);
and
(z) with respect to any Payment Date, the Monthly Note Principal and the
Monthly Certificate Principal for such Payment Date (after giving effect to any
distributions of Available Funds or funds withdrawn from the Reserve Account to
pay principal to the Noteholders or the Certificateholders on such Payment
Date);
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provided, however, that no payment under this Policy on any Payment Date shall
exceed the Policy Amount for such Payment Date.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Indenture dated as of September 1,
1999 between the Trust and the Indenture Trustee (the "Agreement"). As used
herein, the term "Policy Amount" shall mean, with respect to any Payment Date,
(x) the sum of (A) the lesser of (i) the Note Balance plus the
Certificate Balance, in each case as of such Payment Date (after giving
effect to any distribution of Available Funds or funds withdrawn from
the Reserve Account to pay principal to the Noteholders or the
Certificateholders on or before such Payment Date) and (ii) the Net
Principal Policy Amount (after giving effect to any distribution of
Available Funds or funds withdrawn from the Reserve Account to pay
principal to the Noteholders or the Certificateholders on or before
such Payment Date), plus (B) Total Note Interest for such Payment Date,
plus (C) Total Certificate Interest for such Payment Date, plus (D) the
Total Servicing Fee for the preceding Collection Period; less
(y) all amounts on deposit and available for withdrawal from the
Reserve Account on such Payment Date.
As used herein, the term "Net Principal Policy Amount" shall mean the
sum of the Note Balance as of the Closing Date plus the Certificate Balance as
of the Closing Date, minus all amounts previously drawn on the Policy or
withdrawn from the Reserve Account and applied on or before that date to pay
principal to the Noteholders or the Certificateholders.
As used herein, the term "Insurance Agreement" shall mean the Insurance
and Reimbursement Agreement, dated as of September __, 1999 among CarMax Auto
Receivables LLC (the "Depositor"), CarMax Auto Superstores, Inc., as seller (the
"Seller") and as servicer (the "Servicer"), the Trust and MBIA.
As used herein, the term "Insolvency Proceeding" shall mean (i) the
commencement, after the date hereof, of any bankruptcy, insolvency, readjustment
of debt, reorganization, marshaling of assets and liabilities or similar
proceedings by or against the Seller, the Servicer, the Depositor or the Trust,
or (ii) the commencement, after the date hereof, of any proceedings by or
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against the Seller, the Servicer, the Depositor or the Trust for the winding up
or liquidation of its affairs or (iii) the consent, after the date hereof, to
the appointment of a trustee, conservator, receiver or liquidator in any
bankruptcy, insolvency, readjustment of debt, reorganization, marshaling of
assets and liabilities or similar proceedings of or relating to the Seller, the
Servicer, the Depositor or the Trust.
Subject to the foregoing, if any amount paid or required to be paid in
respect of the Insured Obligation is voided (a "Preference Event") under any
applicable bankruptcy, insolvency, receivership or similar law in an Insolvency
Proceeding, and, as a result of such a Preference Event, the Beneficiary, the
Noteholders or the Certificateholders are required to return such voided
payment, or any portion of such voided payment made or to be made in respect of
the Notes or the Certificates, respectively (an "Avoided Payment"), MBIA will
pay an amount equal to each such Avoided Payment, irrevocably, absolutely and
unconditionally and without the assertion of any defenses to payment, including
fraud in inducement or fact or any other circumstances that would have the
effect of discharging a surety in law or in equity, upon receipt by MBIA from
the Beneficiary, the Noteholders or the Certificateholders of (x) a certified
copy of a final order of a court exercising jurisdiction in such Insolvency
Proceeding to the effect that the Beneficiary, the Noteholders or the
Certificateholders are required to return any such payment or portion thereof
prior to the Termination Date (as defined below) of this Policy because such
payment was voided under applicable law, with respect to which order the appeal
period has expired without an appeal having been filed (the "Final Order"), (y)
an assignment, in the form of Exhibit D hereto, irrevocably assigning to MBIA
all rights and claims of such Beneficiary, the Noteholders or the
Certificateholders relating to or arising under such Avoided Payment and (z) a
Notice for Payment in the form of Exhibit A hereto appropriately completed and
executed by the Beneficiary, the Noteholders or the Certificateholders. Such
payment shall be disbursed to the receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Final Order and not to the Beneficiary, the
Noteholders or the Certificateholders directly unless such Noteholder or such
Certificateholder (as the case may be) has returned principal and interest paid
on the Notes or the Certificates (as the case may be) to such receiver,
conservator, debtor-in-possession or trustee in bankruptcy, in which case such
payment shall be disbursed to such Noteholder or such Certificateholder (as the
case may be).
