Exhibit 10.2

CARMAX, INC.

NOTICE OF MARKET STOCK UNIT GRANT

[Date]

 

 

 

 

Dear

 

:

The Board of Directors of CarMax, Inc. (the “Company”) wants to provide you with
an opportunity to share in the success of our Company. Accordingly, I am pleased
to inform you that, as of                      (the “Grant Date”), the
Compensation and Personnel Committee of the Board of Directors of the Company
(the “Committee”) exercised its authority pursuant to the CarMax, Inc. 2002
Stock Incentive Plan, as amended and restated (the “Plan”) and granted you
Market Stock Units of the Company (the “Market Stock Units”) as set forth
herein.

The Market Stock Units are a form of Restricted Stock Units under the Plan and
are subject to the provisions of the Plan. The Committee administers the
Plan. The terms of the Plan are incorporated into this Notice of Market Stock
Unit Grant (the “Notice of Grant”) and in the case of any conflict between the
Plan and this Notice of Grant, the terms of the Plan shall control. All
capitalized terms not defined herein shall have the meaning given to them in the
Plan. Please refer to the Plan for certain conditions not set forth in this
Notice of Grant. Additionally, a copy of a Prospectus for the Plan, which
describes material terms of the Plan, can be found on The CarMax Way. Copies of
the Prospectus, the Plan and the Company’s annual report to shareholders on Form
10-K for fiscal year 20     are available from the Company’s corporate secretary
at (804) 747-0422.

 

Number of Market Stock Units:

 

Grant Date Fair Market Value:

 

 

A. Vesting of Market Stock Units

Except as otherwise provided in this Notice of Grant, all the Market Stock Units
will vest and become nonforfeitable on                      (the “Specified
Date”) or such earlier date as may be provided in this Notice of Grant or the
Plan (collectively, the “Vesting Date”) provided you continue to be employed by
the Company or one of its Subsidiaries from the Grant Date until the Vesting
Date. No Market Stock Units may vest after the Specified Date and all unvested
Market Stock Units remaining after the Specified Date will terminate and be
completely forfeited. If prior to any Vesting Date, your employment with the
Company and its Subsidiaries terminates for any reason other than those
described in Sections B.1, B.2 or B.3, then any unvested Market Stock Units (and
any related dividend equivalent rights) subject to this Notice of Grant shall
terminate and be completely forfeited on the date of such termination of your
employment. To the extent that you do not vest in any Market Stock Units, all
interest in such units, the related shares of Company Stock, and any related
dividend equivalent rights shall be forfeited. You shall have no right or
interest in any Market Stock Unit or related share of Company Stock that is
forfeited. Prior to payment, the Market Stock Units are not transferable by you
by means of sale, assignment, exchange, pledge or otherwise.

 

B. Additional Vesting and Forfeiture Provisions

 

  1. Termination Without Cause or for Good Reason. If (a) the Company terminates
your employment with the Company and its Subsidiaries for any reason other than
Cause (as defined in Section B.4), or (b) you have an effective severance or
employment agreement with the Company or one of its Subsidiaries and you
terminate your employment for “Good Reason”(as defined in such agreement), if
applicable, then:

(x) if your employment terminates on or after the Grant Date but prior to the
first anniversary of the Grant Date, all of your Market Stock Units will be
immediately forfeited, effective as of the date of your termination;

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(y) if your employment terminates on or after the first anniversary of the Grant
Date but prior to the second anniversary of the Grant Date, one-third of your
Market Stock Units will become immediately vested and nonforfeitable and your
remaining Market Stock Units will be immediately forfeited, effective as of the
date of your termination; and

(z) if your employment terminates on or after the second anniversary of the
Grant Date but prior to the Vesting Date, then two-thirds of your Market Stock
Units will become immediately vested and nonforfeitable and your remaining
Market Stock Units will be immediately forfeited, effective as of the date of
your termination.

 

  2. Death or Disability. If your employment by the Company and its Subsidiaries
terminates because you die or become Disabled, all Market Stock Units will
become immediately vested and nonforfeitable, effective as of the date of the
termination of your employment.

 

  3. Retirement. If (a) your employment with the Company and its Subsidiaries
terminates, (b) such termination is not for Cause, not due to your death or
Disability and not otherwise covered by Section B.1, and (c) as of the date of
the termination you have: (i) attained 55 years of age and completed ten years
or more of continuous employment with the Company or its Subsidiaries;
(ii) attained 62 years of age and completed seven years or more of continuous
employment with the Company or its Subsidiaries; or (iii) attained 65 years of
age and completed five years or more of continuous employment with the Company
or its Subsidiaries; then all Market Stock Units will become immediately vested
and nonforfeitable, effective as of the date of the termination of your
employment.

 

  4. Termination For Cause. Upon termination of your employment with the Company
or one of its Subsidiaries for Cause, and notwithstanding anything in Section B
to the contrary, your Market Stock Units will immediately and automatically
without any action on the part of you or the Company, be forfeited, effective as
of the date of your termination. For purposes of this Notice of Grant, “Cause”
shall mean the following: (a) if you have an effective severance or employment
agreement with the Company or one of its Subsidiaries with a definition of
“Cause,” then “Cause” shall have the meaning set forth in your employment or
severance agreement; or (b) if you do not have an effective severance or
employment agreement with the Company or one of its Subsidiaries with a
definition of “Cause,” then “Cause” shall mean that the Company or one of its
Subsidiaries has any reason to believe any of the following: (i) you have
committed fraud, misappropriation of funds or property, embezzlement or other
similar acts of dishonesty; (ii) you have been convicted of a felony or other
crime involving moral turpitude (or pled nolo contendere thereto); (iii) you
have used, possessed or distributed any illegal drug; (iv) you have committed
any misconduct that may subject the Company or one of its Subsidiaries to
criminal or civil liability; (v) you have breached your duty of loyalty to the
Company or one of its Subsidiaries, including, without limitation, the
misappropriation of any of the Company’s or its Subsidiaries’ corporate
opportunities; (vi) you have committed a serious violation or violations of any
Company policy or procedure; (vii) you refuse to follow the lawful instructions
of any Company management; (viii) you have committed any material
misrepresentation in the employment application process; (ix) you have committed
deliberate actions, including neglect or failure to perform the job, which are
contrary to the best interest of the Company or one of its Subsidiaries; or
(x) you have continually failed to perform substantially your duties with the
Company or one of its Subsidiaries.

 

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  5. Change in Full-Time Employment Status. In the event that your employment
with the Company or one of its Subsidiaries changes from full-time to part-time
for any reason, and notwithstanding the terms of Section B.3, your Market Stock
Units will be immediately forfeited, effective as of the date of the change.
Employees on authorized leave (as determined under the Company’s or its
Subsidiary’s authorized leave policy) will not be considered as having
terminated merely by reason of the leave.

 

C. Payment for Market Stock Units

 

  1. Payment Schedule. Payment for your Market Stock Units shall be made in
shares of Company Stock upon the earlier to occur of the two payment dates set
forth below (the earlier date shall be the “Payment Date”).

 

  a) Specified Date. One hundred percent (100%) of the unpaid Market Stock Units
(and related dividend equivalent rights), if vested, shall be paid upon the
Specified Date.

 

  b) Separation from Service. One hundred percent (100%) of the unpaid Market
Stock Units (and related dividend equivalent rights), if vested, shall be paid
upon your “Separation from Service” (as defined in Code section 409A) due to the
Company involuntarily terminating your employment other than for Cause or due to
you terminating your employment for Good Reason, if applicable (collectively, an
“Involuntary Separation”).

In the event payment is made pursuant to your Involuntary Separation, such
payment shall be made within 60 days following your Involuntary Separation.
Notwithstanding anything herein to the contrary, distributions may not be made
to an individual who is a Key Employee (as defined below) as of his or her
Involuntary Separation before the date which is six (6) months after the date of
the Key Employee’s Involuntary Separation (the “Key Employee Delay Period”). Any
payments that would otherwise be made during this period of delay shall be
accumulated and paid in the calendar month following the last day of the Key
Employee Delay Period. For purposes of this award, Key Employee means an
employee who, as of December 31st of a calendar year, meets the requirements of
Code section 409A(a)(2)(B)(i) to be treated as a “specified employee” of the
Company, i.e., a key employee (as defined in Code section 416(i)(1)(A)(i),
(ii) or (iii) applied in accordance with the regulations thereunder and
disregarding Code section 416(i)(5)). If you meet the criteria in the preceding
sentence, you will be considered a Key Employee for purposes of the Plan and
this award for the 12-month period commencing on the next following April 1.

 

D. Number of Shares of Company Stock To Be Paid

Except as set forth in Section D.5 below, the number of shares of Company Stock
that will be paid in accordance with Section C shall be determined on the
applicable Payment Date in accordance with the following formula:

(Number of vested Market Share Units payable on the Payment Date)

multiplied by

((the Payment Date Fair Market Value) divided by (the Grant Date Fair Market
Value)).

For purposes of the formula set forth above:

 

  1. Grant Date Fair Market Value. The Grant Date Fair Market Value, which is
set forth on page one of this Notice of Grant, shall be equal to the
volume-weighted average trading price of the Company Stock occurring on the New
York Stock Exchange on the Grant Date.

 

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  2. Payment Date Fair Market Value. The Payment Date Fair Market Value shall be
equal to the average of the closing price of the Company Stock occurring on the
New York Stock Exchange on the Payment Date and the 39 trading dates immediately
preceding the Payment Date.

 

  3. Maximum Cap. Notwithstanding the calculation set forth in the preceding
paragraph, the Payment Date Fair Market Value shall be capped at two times the
Grant Date Fair Market Value.

 

  4. Expiration upon Payment. Upon each issuance or transfer of shares of
Company Stock in accordance with this Notice of Grant, the portion of the Market
Stock Units attributable to such issuance or transfer shall be extinguished and
such number of Market Stock Units will not be considered to be held by you for
any purpose.

 

  5. Number of Shares of Company Stock to be Paid Following a Change of Control.
Notwithstanding anything herein to the contrary, if the Payment Date occurs on
or after the date of a Change of Control, then the number of shares of Company
Stock that will be paid shall be the greater of: (a) the number of Market Stock
Units or (b) the number of shares determined according to the above formula;
provided, however, that the Payment Date Fair Market Value shall be equal to the
closing price of the Company Stock immediately preceding the consummation of the
Change of Control, subject to the limitation in Section D.3.

 

E. No Shareholder Rights

The Market Stock Units shall not represent an equity security of the Company and
shall not carry any voting or dividend rights. However, you will have the right
to receive payments equivalent to dividends as set forth below. You are an
unsecured general creditor of the Company with respect to any payment relating
to vested Market Stock Units.

 

F. Dividend Equivalent Rights

You shall accumulate dividend equivalent rights on each Market Stock Unit in an
amount equal to the dividends paid, if any, with respect to a share of Company
Stock on each date that a dividend is paid on the Company Stock from the Grant
Date to the Payment Date. The dividend equivalent rights shall be converted into
additional Market Stock Units based on the Fair Market Value of a share of
Company Stock on the date the dividend is paid and shall accumulate and be paid
in additional shares of Company Stock when the payment for the corresponding
Market Stock Unit is made. Such additional Market Stock Units shall be subject
to the same forfeiture restrictions as apply to the Market Stock Unit to which
they relate and shall be converted into shares of Company Stock using the same
formula, Grant Date Fair Market Value and Payment Date Fair Market Value set
forth above.

 

G. Tax Withholding

The Company or its Subsidiary may withhold from your Market Stock Units or
payments under Section C the amount of taxes required by any federal, state, or
local government to be withheld or otherwise deducted and paid with respect to
the vesting and payment of your Market Stock Units (“Tax Withholdings”),
including without limitation, the Federal Insurance Contributions Act (“FICA”)
tax imposed and the income tax withholding related to such FICA amounts. At its
discretion, the Company or its Subsidiary may require you to reimburse it for
any Tax Withholdings and withhold any payments, in whole or in part, until the
Company or its Subsidiary is so reimbursed. The Company or its Subsidiary shall
also have the unrestricted right to withhold from any other cash amounts due (or
to become due) from the Company or its Subsidiary to you, including from your
wages or commissions, an amount equal to any Tax Withholdings. The Company or
its Subsidiary shall report the payment of any Tax Withholdings and other
related information to the appropriate governmental agencies as required under
applicable laws.

 

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H. Change of Capital Structure

If the number of outstanding shares of the Company Stock is increased or
decreased as a result of a stock dividend, stock split, subdivision or
consolidation of shares, or other similar change in capitalization, the number
of Market Stock Units, the Grant Date Fair Market Value, and the Payment Date
Fair Market Value will automatically be adjusted, as provided in the Plan and as
the Committee shall determine to be equitably required so as to preserve the
value of the Market Stock Units that existed immediately before the change;
provided, however, that the Company will not be required to issue any fractional
shares as a result of such adjustment.

 

I. Miscellaneous

The grant of these Market Stock Units does not obligate the Company or any of
its Subsidiaries to continue your employment. If there is any litigation
involving Market Stock Units, each party will bear its own expenses, including
all legal fees, except that in the event of an action brought by you under this
Notice of Grant following a Change of Control, then insofar as such action is
not deemed to be frivolous by the arbitrator, the Company shall bear all
expenses related to the arbitration, including all legal fees incurred by
you. The Committee shall have the authority to interpret and administer this
Notice of Grant.

 

J. 409A Compliance

The Market Stock Units are intended to comply with Code section 409A and
official guidance issued thereunder. Notwithstanding anything herein to the
contrary, this Notice of Grant shall be interpreted, operated and administered
in a manner consistent with this intention.

 

K. Acceptance

By accepting this grant on-line, this Notice of Grant, together with the Plan,
will become the entire agreement between you and the Company with respect to the
subject matter hereof, and will be governed by and construed and enforced in
accordance with the laws of the Commonwealth of Virginia without regard to
conflict of law provisions in any jurisdiction. This Notice of Grant supersedes
all prior discussions, negotiations, understandings, commitments and agreements
with respect to such matters. By accepting this grant online, you agree that you
are in compliance with, and will abide by, the Company’s “Policy Against Insider
Trading” which can be found on The CarMax Way. You also agree not to sell
Company Stock at a time when other applicable laws prohibit a sale. This
restriction will apply as long as you are an employee, consultant or director of
the Company or one of its Subsidiaries.

Sincerely,

[Name, Title]

 

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