EXHIBIT 10.1 – SALE AND SERVICING AGREEMENT

 

[EXECUTION COPY]

 

CARMAX AUTO OWNER TRUST 2005-1,

as Issuer,

 

CARMAX AUTO FUNDING LLC,

as Depositor,

 

and

 

CARMAX BUSINESS SERVICES, LLC,

as Servicer

 

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SALE AND SERVICING AGREEMENT

Dated as of April 1, 2005

 

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TABLE OF CONTENTS

 

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ARTICLE I

DEFINITIONS

SECTION 1.1

  

Definitions

   1

SECTION 1.2

  

Other Definitional Provisions

   17

ARTICLE II

TRUST PROPERTY

SECTION 2.1

  

Conveyance of Trust Property

   18

SECTION 2.2

  

Representations and Warranties of the Seller as to the Receivables

   19

SECTION 2.3

  

Representations and Warranties of the Depositor as to the Receivables

   20

SECTION 2.4

  

Repurchase by Depositor upon Breach

   24

SECTION 2.5

  

Custody of Receivable Files

   24

SECTION 2.6

  

Duties of Servicer as Custodian

   25

SECTION 2.7

  

Instructions; Authority to Act

   26

SECTION 2.8

  

Indemnification of the Custodian

   26

SECTION 2.9

  

Effective Period and Termination

   26

ARTICLE III

ADMINISTRATION AND SERVICING OF RECEIVABLES AND OTHER

TRUST PROPERTY

SECTION 3.1

  

Duties of Servicer

   28

SECTION 3.2

  

Collection and Allocation of Receivable Payments

   28

SECTION 3.3

  

Realization upon Receivables

   29

SECTION 3.4

  

Physical Damage Insurance

   29

SECTION 3.5

  

Maintenance of Security Interests in Financed Vehicles

   29

SECTION 3.6

  

Amendment of Receivable Terms

   30

SECTION 3.7

  

Purchase by Servicer upon Breach

   30

SECTION 3.8

  

Servicing Compensation

   30

SECTION 3.9

  

Servicer’s Certificate

   30

SECTION 3.10

  

Annual Statement as to Compliance; Notice of Event of Servicing Termination

   31

SECTION 3.11

  

Annual Independent Certified Public Accountants’ Reports

   32

SECTION 3.12

  

Access to Certain Documentation and Information Regarding Receivables

   32

SECTION 3.13

  

Reports to the Commission

   33

SECTION 3.14

  

Reports to Rating Agencies

   33

 

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ARTICLE IV

DISTRIBUTIONS; RESERVE ACCOUNT; STATEMENTS TO NOTEHOLDERS

AND CERTIFICATEHOLDERS

SECTION 4.1

  

Accounts

   33

SECTION 4.2

  

Collections

   34

SECTION 4.3

  

Application of Collections

   35

SECTION 4.4

  

Simple Interest Advances and Unreimbursed Servicer Advances

   35

SECTION 4.5

  

Additional Deposits

   36

SECTION 4.6

  

Determination Date Calculations; Application of Available Funds; Application of
Secondary Reserve Account Draw Amount

   36

SECTION 4.7

  

Reserve Account

   39

SECTION 4.8

  

Net Deposits

   40

SECTION 4.9

  

Statements to Noteholders and Certificateholders

   40

SECTION 4.10

  

Control of Securities Accounts

   42

SECTION 4.11

  

Secondary Reserve Account

   42

ARTICLE V

[RESERVED]

ARTICLE VI

THE DEPOSITOR

SECTION 6.1

  

Representations and Warranties of Depositor

   44

SECTION 6.2

  

Liability of Depositor; Indemnities

   45

SECTION 6.3

  

Merger or Consolidation of, or Assumption of the Obligations of, Depositor

   47

SECTION 6.4

  

Limitation on Liability of Depositor and Others

   47

SECTION 6.5

  

Depositor May Own Notes or Certificates

   47

SECTION 6.6

  

[RESERVED]

   48

SECTION 6.7

  

Certain Limitations

   48

ARTICLE VII

THE SERVICER

SECTION 7.1

  

Representations and Warranties of Servicer

   50

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

  

Delegation of Duties

   53

SECTION 7.6

  

Servicer Not to Resign

   53

SECTION 7.7

  

Servicer May Own Notes or Certificates

   54

 

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ARTICLE VIII

SERVICING TERMINATION

SECTION 8.1

  

Events of Servicing Termination

   54

SECTION 8.2

  

Indenture Trustee to Act; Appointment of Successor Servicer

   56

SECTION 8.3

  

Effect of Servicing Transfer

   57

SECTION 8.4

  

Notification to Noteholders, Certificateholders and Rating Agencies

   57

SECTION 8.5

  

Waiver of Past Events of Servicing Termination

   57

SECTION 8.6

  

Repayment of Advances

   58

ARTICLE IX

TERMINATION

SECTION 9.1

  

Optional Purchase of All Receivables

   58

ARTICLE X

MISCELLANEOUS PROVISIONS

SECTION 10.1

  

Amendment

   59

SECTION 10.2

  

Protection of Title to Trust

   60

SECTION 10.3

  

GOVERNING LAW

   62

SECTION 10.4

  

Notices

   63

SECTION 10.5

  

Severability of Provisions

   63

SECTION 10.6

  

Assignment

   63

SECTION 10.7

  

Further Assurances

   63

SECTION 10.8

  

No Waiver; Cumulative Remedies

   63

SECTION 10.9

  

Third-Party Beneficiaries

   64

SECTION 10.10

  

Actions by Noteholder or Certificateholders

   64

SECTION 10.11

  

Counterparts

   64

SECTION 10.12

  

No Bankruptcy Petition

   64

SECTION 10.13

  

Limitation of Liability of Owner Trustee and Indenture Trustee

   64 SCHEDULES

SCHEDULE 1

  

Receivable Schedule

    

SCHEDULE 2

  

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

 

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

 

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

 

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

 

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

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1 Definitions. Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, whenever capitalized shall
have the following meanings:

 

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

 

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

 

“Affiliate” shall mean, with respect to any Person, any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. For purposes of this definition, “control” when used with
respect to any Person shall mean the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Closing Date” shall mean April 13, 2005.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Cutoff Date” shall mean March 31, 2005.

 

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

 

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

 

“Depositor” shall mean CarMax Funding.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Indenture Trustee” shall mean Wells Fargo Bank, National Association, a
national banking association, not in its individual capacity but solely as
Indenture Trustee under the Indenture, and any successor Indenture Trustee under
the Indenture.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Servicing Rate” shall mean 1.00% per annum.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 1.2 Other Definitional Provisions.

 

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

 

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

 

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

 

(d) The words “hereof,” “herein,” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. Article, Section, Schedule and
Exhibit references contained in this Agreement are references to Articles,
Sections, Schedules and Exhibits in or to this Agreement unless otherwise
specified. The term “including” shall mean “including without limitation.”

 

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

 

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

 

ARTICLE II

TRUST PROPERTY

 

SECTION 2.1 Conveyance of Trust Property.

 

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

 

(i) the Receivables;

 

(ii) all amounts received on or in respect of the Receivables after the Cutoff
Date;

 

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

 

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

 

(v) the Receivable Files;

 

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

 

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

 

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

 

(ix) all present and future claims, demands, causes of action and choses in
action in respect of any or all of the foregoing and all payments on or under
and all proceeds of every kind and nature whatsoever in respect of any or all of
the foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property; all accounts, general
intangibles, chattel paper, instruments, documents, money, investment property,
deposit accounts, letters of credit, letter-of-credit rights, insurance
proceeds, condemnation awards, rights to payment of any and every kind and other
forms of obligations; and all other property which at any time constitutes all
or part of or is included in the proceeds of any of the foregoing.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(d) Binding Obligation. Each Receivable represents the genuine, legal, valid and
binding payment obligation in writing of the related Obligor, enforceable by the
holder thereof in all material respects in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation or other similar laws affecting the enforcement of creditors’ rights
generally and by general principles of equity.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 2.6 Duties of Servicer as Custodian.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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effect until terminated pursuant to this Section 2.9. If the Servicer shall
resign as Servicer under Section 7.6, 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 (i) by the Trust, with the
consent of the Indenture Trustee, (ii) by the Holders of Notes evidencing not
less than 25% of the Note Balance of the Controlling Class or, if the Notes have
been paid in full, by the Holders of Certificates evidencing not less than 25%
of the aggregate Certificate Percentage Interest or (iii) by the Owner Trustee,
with the consent of the Holders of Notes evidencing not less than 25% of the
Note Balance of the Controlling Class, in each case by notice then given in
writing to the Depositor and the Servicer (with a copy to the Indenture Trustee
and the Owner Trustee if given by the Noteholders or the Certificateholders). As
soon as practicable after any termination of such appointment, the Servicer
shall deliver, or cause to be delivered, the Receivable 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 or, if the
Notes have been paid in full, at such place as the Owner Trustee may reasonably
designate.