Notwithstanding the foregoing, in no event shall MBIA be obligated to
make any payment in respect of any Avoided Payment, which payment represents a
payment of the principal amount of the Notes or the Certificates, prior to the
time MBIA would have been required to make a payment in respect of such
principal pursuant to the first paragraph of this Policy.
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Payment of amounts hereunder shall be made in immediately available
funds (x) pursuant to the first paragraph of this Policy on the later of (a)
12:00 noon, New York City time, on the Payment Date or (b) 12:00 noon, New York
City time, on the Business Day next succeeding presentation to MBIA and State
Street Bank and Trust Company, N.A., as Fiscal Agent for MBIA or any successor
fiscal agent appointed by MBIA (the "Fiscal Agent") (as hereinafter provided) of
a notice for payment in the form of Exhibit A hereto ("Notice for Payment"),
appropriately completed and executed by the Beneficiary, and (y) in respect of
Avoided Payments, prior to 12:00 noon, New York City time, on the second
Business Day following MBIA's receipt of the documents required under clauses
(x) through (z) of the second preceding paragraph. Any such documents received
by MBIA after 12:00 noon, New York City time, on any Business Day or on any day
that is not a Business Day shall be deemed to have been received by MBIA prior
to 12:00 noon, New York City time, on the next succeeding Business Day. All
payments made by MBIA hereunder in respect of Avoided Payments shall be made
with MBIA's own funds. A Notice for Payment under this Policy may be presented
to the Fiscal Agent and MBIA on any Business Day following the Determination
Date in respect of which the Notice for Payment is being presented by (a)
delivery of the original Notice for Payment to the Fiscal Agent and MBIA at its
respective addresses set forth below, or (b) facsimile transmission of the
original Notice for Payment to the Fiscal Agent and MBIA at its respective
facsimile numbers set forth below. If presentation is made by facsimile
transmission, the Beneficiary shall (i) simultaneously confirm transmission by
telephone to the Fiscal Agent and MBIA at its respective telephone numbers set
forth below, and (ii) as soon as reasonably practicable, deliver the original
Notice for Payment to the Fiscal Agent and MBIA at its respective addresses set
forth below. Any Notice for Payment received by the Fiscal Agent and MBIA after
1:00 p.m., New York City time, on a Business Day, or on any day that is not a
Business Day, shall be deemed to be received by the Fiscal Agent and MBIA at
9:00 a.m., New York City time, on the next succeeding Business Day.
If any Notice for Payment received by the Fiscal Agent is not in proper
form or is otherwise insufficient for the purpose of making a claim hereunder,
it shall be deemed not to have been received by the Fiscal Agent and MBIA, and
MBIA or the Fiscal Agent shall promptly so advise the Indenture Trustee, and the
Indenture Trustee may submit an amended Notice for Payment.
Payments due hereunder unless otherwise stated herein shall be
disbursed by the Fiscal Agent or MBIA to the Indenture Trustee on behalf of the
Noteholders and the Certificateholders by wire transfer of immediately available
funds in the amount of such payment.
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The Fiscal Agent is the agent of MBIA only, and the Fiscal Agent shall
in no event be liable to the Noteholders or the Certificateholders for any acts
of the Fiscal Agent or any failure of MBIA to deposit or cause to be deposited
sufficient funds to make payments due under this Policy.
MBIA hereby waives and agrees not to assert any and all rights to
require the Beneficiary to make demand on or to proceed against any person,
party or security prior to the Beneficiary demanding payment under this Policy.
No defenses, set-offs and counterclaims of any kind available to MBIA so
as to deny payment of any amount due in respect of this Policy shall be valid,
and MBIA hereby waives and agrees not to assert any and all such defenses,
set-offs and counterclaims, including, without limitation, any such rights
acquired by subrogation, assignment or otherwise.
Any rights of subrogation acquired by MBIA as a result of any payment
made under this Policy shall, in all respects, be subordinate and junior in
night of payment to the prior indefeasible payment in full of all amounts due
the Indenture Trustee on account of payments due under the Notes or the
Certificates.
This Policy is neither transferable nor assignable, in whole or in part,
except to a successor trustee duly appointed and qualified under the Agreement.
