Document:

CarMax, Inc. Annual Performance-Based Bonus Plan

    
      
        

      

      CARMAX,
        INC.

      ANNUAL
        PERFORMANCE-BASED BONUS PLAN

      (as
        amended and restated, effective April 24, 2006)

      

      1.
         Purpose.
        The
        purpose of the CarMax, Inc. Annual Performance-Based Bonus Plan (the “Plan”) is
        to provide an annual performance based incentive for executive officers who
        are
        in a position to contribute materially to the success of the Company and
        its
        Subsidiaries.

      

      2. Definitions.

      

      
        	
                (a)
                  

              	
                “Award”
                  means an award made pursuant to the
                  Plan.

              

      

      

      
        	
                (b)
                  

              	
                “Award
                  Agreement” means the agreement entered into between the Company and a
                  Participant, setting forth the terms and conditions applicable
                  to an Award
                  granted to the Participant.

              

      

      

      
        	
                (c)
                  

              	
                “Board”
                  means the Board of Directors of the
                  Company.

              

      

      

      
        	
                (d)
                  

              	
                “Change
                  of Control” means the occurrence of either of the following events: (i) a
                  third person, including a “group” as defined in Section 13(d)(3) of the
                  Securities Exchange Act of 1934, as amended, becomes, or obtains
                  the right
                  to become, the beneficial owner of Company securities having 20%
                  or more
                  of the combined voting power of the then outstanding securities
                  of the
                  Company that may be cast for the election of directors to the Board
                  of the
                  Company (other than as a result of an issuance of securities initiated
                  by
                  the Company in the ordinary course of business); or (ii) as the
                  result of,
                  or in connection with, any cash tender or exchange offer, merger
                  or other
                  business combination, sale of assets or contested election, or
                  any
                  combination of the foregoing transactions, the persons who were
                  directors
                  of the Company before such transactions shall cease to constitute
                  a
                  majority of the Board or of the board of directors of any successor
                  to the
                  Company.

              

      

      

      
        	
                (e)
                  

              	
                “Code”
                  means the Internal Revenue Code of 1986, as
                  amended.

              

      

      

      
        	
                (f)
                  

              	
                “Code
                  Section 162(m) Award” means an Award intended to satisfy the requirements
                  of Code Section 162(m) and designated as such in an Award
                  Agreement.

              

      

      

      
        	
                (g)

              	
                “Committee”
                  means the committee appointed by the Board as described under Section
                  5.

              

      

      

      
        	
                (h)
                  

              	
                “Company”
                  means CarMax, Inc., a Virginia
                  corporation.

              

      

      

      
        	
                (i)

              	
                “Covered
                  Employee” means a covered employee within the meaning of Code Section
                  162(m)(3).

              

      

      

      
        	
                (j)

              	
                “Executive
                  Employee” means all executive officers (as defined in Rule 3b-7 under the
                  Securities Exchange Act of 1934, as amended) of the Company (or
                  any Parent
                  or Subsidiary of the Company, whether now existing or hereafter
                  created or
                  acquired).

              

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        	
                (k)
                  

              	
                “Parent”
                  means, with respect to any corporation, a parent of that corporation
                  within the meaning of Code Section
                  424(e).

              

      

      

      
        	
                (l)
                  

              	
                “Participant”
                  means an Executive Employee selected from time to time by the Committee
                  to
                  participate in the Plan.

              

      

      

      
        	
                (m)
                  

              	
                “Performance
                  Adjustment” means the percentage(s), as set forth in an award schedule,
                  that will, when multiplied by a Participant’s Target Bonus, determine the
                  amount of a Participant’s Award.

              

      

      

      
        	
                (n)

              	
                “Performance
                  Criteria” means the criteria selected by the Committee to measure
                  performance for a Plan Year from among one or more of the following:
                  (i)
                  Pre tax earnings, as shown in the Company’s annual report to shareholders,
                  calculated in accordance with generally accepted accounting principles
                  consistently applied by the Company; and (ii) Earnings per share,
                  as shown
                  in the Company’s annual report to shareholders, calculated in accordance
                  with generally accepted accounting principles consistently applied
                  by the
                  Company.