 

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ARTICLE III

ADMINISTRATION AND SERVICING OF RECEIVABLES AND

OTHER TRUST PROPERTY

 

SECTION 3.1 Duties of Servicer. The Servicer shall administer the Receivables
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 Receivables, 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 use reasonable care and 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 Servicer is hereby authorized and empowered to execute and deliver, on
behalf of itself, the Depositor, 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
Receivables 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 Receivable or waive the
right to collect the unpaid balance (including accrued interest) of any
Receivable 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 Receivable, the Owner Trustee shall thereupon be deemed to have
automatically assigned such Receivable 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 Receivable on
the ground that it shall not be a real party in interest or a holder entitled to
enforce such Receivable, the Owner Trustee shall, at the Servicer’s expense and
written direction, take steps to enforce such Receivable, 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 Receivables 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 Receivable Payments. The Servicer shall
make reasonable efforts to collect all payments called for under the terms and
provisions of the Receivables as and when the same shall become due and
otherwise act with respect to the Receivables 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

 

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and in accordance with the standard of care required by Section 3.1. The
Servicer shall allocate collections on or in respect of the Receivables 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 or decrease the number or amount of any Scheduled Payment,
the Amount Financed under any Receivable or the APR of any Receivable, or
extend, rewrite or otherwise modify the payment terms of any Receivable;
provided, however, that the Servicer may extend the due date for one or more
payments due on any Receivable 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 Receivable shall not cause the
term of such Receivable 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 Receivable 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 Receivable.

 

SECTION 3.3 Realization upon Receivables. 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 Receivable. 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
Receivable.

 

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 Receivable in the related Financed Vehicle. The Trust hereby
authorizes the Servicer, and the Servicer hereby agrees, to take 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 Receivable except as

 

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permitted herein or in accordance with its customary standards, policies,
practices and procedures.

 

SECTION 3.6 Amendment of Receivable Terms. The Servicer shall not impair in any
material respect the rights of the Depositor, the Trust, the Owner Trustee, the
Indenture Trustee, the Certificateholders or the Noteholders in the Receivables
or, except as permitted under Section 3.2, otherwise amend or alter the terms of
the Receivables if, as a result of such amendment or alteration, the interests
of the Depositor, 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 Depositor, the Servicer or the
Owner Trustee, as the case may be, shall inform the other parties to this
Agreement, the Seller and the Indenture Trustee promptly, in writing, upon the
discovery of any breach 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 Depositor, the
Seller, or the Owner Trustee of, such breach, and such breach materially and
adversely affects the interest of the Trust in a Receivable, the Servicer shall
purchase such Receivable from the Trust on the Distribution Date following such
Collection Period; provided, however, that, with respect to a breach of Section
3.2, the Servicer shall purchase the affected Receivable from the Trust at the
end of the Collection Period in which such breach occurs. In consideration of
the purchase of a Receivable hereunder, the Servicer shall remit the Purchase
Amount of such Receivable in the manner specified in Section 4.5. The sole
remedy of the Trust, the Owner Trustee, the Indenture Trustee, the Noteholders
and the Certificateholders with respect to a breach of Section 3.2, 3.5 or 3.6
shall be to require the Servicer to purchase Receivables 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 Receivable pursuant to this Section 3.7.

 

SECTION 3.8 Servicing Compensation. The Servicer shall receive the Monthly
Servicing Fee for servicing the Receivables. The Monthly Servicing Fee for any
Collection Period shall equal the product of one-twelfth (1/12) of the Servicing
Rate and the Pool Balance as of the first day of such Collection Period (or, in
the case of the initial Collection Period, as of the Cutoff Date). The Servicer
shall pay all expenses incurred by it in connection with its activities
hereunder (including the fees and expenses of the Owner Trustee and the
Indenture Trustee, including the reasonable fees and expenses of their
attorneys, and any custodian appointed by the Owner Trustee and the Indenture
Trustee, the fees and expenses of 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 Receivables under Section 3.3.

 

SECTION 3.9 Servicer’s Certificate. On or before the Determination Date
immediately preceding each Distribution Date, the Servicer shall deliver to the
Depositor, the Seller, the Owner Trustee, the Indenture Trustee and each Paying
Agent, with a copy to the Rating Agencies, a certificate of a Servicing Officer
substantially in the form of Exhibit A (a “Servicer’s Certificate”) and attached
to a Servicer’s report containing all information necessary

 

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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 Depositor, the Owner Trustee and the Indenture Trustee the
Receivables to be repurchased by the Depositor or to be purchased by the
Servicer, as the case may be, on the Business Day preceding such Distribution
Date, and, upon request of one of the foregoing parties, each Receivable which
became a Defaulted Receivable 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 2006), the
Servicer shall deliver to the Depositor, the Owner Trustee 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 Trust Fiscal
Year (or, in the case of the Officer’s Certificate to be delivered in the year
2006, during the period beginning on the Closing Date and ending on February 28,
2006) and of its performance under this Agreement has been made under such
officer’s supervision; and

 

(ii) to the best of such officer’s knowledge, based on such review, the Servicer
has fulfilled all its obligations under this Agreement throughout such Trust
Fiscal Year (or, in the case of the Officer’s Certificate to be delivered in the
year 2006, 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.

 

Notwithstanding the foregoing, to the extent that the Commission adopts a rule
requiring the delivery by the Servicer of an annual report on an assessment of
servicing compliance on the basis of detailed servicing criteria, the delivery
of a copy of such report to the Depositor, the Owner Trustee and the Indenture
Trustee shall be deemed to satisfy the provisions of this subsection. 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 written 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 Depositor, the Owner Trustee, 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.

 

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SECTION 3.11 Annual Independent Certified Public Accountants’ Reports. On or
before May 31 of each year (commencing with the year 2006), the Servicer shall
cause a firm of independent certified public accountants (who may also render
other services to the Servicer or its Affiliates) to deliver to the Depositor,
the Owner Trustee and the Indenture Trustee a report addressed to the Board of
Directors of the Servicer with respect to the preceding CarMax Fiscal Year (or,
in the case of the report to be delivered in the year 2006, with respect to the
period beginning on the Closing Date and ending on February 28, 2006) 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 Receivables 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 Depositor, the Seller and the
Servicer within the meaning of 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. In the event such firm requires the Indenture Trustee to agree to
the procedures performed by such firm, the Servicer shall direct the Indenture
Trustee in writing to so agree, it being understood and agreed that the
Indenture Trustee will deliver such letter of agreement in conclusive reliance
upon the direction of the Servicer, and the Indenture Trustee makes no
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures. Notwithstanding the foregoing, to the extent that the Commission
adopts a rule requiring the delivery of an annual attestation of a firm of
independent public accountants with respect to the assessment of servicing
compliance by the Servicer stating, among other things, that the Servicer’s
assessment of compliance with the servicing criteria is fairly stated in all
material respects, or the reason why such an opinion cannot be expressed, the
delivery of a copy of such attestation to the Depositor, the Owner Trustee and
the Indenture Trustee shall be deemed to satisfy the provisions of this Section.

 

SECTION 3.12 Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide the Depositor, the Owner Trustee, the
Indenture Trustee, the Certificateholders and the Noteholders with access to the
Receivable Files in the cases where the Depositor, the Owner Trustee, the
Indenture Trustee, the Certificateholders 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, 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.

