EXHIBIT 10.50

CARMAX, INC.
NOTICE OF PERFORMANCE 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
Performance Stock Units of the Company (the “Performance Stock Units”) as set
forth herein.

The Performance Stock Units are a form of Restricted Stock Units that are being
awarded pursuant to Section 6 of 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 Performance 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.

For purposes of this Notice of Grant, the term “Performance Term” shall mean the
period commencing on ____________ and ending on _____________.

Number of Performance Stock Units:                 

A.
Vesting

Except as otherwise provided in this Notice of Grant, all of the Performance
Stock Units earned pursuant to the Performance Calculation, as set forth and
defined in Exhibit 1, will vest and become nonforfeitable, if at all, on
_______________ (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 Performance Stock Units may vest after the Vesting Date and all unvested
Performance Stock Units on the Vesting Date will terminate and be completely
forfeited.

If prior to the 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 the Performance Stock Units 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
Performance Stock Units, all interest in such units and the related shares of
Company Stock shall be forfeited. You shall have no right or interest in any
Performance Stock Unit or related share of Company Stock that is forfeited.
Prior to payment, the Performance Stock Units are not transferable by you by
means of sale, assignment, exchange, pledge or otherwise.

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B.
Additional Vesting and Forfeiture Provisions

1.
Termination Without Cause or for Good Reason. If prior to the Vesting Date: (a)
the Company terminates your employment with the Company and its Subsidiaries for
any reason other than for 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 Performance Stock Units will be
immediately forfeited, effective as of the date of your termination;

(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, the Performance
Stock Units earned during year one of the Performance Term (as determined
pursuant to the Performance Calculation) will become immediately vested and
nonforfeitable, and your remaining Performance 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, the Performance Stock Units earned
during years one and two of the Performance Term (as determined pursuant to the
Performance Calculation) will become immediately vested and nonforfeitable, and
your remaining Performance Stock Units will be immediately forfeited, effective
as of the date of your termination.

2.
Death or Disability. If you die or become Disabled prior to the Vesting Date,
the number of Performance Stock Units set forth above will become immediately
vested and nonforfeitable, effective as of the date of your death or Disability.

3.
Retirement. If prior to the Vesting Date: (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 of your Performance Stock Units will
become immediately vested and nonforfeitable, and will be paid on the Vesting
Date subject to the Performance Calculation.

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 Performance 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 prior to the Vesting Date, and notwithstanding the terms of Section
B.3, your Performance 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

1.
Payment Schedule. Payment for your vested Performance Stock Units shall be made
in the number of shares of Company Stock, if any, determined in accordance with
Exhibit 1, following the earliest to occur of the following events (the “Payment
Date”): (a) the Vesting Date, (b) the date of your death, or (c) the date you
become Disabled. Such payment shall be made within 60 days following the Payment
Date.

2.
Expiration upon Payment. Upon each issuance or transfer of shares of Company
Stock in accordance with this Notice of Grant, the portion of the Performance
Stock Units attributable to such issuance or transfer shall be extinguished and
such number of Performance Stock Units will not be considered to be held by you
for any purpose.

D.
No Shareholder Rights

The Performance 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 Performance Stock Units.

E.
Dividend Equivalent Rights

You shall accumulate dividend equivalent rights on each Performance 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 Performance 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 if and when the
payment for the corresponding Performance Stock Unit is made.  Such additional
Performance Stock Units shall be subject to the same Performance Calculation and
forfeiture restrictions as apply to the Performance Stock Unit to which they
relate and shall be converted into shares of Company Stock using the same
Performance Calculation, as applicable.

F.
Tax Withholding

The Company or its Subsidiary may withhold from your Performance 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 Performance 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 pay any Tax
Withholdings and withhold any payments, in whole or in part, until the Company
or its Subsidiary is so paid.  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.

G.
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 Performance Stock Units 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 Performance 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.

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H.
Miscellaneous

The grant of these Performance Stock Units does not obligate the Company or any
of its Subsidiaries to continue your employment.  If there is any litigation
involving the Performance 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 or court, the Company
shall bear all expenses related to the arbitration or litigation, including all
legal fees incurred by you.  The Committee shall have the authority to interpret
and administer this Notice of Grant.

I.
409A Compliance

The Performance 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. Notwithstanding anything in the Plan
or this Notice of Grant to the contrary, if at the time of your termination of
employment with the Company you are “specified employee” as defined in Code
section 409A, and the deferral of the commencement of any payment to you
hereunder as a result of such termination of employment is necessary in order to
prevent any accelerated or additional tax under Code section 409A, then the
commencement of the payment of any such amounts shall be deferred until the
earlier of the first business day to occur following the date that is six (6)
months following your “separation from service” (within the meaning of such term
under Code section 409A) with the Company or your death.

J.
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,                         

 

        
[Insert Name]                        
[Insert Title]                                        

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EXHIBIT 1
Performance Calculation

1.
Performance Calculation. Except as set forth in Sections 3 and 4 below, the
number of shares of Company Stock that will be paid shall be determined on the
applicable Payment Date in accordance with the following performance calculation
(the “Performance Calculation”):

For Year 1 of the Performance Term:

(One-Third of the Performance Share Units awarded)
multiplied by
(the Year 1 PSU Performance-Based Multiplier)

For Year 2 of the Performance Term:

(One-Third of the Performance Share Units awarded)
multiplied by
(the Year 2 PSU Performance-Based Multiplier)

For Year 3 of the Performance Term:

(One-Third of the Performance Share Units awarded)
multiplied by
(the Year 3 PSU Performance-Based Multiplier)

2.
PSU Performance-Based Multiplier. For purposes of the Performance Calculation,
the PSU Performance-Based Multiplier for each year of the Performance Term shall
be a number between __ and __. The number of Performance Share Units that may be
earned for each year of the Performance Term shall be determined by the
Committee based upon the Performance-Based Multiplier and the attainment of
performance targets based on such criteria as are determined by the Committee
for each such year. The Committee may in its discretion determine a threshold
level of Company performance required for any year of the Performance Term, such
that the if actual Company performance is equal to or below such threshold, the
number of shares of Company Stock that will be paid in respect of that year of
the Performance Term shall be zero.

3.
Payment on Death or Disability. Notwithstanding anything to the contrary, if
payment is triggered upon your death or you becoming Disabled, then the number
of shares of Company Stock that will be paid shall equal the number of vested
Performance Stock Units.

4.
Payment On or After a Change of Control. Notwithstanding anything to the
contrary, if payment is triggered for any reason on or after the date of a
Change of Control, then the number of shares of Company Stock that will be paid
shall equal the number of vested Performance Stock Units.

5.
Committee Certification. Prior to any payments (other than those under Sections
3 and 4) being made, the Committee will determine whether, and to what extent,
the Performance Calculation for each year of the Performance Term has been
achieved. Such determination shall be final, conclusive and binding on you, and
on all other persons, to the maximum extent permitted by law. The Committee may
adjust the Performance Calculation, as it deems appropriate.