Exhibit 10.3

CARMAX, INC.

NOTICE OF RESTRICTED 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
Restricted Stock Units of the Company (the “Restricted Stock Units”) as set
forth herein.

The Restricted Stock Units are subject to the provisions of the Plan. The
Committee administers the Plan. The terms of the Plan are incorporated into this
Notice of Restricted 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 Restricted Stock Units:  

 

    Grant Date Fair Market Value:  

 

 

 

A. Vesting of Restricted Stock Units

Except as otherwise provided in this Notice of Grant, all the Restricted Stock
Units will vest and become nonforfeitable on [THREE YEAR ANNIVERSARY DATE] (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 Restricted Stock Units may vest after the Specified Date and
all unvested Restricted Stock Units on 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 or B.2, then the Restricted 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 Restricted 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 Restricted Stock Unit or related share of Company Stock that is
forfeited. Prior to payment, the Restricted Stock Units are not transferable by
you by means of sale, assignment, exchange, pledge or otherwise.

 

B. Additional Vesting Provisions

 

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

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  2. Retirement. If (a) your employment with the Company or one if its
Subsidiaries terminates, (b) such termination is not for cause and not due to
your death or Disability, 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
Restricted Stock Units will become immediately vested and nonforfeitable,
effective as of the date of the termination of your employment.

 

  3. Change of Control. In the event of a Change of Control, all Restricted
Stock Units shall vest in accordance with the following: (a) 50% of your
Restricted Stock Units shall vest effective upon the date of the Change of
Control; and (b) 50% of your Restricted Stock Units shall vest effective upon
the one-year anniversary of the date of the Change of Control. Notwithstanding
the foregoing, in the event that any of your Restricted Stock Units would have
vested sooner than the one-year anniversary of the date of the Change of Control
(based upon the vesting schedule set forth in Section A hereof or any other
terms or conditions affecting vesting rights contained herein), such sooner
Vesting Date shall apply to such Restricted Stock Units.

 

C. Payment for Restricted Stock Units

 

  1. Payment Schedule.

Payment for your Restricted Stock Units shall be made in cash upon the earliest
to occur of the four payment dates set forth below (each, a “Payment Date”).

 

  (a) Specified Date

One hundred percent (100%) of the unpaid Restricted 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 Restricted Stock Units (and related
dividend equivalent rights), if vested, shall be paid upon your “Separation from
Service” (as defined in Code section 409A). In the event payment is made
pursuant to your Separation from Service, such payment shall be made on the 60th
day following your Separation from Service. 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 Separation from Service before the
date which is six (6) months after the date of the Key Employee’s Separation
from Service (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.

 

  (c) Disability

One hundred percent (100%) of the unpaid Restricted Stock Units (and related
dividend equivalent rights), if vested, shall be paid upon your Disability.

 

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  (d) Change of Control

Upon the occurrence of an event that is both a “Change in Control Event” (as
defined in Code section 409A(a)(2)(A)(v)) and a Change of Control, fifty percent
(50%) of the Restricted Stock Units (and related dividend equivalent rights), if
vested, shall be paid. Upon the one-year anniversary of the occurrence of an
event that is both a Change in Control Event and a Change of Control, the
remaining fifty percent (50%) of the Restricted Stock Units (and related
dividend equivalent rights), if vested, shall be paid; provided, however, that
if any of the events listed under headings (C)(1)(a), (b), or (c) above occurs
after the occurrence of an event that is both a Change in Control Event and a
Change of Control but before the one-year anniversary of the occurrence of an
event that is both a Change in Control Event and a Change of Control, then the
remaining fifty percent (50%) of the Restricted Stock Units (and related
dividend equivalent rights), if vested, shall be paid upon the earliest to occur
of, and in accordance with, the events listed under headings (C)(1)(a), (b), or
(c) above.

 

  2. Restrictions on Value. The value of each Restricted Stock Unit on the
Payment Date(s) shall equal the Fair Market Value of a share of Company Stock,
with certain exceptions as noted below. The value on the Payment Date of each
Restricted Stock Unit shall not exceed two times, and shall not be less than .75
times, the Grant Date Fair Market Value of one share of Company Stock.
Accordingly, on the Payment Date, the Company’s payment obligations shall not
exceed $             [Insert 2 x Grant Date FMV] per Restricted Stock Unit, and
shall not be less than $             [Insert .75 x Grant Date FMV] per
Restricted Stock Unit.

 

  3. Expiration upon Payment. Upon each cash payment in accordance with this
Notice of Grant, the portion of the Restricted Stock Units attributable to such
payment shall be extinguished and such number of Restricted Stock Units will not
be considered to be held by you for any purpose.

 

D. No Shareholder Rights

The Restricted 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 Restricted Stock Units.

 

E. Dividend Equivalent Rights

You shall accumulate dividend equivalent rights on each Restricted 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 Restricted 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 cash when the payment for the corresponding Restricted
Stock Unit is made. Such additional Restricted Stock Units shall be subject to
the same forfeiture restrictions as apply to the Restricted Stock Unit to which
they relate.

 

F. Tax Withholding

The Company or its Subsidiary may withhold from your Restricted 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 Restricted 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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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 Restricted 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 Restricted Stock Units that existed immediately before the
change.

 

H. Miscellaneous

The grant of these Restricted Stock Units does not obligate the Company or any
of its Subsidiaries to continue your employment. The Committee shall have the
authority to interpret and administer this Notice of Grant.

 

I. 409A Compliance

The Restricted 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.

 

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,     [Name, Title]     ACCEPTED:     Signature    

 

   

 

   

 

Printed Name     Employee ID Number

 

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