 

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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 Servicer shall, or shall cause the Administrator
to, prepare, execute and deliver all certificates and other documents required
to be delivered by the Trust pursuant to the Sarbanes-Oxley Act of 2002 or the
rules and regulations promulgated thereunder. The Depositor shall, at its
expense, cooperate in any reasonable request made by the Servicer in connection
with such filings. The Servicer shall provide or cause to be provided to the
Depositor copies of all documents filed by the Servicer after the Closing Date
with the Commission pursuant to the Securities Act of 1933, as amended, or the
Securities Act of 1934, as amended, that relate specifically to the Trust, the
Notes or the Certificates.

 

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.

 

(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 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 Permitted Investments that mature not
later than the Business Day preceding the Distribution Date following the
Collection Period during which such investment is made. All such Permitted
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, promptly (and in any case within ten (10)
calendar days or such longer period not to exceed thirty (30) calendar days as
to which each Rating Agency shall consent) cause the Collection Account to be
moved to an

 

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Eligible Institution. 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 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, promptly
(and in any case within ten (10) calendar days or such longer period not to
exceed thirty (30) calendar days as to which each Rating Agency may consent)
cause the Note Payment Account to be moved to an Eligible Institution. 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 “CarMax Auto
Owner Trust 2005-1 Trust 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, promptly (and in any case within ten (10) calendar days or such
longer period not to exceed thirty (30) calendar days as to which each Rating
Agency may consent) cause the Certificate Payment Account to be moved to an
Eligible Institution. The Servicer shall promptly notify the Indenture Trustee
and the Owner Trustee in writing 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 Receivables (including
Liquidation Proceeds and all amounts received by the Servicer in connection with
the repossession and sale of a Financed Vehicle (whether or not the related
Receivable has been classified as a Defaulted Receivable) but excluding payments
with respect to Purchased Receivables) as soon as practicable and in no event
after the close of business on the second Business day after such

 

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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) the Rating Agency Condition shall have been satisfied (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 Distribution Date following such Collection
Period (it being understood that the Monthly Remittance Condition has not been
satisfied as of the Closing Date); provided further, that if any such amounts
(including Liquidation Proceeds and all amounts received by the Servicer in
connection with the repossession and sale of a Financed Vehicle (whether or not
the related Receivable has been classified as a Defaulted Receivable)) are
received in respect of a Receivable as to which there is an unreimbursed Simple
Interest Advance, the Servicer shall retain such amounts to the extent of such
unreimbursed Simple Interest Advance (and shall apply the amount retained to
reimburse itself for such unreimbursed Simple Interest Advance) and shall remit
the balance of such amounts to the Collection Account; and, provided further,
that the Servicer shall, if it determines that it has made an Unreimbursed
Servicer Advance, retain amounts received on or in respect of the Receivables to
the extent set forth in Section 4.4(b). 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 Depositor or the Servicer in an Officer’s
Certificate or written notice of such event or circumstance from the Holders of
Notes evidencing not less than 25% of the Note Balance of the Controlling Class
or unless a Responsible Officer of the Owner Trustee or the Indenture Trustee,
as applicable, has actual knowledge of such event or circumstance. The Servicer
shall remit to the Collection Account on the Closing Date all amounts received
by the Servicer on or in respect of the Receivables (including Liquidation
Proceeds and all amounts received by the Servicer in connection with the
repossession and sale of a Financed Vehicle (whether or not the related
Receivable has been classified as a Defaulted Receivable)) during the period
from but excluding the Cutoff Date to and including the second Business Day
preceding the Closing Date.

 

SECTION 4.3 Application of Collections. For purposes of this Agreement, all
amounts received on or in respect of a Receivable during any Collection Period
(including Liquidation Proceeds and all amounts received by the Servicer in
connection with the repossession and sale of a Financed Vehicle (whether or not
the related Receivable has been classified as a Defaulted Receivable) but
excluding payments with respect to Purchased Receivables) shall be applied by
the Servicer, as of the last day of such Collection Period, to interest and
principal on such Receivable in accordance with the Simple Interest Method.

 

SECTION 4.4 Simple Interest Advances and Unreimbursed Servicer Advances.

 

(a) If, as of the end of any Collection Period, one or more payments of Monthly
P&I due under any Receivable (other than a Defaulted Receivable) outstanding at
the end of such Collection Period shall not have been received by the Servicer
and remitted to the Collection Account pursuant to Section 4.2, the Servicer
may, at its option, make, on the Business Day preceding the Distribution Date
immediately following such Collection Period, a Simple Interest Advance with
respect to such Receivable by depositing in or crediting to the

 

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Collection Account the amount of Monthly P&I allocable to interest scheduled to
have been paid during such Collection Period, assuming that such Receivable was
paid on its due date, minus the amount of Monthly P&I actually received and
allocated to interest, if any, with respect to such Receivable during such
Collection Period.

 

(b) If the Servicer determines that it has made an Unreimbursed Servicer
Advance, the Servicer shall reimburse itself for such Unreimbursed Servicer
Advance from unrelated amounts received by the Servicer on or in respect of the
Receivables (including Liquidation Proceeds and all amounts received by the
Servicer in connection with the repossession and sale of a Financed Vehicle
(whether or not the related Receivable has been classified as a Defaulted
Receivable)); provided, however, that the Servicer shall furnish to the
Indenture Trustee and the Owner Trustee, on or before the Distribution Date
following the Collection Period during which such reimbursement is taken, a
certificate of a Servicing Officer setting forth the basis for such
determination, the amount of such Unreimbursed Servicer Advance, the Receivable
with respect to which such Unreimbursed Servicer Advance was made and the
installments or other proceeds with respect to which such reimbursement was
taken.

 

SECTION 4.5 Additional Deposits. The Depositor and the Servicer shall deposit or
cause to be deposited in the Collection Account the aggregate Purchase Amount
with respect to Purchased Receivables pursuant to Section 2.4, 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 Distribution Date following such Collection Period.

 

SECTION 4.6 Determination Date Calculations; Application of Available Funds;
Application of Secondary Reserve Account Draw Amount.

 

(a) On each Determination Date, the Servicer shall calculate the following
amounts:

 

(i) the Available Collections for the following Distribution Date;

 

(ii) the Total Servicing Fee for the preceding Collection Period;

 

(iii) the Total Note Interest for each Class of Class A Notes for the following
Distribution Date;

 

(iv) the Priority Principal Distributable Amount for the following Distribution
Date;

 

(v) the Total Note Interest for the Class B Notes for the following Distribution
Date;

 

(vi) the Secondary Principal Distributable Amount for the following Distribution
Date;

 

(vii) the Total Note Interest for the Class C Notes for the following
Distribution Date;

 

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(viii) [RESERVED];

 

(ix) [RESERVED];

 

(x) the sum of the amounts described in clauses (ii) through (ix) above (the
“Required Payment Amount”); and

 

(xi) the Regular Principal Distributable Amount for the following Distribution
Date.

 

(b) On each Determination Date, the Servicer shall calculate the following
amounts:

 

(i) the lesser of (A) the amount, if any, by which the Required Payment Amount
for the following Distribution Date exceeds the Available Collections for such
Distribution Date and (B) the Reserve Account Amount for such Distribution Date
(before giving effect to any deposits to or withdrawals from the Reserve Account
on such Distribution Date) (such lesser amount, the “Reserve Account Draw
Amount”); provided, however, that if on the last day of the preceding Collection
Period the Pool Balance is zero, the Reserve Account Draw Amount for such
Distribution Date shall equal the Reserve Account Amount for such Distribution
Date;

 

(ii) the Reserve Account Amount for the following Distribution Date (after
giving effect to the withdrawal of the Reserve Account Draw Amount for such
Distribution Date); and

 

(iii) the amount, if any, by which the Required Reserve Account Amount for the
following Distribution Date exceeds the Reserve Account Amount for such
Distribution Date (after giving effect to the withdrawal of the Reserve Account
Draw Amount for such Distribution Date) (such excess, the “Reserve Account
Deficiency”).

 

On each Distribution Date, the Servicer shall instruct the Indenture Trustee to
transfer the Reserve Account Draw Amount, if any, for such Distribution Date
from the Reserve Account to the Collection Account.

 

(c) On each Determination Date, the Servicer shall calculate the following
amounts:

 

(i) the lesser of (A) the Secondary Payment Amount for the following
Distribution Date and (B) the Secondary Reserve Account Amount for such
Distribution Date (before giving effect to any deposits to or withdrawals from
the Secondary Reserve Account on such Distribution Date) (such lesser amount,
the “Secondary Reserve Account Draw Amount”); provided, however, that if on the
last day of the preceding Collection Period the Pool Balance is zero, the
Secondary Reserve Account Draw Amount for such Distribution Date shall equal the
Secondary Reserve Account Amount for such Distribution Date;

 

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(ii) the Secondary Reserve Account Amount for the following Distribution Date
(after giving effect to the withdrawal of the Secondary Reserve Account Draw
Amount for such Distribution Date); and

 

(iii) the amount, if any, by which the Required Secondary Reserve Account Amount
for the following Distribution Date exceeds the Secondary Reserve Account Amount
for such Distribution Date (after giving effect to the withdrawal of the
Secondary Reserve Account Draw Amount for such Distribution Date) (such excess,
the “Secondary Reserve Account Deficiency”).

 

On each Distribution Date, the Servicer shall instruct the Indenture Trustee to
transfer the Secondary Reserve Account Draw Amount, if any, for such
Distribution Date from the Secondary Reserve Account to the Collection Account.

 

(d) On each Distribution Date, the Servicer shall instruct the Indenture Trustee
in writing to apply the Available Funds for such Distribution Date to make the
payments and deposits set forth in Section 2.8(a) of the Indenture.

 

(e) On each Determination Date, after calculating the amounts described in
Section 4.6(a) and 4.6(b), the Servicer shall calculate the following amounts:

 

(i) the portion, if any, of the Total Note Interest for any Class of Class A
Notes for the following Distribution Date which shall not be paid in full
through the application of Available Funds on such Distribution Date;

 

(ii) if the following Distribution Date is on or after the Class Final
Distribution Date for any Class of the Class A Notes, the amount necessary to
reduce the outstanding principal amount of that Class of the Class A Notes to
zero after the application of Available Funds on such Distribution Date;

 

(iii) the portion, if any, of the Total Note Interest for the Class B Notes for
the following Distribution Date which shall not be paid in full through the
application of Available Funds on such Distribution Date;

 

(iv) if the following Distribution Date is on or after the Class B Final
Distribution Date, the amount necessary to reduce the outstanding principal
amount of the Class B Notes to zero after the application of Available Funds on
such Distribution Date;

 

(v) the portion, if any, of the Total Note Interest for the Class C Notes for
the following Distribution Date which shall not be paid in full through the
application of Available Funds on such Distribution Date;

 

(vi) if the following Distribution Date is on or after the Class C Final
Distribution Date, the amount necessary to reduce the outstanding principal
amount of the Class C Notes to zero after the application of Available Funds on
such Distribution Date; and

 

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(vii) the sum of the amounts described in clauses (i) through (vi) above (the
“Secondary Payment Amount”).

 

(f) On each Distribution Date, the Servicer shall instruct the Indenture Trustee
in writing to apply the Secondary Reserve Account Draw Amount for such
Distribution Date to make the payments and deposits set forth in Section 2.8(i)
of the Indenture.

 

SECTION 4.7 Reserve Account.

 

(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
Reserve Account (the “Reserve Account”). The Reserve Account shall be held in
trust for the benefit of the Noteholders and the Certificateholders. 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
Depositor shall deposit the Initial Reserve 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 Depositor to the Trust pursuant to Section 2.1.
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 Indenture Trustee on behalf of the Noteholders and the Certificateholders
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 Permitted
Investments that mature not later than the Business Day preceding the next
Distribution Date. All such Permitted 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 Certificateholders, on any Distribution 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, promptly (and in any case within ten (10) calendar days
or such longer period not to exceed thirty (30) calendar days as to which each
Rating Agency may consent) cause the Reserve Account to be moved to an Eligible
Institution. The Servicer shall promptly notify the Indenture Trustee and the
Owner Trustee in writing 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 Relevant 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

 

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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

 

(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 Relevant UCC).

 

(d) If any Class of Notes has not been paid in full on any Distribution Date on
or after its Final Scheduled Distribution Date (after giving effect to the
distribution of Available Funds and the Secondary Reserve Account Draw Amount on
such Distribution Date), the Servicer shall instruct the Indenture Trustee to
distribute to the Holders of that Class of Notes, from amounts on deposit in the
Reserve Account, an amount equal to the lesser of (i) the amount on deposit in
the Reserve Account and (ii) the outstanding principal amount of that Class of
Notes. If the Reserve Account Amount for any Distribution Date (after giving
effect to the withdrawal of the Reserve Account Draw Amount for such
Distribution Date and the distribution described in the preceding sentence)
exceeds the Required Reserve Account Amount for such Distribution Date, the
Servicer shall instruct the Indenture Trustee in writing to distribute the
amount of such excess to the Certificate Payment Account for payment to the
Certificateholders. The Indenture Trustee and the Owner Trustee hereby release,
on each Distribution Date, their security interest in, to and under Reserve
Account Property distributed to the Certificateholders.

 

(e) If the Note Balance, and all other amounts owing or to be distributed
hereunder or under the Indenture or the Trust Agreement to the Noteholders, or
the Certificateholders, have been paid in full and the Trust has been
terminated, any remaining Reserve Account Property shall be distributed to the
Certificateholders.

 

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 Depositor and the Servicer may make any remittance pursuant
to this Article IV with respect to a Collection Period net of distributions or
reimbursements to be made to the Depositor 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 Distribution Date, the Servicer shall provide to the Indenture Trustee
(with copies to the Depositor, 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 Depositor, the
Rating Agencies and each Paying Agent) for the Owner Trustee to

 

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forward to each Certificateholder of record as of the most recent Record Date, a
statement in substantially the form of Exhibit B or Exhibit C, 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 Distribution Date:

 

(i) the amount of such distribution allocable to principal for each Class of
Notes;

 

(ii) the Priority Principal Distributable Amount for such Distribution Date;

 

(iii) the Secondary Principal Distributable Amount for such Distribution Date;

 

(iv) [RESERVED];

 

(v) the Regular Principal Distributable Amount for such Distribution Date;

 

(vi) the amount of such distribution allocable to current and overdue interest
(including any interest on overdue interest) for each Class of Notes;

 

(vii) the Total Servicing Fee for the preceding Collection Period;

 

(viii) the aggregate outstanding principal balance of each Class of Notes and
the Note Pool Factor with respect to each Class of Notes (in each case after
giving effect to payments allocated to principal reported under clause (i)
above);

 

(ix) the Pool Balance as of the close of business on the last day of the
preceding Collection Period;

 

(x) the Reserve Account Amount on such Distribution Date (after giving effect to
all deposits to or withdrawals from the Reserve Account on such Distribution
Date) and the Secondary Reserve Account Amount on such Distribution Date (after
giving effect to all deposits to or withdrawals from the Secondary Reserve
Account on such Distribution Date);

 

(xi) The Reserve Account Draw Amount for such Distribution Date and the
Secondary Reserve Account Draw Amount for such Distribution Date;

 

(xii) the aggregate Purchase Amount of Receivables repurchased by the Depositor
or purchased by the Servicer, if any, with respect to the preceding Collection
Period;

 

(xiii) the number and aggregate Principal Balance of Receivables that were 31-60
days, 61-90 days or 91 days or more delinquent as of the last day of the
preceding Collection Period;

 

(xiv) the Net Losses with respect to the preceding Collection Period;

 

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(xv) the Overcollateralization Target Amount for such Distribution Date and the
amount by which the Pool Balance exceeds the Note Balance as of such
Distribution Date (after giving effect to any payments made to the Holders of
the Notes on such Distribution Date);

 

(xvi) the amount of Available Collections for the preceding Collection Period;
and

 

(xvii) the amount of Excess Collections with respect to such Distribution Date.

 

SECTION 4.10 Control of Securities Accounts. Notwithstanding anything to the
contrary contained herein, the Trust agrees that each of the Collection Account,
the Note Payment Account, the Certificate Payment Account, the Reserve Account
and the Secondary 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 Relevant 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.

 

SECTION 4.11 Secondary Reserve Account.

 

(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
Secondary Reserve Account (the “Secondary Reserve Account”). The Secondary
Reserve Account shall be held in trust for the benefit of the Noteholders and
the Certificateholders. The Secondary 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 Secondary Reserve Account in accordance with this
Agreement and the Indenture. The Secondary Reserve Account and all amounts,
securities, investments, financial assets and other property deposited in or
credited to the Secondary Reserve Account (the “Secondary Reserve Account
Property”) has been conveyed by the Depositor to the Trust pursuant to Section
2.1. Pursuant to the Indenture, the Trust will pledge all of its right, title
and interest in, to and under the Secondary Reserve Account and the Secondary
Reserve Account Property to the Indenture Trustee on behalf of the Noteholders
and the Certificateholders to secure its obligations under the Notes and the
Indenture.

 

(b) The Secondary 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 Secondary
Reserve Account in Permitted Investments that mature not later than the Business
Day preceding the next Distribution Date. All such Permitted Investments shall
be held to maturity. On any Distribution Date, all interest and other income
(net of losses and investment expenses) on funds on deposit in the Secondary

 

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Reserve Account, to the extent that funds on deposit therein, as certified by
the Servicer, exceed the Required Secondary Reserve Account Amount, shall, at
the written direction of the Servicer, (i) first, be deposited into the Reserve
Account to the extent of any unfunded Reserve Account Deficiency on such
Distribution Date (after giving effect to all deposits to and withdrawals from
the Reserve Account on such Distribution Date) and (ii) second, be paid to the
Certificateholders. If the Secondary Reserve Account is no longer to be
maintained at the Indenture Trustee, the Servicer shall, with the Indenture
Trustee’s assistance as necessary, promptly (and in any case within ten (10)
calendar days or such longer period not to exceed thirty (30) calendar days as
to which each Rating Agency may consent) cause the Secondary Reserve Account to
be moved to an Eligible Institution. The Servicer shall promptly notify the
Indenture Trustee and the Owner Trustee in writing of any change in the account
number or location of the Secondary Reserve Account.

 

(c) With respect to any Secondary Reserve Account Property:

 

(i) any Secondary Reserve Account Property that is a “financial asset” (as
defined in Section 8-102(a)(9) of the Relevant UCC) shall be physically
delivered to, or credited to an account in the name of, the Eligible Institution
maintaining the Secondary 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 Secondary 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

 

(iii) except for any deposit accounts specified in clause (ii) above, the
Secondary Reserve Account shall only be invested in securities or in other
assets which the Eligible Institution maintaining the Secondary Reserve Account
agrees to treat as “financial assets” (as defined in Section 8-102(a)(9) of the
Relevant UCC).

 

(d) If any Class of Notes has not been paid in full on any Distribution Date on
or after its Class Final Distribution Date (after giving effect to the
distribution of Available Funds, the Secondary Reserve Account Draw Amount and
any remaining amounts on deposit in the Reserve Account on such Distribution
Date), the Servicer shall instruct the Indenture Trustee to distribute to the
Holders of that Class of Notes, from amounts on deposit in the Secondary Reserve
Account, an amount equal to the lesser of (i) the amount on deposit in the
Secondary Reserve Account and (ii) the outstanding principal amount of that
Class of Notes. If the Secondary Reserve Account Amount for any Distribution
Date (after giving effect to the withdrawal of the Secondary Reserve Account
Draw Amount for such Distribution Date and the distribution described in the
preceding sentence) exceeds the Required Secondary Reserve Account Amount for
such Distribution Date, the Servicer shall instruct the Indenture Trustee in
writing to distribute the amount of such excess (i) first, to the Reserve
Account to the extent of any unfunded Reserve Account Deficiency on such
Distribution Date (after giving effect to all deposits to and withdrawals from
the Reserve Account on such Distribution Date) and (ii)

 

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second, to the Certificate Payment Account for payment to the
Certificateholders. The Indenture Trustee and the Owner Trustee hereby release,
on each Distribution Date, their security interest in, to and under Secondary
Reserve Account Property distributed to the Certificateholders.

 

(e) If the Note Balance, and all other amounts owing or to be distributed
hereunder or under the Indenture or the Trust Agreement to the Noteholders, or
the Certificateholders, have been paid in full and the Trust has been
terminated, any remaining Secondary Reserve Account Property shall be
distributed to the Certificateholders.

 

ARTICLE V

[RESERVED]

 

ARTICLE VI

THE DEPOSITOR

 

SECTION 6.1 Representations and Warranties of Depositor. The Depositor 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 Depositor has been duly organized and is
validly existing as a limited liability company in good standing under the laws
of the State of Delaware, 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 Receivables.

 

(b) Due Qualification. 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 each jurisdiction in which the failure to so
qualify or to obtain such licenses and approvals would, in the reasonable
judgment of the Depositor, materially and adversely affect the performance by
the Depositor of its obligations under, or the validity or enforceability of,
this Agreement, any of the other Transaction Documents to which the Depositor is
a party, the Receivables, the Notes or the Certificates.

 

(c) Power and Authority. The Depositor 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 Depositor 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 Depositor is a party have been duly authorized by the Depositor 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 Receivables and the
other Trust Property enforceable against all creditors of and purchasers from
the Depositor. This Agreement and the

 

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other Transaction Documents to which the Depositor is a party constitute legal,
valid and binding obligations of the Depositor, enforceable against the
Depositor 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 Depositor of
this Agreement and the other Transaction Documents to which the Depositor 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 terms and provisions of or constitute (with or without
notice or lapse of time or both) a default under the certificate of formation or
limited liability company agreement of the Depositor or any material indenture,
agreement, mortgage, deed of trust or other instrument to which the Depositor is
a party or by which the Depositor 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 Depositor or its
properties of any federal or state regulatory body, court, administrative agency
or other governmental instrumentality having jurisdiction over the Depositor or
any of its properties.

 

(f) No Proceedings. There are no proceedings or investigations pending or, to
the knowledge of the Depositor, threatened against the Depositor 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, the 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
Depositor, would materially and adversely affect the performance by the
Depositor of its obligations under, or the validity or enforceability of, this
Agreement, the Indenture, the Trust Agreement, any of the other Transaction
Documents, the Receivables, the Notes or the Certificates, or (iv) that, in the
reasonable judgment of the Depositor, would adversely affect the federal or
Applicable Tax State income, excise, franchise or similar tax attributes of the
Trust or of the Notes or the Certificates.

 

SECTION 6.2 Liability of Depositor; Indemnities.

 

(a) The Depositor shall be liable in accordance herewith only to the extent of
the obligations specifically undertaken by the Depositor under this Agreement.

 

(b) The Depositor 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 Receivables 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 Receivables or federal or other Applicable Tax State income taxes arising
out

 

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of the transactions contemplated by this Agreement and the other Transaction
Documents), and all costs and expenses in defending against such taxes.

 

(c) The Depositor 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
Depositor’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 Depositor’s violation of federal or state securities laws
in connection with the registration or the sale of the Notes.

 

(d) The Depositor 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 Depositor or
the Servicer shall be required to indemnify the Owner Trustee or the Indenture
Trustee, as applicable.

 

(e) The Depositor 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 Depositor 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 Depositor, without interest. Notwithstanding
anything to the contrary contained herein, the Depositor shall only be required
to pay (i) any fees, expenses, indemnities or other liabilities that it may
incur under the Transaction Documents from funds available pursuant to, and in
accordance with, the payment priorities set forth in this Agreement and (ii) to
the extent the Depositor has additional funds available (other than funds
described in the preceding clause (i)) that would be in excess of amounts that
would be necessary to pay the debt and other obligations of the Depositor in
accordance with the Depositor’s certificate of formation, operating agreement
and all financing documents to which the Depositor is a party. The agreement set
forth in the preceding sentence shall constitute a subordination agreement for
purposes of Section 510(a) of the Bankruptcy Code. In addition, no amount owing
by the Depositor hereunder in excess of liabilities that it is required to pay
in accordance

 

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with the preceding sentence shall constitute a “claim” (as defined in Section
101(5) of the Bankruptcy Code) against it.

 

SECTION 6.3 Merger or Consolidation of, or Assumption of the Obligations of,
Depositor. Any Person (i) into which the Depositor shall be merged or
consolidated, (ii) resulting from any merger, conversion or consolidation to
which the Depositor shall be a party or (iii) that shall succeed by purchase and
assumption to all or substantially all of the business of the Depositor, which
Person in any of the foregoing cases executes an agreement of assumption to
perform every obligation of the Depositor under this Agreement, shall be the
successor to the Depositor 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 Depositor 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, (y)
the Depositor 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 authorized and filed that are necessary to fully preserve and
protect the interest of the Trust and the Indenture Trustee, respectively, in
the Receivables, 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 fully preserve and
protect such interest and (z) the Rating Agency Condition shall have been
satisfied. Notwithstanding anything to the contrary contained herein, the
execution of the foregoing agreement of assumption and compliance with clauses
(x), (y) and (z) above shall be conditions to the consummation of the
transactions referred to in clauses (i), (ii) and (iii) above.

 

SECTION 6.4 Limitation on Liability of Depositor and Others.

 

(a) Neither the Depositor nor any of the directors, officers, employees or
agents of the Depositor 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 Depositor
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 gross negligence in the performance of duties under this Agreement
(except for errors in judgment). The Depositor, 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 Depositor 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 Depositor May Own Notes or Certificates. The Depositor, and any
Affiliate of the Depositor, 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 Depositor

 

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or an Affiliate of the Depositor, except as otherwise expressly provided herein
(including in the definitions of “Note Balance”) or in the other Transaction
Documents. Except as otherwise expressly provided herein (including the
definition of “Note Balance”) or in the other Transaction Documents, Notes and
Certificates so owned by or pledged to the Depositor 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.

 

SECTION 6.6 [RESERVED].

 

SECTION 6.7 Certain Limitations.

 

(a) The purpose of the Depositor shall be limited to the conduct or promotion of
the following activities: (i) to acquire, lease, own, hold, sell, transfer,
convey, dispose of, pledge, assign, borrow money against, grant a security
interest in, finance, refinance or otherwise deal with, publicly or privately
and whether with unrelated third parties or with affiliated entities, automotive
installment sale contracts and service contracts originated or acquired by
CarMax or its Affiliates or interests therein, the related motor vehicles or
interests therein and the related documentation and monies due or to become due
thereunder, proceeds from claims on insurance policies related thereto and all
related rights and the proceeds of any of the foregoing (collectively, the
“Assets”), (ii) to perform its obligations under the Basic Documents (as defined
in the limited liability company agreement of the Depositor (the “LLC
Agreement”)), (iii) to act as settlor or grantor of one or more trusts or
special purpose entities (each, a “Securitization Trust”) formed pursuant to a
trust agreement or other agreement, which Securitization Trust may issue one or
more series or classes of certificates, bonds, notes or other evidences of
interest or indebtedness (collectively, “Securities”) secured by or representing
beneficial interests in the Assets, (iv) to acquire Securities or other property
of a Securitization Trust (including remainder interests in collateral or
reserve accounts) or any interest in any of the foregoing, (v) to cause the
issuance of, authorize, sell and deliver Securities or other instruments secured
or collateralized by Securities, (vi) to own equity interests in other limited
liability companies or partnerships whose purposes are substantially restricted
to those described in clauses (i) through (v) above, (vii) to borrow money other
than pursuant to clause (i) above, but only to the extent that such borrowing is
permitted by the terms of the transactions contemplated by clauses (i) through
(vi) above, (viii) to loan or otherwise invest funds received as a result of the
Depositor’s interest in any Securitization Trust or Securities and any other
income, as determined by the Member (as defined in the LLC Agreement) of the
Depositor from time to time, and (ix) to (A) negotiate, authorize, execute,
deliver or assume or perform the obligations under any agreement, instrument or
document relating to the activities set forth in clauses (i) through (viii)
above, including the Basic Documents (as defined in the LLC Agreement) and (B)
engage in any lawful act or activity and to exercise any powers permitted to
limited liability companies organized under the laws of the State of Delaware
that are incidental to and necessary, convenient or advisable for the
accomplishment of the above-mentioned purposes, including the entering into of
(x) interest rate or basis swap, cap, floor or collar agreements, currency
exchange agreements or similar hedging transactions, (y) any agreement providing
for the funding of any amount due under any of the Securities through direct
borrowings, letters of credit, insurance or otherwise and (z) referral,
management, servicing and administration agreements. Capitalized terms used in
the following sentence, other than the terms “Depositor” and “LLC Agreement”,
have the respective meanings

 

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assigned to them in the LLC Agreement. So long as any Obligation is outstanding,
the Depositor shall not (i) except as contemplated in the Basic Documents,
guarantee any obligation of any Person, including any Affiliate, (ii) engage,
directly or indirectly, in any business other than the activities required or
permitted to be performed under Article Three of the LLC Agreement, the Basic
Documents or Section 4.10 of the LLC Agreement, (iii) incur, create or assume
any indebtedness other than as expressly permitted under Article Three of the
LLC Agreement, the Basic Documents or Section 4.10 of the LLC Agreement, (iv)
make or permit to remain outstanding any loan or advance to, or own or acquire
any stock or securities of, any Person, except that the Depositor may invest in
those investments permitted under Article Three of the LLC Agreement, the Basic
Documents or Section 4.10 of the LLC Agreement and may make any advance required
or expressly permitted to be made pursuant to any provision of Article Three of
the LLC Agreement, the Basic Documents or Section 4.10 of the LLC Agreement and
permit the same to remain outstanding in accordance with such provisions, (v) to
the fullest extent permitted by law, engage in any dissolution, liquidation,
consolidation, merger, asset sale or transfer of ownership interests other than
such activities as are expressly permitted pursuant to any provision of Article
Three of the LLC Agreement, the Basic Documents or Section 4.10 of the LLC
Agreement or (vi) except as contemplated by Article Three of the LLC Agreement
or the Basic Documents, form, acquire or hold any subsidiary (whether a
corporation, partnership, limited liability company or other entity).

 

(b) Notwithstanding any other provision of this Section and any provision of
law, the Depositor shall not do any of the following:

 

(i) engage in any business or activity other than as set forth in clause (a)
above; or

 

(ii) without the unanimous written consent of the members of the Depositor and
the members of the Board of Directors of the Depositor (including all
independent directors of the Depositor), (A) consolidate or merge the Depositor
with or into any Person or sell all or substantially all of the assets of the
Depositor, (B) institute proceedings to have the Depositor be adjudicated
bankrupt or insolvent, or consent to the institution of bankruptcy or insolvency
proceedings against Depositor, (C) file a petition seeking, or consent to,
reorganization or relief with respect to the Depositor under any applicable
federal or state law relating to bankruptcy, (D) consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator or other similar official
of the Depositor or a substantial part of its property, (E) make any assignment
for the benefit of creditors of the Depositor, (F) admit in writing the
Depositor’s inability to pay its debts generally as they become due, (G) take
any action in furtherance of any action set forth in clauses (A) through (F)
above or (H) to the fullest extent permitted by law, dissolve or liquidate the
Depositor.

 

(c) The Depositor shall not amend its organizational documents except in
accordance with the provisions thereof.

 

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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 limited liability company in good standing under the laws
of the state of Delaware, 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 Receivables and to hold the
Receivable Files as custodian on behalf of the Trust.

 

(b) Due Qualification. The Servicer 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 Servicer, materially and adversely affect the performance by the
Servicer of its obligations under, or the validity or enforceability of, this
Agreement, the Indenture, the Trust Agreement, any of the other Transaction
Documents, the Receivables, 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
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 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 terms and provisions of or constitute (with or without
notice or lapse of time or both) a default under the certificate of formation or
limited liability company agreement 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

 

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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 Receivables.

 

(g) Security Interest Matters. The Servicer has in its possession all original
copies of the motor vehicle retail installment sale contracts that constitute or
evidence the Receivables. The motor vehicle retail installment sale contracts
that constitute or evidence the Receivables do not have any marks or notations
indicating that they have been pledged, assigned or otherwise conveyed to any
Person other than the Depositor, the Trust or the Indenture Trustee.

 

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
Depositor 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.

 

(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
Receivables to the Trust or the issuance and original sale of the Notes or the
Certificates or asserted with respect to ownership of the Receivables 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
Depositor from and against any loss, liability or expense incurred by reason of
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

 

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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 Depositor 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) as Servicer
pursuant to Section 8.1 or a resignation by CarMax (or any successor Servicer)
as Servicer pursuant to Section 7.6, 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 and the fees
and expenses of the Owner Trustee and the Indenture Trustee. 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 Depositor, 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 Depositor, 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

 

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authorized and filed that are necessary to fully preserve and protect the
interest of the Trust and the Indenture Trustee, respectively, in the
Receivables, 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 fully preserve and
protect such interest. The Servicer shall provide prior written notice of any
merger, conversion, consolidation or succession pursuant to this Section 7.3 to
the Rating Agencies. Notwithstanding anything to the contrary contained herein,
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 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 Receivables 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 Delegation of Duties. The Servicer may at any time delegate its
duties as servicer under this Agreement to third parties; provided, however,
that no such delegation shall relieve the Servicer of its responsibilities with
respect to such duties and the Servicer shall be solely responsible for the fees
of any such third party.

 

SECTION 7.6 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 (i) upon a determination that the performance of its duties is
no longer permissible under applicable law or (ii) upon the appointment of a
successor Servicer and satisfaction of the Rating Agency Condition with respect
to such resignation and appointment. Any such determination permitting the
resignation of the Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered to the Depositor, 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

 

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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 20 thereof.

 

SECTION 7.7 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 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”) or in the other Transaction Documents. Except as otherwise expressly
provided herein (including in the definitions of “Note 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 Business Day preceding the related Distribution 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 Distribution Date or the Business Day
preceding a Distribution Date, such Distribution Date or preceding Business Day,
as applicable; 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 Depositor or the Noteholders
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 Depositor, the Owner Trustee or the
Indenture Trustee or to the Depositor, the Seller, the Servicer, the Owner
Trustee and the Indenture Trustee by the Holders of Notes evidencing not less
than 25% of the Note Balance of the Controlling Class; or

 

(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 Receivable 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

 

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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 Depositor, the Owner Trustee
or the Indenture Trustee or to the Depositor, the Seller, the Servicer, the
Owner Trustee and the Indenture Trustee by the Holders of Notes evidencing not
less than 25% of the Note Balance of the Controlling Class; 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 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 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 Servicer or relating to substantially all of its property, the admission in
writing by the Servicer of its inability to pay its debts generally as they
become due, the filing by the Servicer of a petition to take advantage of any
applicable bankruptcy, insolvency or reorganization statute, the making by the
Servicer of an assignment for the benefit of its creditors or the voluntary
suspension by the Servicer of payment of its obligations.

 

If an Event of Servicing Termination shall have occurred and be continuing, the
Indenture Trustee or the Holders of Notes evidencing not less than 51% of the
Note Balance of the Controlling Class, in each case by notice then given in
writing to the Depositor and the Servicer (with a copy to the Indenture Trustee
and the Owner Trustee if given by the Noteholders), may terminate all of the
rights and obligations of the Servicer under this Agreement; provided, however,
that the indemnification obligations of the Servicer under Section 7.2 shall
survive such termination. 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 Receivable
Files or 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 Receivable, all Receivable 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
Receivables to the successor Servicer in such electronic form as the successor
Servicer may reasonably request. All reasonable costs

 

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and expenses (including reasonable attorneys’ fees) incurred or payable by the
successor Servicer in connection with the transfer of servicing (whether due to
termination, resignation or otherwise), including allowable compensation of
employees and overhead costs incurred or payable in connection with the transfer
of the Receivable Files or any amendment to this Agreement required in
connection with the transfer of servicing, (the “Transition Costs”) 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 7.6 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; provided, however, that
the Indenture Trustee, as successor Servicer or as successor Administrator,
shall not, in any event, make any Simple Interest Advances pursuant to Section
4.4 and shall have no obligations pursuant to Section 3.8 with respect to the
fees and expenses of the Owner Trustee or the Indenture Trustee, the fees and
expenses of the Owner Trustee’s attorneys or the Indenture Trustee’s attorneys,
the fees and expenses of any custodian appointed by the Owner Trustee or the
Indenture Trustee, the fees and expenses of independent accountants or expenses
incurred in connection with distributions and reports to the Certificateholders
or the Noteholders. 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 Receivables shall be deposited in the Collection Account
within two (2) Business Days of receipt and shall not be retained by the
Servicer. Notwithstanding the foregoing, 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. 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 Receivables as it and such successor shall agree; provided, however, that
such compensation shall not be greater than that payable to CarMax as Servicer
hereunder without the prior consent of the Holders of Notes evidencing at least
51% of the Note Balance of the Controlling Class. 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. Notwithstanding anything to the
contrary contained herein, in no event shall the Indenture Trustee be liable for
any servicing fee or for any differential in the amount of the servicing fee
paid hereunder and the amount necessary to induce any successor Servicer to act
as successor Servicer hereunder.

 

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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 Receivables 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 Receivables 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 Receivables.

 

(c) Any successor Servicer shall provide the Depositor with access to the
Receivable Files and to the successor Servicer’s records (whether written or
automated) with respect to the Receivable 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.

 

(d) Any transfer of servicing hereunder shall not constitute an assumption by
the related successor Servicer of any liability of the related outgoing Servicer
arising out of any breach by such outgoing Servicer of such outgoing Servicer’s
duties hereunder prior to such transfer of servicing.

 

SECTION 8.4 Notification to Noteholders, Certificateholders and Rating Agencies.
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 of the Controlling Class may,
on behalf of all Noteholders, 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, the Reserve Account or the Secondary Reserve
Account in accordance with this Agreement. 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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SECTION 8.6 Repayment of Advances. If the identity of the Servicer shall change,
the predecessor Servicer shall be entitled to receive reimbursement for
outstanding and unreimbursed Simple Interest Advances made pursuant to Section
4.4 by the predecessor Servicer.

 

ARTICLE IX

TERMINATION

 

SECTION 9.1 Optional Purchase of All Receivables.

 

(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 Distribution Date the Owner Trust
Estate, other than the Collection Account, the Note Payment Account, the
Certificate Payment Account, the Reserve Account or the Secondary Reserve
Account. To exercise such option, the Servicer shall notify the Depositor, the
Owner Trustee, the Indenture Trustee and the Rating Agencies no later than ten
(10) days prior to the Distribution Date on which such repurchase is to be
effected and shall deposit into the Collection Account on the Business Day
preceding such Distribution Date an amount equal to the aggregate Purchase
Amount for the Receivables, plus the appraised value of any other Trust
Property, other than the Collection Account, the Note Payment Account, the
Certificate Payment Account, the Reserve Account or the Secondary Reserve
Account, such value to be determined by an appraiser mutually agreed upon by the
Servicer, the Owner Trustee and the Indenture Trustee; 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 all amounts due to the Servicer under this Agreement
plus the Note Balance plus all accrued but unpaid interest (including any
overdue interest) on the Notes plus all amounts due to the Servicer in any
outstanding and unreimbursed Simple Interest Advances and any outstanding and
unreimbursed Unreimbursed Servicer Advances. Upon such payment, the Servicer
shall succeed to and own all interests in and to the Trust. The aggregate
Purchase Amount for such Distribution Date, plus, to the extent necessary, all
amounts in the Reserve Account and Secondary Reserve Account, shall be used to
make payments in full to the Noteholders 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 Depositor, the Owner
Trustee and the Indenture Trustee on such Distribution 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 Receivables at the time of transfer
pursuant to such purchase option represented a fair market price for such
Receivables 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 the Indenture Trustee
shall continue to carry out its obligations hereunder with respect to the
Certificateholders, including making distributions from the Collection Account
in accordance with Section 4.6(d), making withdrawals from the Reserve

 

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Account in accordance with Sections 4.6(b) and 4.7 and making withdrawals from
the Secondary Reserve Account in accordance with Sections 4.6(c) and 4.11.

 

ARTICLE X

MISCELLANEOUS PROVISIONS

 

SECTION 10.1 Amendment.

 

(a) This Agreement may be amended from time to time by the Depositor, the
Servicer and the Owner Trustee, on behalf of the Trust, with the consent of the
Indenture Trustee, but without the consent of any of the Noteholders, 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 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 (i) no such amendment may
materially adversely affect the interests of any Noteholder and (ii) no such
amendment will be permitted unless an Opinion of Counsel is delivered to the
Depositor, the Owner Trustee and the Indenture Trustee to the effect that such
amendment will not cause the Trust 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 any Noteholder.

 

(b) This Agreement may also be amended from time to time by the Depositor, the
Servicer and the Owner Trustee, on behalf of the Trust, with the consent of the
Indenture Trustee and the consent of the Holders of Notes evidencing at least 66
2/3% of the Note Balance of the Controlling Class, 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;
provided, however, that (x) no such amendment will be permitted unless an
Opinion of Counsel is delivered to the Depositor, the Owner Trustee and the
Indenture Trustee to the effect that such amendment will not cause the Trust 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 any Noteholder and (y) that no such
amendment may:

 

(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
or in respect of the Receivables or distributions that are required to be made
for the benefit of the Noteholders, or change any Note Rate, without the consent
of all Noteholders adversely affected by such amendment;

 

(ii) reduce the percentage of the Note Balance of the Controlling Class the
consent of the Holders of which is required for any amendment to this Agreement
without the consent of all the Noteholders adversely affected by such amendment;
or

 

(iii) modify or alter the definition of the term “Required Reserve Account
Amount” or “Required Secondary Reserve Account Amount” without the consent of
all the Noteholders adversely affected by such amendment.

 

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(c) An amendment to this Agreement shall be deemed not to materially adversely
affect the interests of any Noteholder if (i) the Person requesting such
amendment obtains and delivers to the Indenture Trustee and the Owner Trustee an
Opinion of Counsel to that effect or (ii) the Rating Agency Condition is
satisfied.

 

(d) Prior to the execution of any amendment or consent pursuant to Section 10.1,
the Servicer shall provide written notification of the substance of such
amendment or consent to each Rating Agency.

 

(e) 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. It shall not be
necessary for the consent of the Noteholders 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 provided for
in this Agreement) and of evidencing the authorization of the execution thereof
by the Noteholders shall be subject to such reasonable requirements as the Owner
Trustee and the Indenture Trustee may prescribe.

 

(f) Prior to the execution of any amendment pursuant to Section 10.1, the
Depositor, 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 is authorized or permitted by this Agreement 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 any such amendment which affects such Owner Trustee’s or Indenture
Trustee’s own rights, duties or immunities under this Agreement or otherwise.

 

(g) The representations and warranties set forth in Sections 2.3(m), 2.3(n) and
Section 7.1(g) may not be amended or waived.

 

SECTION 10.2 Protection of Title to Trust.

 

(a) The Depositor or the Servicer, or both, shall authorize and file such
financing statements and cause to be authorized 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 Receivables and the
proceeds thereof. The Depositor 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 Depositor nor the Servicer shall change its name, identity or
organizational structure in any manner that would make any financing statement
or continuation statement filed by the Depositor or the Servicer in accordance
with Section 10.2(a) seriously misleading within the meaning of Section 9-506 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

 

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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 Receivables and the
proceeds thereof.

 

(c) Each of the Depositor and the Servicer shall give the Owner Trustee and the
Indenture Trustee at least sixty (60) days’ prior written notice of any change
in its name, identity, organizational structure or jurisdiction of organization
or any relocation of its principal place of business or chief executive office
if, as a result of such change or 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 new
financing statement. The Depositor shall at all times maintain its jurisdiction
of organization, its principal place of business and its chief executive office
within the United States. The Servicer shall at all times maintain each office
from which it shall service Receivables and each office at which the Receivable
Files are located within the United States.

 

(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, 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 Receivable and the amounts
from time to time deposited in the Collection Account, the Reserve Account and
the Secondary Reserve Account in respect of such Receivable.

 

(e) The Servicer shall maintain its computer systems so that, from and after the
time of the transfer of the Receivables to the Trust pursuant to this Agreement,
the Servicer’s master computer records (including any back-up archives) that
refer to a Receivable shall indicate clearly and unambiguously the interest of
the Trust and the Indenture Trustee in such Receivable and that such Receivable
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 Receivable shall be deleted from or modified on the Servicer’s computer
systems when, and only when, such Receivable shall have been paid in full or
repurchased by the Depositor or purchased by the Servicer.

 

(f) If at any time the Depositor 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 Receivable, shall indicate clearly and unambiguously that such
Receivable has been sold and is owned by the Trust and has been pledged to the
Indenture Trustee (unless such Receivable has been paid in full or repurchased
by the Depositor 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
Receivable.

 

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(h) If the Depositor has repurchased one or more Receivables from the Trust
pursuant to Section 2.4 or the Servicer has purchased one or more Receivables
from the Trust pursuant to Section 3.7, the Servicer shall, upon request,
furnish to the Owner Trustee and the Indenture Trustee, within ten (10) Business
Days, a list of all Receivables (by contract number and name of Obligor) then
held as part of the Trust, together with a reconciliation of such list to the
Receivable Schedule and to each of the Servicer’s Certificates furnished before
such request indicating removal of Receivables from the Trust.

 

(i) The Servicer shall deliver to the Depositor and the Depositor shall deliver
to the Owner Trustee and the Indenture Trustee:

 

(1) promptly after the authorization 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 authorized and filed that are necessary fully to preserve and protect
the interest of the Depositor (in the case of an opinion delivered by the
Servicer) or the Trust and the Indenture Trustee (in the case of an opinion
delivered by the Depositor) in the Receivables, 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; and

 

(2) within ninety (90) days after the beginning of each calendar year (beginning
with the year 2006), 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 authorized and filed
that are necessary fully to preserve and protect the interest of the Depositor
(in the case of an opinion delivered by the Servicer) or the Trust and the
Indenture Trustee (in the case of an opinion delivered by the Depositor) in the
Receivables, 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 on or
before March 31 of the following year to preserve and protect such interest.

 

(j) The Depositor 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 WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PROVISIONS THEREOF WHICH MAY
REQUIRE THE APPLICATION OF THE LAWS OF ANY OTHER

 

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JURISDICTION (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW).

 

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
Depositor, at the following address: 4900 Cox Road, Suite 200, Glen Allen,
Virginia 23060, Attention: Treasurer, (ii) in the case of the Seller or 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 Ratings Services, a division of The
McGraw-Hill Companies, Inc., 55 Water Street, 43rd Floor, New York, New York
10041, Attention: Asset Backed Surveillance Department.

 

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 Depositor or the Servicer without the prior
written consent of the Owner Trustee, the Indenture Trustee and the Holders of
Notes evidencing not less than 66 2/3% of the Note Balance of the Controlling
Class.

 

SECTION 10.7 Further Assurances. The Depositor, the Servicer and the Trust agree
to do and perform, from time to time, any and all acts and to authorize and/or
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 the authorization of any financing statements or
continuation statements relating to the Receivables 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 Depositor, 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.

 

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SECTION 10.9 Third-Party Beneficiaries. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, the Owner Trustee, the
Noteholders, the Certificateholders and their respective successors and
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 No Bankruptcy Petition. The Owner Trustee, the Indenture Trustee,
the Trust and the Servicer each covenants and agrees that it will not at any
time institute against, or join any other Person in instituting against, the
Depositor or the Trust any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings or other proceedings under any federal or state
bankruptcy or similar law. This Section 10.12 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 10.13 Limitation of Liability of Owner Trustee and Indenture Trustee.

 

(a) Notwithstanding anything to the contrary contained herein, 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.

 

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(b) Notwithstanding anything to the contrary contained herein, 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.

 

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the Trust, the Depositor and the Servicer 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 2005-1

By:

 

THE BANK OF NEW YORK,

   

not in its individual capacity but solely

as Owner Trustee

 

By:

 

/s/ Anna Bourtman

   

Name: Anna Bourtman

   

Title: Assistant Treasurer

 

CARMAX AUTO FUNDING LLC,

as Depositor

By:

 

/s/ Thomas W. Reedy

   

Name: Thomas W. Reedy

   

Title: Treasurer

 

CARMAX BUSINESS SERVICES, LLC,

as Servicer

By:

 

/s/ Keith D. Browning

   

Name: Keith D. Browning

   

Title: Chief Financial Officer

 

Accepted and agreed:

 

WELLS FARGO BANK,

NATIONAL ASSOCIATION,

not in its individual capacity

but solely as Indenture Trustee

 

By:

 

/s/ Marianna C. Stershic

   

Name: Marianna C. Stershic

   

Title: Vice President

 

S-1

Sale and Servicing Agreement