Such transfer and assignment shall be effective upon receipt by MBIA of a copy
of the instrument effecting such transfer and assignment signed by the
transferor and by the transferee, and a certificate, properly completed and
signed by the transferor and the transferee, in the form of Exhibit B hereto
(which shall be conclusive evidence of such transfer and assignment), and, in
such case, the transferee instead of the transferor shall, without the necessity
of further action, be entitled to all the benefits of and rights under this
Policy in the transferor's place, provided that, in such case, the Notice for
Payment presented hereunder shall be a certificate of the transferee and shall
be signed by one who states therein that he is a duly authorized officer of the
transferee.
All notices, presentations, transmissions, deliveries and communications
made by the Beneficiary to MBIA with respect to this Policy shall specifically
refer to the number of this Policy and shall be made to MBIA at:
MBIA Insurance Corporation
113 King Street
Armonk, N.Y. 10504
Attention: Insured Portfolio Management,
Structured Finance
Telephone: (914) 273-4949
Facsimile: (914) 765-3163
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or such other address, telephone number or facsimile number as MBIA may
designate to the Beneficiary in writing from time to time. Each such notice,
presentation, transmission, delivery and communication shall be effective only
upon actual receipt by MBIA.
Any notice hereunder delivered to the Fiscal Agent may be made at the
address listed below for the Fiscal Agent or such other address as MBIA shall
specify in writing to the Indenture Trustee and the Depositor.
The notice address of the Fiscal Agent is 61 Broadway, 15th Floor, New
York, New York 10006, Attention: Municipal Registrar and Paying Agency,
Facsimile: (212) 612-3201, Telephone: (212) 612-3458 or such other address as
the Fiscal Agent shall specify to the Indenture Trustee in writing.
The obligations of MBIA under this Policy are irrevocable, primary,
absolute and unconditional (except as expressly provided herein) and neither the
failure of the Indenture Trustee, the Depositor, the Servicer or any other
Person to perform any covenant or obligation in favor of MBIA (or otherwise),
nor the failure or omission to make a demand permitted hereunder, nor the
commencement of any bankruptcy, debtor or other insolvency proceeding by or
against the Indenture Trustee, the Depositor, the Servicer, or any other Person
shall in any way affect or limit MBIA's obligations under this Policy. If an
action or proceeding to enforce this Policy is brought by the Beneficiary, the
Beneficiary shall be entitled to recover from MBIA costs and expenses reasonably
incurred, including, without limitation, reasonable fees and expenses of
counsel.
There shall be no acceleration payment due under this Policy unless such
acceleration is at the sole option of MBIA.
This Policy and the obligations of MBIA hereunder shall terminate on the
day (the "Termination Date") on which the earliest of the following occurs: (i)
MBIA receives written notice, signed by the Beneficiary, substantially in the
form of Exhibit C hereto, stating that the Agreement has been terminated
pursuant to its terms, (ii) the date which is one year and one day following the
Payment Date occurring on [__________________] and (iii) the date which is one
year and one day following the Payment Date upon which the later of the final
distribution on the Notes or the Certificates is made.
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The foregoing notwithstanding, if an Insolvency Proceeding is existing
by or against the Seller, the Servicer, the Depositor or the Trust, during the
one year and one day period set forth in clauses (ii) or (iii) above, then this
Policy and MBIA's obligations hereunder shall terminate on the later of (i) the
date of the conclusion or dismissal of such Insolvency Proceeding without
continuing jurisdiction by the court in such Insolvency Proceeding, and (ii) the
date on which MBIA has made all payments required to be made under the terms of
this Policy in respect of Avoided Payments.
This Policy is not covered by the property/casualty insurance fund
specified in Article Seventy-Six of the New York State insurance law.
This Policy sets forth in full the undertaking of MBIA and shall not be
modified, altered or affected by any other agreement or instrument, including
any modification or amendment to any other agreement or instrument, or by the
merger, consolidation or dissolution of the Trust or any other Person and may
not be canceled or revoked by MBIA prior to the time it is terminated in
accordance with the express terms hereof.
This Policy shall be returned to MBIA upon expiration.
THIS POLICY SHALL BE CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES OR
THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
IN WITNESS WHEREOF, MBIA has caused this Policy to be duly executed on
the date first written above.
MBIA INSURANCE CORPORATION
By: _____________________________
Name:
Title:
By: _____________________________
Name:
Title:
