Carmax Inc 10-Q for FY2027 Q1
Carmax Inc (KMX)
10-Q
2026-06-24
For: 2026-05-31
View Original
Added on
June 24, 2026
About this 10-Q
Carmax Inc filed this 10-Q on June 24, 2026, covering the quarter ended May 31, 2026 (FY2027 Q1).
Headline figures
Quarter ended May 31, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $8.01B
- up 6.2% from $7.55B a year earlier
- Net income
- $185.63M
- down 11.8% from net income of $210.38M a year earlier
- Diluted EPS
- $1.31
- down 5.1% from $1.38 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Quarterly Period Ended May 31, 2026
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
Commission File Number: 1-31420
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation) | (I.R.S. Employer Identification No.) | ||||||||||
(Address of Principal Executive Offices) | (Zip Code) | ||||||||||
(804 ) 747-0422
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding as of June 22, 2026 | |||||||
| Common Stock, par value $0.50 | ||||||||
Page 1
CARMAX, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No. | |||||||||||
| PART I. | FINANCIAL INFORMATION | ||||||||||
| Item 1. | Financial Statements: | ||||||||||
| Consolidated Statements of Earnings (Unaudited) – | |||||||||||
| Three Months Ended May 31, 2026 and 2025 | |||||||||||
| Consolidated Statements of Comprehensive Income (Unaudited) – | |||||||||||
| Three Months Ended May 31, 2026 and 2025 | |||||||||||
| Consolidated Balance Sheets (Unaudited) – | |||||||||||
| May 31, 2026 and February 28, 2026 | |||||||||||
| Consolidated Statements of Cash Flows (Unaudited) – | |||||||||||
| Three Months Ended May 31, 2026 and 2025 | |||||||||||
| Consolidated Statements of Shareholders’ Equity (Unaudited) – | |||||||||||
| Three Months Ended May 31, 2026 and 2025 | |||||||||||
| Notes to Consolidated Financial Statements (Unaudited) | |||||||||||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and | ||||||||||
| Results of Operations | |||||||||||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | ||||||||||
| Item 4. | Controls and Procedures | ||||||||||
| PART II. | OTHER INFORMATION | ||||||||||
| Item 1. | Legal Proceedings | ||||||||||
| Item 1A. | Risk Factors | ||||||||||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||||||||||
| Item 6. | Exhibits | ||||||||||
| SIGNATURES | |||||||||||
Page 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CARMAX, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)
| Three Months Ended May 31 | |||||||||||||||||||||||||||||||||||
| (In thousands except per share data) | 2026 | %(1) | 2025 | %(1) | |||||||||||||||||||||||||||||||
| SALES AND OPERATING REVENUES: | |||||||||||||||||||||||||||||||||||
| Used vehicle sales | $ | $ | |||||||||||||||||||||||||||||||||
| Wholesale vehicle sales | |||||||||||||||||||||||||||||||||||
| Other sales and revenues | |||||||||||||||||||||||||||||||||||
| NET SALES AND OPERATING REVENUES | |||||||||||||||||||||||||||||||||||
| COST OF SALES: | |||||||||||||||||||||||||||||||||||
| Used vehicle cost of sales | |||||||||||||||||||||||||||||||||||
| Wholesale vehicle cost of sales | |||||||||||||||||||||||||||||||||||
| Other cost of sales | |||||||||||||||||||||||||||||||||||
| TOTAL COST OF SALES | |||||||||||||||||||||||||||||||||||
| GROSS PROFIT | |||||||||||||||||||||||||||||||||||
| CARMAX AUTO FINANCE INCOME | |||||||||||||||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||||||||||||||
| Other income | ( | ( | |||||||||||||||||||||||||||||||||
| Earnings before income taxes | |||||||||||||||||||||||||||||||||||
| Income tax provision | |||||||||||||||||||||||||||||||||||
| NET EARNINGS | $ | $ | |||||||||||||||||||||||||||||||||
| WEIGHTED AVERAGE COMMON SHARES: | |||||||||||||||||||||||||||||||||||
| Basic | |||||||||||||||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||||||||||||||
| NET EARNINGS PER SHARE: | |||||||||||||||||||||||||||||||||||
| Basic | $ | $ | |||||||||||||||||||||||||||||||||
| Diluted | $ | $ | |||||||||||||||||||||||||||||||||
(1) Percents are calculated as a percentage of net sales and operating revenues and may not total due to rounding.
See accompanying notes to consolidated financial statements.
Page 3
CARMAX, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
| Three Months Ended May 31 | |||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | |||||||||||||||||||||
| NET EARNINGS | $ | $ | |||||||||||||||||||||
| Other comprehensive income (loss), net of taxes: | |||||||||||||||||||||||
| Net change in retirement benefit plan unrecognized actuarial losses | |||||||||||||||||||||||
| Net change in cash flow hedge unrecognized gains | ( | ||||||||||||||||||||||
| Other comprehensive income (loss), net of taxes | ( | ||||||||||||||||||||||
| TOTAL COMPREHENSIVE INCOME | $ | $ | |||||||||||||||||||||
See accompanying notes to consolidated financial statements.
Page 4
CARMAX, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
| As of May 31 | As of February 28 | ||||||||||
| (In thousands except share data) | 2026 | 2026 | |||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash from collections on auto loans held for investment | |||||||||||
| Accounts receivable, net | |||||||||||
| Auto loans held for sale | |||||||||||
| Inventory | |||||||||||
| Other current assets | |||||||||||
| TOTAL CURRENT ASSETS | |||||||||||
| Auto loans held for investment, net of allowance for loan losses of $474,986 and $453,027 as of May 31, 2026 and February 28, 2026, respectively | |||||||||||
| Property and equipment, net of accumulated depreciation of $2,285,968 and $2,217,485 as of May 31, 2026 and February 28, 2026, respectively | |||||||||||
| Deferred income taxes | |||||||||||
| Operating lease assets | |||||||||||
| Other assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Accrued income taxes | |||||||||||
| Current portion of operating lease liabilities | |||||||||||
| Current portion of long-term debt | |||||||||||
| Current portion of non-recourse notes payable | |||||||||||
| TOTAL CURRENT LIABILITIES | |||||||||||
| Long-term debt, excluding current portion | |||||||||||
| Non-recourse notes payable, excluding current portion | |||||||||||
| Operating lease liabilities, excluding current portion | |||||||||||
| Other liabilities | |||||||||||
| TOTAL LIABILITIES | |||||||||||
| Commitments and contingent liabilities | |||||||||||
| SHAREHOLDERS’ EQUITY: | |||||||||||
| Common stock, $0.50 par value; 350,000,000 shares authorized; 141,909,099 and 141,799,070 shares issued and outstanding as of May 31, 2026 and February 28, 2026, respectively | |||||||||||
| Capital in excess of par value | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Retained earnings | |||||||||||
| TOTAL SHAREHOLDERS’ EQUITY | |||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
Page 5
CARMAX, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
| Three Months Ended May 31 | |||||||||||
| (In thousands) | 2026 | 2025 | |||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net earnings | $ | $ | |||||||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Share-based compensation expense | |||||||||||
| Provision for loan losses | |||||||||||
| Provision for cancellation reserves | |||||||||||
| Deferred income tax (benefit) provision | ( | ||||||||||
| Other | ( | ||||||||||
| Net (increase) decrease in: | |||||||||||
| Accounts receivable, net | ( | ( | |||||||||
| Auto loans held for sale | ( | ( | |||||||||
| Inventory | |||||||||||
| Other current assets | |||||||||||
| Auto loans held for investment, net | |||||||||||
| Other assets | ( | ( | |||||||||
| Net decrease in: | |||||||||||
| Accounts payable, accrued expenses and other | |||||||||||
| current liabilities and accrued income taxes | ( | ( | |||||||||
| Other liabilities | ( | ( | |||||||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | |||||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from disposal of property and equipment | |||||||||||
| Purchases of investments | ( | ( | |||||||||
| Sales and returns of investments | |||||||||||
| Principal payments received on beneficial interests | |||||||||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ( | |||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Proceeds from issuances of long-term debt | |||||||||||
| Payments on long-term debt | ( | ( | |||||||||
| Cash paid for debt issuance costs | ( | ( | |||||||||
| Payments on finance lease obligations | ( | ( | |||||||||
| Issuances of non-recourse notes payable | |||||||||||
| Payments on non-recourse notes payable | ( | ( | |||||||||
| Repurchase and retirement of common stock | ( | ( | |||||||||
| Equity issuances | |||||||||||
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ( | ||||||||||
| Increase in cash, cash equivalents, and restricted cash | |||||||||||
| Cash, cash equivalents, and restricted cash at beginning of year | |||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | $ | |||||||||
| RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash from collections on auto loans held for investment | |||||||||||
| Restricted cash included in other assets | |||||||||||
| CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | $ | |||||||||
See accompanying notes to consolidated financial statements.
Page 6
CARMAX, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
(Unaudited)
| Three Months Ended May 31, 2026 | |||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||
| Common | Capital in | Other | |||||||||||||||||||||||||||||||||
| Shares | Common | Excess of | Retained | Comprehensive | |||||||||||||||||||||||||||||||
| (In thousands) | Outstanding | Stock | Par Value | Earnings | Loss | Total | |||||||||||||||||||||||||||||
| Balance as of February 28, 2026 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Share-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Stock incentive plans, net shares issued | ( | — | — | ( | |||||||||||||||||||||||||||||||
| Balance as of May 31, 2026 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
CARMAX, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
(Unaudited)
| Three Months Ended May 31, 2025 | |||||||||||||||||||||||||||||||||||
| Accumulated | |||||||||||||||||||||||||||||||||||
| Common | Capital in | Other | |||||||||||||||||||||||||||||||||
| Shares | Common | Excess of | Retained | Comprehensive | |||||||||||||||||||||||||||||||
| (In thousands) | Outstanding | Stock | Par Value | Earnings | Income (Loss) | Total | |||||||||||||||||||||||||||||
| Balance as of February 28, 2025 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
| Net earnings | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Share-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
| Repurchases of common stock | ( | ( | ( | ( | — | ( | |||||||||||||||||||||||||||||
| Exercise of common stock options | — | — | |||||||||||||||||||||||||||||||||
| Stock incentive plans, net shares issued | ( | — | — | ( | |||||||||||||||||||||||||||||||
| Balance as of May 31, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements.
Page 7
CARMAX, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1.Background
Business. CarMax, Inc. (“we,” “our,” “us,” “CarMax” and “the company”), including its wholly owned subsidiaries, is the nation’s largest retailer of used vehicles. We operate in two reportable segments: CarMax Sales Operations and CarMax Auto Finance (“CAF”). Our CarMax Sales Operations segment consists of all aspects of our auto merchandising and service operations, excluding financing provided by CAF. Our CAF segment consists solely of our own finance operation that provides financing to customers buying retail vehicles from CarMax.
The company operates in two operating segments, CarMax Sales Operations and CAF, both of which are reportable segments. The chief executive officer, who serves as the company’s chief operating decision maker (“CODM”), reviews the performance of our CarMax Sales Operations segment at the gross profit level, the components of which are presented within the consolidated statements of earnings. The CODM uses gross profit to assess financial performance, monitor forecasted versus actual results and adjust pricing strategy. The required segment information related to our CAF segment is presented in Note 3. Additionally, asset information by segment is not utilized for purposes of assessing performance or allocating resources and, as a result, such information has not been presented.
We deliver an unrivaled customer experience by offering a broad selection of quality used vehicles and related products and services at competitive, no-haggle prices using a customer-friendly sales process. Our sales platform leverages our scale, nationwide footprint and infrastructure and empowers our customers to buy a vehicle on their terms, whether online, in-store or through a combination of both. Our associates, stores, technology and digital capabilities tied together enable us to provide the most customer-centric car buying and selling experience, a key differentiator in a large and fragmented market. We offer customers a range of related products and services, including the appraisal and purchase of vehicles directly from consumers and dealers; the financing of retail vehicle purchases through CAF and third-party finance providers; the sale of extended protection plan (“EPP”) products, which include extended service plans (“ESPs”) and guaranteed asset protection (“GAP”); advertising and subscription services; and vehicle repair service. Vehicles purchased through the appraisal process that do not meet our retail standards are sold to licensed dealers through wholesale auctions.
Basis of Presentation and Use of Estimates. The accompanying interim unaudited consolidated financial statements include the accounts of CarMax and our wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. These interim unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, such interim consolidated financial statements reflect all normal recurring adjustments considered necessary to present fairly the financial position and the results of operations and cash flows for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full fiscal year.
The accounting policies followed in the presentation of our interim financial results are consistent with those included in the company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2026 (the “2026 Annual Report”), with the exception of those related to recent accounting pronouncements adopted in the current fiscal year. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and footnotes included in our 2026 Annual Report.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. Certain prior year amounts have been reclassified to conform to the current year’s presentation. Amounts and percentages may not total due to rounding.
Recent Accounting Pronouncements.
Adopted in the Current Period
In November 2024, the Financial Accounting Standards Board (“FASB”) issued an accounting pronouncement (ASU 2024-04) related to induced conversions of convertible debt instruments. The amendments in this update clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversions rather than as debt extinguishments. This update is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years, though early adoption was permitted. We adopted this pronouncement for our fiscal year beginning March 1, 2026, and it did not have a material effect on our consolidated financial statements.
Page 8
In July 2025, the FASB issued an accounting pronouncement (ASU 2025-05) related to credit losses for accounts receivable and contract assets. The amendments in this update provide a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. This update is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years, though early adoption was permitted. We adopted this pronouncement for our fiscal year beginning March 1, 2026, and it did not have a material effect on our consolidated financial statements.
Effective in Future Periods
In April 2026, the FASB issued an accounting pronouncement (ASU 2026-01) related to paid-in-kind (“PIK”) dividends on equity-classified preferred stock. The amendments in this update require that PIK dividends on equity-classified preferred stock be initially measured using the PIK dividend rate stated in the preferred stock agreement. This update is effective for annual periods beginning after December 15, 2026, including interim periods within those fiscal years. We plan to adopt this pronouncement for our fiscal year beginning March 1, 2027, and we do not expect it to have a material effect on our consolidated financial statements.
In May 2026, the FASB issued an accounting pronouncement (ASU 2026-02) related to environmental credits and environmental credit obligations. The amendments in this update provide recognition, measurement, presentation and disclosure requirements for environmental credits and related environmental credit obligations for all entities that generate, purchase or receive environmental credits or have a regulatory compliance obligation that may be settled with environmental credits. This update is effective for annual periods beginning after December 15, 2027, including interim periods within those fiscal years. We plan to adopt this pronouncement for our fiscal year beginning March 1, 2028, and we do not expect it to have a material effect on our consolidated financial statements.
2. Revenue
We recognize revenue when control of the good or service has been transferred to the customer, generally either at the time of sale or upon delivery to a customer. Our contracts have a fixed contract price and revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. We collect sales taxes and other taxes from customers on behalf of governmental authorities at the time of sale. These taxes are accounted for on a net basis and are not included in net sales and operating revenues or cost of sales. We generally expense sales commissions when incurred because the amortization period would have been less than one year. These costs are recorded within selling, general and administrative expenses. We do not have any significant payment terms as payment is received at or shortly after the point of sale.
Disaggregation of Revenue
| Three Months Ended May 31 | |||||||||||||||||||||||
| (In millions) | 2026 | 2025 | |||||||||||||||||||||
| Used vehicle sales | $ | $ | |||||||||||||||||||||
| Wholesale vehicle sales | |||||||||||||||||||||||
| Other sales and revenues: | |||||||||||||||||||||||
| Extended protection plan revenues | |||||||||||||||||||||||
| Third-party finance fees, net | ( | ( | |||||||||||||||||||||
Advertising & subscription revenues (1) | |||||||||||||||||||||||
| Service revenues | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total other sales and revenues | |||||||||||||||||||||||
| Total net sales and operating revenues | $ | $ | |||||||||||||||||||||
(1) Excludes intercompany sales and operating revenues that have been eliminated in consolidation.
Used Vehicle Sales. Revenue from the sale of used vehicles is recognized upon transfer of control of the vehicle to the customer. As part of our customer service strategy, we guarantee the retail vehicles we sell with a 10-day money-back guarantee. We record a reserve for estimated returns based on historical experience and trends. The reserve for estimated returns is presented gross on the consolidated balance sheets, with a return asset recorded in other current assets and a refund liability recorded in accrued expenses and other current liabilities. We also guarantee the used vehicles we sell with a 30-day
Page 9
limited warranty. These warranties are deemed assurance-type warranties and are accounted for as warranty obligations. See Note 15 for additional information on this warranty and its related obligation.
Wholesale Vehicle Sales. Wholesale vehicles are sold at our auctions, and revenue from the sale of these vehicles is recognized upon transfer of control of the vehicle to the customer. Dealers also pay a fee to us based on the sale price of the vehicles they purchase. This fee is recognized as revenue at the time of sale. While we provide condition disclosures on each wholesale vehicle sold, the vehicles are subject to a limited right of return. We record a reserve for estimated returns based on historical experience and trends. The reserve for estimated returns is presented gross on the consolidated balance sheets, with a return asset recorded in other current assets and a refund liability recorded in accrued expenses and other current liabilities.
EPP Revenues. We also sell ESP and GAP products on behalf of unrelated third parties, who are primarily responsible for fulfilling the contract, to customers who purchase a retail vehicle. The ESPs we currently offer on all used vehicles provide coverage up to 60 months (subject to mileage limitations), while GAP covers the customer for the term of their finance contract. We recognize revenue, on a net basis, at the time of sale. We also record a reserve, or refund liability, for estimated contract cancellations. The reserve for cancellations is evaluated for each product and is based on forecasted forward cancellation curves utilizing historical experience, recent trends and credit mix of the customer base. Our risk related to contract cancellations is limited to the revenue that we receive. Cancellations fluctuate depending on the volume of EPP sales, customer financing default or prepayment rates, and shifts in customer behavior, including those related to changes in the coverage or term of the product. The current portion of estimated cancellation reserves is recognized as a component of accrued expenses and other current liabilities with the remaining amount recognized in other liabilities. See Note 7 for additional information on cancellation reserves.
We are contractually entitled to receive profit-sharing revenues based on the performance of the ESPs administered by third parties. These revenues are a form of variable consideration included in EPP revenues to the extent that it is probable that it will not result in a significant revenue reversal. An estimate of the amount to which we expect to be entitled is determined upon satisfying the performance obligation of selling the ESP. This estimate is subject to various constraints; primarily, factors that are outside of the company’s influence or control. We have determined that these constraints generally preclude any profit-sharing revenues from being recognized before they are paid. As of May 31, 2026 and February 28, 2026, no current or long-term contract asset was recognized related to cumulative profit-sharing payments to which we expect to be entitled. The estimate of the amount to which we expect to be entitled is reassessed each reporting period and any changes are reflected in other sales and revenues on our consolidated statements of earnings and other assets on our consolidated balance sheets.
Third-Party Finance Fees. Customers applying for financing who are not approved or are conditionally approved by CAF are generally evaluated by other third-party finance providers. These providers generally either pay us or are paid a fixed, pre-negotiated fee per contract. We recognize these fees at the time of sale.
Advertising and Subscription Revenues. Advertising and subscription revenues consist of revenues earned by our Edmunds business. Advertising revenues are derived from advertising contracts with automotive manufacturers based on fixed fees per impression and fees for certain activities completed by customers on the manufacturers’ websites. These fees are recognized in the period the impressions are delivered or certain activities occurred. Subscription revenues are derived from packages sold to automotive dealers that include car leads, inventory listings and enhanced placement in Edmunds’ dealer locator and are recognized over the period that the services are made available to the dealers. Subscription revenues also include a digital marketing subscription service, which allows dealers to gain exposure on third party partner websites. Revenues for this service are recognized on a net basis.
Service Revenues. Service revenue consists of labor and parts income related to vehicle repair service, including repairs of vehicles covered under an ESP we sell or warranty program. Service revenue is recognized at the time the work is completed.
Other Revenues. Other revenues include miscellaneous goods and services, which are immaterial to our consolidated financial statements.
3. CarMax Auto Finance
CAF provides financing to qualified retail customers purchasing vehicles from CarMax. CAF provides us the opportunity to capture additional profits, cash flows and sales while managing our reliance on third-party finance sources. Management regularly analyzes CAF’s operating results by assessing profitability, the performance of its auto loans, including trends in credit losses and delinquencies, and CAF direct expenses. The CODM reviews CAF income to assess CAF’s performance and make operating decisions, including resource allocations.
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We typically use securitizations or other funding arrangements to fund loans originated by CAF. Certain pools of loans may be sold in such a way that CAF relinquishes all, or nearly all, of its continuing financial interests in the loans. We classify these loans as held for sale when we have both the intent and ability to sell the loans in an off-balance sheet transaction. As of May 31, 2026, the carrying value of auto loans held for sale was $619.0 million and no valuation allowance was recorded. Once sold, CAF, as servicer, continues to be responsible for managing collections and performing other servicing activities for the sold auto loans and earns servicing income as compensation for these activities.
CAF income primarily reflects the interest and fee income generated by auto loans held for investment and auto loans held for sale less the interest expense associated with the debt issued to fund these loans, a provision for estimated loan losses on auto loans held for investment, direct CAF expenses and income related to the sale of auto loans. CAF income does not include any allocation of indirect costs. Although CAF benefits from certain indirect overhead expenditures, we have not allocated indirect costs to CAF to avoid making subjective allocation decisions. Examples of indirect costs not allocated to CAF include retail store expenses and corporate expenses. In addition, except for auto loans held for investment, which are disclosed in Note 4, and auto loans held for sale, CAF assets are not separately reported nor do we allocate assets to CAF because such allocation would not be useful to management in making operating decisions.
Components of CAF Income
| Three Months Ended May 31 | |||||||||||||||||||||||
| (In millions) | 2026 | 2025 | |||||||||||||||||||||
| Interest margin: | |||||||||||||||||||||||
| Interest and fee income | $ | $ | |||||||||||||||||||||
| Interest expense | ( | ( | |||||||||||||||||||||
| Total interest margin | |||||||||||||||||||||||
| Provision for loan losses | ( | ( | |||||||||||||||||||||
| Total interest margin after provision for loan losses | |||||||||||||||||||||||
| Servicing income | |||||||||||||||||||||||
| Direct expenses: | |||||||||||||||||||||||
| Payroll and fringe benefit expense | ( | ( | |||||||||||||||||||||
| Depreciation and amortization | ( | ( | |||||||||||||||||||||
| Other direct expenses | ( | ( | |||||||||||||||||||||
| Total direct expenses | ( | ( | |||||||||||||||||||||
| CarMax Auto Finance income | $ | $ | |||||||||||||||||||||
4. Auto Loans Held for Investment
Auto loans held for investment include amounts due from customers related to retail vehicle sales financed through CAF and are presented net of an allowance for estimated loan losses. These auto loans represent a large group of smaller-balance homogeneous loans, which we consider to be part of one class of financing receivable and one portfolio segment for purposes of determining our allowance for loan losses. We generally use warehouse facilities to fund auto loans held for investment originated by CAF until we elect to fund them through an asset-backed term funding transaction, such as a term securitization or alternative funding arrangement. We recognize transfers of auto loans held for investment into the warehouse facilities and asset-backed term funding transactions (together, “non-recourse funding vehicles”) as secured borrowings, which result in recording the auto loans held for investment and the related non-recourse notes payable on our consolidated balance sheets. The majority of the auto loans held for investment serve as collateral for the related non-recourse notes payable of $16.08 billion as of May 31, 2026, and $15.83 billion as of February 28, 2026. See Note 9 for additional information on securitizations and non-recourse notes payable.
Interest income and expenses related to auto loans held for investment are included in CAF income. Interest income on auto loans held for investment is recognized when earned based on contractual loan terms. All loans continue to accrue interest until repayment or charge-off. When a charge-off occurs, accrued interest is written off by reversing interest income. Due to the timely write-off of accrued interest, we have made the election to exclude accrued interest from our allowance for loan losses. Direct costs associated with loan originations are not considered material, and thus, are expensed as incurred. See Note 3 for additional information on CAF income.
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Auto Loans Held for Investment, Net
| As of May 31 | As of February 28 | ||||||||||
| (In millions) | 2026 | 2026 | |||||||||
| Auto loans held for investment | $ | $ | |||||||||
| Accrued interest and fees | |||||||||||
| Other | ( | ||||||||||
| Less: allowance for loan losses | ( | ( | |||||||||
| Auto loans held for investment, net | $ | $ | |||||||||
Credit Quality. When customers apply for financing, CAF’s proprietary scoring models utilize the customers’ credit history and certain application information to evaluate and rank their risk. We obtain credit histories and other credit data that includes information such as number, age, type of and payment history for prior or existing credit accounts. The application information that is used includes income, collateral value and down payment. The scoring models yield credit grades that represent the relative likelihood of repayment. Customers with the highest probability of repayment are A-grade customers. Customers assigned a lower grade are determined to have a lower probability of repayment. For loans that are approved, the credit grade influences the terms of the agreement, such as the required loan-to-value ratio and interest rate. After origination, credit grades are generally not updated.
CAF uses a combination of the initial credit grades and historical performance to monitor the credit quality of the auto loans held for investment on an ongoing basis. We validate the accuracy of the scoring models periodically. Loan performance is reviewed on a recurring basis to identify whether the assigned grades adequately reflect the customers’ likelihood of repayment.
Auto Loans Held for Investment by Major Credit Grade
| As of May 31, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
Fiscal Year of Origination (1) | |||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | 2027 | 2026 | 2025 | 2024 | 2023 | Prior to 2023 | Total | % (2) | |||||||||||||||||||||||||||||||||||||||
| Tier 1: | |||||||||||||||||||||||||||||||||||||||||||||||
| A | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| B | |||||||||||||||||||||||||||||||||||||||||||||||
| C and other | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Tier 1 | |||||||||||||||||||||||||||||||||||||||||||||||
| Tier 2 and Tier 3: | |||||||||||||||||||||||||||||||||||||||||||||||
| C and other | |||||||||||||||||||||||||||||||||||||||||||||||
| Total auto loans held for investment | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Gross charge-offs | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
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| As of February 28, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||
Fiscal Year of Origination (1) | |||||||||||||||||||||||||||||||||||||||||||||||
| (In millions) | 2026 | 2025 | 2024 | 2023 | 2022 | Prior to 2022 | Total | % (2) | |||||||||||||||||||||||||||||||||||||||
| Tier 1: | |||||||||||||||||||||||||||||||||||||||||||||||
| A | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| B | |||||||||||||||||||||||||||||||||||||||||||||||
| C and other | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Tier 1 | |||||||||||||||||||||||||||||||||||||||||||||||
| Tier 2 and Tier 3: | |||||||||||||||||||||||||||||||||||||||||||||||
| C and other | |||||||||||||||||||||||||||||||||||||||||||||||
| Total auto loans held for investment | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
| Gross charge-offs | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
(1) Classified based on credit grade assigned when customers were initially approved for financing.
(2) Percent of total auto loans held for investment.
Allowance for Loan Losses. The allowance for loan losses at May 31, 2026 represents the net credit losses expected over the remaining contractual life of our auto loans held for investment. The allowance for loan losses is determined using a net loss timing curve method (“method”), primarily based on the composition of the portfolio of auto loans held for investment and historical gross loss and recovery trends. Due to the fact that losses for loans with less than 18 months of performance history can be volatile, our net loss estimate weights both historical losses by credit grade at origination and actual loss data on the loans to-date, along with forward loss curves, in estimating future performance. Once the loans have 18 months of performance history, the net loss estimate reflects actual loss experience of those loans to-date, along with forward loss curves, to predict future performance. The forward loss curves are constructed using historical performance data and show the average timing of losses over the course of a loan’s life. The net loss estimate is calculated by applying the loss rates developed using the methods described above to the amortized cost basis of the auto loans held for investment at inception of the loan.
The output of the method is adjusted to take into account reasonable and supportable forecasts about the future. Specifically, the change in U.S. unemployment rates and the Black Book wholesale used vehicle retention index are used to predict changes in gross loss and recovery rates, respectively. An economic adjustment factor, based upon a single macroeconomic scenario, is developed to capture the relationship between changes in these forecasts and changes in gross loss and recovery rates. This factor is applied to the output of the method for the reasonable and supportable forecast period of two years. After the end of this two-year period, we revert to historical experience on a straight-line basis over a period of 12 months. We periodically consider whether the use of alternative metrics would result in improved model performance and revise the models when appropriate. We also consider whether qualitative adjustments are necessary for factors that are not reflected in the quantitative methods but impact the measurement of estimated credit losses. Such adjustments include the uncertainty of the impacts of recent economic trends on customer behavior. The change in the allowance for loan losses is recognized through an adjustment to the provision for loan losses.
Allowance for Loan Losses
| Three Months Ended May 31, 2026 | |||||||||||||||||||||||
| (In millions) | Tier 1 | Tier 2 & Tier 3 | Total | % (1) | |||||||||||||||||||
| Balance as of beginning of period | $ | $ | $ | ||||||||||||||||||||
Transfer of auto loans to held for sale (2) (5) | ( | ( | ( | ||||||||||||||||||||
| Charge-offs | ( | ( | ( | ||||||||||||||||||||
Recoveries (3) | |||||||||||||||||||||||
Provision for loan losses (4) (5) | |||||||||||||||||||||||
| Balance as of end of period | $ | $ | $ | ||||||||||||||||||||
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| Three Months Ended May 31, 2025 | |||||||||||||||||||||||
| (In millions) | Tier 1 | Tier 2 & Tier 3 | Total | % (1) | |||||||||||||||||||
| Balance as of beginning of period | $ | $ | $ | ||||||||||||||||||||
Transfer of auto loans to held for sale (2) (5) | ( | ( | ( | ||||||||||||||||||||
| Charge-offs | ( | ( | ( | ||||||||||||||||||||
Recoveries (3) | |||||||||||||||||||||||
Provision for loan losses (4) (5) | |||||||||||||||||||||||
| Balance as of end of period | $ | $ | $ | ||||||||||||||||||||
(1) Percent of total auto loans held for investment.
(2) Represents release of allowance previously recognized on auto loans held for sale.
(3) Net of costs incurred to recover vehicle.
(4) Represents the provision for loan losses on auto loans held for investment.
(5) Combined total amounts of $95.6 million and $101.7 million represent the net provision for loan losses recognized as part of CAF income for the three months ended May 31, 2026 and 2025, respectively.
During the first three months of fiscal 2027, the allowance for loan losses as a percentage of total auto loans held for investment increased by 17 basis points. The increase was primarily driven by our continued expansion in the Tier 2 credit space, along with seasonality as the credit mix of new originations tends to shift down the credit spectrum during tax season. This impact was partially offset by the release of the allowance previously recognized on auto loans held for sale. The allowance for loan losses as of May 31, 2026 reflects our best estimate of expected future losses based on recent trends in delinquencies, loss performance, recovery rates and the economic environment.
Past Due Loans. An account is considered delinquent when the related customer fails to make a substantial portion of a scheduled payment on or before the due date. In general, accounts are charged-off on the last business day of the month during which the earliest of the following occurs: the loan is 120 days or more delinquent as of the last business day of the month, the related vehicle is repossessed and liquidated, or the loan is otherwise deemed uncollectable. For purposes of determining impairment, auto loans are evaluated collectively, as they represent a large group of smaller-balance homogeneous loans, and therefore, are not individually evaluated for impairment.
Past Due Loans
| As of May 31, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Tier 1 | Tier 2 & Tier 3 | Total | |||||||||||||||||||||||||||||||||||||||
| (In millions) | A | B | C & Other | Total | C & Other | $ | % (1) | ||||||||||||||||||||||||||||||||||
| Current | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Delinquent loans: | |||||||||||||||||||||||||||||||||||||||||
| 31-60 days past due | |||||||||||||||||||||||||||||||||||||||||
| 61-90 days past due | |||||||||||||||||||||||||||||||||||||||||
| Greater than 90 days past due | |||||||||||||||||||||||||||||||||||||||||
| Total past due | |||||||||||||||||||||||||||||||||||||||||
| Total auto loans held for investment | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
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| As of February 28, 2026 | |||||||||||||||||||||||||||||||||||||||||
| Tier 1 | Tier 2 & Tier 3 | Total | |||||||||||||||||||||||||||||||||||||||
| (In millions) | A | B | C & Other | Total | C & Other | $ | % (1) | ||||||||||||||||||||||||||||||||||
| Current | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
| Delinquent loans: | |||||||||||||||||||||||||||||||||||||||||
| 31-60 days past due | |||||||||||||||||||||||||||||||||||||||||
| 61-90 days past due | |||||||||||||||||||||||||||||||||||||||||
| Greater than 90 days past due | |||||||||||||||||||||||||||||||||||||||||
| Total past due | |||||||||||||||||||||||||||||||||||||||||
| Total auto loans held for investment | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||
(1) Percent of total auto loans held for investment.
5. Derivative Instruments and Hedging Activities
We use derivatives to manage certain risks arising from both our business operations and economic conditions, particularly with regard to issuances of debt. Primary exposures include SOFR and other rates used as benchmarks in our securitizations and other debt financing. We enter into derivative instruments to manage exposures related to the future known receipt or payment of uncertain cash amounts, the values of which are impacted by interest rates, and generally designate these derivative instruments as cash flow hedges for accounting purposes. In certain cases, we may choose not to designate a derivative instrument as a cash flow hedge for accounting purposes due to uncertainty around the probability that future hedged transactions will occur. Our derivative instruments are used to manage (i) differences in the amount of our known or expected cash receipts and our known or expected cash payments principally related to the funding of our auto loans held for investment, and (ii) exposure to variable interest rates associated with our term loan.
For the derivatives associated with our non-recourse funding vehicles that are designated as cash flow hedges, the changes in fair value are initially recorded in accumulated other comprehensive loss (“AOCL”). For the majority of these derivatives, the amounts are subsequently reclassified into CAF income in the period that the hedged forecasted transaction affects earnings, which occurs as interest expense is recognized on those future issuances of debt. During the next 12 months, we estimate that an additional $15.0 million will be reclassified from AOCL as an increase to CAF income. Changes in fair value related to derivatives that have not been designated as cash flow hedges for accounting purposes are recognized in the income statement in the period in which the change occurs. For the three months ended May 31, 2026, we did not recognize expense in CAF income representing these changes in fair value. For the three months ended May 31, 2025, we recognized $1.0 million in CAF income representing these changes in fair value.
As of May 31, 2026 and February 28, 2026, we had interest rate swaps outstanding with a combined notional amount of $3.68 billion and $3.76 billion, respectively, that were designated as cash flow hedges of interest rate risk. As of May 31, 2026 and February 28, 2026, we had no
See Note 6 for discussion of fair values of financial instruments and Note 12 for the effect on comprehensive income.
6. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market or, if none exists, the most advantageous market, for the specific asset or liability at the measurement date (referred to as the “exit price”). The fair value should be based on assumptions that market participants would use, including a consideration of nonperformance risk.
We assess the inputs used to measure fair value using the three-tier hierarchy. The hierarchy indicates the extent to which inputs used in measuring fair value are observable in the market.
Level 1 Inputs include unadjusted quoted prices in active markets for identical assets or liabilities that we can access at the measurement date.
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Level 2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets in active markets, quoted prices from identical or similar assets in inactive markets, observable inputs, such as interest rates and yield curves, and assumptions about risk.
Level 3 Inputs that are significant to the measurement that are not observable in the market and include management’s judgments about the assumptions market participants would use in pricing the asset or liability (including assumptions about risk).
Our fair value processes include controls that are designed to ensure that fair values are appropriate. Such controls include model validation, review of key model inputs, analysis of period-over-period fluctuations and reviews by senior management.
Valuation Methodologies
Money Market Securities. Money market securities are cash equivalents, which are included in cash and cash equivalents, restricted cash from collections on auto loans held for investment and other assets. They consist of highly liquid investments with original maturities of three months or less and are classified as Level 1.
Mutual Fund Investments. Mutual fund investments consist of publicly traded mutual funds that primarily include diversified equity investments in large-, mid- and small-cap domestic and international companies or investment grade debt securities. The investments, which are included in other assets, are held in a rabbi trust established to fund informally our executive deferred compensation plan and are classified as Level 1.
Derivative Instruments. The fair values of our derivative instruments are included in either other current assets, other assets, accounts payable or other liabilities. Our derivatives are not exchange-traded and are over-the-counter customized derivative instruments. All of our derivative exposures are with highly rated bank counterparties.
We measure derivative fair values assuming that the unit of account is an individual derivative instrument and that derivatives are sold or transferred on a stand-alone basis. We estimate the fair value of our derivatives using quotes determined by the derivative counterparties and third-party valuation services. Quotes from third-party valuation services and quotes received from bank counterparties project future cash flows and discount the future amounts to a present value using market-based expectations for interest rates and the contractual terms of the derivative instruments. The models do not require significant judgment and model inputs can typically be observed in a liquid market; however, because the models include inputs other than quoted prices in active markets, all derivatives are classified as Level 2.
Our derivative fair value measurements consider assumptions about counterparty and our own nonperformance risk. We monitor counterparty and our own nonperformance risk and, in the event that we determine that a party is unlikely to perform under terms of the contract, we would adjust the derivative fair value to reflect the nonperformance risk.
Beneficial Interests in Non-Consolidated Securitizations. The fair values of our beneficial interests in non-consolidated securitizations are included in other assets. The beneficial interests in non-consolidated securitizations represent our retained interest in the rated notes and residual certificate from securitization transactions for which we are not the primary beneficiary and therefore not required to consolidate.
Our beneficial interests in non-consolidated securitizations are measured at fair value on a recurring basis. Changes in fair value for the rated notes that are deemed to be high credit quality are recognized in AOCL. For the remaining rated notes and residual certificate we have elected the fair value option, which allows us to recognize changes of these assets in the period fair value changes. These changes in fair value are recognized in CAF income.
The fair values of our beneficial interests for all rated notes are classified as Level 2 and are based on non-binding bank quotes. The non-binding bank quotes are based on recent market transactions and current business conditions. The fair value of our beneficial interest for the residual certificate is classified as Level 3 due to the lack of observable market data. The fair value is determined using a discounted cash flow model. As of May 31, 2026, the discount rate used was approximately 18 %. Significant increases or decreases in the inputs to the models could result in a significantly higher or lower fair value measurement.
There were no transfers in or out of Level 3 during the three months ended May 31, 2026 and 2025.
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The following table presents additional information about Level 3 beneficial interests in non-consolidated securitizations measured at fair value on a recurring basis:
| Three Months Ended | |||||
| (In thousands) | May 31, 2026 | ||||
| Balance as of beginning of year | $ | ||||
| Principal payments received | ( | ||||
| Interest income | |||||
| Balance as of end of period | $ | ||||
Items Measured at Fair Value on a Recurring Basis
| As of May 31, 2026 | |||||||||||||||||||||||
| (In thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market securities | $ | $ | $ | $ | |||||||||||||||||||
| Mutual fund investments | |||||||||||||||||||||||
| Derivative instruments designated as hedges | |||||||||||||||||||||||
| Beneficial interests in non-consolidated securitizations | |||||||||||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | |||||||||||||||||||
| Percent of total assets at fair value | % | % | % | % | |||||||||||||||||||
| Percent of total assets | % | % | % | % | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Derivative instruments designated as hedges | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Total liabilities at fair value | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Percent of total liabilities | % | % | % | % | |||||||||||||||||||
| As of February 28, 2026 | |||||||||||||||||||||||
| (In thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market securities | $ | $ | $ | $ | |||||||||||||||||||
| Mutual fund investments | |||||||||||||||||||||||
| Derivative instruments designated as hedges | |||||||||||||||||||||||
| Beneficial interests in non-consolidated securitizations | |||||||||||||||||||||||
| Total assets at fair value | $ | $ | $ | $ | |||||||||||||||||||
| Percent of total assets at fair value | % | % | % | % | |||||||||||||||||||
| Percent of total assets | % | % | % | % | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Derivative instruments designated as hedges | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Total liabilities at fair value | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Percent of total liabilities | % | % | % | % | |||||||||||||||||||
Fair Value of Financial Instruments
The carrying value of our cash and cash equivalents, accounts receivable, other restricted cash deposits and accounts payable approximates fair value due to the short-term nature and/or variable rates associated with these financial instruments. Auto loans held for investment are presented net of an allowance for estimated loan losses, which we believe approximates fair value.
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We believe that the carrying value of our revolving credit facility and term loan approximates fair value due to the variable rates associated with these obligations.
The fair value of our auto loans held for sale, which are not carried at fair value on our consolidated balance sheets, was determined using Level 2 inputs from the company’s recent term securitization transactions and other available market data. The carrying value and fair value of the auto loans held for sale as of May 31, 2026 and February 28, 2026, respectively, are as follows:
| (In thousands) | As of May 31, 2026 | As of February 28, 2026 | |||||||||
| Carrying value | $ | $ | |||||||||
| Fair value | $ | $ | |||||||||
The fair value of our senior unsecured notes, which are not carried at fair value on our consolidated balance sheets, was determined using Level 2 inputs based on quoted market prices. The carrying value and fair value of the senior unsecured notes as of May 31, 2026 and February 28, 2026, respectively, are as follows:
| (In thousands) | As of May 31, 2026 | As of February 28, 2026 | |||||||||
| Carrying value | $ | $ | |||||||||
| Fair value | $ | $ | |||||||||
7. Cancellation Reserves
We recognize revenue for EPP products, on a net basis, at the time of sale. We also record a reserve, or refund liability, for estimated contract cancellations. Cancellations of these services may result from early termination by the customer, or default or prepayment on the finance contract. The reserve for cancellations is evaluated for each product and is based on forecasted forward cancellation curves utilizing historical experience, recent trends and credit mix of the customer base.
Cancellation Reserves
| Three Months Ended May 31 | |||||||||||||||||||||||
| (In millions) | 2026 | 2025 | |||||||||||||||||||||
| Balance as of beginning of period | $ | $ | |||||||||||||||||||||
| Cancellations | ( | ( | |||||||||||||||||||||
| Provision for future cancellations | |||||||||||||||||||||||
| Balance as of end of period | $ | $ | |||||||||||||||||||||
The current portion of estimated cancellation reserves is recognized as a component of accrued expenses and other current liabilities with the remaining amount recognized in other liabilities. As of May 31, 2026 and February 28, 2026, the current portion of cancellation reserves was $72.4 million and $70.2 million, respectively.
8. Income Taxes
We had $20.6 million of gross unrecognized tax benefits as of May 31, 2026, and $18.8 million as of February 28, 2026. There were no significant changes to the gross unrecognized tax benefits as reported for the fiscal year ended February 28, 2026.
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9. Debt
| (In thousands) | As of May 31 | As of February 28 | ||||||||||||
Debt Description (1) | Maturity Date | 2026 | 2026 | |||||||||||
Revolving credit facility (2) | June 2028 | $ | $ | |||||||||||
Term loan (2) | November 2030 | |||||||||||||
| 4.17% Senior notes | April 2026 | |||||||||||||
| 4.27% Senior notes | April 2028 | |||||||||||||
| Financing obligations | Various dates through February 2059 | |||||||||||||
| Non-recourse notes payable | Various dates through April 2033 | |||||||||||||
| Total debt | ||||||||||||||
| Less: current portion | ( | ( | ||||||||||||
| Less: unamortized debt issuance costs | ( | ( | ||||||||||||
| Long-term debt, net | $ | $ | ||||||||||||
(1) Interest is payable monthly, with the exception of our senior notes, which are payable semi-annually.
(2) Borrowings accrue interest at variable rates based on SOFR, the federal funds rate, or the prime rate, depending on the type of borrowing.
Revolving Credit Facility. Borrowings under our $2.00 billion unsecured revolving credit facility (the “credit facility”) are available for working capital and general corporate purposes. We pay a commitment fee on the unused portions of the available funds. Borrowings under the credit facility are either due “on demand” or at maturity depending on the type of borrowing. Borrowings with “on demand” repayment terms are presented as short-term debt while amounts due at maturity are presented as long-term debt. As of May 31, 2026, the unused capacity of $1.11 billion was fully available to us.
Term Loan. Borrowings under the $500 million term loan are available for working capital and general corporate purposes. The interest rate on our term loan was 4.53 % as of May 31, 2026. The term loan was classified as long-term debt as no repayments are scheduled to be made within the next 12 months.
On June 15, 2026, we entered into a new term loan agreement for an aggregate principal amount of $500 million, which will mature on June 15, 2029. The proceeds from the term loan were used to pay down normal course borrowings under our $2.00 billion credit facility and for other working capital and general corporate purposes.
Senior Notes. The 4.17% senior notes matured during the first quarter of fiscal 2027. Borrowings under our unsecured senior notes totaling $200 million are available for working capital and general corporate purposes. As of May 31, 2026, all notes were classified as long-term debt as no repayments are scheduled to be made within the next 12 months.
Financing Obligations. Financing obligations relate to stores subject to sale-leaseback transactions that do not qualify for sale accounting. The financing obligations were structured at varying interest rates and generally have initial lease terms ranging from 15 to 20 years with payments made monthly. We have not entered into any new sale-leaseback transactions since fiscal 2009. In the event the agreements are modified or extended beyond their original term, the related obligation is adjusted based on the present value of the revised future payments, with a corresponding change to the assets subject to these transactions. Upon modification, the amortization of the obligation is reset, resulting in more of the payments being applied to interest expense in the initial years following the modification.
Non-Recourse Notes Payable. The non-recourse notes payable relate to auto loans held for investment and auto loans held for sale funded through non-recourse funding vehicles. The timing of principal payments on the non-recourse notes payable is based on the timing of principal collections and defaults on the related auto loans. The current portion of non-recourse notes payable represents principal payments that are due to be distributed in the following period.
Notes payable related to our asset-backed term funding transactions accrue interest predominantly at fixed rates and have scheduled maturities through April 2033, but may mature earlier, depending upon the repayment rate of the underlying auto loans.
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Information on our funding vehicles of non-recourse notes payable as of May 31, 2026 are as follows:
| (In billions) | Capacity | ||||
| Warehouse facilities: | |||||
| September 2026 expiration | $ | ||||
| March 2027 expiration | |||||
| May 2027 expiration | |||||
| Combined warehouse facility limit | $ | ||||
| Unused capacity | $ | ||||
| Non-recourse notes payable outstanding: | |||||
| Warehouse facilities | $ | ||||
| Asset-backed term funding transactions | |||||
| Non-recourse notes payable | $ | ||||
We generally enter into warehouse facility agreements for one-year terms and typically renew the agreements annually. The return requirements of warehouse facility investors could fluctuate significantly depending on market conditions. At renewal, the cost, structure and capacity of the facilities could change. These changes could have a significant impact on our funding costs.
See Note 4 for additional information on the related auto loans held for investment.
Capitalized Interest. We capitalize interest in connection with the construction of certain facilities. For the three months ended May 31, 2026 and 2025, we capitalized interest of $3.6 million and $4.0 million, respectively.
Financial Covenants. The credit facility, term loan and senior note agreements contain representations and warranties, conditions and covenants. We must also meet financial covenants in conjunction with certain financing obligations. The agreements governing our non-recourse funding vehicles contain representations and warranties, as well as financial covenants and performance triggers related to events of default. As of May 31, 2026, we were in compliance with these financial covenants and our non-recourse funding vehicles were in compliance with these performance triggers.
10. Stock and Stock-Based Incentive Plans
(A)Share Repurchase Program
As of May 31, 2026, a total of $2.0 billion of board authorizations for repurchases of our common stock was outstanding, with no expiration date, of which $1.31 billion remained available for repurchase.
Common Stock Repurchases
| Three Months Ended | |||||||||||||||||||||||
| May 31 | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
Number of shares repurchased (in thousands) | |||||||||||||||||||||||
| Average cost per share | $ | $ | |||||||||||||||||||||
Available for repurchase, as of end of period (in millions) | $ | $ | |||||||||||||||||||||
(B)Share-Based Compensation
We maintain long-term incentive plans for management, certain employees and the non-employee members of our board. The plans allow for the granting of equity-based compensation awards, including nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, stock- and cash-settled restricted stock units, stock grants or a combination of awards. To date, we have not awarded any incentive stock options.
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The majority of associates who receive share-based compensation awards primarily receive cash-settled restricted stock units. Senior management and other key associates receive awards of nonqualified stock options, stock-settled restricted stock units and/or restricted stock awards. Non-employee directors are eligible to receive awards of nonqualified stock options, stock grants, stock-settled restricted stock units and/or restricted stock awards. Excluding stock grants and stock-settled deferred stock units, all share-based compensation awards, including any associated dividend rights, are subject to forfeiture.
Nonqualified Stock Options. Nonqualified stock options are awards that allow the recipient to purchase shares of our common stock at a fixed price. Stock options are granted at an exercise price equal to the fair market value of our common stock on the grant date. The stock options generally vest annually in equal amounts over four years . These options expire seven years after the date of the grant.
Cash-Settled Restricted Stock Units. Also referred to as CRSUs, these are awards that entitle the holder to a cash payment equal to the fair market value of a share of our common stock for each unit granted. Conversion generally occurs annually in equal amounts over three years . However, the cash payment per CRSU will not be greater than 200 % or less than 75 % of the fair market value of a share of our common stock on the grant date. The initial grant date fair values are based on the closing prices of our common stock on the grant dates. CRSUs are liability-classified awards and do not have voting rights.
Stock-Settled Market Stock Units. Also referred to as market stock units, or MSUs, these are restricted stock unit awards with market conditions granted to eligible key associates that are converted into between zero and two shares of common stock for each unit granted. Conversion generally occurs at the end of a -year vesting period. The conversion ratio is calculated by dividing the average closing price of our stock during the final 40 trading days of the -year vesting period by our stock price on the grant date, with the resulting quotient capped at two . This quotient is then multiplied by the number of MSUs granted to yield the number of shares awarded. The grant date fair values are determined using a Monte-Carlo simulation and are based on the expected market price of our common stock on the vesting date and the expected number of converted common shares. MSUs do not have voting rights.
Stock-Settled Restricted Stock Units. Also referred to as SRSUs, these are restricted stock unit awards granted to eligible key associates that entitle the holder to shares of common stock equal to the fair market value of our common stock on the grant date. Conversion generally occurs annually in equal amounts over three years . SRSUs do not have voting rights.
Other Share-Based Incentives
Stock-Settled Performance Stock Units. Also referred to as performance stock units, or PSUs, these are restricted stock unit awards with performance conditions granted to eligible key associates that are converted into between zero and two shares of common stock for each unit granted. Conversion generally occurs at the end of a -year vesting period. For the first-year period of the fiscal 2024 grants, the conversion ratio is based on the company reaching certain performance target levels set by the board at the beginning of each one-year period, with the resulting quotients subject to meeting a minimum threshold of 25% and capped at 200%. For the second- and third-year periods of the fiscal 2024 grants, the fiscal 2025 grants, the fiscal 2026 grants and the fiscal 2027 grants, the conversion ratio is based on the company reaching certain target levels set by the board, with the resulting quotients subject to meeting a minimum threshold of 50% and capped at 200%. These quotients are then multiplied by the number of PSUs granted to yield the number of shares awarded.
For the first-year period of the fiscal 2024 awards, the performance targets were based on annual pre-tax diluted earnings per share, excluding any unrealized gains or losses on equity investments in private companies, and market share. For the first-year period of the fiscal 2024 grants, the board certified a performance adjustment factor of 38%. For the second- and third-year periods of the fiscal 2024 awards, the performance targets are based on annual pre-tax earnings, excluding any unrealized gains or losses on equity investments in private companies and any significant non-recurring non-cash gains or losses. For the second-year period of the fiscal 2024 grants, the board certified a performance adjustment factor of 159%. For the third-year period of the fiscal 2024 grants, the board certified a performance adjustment factor of 0%. For the fiscal 2025, fiscal 2026 and fiscal 2027 awards, the performance targets are based on cumulative three-year pre-tax earnings, excluding any unrealized gains or losses on equity investments in private companies and any significant non-recurring non-cash gains or losses.
PSUs do not have voting rights. The grant date fair values are based on the closing prices of our common stock on the grant dates. As of May 31, 2026, 724,329 units were outstanding at a weighted average grant date fair value per share of $54.92 .
Stock-Settled Deferred Stock Units. Also referred to as deferred stock units, or DSUs, these are restricted stock unit awards granted to non-employee members of our board that are converted into one share of common stock for each unit granted. Conversion occurs at the end of the -year vesting period unless the director has exercised the option to defer conversion until separation of service to the company. The grant date fair values are based on the closing prices of our common stock on
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the grant dates. DSUs have no voting rights. As of May 31, 2026, 128,526 units were outstanding at a weighted average grant date fair value of $83.61 .
Restricted Stock Awards. Restricted stock awards, or RSAs, are awards of our common stock that are subject to specified restrictions that generally lapse after a - to -year period from the date of the grant. The grant date fair values are based on the closing prices of our common stock on the grant dates. Participants holding restricted stock are entitled to vote on matters submitted to holders of our common stock for a vote. As of May 31, 2026, there were no RSAs outstanding.
(C)Share-Based Compensation
Composition of Share-Based Compensation Expense
| Three Months Ended | |||||||||||||||||||||||
| May 31 | |||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | |||||||||||||||||||||
| Cost of sales | $ | $ | |||||||||||||||||||||
| CarMax Auto Finance income | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Share-based compensation expense, before income taxes | $ | $ | |||||||||||||||||||||
Composition of Share-Based Compensation Expense – By Grant Type
| Three Months Ended | |||||||||||||||||||||||
| May 31 | |||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | |||||||||||||||||||||
| Nonqualified stock options | $ | $ | |||||||||||||||||||||
| Cash-settled restricted stock units (CRSUs) | |||||||||||||||||||||||
| Stock-settled market stock units (MSUs) | |||||||||||||||||||||||
| Stock-settled restricted stock units (SRSUs) | |||||||||||||||||||||||
| Other share-based incentives: | |||||||||||||||||||||||
| Stock-settled performance stock units (PSUs) | |||||||||||||||||||||||
| Employee stock purchase plan | |||||||||||||||||||||||
| Total other share-based incentives | |||||||||||||||||||||||
| Share-based compensation expense, before income taxes | $ | $ | |||||||||||||||||||||
Unrecognized Share-Based Compensation Expense – By Grant Type
| As of May 31, 2026 | |||||||||||
| Weighted Average | |||||||||||
| Unrecognized | Remaining | ||||||||||
| Compensation | Recognition Life | ||||||||||
| (Costs in millions) | Costs | (Years) | |||||||||
| Nonqualified stock options | $ | ||||||||||
| Stock-settled market stock units | |||||||||||
| Stock-settled restricted stock units | |||||||||||
| Stock-settled performance stock units | |||||||||||
| Total | $ | ||||||||||
We recognize compensation expense for stock options, MSUs, PSUs, DSUs, SRSUs and RSAs on a straight-line basis (net of estimated forfeitures) over the requisite service period, which is generally the vesting period of the award. The PSU expense is adjusted for any change in management’s assessment of the performance target level that is probable of being achieved. The variable expense associated with CRSUs is recognized over their vesting period (net of estimated forfeitures) and is calculated based on the closing price of our common stock on the last trading day of each reporting period.
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The total costs for matching contributions for our employee stock purchase plan are included in share-based compensation expense. There were no
Stock Option Activity
| Weighted | |||||||||||||||||||||||
| Weighted | Average | ||||||||||||||||||||||
| Average | Remaining | Aggregate | |||||||||||||||||||||
| Number of | Exercise | Contractual | Intrinsic | ||||||||||||||||||||
| (Shares and intrinsic value in thousands) | Shares | Price | Life (Years) | Value | |||||||||||||||||||
| Outstanding as of February 28, 2026 | $ | ||||||||||||||||||||||
| Options granted | $ | ||||||||||||||||||||||
| Options exercised | $ | ||||||||||||||||||||||
| Options forfeited or expired | ( | $ | |||||||||||||||||||||
| Outstanding as of May 31, 2026 | $ | $ | |||||||||||||||||||||
| Exercisable as of May 31, 2026 | $ | $ | |||||||||||||||||||||
Stock Option Information
| Three Months Ended May 31 | |||||||||||
| 2026 | 2025 | ||||||||||
| Options granted | |||||||||||
| Weighted average grant date fair value per share | $ | $ | |||||||||
Cash received from options exercised (in millions) | $ | $ | |||||||||
Intrinsic value of options exercised (in millions) | $ | $ | |||||||||
Realized tax benefits (in millions) | $ | $ | |||||||||
For stock options, the fair value of each award is estimated as of the date of grant using a binomial valuation model. In computing the value of the option, the binomial model considers characteristics of fair-value option pricing that are not available for consideration under a closed-form valuation model (for example, the Black-Scholes model), such as the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life and the probability of termination or retirement of the option holder. For this reason, we believe that the binomial model provides a fair value that is more representative of actual experience and future expected experience than the value calculated using a closed-form model. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the recipients of share-based awards.
Assumptions Used to Estimate Option Values
| Three Months Ended May 31 | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Dividend yield | % | % | |||||||||||||||||||||
Expected volatility factor (1) | % | - | % | % | - | % | |||||||||||||||||
| Weighted average expected volatility | % | % | |||||||||||||||||||||
Risk-free interest rate (2) | % | - | % | % | - | % | |||||||||||||||||
Expected term (in years) (3) | |||||||||||||||||||||||
(1)Measured using historical daily price changes of our stock for a period corresponding to the term of the options and the implied volatility derived from the market prices of traded options on our stock.
(2)Based on the U.S. Treasury yield curve at the time of grant.
(3)Represents the estimated number of years that options will be outstanding prior to exercise.
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Cash-Settled Restricted Stock Unit Activity
| Weighted | |||||||||||
| Average | |||||||||||
| Number of | Grant Date | ||||||||||
| (Units in thousands) | Units | Fair Value | |||||||||
| Outstanding as of February 28, 2026 | $ | ||||||||||
| Stock units granted | $ | ||||||||||
| Stock units vested and converted | ( | $ | |||||||||
| Stock units cancelled | ( | $ | |||||||||
| Outstanding as of May 31, 2026 | $ | ||||||||||
Cash-Settled Restricted Stock Unit Information
| Three Months Ended May 31 | |||||||||||
| 2026 | 2025 | ||||||||||
| Stock units granted | |||||||||||
| Initial weighted average grant date fair value per share | $ | $ | |||||||||
Payments (before payroll tax withholdings) upon vesting (in millions) | $ | $ | |||||||||
Realized tax benefits (in millions) | $ | $ | |||||||||
Expected Cash Settlement Range Upon Restricted Stock Unit Vesting
| As of May 31, 2026 | |||||||||||
| (In thousands) | Minimum (1) | Maximum (1) | |||||||||
| Fiscal 2028 | $ | $ | |||||||||
| Fiscal 2029 | |||||||||||
| Fiscal 2030 | |||||||||||
| Total expected cash settlements | $ | $ | |||||||||
(1)Net of estimated forfeitures.
Stock-Settled Market Stock Unit Activity
| Weighted | |||||||||||
| Average | |||||||||||
| Number of | Grant Date | ||||||||||
| (Units in thousands) | Units | Fair Value | |||||||||
| Outstanding as of February 28, 2026 | $ | ||||||||||
| Stock units granted | $ | ||||||||||
| Stock units vested and converted | ( | $ | |||||||||
| Stock units cancelled | ( | $ | |||||||||
| Outstanding as of May 31, 2026 | $ | ||||||||||
Stock-Settled Market Stock Unit Information
| Three Months Ended May 31 | |||||||||||
| 2026 | 2025 | ||||||||||
| Stock units granted | |||||||||||
| Weighted average grant date fair value per share | $ | $ | |||||||||
Realized tax benefits (in millions) | $ | $ | |||||||||
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Stock-Settled Restricted Stock Unit Activity
| Weighted | |||||||||||
| Average | |||||||||||
| Number of | Grant Date | ||||||||||
| (Units in thousands) | Units | Fair Value | |||||||||
| Outstanding as of February 28, 2026 | $ | ||||||||||
| Stock units granted | $ | ||||||||||
| Stock units vested and converted | ( | $ | |||||||||
| Stock units cancelled | ( | $ | |||||||||
| Outstanding as of May 31, 2026 | $ | ||||||||||
Stock-Settled Restricted Stock Unit Information
| Three Months Ended May 31 | |||||||||||
| 2026 | 2025 | ||||||||||
| Stock units granted | |||||||||||
| Weighted average grant date fair value per share | $ | $ | |||||||||
Realized tax benefits (in millions) | $ | $ | |||||||||
11. Net Earnings Per Share
Basic net earnings per share is computed by dividing net earnings available for basic common shares by the weighted average number of shares of common stock outstanding. Diluted net earnings per share is computed by dividing net earnings available for diluted common shares by the sum of weighted average number of shares of common stock outstanding and dilutive potential common stock. Diluted net earnings per share is calculated using the “if-converted” treasury stock method.
Basic and Dilutive Net Earnings Per Share Reconciliations
| Three Months Ended | |||||||||||||||||||||||
| May 31 | |||||||||||||||||||||||
| (In thousands except per share data) | 2026 | 2025 | |||||||||||||||||||||
| Net earnings | $ | $ | |||||||||||||||||||||
| Weighted average common shares outstanding | |||||||||||||||||||||||
| Dilutive potential common shares: | |||||||||||||||||||||||
| Stock options | |||||||||||||||||||||||
| Stock-settled stock units and awards | |||||||||||||||||||||||
| Weighted average common shares and dilutive potential common shares | |||||||||||||||||||||||
| Basic net earnings per share | $ | $ | |||||||||||||||||||||
| Diluted net earnings per share | $ | $ | |||||||||||||||||||||
Certain options to purchase shares of common stock were outstanding and not included in the calculation of diluted net earnings per share because their inclusion would have been antidilutive. On a weighted average basis, for the three months ended May 31, 2026 and 2025, options to purchase 8,131,638 shares and 7,180,325 shares of common stock, respectively, were not included.
Page 25
12. Accumulated Other Comprehensive Loss
Changes in Accumulated Other Comprehensive Loss By Component
| Net | Total | ||||||||||||||||||||||
| Net | Net | Unrecognized | Accumulated | ||||||||||||||||||||
| Unrecognized | Unrecognized | Beneficial | Other | ||||||||||||||||||||
| Actuarial | Hedge | Interests | Comprehensive | ||||||||||||||||||||
| (In thousands, net of income taxes) | Losses | Gains | Gains | Loss | |||||||||||||||||||
| Balance as of February 28, 2026 | $ | ( | $ | $ | $ | ( | |||||||||||||||||
| Other comprehensive income before reclassifications | |||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss | ( | ( | |||||||||||||||||||||
| Other comprehensive income | |||||||||||||||||||||||
| Balance as of May 31, 2026 | $ | ( | $ | $ | $ | ( | |||||||||||||||||
Changes In and Reclassifications Out of Accumulated Other Comprehensive Loss
| Three Months Ended May 31 | |||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | |||||||||||||||||||||
| Retirement Benefit Plans: | |||||||||||||||||||||||
| Actuarial loss amortization reclassifications recognized in net pension expense: | |||||||||||||||||||||||
| Cost of sales | $ | $ | |||||||||||||||||||||
| CarMax Auto Finance income | |||||||||||||||||||||||
| Selling, general and administrative expenses | |||||||||||||||||||||||
| Total amortization reclassifications recognized in net pension expense | |||||||||||||||||||||||
| Tax expense | ( | ( | |||||||||||||||||||||
| Amortization reclassifications recognized in net pension expense, net of tax | |||||||||||||||||||||||
| Net change in retirement benefit plan unrecognized actuarial losses, net of tax | |||||||||||||||||||||||
| Cash Flow Hedges (Note 5): | |||||||||||||||||||||||
| Changes in fair value | ( | ||||||||||||||||||||||
| Tax (expense) benefit | ( | ||||||||||||||||||||||
| Changes in fair value, net of tax | ( | ||||||||||||||||||||||
| Reclassifications to CarMax Auto Finance income | ( | ( | |||||||||||||||||||||
| Tax benefit | |||||||||||||||||||||||
| Reclassification of hedge gains, net of tax | ( | ( | |||||||||||||||||||||
| Net change in cash flow hedge unrecognized gains, net of tax | ( | ||||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | $ | $ | ( | ||||||||||||||||||||
Changes in the funded status of our retirement plans, changes in the fair value of derivatives that are designated and qualify as cash flow hedges and changes in the fair value of certain of our beneficial interests in non-consolidated securitizations are recognized in accumulated other comprehensive loss. The cumulative balances are net of deferred taxes of $3.9 million as of May 31, 2026 and $10.5 million as of February 28, 2026.
13. Leases
Our leases primarily consist of operating and finance leases related to retail stores, office space, land and equipment. We also have stores subject to sale-leaseback transactions that do not qualify for sale accounting and are accounted for as financing obligations. For more information on these financing obligations see Note 9.
The initial term for real property leases is typically 5 to 20 years. For equipment leases, the initial term generally ranges from 3 to 8 years. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 to 20
Page 26
years or more. We include options to renew (or terminate) in our lease term, and as part of our right-of-use (“ROU”) assets and lease liabilities, when it is reasonably certain that we will exercise that option.
ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. We include variable lease payments in the initial measurement of ROU assets and lease liabilities only to the extent they depend on an index or rate. Changes in such indices or rates are accounted for in the period the change occurs, and do not result in the remeasurement of the ROU asset or liability. We are also responsible for payment of certain real estate taxes, insurance and other expenses on our leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. We generally account for non-lease components, such as maintenance, separately from lease components. For certain equipment leases, we apply a portfolio approach to account for the lease assets and liabilities.
Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with a term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.
The components of lease expense were as follows:
| Three Months Ended May 31 | |||||||||||||||||||||||
| (In thousands) | 2026 | 2025 | |||||||||||||||||||||
Operating lease cost (1) | $ | $ | |||||||||||||||||||||
| Finance lease cost: | |||||||||||||||||||||||
| Depreciation of lease assets | |||||||||||||||||||||||
| Interest on lease liabilities | |||||||||||||||||||||||
| Total finance lease cost | |||||||||||||||||||||||
| Total lease cost | $ | $ | |||||||||||||||||||||
(1) Includes short-term leases and variable lease costs, which are immaterial.
Supplemental balance sheet information related to leases was as follows:
| As of May 31 | As of February 28 | |||||||||||||
| (In thousands) | Classification | 2026 | 2026 | |||||||||||
| Assets: | ||||||||||||||
| Operating lease assets | Operating lease assets | $ | $ | |||||||||||
| Finance lease assets | Property and equipment, net (1) | |||||||||||||
| Total lease assets | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||
| Current: | ||||||||||||||
| Operating leases | Current portion of operating lease liabilities | $ | $ | |||||||||||
| Finance leases | Accrued expenses and other current liabilities | |||||||||||||
| Long-term: | ||||||||||||||
| Operating leases | Operating lease liabilities, excluding current portion | |||||||||||||
| Finance leases | Other liabilities | |||||||||||||
| Total lease liabilities | $ | $ | ||||||||||||
(1) Finance lease assets are recorded net of accumulated depreciation of $79.2 million as of May 31, 2026 and $74.6 million as of February 28, 2026.
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Lease term and discount rate information related to leases was as follows:
| As of May 31 | As of February 28 | ||||||||||
| Lease Term and Discount Rate | 2026 | 2026 | |||||||||
Weighted Average Remaining Lease Term (in years) | |||||||||||
| Operating leases | |||||||||||
| Finance leases | |||||||||||
| Weighted Average Discount Rate | |||||||||||
| Operating leases | % | % | |||||||||
| Finance leases | % | % | |||||||||
Supplemental cash flow information related to leases was as follows:
| Three Months Ended May 31 | |||||||||||
| (In thousands) | 2026 | 2025 | |||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
| Operating cash flows from finance leases | $ | $ | |||||||||
| Financing cash flows from finance leases | $ | $ | |||||||||
| Lease assets obtained in exchange for lease obligations: | |||||||||||
| Operating leases | $ | $ | |||||||||
| Finance leases | $ | $ | |||||||||
Maturities of lease liabilities were as follows:
| As of May 31, 2026 | |||||||||||
| (In thousands) | Operating Leases | Finance Leases | |||||||||
| Fiscal 2027, remaining | $ | $ | |||||||||
| Fiscal 2028 | |||||||||||
| Fiscal 2029 | |||||||||||
| Fiscal 2030 | |||||||||||
| Fiscal 2031 | |||||||||||
| Thereafter | |||||||||||
| Total lease payments | |||||||||||
| Less: interest | ( | ( | |||||||||
| Present value of lease liabilities | $ | $ | |||||||||
14. Supplemental Cash Flow Information
Supplemental disclosures of cash flow information:
| Three Months Ended May 31 | |||||||||||
| (In thousands) | 2026 | 2025 | |||||||||
| Non-cash investing and financing activities: | |||||||||||
| (Decrease) increase in accrued capital expenditures | $ | ( | $ | ||||||||
| Increase in financing obligations | $ | $ | |||||||||
See Note 13 for supplemental cash flow information related to leases.
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15. Contingent Liabilities
Litigation. The company is a class member in a consolidated and settled class action lawsuit (In re: Takata Airbag Product Liability Litigation (U.S. District Court, Southern District of Florida)) against Toyota, Mazda, Subaru, BMW, Honda, Nissan, Ford and Volkswagen related to the economic loss associated with defective Takata airbags installed as original equipment in certain model vehicles from model years 2000-2019. In April 2020, CarMax received $40.3 million in net recoveries from the Toyota, Mazda, Subaru, BMW, Honda and Nissan settlement funds. In January 2022, CarMax received $3.8 million in net recoveries from the Ford settlement funds. On April 21, 2023, CarMax received $59.3 million in net recoveries from residual undisbursed funds in the Toyota, Mazda, Subaru, BMW, Honda and Nissan settlements. On August 9, 2023, CarMax received $7.9 million in additional residual funds in the BMW, Mazda, and Nissan settlements. On December 19, 2025, CarMax received $8.2 million in additional residual funds in the Ford settlement. The Volkswagen settlement has not yet been resolved. We are unable to make a reasonable estimate of the amount or range of gain that could result from CarMax’s participation in the Volkswagen matter.
On November 3, 2025, a putative class action complaint titled Jason Cap v. CarMax, Inc., et al. was filed in the United States District Court for the District of Maryland against the company and certain present or former officers of the company. An amended complaint was filed on March 31, 2026. The amended complaint (i) seeks to certify a class of investors who purchased or otherwise acquired the company’s publicly traded securities between June 20, 2025 and November 5, 2025, and (ii) asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5. The amended complaint seeks unspecified damages and an award of fees, costs, and expenses. The company has filed a motion to dismiss the amended complaint. The company believes that the claims are without merit and intends to vigorously defend against the claims in all respects. Given the preliminary nature of the action, we are unable to assess the likelihood of any potential loss or adverse effect on our financial condition or to estimate the amount or range of potential losses, if any, from this action.
We are involved in various other legal proceedings in the normal course of business. Based upon our evaluation of information currently available, we believe that the ultimate resolution of any such proceedings will not have a material adverse effect, either individually or in the aggregate, on our financial condition, results of operations or cash flows.
Other Matters. In accordance with the terms of real estate lease agreements, we generally agree to indemnify the lessor from certain liabilities arising as a result of the use of the leased premises, including environmental liabilities and repairs to leased property upon termination of the lease. Additionally, in accordance with the terms of agreements entered into for the sale of properties, we generally agree to indemnify the buyer from certain liabilities and costs arising subsequent to the date of the sale, including environmental liabilities and liabilities resulting from the breach of representations or warranties made in accordance with the agreements. We do not have any known material environmental commitments, contingencies or other indemnification issues arising from these arrangements.
As part of our customer service strategy, we guarantee the used vehicles we retail with a 30-day limited warranty. A vehicle in need of repair within this period will be repaired free of charge. As a result, each vehicle sold has an implied liability associated with it. Accordingly, based on historical trends, we record a provision for estimated future repairs during the guarantee period for each vehicle sold. The liability for this guarantee was $14.7 million as of May 31, 2026 and $21.7 million as of February 28, 2026, and is included in accrued expenses and other current liabilities.
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ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes and the MD&A included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026 (“fiscal 2026”), as well as our unaudited interim consolidated financial statements and the accompanying notes included in Item 1 of this Form 10-Q. Note references are to the notes to unaudited interim consolidated financial statements included in Item 1. All references to net earnings per share are to diluted net earnings per share. Certain prior year amounts have been reclassified to conform to the current year’s presentation. Amounts and percentages may not total due to rounding.
OVERVIEW
CarMax is the nation’s largest retailer of used vehicles. We operate in two reportable segments: CarMax Sales Operations and CarMax Auto Finance (“CAF”). Our CarMax Sales Operations segment consists of all aspects of our auto merchandising and service operations, excluding financing provided by CAF. Our CAF segment consists solely of our own finance operation that provides financing to customers buying retail vehicles from CarMax.
CarMax Sales Operations
Our sales operations segment consists of retail sales of used vehicles and related products and services, such as wholesale vehicle sales; the sale of extended protection plan (“EPP”) products, which include extended service plans (“ESPs”) and guaranteed asset protection (“GAP”); advertising and subscription revenues; and vehicle repair service. We offer competitive, no-haggle prices; a broad selection of CarMax Quality Certified used vehicles; value-added EPP products; and superior customer service. Our sales platform leverages our scale, nationwide footprint and infrastructure and empowers our customers to buy a vehicle on their terms, whether online, in-store or through a combination of both. Our associates, stores, technology and digital capabilities tied together enable us to provide the most customer-centric car buying and selling experience, a key differentiator in a large and fragmented market.
Our customers finance the majority of the retail vehicles purchased from us, and availability of on-the-spot financing is a critical component of the sales process. We provide financing to qualified retail customers through CAF and our arrangements with industry-leading third-party finance providers. All of the finance offers, whether by CAF or our third-party providers, are backed by a 3-day payoff option.
CarMax Auto Finance
In addition to third-party finance providers, we provide vehicle financing through CAF, which offers financing solely to customers buying retail vehicles from CarMax. CAF allows us to manage our reliance on third-party finance providers and to leverage knowledge of our business to provide qualifying customers a competitive financing option. As a result, we believe CAF enables us to capture additional profits, cash flows and sales. CAF income primarily reflects the interest and fee income generated by the auto loans held for investment and auto loans held for sale less the interest expense associated with the debt issued to fund these loans, a provision for estimated loan losses on loans held for investment, direct expenses and income related to the sale of auto loans. CAF income does not include any allocation of indirect costs. After the effect of 3-day payoffs and vehicle returns, CAF financed 43.3% of our retail used vehicle unit sales in the first three months of fiscal 2027. As of May 31, 2026, CAF serviced approximately 1.1 million customer accounts, which includes its $16.71 billion portfolio of auto loans and $700 million of auto loans that have previously been sold.
Management regularly analyzes CAF’s operating results by assessing the competitiveness of our consumer offer, profitability, the performance of its auto loans, including trends in credit losses and delinquencies, and CAF direct expenses.
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Revenues and Profitability
The sources of revenue and gross profit from the CarMax Sales Operations segment for the first three months of fiscal 2027 are as follows:
| Net Sales and Operating Revenues | Gross Profit | |||||||
A high-level summary of our financial results for the first quarter of fiscal 2027 as compared to the first quarter of fiscal 2026 is as follows (1):
| (Dollars in millions except per share or per unit data) | Three Months Ended May 31, 2026 | Change from Three Months Ended May 31, 2025 | |||||||||||||||||||||
| Income statement information | |||||||||||||||||||||||
| Net sales and operating revenues | $ | 8,013.5 | 6.2 | % | |||||||||||||||||||
| Gross profit | $ | 854.4 | (4.4) | % | |||||||||||||||||||
| CAF income | $ | 140.2 | (1.0) | % | |||||||||||||||||||
| Selling, general and administrative expenses | $ | 635.2 | (3.7) | % | |||||||||||||||||||
| Net earnings | $ | 185.6 | (11.8) | % | |||||||||||||||||||
| Unit sales information | |||||||||||||||||||||||
| Used unit sales | 230,293 | — | % | ||||||||||||||||||||
| Change in used unit sales in comparable stores | (0.8) | % | N/A | ||||||||||||||||||||
| Wholesale unit sales | 162,064 | 8.4 | % | ||||||||||||||||||||
| Per unit information | |||||||||||||||||||||||
| Used gross profit per unit | $ | 2,177 | (9.6) | % | |||||||||||||||||||
| Wholesale gross profit per unit | $ | 1,046 | (0.1) | % | |||||||||||||||||||
| SG&A per total unit | $ | 1,619 | (6.8) | % | |||||||||||||||||||
| Per share information | |||||||||||||||||||||||
| Net earnings per diluted share | $ | 1.31 | (5.1) | % | |||||||||||||||||||
| Online sales metrics | |||||||||||||||||||||||
Digitally enabled transactions (2) | 84 | % | 4 | % | |||||||||||||||||||
Omni sales (3) | 70 | % | 4 | % | |||||||||||||||||||
Online retail sales (4) | 14 | % | — | % | |||||||||||||||||||
| Unit buys information | |||||||||||||||||||||||
| Total vehicle purchases | 321,654 | (4.4) | % | ||||||||||||||||||||
| Vehicles purchased from consumers | 280,693 | (2.5) | % | ||||||||||||||||||||
| Vehicles purchased from dealers | 40,961 | (15.4) | % | ||||||||||||||||||||
(1) Where applicable, amounts are net of intercompany eliminations.
(2) A digitally enabled transaction is defined as either an omni retail sale or an online retail sale, as defined below.
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(3) An omni retail sale is defined as a sale where customers complete at least one, but not all, of the four activities listed in note (4) below online, or additional steps that can be completed online, including pre-qualifying for financing, setting appointments and signing up for notifications of cars coming soon.
(4) An online retail sale is defined as a sale where the customer completes all four of the following activities online: reserving the vehicle; financing the vehicle, if needed; trading-in or opting out of a trade-in; and creating an online sales order.
Liquidity
Our primary ongoing sources of liquidity include funds provided by operations, proceeds from non-recourse funding vehicles and borrowings under our revolving credit facility or through other financing sources. In addition to funding our operations, this liquidity has been used to fund our capital expenditures and the repurchase of common stock under our share repurchase program.
Our current capital allocation strategy is to focus on funding the business to drive unit sales and earnings growth that enables us to consistently reward our shareholders. We continue to take a disciplined approach to our capital structure, including managing our net leverage to preserve efficient access to the capital markets for both CAF and CarMax overall. With leverage slightly above our targeted range, and as we focus on improving the business during this transitional period, we paused our share buybacks during the fourth quarter of fiscal 2026. For the first quarter of fiscal 2027, our leverage remained slightly above our targeted range. We remain committed to returning capital to shareholders and intend to resume share repurchases in the future at the appropriate time depending upon market conditions, our leverage and our capital needs, among other factors. We believe we have the appropriate liquidity, access to capital and financial strength to support our operations and continue investing in our business for the next 12 months and thereafter for the foreseeable future.
Strategic Update and Future Outlook
We possess an award-winning, people-first culture, an iconic brand, an irreplaceable national footprint and meaningful digital capabilities. When fully harnessed, this combination enhances our competitive advantage and will drive our market share growth and financial returns in one of the largest consumer markets in the nation. Despite these advantages, it is clear that there are some key areas that have impeded our ability to perform to our full potential. Our core operations are not yet fast and efficient enough, retail prices and selection must continue to improve and our costs remain too high. In addition, our digital experience is too complex and not seamlessly connected to the in-person experience. This has put friction in the customer experience, ultimately impacting conversion and preventing us from fully leveraging our unmatched scale and store network.
In order to move forward, we have established our strategy for growth, built around four pillars with the objective of delivering strong unit sales and earnings growth that enables CarMax to consistently reward shareholders. The four pillars place the customer at the center of everything we do and are designed to meaningfully improve how we operate at scale and support consistently strong performance. Our four pillars are:
•Great Offering - give customers every reason to choose CarMax. We plan to ensure our pricing remains competitive across demand cycles while we both grow our saleable inventory and provide customers faster access to our vehicles.
•Easy Experience - make it easy to do business with us through a seamless experience. We plan to better connect digital capabilities with in-store experiences to improve conversion and customer satisfaction.
•Add Value On Each Transaction - grow profitability by maximizing value across all aspects of our business. This includes our CAF full spectrum ambitions as well as the extended protection plan redesign initiatives that are already underway.
•Run Lean - continue to reimagine our cost structure to enable a great offering. We plan to lower reconditioning costs through technology and operational efficiency while continuing to deliver the high-quality vehicles customers expect from CarMax. We are also working to enhance our logistics network and continuing to reduce our SG&A expenses.
We plan to host a strategic update in late fall to share additional details on key initiatives and milestones underlying our strategy for growth.
While this work will take time, we are encouraged that the progress we have been making across the four pillars is already translating into improved trends that we expect will continue this fiscal year. For the first quarter of fiscal 2027, on a year-over-year basis and compared to our strongest quarter from fiscal 2026, retail unit sales delivered slight growth, reflecting the near-term steps we have been taking across pricing, marketing and conversion to strengthen the business and drive performance. In addition, we levered SG&A expense on a total unit basis, expanded CAF penetration and increased EPP margin, all while improving our year-over-year EPS trend.
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Regarding SG&A expenses, our goal is to achieve $200 million in exit rate savings in SG&A expense by the end of fiscal 2027. However, the year-over-year savings within fiscal 2027 are expected to be offset as we annualize over materially reduced corporate bonus and share-based compensation expense in fiscal 2026, which offsets approximately half of the anticipated savings in fiscal 2027. The savings are also expected to be impacted by inflationary pressures and new location growth. We expect the full impact from these savings to occur in fiscal 2028. For the first quarter of fiscal 2027, the year-over-year decline in SG&A expense was in line with our full year expectations and we remain on track to achieve our $200 million savings target. In addition to offsetting cost pressures, these ongoing savings are expected to enable additional flexibility to reinvest in areas that directly drive sales, while also serving as a tailwind to our earnings.
In fiscal 2027, we plan to take a more dynamic approach to margin management. We expect used margins for the full fiscal year to decline by approximately $200 per unit, although this may vary as we continue to optimize performance. This outlook reflects our pricing actions and our ongoing efforts to reduce logistics and reconditioning cost of sales in support of more competitive pricing and stronger sales. In the first quarter of fiscal 2027, we lowered margins by less than the $300 per unit guidance we provided last quarter as we balanced demand, margins and efficiency gains in our reconditioning process to support sales.
During fiscal 2026, we tested EPP product enhancements that focused on increasing penetration and margin per unit. We began the nationwide rollout of these products in the first quarter of fiscal 2027 and anticipate the full rollout to be completed in the second quarter. EPP margins increased slightly in the first quarter and we are on track to achieve incremental EPP margin per unit of approximately $35 in fiscal 2027.
In calendar 2025, we estimate we sold approximately 3.6% of the age 0- to 10-year old vehicles sold on a nationwide basis, a decrease from 3.7% in calendar 2024. External title data indicates that while we gained market share in the first half of calendar 2025, sales and market share were pressured in the second half of the year. Notwithstanding the prior pressure, we believe we will grow our market share on a sustainable basis going forward.
As of May 31, 2026, we operated 256 used car stores located in 110 U.S. television markets, which covered approximately 85% of the U.S. population. The format and operating models utilized in our stores are continuously evaluated and may change or evolve over time based upon market and consumer expectations. During the first three months of fiscal 2027, we opened one stand-alone reconditioning/auction center located in Locust Grove, Georgia, supporting the Atlanta metro market. During the remainder of the fiscal year, we plan to open four stores, two stand-alone auction facilities and one additional stand-alone reconditioning/auction center. We are utilizing our stand-alone reconditioning and auction locations to balance capacity and drive efficiencies across the network.
While we execute both our short- and long-term strategy, there are trends and factors that could impact our strategic approach or our results in the short and medium term. For additional information about risks and uncertainties facing our company, see “Risk Factors,” included in Part I. Item 1A of the Annual Report on Form 10-K for the fiscal year ended February 28, 2026 and Part II, Item 1A of this report.
CRITICAL ACCOUNTING ESTIMATES
For information on critical accounting policies, see “Critical Accounting Estimates” in the MD&A included in Item 7 of the Annual Report on Form 10-K for the fiscal year ended February 28, 2026.
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RESULTS OF OPERATIONS – CARMAX SALES OPERATIONS
NET SALES AND OPERATING REVENUES
| Three Months Ended May 31 | |||||||||||||||||||||||||||||||||||
| (In millions) | 2026 | 2025 | Change | ||||||||||||||||||||||||||||||||
| Used vehicle sales | $ | 6,391.3 | $ | 6,103.4 | 4.7 | % | |||||||||||||||||||||||||||||
| Wholesale vehicle sales | 1,427.6 | 1,252.7 | 14.0 | % | |||||||||||||||||||||||||||||||
| Other sales and revenues: | |||||||||||||||||||||||||||||||||||
| Extended protection plan revenues | 133.5 | 131.7 | 1.4 | % | |||||||||||||||||||||||||||||||
| Third-party finance fees, net | (4.5) | (0.7) | (542.8) | % | |||||||||||||||||||||||||||||||
Advertising & subscription revenues (1) | 36.7 | 36.5 | 0.4 | % | |||||||||||||||||||||||||||||||
| Other | 28.9 | 22.9 | 26.2 | % | |||||||||||||||||||||||||||||||
| Total other sales and revenues | 194.6 | 190.4 | 2.2 | % | |||||||||||||||||||||||||||||||
| Total net sales and operating revenues | $ | 8,013.5 | $ | 7,546.5 | 6.2 | % | |||||||||||||||||||||||||||||
(1) Excludes intercompany sales and operating revenues that have been eliminated in consolidation.
UNIT SALES
| Three Months Ended May 31 | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
| Used vehicles | 230,293 | 230,210 | — | % | |||||||||||||||||||||||||||||||
| Wholesale vehicles | 162,064 | 149,517 | 8.4 | % | |||||||||||||||||||||||||||||||
| Total vehicles | 392,357 | 379,727 | 3.3 | % | |||||||||||||||||||||||||||||||
AVERAGE SELLING PRICES
| Three Months Ended May 31 | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
| Used vehicles | $ | 27,288 | $ | 26,120 | 4.5 | % | |||||||||||||||||||||||||||||
| Wholesale vehicles | $ | 8,364 | $ | 7,959 | 5.1 | % | |||||||||||||||||||||||||||||
COMPARABLE STORE USED VEHICLE SALES CHANGES
Three Months Ended May 31 (1) | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Used vehicle units | (0.8) | % | 8.1 | % | |||||||||||||||||||
| Used vehicle revenues | 3.8 | % | 6.6 | % | |||||||||||||||||||
(1) Stores are added to the comparable store base beginning in their fourteenth full month of operation. We do not remove renovated stores from our comparable store base. Comparable store calculations include results for a set of stores that were included in our comparable store base in both the current and corresponding prior year periods.
VEHICLE SALES CHANGES
| Three Months Ended May 31 | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Used vehicle units | — | % | 9.0 | % | |||||||||||||||||||
| Used vehicle revenues | 4.7 | % | 7.5 | % | |||||||||||||||||||
| Wholesale vehicle units | 8.4 | % | 1.2 | % | |||||||||||||||||||
| Wholesale vehicle revenues | 14.0 | % | (0.3) | % | |||||||||||||||||||
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USED VEHICLE FINANCING PENETRATION BY CHANNEL (BEFORE THE IMPACT OF 3-DAY PAYOFFS)
Three Months Ended May 31 (1) | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
CAF (2) | 45.7 | % | 44.4 | % | |||||||||||||||||||
Tier 2 (3) | 15.7 | % | 17.7 | % | |||||||||||||||||||
Tier 3 (4) | 9.0 | % | 8.0 | % | |||||||||||||||||||
Other (5) | 29.6 | % | 29.9 | % | |||||||||||||||||||
| Total | 100.0 | % | 100.0 | % | |||||||||||||||||||
(1) Calculated as used vehicle units financed for respective channel as a percentage of total used units sold.
(2) Includes CAF’s Tier 2 and Tier 3 loan originations, which represent less than 5% of total used units sold.
(3) Third-party finance providers who generally pay us a fee or to whom no fee is paid.
(4) Third-party finance providers to whom we pay a fee.
(5) Represents customers arranging their own financing and customers that do not require financing.
CHANGE IN USED CAR STORE BASE
| Three Months Ended May 31 | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Used car stores, beginning of period | 256 | 250 | |||||||||||||||||||||
| Store openings | — | — | |||||||||||||||||||||
| Used car stores, end of period | 256 | 250 | |||||||||||||||||||||
Used Vehicle Sales. The 4.7% increase in used vehicle revenues in the first quarter of fiscal 2027 was driven by a 4.5% increase in average retail selling price, or approximately $1,200. Total used unit sales increased slightly from the prior year quarter, which benefited from tariff-driven demand, and included a 0.8% decrease in comparable store used unit sales. Sales performance in the first quarter of fiscal 2027 was supported by more competitive vehicle pricing, an increase in acquisition marketing and the initial progress made towards our four strategic pillars, discussed above.
The increase in average retail selling price in the first quarter of fiscal 2027 primarily reflected an increase in vehicle acquisition costs as well as a shift in the mix of our sales by vehicle age.
Wholesale Vehicle Sales. Vehicles sold at our wholesale auctions are, on average, more than 11 years old with more than 100,000 miles and are primarily comprised of vehicles purchased through our appraisal process that do not meet our retail standards. Our wholesale auction prices usually reflect trends in the general wholesale market for the types of vehicles we sell, although they can also be affected by changes in vehicle mix or the average age, mileage or condition of the vehicles being sold.
The 14.0% increase in wholesale vehicle revenues in the first quarter of fiscal 2027 was driven by an 8.4% increase in unit sales and a 5.1% increase in average selling price, or approximately $400. The increase in average selling price in the first quarter of fiscal 2027 primarily reflected an increase in vehicle acquisition costs.
Other Sales and Revenues. Other sales and revenues include revenue from the sale of ESPs and GAP (collectively reported in EPP revenues, net of a reserve for estimated contract cancellations), net third-party finance fees, advertising and subscription revenues earned by our Edmunds business, and other revenues, which are predominantly comprised of service department sales. The fees we pay to the Tier 3 providers are reflected as an offset to finance fee revenues received from the Tier 2 providers. The mix of our retail vehicles financed by CAF, Tier 2 and Tier 3 providers, or customers that arrange their own financing, may vary from quarter to quarter depending on several factors, including the credit quality of applicants, changes in providers’ credit decisioning and external market conditions. Changes in originations by one tier of credit providers may also affect the originations made by providers in other tiers.
Other sales and revenues was relatively consistent year-over-year, increasing 2.2% in the first quarter of fiscal 2027.
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GROSS PROFIT
Three Months Ended May 31 (1) | |||||||||||||||||||||||||||||||||||
| (In millions) | 2026 | 2025 | Change | ||||||||||||||||||||||||||||||||
| Used vehicle gross profit | $ | 501.4 | $ | 554.2 | (9.5) | % | |||||||||||||||||||||||||||||
| Wholesale vehicle gross profit | 169.5 | 156.6 | 8.3 | % | |||||||||||||||||||||||||||||||
| Other gross profit | 183.5 | 182.8 | 0.4 | % | |||||||||||||||||||||||||||||||
| Total | $ | 854.4 | $ | 893.6 | (4.4) | % | |||||||||||||||||||||||||||||
(1) Amounts are net of intercompany eliminations.
GROSS PROFIT PER UNIT
Three Months Ended May 31 (1) | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||||||||||||||
$ per unit(2) | %(3) | $ per unit(2) | %(3) | ||||||||||||||||||||||||||||||||||||||||||||
| Used vehicle gross profit | $ | 2,177 | 7.8 | $ | 2,407 | 9.1 | |||||||||||||||||||||||||||||||||||||||||
| Wholesale vehicle gross profit | $ | 1,046 | 11.9 | $ | 1,047 | 12.5 | |||||||||||||||||||||||||||||||||||||||||
| Other gross profit | $ | 797 | 94.4 | $ | 794 | 96.1 | |||||||||||||||||||||||||||||||||||||||||
(1) Amounts are net of intercompany eliminations.
(2) Calculated as category gross profit divided by its respective units sold, except the other category, which is divided by total used units sold.
(3) Calculated as a percentage of its respective sales or revenue.
Used Vehicle Gross Profit. We target a dollar range of gross profit per used unit sold, using a dynamic approach. The gross profit dollar target for an individual vehicle is based on a variety of factors, including its probability of sale and its mileage relative to its age; however, it is not primarily based on the vehicle’s selling price. Our ability to quickly adjust appraisal offers to be consistent with trends in the broader trade-in market and the pace of our inventory turns reduce our exposure to the inherent continual fluctuation in used vehicle values and contribute to our ability to manage gross profit dollars per unit. Gross profit per used unit is consistent across our sales platform.
We systematically adjust individual vehicle prices based on proprietary pricing algorithms in order to appropriately balance sales trends, inventory turns and gross profit achievement. Other factors that may influence gross profit include the wholesale and retail vehicle pricing environments, vehicle reconditioning and logistics costs, and the percentage of vehicles sourced directly from consumers and dealers through our appraisal process. Vehicles purchased directly from consumers and dealers generally have a lower cost per unit compared with vehicles purchased at auction or through other channels, which may generate more gross profit per unit. In any given period, our gross profit may also be impacted by the age mix of vehicles sold, as older vehicles are generally more profitable. We monitor macroeconomic factors and pricing elasticity and adjust our pricing accordingly to strike the right balance between optimizing unit sales and profitability while also maintaining competitively priced inventory.
Used vehicle gross profit decreased 9.5% in the first quarter of fiscal 2027, primarily driven by lower used vehicle gross profit per unit, which decreased $230 from the record high first quarter in the prior year. The decrease in used vehicle gross profit per unit reflects the continuation of pricing actions implemented to drive unit sales. In the first quarter of fiscal 2027, we lowered margins by less than the $300 per unit guidance we provided last quarter as we balanced demand, margins and efficiency gains in our reconditioning process to support sales.
Wholesale Vehicle Gross Profit. Our wholesale gross profit per unit reflects the demand for older, higher mileage vehicles, which are the mainstay of our auctions, as well as strong dealer attendance and resulting high dealer-to-car ratios at our auctions. The frequency of our auctions, which are generally held weekly or bi-weekly, minimizes the depreciation risk on these vehicles. Our ability to adjust appraisal offers and quickly move vehicles to our stand-alone auctions in response to the wholesale pricing environment are key factors that influence wholesale gross profit.
Wholesale vehicle gross profit increased 8.3% in the first quarter of fiscal 2027, driven by an 8.4% increase in wholesale unit sales. Wholesale vehicle gross profit per unit was in line with the prior year period.
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Other Gross Profit. Other gross profit includes profits related to EPP revenues, net third-party finance fees, advertising and subscription profits earned by our Edmunds business, and other revenues. Other revenues are predominantly comprised of service department operations, including used vehicle reconditioning. We have no cost of sales related to EPP revenues or net third-party finance fees, as these represent revenues paid to us by certain third-party providers. Third-party finance income is reported net of the fees we pay to third-party Tier 3 finance providers. Accordingly, changes in the relative mix of the components of other gross profit can affect the composition and amount of other gross profit.
Other gross profit was relatively consistent year-over year, decreasing 0.4% in the first quarter of fiscal 2027.
SG&A Expenses
COMPONENTS OF SG&A EXPENSES AS A PERCENTAGE OF TOTAL SG&A EXPENSES
Three Months Ended May 31, 2026
COMPONENTS OF SG&A EXPENSES COMPARED WITH PRIOR PERIOD (1)
| Three Months Ended May 31 | |||||||||||||||||||||||||||||||||||
| (In millions except per unit data) | 2026 | 2025 | Change | ||||||||||||||||||||||||||||||||
| Compensation and benefits: | |||||||||||||||||||||||||||||||||||
| Compensation and benefits, excluding share-based compensation expense | $ | 329.6 | $ | 349.0 | (5.6) | % | |||||||||||||||||||||||||||||
| Share-based compensation expense | 39.7 | 45.6 | (12.9) | % | |||||||||||||||||||||||||||||||
Total compensation and benefits (2) | $ | 369.3 | $ | 394.6 | (6.4) | % | |||||||||||||||||||||||||||||
| Occupancy costs | 66.8 | 68.9 | (3.0) | % | |||||||||||||||||||||||||||||||
| Advertising expense | 75.9 | 67.9 | 11.8 | % | |||||||||||||||||||||||||||||||
Other overhead costs (3) | 123.2 | 128.2 | (4.0) | % | |||||||||||||||||||||||||||||||
| Total SG&A expenses | $ | 635.2 | $ | 659.6 | (3.7) | % | |||||||||||||||||||||||||||||
| SG&A per total unit | $ | 1,619 | $ | 1,737 | (6.8) | % | |||||||||||||||||||||||||||||
(1) Amounts are net of intercompany eliminations.
(2) Excludes compensation and benefits related to reconditioning and vehicle repair service, which are included in cost of sales. See Note 10 for details of share-based compensation expense by grant type.
(3) Includes IT expenses, non-CAF bad debt, insurance, preopening and relocation costs, travel, charitable contributions and other administrative expenses.
SG&A expenses decreased $24.5 million, or 3.7%, in the first three months of fiscal 2027. Factors contributing to the net decrease include the following:
•$25.3 million decrease in total compensation and benefits primarily driven by reduced payroll expense as we make tangible progress toward our targeted cost reductions.
•$8.0 million increase in advertising expense, reflecting higher acquisition marketing spend to support sales and buys.
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During the first quarter of fiscal 2027, we levered SG&A on a total unit basis by $118, or 6.8%. In fiscal 2027, we expect to leverage SG&A per total unit when excluding the restructuring charges incurred in fiscal 2026.
Interest Expense. Interest expense includes the interest related to short- and long-term debt, financing obligations and finance lease obligations. It does not include interest on the non-recourse notes payable, which is reflected within CAF income.
Interest expense increased to $33.8 million in the first quarter of fiscal 2027 compared with $27.1 million in the first quarter of fiscal 2026. The increase reflects higher outstanding debt balances, primarily related to our revolving credit facility.
Other Income. Other income of $2.1 million in the first quarter of fiscal 2027 was relatively consistent with $0.3 million in the first quarter of fiscal 2026.
Income Taxes. The effective income tax rate was 28.2% in the first quarter of fiscal 2027 versus 25.7% in the first quarter of fiscal 2026. The increase in the effective income tax rate was primarily driven by the expiration of unexercised stock options as well as the impact of tax credit purchases on the prior year quarter.
RESULTS OF OPERATIONS – CARMAX AUTO FINANCE
CAF income primarily reflects interest and fee income generated by auto loans held for investment and auto loans held for sale less the interest expense associated with the debt issued to fund these loans, a provision for estimated loan losses on loans held for investment, direct CAF expenses and income related to the sale of auto loans. Total interest margin primarily reflects the spread between interest and fees charged to consumers and our funding costs. Changes in the interest margin on new originations generally affect CAF income over time. Increases in interest rates, which affect CAF’s funding costs, competitive pressures on rates charged to customers or reducing higher risk accounts in our origination strategy, could result in compression in the interest margin on new originations.
The provision for loan losses reflects the estimated lifetime loan losses on new originations as well as changes in the estimated allowance for remaining loan losses on the existing portfolio. Changes to the allowance are primarily driven by loss and delinquency experience as well as economic factors related to our outlook for net losses expected to occur over the remaining contractual life of the loans held for investment.
CAF’s portfolio is composed primarily of auto loans originated over the past several years. Trends in auto loan growth and interest margins primarily reflect the cumulative effect of changes in the business over a multi-year period. Current period originations reflect current trends in both our retail sales and the CAF business, including the volume and credit mix of loans originated, current interest rates charged to consumers and loan terms. Loans originated in a given fiscal period generally impact CAF income over time, as we recognize income over the life of the underlying auto loan, or upon sale of the loan.
We typically use securitizations or other funding arrangements to fund loans originated by CAF. Certain pools of loans may be sold in such a way that CAF relinquishes all, or nearly all, of its continuing financial interests in the loans. These loans are classified as held for sale on our consolidated balance sheet until they are sold, at which point a gain on sale is recognized. As servicer, CAF continues to be responsible for managing collections and performing other servicing activities for the sold auto loans and earns servicing income as compensation for these activities.
As part of our initial plan to increase CAF penetration to 50%, we began a measured expansion in fiscal 2026 by recapturing profitable segments of Tier 1 originations that we had previously shifted to our Tier 2 lenders as well as testing expanded lending with a focus in the top half of the Tier 2 space. We continue to monitor consumer behavior and the broader economy and adjust our origination strategy as needed. We expect each additional percentage point of CAF penetration to generate $10 million to $12 million in lifetime pre-tax income per year of origination, net of the impact to finance partner participation fees. Our pre-tax income expectations will be impacted by the volume of loans originated, interest rates charged to customers, loan terms, loss rates, average credit scores, funding strategy, loan sales and the broader macroeconomic and lending environments. In fiscal 2026, CAF targeted originating less than 15% and 5% of the total Tier 2 and Tier 3 loan volume, respectively. In fiscal 2027, we intend to increase the target originations for Tier 2 to approximately 30% of the total volume across the Tier 2 spectrum, with a continued focus on the top half of the Tier 2 space. We do not plan to increase our target originations for Tier 3 in fiscal 2027. Any future adjustments in Tier 2 and Tier 3 will consider the broader lending environment, which includes funding availability, along with the long-term sustainability of the change.
Tier 2 and Tier 3 loans have higher loss and delinquency rates than the remainder of the CAF portfolio, as well as higher contract rates, which impact the provision for loan losses and allowance for loan losses as a percentage of auto loans held for investment. An increase in CAF’s net penetration of one percentage point generally corresponds to approximately $50 million
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to $60 million of originations. We estimate that these incremental originations, if consisting of only Tier 1 loans, would result in an increase to the provision of approximately $1.5 million to $2.0 million. For an incremental percentage point of penetration consisting of only Tier 2 loans, we estimate that the provision would increase by approximately $10 million to $12 million. These estimates are impacted by the credit mix of originations and the broader macroeconomic environment as well as our ability to execute the sale of certain pools of auto loans During the first quarter of fiscal 2027, approximately 90% of CAF originations were Tier 1, with the remaining 10% consisting of Tier 2.
CAF income does not include any allocation of indirect costs. Although CAF benefits from certain indirect overhead expenditures, we have not allocated indirect costs to CAF to avoid making subjective allocation decisions. Examples of indirect costs not allocated to CAF include retail store expenses and corporate expenses.
See Note 3 for additional information on CAF income and Note 4 for information on auto loans held for investment, including credit quality.
SELECTED CAF FINANCIAL INFORMATION
| Three Months Ended May 31 | |||||||||||||||||||||||
| (In millions) | 2026 | 2025 | |||||||||||||||||||||
| Interest margin: | |||||||||||||||||||||||
| Interest and fee income | $ | 460.9 | $ | 485.4 | |||||||||||||||||||
| Interest expense | (184.2) | (197.5) | |||||||||||||||||||||
| Total interest margin | $ | 276.7 | $ | 287.9 | |||||||||||||||||||
| Provision for loan losses | $ | (95.6) | $ | (101.7) | |||||||||||||||||||
| CarMax Auto Finance income | $ | 140.2 | $ | 141.7 | |||||||||||||||||||
Average auto loans outstanding (1) | $ | 16,533.7 | $ | 17,719.9 | |||||||||||||||||||
| Total interest margin as a percent of average auto loans outstanding | 6.7 | % | 6.5 | % | |||||||||||||||||||
(1) Includes auto loans held for investment and auto loans held for sale.
CAF ORIGINATION INFORMATION (AFTER THE IMPACT OF 3-DAY PAYOFFS) (1)
| Three Months Ended May 31 | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
Net auto loans originated (in millions) | $ | 2,445.1 | $ | 2,318.5 | |||||||||||||||||||
| Vehicle units financed | 99,607 | 96,192 | |||||||||||||||||||||
Net penetration rate (2) | 43.3 | % | 41.8 | % | |||||||||||||||||||
| Weighted average contract rate | 11.3 | % | 11.4 | % | |||||||||||||||||||
Weighted average credit score (3) | 720 | 722 | |||||||||||||||||||||
Weighted average loan-to-value (LTV) (4) | 88.8 | % | 89.3 | % | |||||||||||||||||||
Weighted average term (in months) | 69.0 | 68.6 | |||||||||||||||||||||
(1) Includes auto loans held for investment and auto loans held for sale.
(2) Vehicle units financed as a percentage of total used units sold.
(3) The credit scores represent FICO® scores and reflect only loans with obligors that have a FICO® score at the time of application. The FICO® score with respect to any loans with co-obligors is calculated as the average of each obligor’s FICO® score at the time of application. FICO® scores are not a significant factor in our primary scoring model, which relies on information from credit bureaus and other application information as discussed in Note 4. FICO® is a federally registered servicemark of Fair Isaac Corporation.
(4) LTV represents the ratio of the amount financed to the total collateral value, which is measured as the vehicle selling price plus applicable taxes, title and fees.
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LOAN PERFORMANCE INFORMATION
| As of and for the Three Months Ended May 31 | |||||||||||||||||||||||
| (In millions) | 2026 | 2025 | |||||||||||||||||||||
| Ending auto loans held for investment | $ | 16,098.5 | $ | 17,154.5 | |||||||||||||||||||
| Average auto loans held for investment | $ | 16,350.6 | $ | 17,614.5 | |||||||||||||||||||
| Allowance for loan losses | $ | 475.0 | $ | 474.2 | |||||||||||||||||||
| Allowance for loan losses as a percentage of ending auto loans held for investment | 2.95 | % | 2.76 | % | |||||||||||||||||||
| Net credit losses | $ | 73.6 | $ | 86.2 | |||||||||||||||||||
| Annualized net credit losses as a percentage of average auto loans held for investment | 1.80 | % | 1.96 | % | |||||||||||||||||||
| Past due accounts as a percentage of ending auto loans held for investment | 5.20 | % | 5.48 | % | |||||||||||||||||||
Average recovery rate (1) | 47.5 | % | 47.4 | % | |||||||||||||||||||
(1) The average recovery rate represents the average percentage of the outstanding principal balance we receive when a vehicle is repossessed and liquidated, generally at our wholesale auctions. While in any individual period conditions may vary, over the past 10 fiscal years, the annual recovery rate has ranged from a low of 45% to a high of 71%, and it is primarily affected by the wholesale market environment.
•CAF Income
◦CAF income decreased $1.4 million, or 1.0%, in the first quarter of fiscal 2027 primarily driven by the decrease in average auto loans outstanding resulting from the sale of auto loans during the third quarter of fiscal 2026, which in turn reduced total interest margin. This decrease was largely offset by interest earned on higher margin loans from our full spectrum growth as well as servicing income associated with the sold auto loans.
•Total Interest Margin
◦Total interest margin increased as a percentage of average auto loans outstanding to 6.7% in the first quarter of fiscal 2027, compared with 6.5% in the first quarter of fiscal 2026. The increase was primarily due to higher margin loans driven by our Tier 2 expansion. We expect that our total interest margin percentage will be approximately 6.5% for the remainder of fiscal 2027.
•Provision for Loan Losses
◦The provision for loan losses resulted in expense of $95.6 million in the first quarter of fiscal 2027 compared with expense of $101.7 million in the first quarter of fiscal 2026.
◦Losses for the first quarter of fiscal 2027 were in line with expectations and the provision largely reflects our estimate of lifetime losses on new originations for the period, which includes our continued expansion in the Tier 2 credit space. The provision for the prior year period reflected unfavorable loss performance, primarily within loans originated in 2022 and 2023, when average selling prices were elevated and these customers were later challenged by the inflationary environment.
◦There were also reductions in the provision for both the first quarter of fiscal 2027 and fiscal 2026 due to the release of $25.1 million and $26.5 million, respectively, for the allowance previously recorded for loans that were reclassified as held for sale.
◦The allowance for loan losses as a percentage of auto loans held for investment was 2.95% as of May 31, 2026, compared with 2.76% as of May 31, 2025 and 2.78% as of February 28, 2026. The increase in the allowance percentage was primarily driven by our continued expansion in the Tier 2 credit space, along with seasonality as the credit mix of new originations tends to shift down the credit spectrum during tax season.
•Loan Performance
◦The increase in net loan originations in the first quarter of fiscal 2027 primarily resulted from increases in the net penetration rate and the average amount financed.
◦CAF net penetration increased 150 basis points in the first quarter of fiscal 2027 due to our continued expansion into the Tier 2 credit space.
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PLANNED FUTURE ACTIVITIES
During the first three months of fiscal 2027, we opened one stand-alone reconditioning/auction center in Locust Grove, Georgia. For the remainder of fiscal 2027, we anticipate opening four new store locations, one additional stand-alone reconditioning/auction center and two stand-alone auction facilities. We currently estimate capital expenditures will total approximately $400 million in fiscal 2027. Capital expenditures were $541.0 million in fiscal 2026. Planned capital spending in fiscal 2027 largely consists of spending to support our future long-term growth in offsite reconditioning and auction facilities, as well as our new stores. This spending is expected to be at a reduced rate as compared with the prior year due to significant investments made in fiscal 2026 as well as slowed growth in store openings in the current and upcoming fiscal years.
FINANCIAL CONDITION
Liquidity and Capital Resources
Our primary ongoing cash requirements are to fund our existing operations, store and capacity expansion, store improvement, CAF, strategic growth initiatives and our share repurchase program. Our primary ongoing sources of liquidity include funds provided by operations, proceeds from non-recourse funding vehicles and borrowings under our revolving credit facility or through other financing sources.
Our current capital allocation strategy is to focus on funding the business to drive unit sales and earnings growth that enables us to consistently reward our shareholders. We continue to take a disciplined approach to our capital structure, including managing our net leverage to preserve efficient access to the capital markets for both CAF and CarMax overall. With leverage slightly above our targeted range, and as we focus on improving the business during this transitional period, we paused our share buybacks during the fourth quarter of fiscal 2026. For the first quarter of fiscal 2027, our leverage remained slightly above our targeted range. We remain committed to returning capital to shareholders and intend to resume share repurchases in the future at the appropriate time depending upon market conditions, our leverage and our capital needs, among other factors. We believe we have the appropriate liquidity, access to capital and financial strength to support our operations and continue investing in our business for the next 12 months and thereafter for the foreseeable future.
We have historically managed leverage based on a number of factors, including internal financial forecasts, consideration of CAF’s operational and capital needs, external peer benchmarking, requirements of our debt agreements and macroeconomic conditions. Generally, we expect to use our revolving credit facility and other financing sources, together with stock repurchases, to maintain a leverage profile that ensures operating flexibility while supporting continued investment in the business.
Operating Activities. During the first three months of fiscal 2027, net cash provided by operating activities totaled $17.6 million compared with $299.5 million in the prior year period.
As of May 31, 2026, total inventory was $4.06 billion, representing a decrease of $74.2 million, or 1.8%, compared with the balance as of the start of the fiscal year. The decrease was primarily due to a decrease in volume driven by seasonality related to the end of tax refund season, partially offset by an increase in average cost driven by increased acquisition costs.
Our operating cash flows are significantly impacted by changes in auto loans held for investment and auto loans held for sale, which combined increased $351.7 million in the current year period compared with $299.6 million in the prior year period. A significant portion of the changes in auto loans held for investment and auto loans held for sale are accompanied by changes in non-recourse notes payable, which are issued to fund auto loans originated by CAF. Net issuances of non-recourse notes payable were $254.8 million in the current year period compared with $82.5 million in the prior year period and are separately reflected as cash from financing activities. Due to the presentation differences between auto loans held for investment, auto loans held for sale and non-recourse notes payable on the consolidated statements of cash flows, fluctuations in these amounts can impact our operating and financing cash flows without significantly affecting our overall liquidity, working capital or cash flows.
The decrease in net cash provided by operating activities for the first three months of the current fiscal year compared with the prior year period primarily reflected changes in inventory and the net change in auto loans held for investment and auto loans held for sale, as discussed above.
Investing Activities. During the first three months of fiscal 2027, net cash used in investing activities totaled $99.6 million compared with $141.2 million in fiscal 2026. Capital expenditures were $103.3 million in the current year period versus $136.7 million in the prior year period. Capital expenditures primarily included construction costs to support our growth in offsite reconditioning and auction facilities as well as our new stores. We maintain a multi-year pipeline of sites to support our
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store and capacity growth, so portions of capital spending in one year may relate to locations that we open in subsequent fiscal years.
As of May 31, 2026, 171 of our 256 used car stores were located on owned sites and 85 were located on leased sites, including 29 land-only leases and 56 land and building leases.
Financing Activities. During the first three months of fiscal 2027, net cash provided by financing activities totaled $90.5 million compared with net cash used in financing activities of $129.4 million in the prior year period. Included in these amounts were net issuances of non-recourse notes payable of $254.8 million compared with $82.5 million in the prior year period. Non-recourse notes payable are typically used to fund changes in auto loans held for investment and auto loans held for sale (see “Operating Activities”).
During the first three months of fiscal 2027, cash provided by financing activities was impacted by net payments on our long-term debt of $151.8 million. During the first three months of fiscal 2026, cash used in financing activities was impacted by net payments on our long-term debt of $3.9 million as well as stock repurchases of $204.0 million.
TOTAL DEBT AND CASH AND CASH EQUIVALENTS
| (In thousands) | As of May 31 | As of February 28 | |||||||||
Debt Description (1) | Maturity Date | 2026 | 2026 | ||||||||
Revolving credit facility (2) | June 2028 | $ | 893,000 | $ | 840,800 | ||||||
Term loan (2) | November 2030 | 499,309 | 499,271 | ||||||||
| 4.17% Senior notes | April 2026 | — | 200,000 | ||||||||
| 4.27% Senior notes | April 2028 | 200,000 | 200,000 | ||||||||
| Financing obligations | Various dates through February 2059 | 486,325 | 483,633 | ||||||||
| Non-recourse notes payable | Various dates through April 2033 | 16,082,391 | 15,827,609 | ||||||||
Total debt (3) | $ | 18,161,025 | $ | 18,051,313 | |||||||
| Cash and cash equivalents | $ | 132,223 | $ | 122,826 | |||||||
(1) Interest is payable monthly, with the exception of our senior notes, which are payable semi-annually.
(2) Borrowings accrue interest at variable rates based on SOFR, the federal funds rate, or the prime rate, depending on the type of borrowing.
(3) Total debt excludes unamortized debt issuance costs. See Note 9 for additional information.
Borrowings under our $2.00 billion unsecured revolving credit facility are available for working capital and general corporate purposes, and the unused portion is fully available to us. The credit facility, term loan and senior note agreements contain representations and warranties, conditions and covenants. If these requirements are not met, all amounts outstanding or otherwise owed could become due and payable immediately and other limitations could be placed on our ability to use any available borrowing capacity. As of May 31, 2026, we were in compliance with these financial covenants.
On June 15, 2026, we entered into a new term loan agreement for an aggregate principal amount of $500 million, which will mature on June 15, 2029. The proceeds from the term loan were used to pay down normal course borrowings under our $2.00 billion credit facility and for other working capital and general corporate purposes.
See Note 9 for additional information on our revolving credit facility, term loan, senior notes and financing obligations.
CAF auto loans held for investment and auto loans held for sale are primarily funded through our warehouse facilities and asset-backed term funding transactions. These non-recourse funding vehicles are structured to legally isolate the auto loans, and we would not expect to be able to access the assets of our non-recourse funding vehicles, even in insolvency, receivership or conservatorship proceedings. Similarly, the investors in the non-recourse notes payable have no recourse to our assets beyond the related loans, the amounts on deposit in reserve accounts and the restricted cash from collections on auto loans held for investment. We do, however, continue to have the rights associated with the interest we retain in these non-recourse funding vehicles.
As of May 31, 2026, $12.97 billion and $3.11 billion of non-recourse notes payable were outstanding related to asset-backed term funding transactions and our warehouse facilities, respectively. During the first three months of fiscal 2027, we funded a
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total of $1.36 billion in asset-backed term funding transactions. As of May 31, 2026, we had $3.24 billion of unused capacity in our warehouse facilities.
We have periodically increased our warehouse facility limit over time, as our store base, sales and CAF loan originations have grown. See Note 9 for additional information on the warehouse facilities.
We generally repurchase the loans funded through our warehouse facilities when we enter into an asset-backed term funding transaction. If our counterparties were to refuse to permit these repurchases it could impact our ability to execute on our funding program. Additionally, the agreements related to the warehouse facilities include various representations and warranties, as well as covenants and performance triggers related to events of default. If these requirements are not met, we could be unable to continue to fund loans through the warehouse facilities. In addition, warehouse facility investors could charge us a higher rate of interest and could have us replaced as servicer. Further, we could be required to deposit collections on the related loans with the warehouse facility agents on a daily basis and deliver executed lockbox agreements to the warehouse facility agents.
The timing and amount of stock repurchases are determined based on stock price, market conditions, legal requirements, cash flow dynamics and other factors. Shares repurchased are deemed authorized but unissued shares of common stock. As of May 31, 2026, a total of $2 billion of board authorizations for repurchases was outstanding, with no expiration date, of which $1.31 billion remained available for repurchase. See Note 10 for more information on share repurchase activity.
Fair Value Measurements
We recognize money market securities, mutual fund investments, certain equity investments, beneficial interests in non-consolidated securitizations and derivative instruments at fair value. See Note 6 for more information on fair value measurements.
FORWARD-LOOKING STATEMENTS
We caution readers that the statements contained in this report that are not statements of historical fact, including statements about our future business plans, operations, challenges, opportunities or prospects, including without limitation any statements or factors regarding our recent leadership transition, four-pillar strategic framework, operating capacity, sales, inventory, market share, financial and operational targets and goals, revenue, margins, expenses, liquidity, loan originations, capital expenditures, share repurchase plans, debt obligations or earnings, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by the use of words such as “anticipate,” “believe,” “commit,” “could,” “enable,” “encourage,” “estimate,” “expect,” “focus on,” “intend,” “may,” “on track,” “outlook,” “plan,” “position,” “predict,” “should,” “target,” “will” and other similar expressions, whether in the negative or affirmative. Such forward-looking statements are based upon management’s current knowledge, expectations and assumptions and involve risks and uncertainties that could cause actual results to differ materially from anticipated results. We disclaim any intent or obligation to update these statements. Among the factors that could cause actual results and outcomes to differ materially from those contained in the forward-looking statements are the following:
•Changes in the competitive landscape and/or our failure to successfully adjust to such changes.
•Changes in general or regional U.S. economic conditions, including economic downturns, inflationary pressures, fluctuating interest rates, tariffs, the effect of trade policies or related uncertainties and the potential impact of international events (including the conflict in the Middle East).
•Changes in the availability or cost of capital and working capital financing, including changes related to the asset-backed securitization market.
•Events that damage our reputation or harm the perception of the quality of our brand.
•Significant changes in prices of new and used vehicles.
•A reduction in the availability of or access to sources of inventory or a failure to expeditiously liquidate inventory.
•The failure or inability to realize the expected benefits and objectives associated with our four-pillar strategic framework.
•Our inability to realize the benefits associated with our sales platform or initiatives designed to leverage evolving technologies, including AI.
•Factors related to geographic and sales growth, including the inability to effectively manage our growth.
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•Our inability to recruit, develop and retain associates and maintain positive associate relations.
•The loss of key associates from our store, regional or corporate management teams, the failure to effectively execute key executive succession plans, disruptions associated with leadership transitions or a significant increase in labor costs.
•Changes in economic conditions or other factors that result in greater credit losses for CAF’s portfolio of auto loans than anticipated.
•The failure or inability to realize the benefits associated with our strategic investments.
•Changes in consumer credit availability provided by our third-party finance providers.
•Changes in the availability of extended protection plan products from third-party providers.
•The performance of the third-party vendors we rely on for key components of our business.
•Adverse conditions affecting one or more automotive manufacturers.
•The inaccuracy of estimates and assumptions used in the preparation of our financial statements, or the effect of new accounting requirements or changes to U.S. generally accepted accounting principles.
•The failure or inability to adequately protect our intellectual property.
•The occurrence of severe weather events.
•The failure or inability to meet our environmental goals or satisfy related disclosure requirements.
•Factors related to the geographic concentration of our stores.
•Security breaches or other events that result in the misappropriation, loss or other unauthorized disclosure of confidential customer, associate or corporate information.
•The failure of or inability to sufficiently enhance key information systems.
•Factors related to the regulatory and legislative environment in which we operate.
•The effect of evolving regulations, disclosure requirements, standards and expectations relating to environmental, social and governance matters.
•The effect of various litigation matters.
•The volatility in the market price for our common stock.
•The impact of potential shareholder activism.
For more details on factors that could affect expectations, see Part II, Item 1A, “Risk Factors” on Page 46 of this report, our Annual Report on Form 10-K for the fiscal year ended February 28, 2026, and our quarterly or current reports as filed with or furnished to the U.S. Securities and Exchange Commission (“SEC”). Our filings are publicly available on our investor information home page at investors.carmax.com. Requests for information may also be made to our Investor Relations Department by email to investor_relations@carmax.com or by calling 1-804-747-0422, ext. 7865. We undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes to our market risk since February 28, 2026. For information on our exposure to market risk, refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the fiscal year ended February 28, 2026.
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Item 4. Controls and Procedures
Disclosure. We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”)) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures are also designed to ensure that this information is accumulated and communicated to management, including the chief executive officer (“CEO”) and the chief financial officer (“CFO”), as appropriate to allow timely decisions regarding required disclosure.
As of the end of the period covered by this report, with the participation of the CEO and CFO, we evaluated the effectiveness of our disclosure controls and procedures. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period.
Internal Control over Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended May 31, 2026, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of certain legal proceedings, see Note 15 to the consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
In connection with information set forth in this Form 10-Q, the factors discussed under “Risk Factors” in our Form 10-K for fiscal year ended February 28, 2026, should be considered. These risks could materially and adversely affect our business, financial condition, and results of operations. There have been no material changes to the factors discussed in our Form 10‑K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In April 2022, the board authorized the repurchase of up to $2 billion of our common stock with no expiration date. Purchases may be made in open market transactions, including through Rule 10b5-1 plans, or privately negotiated transactions at management’s discretion and the timing and amount of repurchases are determined based on stock price, market conditions, legal requirements and other factors. Shares repurchased are deemed authorized but unissued shares of common stock.
The following table provides information relating to the company’s repurchase of common stock for the first quarter of fiscal 2027. The table does not include transactions related to employee equity awards or exercise of employee stock options.
| Approximate | ||||||||||||||||||||||||||
| Dollar Value | ||||||||||||||||||||||||||
| Total Number | of Shares that | |||||||||||||||||||||||||
| Total Number | Average | of Shares Purchased | May Yet Be | |||||||||||||||||||||||
| of Shares | Price Paid | as Part of Publicly | Purchased Under | |||||||||||||||||||||||
| Period | Purchased | per Share | Announced Program | the Program | ||||||||||||||||||||||
| March 1 - 31, 2026 | — | $ | — | — | $ | 1,305,060,166 | ||||||||||||||||||||
| April 1 - 30, 2026 | — | $ | — | — | $ | 1,305,060,166 | ||||||||||||||||||||
| May 1 - 31, 2026 | — | $ | — | — | $ | 1,305,060,166 | ||||||||||||||||||||
| Total | — | — | ||||||||||||||||||||||||
Page 46
Item 6. Exhibits
| Form of CarMax, Inc. Amended and Restated Severance Agreement between CarMax, Inc. and the persons listed at the end of such Agreement, as filed as Exhibit 10.1 to CarMax's Current Report on Form 8-K, filed March 2, 2026 (File No. 1-31420), is incorporated by this reference.* | |||||
| Term Loan Credit Agreement, dated as of June 15, 2026, among CarMax Auto Superstores, Inc., CarMax, Inc., MUFG Bank, Ltd., as administrative agent, and the other lending institutions named therein, filed herewith. | |||||
Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a), filed herewith. | |||||
Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a), filed herewith. | |||||
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, filed herewith. | |||||
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, filed herewith. | |||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | ||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document. | ||||
* Indicates management contract, compensatory plan or arrangement of the company required to be filed as an exhibit.
Page 47
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CARMAX, INC. | |||||
| By: | /s/ Keith Barr | ||||
| Keith Barr | |||||
| President and | |||||
| Chief Executive Officer | |||||
| By: | /s/ Enrique N. Mayor-Mora | ||||
| Enrique N. Mayor-Mora | |||||
| Executive Vice President and | |||||
| Chief Financial Officer | |||||
June 24, 2026
Page 48
TERM LOAN CREDIT AGREEMENT Dated as of June 15, 2026 among CARMAX AUTO SUPERSTORES, INC., as the Borrower, CARMAX, INC. and MUFG BANK, LTD., as Administrative Agent, and THE LENDERS PARTY HERETO MUFG BANK, LTD., CANADIAN IMPERIAL BANK OF COMMERCE and ROYAL BANK OF CANADA, as Joint Lead Arrangers and Joint Bookrunners PNC BANK, NATIONAL ASSOCIATION, as Documentation Agent
i TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND ACCOUNTING TERMS ...................................................................... 1 1.01 Defined Terms .................................................................................................................... 1 1.02 Other Interpretive Provisions ............................................................................................ 27 1.03 Accounting Terms ............................................................................................................. 28 1.04 Rounding ........................................................................................................................... 29 1.05 Times of Day .................................................................................................................... 29 1.06 Timing of Performance ..................................................................................................... 29 1.07 Pro Forma Calculation ...................................................................................................... 29 1.08 Rates.................................................................................................................................. 29 ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS ...................................................... 30 2.01 Term Loans ....................................................................................................................... 30 2.02 Borrowings and Conversions ............................................................................................ 30 2.03 [Reserved] ......................................................................................................................... 31 2.04 [Reserved] ......................................................................................................................... 31 2.05 [Reserved] ......................................................................................................................... 31 2.06 Prepayments ...................................................................................................................... 31 2.07 [Reserved] ......................................................................................................................... 31 2.08 Repayment of Loans ......................................................................................................... 31 2.09 Interest .............................................................................................................................. 31 2.10 Fees ................................................................................................................................... 32 2.11 Computation of Interest and Fees ..................................................................................... 32 2.12 Evidence of Debt............................................................................................................... 32 2.13 Payments Generally; Administrative Agent’s Clawback .................................................. 33 2.14 Sharing of Payments by Lenders ...................................................................................... 34 2.15 [Reserved] ......................................................................................................................... 35 2.16 [Reserved] ......................................................................................................................... 35 2.17 [Reserved] ......................................................................................................................... 35 2.18 Defaulting Lenders ............................................................................................................ 35 ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY ....................................................... 36 3.01 Taxes ................................................................................................................................. 36 3.02 Illegality ............................................................................................................................ 40 3.03 Inability to Determine Rates ............................................................................................. 40 3.04 Increased Costs ................................................................................................................. 41 3.05 Mitigation Obligations; Replacement of Lenders ............................................................. 42 3.06 Survival ............................................................................................................................. 42 3.07 Benchmark Replacement .................................................................................................. 42 ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS .............................................. 44 4.01 Conditions to Effectiveness .............................................................................................. 44 ARTICLE V REPRESENTATIONS AND WARRANTIES ..................................................................... 45 5.01 Existence, Qualification and Power .................................................................................. 45 5.02 Authorization; No Contravention...................................................................................... 46 5.03 Governmental Authorization; Other Consents .................................................................. 46
ii 5.04 Binding Effect ................................................................................................................... 46 5.05 Financial Statements; No Material Adverse Effect ........................................................... 46 5.06 Litigation ........................................................................................................................... 46 5.07 No Default ......................................................................................................................... 47 5.08 Ownership of Property ...................................................................................................... 47 5.09 [Reserved] ......................................................................................................................... 47 5.10 [Reserved] ......................................................................................................................... 47 5.11 [Reserved] ......................................................................................................................... 47 5.12 ERISA Compliance ........................................................................................................... 47 5.13 Subsidiaries; Equity Interests ............................................................................................ 48 5.14 Margin Regulations; Investment Company Act ................................................................ 48 5.15 Disclosure ......................................................................................................................... 48 5.16 Compliance with Laws ..................................................................................................... 48 5.17 [Reserved] ......................................................................................................................... 49 5.18 [Reserved] ......................................................................................................................... 49 5.19 OFAC ................................................................................................................................ 49 5.20 Anti-Corruption Laws ....................................................................................................... 49 5.21 No Affected Financial Institutions .................................................................................... 49 ARTICLE VI AFFIRMATIVE COVENANTS .......................................................................................... 49 6.01 Financial Statements ......................................................................................................... 49 6.02 Certificates; Other Information ......................................................................................... 50 6.03 Notices .............................................................................................................................. 52 6.04 Payment of Taxes .............................................................................................................. 52 6.05 Preservation of Existence, Etc .......................................................................................... 52 6.06 Maintenance of Properties ................................................................................................ 53 6.07 Maintenance of Insurance ................................................................................................. 53 6.08 Compliance with Laws and Contractual Obligations ........................................................ 53 6.09 Books and Records ........................................................................................................... 53 6.10 Inspection Rights .............................................................................................................. 53 6.11 Use of Proceeds ................................................................................................................ 54 6.12 New Subsidiaries .............................................................................................................. 54 6.13 Anti-Corruption Laws ....................................................................................................... 54 6.14 Most Favored Lender Provisions ...................................................................................... 54 ARTICLE VII NEGATIVE COVENANTS ............................................................................................... 55 7.01 Liens.................................................................................................................................. 55 7.02 Fundamental Changes ....................................................................................................... 58 7.03 Change in Nature of Business ........................................................................................... 59 7.04 Transactions with Affiliates .............................................................................................. 59 7.05 Burdensome Agreements .................................................................................................. 60 7.06 Reserved ............................................................................................................................ 60 7.07 Financial Covenants .......................................................................................................... 60 7.08 Indebtedness ...................................................................................................................... 60 7.09 Sanctions ........................................................................................................................... 61 7.10 Anti-Corruption Laws ....................................................................................................... 61 ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES .................................................................... 61 8.01 Events of Default .............................................................................................................. 61 8.02 Remedies Upon Event of Default ..................................................................................... 63 8.03 Application of Funds......................................................................................................... 63
iii ARTICLE IX ADMINISTRATIVE AGENT ............................................................................................. 64 9.01 Appointment and Authority .............................................................................................. 64 9.02 Rights as a Lender ............................................................................................................. 64 9.03 Exculpatory Provisions ..................................................................................................... 64 9.04 Reliance by Administrative Agent .................................................................................... 65 9.05 Delegation of Duties ......................................................................................................... 66 9.06 Resignation of Administrative Agent ............................................................................... 66 9.07 Non-Reliance on Administrative Agent and Other Lenders ............................................. 67 9.08 No Other Duties, Etc ......................................................................................................... 67 9.09 Administrative Agent May File Proofs of Claim .............................................................. 67 9.10 Guaranty Matters .............................................................................................................. 68 9.11 ERISA Matters .................................................................................................................. 68 ARTICLE X MISCELLANEOUS .............................................................................................................. 69 10.01 Amendments, Etc .............................................................................................................. 69 10.02 Notices; Effectiveness; Electronic Communication .......................................................... 70 10.03 No Waiver; Cumulative Remedies; Enforcement ............................................................. 72 10.04 Expenses; Indemnity; Damage Waiver ............................................................................. 73 10.05 Payments Set Aside ........................................................................................................... 75 10.06 Successors and Assigns ..................................................................................................... 75 10.07 Treatment of Certain Information; Confidentiality ........................................................... 79 10.08 Right of Setoff .................................................................................................................. 80 10.09 Interest Rate Limitation .................................................................................................... 80 10.10 Counterparts; Integration; Effectiveness ........................................................................... 80 10.11 Survival of Representations and Warranties ..................................................................... 81 10.12 Severability ....................................................................................................................... 81 10.13 Replacement of Lenders ................................................................................................... 81 10.14 Governing Law; Jurisdiction; Etc ..................................................................................... 82 10.15 WAIVER OF JURY TRIAL ............................................................................................. 83 10.16 No Advisory or Fiduciary Responsibility ......................................................................... 83 10.17 Electronic Execution of Assignments and Certain Other Documents .............................. 84 10.18 USA PATRIOT Act Notice .............................................................................................. 85 10.19 Acknowledgement and Consent to Bail-In of Affected Financial Institutions ................. 85 10.20 Acknowledgement Regarding any Supported QFCs ........................................................ 85 10.21 Erroneous Payments.......................................................................................................... 86
SCHEDULES 1.01 Term Securitization Programs 2.01 Commitments 5.06 Litigation 5.13 Subsidiaries and Other Equity Investments 7.01 Existing Liens 10.02 Administrative Agent’s Office; Certain Addresses for Notices 10.08 Restricted Deposit Accounts EXHIBITS Form of A Loan Notice B Note C Compliance Certificate D Assignment and Assumption E Company Guaranty Agreement F Subsidiary Guaranty Agreement G Joinder Agreement H Notice of Loan Prepayment iv
TERM LOAN CREDIT AGREEMENT This TERM LOAN CREDIT AGREEMENT (“Agreement”) is entered into as of June 15, 2026, by and among CARMAX AUTO SUPERSTORES, INC., a Virginia corporation (the “Borrower”), CARMAX, INC., a Virginia corporation (the “Company”), each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), and MUFG BANK, LTD., as Administrative Agent. RECITALS WHEREAS, the Borrower and the Company have requested that the Lenders provide a term loan facility to the Borrower in an aggregate principal amount of $500,000,000; and WHEREAS, the Lenders are willing to do so on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS 1.01 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below: “ABCP Facility” means (a) the private securitization facility governed by the Transfer and Administration Agreement dated as of December 1, 2004 among CarMax Funding II, as transferor, CarMax Business Services, LLC, a Delaware limited liability company, individually and as servicer, Bank of America, N.A., as a bank investor, as a class agent and as agent, and the other investors and class agents party thereto, as amended, supplemented or otherwise modified from time to time, (b) the private securitization facility governed by the Transfer and Administration Agreement dated as of May 25, 2010 among CarMax Funding III, as transferor, CarMax Business Services, LLC, a Delaware limited liability company, individually and as servicer, Wells Fargo Securities LLC, a Delaware limited liability company, as a class agent and as agent, and the investors and other class agents party thereto, as amended, supplemented or otherwise modified from time to time, (c) the private securitization facility governed by the Transfer and Administration Agreement dated as of August 1, 2016 among CarMax Funding IV, as transferor, CarMax Business Services, LLC, a Delaware limited liability company, individually and as servicer and Wells Fargo Bank, National Association, as agent, a class agent and a bank investor, as amended, supplemented or otherwise modified from time to time, (d) the private securitization facility governed by the Transfer and Administration Agreement dated as of September 29, 2017 among CarMax Funding V, as transferor, CarMax Business Services, LLC, a Delaware limited liability company, individually and as servicer, Sumitomo Mitsui Banking Corporation, a Japanese banking corporation, as a bank investor, Manhattan Asset Funding Company LLC, a Delaware limited liability company, as a conduit investor, and SMBC Nikko Securities America, Inc., a Delaware corporation, as class agent and as agent, as amended, supplemented or otherwise modified from time to time, (e) the private securitization facility governed by the Loan and Security Agreement dated as of October 9, 2020, among CarMax Funding VI, CarMax Business Services, LLC, a Delaware limited liability company, individually and as servicer, Chariot Funding LLC, as a conduit lender, Jupiter Securitization Company, as a conduit lender, JPMorgan Chase Bank, N.A., as the committed lender and administrative agent, as amended, supplemented or otherwise modified from time to time, and (f) any other asset-backed commercial paper facility under which retail installment contracts originated by the Company or any other Loan Party are sold, transferred or
2 assigned from time to time to one or more special purpose entities in a transaction that constitutes a “true sale” for bankruptcy purposes (as evidenced by an opinion prepared and delivered in a manner consistent with market standards by reputable independent counsel experienced in securitization transactions) for a price equal to not less than the fair market value of such retail installment contracts and on such other terms and conditions as shall be reasonable and customary for such transactions; provided, however, that, except as may be required by credit risk retention rules under applicable Law, (x) such arrangement does not include (i) provisions under which the Company or any Subsidiary (other than an Excluded Special Purpose Finance Subsidiary) directly assumes the credit risk associated with such retail installment contracts, (ii) direct or indirect recourse provisions under which, based on the historical performance of such retail installment contracts, the Company or any Subsidiary (other than an Excluded Special Purpose Finance Subsidiary) could reasonably be expected to suffer economic loss, or (iii) any recourse provisions which are not customary for transactions of such type and (y) such arrangement does not result in the creation of any Lien on the assets of the Company or any Subsidiary (other than Excluded Special Purpose Finance Subsidiaries), other than Liens on such retail installment contracts and the Related Property. “Acquisition” means any transaction or series of transactions resulting in the acquisition of (i) more than 50.00% of the Equity Interests in another Person, whether by purchase of such Equity Interests or upon the exercise of an option or warrant for, or conversion of securities into, such Equity Interests, (ii) assets of another Person which constitute all or substantially all of the assets of such Person or of a business unit or division of, or a line or lines of business conducted by such Person, or (iii) assets constituting a vehicle dealership. “Administrative Agent” means MUFG in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent pursuant to the terms hereof. “Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02, or such other address or account as the Administrative Agent may from time to time notify to the Company and the Lenders. “Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent. “Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution. “Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. “Agent Parties” has the meaning specified in Section 10.02(c). “Agreement” has the meaning specified in the introductory paragraph hereto. “Applicable Leverage Ratio” means (a) as of the Closing Date, the Consolidated Leverage Ratio and (b) from and after the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a) following a Revolver Repricing Amendment, the Consolidated Net Leverage Ratio. “Applicable Percentage” means with respect to such Lender’s portion of the outstanding Term Loan at any time, the percentage (carried out to the ninth decimal place) of the outstanding principal amount of the Term Loan held by such Lender at such time.
3 “Applicable Rate” means the following percentages per annum, based upon the Applicable Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(a): Pricing Tier Applicable Leverage Ratio Applicable Rate for Daily SOFR Loans Applicable Rate for Base Rate Loans 1 ≤0.75:1 0.950% 0.000% 2 > 0.75:1 but ≤ 1.75:1 1.100% 0.100% 3 > 1.75:1 but ≤ 2.50:1 1.200% 0.200% 4 > 2.50:1 but ≤ 3.25:1 1.300% 0.300% 5 > 3.25:1 but ≤ 3.75:1 1.400% 0.400% 6 > 3.75:1 1.600% 0.600% Any increase or decrease in the Applicable Rate resulting from a change in the Applicable Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a); provided, however, that if a Compliance Certificate is not delivered when due in accordance with such Section, then, upon the request of the Required Lenders, Pricing Tier 6 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall remain in effect until the date on which such Compliance Certificate is delivered in accordance with Section 6.02(a), whereupon the Applicable Rate shall be adjusted based upon the calculation of the Applicable Leverage Ratio contained in such Compliance Certificate. The Applicable Rate in effect from the Closing Date through the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a) for the fiscal quarter ending May 31, 2026 shall be determined based upon Pricing Tier 4. “Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender. “Arranger” or “Arrangers” means, either individually or collectively as the context may require, MUFG, Canadian Imperial Bank of Commerce and Royal Bank of Canada, in their capacities as joint lead arrangers and joint bookrunners. “Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 10.06(b)), and accepted by the Administrative Agent, in substantially the form of Exhibit D or any other form (including electronic documentation generated by use of an electronic platform) approved by the Administrative Agent.
4 “Attributable Indebtedness” means, on any date, (a) in respect of any capital lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP, and (b) in respect of any Synthetic Lease Obligation, the capitalized amount of the remaining lease payments under the relevant lease that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP if such lease were accounted for as a capital lease. “Audited Financial Statements” means the audited consolidated balance sheet of the Company and its Subsidiaries as of February 28, 2026, and the related consolidated statements of earnings, shareholders’ equity and cash flows of the Company and its Subsidiaries for the fiscal year ended on that date, including the notes thereto. “Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, any tenor for such Benchmark or payment period for interest calculated with reference to such Benchmark, as applicable, that is or may be used for determining the length of an interest period or any frequency of making payments of interest calculated with reference to such Benchmark pursuant to this Agreement as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed pursuant to Section 3.07(d). “Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution. “Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, rule, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings). “Base Rate” means, for any day, a rate of interest per annum equal to the highest of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by MUFG as its “prime rate” and (c) SOFR in effect on such day (taking into account any SOFR floor set forth in the definition of “Daily SOFR”) plus 1%; provided that if the Base Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement. The “prime rate” is a rate set by MUFG based upon various factors including MUFG’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such rate announced by MUFG shall take effect at the opening of business on the day specified in the public announcement of such change. If the Base Rate is being used as an alternate rate of interest pursuant to Section 3.02 or Section 3.03 hereof, then the Base Rate shall be the greater of clauses (a) and (b) above and shall be determined without reference to clause (c) above. “Base Rate Loan” means a Loan that bears interest at a rate based on the Base Rate. “Benchmark” means, initially, Daily SOFR; provided that if a replacement of the Benchmark has occurred pursuant to Section 3.07, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 3.07. “Benchmark Replacement” means, for any Available Tenor, with respect to any Benchmark Transition Event, the sum of: (a) the alternate benchmark rate that has been selected by the Administrative
5 Agent and the Borrower as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement for the then-current Benchmark for Dollar-denominated syndicated credit facilities at such time and (B) the related Benchmark Replacement Adjustment; provided that, if such the Benchmark Replacement as so determined would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents. “Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with a Benchmark Replacement for any setting of such Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by the Administrative Agent and the Borrower for the applicable Corresponding Tenor giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body on the applicable Benchmark Replacement Date or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated credit facilities. “Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark: (a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); (b) in the case of clause (c) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein, the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be no longer representative; provided, that such non-representativeness will be determined by reference to the most recent statement or publication referenced in such clause (c). For the avoidance of doubt, (A) if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for such determination and (B) the “Benchmark Replacement Date” will be deemed to have occurred with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof). “Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark: (a) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors (if applicable) of such Benchmark (or such component thereof), permanently or indefinitely, provided that, at the time of such statement or
6 publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); (b) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor (if applicable) of such Benchmark (or such component thereof); or (c) a public statement or publication of information by any of the entities referenced in clause (b) above announcing that all Available Tenors of such Benchmark (or such component thereof) are no longer, or as of a specified future date will no longer be, representative. For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof). “Benchmark Unavailability Period” means the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark in accordance with Section 3.07 and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark in accordance with Section 3.07. “Beneficial Ownership Certification” means a certification regarding beneficial ownership that is required by the Beneficial Ownership Regulation. “Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230. “Benefit Plan” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in and subject to Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”. “Borrower” has the meaning specified in the introductory paragraph hereto. “Borrower Materials” has the meaning specified in Section 6.02. “Borrowing” means a borrowing consisting of simultaneous Loans of the same Type made by each of the Lenders pursuant to Section 2.01. “Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, New York State or the state where the Administrative Agent’s Office is located. “CarMax Funding II” means CarMax Funding II, LLC, a Delaware limited liability company.
7 “CarMax Funding III” means CarMax Funding III, LLC, a Delaware limited liability company. “CarMax Funding IV” means CarMax Funding IV, LLC, a Delaware limited liability company. “CarMax Funding V” means CarMax Funding V, LLC, a Delaware limited liability company. “CarMax Funding VI” means CarMax Funding VI, LLC, a Delaware limited liability company. “CarMax Funding VII” means CarMax Funding VII, LLC, a Delaware limited liability company. “Cash Equivalents” means, as at any date, (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (b) Dollar denominated time deposits and certificates of deposit with (i) any Lender, (ii) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (iii) any bank whose short term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof (any such bank being an “Approved Bank”), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s and maturing within six months of the date of acquisition, (d) marketable short-term money market and similar funds (including such funds investing a portion of their assets in municipal securities) having a rating of at least P-1 or A-1 from either S&P or Moody’s, respectively (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized statistical rating agency selected by the Borrower), (e) repurchase agreements entered into by any Person with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500,000,000 for direct obligations issued by or fully guaranteed or insured by the United States government or any agency or instrumentality of the United States in which such Person shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations, (f) investments, classified in accordance with GAAP as current assets, in money market investment programs registered under the Investment Company Act of 1940 which are administered by reputable financial institutions having capital of at least $500,000,000, (g) investment funds investing at least 95% of their assets in securities of the types (including as to credit quality and maturity) described in clauses (b) through (f) above and (h) solely with respect to any Foreign Subsidiary, investments of comparable tenor and credit quality to those described in the foregoing clauses (b) through (g) customarily utilized in countries in which such Foreign Subsidiary operates for short term cash management purposes. “Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all regulations, requests, rules, guidelines or directives under or issued in connection therewith or in the implementation thereof and (y) all regulations, requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
8 “Change of Control” means an event or series of events by which: (a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire (such right, an “option right”)), directly or indirectly, of 35% or more of the equity securities of the Company entitled to vote for members of the board of directors or equivalent governing body of the Company on a fully-diluted basis (and taking into account all such securities that such person or group has the right to acquire pursuant to any option right); or (b) during any period of 12 consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Company cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; or (c) the Borrower ceases to be a direct or indirect, wholly-owned Subsidiary of the Company; or (d) the Borrower becomes a direct or indirect Subsidiary of any Subsidiary that is not a Loan Party. “Closing Date” means June 15, 2026. “Code” means the Internal Revenue Code of 1986. “Collection Account” means any bank account established expressly for the remittance of collections related to Permitted Retail Installment Contracts. “Commitment” means, as to each Lender, its obligation to make or maintain a Term Loan to the Borrower pursuant to Section 2.01, in an aggregate principal amount not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable. The aggregate amount of Commitments of all Lenders on the Closing Date is Five Hundred Million Dollars ($500,000,000). “Communication” means this Agreement, any Loan Document and any document, any amendment, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to any Loan Document. “Company” has the meaning specified in the introductory paragraph hereto. “Company Guaranty Agreement” means the Company Guaranty Agreement, dated as of the date hereof, made by the Company in favor of the Administrative Agent and the Lenders, substantially in the form of Exhibit E.
9 “Company Margin Stock” means capital stock issued by the Company that (i) constitutes “margin stock” within the meaning of such term under Regulation U of the Federal Reserve Board and (ii) would, taking into account all other “margin stock” held by the Company and its Subsidiaries, cause the value of all such “margin stock” to exceed 25% of the value of all assets of the Company and its Subsidiaries that directly or indirectly secure (with the meaning of Regulation U of the Federal Reserve Board) the Obligations. “Compliance Certificate” means a certificate substantially in the form of Exhibit C. “Conforming Changes” means, with respect to the initial Benchmark or any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definitions of “Base Rate”, “SOFR”, “Daily SOFR”, “Borrowing”, “Business Day”, “SOFR Business Day” or “Interest Period” or any similar of analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Administrative Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Administrative Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents). “Consolidated EBITDA” means, for any period, for the Company and its Subsidiaries on a consolidated basis, an amount equal to Consolidated Net Income for such period plus (a) the following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated Interest Charges for such period; (ii) the provision for Federal, state, local and foreign income taxes based on income, profits or capital payable by the Company and its Subsidiaries for such period; (iii) depreciation and amortization expense; (iv) share-based compensation expense reducing such Consolidated Net Income which does not represent a cash item in such period or any future period; (v) other non-recurring expenses of the Company and its Subsidiaries reducing such Consolidated Net Income which do not represent a cash item in such period or any future period; and (vi) the amortization or expense of all premiums, fees and expenses payable to the extent related to Indebtedness; and minus (b) the following to the extent included in calculating such Consolidated Net Income: (x) Federal, state, local and foreign income tax credits of the Company and its Subsidiaries for such period and (ii) all non-cash items increasing such Consolidated Net Income. “Consolidated EBITDAR” means, for any period, for the Company and its Subsidiaries on a consolidated basis, an amount equal to Consolidated EBITDA for such period, plus Consolidated Rental Obligations for such period.
10 “Consolidated Funded Debt” means, with respect to the Company and its Subsidiaries on a consolidated basis, at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP: (a) all obligations of such Persons for borrowed money and all monetary obligations of such Persons evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) all unreimbursed obligations of such Persons arising under drawn letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments; (c) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Persons (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Persons or is limited in recourse; (d) capital leases and Synthetic Lease Obligations; and (e) all Guarantees of such Person in respect of any of the foregoing. For all purposes hereof, Consolidated Funded Debt shall include the Indebtedness of the types described above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company or the foreign equivalent thereof) in which the Company or any of its Subsidiaries is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person (in which case such Indebtedness shall not be included) or the liability of such Person in respect of such Indebtedness is otherwise limited (in which case such Indebtedness shall only be included to the extent of such liability). The amount of any Indebtedness secured by a Lien on property owned or being purchased by the Company or any of its Subsidiaries shall be deemed to be the lesser of the outstanding amount of such Indebtedness and the fair market value of such property as determined by such Person in good faith if recourse with respect to such Indebtedness is expressly limited to such property. The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date. Consolidated Funded Debt shall not include the liabilities of any Excluded Special Purpose Finance Subsidiary. “Consolidated Interest and Rent Coverage Ratio” means, as of any date of determination, the ratio of (a) Consolidated EBITDAR for the four fiscal quarter period ending on such date to (b) Consolidated Interest Charges for such period plus Consolidated Rental Obligations for the four fiscal quarter period ending on such date ((x) excluding such rental obligations with respect to real property leased by the Company and its Subsidiaries at the beginning of such period that was purchased by the Company and its Subsidiaries during such four quarter period, but (y) including, on an annualized basis, such rental obligations with respect to real property owned by the Company and its Subsidiaries at the beginning of such period that was Disposed pursuant to a sale and leaseback transaction consummated during such period). “Consolidated Interest Charges” means, for any period, for the Company and its Subsidiaries on a consolidated basis, the sum of (a) all gross interest expense (without reducing such amount by, or otherwise netting out, any interest income, floorplan assistance, interest credits or other similar income), premium payments, debt discount, fees, charges and related expenses of the Company and its Subsidiaries in connection with borrowed money or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, but excluding any such interest or expense of (i) an Excluded Special Purpose Finance Subsidiary or (ii) any Person that is neither the Company nor a
11 Subsidiary, which interest or expense (in the case of each of clauses (i) and (ii)) arises pursuant to a Permitted Sale Facility, and (b) the portion of rent expense of the Company and its Subsidiaries with respect to such period under (i) capital leases that is treated as interest in accordance with GAAP and (ii) Synthetic Lease Obligations that would be treated as interest under GAAP were such leases treated as capital leases. “Consolidated Leverage Ratio” means, as of any date of determination, the ratio of (a) an amount equal to (i) the Consolidated Funded Debt as of such date plus (ii) the product of (A) six (6) times (B) Consolidated Rental Obligations for the four fiscal quarter period ending on such date ((x) excluding such rental obligations with respect to real property leased by the Company and its Subsidiaries at the beginning of such period that was purchased by the Company and its Subsidiaries during such four quarter period, but (y) including, on an annualized basis, such rental obligations with respect to real property owned by the Company and its Subsidiaries at the beginning of such period that was Disposed pursuant to a sale and leaseback transaction consummated during such period) to (b) Consolidated EBITDAR for the four fiscal quarter period ending on such date. “Consolidated Net Income” means, for any period, for the Company and its Subsidiaries on a consolidated basis, the net income of the Company and its Subsidiaries for such period (excluding any income (or loss) for such period of any Person if such Person is not a Subsidiary, except that the aggregate amount of cash actually distributed by such Person during such period to the Company or a Subsidiary as a dividend or other distribution shall be included in Consolidated Net Income). “Consolidated Net Leverage Ratio” means, as of any date of determination, the ratio of (a) an amount equal to (i) the Consolidated Funded Debt as of such date minus (ii) the amount of unrestricted cash and Cash Equivalents held by any Loan Party in the United States as of such date in excess of $15,000,000 (which cash is verifiable by the Administrative Agent) plus (iii) the product of (A) six (6) times (B) Consolidated Rental Obligations for the four fiscal quarter period ending on such date ((x) excluding such rental obligations with respect to real property leased by the Company and its Subsidiaries at the beginning of such period that was purchased by the Company and its Subsidiaries during such four quarter period, but (y) including, on an annualized basis, such rental obligations with respect to real property owned by the Company and its Subsidiaries at the beginning of such period that was Disposed pursuant to a sale and leaseback transaction consummated during such period) to (b) Consolidated EBITDAR for the four fiscal quarter period ending on such date. “Consolidated Rental Obligations” means, for any period, the aggregate amount of all rental obligations accrued during such period for which the Company and its Subsidiaries are directly or indirectly liable (as lessee or as guarantor or other surety but without duplication) under all leases (excluding capital leases) in effect at any time during such period, all as determined on a consolidated basis in accordance with GAAP. “Consolidated Unencumbered Current Assets” means, as of any date of determination, the book value of current assets of the Company and its Subsidiaries, on a consolidated basis, that are not subject to any Lien securing Indebtedness. “Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
12 “Corresponding Tenor” with respect to any Available Tenor means, as applicable, either a tenor (including overnight) or an interest payment period having approximately the same length (disregarding business day adjustment) as such Available Tenor. “Credit Extension” means a Borrowing. “Credit Facilities” means, collectively, the Revolving Credit Facility and the Term Loan Facility. “Credit Facility Documents” means the Revolving Credit Facility, the Term Loan Facility and all other instruments, agreements and other documents evidencing, securing or governing the Indebtedness evidenced by the Revolving Credit Facility or the Term Loan Facility or providing for any guarantee or other right in respect thereof. “Daily SOFR” shall mean, for any day (a “SOFR Rate Day”), a rate per annum equal to SOFR for the day (such day “SOFR Determination Date”) that is two (2) SOFR Business Days prior to (i) if such SOFR Rate Day is a SOFR Business Day, such SOFR Rate Day or (ii) if such SOFR Rate Day is not a SOFR Business Day, the SOFR Business Day immediately preceding such SOFR Rate Day, in each case, as such SOFR is published by the SOFR Administrator on the SOFR Administrator’s Website (or any successor source). If by 5:00 p.m. on the second (2nd) SOFR Business Day immediately following any SOFR Determination Date, SOFR in respect of such SOFR Determination Date has not been so published and a Benchmark Replacement with respect to Daily SOFR has not been implemented in accordance with Section 3.07, then SOFR for such SOFR Determination Date will be SOFR as published in respect of the first preceding SOFR Business Day for which such SOFR was published on the SOFR Administrator’s Website; provided that any SOFR determined pursuant to this sentence shall be utilized for purposes of the calculation of Daily SOFR for no more than three (3) consecutive SOFR Rate Days. Any change in Daily SOFR due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower or the Company. If the rate as so determined would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement. “Daily SOFR Loan” means a Loan that bears interest at a rate based on Daily SOFR. “Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally. “Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default. “Default Rate” means an interest rate equal to (i) the Base Rate plus (ii) the Applicable Rate, if any, applicable to Base Rate Loans plus (iii) 2% per annum; provided, however, that with respect to a Daily SOFR Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Rate) otherwise applicable to such Loan plus 2% per annum. “Defaulting Lender” means, subject to Section 2.18(b), any Lender that (a) has failed to (i) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Company in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (ii) pay to the Administrative Agent or any Lender any other amount required to be paid by it hereunder within two Business Days of the date when due, (b) has notified the
13 Company or the Administrative Agent in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect with respect to its funding obligations hereunder (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after written request by the Administrative Agent or the Company, to confirm in writing to the Administrative Agent and the Company that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Company), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity or (iii) become the subject of a Bail-in Action; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any Equity Interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (d) above, and of the effective date of such status, shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.18(b)) as of the date established therefor by the Administrative Agent in a written notice of such determination, which shall be delivered by the Administrative Agent to the Company and each Lender promptly following such determination. “Delaware Divided LLC” means any Delaware LLC which has been formed upon consummation of a Delaware LLC Division. “Delaware LLC” means any limited liability company organized or formed under the laws of the State of Delaware. “Delaware LLC Division” means the statutory division of any Delaware LLC into two or more Delaware LLCs pursuant to Section 18-217 of the Delaware Limited Liability Company Act. “Designated Jurisdiction” means any country or territory to the extent that such country or territory itself or whose government is the subject of any territorial Sanction. “Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith and including any disposition of property to a Delaware Divided LLC pursuant to a Delaware LLC Division, but excluding sales, transfers or other dispositions of Company Margin Stock that is held by the Company as treasury stock. “Dollar” and “$” mean lawful money of the United States. “Domestic Subsidiary” means any Subsidiary that is organized under the Laws of any state of the United States or the District of Columbia.
14 “EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a Subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent. “EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway. “EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution. “Electronic Copy” has the meaning specified in Section 10.17. “Electronic Record” and “Electronic Signature” shall have the meanings assigned to them, respectively, by 15 USC §7006, as it may be amended from time to time. “Eligible Assignee” means any Person that meets the requirements to be an assignee under Sections 10.06(b)(iii) and (v) (subject to such consents, if any, as may be required under Section 10.06(b)(iii)). “Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. “Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Company, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. “Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting. “ERISA” means the Employee Retirement Income Security Act of 1974. “ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Company within the meaning of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code).
15 “ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Company or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability upon the Company or any ERISA Affiliate under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, that has not been satisfied in full. “Erroneous Payment” has the meaning specified in Section 10.21(a). “EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time. “Event of Default” has the meaning specified in Section 8.01. “Excluded Special Purpose Finance Subsidiaries” means, collectively, (a) CarMax Funding II, (b) CarMax Auto Funding LLC, a Delaware limited liability company, (c) CarMax Funding III, (d) CarMax Funding IV, (e) CarMax Funding V, (f) CarMax Funding VI, (g) CarMax Funding VII, (h) CarMax Funding Services, LLC, a Delaware limited liability company, (i) CarMax Funding Services II, LLC, a Delaware limited liability company, and (j) any other special purpose Subsidiary formed to purchase or otherwise acquire retail installment contracts in connection with an existing or proposed Permitted Sale Facility and which does not conduct any business other than in connection with such Permitted Sale Facility. “Excluded Subsidiaries” means (a) Glen Allen Insurance, Ltd., a Bermuda company and any other captive insurance subsidiary; (b) each Excluded Special Purpose Finance Subsidiary; (c) any Subsidiary of the Company that is (i) a Foreign Subsidiary or a Subsidiary of a Foreign Subsidiary, (ii) a FSHCO or (iii) a Subsidiary that is not wholly-owned by a Loan Party; (d) any Subsidiary of the Company (i) that is prohibited from guaranteeing the Obligations by applicable Law, (ii) that would require governmental (including regulatory) consent, approval, license or authorization to provide a guarantee, in each case unless such consent, approval, license or authorization has been received or (iii) that is prohibited from guaranteeing the Obligations by any agreement or other undertaking to which such Subsidiary is a party (with any Person other than another Subsidiary or an Affiliate of the Company) or by which its property or assets is bound existing on the Closing Date, or with respect to any Subsidiary acquired after the Closing Date, existing as of the date of acquisition (as long as such agreement or other undertaking was not incurred in contemplation of such acquisition and is disclosed to the Administrative Agent), in each case, as long as such prohibition is in effect; (e) each Immaterial Subsidiary; and (f) any not-for-profit subsidiary; provided that, in no event shall any borrower or guarantor in respect of the Revolving Credit Facility or the Term Loan Facility be an Excluded Subsidiary. “Excluded Taxes” means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Company or the Borrower hereunder, (a) Taxes imposed on or measured by its overall net income (however denominated), including branch profits Taxes, and franchise Taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable Lending Office is located, (b) any branch profits Taxes imposed by the United States or any similar tax imposed by any other
16 jurisdiction in which the Company or the Borrower, as the case may be, is located, (c) any U.S. federal withholding Taxes imposed pursuant to FATCA and (d) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Company under Section 10.13), any U.S. federal withholding Tax that is imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new Lending Office) or is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 3.01(e), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Lending Office (or assignment), to receive additional amounts from the Company or the Borrower, as the case may be, with respect to such withholding Tax pursuant to Section 3.01(a). “FATCA” means Sections 1471 through 1474 of the Code, as of the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code, and any intergovernmental agreements entered into pursuant thereto. “Federal Funds Rate” means, for any day, the greater of (a) zero and (b) the rate per annum calculated by the Federal Reserve Bank of New York based on such day’s federal funds transactions by depository institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the federal funds effective rate or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. (Central time) on such day on such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion. “Federal Reserve Board” means the Board of Governors of the Federal Reserve System of the United States. “Fee Letter” means, collectively or individually as the context may require, (a) that certain engagement letter dated as of May 27, 2026, by and between MUFG and the Borrower and (b) any other fee letter between the Borrower and MUFG or any Lender executed in connection with this Agreement. “Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to Daily SOFR. The Borrower, the Administrative Agent and the Lenders acknowledge that the Floor as of the Closing Date is zero percent per annum (0.00%). “Foreign Lender” means, with respect to the Company or the Borrower, any Lender that is organized under the laws of a jurisdiction other than that in which the Company or the Borrower is resident for tax purposes. For purposes of this definition, the United States, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. “Foreign Subsidiary” means any direct or indirect Subsidiary of the Company other than a Domestic Subsidiary. “FSHCO” means any Domestic Subsidiary of the Company substantially all of whose assets consists of the Equity Interests of one or more Foreign Subsidiaries. “Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its activities.
17 “GAAP” means generally accepted accounting principles in the United States set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession in the United States, that are applicable to the circumstances as of the date of determination, consistently applied. “Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra- national bodies such as the European Union or the European Central Bank). “Guarantee” means, as to any Person, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or other monetary obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided, however, that the term “Guarantee” shall not include endorsements of drafts or other negotiable instruments for collection or deposit in the ordinary course of business, or customary and reasonable indemnity obligations in effect on the Closing Date, or entered into in connection with any acquisition or Disposition of assets permitted under this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith; provided, however, that the amount of any Guarantee described in clause (b) above which is expressly non-recourse to the other assets of such Person shall be deemed to be the lesser of the amount determined as described above and the fair market value of the assets subject to such Lien as determined by the guaranteeing Person in good faith. The term “Guarantee” as a verb has a corresponding meaning. “Guaranties” means the Company Guaranty Agreement and the Subsidiary Guaranty Agreement. “Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. “Immaterial Subsidiary” means any Subsidiary that neither (a) has total assets in excess of 5% of the consolidated total assets of the Company and its Subsidiaries (based upon and as of the date of the most recent consolidated financial statements of the Company and its Subsidiaries delivered pursuant to Section 6.01), nor (b) has total revenues in excess of 5% of the consolidated total revenues of the Company and its
18 Subsidiaries for the most recent four-quarter period (based upon and ending on the date of the most recent consolidated financial statements of the Company and its Subsidiaries delivered pursuant to Section 6.01), with any Subsidiary which was previously an Immaterial Subsidiary ceasing to be an Immaterial Subsidiary on the date financial statements delivered pursuant to Section 6.01 demonstrate that such Subsidiary ceases to qualify as an Immaterial Subsidiary; provided, that, (i) the total assets held by all Subsidiaries treated as Immaterial Subsidiaries hereunder shall not exceed 15% of the consolidated total assets of the Company and its Subsidiaries (based upon and as of the date of the most recent consolidated financial statements of the Company and its Subsidiaries delivered pursuant to Section 6.01) and (ii) the total revenues generated by all Subsidiaries treated as Immaterial Subsidiaries hereunder shall not exceed 15% of the consolidated total revenues of the Company and its Subsidiaries for the most recent four-quarter period (based upon and ending on the date of the most recent consolidated financial statements of the Company and its Subsidiaries delivered pursuant to Section 6.01). “Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments; (b) all direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments issued or created for the account of such Person; (c) net obligations of such Person under any Swap Contract; (d) all obligations of such Person to pay the deferred purchase price of property or services (other than (x) trade accounts payable arising in the ordinary course of business, (y) any earn-out obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP and (z) current liabilities consisting of expenses accrued in the ordinary course of business); (e) indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (f) capital leases and Synthetic Lease Obligations; (g) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any Equity Interest in such Person or any other Person, valued, in the case of a redeemable preferred interest, at the greater of its voluntary or involuntary liquidation preference plus accrued and unpaid dividends; and (h) all Guarantees of such Person in respect of any of the foregoing. For all purposes hereof, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company or the foreign equivalent thereof) in which such Person is a general partner or a joint venturer, unless such Indebtedness is expressly made non-recourse to such Person (in which case such Indebtedness shall not be included) or the liability of such Person in respect of such Indebtedness is otherwise limited (in which case such Indebtedness shall only be included to the extent of such liability). The amount of any Indebtedness
19 secured by a Lien on property owned or being purchased by any Person shall be deemed to be the lesser of the outstanding amount of such Indebtedness and the fair market value of such property as determined by such Person in good faith if recourse with respect to such Indebtedness is expressly limited to such property. The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date. The amount of any capital lease or Synthetic Lease Obligation as of any date shall be deemed to be the amount of Attributable Indebtedness in respect thereof as of such date. “Indemnified Taxes” means Taxes other than Excluded Taxes. “Indemnitees” has the meaning specified in Section 10.04(b). “Information” has the meaning specified in Section 10.07. “Interest Payment Date” means the first Business Day of each calendar month. “Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of capital stock or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of debt of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person and any arrangement pursuant to which the investor Guarantees Indebtedness of such other Person, or (c) the purchase or other acquisition (in one transaction or a series of transactions) of assets of another Person that constitute a business unit; provided however, that investments made by the Company or any of its Subsidiaries at the direction of an employee thereof under any deferred compensation plan or “rabbi trust” formed in connection with such plan shall not constitute “Investments” for purposes of this Agreement. “IRS” means the United States Internal Revenue Service. “Joinder Agreement” means each Joinder Agreement, substantially in the form of Exhibit G, executed and delivered by a Subsidiary or any other Person to the Administrative Agent, for the benefit of the Lenders, pursuant to Section 6.12. “Joint Venture” means any Person in whom the Company or any of its Subsidiaries beneficially owns 50.0% or less of the Equity Interests thereof entitled to vote for members of the board of directors or equivalent governing body. “Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case whether or not having the force of law. “Lender” has the meaning specified in the introductory paragraph hereto. “Lender Party” has the meaning specified in Section 10.21(a). “Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Company and the Administrative Agent, which office may include any Affiliate of such
20 Lender or any domestic or foreign branch of such Lender or such affiliate. Unless the context otherwise requires each reference to a Lender shall include its applicable Lending Office. “Leverage Holiday” has the meaning specified in Section 7.07. “Lien” means any mortgage, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement in the nature of a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing). “Loan” means the Term Loan, or any portion thereof. “Loan Documents” means, collectively, this Agreement, each Joinder Agreement, each Note, each Guaranty and the Fee Letter. “Loan Notice” means a notice of (a) a Borrowing, or (b) a conversion of Loans from one Type to the other pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A or such other form as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent) appropriately completed and signed by a Responsible Officer of the Borrower. “Loan Parties” means, collectively, the Company, the Borrower and each Subsidiary Guarantor. “Material Acquisition” mean any Acquisition that the aggregate consideration therefor (including Indebtedness assumed in connection therewith) equals or exceeds $250,000,000. “Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect on, the business, assets, liabilities, results of operations or financial condition of the Company and its Subsidiaries, taken as a whole; (b) a material impairment of the ability of the Loan Parties, taken as a whole, to perform their payment or guaranty obligations under any Loan Document; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document to which it is a party. “Maturity Date” means June 15, 2029. “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto. “Most Favored Lender Provisions” has the meaning specified in Section 6.14. “MUFG” means MUFG Bank, Ltd. and its successors. “Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions. “Non-Consenting Lender” means any Lender that does not approve any amendment, waiver or consent that (i) requires the approval of all Lenders or all affected Lenders in accordance with the terms of Section 10.01 and (ii) has been approved by the Required Lenders.
21 “Note” means a promissory note made by the Borrower in favor of a Lender evidencing Loans made by such Lender to the Borrower, substantially in the form of Exhibit B. “Notice of Loan Prepayment” means a notice of prepayment with respect to a Loan, which shall be substantially in the form of Exhibit H or such other form as may be approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Borrower. “Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party of any proceeding under any Debtor Relief Laws naming such Loan Party as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding. “OFAC” means the Office of Foreign Assets Control of the United States Department of the Treasury. “Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and bylaws of such corporation (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement of such company; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with the formation or organization of such partnership, joint venture, trust or other entity with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity. “Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document. “Outstanding Amount” means with respect to the Term Loan, on any date, the aggregate outstanding principal amount thereof after giving effect to any borrowings and prepayments or repayments of the Term Loan occurring on such date. “Payment Recipient” has the meaning specified in Section 10.21(a). “Participant” has the meaning specified in Section 10.06(d). “Participant Register” has the meaning specified in Section 10.06(d). “Patriot Act” has the meaning specified in Section 10.18. “PBGC” means the Pension Benefit Guaranty Corporation. “Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Company or any ERISA Affiliate or to which the Company or any ERISA Affiliate
22 contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years. “Permitted Retail Installment Contract” means a vehicle retail installment contract sold, transferred or assigned by the Company or a Subsidiary to the applicable purchaser, transferee or assignee pursuant to a Permitted Sale Facility. “Permitted Sale Facilities” means, collectively, (i) each ABCP Facility, (ii) each Term Securitization Program, (iii) each arrangement under which Third-Party Contracts are sold for fair market value to financial institutions or other lenders and (iv) each other arrangement which provides for the sale, transfer or assignment of retail installment contracts originated by the Company or any other Loan Party to a third party purchaser, transferee or assignee and in a transaction that constitutes a “true sale” for bankruptcy purposes for a price equal to not less than the fair market value of such retail installment contracts and on such other terms and conditions as shall be reasonable and customary for such transactions; provided, however, that, in the case of any arrangement described in clause (iii) or (iv) above, except as may be required by credit risk retention rules under applicable Law, (x) such arrangement does not create Indebtedness (except for income tax or GAAP purposes) of the Company or any Subsidiary (other than an Excluded Special Purpose Finance Subsidiary), (y) such arrangement does not include (1) provisions under which the Company or any Subsidiary (other than an Excluded Special Purpose Finance Subsidiary) directly assumes the credit risk associated with such retail installment contracts, (2) direct or indirect recourse provisions under which, based on the historical performance of such retail installment contracts, the Company or any Subsidiary (other than an Excluded Special Purpose Finance Subsidiary) could reasonably be expected to suffer economic loss, or (3) any recourse provisions which are not customary for transactions of such type and (z) such arrangement does not result in the creation of any Lien on the assets of the Company or any Subsidiary (other than Excluded Special Purpose Finance Subsidiaries), other than Liens on such retail installment contracts and the Related Property. “Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. “Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Company or, with respect to any such plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA Affiliate. “Platform” has the meaning specified in Section 6.02. “Pro Forma Basis” “Pro Forma Compliance” and “Pro Forma Effect” means, in respect of a Specified Transaction, that such Specified Transaction and the following transactions in connection therewith (to the extent applicable) shall be deemed to have occurred as of the first day of the applicable period of measurement for the applicable covenant or requirement: (a)(i) with respect to any Disposition of all or substantially all Equity Interests in any Subsidiary or any division or product line of the Company or any Subsidiary, income statement items (whether positive or negative) attributable to the property or Person, if any, subject to such Disposition shall be excluded and (ii) with respect to any Acquisition, income statement items (whether positive or negative) attributable to the Person or property acquired shall be included to the extent relating to any period applicable in such calculations to the extent such items are not otherwise included in such income statement items for the Company and its Subsidiaries in accordance with GAAP or in accordance with any defined terms set forth in Section 1.01, (b) any retirement of Indebtedness and (c) any incurrence or assumption of Indebtedness by the Company or any Subsidiary (and if such Indebtedness has a floating or formula rate, such Indebtedness shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in
23 effect with respect to such Indebtedness as at the relevant date of determination); provided that (A) Pro Forma Basis, Pro Forma Compliance and Pro Forma Effect in respect of any Specified Transaction shall be calculated in a reasonable and factually supportable manner and certified by a Responsible Officer of the Company and (B) any such calculation shall be subject to the applicable limitations set forth in the definition of Consolidated EBITDA. “PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time. “Public Lender” has the meaning specified in Section 6.02. “Reference Time” with respect to any setting of the then-current Benchmark means (a) if such Benchmark is Daily SOFR, 3:00 p.m. (New York City time) on the day that is four (4) Business Days preceding the date of such setting, and (b) if such Benchmark is not Daily SOFR, the time determined by the Administrative Agent in its reasonable discretion. “Register” has the meaning specified in Section 10.06(c). “Related Indemnified Party” means, with respect to any Indemnitee, (a) any Controlling or Controlled Affiliate of such Indemnitee, (b) the respective directors, officers, managers or employees of such Indemnitee or any of its Controlling or Controlled Affiliates and (c) the respective agents, advisors and representatives of such Indemnitee or any of its Controlling or Controlled Affiliates, in the case of this clause (c), acting at the instructions of such Indemnitee; provided, that each reference to a Controlled or Controlling Affiliate in this sentence pertains to a Controlled or Controlling Affiliate involved, directly or indirectly, in the negotiation, syndication or administration of the credit facilities provided for herein. “Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates. “Related Property” means, with respect to any retail installment contract, (a) the Lien created by such contract in the vehicle purchased under such contract, (b) all other Liens, if any, (other than Liens on assets of the Company or any Subsidiary) to secure payment of such contract, (c) all guaranties, insurance contracts and other agreements or arrangements of whatever character from time to time supporting or securing payment of such contract, (d) all documents evidencing such contract or the Liens, guaranties, agreements or arrangements described in clauses (a) through (c) above, (e) all present and future claims, demands, causes of action and choses in action in respect of the foregoing and (f) all proceeds of the foregoing. “Relevant Governmental Body” means the Federal Reserve Board or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board or the Federal Reserve Bank of New York, or any successor thereto. “Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the thirty (30) day notice period has been waived. “Required Lenders” means, as of any date of determination, Lenders having more than 50% of the Total Outstandings; provided that the portion of the Total Outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders.
24 “Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority. “Responsible Officer” means the chief executive officer, the president, the chief financial officer, any executive vice president, any senior vice president, any vice president, the treasurer, the secretary or any assistant treasurer of a Loan Party and, solely for purposes of notices given pursuant to Article II, any other officer of the applicable Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent or any other officer or employee of the applicable Loan Party designated in or pursuant to an agreement between the applicable Loan Party and the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party. “Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any capital stock or other Equity Interest of the Company or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such capital stock or other Equity Interest, or on account of any return of capital to the Company’s stockholders, partners or members (or the equivalent Person thereof). “Revolving Credit Facility” means the Amended and Restated Credit Agreement, dated as of June 21, 2023, among the Borrower, the Company, Bank of America, N.A., as administrative agent, the lenders party thereto, and the other parties thereto, as amended, restated, amended and restated, refinanced, replaced, supplemented or otherwise modified from time to time. “Revolver Repricing Amendment” means an amendment to the Revolving Credit Facility pursuant to which the Pricing Tiers set forth in the Applicable Rate definition therein are determined by reference to the Consolidated Net Leverage Ratio, in form and substance reasonably satisfactory to the Administrative Agent. “S&P” means Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. and any successor thereto. “Sanctioned Person” means any Person that is (a) listed in any Sanctions-related list of designated Persons maintained by OFAC or the U.S. Department of State or that is otherwise the target of Sanctions, (b) any Person located, organized or resident in a Designated Jurisdiction, or (c) any Person 50% or more owned or otherwise controlled by any such Person or Persons. “Sanction(s)” means any economic, financial or trade sanction administered or enforced by the United States Government, including those administered by OFAC, the United Nations Security Council, the European Union, His Majesty’s Treasury or other applicable sanctions authority recognized by the foregoing. “SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions. “SOFR” means, with respect to any SOFR Business Day, a rate per annum equal to the secured overnight financing rate for such SOFR Business Day published by the SOFR Administrator on the SOFR Administrator’s Website.
25 “SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate). “SOFR Administrator’s Website” means the website of the Federal Reserve Bank of New York, currently at https://www.newyorkfed.org, or any successor source for the secured overnight financing rate identified as such by the SOFR Administrator from time to time. “SOFR Business Day” means any day (other than a Saturday or Sunday) on which banks generally are open in New York City, New York for the conduct of substantially all of their commercial lending activities and interbank wire transfers can be made on the Fedwire system except a day on which the Securities Industry and Financial Markets Association (SIFMA) recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities. “Specified Transaction” means (a) any Acquisition, (b) any Investment that results in a Person becoming a Subsidiary, (c) any Disposition that results in a Subsidiary ceasing to be a Subsidiary of the Company, (d) any Disposition of a business unit, line of business or division of the Company or any Subsidiary, in each case whether by merger, consolidation, amalgamation or otherwise and (e) any other event that by the express terms of the Loan Documents requires Pro Forma Compliance with a test or covenant, calculation as to Pro Forma Effect with respect to a test or covenant or requires such test or covenant to be calculated on a Pro Forma Basis. “Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, (a) all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Company and (b) all references herein to “Subsidiaries” in connection with financial statements or financial ratios (or the components thereof) shall refer to the Subsidiaries of the Company the accounts of which (i) are consolidated with those of the Company in its consolidated financial statements or (ii) would be consolidated with those of the Company in its consolidated financial statements if such statements were prepared in accordance with GAAP. “Subsidiary Guarantors” means, collectively, all Subsidiaries executing a Subsidiary Guaranty Agreement on the Closing Date and all other Subsidiaries that enter into a Joinder Agreement. “Subsidiary Guaranty Agreement” means the Subsidiary Guaranty Agreement, dated as of the date hereof, made by the Subsidiary Guarantors in favor of the Administrative Agent and the Lenders, substantially in the form of Exhibit F. “Swap Contracts” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and
26 Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement. “Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender). “Synthetic Lease Obligation” means the monetary obligation of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment). “Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto. “Term Loan” has the meaning specified in Section 2.01. “Term Loan Facility” means, the Term Loan Credit Agreement, dated as of October 15, 2021, among the Borrower, the Company, U.S. Bank National Association, as administrative agent, the lenders from time to time party thereto and the other parties from time to time party thereto, in each case, as amended, restated, amended and restated, refinanced, replaced, supplemented or otherwise modified from time to time. “Term Securitization Programs” means (a) the public securitization programs identified on Schedule 1.01 and (b) any other securitization program under which a pool of retail installment contracts originated by the Company or any other Loan Party is sold, transferred or assigned to one or more special purpose entities in a transaction that constitutes a “true sale” for bankruptcy purposes (as evidenced by an opinion prepared and delivered in a manner consistent with market standards by reputable independent counsel experienced in securitization transactions) for a price equal to not less than the fair market value of such retail installment contracts and on such other terms and conditions as shall be reasonable and customary for such transactions; provided, however, that, except as may be required by credit risk retention rules under applicable Law, (x) such arrangement does not include (i) provisions under which the Company or any Subsidiary (other than an Excluded Special Purpose Finance Subsidiary) directly assumes the credit risk associated with such retail installment contracts, (ii) direct or indirect recourse provisions under which, based on the historical performance of such retail installment contracts, the Company or any Subsidiary (other than an Excluded Special Purpose Finance Subsidiary) could reasonably be expected to suffer economic loss, or (iii) any recourse provisions which are not customary for transactions of such type and (y) such arrangement does not result in the creation of any Lien on the assets of the Company or any Subsidiary (other than Excluded Special Purpose Finance Subsidiaries), other than Liens on such retail installment contracts and the Related Property. “Third-Party Contract” means a retail installment contract originated by the Company or any other Loan Party, which contract is assigned to a financial institution or other lender that is not an Affiliate of the Company, promptly after origination.
27 “Threshold Amount” means $125,000,000. “Total Outstandings” means the aggregate Outstanding Amount of all Loans. “Type” means, with respect to the Term Loan, its character as a Base Rate Loan or a Daily SOFR Loan. “UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person subject to IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms. “UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution. “Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment. “United States” and “U.S.” mean the United States of America. “U.S. Person” means any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code. “wholly-owned” means, with respect to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (x) director’s qualifying shares and (y) shares issued to foreign nationals to the extent required by applicable Law) are owned by such Person and/or by one or more wholly-owned Subsidiaries of such Person. “Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail- In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers. 1.02 Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document: (a) The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any Organization Document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise
28 modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. (b) In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.” (c) Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document. (d) Any reference herein to a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale, disposition or transfer, or similar term, shall be deemed to apply to a division of or by a limited liability company, or an allocation of assets to a series of a limited liability company (or the unwinding of such a division or allocation), as if it were a merger, transfer, consolidation, amalgamation, consolidation, assignment, sale, disposition or transfer, or similar term, as applicable, to, of, or with a separate Person. Any division of a limited liability company shall constitute a separate Person hereunder (and each division of any limited liability company that is a Subsidiary, joint venture or any other like term shall also constitute such a Person or entity). 1.03 Accounting Terms. (a) Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein. (b) Changes in GAAP or Accounting Practices; Lease Accounting. If at any time any change in GAAP or any change in any accounting practice or financial reporting practice of any Loan Party made in accordance with GAAP would affect the computation of any financial ratio, basket or requirement set forth in any Loan Document, and either the Company or the Required Lenders shall so request, the Administrative Agent, the Lenders and the Company shall negotiate in good faith to amend such ratio, basket or requirement to preserve the original intent thereof in light of such change in GAAP or such change in accounting practice or financial reporting practice (subject to the approval of the Required Lenders not to be unreasonably withheld, conditioned or delayed); provided that, until so amended, (i) such ratio, basket or requirement shall continue to be computed in accordance with GAAP or such accounting practice or financial reporting practice prior to such change therein and (ii) the Company shall provide to the Administrative Agent and
29 the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio, basket or requirement made before and after giving effect to such change in GAAP or such change in accounting practice or financial reporting practice. Notwithstanding the forgoing or any provision herein to the contrary, any lease that is characterized as an operating lease in accordance with GAAP after the Company’s adoption of ASC 842 (regardless of the date on which such lease has been entered into) shall not be a capital or finance lease, and any such lease shall be, for all purposes of this Agreement, treated as though it were reflected on the Company’s consolidated financial statements in the same manner as an operating lease would have been reflected prior to the Company’s adoption of ASC 842. 1.04 Rounding. Any financial ratios required to be maintained by the Company pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number). 1.05 Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable). 1.06 Timing of Performance. When the performance of any covenant, duty or obligation (other than a payment obligation arising under the Loan Documents) is required to be performed on a day which is not a Business Day, the date of such performance shall extend to the immediately succeeding Business Day. 1.07 Pro Forma Calculation. Notwithstanding anything to the contrary herein, the Consolidated Interest and Rent Coverage Ratio, the Consolidated Leverage Ratio and the Consolidated Net Leverage Ratio, as applicable, shall be calculated on a Pro Forma Basis with respect to each Specified Transaction occurring during the applicable four quarter period to which such calculation relates, and/or subsequent to the end of such four-quarter period but not later than the date of such calculation; provided that, notwithstanding the foregoing, when calculating the Consolidated Interest and Rent Coverage Ratio, the Consolidated Net Leverage Ratio or the Consolidated Leverage Ratio, as applicable, for purposes of (i) the Applicable Rate and (ii) determining actual compliance (and not Pro Forma Compliance or compliance on a Pro Forma Basis) with the financial covenants set forth in Section 7.07, any Specified Transaction and any related adjustment contemplated in the definition of Pro Forma Basis (and corresponding provisions of the definition of Consolidated EBITDA) that occurred subsequent to the end of the applicable four quarter period shall not be given Pro Forma Effect. With respect to any provision of this Agreement (other than the provisions of Section 7.07) that requires compliance or Pro Forma Compliance with the financial covenants set forth in Section 7.07, such compliance or Pro Forma Compliance shall be required regardless of whether the Company is otherwise required to comply with such covenant under the terms of Section 7.07 at such time. 1.08 Rates. Daily SOFR is derived from SOFR. Sections 3.03 and 3.07 provides a mechanism for (a) determining an alternative rate of interest if Daily SOFR is no longer available or in the other circumstances set forth in Sections 3.03 and 3.07 and (b) modifying this Agreement to give effect to such alternative rate of interest. The Administrative Agent does not warrant or accept any responsibility for, and shall not have any liability with respect to, the administration, submission, or any other matter related to SOFR or other rates in the definition of “Daily SOFR” or with respect to any alternative or successor rate thereto, or replacement rate thereof (including any Benchmark Replacement), including without limitation whether any such alternative, successor, or replacement reference rate (including any Benchmark Replacement), as it may or may not be adjusted pursuant to Sections 3.03 and 3.07, will have the same value as, or be economically equivalent to, Daily SOFR. The Administrative Agent and its affiliates or
30 other related entities may engage in transactions that affect the calculation of Base Rate, SOFR, Daily SOFR, any alternative, successor or replacement rate (including any Benchmark Replacement), or any relevant adjustments thereto, in each case, in a manner adverse to the Borrower. The Administrative Agent may select information sources or services in its reasonable discretion to ascertain the Base Rate, Daily SOFR, SOFR, or any other Benchmark, in each case pursuant to the terms of this Agreement, and shall have no liability to the Borrower, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or calculation of any such rate (or component thereof) provided by any such information source or service. ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS 2.01 Term Loans. Each Lender severally agrees, on the terms and conditions set forth in this Agreement, to make a term loan to the Borrower in Dollars (the “Term Loan”) on the Closing Date, in an amount equal to such Lender’s Commitment by making immediately available funds available to the Administrative Agent’s designated account, not later than the time specified by the Administrative Agent. Amounts repaid or prepaid in respect of the Term Loans may not be reborrowed. The Term Loan may consist of Base Rate Loans or Daily SOFR Loans, or a combination thereof, as further provided herein. As of the Closing Date, the Outstanding Amount of the Term Loan is $500,000,000. 2.02 Borrowings and Conversions. (a) Each Borrowing and each conversion of Loans from one Type to the other shall be made upon the Borrower’s irrevocable notice to the Administrative Agent, which may be given by: (A) telephone or (B) a Loan Notice; provided that any telephonic notice must be confirmed immediately by delivery to the Administrative Agent of a Loan Notice. Each such Loan Notice must be received by the Administrative Agent not later than (i) 1:00 p.m. one Business Day prior to the requested date of any Borrowing of Daily SOFR Loans, or of any conversion of Daily SOFR Loans to Base Rate Loans or of any conversion of Base Rate Loans to Daily SOFR Loans, and (ii) 11:00 a.m. on the requested date of any Borrowing of Base Rate Loans. Each Borrowing of or conversion of Loans shall be in a principal amount of $1,000,000 or a whole multiple of $100,000 in excess thereof. Each Loan Notice shall specify (i) whether the Borrower is requesting a Borrowing, or a conversion of Loans from one Type to the other, (ii) the requested date of the Borrowing or conversion, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed or converted, and (iv) the Type of Loans to be borrowed or to which existing Loans are to be converted. If the Borrower fails to provide a timely Loan Notice requesting a conversion of Daily SOFR Loans to Base Rate Loans, such Loans shall continue as Daily SOFR Loans. If the Borrower fails to specify a Type of Loan in a Loan Notice, then the applicable Loans shall be made as Daily SOFR Loans. (b) Upon satisfaction of the applicable conditions set forth in Section 4.01, the Administrative Agent shall make all funds so received available to the Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of the Borrower on the books of MUFG with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by the Borrower.
31 (c) The Administrative Agent shall promptly notify the Borrower and the Lenders of the interest rate applicable to any Daily SOFR Loans upon determination of such interest rate. At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Borrower and the Lenders of any change in MUFG’s prime rate used in determining the Base Rate promptly following the public announcement of such change. 2.03 [Reserved]. 2.04 [Reserved]. 2.05 [Reserved]. 2.06 Prepayments. The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Loans in whole or in part without premium or penalty; provided that (i) such notice must be received by the Administrative Agent not later than 2:00 p.m. (A) one Business Day prior to the date of repayment of a Daily SOFR Loan and (B) on the date of prepayment of any Base Rate Loan; and (ii) any prepayment of Loans shall be in a principal amount of $500,000 or a whole multiple of $100,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding. Each such notice must be in the form of a Notice of Loan Prepayment and shall specify the date and amount of such prepayment and the Type(s) of Loans to be prepaid. The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Applicable Percentage of such prepayment. If such notice is given by the Borrower, the Borrower shall make such prepayment of principal and interest accrued thereon and the payment amount specified in such notice shall be due and payable on the date specified therein. Subject to Section 2.18, each such principal prepayment shall be applied to the Loans of the Lenders in accordance with their respective Applicable Percentages. Notwithstanding the foregoing, the Borrower may rescind any notice of prepayment, if such prepayment would have resulted from a refinancing of all or a portion of the Loans hereunder, which refinancing shall not be consummated or shall otherwise be delayed. 2.07 [Reserved]. 2.08 Repayment of Loans. The Borrower shall repay to the Lenders on the Maturity Date the aggregate principal amount of the Term Loans outstanding on such date. 2.09 Interest. (a) Subject to the provisions of subsection (b) below, (i) each Daily SOFR Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to Daily SOFR plus the Applicable Rate; and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate. (b) (i) If any amount of principal of any Loan is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, such overdue amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. (ii) If any amount (other than principal of any Loan) payable by the Borrower under any Loan Document is not paid when due (without regard to any applicable grace periods), whether at stated maturity, by acceleration or otherwise, then upon the request of
32 the Required Lenders, such overdue amount shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws. (iii) Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand. (c) Interest on each Loan shall be due and payable in arrears (i) on each Interest Payment Date applicable thereto and (ii) at such other times as may be specified herein; provided, however, that, in the case of clause (i) above, if the Administrative Agent fails to provide the Borrower with a statement of interest with respect to such Loan on or prior to such Interest Payment Date, interest on such Loan shall be due and payable upon the Borrower’s receipt of such statement. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law. 2.10 Fees. (a) The Company shall pay to the Arrangers and the Administrative Agent, for their own respective accounts, fees in the amounts and at the times specified in any Fee Letter between an Arranger or the Administrative Agent and the Company or the Borrower. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever. (b) The Company and the Borrower, as applicable, shall pay to the Lenders such other fees, if any, with respect to the Loan Documents, the Loans or the Commitment, as shall have been separately agreed upon in writing in the amounts and at the times so specified. Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever. 2.11 Computation of Interest and Fees. All computations of interest for Base Rate Loans (including Base Rate Loans determined by reference to SOFR) shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed. All other computations of fees and interest, including those with respect to Daily SOFR Loans, shall be made on the basis of a 360-day year and actual days elapsed (which results in more fees or interest, as applicable, being paid than if computed on the basis of a 365-day year). Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.13(a), bear interest for one day. Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error. 2.12 Evidence of Debt. The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Administrative Agent in the ordinary course of business. The accounts or records maintained by the Administrative Agent and each Lender shall be conclusive absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations. In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error. Upon the request of any Lender to the Borrower made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note, which shall evidence such Lender’s Loans in
33 addition to such accounts or records. Each Lender may attach schedules to any of its Notes and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto. 2.13 Payments Generally; Administrative Agent’s Clawback. (a) General. All payments to be made by the Borrower shall be made free and clear and without condition or deduction for any counterclaim, defense, recoupment or setoff. Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the Administrative Agent’s Office in Dollars and in immediately available funds not later than 2:00 p.m. on the date specified herein. The Administrative Agent will promptly distribute to each Lender its Applicable Percentage (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office. All payments received by the Administrative Agent after 2:00 p.m. shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue. If any payment to be made by the Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be. (b) (i) Funding by Lenders; Presumption by Administrative Agent. Unless the Administrative Agent shall have received notice from a Lender prior to 12:00 noon on the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date and at the time required in accordance with Section 2.02 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in immediately available funds with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any reasonable administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by the Borrower, the interest rate applicable to Daily SOFR Loans; provided, however, that the Administrative Agent shall demand such payment from the Borrower only if such Lender has failed to make such payment forthwith on demand or if the Administrative Agent is prohibited by Law or otherwise from making such demand on such Lender. If the Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing. Any payment by the Borrower shall be without prejudice to any claim the Borrower may have against a Lender that shall have failed to make such payment to the Administrative Agent. (ii) Payments by Borrower; Presumptions by Administrative Agent. Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders
34 hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. A notice of the Administrative Agent to any Lender or Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error. (c) Failure to Satisfy Conditions Precedent. If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender to the Borrower as provided in the foregoing provisions of this Article II, and such funds are not made available to the Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall promptly return such funds (in like funds as received from such Lender) to such Lender, without interest. (d) Obligations of Lenders Several. The obligations of the Lenders hereunder to make Loans and to make payments pursuant to Section 10.04(c) are several and not joint. The failure of any Lender to make any Loan or to make any payment under Section 10.04(c) on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan or to make its payment under Section 10.04(c). (e) Funding Source. Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner. 2.14 Sharing of Payments by Lenders. If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of the Loans made by it resulting in such Lender’s receiving payment of a proportion of the aggregate amount of such Loans or participations and accrued interest thereon greater than its pro rata share thereof as provided herein, then the Lender receiving such greater proportion shall (a) notify the Administrative Agent of such fact, and (b) purchase (for cash at face value) participations in the Loans of the other Lenders, or make such other adjustments as shall be equitable, so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and other amounts owing them, provided that: (i) if any such participations or subparticipations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations or subparticipations shall be rescinded and the purchase price restored to the extent of such recovery, without interest; and (ii) the provisions of this Section shall not be construed to apply to (A) any payment made by or on behalf of the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), or (B) any payment obtained by a Lender as consideration for the assignment of or sale of a
35 participation in any of its Loans to any assignee or participant, other than an assignment to the Borrower or any Subsidiary thereof (as to which the provisions of this Section shall apply) Each Loan Party consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Loan Party rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Loan Party in the amount of such participation. 2.15 [Reserved]. 2.16 [Reserved]. 2.17 [Reserved]. 2.18 Defaulting Lenders. (a) Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law: (i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders” and Section 10.01. (ii) Defaulting Lender Waterfall. Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VIII or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 10.08 shall be applied at such time or times as may be determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, as the Borrower may request (so long as no Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; third, if so determined by the Administrative Agent and the Borrower, to be held in a deposit account and released in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement; fourth, to the payment of any amounts owing to the Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; fifth, so long as no Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and sixth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender pursuant to this Section 2.18(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto. (b) Defaulting Lender Cure. If the Company and the Administrative Agent agree in writing in their sole discretion that a Lender is no longer a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice
36 and subject to any conditions set forth therein, that Lender will, to the extent applicable, purchase at par that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages, whereupon such Lender will cease to be a Defaulting Lender; provided, however, that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 Taxes. (a) Payments Free of Taxes. (i) Any and all payments by or on account of any obligation of the Company or the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction or withholding for any Indemnified Taxes or Other Taxes, provided that if applicable law requires the deduction or withholding of any Taxes from such payments, then the Administrative Agent, the Company or the Borrower, as applicable, shall be entitled to make such deduction or withholding. (ii) If the Borrower, the Company or the Administrative Agent shall be required by the Code to withhold or deduct any Taxes from any payment, then (A) the Administrative Agent shall withhold or make such deductions as are determined by the Administrative Agent to be required, (B) the Administrative Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes or Other Taxes, the sum payable by the Borrower or the Company shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) the applicable recipient receives an amount equal to the sum it would have received had no such withholding or deduction for Indemnified Taxes or Other Taxes been made. (iii) If the Borrower, the Company or the Administrative Agent shall be required by any applicable laws other than the Code to withhold or deduct any Taxes from any payment, then (A) the Borrower, the Company or the Administrative Agent, as required by such laws, shall withhold or make such deductions as are determined by it to be required, (B) the Borrower, the Company or the Administrative Agent, to the extent required by such laws, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with such laws, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes or Other Taxes, the sum payable by the Borrower or the Company shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) the applicable recipient receives
37 an amount equal to the sum it would have received had no such withholding or deduction for Indemnified Taxes or Other Taxes been made. (b) Payment of Other Taxes by the Company and the Borrower. Without limiting the provisions of subsection (a) above, the Company and the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) (i) Indemnification by the Company and the Borrower. The Company and the Borrower (jointly and severally) shall indemnify the Administrative Agent and each Lender, within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) paid by the Administrative Agent or such Lender, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability, setting forth in reasonable detail the calculation of such amount, delivered to the Company or the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. The Borrower and the Company (jointly and severally) shall indemnify the Administrative Agent and shall make payment in respect thereof within 10 days after demand therefor, for any amount which a Lender for any reason fails to pay indefeasibly to the Administrative Agent as required pursuant to Section 3.01(c)(ii) below. Upon making such payment to the Administrative Agent, the Borrower or the Company, as applicable, shall be subrogated to the rights of the Administrative Agent pursuant to Section 3.01(c)(ii)(y) and (z) below against the applicable Lender, other than the right of set-off pursuant to the last sentence of Section 3.01(c)(ii). (ii) Indemnification by the Lenders. Each Lender shall, and does hereby severally indemnify and shall make payment in respect thereof within 10 days after demand therefor, (x) the Administrative Agent, for any Indemnified Taxes or Other Taxes attributable to such Lender (but only to the extent that the Company or the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes or Other Taxes and without limiting the obligation of the Company and the Borrower to do so), (y) the Administrative Agent, the Borrower and the Company for any Taxes attributable to such Lender’s failure to comply with the provisions of Section 10.06(d) relating to the maintenance of a Participant Register and (z) the Administrative Agent, the Borrower and the Company for any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent, the Borrower or the Company in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this clause (ii). (d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Company or the Borrower to a Governmental Authority, the Company or the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt
38 issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) Status of Lenders. (i) Any Lender that is entitled to an exemption from or reduction of withholding tax under the law of the jurisdiction in which the Company or the Borrower is resident for tax purposes, or any treaty to which such jurisdiction is a party, with respect to payments hereunder or under any other Loan Document shall deliver to the Company (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Company or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if requested by the Company or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Company or the Administrative Agent as will enable the Company or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.01(e)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender. (ii) Without limiting the generality of the foregoing, in the event that the Company or the Borrower is resident for tax purposes in the United States: (A) any Lender that is a U.S. Person shall deliver to the Company and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Company or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding Tax; (B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Company and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Company or the Administrative Agent), whichever of the following is applicable: (I) duly completed copies of Internal Revenue Service Form W-8BEN or W-8BEN-E, as applicable claiming eligibility for benefits of an income tax treaty to which the United States is a party, (II) duly completed copies of Internal Revenue Service Form W-8ECI, (III) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Code, (x)
39 a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Company or the applicable Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue Service Form W-8BEN or W- 8BEN-E, as applicable, or (IV) to the extent a Foreign Lender is not the beneficial owner IRS Form W-8IMY, accompanied by a Form W-8ECI, W-8BEN, W- 8BEN-E, W-9 or any other required information from each beneficial owner, as applicable; (C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Company and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Company or the Administrative Agent), any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States Federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Company or the Administrative Agent to determine the withholding or deduction required to be made; and (D) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Company and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Company or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Company or the Administrative Agent as may be necessary for the Company and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement. (iii) Each Lender agrees that if any form or certification it previously delivered pursuant to this Section 3.01(e) expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Company and the Administrative Agent in writing of its legal inability to do so. (f) Treatment of Certain Refunds. Unless required by applicable Laws, at no time shall the Administrative Agent have any obligation to file for or otherwise pursue on behalf of a Lender, or have any obligation to pay to any Lender, any refund of Taxes withheld or deducted from funds paid for the account of such Lender. If the Administrative Agent or any Lender determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Company or the Borrower or with respect to which the
40 Company or the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower, as applicable, an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Company or the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Company and the Borrower, upon the request of the Administrative Agent or such Lender, agrees to repay the amount paid over to the Company or the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Company or the Borrower or any other Person. (g) Survival. Each party’s obligations under this Section 3.01 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations. 3.02 Illegality. Subject to the provisions of Section 3.07, if the Administrative Agent or any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Loans whose interest is determined by reference to Daily SOFR, or to determine or charge interest rates based upon Daily SOFR, then, on notice thereof by such Lender to the Company through the Administrative Agent, (i) any obligation of such Lender to make or continue Daily SOFR Loans or to convert Base Rate Loans to Daily SOFR Loans, shall be suspended and (ii) if such notice asserts the illegality of such Lender making or maintaining Base Rate Loans the interest rate on which is determined by reference to the SOFR component of the Base Rate, the interest rate on such Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the SOFR component of the Base Rate, in each case until such Lender notifies the Administrative Agent and the Company that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, (x) the Company and the Borrower (jointly and severally) shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all such Daily SOFR Loans of such Lender to Base Rate Loans (the interest rate on which Base Rate Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the SOFR component of the Base Rate), immediately and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon Daily SOFR, the Administrative Agent shall during the period of such suspension compute the Base Rate applicable to such Lender without reference to the SOFR component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon Daily SOFR. Upon any such prepayment or conversion, the Company and the Borrower (jointly and severally) shall also pay accrued interest on the amount so prepaid or converted. 3.03 Inability to Determine Rates. Subject to the provisions of Section 3.07, if in connection with any request for a Daily SOFR Loan or a conversion thereto (i) the Administrative Agent determines that the interest rate applicable to Daily SOFR Loans for any requested Interest Period is not ascertainable or available (including, without limitation, because the applicable Reuters Screen (or on any successor or substitute page on such screen) is unavailable) or (ii) the Administrative Agent or the Required Lenders determine for any reason that Daily SOFR does not adequately and fairly reflect the cost of making or maintaining Daily SOFR Loans, then the Administrative Agent shall suspend the availability of Daily SOFR Loans and require any affected Daily SOFR Loans to be repaid or converted to Base Rate Loans.
41 3.04 Increased Costs. (a) Increased Costs Generally. If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender; (ii) subject any Lender to any tax of any kind whatsoever with respect to this Agreement or any Daily SOFR Loan made or participated in by it, or change the basis of taxation of payments to such Lender in respect thereof (except, in each case, for Indemnified Taxes or Other Taxes covered by Section 3.01 and the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender); or (iii) impose on any Lender or any interbank market any other condition, cost or expense affecting this Agreement or Daily SOFR Loans made or participated in by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan the interest on which is determined by reference to Daily SOFR (or of maintaining its obligation to make or participate in any such Loan), or to reduce the amount of any sum received or receivable by such Lender hereunder (whether of principal, interest or any other amount) then, upon request of such Lender, the Company and the Borrower (jointly and severally) will pay to such Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered. (b) Capital Requirements. If any Lender determines that any Change in Law affecting such Lender or any Lending Office of such Lender or such Lender’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement, the Commitment of such Lender or the Loans made by, or participations in Loans held by, such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy and liquidity), then from time to time the Company and the Borrower (jointly and severally) will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered. (c) Certificates for Reimbursement. A certificate of a Lender setting forth in reasonable detail the calculation of the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Company shall be conclusive absent demonstrable error. The Company and the Borrower (jointly and severally) shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Delay in Requests. Failure or delay on the part of any Lender to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s right to demand such compensation, provided that neither the Company nor the Borrower shall be required to compensate a Lender pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than six months prior to the date that such Lender notifies the Company of the Change in Law giving rise to such increased
42 costs or reductions and of such Lender’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the six- month period referred to above shall be extended to include the period of retroactive effect thereof). 3.05 Mitigation Obligations; Replacement of Lenders. (a) Designation of a Different Lending Office. If any Lender requests compensation under Section 3.04, or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender gives a notice pursuant to Section 3.02, then such Lender shall use reasonable efforts to designate a different Lending Office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 3.01 or 3.04, as the case may be, in the future, or eliminate the need for the notice pursuant to Section 3.02, as applicable, and (ii) in each case, would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) Notwithstanding anything contained herein to the contrary, a Lender shall not be entitled to any compensation pursuant to Section 3.04 or to exercise the rights under Section 3.02 to the extent such Lender is not generally imposing such charges or requesting such compensation from, or is not exercising such rights against, as applicable, other similarly situated borrowers under similar circumstances. (c) Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Company or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender ceases to make Daily SOFR Loans as a result of any condition described in Section 3.02 or 3.03, or if any Lender becomes a Non-Consenting Lender, the Company may, at its expense, replace such Lender in accordance with Section 10.13. If any Lender is a Defaulting Lender, the Company may, at its expense, replace such Defaulting Lender or terminate the applicable Commitment of such Defaulting Lender in accordance with Section 10.13. 3.06 Survival. All of the Company’s and the Borrower’s obligations under this Article III shall survive termination of the Commitment and repayment of all other Obligations hereunder, and resignation of the Administrative Agent. 3.07 Benchmark Replacement. (a) Benchmark Transition Event. Notwithstanding anything to the contrary herein or in any other Loan Document, upon the occurrence of a Benchmark Transition Event, the Administrative Agent, the Borrower and the Company may amend this Agreement to replace the then current Benchmark with a Benchmark Replacement. Any such amendment with respect to a Benchmark Transition Event will become effective at or after 5:00 p.m. (New York City time) on the fifth Business Day after the Administrative Agent has posted such proposed amendment to all Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Administrative Agent has not received, by such time, written notice of objection to such amendment from Lenders comprising the Required Lenders.
43 (b) [Reserved]. (c) Conforming Changes. In connection with the use or administration of the initial Benchmark or the implementation of a Benchmark Replacement, the Administrative Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document. (d) Notices; Standards for Decisions and Determinations. The Administrative Agent will promptly notify the Borrower and the Lenders of (A) the implementation of any Benchmark Replacement, (B) the effectiveness of any Conforming Changes, (C) the removal or reinstatement of any tenor of a Benchmark pursuant to clause (e) below and (D) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by the Administrative Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section 3.07, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action or any selection, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party to this Agreement or any other Loan Document, except, in each case, as expressly required pursuant to this Section 3.07. (e) Unavailability of Tenor of Benchmark. Notwithstanding anything to the contrary herein or in any other Loan Document, at any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (and either (A) any tenor for such Benchmark is not displayed on a screen or other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion or (B) the regulatory supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any tenor for such Benchmark is or will be no longer representative, then the Administrative Agent may modify the definition of “Interest Period” (or analogous term) for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor and (ii) if a tenor that was removed pursuant to clause (a) above either (A) is subsequently displayed on a screen or information service for a Benchmark (including a Benchmark Replacement) or (B) is not, or is no longer, subject to an announcement that it is or will no longer be representative for a Benchmark (including a Benchmark Replacement), then the Administrative Agent may modify the definition of “Interest Period” (or analogous term) for all Benchmark settings at or after such time to reinstate such previously removed tenor. (f) Benchmark Unavailability Period. Upon notice to the Borrower by the Administrative Agent in accordance with Section 10.02 of the commencement of a Benchmark Unavailability Period and until a Benchmark Replacement is determined in accordance with this Section 3.07, the Borrower may revoke any request for a Daily SOFR Loan (or a Borrowing utilizing the then-current Benchmark), or any request for the conversion or continuation of a Daily SOFR Loan (or a Borrowing utilizing the then-current Benchmark) to be made, converted or continued during any Benchmark Unavailability Period and, failing that, the Borrower will be deemed to have converted any such request into a request for a Base Rate Loan or conversion to a Base Rate Loan. During any Benchmark Unavailability Period or at any time that a tenor for the then-current Benchmark is not an Available Tenor, the component of the Base Rate based upon the then-current Benchmark or such tenor for such Benchmark, as applicable, will not be used in any determination of the Base Rate.
44 ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS 4.01 Conditions to Effectiveness. This Agreement shall become effective upon, and the obligation of each Lender to make its term loan on the Closing Date are subject to, the satisfaction (or waiver) of the following conditions precedent: (a) The Administrative Agent’s receipt of the following, each of which shall be originals, telecopies or “pdf” files (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each dated as of the Closing Date (or, in the case of certificates of governmental officials, as of a recent date acceptable to the Administrative Agent), each in form and substance reasonably satisfactory to the Administrative Agent and each Lender: (i) executed counterparts of (A) this Agreement and (B) the Guaranties; (ii) a Note executed by the Borrower in favor of each Lender requesting a Note; (iii) such customary certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party; (iv) such documents and certifications as the Administrative Agent may reasonably require to evidence that each Loan Party is duly organized or formed, and that each Loan Party is validly existing, in good standing and qualified to engage in business in the jurisdiction of its incorporation or organization; (v) a customary opinion of Troutman Pepper Locke LLP, counsel to the Loan Parties, addressed to the Administrative Agent and each Lender, as to such matters concerning the Loan Parties and the Loan Documents as the Required Lenders may reasonably request; (vi) a certificate of a Responsible Officer of each Loan Party either (A) attaching copies of all consents, licenses and approvals required by any Governmental Authority or any other Person in connection with the execution, delivery and performance by such Loan Party and the validity against such Loan Party of the Loan Documents to which it is a party, and such consents, licenses and approvals shall be in full force and effect, or (B) stating that no such consents, licenses or approvals are so required; (vii) a certificate signed by a Responsible Officer of the Company certifying (A) that the conditions specified in Sections 4.01(c) and (d) have been satisfied, (B) that there has not occurred a Material Adverse Effect since February 28, 2026, (C) as to the absence of any action, suit, investigation or proceeding pending, or to the knowledge of the Company, threatened in any court or before any arbitrator or governmental authority that either individually or in the aggregate, could reasonably be expected to have a Material
45 Adverse Effect, and (D) the incurrence of the Credit Extension on the Closing Date is permitted pursuant to Section 7.08 of the Revolving Credit Facility and Section 7.08 of each Term Loan Facility; and (viii) such other assurances, certificates, documents, consents or opinions as the Administrative Agent reasonably may require. (b) (i) Upon the reasonable request of any Lender made at least ten days prior to the Closing Date, the Company shall have provided to such Lender the documentation and other information so requested in connection with applicable “know your customer” and anti-money- laundering rules and regulations, including the PATRIOT Act, in each case at least five days prior to the Closing Date; and (ii) at least five days prior to the Closing Date, if the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, it shall deliver a Beneficial Ownership Certification in relation to the Borrower. (c) The representations and warranties of (i) the Company and the Borrower contained in Article V and (ii) each Loan Party contained in each other Loan Document shall be true and correct in all material respects (and in all respects if any such representation or warranty is already qualified by materiality) on and as of the Closing Date. (d) No Default shall exist. (e) Any fees required to be paid on or before the Closing Date pursuant to the Fee Letter shall have been paid. (f) Unless waived by the Administrative Agent, the Company shall have paid all reasonable fees, charges and disbursements of counsel to the Administrative Agent contemplated hereunder to the extent invoiced in reasonable detail at least one (1) Business Day prior to the Closing Date (or such later date as the Borrower may reasonably agree). Without limiting the generality of the provisions of the last paragraph of Section 9.03, for purposes of determining compliance with the conditions specified in this Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required hereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto. ARTICLE V REPRESENTATIONS AND WARRANTIES Each of the Company and the Borrower represents and warrants to the Administrative Agent and the Lenders that: 5.01 Existence, Qualification and Power. Each Loan Party (a) is duly organized or formed, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, and (c) is duly qualified and is authorized to do business and in good standing (or its equivalent, to the extent such concept is inapplicable in the relevant jurisdiction) under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification or license; except in
46 each case referred to in clause (b)(i) and (c), to the extent that failure to be or to have such could not reasonably be expected to have a Material Adverse Effect. 5.02 Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is party, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) contravene the terms of any of such Person’s Organization Documents; (b) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or by which such Person is bound or by which the property of such Person or any of its Subsidiaries is bound or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject, except to the extent such conflict or breach, or the creation of such Lien, or such required payment, as the case may be, could not reasonably be expected to have a Material Adverse Effect; or (c) violate any Law, except to the extent such violation could not reasonably be expected to have a Material Adverse Effect. 5.03 Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with the execution, delivery or performance by, or enforcement against, any Loan Party of this Agreement or any other Loan Document (other than any such approval, consent, exemption, authorization, other action, notice or filing (x) that has been obtained, taken, given or made and is in full force and effect or (y) the failure of which to obtain or make could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect). 5.04 Binding Effect. This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is party thereto. This Agreement constitutes, and each other Loan Document constitutes, a legal, valid and binding obligation of each Loan Party that is party thereto, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws or by general principles of equity. 5.05 Financial Statements; No Material Adverse Effect. (a) The Audited Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the financial condition of the Company and its Subsidiaries (on a consolidated basis) as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (iii) show, in each case to the extent required by GAAP, all material indebtedness and other material liabilities, direct or contingent, of the Company and its Subsidiaries as of the date thereof, including liabilities for taxes, material commitments and Indebtedness. (b) [Reserved] (c) Since the later of (i) the date of the Audited Financial Statements and (ii) the date of the most recent financial statements delivered pursuant to in Section 6.01(a), there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect. 5.06 Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Company, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Company or any of its Subsidiaries or against any of their
47 properties or revenues that (a) purport to affect or pertain to this Agreement or any other Loan Document or any of the transactions contemplated hereby or (b) either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect (in each case (except as described in the proviso to this sentence) other than such actions, suits, proceedings, claims or disputes (i) set forth on Schedule 5.06 or (ii) that have been disclosed in writing to the Administrative Agent and the Lenders pursuant to Section 6.03(b)). 5.07 No Default. Neither the Company nor any Subsidiary is in default under or with respect to any Contractual Obligation that could, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.08 Ownership of Property. Each of the Company and each Subsidiary has good record and marketable title in fee simple to, or valid leasehold interests in or other contractual rights to use, all real property necessary or used in the ordinary conduct of its business, except where the failure to have such title, interest or other right could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.09 [Reserved]. 5.10 [Reserved]. 5.11 [Reserved]. 5.12 ERISA Compliance. (a) Except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect (i) each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal or state Laws and (ii) each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of the Company, nothing has occurred which would prevent, or cause the loss of, such qualification. The Company and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. (b) There are no pending or, to the knowledge of the Company, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no non-exempt prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has had or could reasonably be expected to have a Material Adverse Effect. (c) (i) No ERISA Event has occurred or is reasonably expected to occur that could reasonably be expected to have a Material Adverse Effect; and (ii) as of the most recent certification date for any Pension Plan, the certified adjusted funding target attainment percentage (as defined in Section 436(j)(2) of the Code) for such Pension Plan is 60% or higher and neither the Company nor any ERISA Affiliate knows of any facts or circumstances that could reasonably be expected to cause the adjusted funding target attainment percentage for any Pension Plan to drop below 60% as of the most recent valuation date for such Pension Plan; (iii) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of
48 ERISA); (iv) neither the Company nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Company nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA. (d) As of the Closing Date, the Borrower is not and will not be using “plan assets” (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Loan. 5.13 Subsidiaries; Equity Interests. As of the Closing Date, the Company has no Subsidiaries other than those specifically disclosed in Part (a) of Schedule 5.13, and all of the outstanding Equity Interests in such Subsidiaries that are owned by the Company or any Subsidiary have been validly issued, are fully paid and nonassessable and are owned by such Person in the amounts specified on Part (a) of Schedule 5.13 free and clear of all Liens except Liens permitted by Section 7.01. As of the Closing Date, the Company has no equity investments in any other corporation or entity other than those specifically disclosed in Part (b) of Schedule 5.13. All of the outstanding Equity Interests in the Company have been validly issued and are fully paid and nonassessable. 5.14 Margin Regulations; Investment Company Act. (a) Neither the Company nor the Borrower is engaged or will engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Federal Reserve Board), or extending credit for the purpose of purchasing or carrying margin stock. (b) None of the Company, any Person Controlling the Company, or any Subsidiary is or is required to be registered as an “investment company” under the Investment Company Act of 1940. 5.15 Disclosure. No report, financial statement, certificate or other written information furnished by or on behalf of any Loan Party (other than projected financial information, pro forma financial information and information of a general economic or industry nature) to the Administrative Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case, as modified or supplemented by other written information so furnished), when taken as a whole, contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein (when taken as a whole), in the light of the circumstances under which they were made, not materially misleading; provided that, with respect to projected and pro forma financial information, the Company represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time of preparation and delivery; it being understood that such projections may vary from actual results and that such variances may be material. As of the Closing Date, the information included in the Beneficial Ownership Certification, if applicable, is true and correct in all respects. 5.16 Compliance with Laws. Each of the Company and each Subsidiary is in compliance in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its properties, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree is being contested in good faith by appropriate proceedings diligently conducted or (b) the failure to comply therewith, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
49 5.17 [Reserved]. 5.18 [Reserved]. 5.19 OFAC. None of the Loan Parties, nor any of their Subsidiaries, nor, to the knowledge of the Company or the Borrower, any director, officer, employee, or agent of the Company or any Subsidiary, is an individual or entity that is a Sanctioned Person. 5.20 Anti-Corruption Laws. The Loan Parties and their Subsidiaries have conducted their businesses in compliance in all material respects with the United States Foreign Corrupt Practices Act of 1977 and other similar anti- corruption Laws in other jurisdictions that may be applicable to the Loan Parties and their Subsidiaries from time to time and have instituted and maintained policies and procedures reasonably designed to promote and achieve compliance with the United States Foreign Corrupt Practices Act of 1977 and, in the case of any business from time to time conducted outside of the United States, such other similar anti-corruption laws. 5.21 No Affected Financial Institutions. No Loan Party is an Affected Financial Institution. ARTICLE VI AFFIRMATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, or any Loan or other Obligation (other than contingent indemnification obligations as to which no claim has been asserted) hereunder shall remain unpaid or unsatisfied, the Company shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03 and 6.12) cause the Borrower and each other Subsidiary to: 6.01 Financial Statements. Deliver to the Administrative Agent (for further distribution to each Lender): (a) as soon as available, but in any event within ninety (90) days after the end of each fiscal year of the Company (or if earlier, fifteen (15) days after the date required to be filed with the SEC) (commencing with the fiscal year ended February 28, 2027), a consolidated balance sheet of the Company and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of earnings, shareholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with GAAP, audited and accompanied by a report and opinion of a “Big 4” accounting firm (or another independent certified public accountant of nationally recognized standing reasonably acceptable to the Administrative Agent), which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception (other than a “going concern” statement, explanatory note or like qualification or exception resulting solely from an upcoming maturity date under this Agreement or any other Indebtedness occurring within one year from the time such opinion is delivered) or any qualification or exception as to the scope of such audit; and (b) as soon as available, but in any event within forty-five (45) days after the end of each of the first three fiscal quarters of each fiscal year of the Company (or if earlier, five days after
50 the date required to be filed with the SEC) (commencing with the fiscal quarter ended May 31, 2026), a consolidated balance sheet of the Company and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of earnings and cash flows for such fiscal quarter and for the portion of the Company’s fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail, certified by a Responsible Officer of the Company as fairly presenting the financial condition, results of operations and cash flows of the Company and its Subsidiaries in accordance with GAAP, subject only to normal year- end audit adjustments and the absence of footnotes. As to any information contained in materials furnished pursuant to Section 6.02(c), the Company shall not be separately required to furnish such information under clause (a) or (b) above, but the foregoing shall not be in derogation of the obligation of the Company to furnish the information and materials described in clauses (a) and (b) above at the times specified therein. 6.02 Certificates; Other Information. Deliver to the Administrative Agent and each Lender (or, if requested by the Company in a notice to the Administrative Agent with respect to any specific item, deliver such item to the Administrative Agent (for distribution to each Lender)), in form and detail satisfactory to the Administrative Agent and the Required Lenders: (a) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Company which shall also contain a calculation of the Consolidated Leverage Ratio as of the last day of the applicable period for any Compliance Certificate delivered prior to a Revolver Repricing Amendment (which delivery may, unless the Administrative Agent or a Lender requests executed originals, be by electronic communication including fax or email and shall be deemed to be an original authentic counterpart thereof for all purposes); (b) promptly after any request by the Administrative Agent or any Lender, copies of any detailed audit reports or recommendations submitted in writing to the board of directors (or the audit committee of the board of directors) of the Company by independent accountants in connection with the accounts or books of the Company or any Subsidiary, or any audit of any of them; (c) promptly after the same are sent or filed, as applicable, copies of each annual report, proxy or financial statement or other report or communication sent by or on behalf of the Company to the stockholders of the Company, and notification (by facsimile or electronic mail) of the filing of each annual report on Form 10-K, quarterly report on Form 10-Q, current report on Form 8-K, or registration statement by the Company with the SEC under Section 13 or 15(d) of the Securities Exchange Act of 1934, in each case to the extent not otherwise required to be delivered to the Administrative Agent pursuant hereto; (d) promptly, and in any event within five Business Days, after receipt thereof by the Company or any Subsidiary, copies of each notice or other correspondence received from the SEC (or comparable agency in any applicable non-U.S. jurisdiction) concerning any formal investigation by such agency regarding financial or other operational results of the Company or any Subsidiary thereof; (e) promptly following any request therefor, information and documentation reasonably requested by the Administrative Agent or any Lender for purposes of compliance with
51 applicable “know your customer” requirements under the PATRIOT Act, the Beneficial Ownership Regulation or other applicable anti-money laundering laws; and (f) within a reasonable period of time after any request by the Administrative Agent, such additional information regarding the business, financial or corporate affairs of the Company or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or the Required Lenders may from time to time reasonably request. Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(c) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Company posts such documents, or provides a link thereto on the Company’s website on the Internet at the website address listed on Schedule 10.02; or (ii) on which such documents (A) are available on the website of the SEC at http://www.sec.gov or (B) are posted on the Company’s behalf on another Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that in the case of documents that are not available on http://www.sec.gov, (i) the Company shall deliver paper copies of such documents to the Administrative Agent or any Lender that requests in writing the Company to deliver such paper copies until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender and (ii) the Company shall notify the Administrative Agent and each Lender (or if requested by the Company in writing to the Administrative Agent with respect to any specific items, the Company shall notify the Administrative Agent of such posting and the Administrative Agent shall thereafter notify the Lenders of such posting) (by facsimile or electronic mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents. The Administrative Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Company with any such request by a Lender for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents. The Company and the Borrower hereby acknowledge that (a) the Administrative Agent and/or Arrangers may, but shall not be obligated to, make available to the Lenders materials and/or information provided by or on behalf of the Company and the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on Debt Domain or another similar electronic system (the “Platform”) and (b) certain of the Lenders (each a “Public Lender”) may have personnel who do not wish to receive material non-public information with respect to the Company and the Borrower or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons’ securities. The Company and the Borrower hereby agree that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC”, the Company and the Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Company or the Borrower or its securities for purposes of United States Federal and state securities laws (provided, however, that to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 10.07); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side Information”; and (z) the Administrative Agent and the Arrangers shall be entitled to treat any
52 Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Side Information”. 6.03 Notices. Promptly after a Responsible Officer has obtained knowledge thereof, notify the Administrative Agent (and the Administrative Agent shall thereafter notify the Lenders of such notice): (a) of the occurrence and continuation of any Default; (b) of (i) any breach or non performance of, or any default under, any Contractual Obligation of the Company or any Subsidiary that could reasonably be expected to have a Material Adverse Effect, (ii) any non-frivolous action, suit, proceeding, claim or dispute pending or, to the knowledge of the Company, threatened or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Company or any of its Subsidiaries or against any of their properties or revenues that could reasonably be expected to have a Material Adverse Effect; (iii) any material development in any such action, suit, proceeding, claim or dispute; and (iv) any other matter that has resulted or could reasonably be expected to result in a Material Adverse Effect; (c) of the occurrence of any ERISA Event that could reasonably be expected to result in liability of the Company or any Subsidiary under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in the aggregate amount in excess of the Threshold Amount; and (d) of any material change in accounting policies or financial reporting practices by the Company that is not described in the financial statements referred to in Sections 6.01(a) and (b), other than any such change required by GAAP. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of the Company setting forth details of the occurrence referred to therein and stating what action the Company has taken and proposes to take with respect thereto. Each notice pursuant to Section 6.03(a) shall describe with particularity any and all provisions of this Agreement and any other Loan Document that have been breached. 6.04 Payment of Taxes. Pay, discharge or otherwise satisfy as the same shall become due and payable, all its tax liabilities, assessments and governmental charges or levies upon it or its properties or assets, including vehicles, unless the same are being contested in good faith by appropriate proceedings diligently conducted and adequate reserves in accordance with GAAP are being maintained by the Company or such Subsidiary, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. 6.05 Preservation of Existence, Etc. (a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization except in a transaction permitted by Section 7.02 or if otherwise Disposed of in a transaction not prohibited hereunder; (b) take all reasonable action to maintain its good standing (if applicable) and all rights, privileges, permits, licenses and franchises, necessary or desirable in the normal conduct of its business, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; (c) preserve or renew all of its registered patents, trademarks, trade names and service marks, the non-preservation or non-renewal of which could reasonably be expected to have a Material Adverse Effect; and (d) if applicable, take all reasonable action to preserve and maintain, in accordance with its standard policies and procedures, all manufacturer statements of origin, certificates of origin, certificates of title or ownership and other customary vehicle title documentation necessary or desirable in the normal conduct of its business except as otherwise permitted hereunder.
53 6.06 Maintenance of Properties. Except where the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (a) maintain, preserve and protect all of its properties and equipment necessary in the operation of its business in good working order and condition, ordinary wear and tear excepted and casualty or condemnation excepted; (b) make all necessary repairs thereto and renewals and replacements thereof; and (c) use the standard of care typical in the industry in the operation and maintenance of its facilities. 6.07 Maintenance of Insurance. Maintain with financially sound and reputable insurance companies (including self-insurance) insurance with respect to its properties and business against such casualties and contingencies as are customarily insured against by businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as are customary for similar businesses in all material respects. 6.08 Compliance with Laws and Contractual Obligations. Comply in all material respects with the requirements of all Laws and all orders, writs, injunctions and decrees of any Governmental Authority and all Contractual Obligations applicable to it or to its business or property, except in such instances in which (a) such requirement of Law or order, writ, injunction or decree or Contractual Obligation (other than the Loan Documents) is being contested in good faith by appropriate proceedings diligently conducted; or (b) the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect. 6.09 Books and Records. Maintain proper books of record and account, in which full, true and correct entries shall be made, in a manner to allow financial statements to be prepared in conformity with GAAP (or, in the case of Foreign Subsidiaries, in conformity with generally accepted accounting principles that are applicable in their respective jurisdictions of organization) consistently applied in respect of all financial transactions and matters involving the assets and business of the Company or such Subsidiary, as the case may be, including, if applicable and in accordance with the standard policies and procedures of the Company or such Subsidiary, as the case may be, books and records specifying the year, make, model, cost, price, location and vehicle identification number of each vehicle owned by the Company or such Subsidiary. 6.10 Inspection Rights. Permit representatives and independent contractors of the Administrative Agent and each Lender, in each case at the expense of the Administrative Agent or such Lender, to visit and inspect any of its properties, to examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss its affairs, finances and accounts with its directors, officers, and independent public accountants (subject to such accountants’ customary policies and procedures), all at such reasonable times during normal business hours as may be reasonably requested upon reasonable advance notice to the Company and (unless an Event of Default exists) no more than once during any period of twelve (12) consecutive months; provided, however, that (i) unless an Event of Default exists, only the Administrative Agent on behalf of the Lenders may exercise rights under this Section 6.10, (ii) when an Event of Default exists the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Company at any time during normal business hours and without advance notice and (iii) this Section 6.10 shall not apply to any Excluded Special Purpose Finance Subsidiary. The Administrative Agent and the Lenders shall give the Company the opportunity to participate in any discussion with the Company’s accountants. Notwithstanding anything else set forth herein to the contrary, in no event shall the Company or any of the Subsidiaries be required to allow any such Person to inspect or examine, or be required to discuss, any records, documents or other information (x) with respect to which the Company or any of the Subsidiaries has obligations of confidentiality (whether pursuant to law, contract or otherwise) (it being understood that the Company or any of the Subsidiaries shall inform the Administrative Agent of the existence and nature of the confidential records, documents or other information not being provided and, following a reasonable request from the Administrative Agent, use commercially reasonable efforts to request consent from an
54 applicable contractual counterparty to disclose such information (but shall not be required to incur any cost or expense or pay any consideration of any type to such party in order to obtain such consent)) or (y) that is subject to attorney-client privilege. 6.11 Use of Proceeds. Use the proceeds of the Credit Extension for working capital, to finance capital expenditures and for other general corporate purposes, including the repayment of existing Indebtedness, in each case not in contravention of any Law or of any Loan Document, including, without limitation, for Acquisitions and for the repurchase of shares of the Company’s capital stock to the extent such repurchase does not violate Regulation U of the Federal Reserve Board. 6.12 New Subsidiaries. As soon as practicable but in any event within thirty (30) days (or such longer period as the Administrative Agent may agree in its reasonable discretion) (a) following the acquisition or creation of any Subsidiary (other than an Excluded Subsidiary) by a Loan Party (including by way of division), (b) following the designation of any Subsidiary as a Designated Borrower as defined in the Revolving Credit Facility (or similar term) under the Revolving Credit Facility or the joinder of any Subsidiary as a guarantor under the Revolving Credit Facility or the Term Loan Facility or (c) following a Subsidiary which was previously an Immaterial Subsidiary ceasing to be an Immaterial Subsidiary as provided in the definition thereof, cause to be delivered to the Administrative Agent each of the following: (i) a Joinder Agreement duly executed by such Subsidiary (with all schedules thereto appropriately completed); (ii) if reasonably requested by the Administrative Agent, an opinion or opinions of counsel to such Subsidiary dated as of the date of delivery of such Joinder Agreements (and other Loan Documents) provided for in this Section 6.12 and addressed to the Administrative Agent, in form and substance reasonably acceptable to the Administrative Agent; and (iii) current copies of the Organization Documents of such Subsidiary, minutes of duly called and conducted meetings (or duly effected consent actions) of the Board of Directors, partners, or appropriate committees (and, if required by such Organization Documents or applicable law, of the shareholders, members or partners) of such Subsidiary authorizing the actions and the execution and delivery of documents described in this Section 6.12, all certified by the applicable Governmental Authority (in the case of certificates of incorporation, certificates of formation or equivalent organizational documents) or appropriate officer as the Administrative Agent may reasonably request. 6.13 Anti-Corruption Laws. Conduct its businesses in compliance in all material respects with the United States Foreign Corrupt Practices Act of 1977 and other similar anti-corruption Laws in other jurisdictions that may be applicable to the Loan Parties and their Subsidiaries from time to time and maintain policies and procedures reasonably designed to promote and achieve compliance with the United States Foreign Corrupt Practices Act of 1977 and, in the case of any business from time to time conducted outside of the United States, such other similar anti-corruption laws. 6.14 Most Favored Lender Provisions. If at any time the Credit Facilities or any other Credit Facility Document, or the documentation for any replacement revolving credit facility or replacement term facility, as applicable, includes (a) representations and warranties, covenants, springing maturity dates or events of default (including related definitions) in favor of a Lender (as defined in the applicable Credit Facility), or lender under any replacement revolving and/or term loan credit facility, as applicable, that are not provided for in this Agreement or the other Loan Documents, and/or that are more restrictive than the
55 same or similar provisions provided for in this Agreement and the other Loan Documents, or (b) requirements for the credit facility(ies) evidenced thereby to be secured by additional collateral or guaranteed by Subsidiaries of the Company that are not already Guarantors (any or all of the foregoing, collectively, the “Most Favored Lender Provisions”) (in the case of each of the Most Favored Lender Provisions, other than any differences between the applicable Credit Facility and related loan documentation, on the one hand, and this Agreement or the other Loan Documents, on the other hand, existing as of the Closing Date (or otherwise consistent with such differences), including without limitation matters related solely to the funding mechanics under the applicable Credit Facility), then (i) such Most Favored Lender Provisions shall immediately and automatically be deemed incorporated into this Agreement and the other Loan Documents as if set forth fully herein and therein, mutatis mutandis, and no such incorporated provision may thereafter be waived, amended or modified except pursuant to the provisions of Section 10.01, and (ii) the Borrower shall promptly, and in any event within ten (10) Business Days after the Borrower or any other Loan Party enters into any such Most Favored Lender Provisions, so advise the Administrative Agent in writing. Thereafter, upon the request of the Administrative Agent or the Required Lenders, the Borrower, the Company and the Guarantors shall enter into an amendment to this Agreement and, if applicable, the other Loan Documents evidencing the incorporation of such Most Favored Lender Provisions, it being agreed that any failure to make such request or to enter into any such amendment shall in no way qualify or limit the incorporation described in clause (i) of the immediately preceding sentence. In the event that at any time and from time to time after the execution of an amendment with respect to any Most Favored Lender Provision, the applicable Credit Facilities or Credit Facility Documents, or the documentation for any replacement revolving credit facility or replacement term facility, as applicable, shall no longer include such Most Favored Lender Provision, then upon notice by the Borrower to the Administrative Agent, the Administrative Agent and the Lenders shall execute and deliver to the Borrower, at the Borrower’s expense, an amendment to this Agreement and, if applicable, the other Loan Documents in form and substance reasonably satisfactory to the Administrative Agent and the Borrower evidencing the amendment of this Agreement and, if applicable, the other Loan Documents to delete such Most Favored Lender Provision from this Agreement and, if applicable, the other Loan Documents. ARTICLE VII NEGATIVE COVENANTS So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation (other than contingent indemnification obligations as to which no claim has been asserted) hereunder shall remain unpaid or unsatisfied, the Company shall not, nor shall it permit the Borrower or any other Subsidiary to, directly or indirectly: 7.01 Liens. Create, incur, assume or suffer to exist any Lien upon any of its current assets, whether now owned or hereafter acquired, other than the following: (a) Liens pursuant to any Loan Document; (b) Liens existing on the date hereof and listed on Schedule 7.01 and any renewals, refinancings or extensions thereof, provided that in the case of any such renewal, refinancing or extension (i) the property covered thereby is not changed (other than (A) after-acquired property that is affixed or incorporated into the property encumbered by such Lien on the Closing Date to the extent that the Liens being renewed, refinanced or extended included after-acquired property and (B) proceeds and products thereof), (ii) the amount secured or benefited thereby is not increased, and (iii) the direct or any contingent obligor with respect thereto is not changed;
56 (c) Liens for Taxes and assessments which are not yet delinquent for a period of more than thirty (30) days or which are delinquent for a period of more than thirty (30) days and are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP (or, for Foreign Subsidiaries, in conformity with generally accepted accounting principles that are applicable in their respective jurisdiction of organization); (d) landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising in the ordinary course of business which secure amounts not overdue for a period of more than sixty (60) days or if more than sixty (60) days overdue, are unfiled (or if filed, have been discharged or are stayed) and no other action has been taken to enforce such Lien or which are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; (e) pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation and securing liability for reimbursement or indemnification obligations of insurance carriers providing property, casualty or liability insurance, and deposits in the ordinary course of business securing liability to insurance carriers under insurance or self-insurance arrangements, and Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto; (f) pledges or deposits to secure the performance of bids, trade contracts, governmental contracts, and leases (other than Indebtedness for borrowed money), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (g) easements, rights-of-way, restrictions and other similar encumbrances and minor title defects affecting real property which do not in any case materially and adversely interfere with the ordinary conduct of the business of the applicable Person; (h) other Liens on real property securing Indebtedness; provided that in each case (i) the principal amount of the Indebtedness does not exceed 95% of the appraised fair market value of the real property securing such Indebtedness as of the date such Liens are granted on such real property and (ii) such real property is used for purposes that would not be prohibited by Section 7.03; (i) Liens securing judgments for the payment of money not constituting an Event of Default under Section 8.01(h); (j) Liens securing Indebtedness (or any extension, renewal or refinancing thereof) in respect of capital leases, Synthetic Lease Obligations and purchase money obligations for fixed or capital assets or for vehicles acquired at auction; provided that (i) such Liens do not at any time encumber any property (except for replacements, additions and accessions to such property) other than the property financed by such Indebtedness, and (ii) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition (or in the case of any extension, renewal or refinancing, the outstanding amount of Indebtedness is not increased);
57 (k) Liens on Permitted Retail Installment Contracts, the Related Property and assets of Excluded Special Purpose Finance Subsidiaries arising in connection with Permitted Sale Facilities; (l) Liens (i) arising in connection with leases or subleases (each not constituting Indebtedness), licenses or sublicenses (including software and other technology licenses) in each case entered into in the ordinary course of business, (ii) deemed to exist in connection with software escrow arrangements with third parties in the ordinary course of business, and (iii) in connection with leases, licenses, subleases or sublicenses granted to others in the ordinary course of business and not interfering in any material respect with the business of the Company and its Subsidiaries; (m) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes, or (iii) arising as a matter of Law or under customary general terms and conditions encumbering deposits (including the right of setoff or similar rights and remedies as to deposit accounts or other funds maintained with depository institutions) and which are within the general parameters customary in the banking industry; (n) Liens on vehicles purchased in the ordinary course of business, provided that such Liens were in existence at the time of such purchase; (o) Liens on specific property existing at the time such property was acquired or existing on the property of any Person that becomes a Subsidiary after the date hereof, provided that (i) such Liens were in existence at the time of such acquisition or such Person becoming a Subsidiary and not created in contemplation thereof, (ii) no such Lien extends to any property other than the property acquired or property of such Person becoming a Subsidiary, and the proceeds and products thereof, and (iii) the Loan Parties shall be in Pro Forma Compliance (as determined as of the most recent date for which financial statements have been furnished pursuant to Section 6.01(a) or (b)) with Section 7.07 at the time of such acquisition; (p) (A) Liens not otherwise permitted under this Section 7.01; provided that (i) at the time of the creation or incurrence of such Lien, no Default shall exist or would result from such Lien, and (ii) the aggregate principal amount of Indebtedness secured by all Liens created or incurred in reliance on this clause (p) shall not exceed 15% of Consolidated Unencumbered Current Assets (determined at the time of incurrence and calculated using Consolidated Unencumbered Current Assets as of the most recently ended fiscal quarter for which financial statements have been furnished) and (B) Liens that extend, renew, substitute or replace (including successive extensions, renewals, substitutions or replacements), in whole or in part, any Lien permitted pursuant to clause (p)(A) of this Section 7.01; provided that (i) the Indebtedness secured by any such Lien is in an aggregate outstanding principal amount not greater than the aggregate principal amount of the Indebtedness secured by the Lien which is being extended, renewed, substituted or replaced, plus any accreted amount, unpaid accrued interest, premium, underwriting discount, and any other fees, commissions and expenses incurred in connection therewith and (ii) the assets encumbered by such Lien are not increased; (q) Liens on Company Margin Stock that is held by the Company as treasury stock; (r) Liens (i) in favor of customs and revenue authorities arising as a matter of Law to secure payment of customs duties in connection with the importation of goods in the ordinary
58 course of business or (ii) on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business; (s) Liens (i) on cash earnest money deposits in favor of the seller of any property to be acquired in an Acquisition or Investment which is to be applied against the purchase price for such Acquisition or Investment or (ii) consisting of an agreement to Dispose of any property in a Disposition not prohibited hereunder, in each case solely to the extent such Acquisition, Investment or Disposition, as the case may be, would have been permitted on the date of the creation of such Lien; (t) Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Company or any Subsidiary in the ordinary course of business; (u) Liens on Equity Interests of Joint Ventures securing obligations of such Joint Venture, and options, put and call arrangements, rights of first refusal and other similar rights relating to Investments in Joint Ventures, partnerships and the Company’s Equity Interests; (v) Liens consisting of cash deposits securing any Swap Contract permitted hereunder in the ordinary course of business and consistent with past practices (so long as (i) no Event of Default has occurred and is continuing at the time of granting such Lien and (ii) such Liens are required by regulatory requirements applicable to the relevant counterparties); (w) netting arrangements in respect of Swap Contracts (but only to the extent the amounts netted arise under Swap Contracts with the same counterparties); (x) Liens on cash or Cash Equivalents (and the related escrow accounts) in connection with the issuance into (and pending the release from) escrow of any Indebtedness to the extent permitted under Section 7.08; and (y) Liens arising from precautionary UCC financing statement (or similar filings under applicable law) filings regarding operating leases entered into by the Company or any Subsidiary. 7.02 Fundamental Changes. Dissolve, liquidate, merge or consolidate with or into another Person or consummate any Delaware LLC Division, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of the assets (whether now owned or hereafter acquired) of the Company and its Subsidiaries (taken as a whole) to or in favor of any Person, except that: (a) the Company or the Borrower may merge or consolidate with or into any Person as part of an Acquisition or Investment not prohibited hereunder, provided that (i) the Company or the Borrower, as applicable, shall be the continuing or surviving Person and (ii) no Event of Default exists or would result therefrom; (b) (i) any Subsidiary (other than the Borrower) may merge or consolidate with or into (x) the Company, provided that the Company shall be the continuing or surviving Person, (y) the Borrower, provided that the Borrower shall be the continuing or surviving Person, or (z) any one or more other Subsidiaries, provided that when any Subsidiary Guarantor is merging or consolidating with another Subsidiary that is not a Guarantor, such Subsidiary Guarantor shall be the continuing or surviving Person or such other Subsidiary shall become a Subsidiary Guarantor
59 pursuant to Section 6.12, (ii) any Subsidiary (other than the Borrower) may liquidate or dissolve, or the Borrower or any Subsidiary may change its legal form if the Company determines in good faith that such action is in the best interest of the Company and its Subsidiaries and is not disadvantageous to the Lenders in any material respect (it being understood that in the case of any dissolution of a Subsidiary that is a Guarantor, such Subsidiary shall, at or before the time of such dissolution, transfer its assets to the Company or another Subsidiary unless such Disposition of assets is permitted hereunder; and in the case of any change in legal form, a Subsidiary that is a Guarantor will remain a Guarantor, unless such Guarantor is otherwise permitted to cease being a Guarantor hereunder) and (iii) the Company may merge or consolidate with or into the Borrower; provided that the Borrower is the surviving Person; (c) any Subsidiary (other than the Borrower) may (i) Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Company or to another Subsidiary; provided that if the transferor in such a transaction is a Subsidiary Guarantor, then the transferee must either be the Company, the Borrower or a Subsidiary Guarantor and (ii) merge or consolidate with, or Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to any other Person (that is not a Subsidiary) so long as such merger, consolidation or Disposition does not constitute a Disposition of all or substantially all of the assets of the Company and its Subsidiaries (taken as a whole) to such other Person; and (d) any Subsidiary may sell all or substantially all of its Permitted Retail Installment Contracts and Related Property pursuant to Permitted Sale Facilities; provided, however, that any Excluded Subsidiary may dissolve, liquidate, or merge or consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person. 7.03 Change in Nature of Business. Engage in any material line of business substantially different from those lines of business conducted by the Company and its Subsidiaries on the date hereof or any business substantially related, incidental or complementary thereto or extensions thereof if, after giving effect thereto, the business conducted by the Company and its Subsidiaries, taken as a whole, would be substantially different from the business conducted by the Company and its Subsidiaries on the date hereof. 7.04 Transactions with Affiliates. Enter into any transaction of any kind with any Affiliate of the Company, whether or not in the ordinary course of business, other than on fair and reasonable terms substantially as favorable to the Company or such Subsidiary as would be obtainable by the Company or such Subsidiary at the time in a comparable arm’s length transaction with a Person not an Affiliate of the Company, provided that the foregoing restriction shall not apply to (i) transactions between or among the Company and its Subsidiaries not involving any other Affiliate, (ii) the payment of reasonable and customary fees and expenses, and the provision of customary indemnification to directors, officers, employees, members of management and consultants of the Company and its Subsidiaries, (iii) the issuance of Equity Interests to any director, officer, employee or consultant of the Company or its Subsidiaries, (iv) employment and severance arrangements (including options to purchase Equity Interests of the Company, restricted stock plans, long-term incentive plans, stock appreciation rights, participation plans or similar employee benefits plan) between the Company or any Subsidiary and their directors, officers, employees, members of management and consultants in the ordinary course of business, (v) payments to or from, and transactions with, joint ventures (to the extent such joint venture is only an Affiliate as a result of Investments by the Company and the Subsidiaries in such joint venture) in the ordinary course of business, (vi) transactions between the Company or any Subsidiary and any Person that is an Affiliate solely due to the fact that an officer or a director of such Person is also a director of the Company or such Subsidiary;
60 provided, however, that such director abstains from voting as a director of the Company or such Subsidiary, as the case may be, on any matter involving such other Person, (vii) share repurchases of the Company’s common stock, (viii) any transaction in which the aggregate amount involved in each single or related series of transactions does not exceed $10,000,000 and (ix) any other transaction with an Affiliate, which is approved by a majority of disinterested members of the board of directors of the Company in good faith. 7.05 Burdensome Agreements. Enter into any Contractual Obligation (other than this Agreement or any other Loan Document) that limits the ability of any Subsidiary to make Restricted Payments to the Company or any Subsidiary Guarantor or to otherwise transfer property to the Company or any Subsidiary Guarantor; provided, however, that this section shall not prohibit any limitation (i) imposed on an Excluded Subsidiary, (ii) imposed in connection with a Disposition of property or assets not prohibited hereunder pending the consummation of such Disposition; (iii) imposed by law or any Loan Document; (iv) in the documentation governing the Revolving Credit Facility or the Term Loan Facility; (v) contained in any agreement of (A) an entity or related to assets acquired by or merged into or consolidated with the Company or any Subsidiary or (B) a Person that becomes a Subsidiary, in each case in existence at the time of such acquisition, merger, consolidation or such Person becoming a Subsidiary and so long as such limitation was not incurred in connection with, or in contemplation of, such acquisition, merger, consolidation or such Person becoming a Subsidiary and in any extension, renewal, refinancing or replacement of any such agreement; provided that any agreement effecting such extension, renewal, refinancing or replacement does not contain any restriction or limitation on the payment of dividends or distributions that is more restrictive than the restrictions and limitations contained in the agreement being extended, renewed, refinanced or replaced; and (vi) in any one or more agreements governing Indebtedness entered into after the Closing Date that contain encumbrances and other restrictions that are, taken as a whole, in the reasonable and good faith judgment of the Company, no more restrictive in any material respect with respect to the Company or any Subsidiary than those encumbrances and other restrictions that are in effect on the Closing Date pursuant to agreements and instruments in effect on the Closing Date (including this Agreement, the Revolving Credit Facility and the Term Loan Facility) and that do not materially impair the ability of the Loan Parties to repay the Obligations. 7.06 Reserved. 7.07 Financial Covenants. (a) Consolidated Net Leverage Ratio. Permit the Consolidated Net Leverage Ratio as of the end of any fiscal quarter of the Company to be greater than 3.75 to 1.00; provided, that, upon the consummation of any Material Acquisition and the written election of the Company to the Administrative Agent no later than ten Business Days following the consummation of such Material Acquisition, the maximum permitted Consolidated Net Leverage Ratio for each of the four (4) fiscal quarters of the Company immediately following such Material Acquisition (including the fiscal quarter of the Company in which such Material Acquisition was consummated) (such period of increase, the “Leverage Holiday”) shall be increased to 4.25 to 1.00; provided, further, that, there shall be at least four consecutive fiscal quarters between such elections during which time no Leverage Holiday shall be in effect. (b) Consolidated Interest and Rent Coverage Ratio. Permit the Consolidated Interest and Rent Coverage Ratio as of the end of any fiscal quarter of the Company to be less than 2.00 to 1.00. 7.08 Indebtedness. Incur any Indebtedness after the Closing Date unless the Loan Parties shall be in compliance with Section 7.07 on a Pro Forma Basis as of the most recent date for which financial statements have been furnished pursuant to Section 6.01(a) or (b) giving effect to such incurrence.
61 7.09 Sanctions. Directly or indirectly, use any Credit Extension or the proceeds of any Credit Extension, or lend, contribute or otherwise make available such Credit Extension or the proceeds of any Credit Extension to any Person, to fund any activities of or business with any Sanctioned Person or in any Designated Jurisdiction. 7.10 Anti-Corruption Laws. Directly or, to the knowledge of the Company or the Borrower, indirectly use the proceeds of any Credit Extension for any purpose which would violate the United States Foreign Corrupt Practices Act of 1977 or other similar anti-corruption Laws in other jurisdictions that may be applicable to the Loan Parties or their Subsidiaries from time to time. ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES 8.01 Events of Default. Any of the following shall constitute an Event of Default: (a) Non-Payment. The Company or any other Loan Party fails to pay (i) when due and as required to be paid herein, any amount of principal of any Loan, or (ii) within five Business Days after the same becomes due and payable, any interest on any Loan, or any fee due hereunder, or (iii) within seven Business Days after the same becomes due, any other amount payable hereunder or under any other Loan Document; or (b) Specific Covenants. The Company or any other Loan Party fails to perform or observe any term, covenant or agreement contained in any of Section 6.03(a), 6.05(a) (solely with respect to the Borrower or the Company), 6.11 or Article VII; or (c) Other Defaults. The Company, the Borrower or any other Loan Party fails to perform or observe any other covenant or agreement (not specified in subsection (a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after the Company receives notice thereof from the Administrative Agent; or (d) Representations and Warranties. Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Company or any other Loan Party herein, in any other Loan Document, or in any document delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or (e) Cross-Default. (i) A default shall occur, which is not cured or waived, (A) in the payment of any principal, interest, premium or other amounts with respect to (x) any Indebtedness (other than the Indebtedness hereunder or under the Credit Facilities) of the Company or of any Subsidiary in an outstanding aggregate amount not less than the Threshold Amount or (y) the Credit Facilities, or (B) in the performance, observance or fulfillment of any term or covenant contained in any agreement or instrument under or pursuant to which any such Indebtedness described in clause (A) above may have been issued, created, assumed, guaranteed or secured by the Company or any Subsidiary, and in the case of each of clauses (A) and (B) such default shall continue for more than the period of grace, if any, therein specified, and if such default shall permit the holder of any such Indebtedness to accelerate the maturity thereof or (ii) any other event occurs with respect to any Indebtedness described in clause (i)(A) above, the effect of which other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of
62 such holder or holders) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be prepaid, defeased or redeemed (automatically or otherwise) prior to its stated maturity and such Indebtedness shall not be repaid when due; unless, in the case of clauses (i)(B) and (ii) above, (1) such default or other event is capable of being cured, (2) the Company or such Subsidiary, as applicable, is diligently pursuing such cure and (3) the holders of such Indebtedness have not caused such Indebtedness to be accelerated (or otherwise prepaid, defeased or redeemed) or terminated the commitments with respect to such Indebtedness; provided, however, (y) this Section 8.01(e) shall not apply to secured Indebtedness that becomes due as a result of the voluntary Disposition of the property or assets securing such Indebtedness and (z) notwithstanding the foregoing and solely with respect to any agreement or instrument between the Company or any Subsidiary, on one hand, and any Lender or any Affiliate of any Lender, on the other hand, that is within the scope of this Section 8.01(e), an Event of Default shall not be deemed to have occurred under this Section 8.01(e) solely as a result of the Company’s or such Subsidiary’s sale, pledge, or other Disposition of Company Margin Stock in violation of any restriction on the sale, pledge, or other Disposition of Company Margin Stock that is contained in any such instrument or agreement; provided, further, that, with respect to any Permitted Sale Facility, this Section 8.01(e) shall not apply with respect to any event the effect of which is to cause the early termination, acceleration or early amortization of such Permitted Sale Facility so long as (A) such early termination, acceleration or early amortization of such Permitted Sale Facility could not reasonably be expected to have a Material Adverse Effect and (B) such event could not reasonably be expected to result in any recourse against the Company or any Subsidiary (other than an Excluded Special Purpose Finance Subsidiary) in an aggregate amount of more than the Threshold Amount; (f) Insolvency Proceedings, Etc. The Company or any Subsidiary institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any substantial portion of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief is entered in any such proceeding; or (g) Inability to Pay Debts; Attachment. (i) The Company or any Subsidiary becomes unable or admits in writing its inability or fails generally to pay its debts as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within sixty (60) days after its issue or levy; or (h) Judgments. There is entered against the Company or any Subsidiary (i) one or more final judgments or orders for the payment of money in an aggregate amount (as to all such judgments and orders) exceeding the Threshold Amount (to the extent not paid or covered by independent third-party insurance as to which the insurer does not dispute coverage), or (ii) any one or more non-monetary final judgments that have, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, such judgment is not vacated, discharged or stayed or bonded pending appeal within thirty (30) days from the entry thereof, or if longer, within the applicable appeal period (but in no event for more than sixty (60) days from the entry thereof); or
63 (i) ERISA. (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Company under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC or (ii) the Company or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan, and in each case in clauses (i) and (ii) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect; or (j) Invalidity of Loan Documents. Any material provision of any Loan Document, at any time after its execution and delivery and for any reason other than (i) as expressly permitted hereunder or thereunder, (ii) with respect to a Subsidiary Guarantor, the release thereof from the Subsidiary Guaranty Agreement upon the Disposition of such Guarantor in a transaction not prohibited hereunder or (iii) satisfaction in full of all the Obligations (other than contingent indemnification obligations as to which no claim has been asserted), ceases to be in full force and effect; or the Company or any Subsidiary contests in writing the validity or enforceability of any provision of any Loan Document; or any Loan Party denies in writing that it has any or further liability or obligation under any Loan Document (other than as a result of repayment in full of Obligations (other than contingent indemnification obligations as to which no claim has been asserted)), or purports in writing to revoke, terminate or rescind any Loan Document; or (k) Change of Control. There occurs any Change of Control. 8.02 Remedies Upon Event of Default. If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions: (a) upon notice to the Borrower, declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company and the Borrower; and (b) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or Law or equity; provided, however, that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Company or the Borrower under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable without further act of the Administrative Agent or any Lender. 8.03 Application of Funds. After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall, subject to the provisions of Section 2.18 be applied by the Administrative Agent in the following order: First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (including fees, charges and disbursements of counsel payable under Sections
64 10.04 and 10.05 to the Administrative Agent and amounts payable under Article III) payable to the Administrative Agent in its capacity as such; Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including fees, charges and disbursements of counsel payable under Sections 10.04 and 10.05) to the respective Lenders and amounts payable under Article III, ratably among them in proportion to the respective amounts described in this clause Second payable to them; Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Obligations, ratably among the Lenders in proportion to the respective amounts described in this clause Third payable to them; Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause Fourth held by them; and Last, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to the Company or as otherwise required by Law. ARTICLE IX ADMINISTRATIVE AGENT 9.01 Appointment and Authority. Each of the Lenders hereby irrevocably appoints MUFG to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except as otherwise provided in Section 9.06(c), the provisions of this Article are solely for the benefit of the Administrative Agent and the Lenders, and neither the Company nor the Borrower shall have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” herein or in any other Loan Documents (or any other similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used as a matter of market custom and is intended to create or reflect only an administrative relationship between contracting parties. 9.02 Rights as a Lender. The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Company or the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders. 9.03 Exculpatory Provisions. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:
65 (a) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing; (b) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law; and (c) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Company or any of the Borrower or any of their respective Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 10.01 and 8.02) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given in writing to the Administrative Agent by the Company or a Lender. The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. 9.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to the making of such Loan. The Administrative Agent may consult with legal counsel (who may be counsel for the Company), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.
66 9.05 Delegation of Duties. The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub agents appointed by the Administrative Agent. The Administrative Agent and any such sub agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub agent and to the Related Parties of the Administrative Agent and any such sub agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non appealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agents. 9.06 Resignation of Administrative Agent. (a) The Administrative Agent may at any time give notice of its resignation to the Lenders and the Company. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Company unless an Event of Default has occurred and is continuing (such consent not to be unreasonably withheld), to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Resignation Effective Date”), then the retiring Administrative Agent may (but is not obligated to), on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Resignation Effective Date. (b) If the Person serving as Administrative Agent is a Defaulting Lender pursuant to clause (d) of the definition thereof, the Required Lenders may, to the extent permitted by applicable Law, by notice in writing to the Company and such Person remove such Person as Administrative Agent and, with the consent of the Company unless an Event of Default has occurred and is continuing (such consent not to be unreasonably withheld), appoint a successor. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty days (or such earlier day as shall be agreed by the Required Lenders) (the “Removal Effective Date”), then such removal shall nonetheless become effective in accordance with such notice on the Removal Effective Date. (c) With effect from the Resignation Effective Date or the Removal Effective Date (as applicable) (i) the retiring or removed Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents and (ii) except for any indemnity payments or other amounts then owed to the retiring or removed Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for above. Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or removed) Administrative Agent (other than as provided in Section 3.06 and other than any rights to indemnity payments or other amounts owed to the retiring or removed Administrative Agent as of the Resignation Effective Date or the Removal Effective Date, as applicable), and the retiring or removed Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring or removed Administrative Agent’s resignation or removal hereunder and under the other
67 Loan Documents, the provisions of this Article and Section 10.04 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its sub agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent. 9.07 Non-Reliance on Administrative Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. 9.08 No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of the arrangers, book runners, syndication agents or documentation agents, if any, listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent or a Lender hereunder. 9.09 Administrative Agent May File Proofs of Claim. In case of the pendency of any proceeding under any Debtor Relief Law or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Company or the Borrower) shall be entitled and empowered (but not obligated), by intervention in such proceeding or otherwise: (a) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.10 and 10.04) allowed in such judicial proceeding; and (b) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.10 and 10.04. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.
68 9.10 Guaranty Matters. The Lenders irrevocably authorize the Administrative Agent, at its option and in its discretion, to release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty Agreement if such Person ceases to be a Subsidiary as a result of a transaction permitted hereunder. Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release any Subsidiary Guarantor from its obligations under the Subsidiary Guaranty Agreement pursuant to this Section 9.10. Upon release of a Subsidiary Guarantor from its obligations under the Subsidiary Guaranty Agreement, the Administrative Agent (and each Lender irrevocably authorizes the Administrative Agent to), at the Company’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such Subsidiary Guarantor from its obligations under the Subsidiary Guaranty Agreement, in accordance with the terms thereof and this Section 9.10. 9.11 ERISA Matters. (a) Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and each Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Company or any other Loan Party, that at least one of the following is and will be true: (i) such Lender is not using “plan assets” (within the meaning of Section 3(42) of ERISA or otherwise) of one or more Benefit Plans with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments or this Agreement, (ii) the transaction exemption set forth in one or more PTEs, such as PTE 84- 14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96- 23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loan and this Agreement, (iii) (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans and this Agreement, or (iv) such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender. (b) In addition, unless either (1) subclause (i) in the immediately preceding clause (a) is true with respect to a Lender or (2) a Lender has provided another representation, warranty and
69 covenant in accordance with subclause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent and each Arranger and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Company or any other Loan Party, that none of the Administrative Agent or any Arranger or any of their respective Affiliates is a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Loans and this Agreement (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related to hereto or thereto). ARTICLE X MISCELLANEOUS 10.01 Amendments, Etc. Except as expressly provided below, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Company or any other Loan Party therefrom, shall be effective unless in writing and signed by the Required Lenders and the Company or the applicable Loan Party, as the case may be, and the Administrative Agent’s receipt of such writing is acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no such amendment, waiver or consent shall: (a) waive any condition set forth in Section 4.01 without the written consent of each Lender; (b) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 8.02) without the written consent of such Lender; (c) postpone any date fixed by this Agreement or any other Loan Document for any payment or mandatory prepayment of principal, interest, fees or other amounts due to the Lenders (or any of them) hereunder or under any other Loan Document without the written consent of each Lender entitled to receive such payment; (d) reduce the principal of, or the rate of interest specified herein on, any Loan, or (subject to clause (ii) of the proviso following paragraph (g) of this Section 10.01) any fees or other amounts payable hereunder or under any other Loan Document without the written consent of each Lender entitled to receive such amount; it being understood that any change (i) to the definition of the Consolidated Leverage Ratio, the Consolidated Net Leverage Ratio or, in each case, in the component definitions thereof or (ii) in the Applicable Leverage Ratio in connection with a Revolver Repricing Amendment, shall not constitute a reduction in any rate of interest or any fees based thereon; provided, however, that only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate; (e) change Section 2.14 or Section 8.03 in a manner that would alter the pro rata sharing of payments required thereby without the written consent of each Lender;
70 (f) change any provision of this Section 10.01 or the definition of “Required Lenders” without the written consent of each Lender; (g) release the Company from the Company Guaranty Agreement or, other than as a result of a Disposition or otherwise expressly permitted hereunder or thereunder, release all or substantially all of the value of the Subsidiary Guaranty Agreement without the written consent of each Lender; or (h) subordinate the Obligations to any other Indebtedness without the written consent of each Lender; and, provided further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document. Notwithstanding anything to the contrary contained herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of such Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment, consent or modification requiring the consent of all Lenders or each affected Lender that by its terms affects such Defaulting Lender disproportionately adversely relative to other affected Lenders shall require the consent of such Defaulting Lender. Notwithstanding any provision herein to the contrary: (a) the Administrative Agent and the Company may amend, modify or supplement this Agreement or any other Loan Document to cure or correct administrative errors or omissions, any ambiguity, omission, defect or inconsistency or to effect administrative changes, and such amendment shall become effective without any further consent of any other party to such Loan Document so long as (i) such amendment, modification or supplement does not adversely affect the rights of any Lender or other holder of Obligations in any material respect and (ii) the Lenders shall have received at least five Business Days’ prior written notice thereof and the Administrative Agent shall not have received, within five Business Days of the date of such notice to the Lenders, a written notice from the Required Lenders stating that the Required Lenders object to such amendment, (b) each Fee Letter may be amended, or rights or privileges thereunder waived, in a writing executed only by the parties thereto and (c) the Administrative Agent, the Borrower and the Company may make amendments to this Agreement contemplated by Section 3.07. 10.02 Notices; Effectiveness; Electronic Communication. (a) Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in subsection (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows: (i) if to the Company, the Borrower or the Administrative Agent, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 10.02; and (ii) if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire (including, as
71 appropriate, notices delivered solely to the Person designated by a Lender on its Administrative Questionnaire then in effect for the delivery of notices that may contain material non-public information relating to the Company or the Borrower). Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the recipient). Notices and other communications delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b). (b) Electronic Communications. Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail, FpML messaging and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Article II, Section 6.03 or Section 10.14(d) if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article or Section by electronic communication. The Administrative Agent or the Company may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor; provided that for both clauses (i) and (ii) above, if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient. (c) The Platform. THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.” THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Company, the Borrower, any Lender or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Company’s, the Borrower’s or the Administrative Agent’s transmission of Borrower Materials or notices through the Platform, any other electronic platform or electronic messaging service, or through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and nonappealable judgment to have resulted from the gross
72 negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to the Company, the Borrower, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages). (d) Change of Address, Etc. Each of the Company (for itself and on behalf of the Borrower) and the Administrative Agent may change its address, facsimile or telephone number and electronic mail addresses for notices and other communications hereunder by notice to the other parties hereto. Each other Lender may change its address, facsimile or telephone number and electronic mail addresses for notices and other communications hereunder by notice to the Company and the Administrative Agent. In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, facsimile number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender. Furthermore, each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to at all times have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable Law, including United States Federal and state securities Laws, to make reference to Borrower Materials that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to the Company or its securities for purposes of United States Federal or state securities Laws. (e) Reliance by Administrative Agent and Lenders. The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Loan Notices) purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The Company and the Borrower (jointly and severally) shall indemnify the Administrative Agent, each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Company or the Borrower. All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording. 10.03 No Waiver; Cumulative Remedies; Enforcement. No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document (including the imposition of the Default Rate) 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 herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. This Agreement may be amended and restated without the consent of any Lender (but with the consent of the Company, the Borrower and the Administrative Agent) if, upon giving effect to such amendment and restatement, such Lender shall no longer be a party to this Agreement (as so amended and restated), the Commitments of such Lender shall have terminated, such Lender shall have no other commitment or other obligation hereunder and shall have been paid in full all principal, interest and other amounts owing to it or accrued for its account under this Agreement.
73 Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent in accordance with Section 8.02 for the benefit of all the Lenders; provided, however, that the foregoing shall not prohibit (a) the Administrative Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Administrative Agent) hereunder and under the other Loan Documents, (b) any Lender from exercising setoff rights in accordance with Section 10.08 (subject to the terms of Section 2.14), or (c) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided, further, that if at any time there is no Person acting as Administrative Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Administrative Agent pursuant to Section 8.02 and (ii) in addition to the matters set forth in clauses (b) and (c) of the preceding proviso and subject to Section 2.14, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders. 10.04 Expenses; Indemnity; Damage Waiver. (a) Costs and Expenses. The Company and the Borrower (jointly and severally) shall pay (i) all reasonable and documented out of pocket expenses incurred by the Administrative Agent and its Affiliates (including the reasonable fees, charges and disbursements of one primary counsel for the Administrative Agent), in connection with the syndication of the credit facilities provided for herein, the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated) and (ii) all reasonable and documented out of pocket expenses incurred by the Administrative Agent or any Lender (including the reasonable fees, charges and disbursements of one primary counsel for the Administrative Agent or any Lender, taken as a whole, and if necessary, one local counsel in any relevant jurisdiction, to the Administrative Agent or any Lender, taken as a whole, unless the representation of one or more such Person by such counsel would be inappropriate due to the existence of an actual conflict of interest, in which case, upon prior written notice to the Company, the Company and the Borrower shall also be required to reimburse the reasonable out of pocket fees, charges and disbursements of one additional counsel to such affected Persons in each relevant jurisdiction), in connection with the enforcement or protection of its rights, including any audit fees incurred when conducting any audit of any Loan Party during the continuance of an Event of Default (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section, or (B) in connection with the Loans made hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans. (b) Indemnification by the Company and the Borrower. The Company and the Borrower (jointly and severally) shall indemnify the Administrative Agent (and any sub agent thereof), each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the reasonable and documented out-of- pocket fees, charges and disbursements of one primary counsel to the Indemnitees, taken as a whole, and if necessary, one local counsel in any relevant jurisdiction, to the Indemnitees, taken as a whole, unless the representation of one or more Indemnitees by such counsel would be inappropriate due to the existence of an actual conflict of interest, in which case, upon prior written notice to the Company, the Company and the Borrower shall also be required to reimburse the
74 reasonable out of pocket fees, charges and disbursements of one additional counsel to such affected Indemnitees in each relevant jurisdiction), incurred by any Indemnitee or asserted against any Indemnitee by any Person (including any third party, the Company, the Borrower or any other Loan Party), other than such Indemnitee and its Related Parties, arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder, the consummation of the transactions contemplated hereby or thereby, or, in the case of the Administrative Agent (and any sub agent thereof) and its Related Parties only, the administration of this Agreement and the other Loan Documents, (ii) any Loan or the use or proposed use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Company or any of its Subsidiaries, or any Environmental Liability, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Company or any other Loan Party, and regardless of whether any Indemnitee is a party thereto, in all cases, whether or not caused by or arising, in whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that losses, claims, damages, liabilities or related expenses (i) are determined by a court of competent jurisdiction by final order to have resulted from (A) the willful misconduct, bad faith or gross negligence of such Indemnitee or any Related Indemnified Party thereof or (B) a material breach by such Indemnitee of its obligations hereunder, or (ii) arise solely from a proceeding brought by an Indemnitee against any other Indemnitee (other than any claims against any Indemnitee in its capacity or in fulfilling its role as an arranger or agent or any similar role hereunder) and do not involve an act or omission by any Loan Party or Affiliate thereof. (c) Reimbursement by Lenders. To the extent that the Company or the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Administrative Agent (or any sub-agent thereof) or any Related Party of any of the foregoing, each Lender severally agrees to pay to the Administrative Agent (or any such sub- agent) or such Related Party, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent (or any such sub-agent) in its capacity as such, or against any Related Party of any of the foregoing acting for the Administrative Agent (or any such sub-agent) in connection with such capacity. The obligations of the Lenders under this subsection (c) are subject to the provisions of Section 2.13(d). (d) Waiver of Consequential Damages, Etc. Without limiting the Loan Parties’ indemnification obligations above, to the fullest extent permitted by applicable Law, no party hereto shall assert, and each other party hereto hereby waives, any claim against any other party hereto (or any Indemnitee or any Loan Party), on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of the proceeds thereof (other than in respect of any such damages incurred or paid by an Indemnitee to a third party and to which such Indemnitee is otherwise entitled to indemnification as provided above). No Indemnitee referred to in subsection (b) above shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems
75 in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby. (e) Payments. All amounts due under this Section shall be payable not later than ten Business Days after demand therefor. (f) Survival. The agreements in this Section shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Commitment and the repayment, satisfaction or discharge of all the other Obligations. 10.05 Payments Set Aside. To the extent that any payment by or on behalf of the Company or the Borrower is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Administrative Agent (other than any amount consisting of the Administrative Agent’s fees under Section 2.10(a)), plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement. 10.06 Successors and Assigns. (a) Successors and Assigns Generally. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that neither the Company nor the Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Administrative Agent and each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Assignments by Lenders. Any Lender may at any time assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that any such assignment shall be subject to the following conditions: (i) Minimum Amounts.
76 (A) in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the related Loans at the time owing to it or contemporaneous assignments to related Approved Funds (determined after giving effect to such Assignments) that equal at least the amount specified in subsection (b)(i)(B) of this Section in the aggregate or in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund, no minimum amount need be assigned; and (B) in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the Commitment is not then in effect, the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Company otherwise consents (each such consent not to be unreasonably withheld or delayed); (ii) Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loans or the Commitment assigned; (iii) Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition: (A) the consent of the Company (such consent not to be unreasonably withheld or delayed) shall be required unless (1) an Event of Default pursuant to Section 8.01(a), 8.01(f) or 8.01(g) has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund; provided that the Company shall be deemed to have consented to any such assignment unless it objects thereto by written notice to the Administrative Agent within five (5) Business Days after having received notice thereof; (B) the consent of the Administrative Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of such Lender or an Approved Fund with respect to such Lender. (iv) Assignment and Assumption. The parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment. The assignee, if it is not a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire. (v) No Assignment to Certain Persons. No such assignment shall be made to (A) the Company or any of the Company’s Affiliates or Subsidiaries, (B) any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B), or (C) a natural
77 person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of a natural person). (vi) Certain Additional Payments. In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Company and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent or any Lender hereunder (and interest accrued thereon). Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs. Subject to acceptance and recording thereof by the Administrative Agent pursuant to subsection (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.01, 3.04, and 10.04 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided, that except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section. (c) Register. The Administrative Agent, acting solely for this purpose as an agent of the Borrower (and such agency being solely for tax purposes), shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it (or the equivalent thereof in electronic form) and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Participations. Any Lender may at any time, without the consent of, or notice to, the Company, the Borrower or the Administrative Agent, sell participations to any Person (other
78 than a natural person (or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of a natural person), a Defaulting Lender or the Company or any of the Company’s Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Company, the Borrower, the Administrative Agent and the Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. For the avoidance of doubt, each Lender shall be responsible for the indemnity under Section 10.04(c) without regard to the existence of any participation. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that affects such Participant. Subject to subsection (e) of this Section, each of the Company and the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01 and 3.04 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section, provided that such Participant agrees to be subject to the provisions of Section 3.05 and Section 10.13 as if it were an assignee under paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 10.08 as though it were a Lender, provided that such Participant agrees to be subject to Section 2.14 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register. (e) Limitation upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 3.01 or 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Company’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 3.01 unless the Company is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.01(e) as though it were a Lender. (f) Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under any of its Notes, if any) to
79 secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. 10.07 Treatment of Certain Information; Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Related Parties who need to know such Information in connection with the transactions hereunder (it being understood and agreed that (i) the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential and (ii) the Administrative Agent and the Lenders, as applicable, shall be responsible for their respective Controlled or Controlling Affiliates’ failure to maintain the confidentiality of such Information), (b) to the extent required or requested by any regulatory authority purporting to have jurisdiction over it or its Related Parties (including any self-regulatory authority, such as the National Association of Insurance Commissioners); provided that (i) the Administrative Agent or such Lender, as applicable, agrees to the extent practicable and not prohibited by applicable Law to inform the Company promptly thereof prior to such disclosure and (ii) notwithstanding anything to the contrary contained herein, the Administrative Agent or the Lenders, and their Affiliates may disclose Information, without notice to the Company, to any Governmental Authority or self-regulatory authority (including bank and securities examiners) having or claiming to have authority to regulate or oversee any aspect of such Person’s or its Affiliate’s business in connection with the exercise of such authority or claimed authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party hereto, (e) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the written consent (including by electronic mail) of the Company or (h) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section or (y) becomes available to the Administrative Agent or any Lender from a source other than the Company or any Subsidiary that is not, to the knowledge of the Administrative Agent or such Lender, as applicable, subject to a confidentiality obligation owing to the Company or any Subsidiaries prohibiting disclosure with respect to such Information. For purposes of this Section, “Information” means all information received from the Company or any Subsidiary relating to the Company or any Subsidiary or any of their respective businesses, other than any such information that is available to the Administrative Agent or any Lender on a nonconfidential basis prior to disclosure by the Company or any Subsidiary, provided that, in the case of written information received from the Company or any Subsidiary after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. Each of the Administrative Agent and the Lenders acknowledges that (a) the Information may include material non-public information concerning the Company or a Subsidiary, as the case may be, (b) it has developed compliance procedures regarding the use of material non-public information and (c) it will handle such material non-public information in accordance with applicable Law, including Federal and state securities Laws.
80 10.08 Right of Setoff. Subject to Section 2.14, if an Event of Default shall have occurred and be continuing, each Lender and each of their respective Affiliates is hereby authorized at any time and from time to time, after obtaining the written consent of the Administrative Agent, to the fullest extent permitted by applicable law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of the Company or the Borrower against any and all of the Obligations of the Company or the Borrower, as applicable, now or hereafter existing under this Agreement or any other Loan Document to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any other Loan Document and although such Obligations of the Company or the Borrower may be contingent or unmatured or are owed to a branch or office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness; provided, however, that the Lenders and their respective Affiliates shall not set off or apply (A) any such deposits in deposit accounts owned by or in the name of the Company or the Borrower with respect to which the Company or the Borrower is acting on behalf of another person who is not a Loan Party or a Subsidiary in connection with any engagement, and the Company or the Borrower does not own such deposit account for its own benefit, and (B) any such deposits in any deposit account containing only the assets of Persons (other than the Company or Affiliates of the Company) for whom the Company or any Subsidiary is serving as a fiduciary or on a contractual basis or (C) in each case except pursuant to the terms of any Permitted Sale Facility, (i) any such deposits at any time held in or credited to any Collection Account or (ii) any such deposits at any time held in or credited to any deposit account identified on Schedule 10.08 to the extent that, in the case of this clause (ii), such deposits are required by the terms of a Permitted Sale Facility to be paid to a Person other than a Loan Party; provided, further, that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.18 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. Each Lender acknowledge that certain deposits held in or credited to the deposit accounts identified on Schedule 10.08 are required by the terms of a Permitted Sale Facility to be paid to a Person other than a Loan Party. The rights of each Lender and its Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender or its Affiliates may have. Each Lender agrees to notify the Company and the Administrative Agent promptly after any such setoff and application, provided, however, that the failure to give such notice shall not affect the validity of such setoff and application. 10.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Company. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations hereunder. 10.10 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other
81 Loan Documents and any separate fee letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic imaging means (e.g. “pdf” or “tif”) shall be effective as delivery of a manually executed counterpart of this Agreement. 10.11 Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied. 10.12 Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without limiting the foregoing provisions of this Section 10.12, if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent, then such provisions shall be deemed to be in effect only to the extent not so limited. 10.13 Replacement of Lenders. If any Lender requests compensation under Section 3.04, or if the Company or the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 3.01, or if any Lender ceases to make Daily SOFR Loans as a result of any condition described in Section 3.02 or 3.03, or if any Lender is a Defaulting Lender or a Non-Consenting Lender or if any other circumstance exists hereunder that gives the Company the right to replace a Lender as a party hereto, then the Company may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 10.06), all of its interests, rights (other than its existing rights to payments pursuant to Sections 3.01 and 3.04) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that: (a) the Company shall have paid to the Administrative Agent the assignment fee specified in Section 10.06(b); (b) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Company (in the case of all other amounts);
82 (c) in the case of any such assignment resulting from a claim for compensation under Section 3.04 or payments required to be made pursuant to Section 3.01, such assignment will result in a reduction in such compensation or payments thereafter; (d) such assignment does not conflict with applicable Laws; and (e) in the case of any assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent. A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Company to require such assignment and delegation cease to apply. Any Lender being replaced pursuant to this Section 10.13 shall (i) execute and deliver an Assignment and Assumption with respect to such Lender’s outstanding Loans and (ii) deliver any Notes evidencing such Loans to the Borrower or the Administrative Agent. In connection with any such replacement, if any such Lender being replaced does not execute and deliver to the Administrative Agent a duly executed Assignment and Assumption reflecting such replacement within five Business Days of the date on which the assignee Lender executes and delivers such Assignment and Assumption to such Lender being replaced, then such Lender being replaced shall be deemed to have executed and delivered such Assignment and Assumption without any action on the part of such Lender being replaced. Notwithstanding the foregoing, upon not less than three Business Days prior notice to any Defaulting Lender and the Administrative Agent (which the Administrative Agent shall promptly provide to the Lenders), the Borrower (with the consent of the Administrative Agent) shall have the right to terminate the then unutilized Commitment of such Defaulting Lender, after taking into account the portion of such Commitment, if any, which theretofore has been or substantially contemporaneously therewith is being, assigned pursuant to the foregoing provisions of this Section 10.13. In the event of any such termination, future Credit Extensions shall be allocated to the non-Defaulting Lenders in accordance with Section 2.18(a)(ii). 10.14 Governing Law; Jurisdiction; Etc. (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. (b) SUBMISSION TO JURISDICTION. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT IT WILL NOT COMMENCE ANY ACTION, LITIGATION OR PROCEEDING OF ANY KIND OR DESCRIPTION, WHETHER IN LAW OR EQUITY, WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, AGAINST ANY OTHER PARTY OR ANY RELATED PARTY OF SUCH OTHER PARTY IN ANY WAY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN ANY FORUM OTHER THAN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE JURISDICTION OF SUCH COURTS AND AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION, LITIGATION OR PROCEEDING MAY BE HEARD AND
83 DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION, LITIGATION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE AGENT, ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION. (c) WAIVER OF VENUE. EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. (d) SERVICE OF PROCESS. EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 10.02. NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW. 10.15 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. 10.16 No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each of the Loan Parties acknowledges and agrees, and acknowledges its Affiliates’ understanding, that: (i) (A) the arranging and other services regarding this Agreement provided by the Administrative Agent and the Arrangers are arm’s-length commercial transactions between the Loan Parties and their respective Affiliates, on the one hand, and the Administrative Agent and the Arrangers, on the other hand, (B) each of the Loan Parties has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each of the Loan Parties is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents;
84 (ii) (A) the Administrative Agent and the Arrangers each is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Loan Parties or any of their respective Affiliates, or any other Person and (B) neither the Administrative Agent nor the Arrangers has any obligation to the Loan Parties or any of their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Administrative Agent and the Arrangers and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Loan Parties and their respective Affiliates, and neither the Administrative Agent nor the Arrangers has any obligation to disclose any of such interests to the Loan Parties and their respective Affiliates. To the fullest extent permitted by Law, each of the Loan Parties hereby waives and releases any claims that it may have against the Administrative Agent and the Arrangers with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby. 10.17 Electronic Execution of Assignments and Certain Other Documents. This Agreement, any Loan Document and any other Communication, including Communications required to be in writing, may be in the form of an Electronic Record and may be executed using Electronic Signatures. Each of the Loan Parties and each of the Administrative Agent and each Lender Party agrees that any Electronic Signature on or associated with any Communication shall be valid and binding on such Person to the same extent as a manual, original signature, and that any Communication entered into by Electronic Signature, will constitute the legal, valid and binding obligation of such Person enforceable against such Person in accordance with the terms thereof to the same extent as if a manually executed original signature was delivered. Any Communication may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Communication. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Communication converted into another format, for transmission, delivery and/or retention. The Administrative Agent and each of the Lender Parties may, at its option, create one or more copies of any Communication in the form of an imaged Electronic Record (“Electronic Copy”), which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document. All Communications in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record. Notwithstanding anything contained herein to the contrary, the Administrative Agent is under no obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by such Person pursuant to procedures approved by it; provided, further, without limiting the foregoing, (a) to the extent the Administrative Agent has agreed to accept such Electronic Signature, the Administrative Agent and each of the Lender Parties shall be entitled to rely on any such Electronic Signature purportedly given by or on behalf of any Loan Party and/or any Lender Party without further verification and (b) upon the request of the Administrative Agent or any Lender Party, any Electronic Signature shall be promptly followed by such manually executed counterpart. The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into the sufficiency, validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document (including, for the avoidance of doubt, in connection with the Administrative Agent’s reliance on any Electronic Signature transmitted by telecopy, emailed .pdf or any other electronic means). The Administrative Agent shall be entitled to rely on, and shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon, any Communication (which writing may be a fax, any electronic message, Internet or intranet website posting or other distribution or signed using an Electronic Signature) or any statement made to it orally or by telephone and
85 believed by it to be genuine and signed or sent or otherwise authenticated (whether or not such Person in fact meets the requirements set forth in the Loan Documents for being the maker thereof). Each of the Loan Parties and each Lender Party hereby waives (i) any argument, defense or right to contest the legal effect, validity or enforceability of this Agreement or any other Loan Document based solely on the lack of paper original copies of this Agreement or such other Loan Document, and (ii) waives any claim against the Administrative Agent, each Lender Party and each Related Party for any liabilities arising solely from the Administrative Agent’s and/or any Lender Party’s reliance on or use of Electronic Signatures, including any liabilities arising as a result of the failure of the Loan Parties to use any available security measures in connection with the execution, delivery or transmission of any Electronic Signature. 10.18 USA PATRIOT Act Notice. Each Lender that is subject to the Patriot Act (as hereinafter defined) and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Company and the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Company and the Borrower, which information includes the name and address of the Company and the Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Company and the Borrower in accordance with the Patriot Act. The Company and the Borrower shall, to the extent commercially reasonable, promptly following a request by the Administrative Agent or any Lender, provide all documentation and other information that the Administrative Agent or such Lender reasonably requests in order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act. 10.19 Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Solely to the extent any Lender that is an Affected Financial Institution is a party to this Agreement and notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender that is an Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by: (a) the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any Lender that is an Affected Financial Institution; and (b) the effects of any Bail-in Action on any such liability, including, if applicable: (i) a reduction in full or in part or cancellation of any such liability; (ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or (iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority. 10.20 Acknowledgement Regarding any Supported QFCs.
86 To the extent that the Loan Documents provide support, through a guarantee or otherwise, for any Swap Contract or any other agreement or instrument that is a QFC (such support, “QFC Credit Support”, and each such QFC, a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States): (a) In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support. (b) As used in this Section 10.20, the following terms have the following meanings: “BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party. “Covered Entity” means any of the following: (i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b); (ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or (iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b). “Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable. “QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D). 10.21 Erroneous Payments. (a) If the Administrative Agent notifies a Lender or other holder of any Obligations (each, a “Lender Party”), or any Person who has received funds on behalf of a Lender Party (any such Lender Party or other recipient, a “Payment Recipient”), that the Administrative Agent has determined in its sole discretion (whether or not after receipt of any notice under immediately
87 succeeding clause (b)) that any funds received by such Payment Recipient from the Administrative Agent or any of its Affiliates were erroneously transmitted to, or otherwise erroneously received by, such Payment Recipient (whether or not such error is known to any Payment Recipient) (any such funds, whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise, individually and collectively, an “Erroneous Payment”) and demands the return of such Erroneous Payment (or a portion thereof), such Erroneous Payment shall at all times remain the property of the Administrative Agent and shall be segregated by the Payment Recipient and held in trust for the benefit of the Administrative Agent, and such Payment Recipient shall promptly, but in no event later than one Business Day thereafter, return to the Administrative Agent the amount of any such Erroneous Payment (or portion thereof) as to which such a demand was made, in same day funds (in the currency so received), together with interest thereon in respect of each day from and including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the Administrative Agent in same day funds at the greater of the Federal Funds Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect. A notice of the Administrative Agent to any Payment Recipient under this clause (a) shall be conclusive, absent manifest error. (b) Without limiting immediately preceding clause (a), if any Payment Recipient receives a payment, prepayment or repayment (whether received as a payment, prepayment or repayment of principal, interest, fees, distribution or otherwise) from the Administrative Agent (or any of its Affiliates) that (x) is in a different amount than, or on a different date from, that specified in a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, (y) was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Administrative Agent (or any of its Affiliates), or (z) such Payment Recipient otherwise becomes aware was transmitted, or received, in error (in whole or in part): (i) (A) in the case of immediately preceding clause (x) or (y), an error shall be presumed to have been made (absent written confirmation from the Administrative Agent to the contrary) or (B) in the case of immediately preceding clause (z), an error has been made, in each case, with respect to such payment, prepayment or repayment; and (ii) such Payment Recipient shall promptly (and, in all events, within one Business Day of its knowledge of such error) notify the Administrative Agent of its receipt of such payment, prepayment or repayment, the details thereof (in reasonable detail) and that it is so notifying the Administrative Agent pursuant to this Section 10.21(b). (c) Each Lender Party hereby authorizes the Administrative Agent to set off, net and apply any and all amounts at any time owing to such Lender Party under any Loan Document, or otherwise payable or distributable by the Administrative Agent to such Lender Party from any source, against any amount due to the Administrative Agent under immediately preceding clause (a) or under the indemnification provisions of this Agreement. (d) An Erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations, except to the extent such Erroneous Payment comprises funds received by the Administrative Agent from a Loan Party for the purpose of making a payment on the Obligations. (e) To the extent permitted by applicable law, each Payment Recipient hereby agrees not to assert any right or claim to an Erroneous Payment, and hereby waives, and is deemed to waive, any claim, counterclaim, defense or right of set-off or recoupment, including without
88 limitation any defense based on “discharge for value” or any similar doctrine, with respect to any demand, claim or counterclaim by the Administrative Agent for the return of any Erroneous Payment. (f) Each party’s agreements under this Section 10.21 shall survive the resignation or replacement of the Administrative Agent, any transfer of rights or obligations by, or the replacement of, a Lender, the termination of the commitments, or the repayment, satisfaction or discharge of any or all Obligations. [signature pages follow]
CARMAX, INC. TERM LOAN CREDIT AGREEMENT IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. CARMAX, INC., a Virginia corporation By: /s/ Enrique Mayor-Mora Name: Enrique Mayor-Mora Title: Executive Vice President and Chief Financial Officer CARMAX AUTO SUPERSTORES, INC., a Virginia corporation By: /s/ Enrique Mayor-Mora Name: Enrique Mayor-Mora Title: Executive Vice President and Chief Financial Officer
CARMAX, INC. TERM LOAN CREDIT AGREEMENT AGENT: MUFG BANK, LTD., as Administrative Agent By: /s/ Lawrence Blat Name: Lawrence Blat Title: Authorized Signatory
CARMAX, INC. TERM LOAN CREDIT AGREEMENT LENDERS: MUFG BANK, LTD., as Lender By: /s/ Andrea Matsudaira Name: Andrea Matsudaira Title: Vice President
TERM LOAN CREDIT AGREEMENT CARMAX Canadian Imperial Bank of Commerce, New York Branch as Lender By: /s/ Noah Shiling Name: Noah Shiling Title: Executive Director & Authorized Signatory
TERM LOAN CREDIT AGREEMENT CARMAX ROYAL BANK OF CANADA, as Lender By: /s/ Benjamin Lennon Name: Benjamin Lennon Title: Authorized Signatory
TERM LOAN CREDIT AGREEMENT CARMAX PNC BANK, NATIONAL ASSOCIATION, as Lender By: /s/ Stephanie Gray Name: Stephanie Gray Title: Senior Vice President
TERM LOAN CREDIT AGREEMENT CARMAX M&T Bank, as Lender By: /s/ Mark Wolfram Name: Mark Wolfram Title: Senior Vice President
FIRST NATIONAL BANK OF PENNSYLVANIA, as Lender By: /s/ John Wesley Lux York Name: John Wesley Lux York Title: Senior Vice President TERM LOAN CREDIT AGREEMENT CARMAX
EXHIBIT 31.1
Certification of the Chief Executive Officer
Pursuant to Rule 13a-14(a)
I, Keith Barr, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CarMax, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: June 24, 2026
/s/ Keith Barr
Keith Barr
President and
Chief Executive Officer
EXHIBIT 31.2
Certification of the Chief Financial Officer
Pursuant to Rule 13a-14(a)
I, Enrique N. Mayor-Mora, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CarMax, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: June 24, 2026
/s/ Enrique N. Mayor-Mora
Enrique N. Mayor-Mora
Executive Vice President and
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the CarMax, Inc. (the "company") Quarterly Report on Form 10-Q for the period ended May 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Keith Barr, President and Chief Executive Officer of the company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company as of, and for, the periods presented in the Report.
| Date: | June 24, 2026 | By: | /s/ Keith Barr | ||||||||
| Keith Barr | |||||||||||
| President and Chief Executive Officer | |||||||||||
EXHIBIT 32.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
In connection with the CarMax, Inc. (the "company") Quarterly Report on Form 10-Q for the period ended May 31, 2026, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Enrique N. Mayor-Mora, Executive Vice President and Chief Financial Officer of the company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company as of, and for, the periods presented in the Report.
| Date: | June 24, 2026 | By: | /s/ Enrique N. Mayor-Mora | ||||||||
| Enrique N. Mayor-Mora | |||||||||||
| Executive Vice President and | |||||||||||
| Chief Financial Officer | |||||||||||