              

      

      

      
        	
                (o)
                  

              	
                “Performance
                  Goal” means one or more levels of performance as to each Performance
                  Criteria, as established by the Committee, that will result in
                  the
                  Performance Adjustment that is established by the Committee for
                  each such
                  level of performance.

              

      

      

      
        	
                (p)
                  

              	
                “Plan
                  Year” means the fiscal year of the
                  Company.

              

      

      

      
        	
                (q)
                  

              	
                “Retirement”
                  means, with respect to a Participant, the earliest date on which
                  the
                  Participant is eligible to retire under any qualified Code Section
                  401(a)
                  plan of the Company, or, if there is no such plan, age
                  65.

              

      

      

      
        	
                (r)
                  

              	
                “Subsidiary”
                  means
                  any business entity (including, but not limited to, a corporation,
                  partnership or limited liability company) of which a company directly
                  or
                  indirectly owns one hundred percent (100%) of the voting interests
                  of the
                  entity unless the Committee determines that the entity should not
                  be
                  considered a Subsidiary for purposes of the Plan. If a company
                  owns less
                  than one hundred percent (100%) of the voting interests of the
                  entity, the
                  entity will be considered a Subsidiary for purposes of the Plan
                  only if
                  the Committee determines that the entity should be so
                  considered.

              

      

      

      
        	
                (s)

              	
                “Target
                  Bonus” means the bonus payable to a Participant if there is a 100 percent
                  Performance Adjustment for each Performance
                  Criteria.

              

      

      

      3.  Eligibility.
        All
        present and future Executive Employees shall be eligible to receive Awards
        under
        the Plan. The Committee shall have the 

      power
        and
        complete discretion to select eligible Executive Employees to receive Awards
        and
        to determine for each Participant the terms and conditions and the amount
        of
        each Award.

      

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

      4.  Awards.

      

      
        	
                (a)
                  

              	
                Each
                  Award shall be evidenced by an Award Agreement setting forth the
                  Performance Goals for each Performance Criteria, the Target Bonus,
                  the
                  maximum bonus payable and such other terms and conditions applicable
                  to
                  the Award, as determined by the Committee, not inconsistent with
                  the terms
                  of the Plan. Anything else in this Plan to the contrary notwithstanding,
                  the aggregate maximum amount payable under the Plan to any Participant
                  in
                  any Plan Year shall be the lesser of 200 percent of the Participant’s base
                  salary or $2,000,000. In the event of any conflict between an Award
                  Agreement and the Plan, the terms of the Plan shall
                  govern.

              

      

      

      
        	
                (b)
                  

              	
                The
                  Committee shall establish the Performance Goals for the Company
                  and/or its
                  Subsidiaries each Plan Year. The Committee shall also determine
                  the extent
                  to which each Performance Criteria shall be weighted in determining
                  Awards. The Committee may vary the Performance Criteria, Performance
                  Goals
                  and weightings from Participant to Participant, Award to Award
                  and Plan
                  Year to Plan Year. The Committee may increase, but not decrease,
                  any
                  Performance Goal during a Plan
                  Year.

              

      

      

      
        	
                (c)
                  

              	
                The
                  Committee shall establish for each Award the percentage of the
                  Target
                  Bonus for such Participant payable at specified levels of performance,
                  based on the Performance Goal for each Performance Criteria and
                  the
                  weighting established for such criteria. The Award payable to any
                  Participant may range from zero (0) to two hundred percent of the
                  Participant’s Target Bonus, depending upon whether, or the extent to
                  which, the Performance Goals have been achieved. All such determinations
                  regarding the achievement of any Performance Goals will be made
                  by the
                  Committee; provided, however, that the Committee may not increase
                  during a
                  Plan Year the amount of the Award that would otherwise be payable
                  upon
                  achievement of the Performance Goal or
                  Goals.

              

      

      

      
        	
                (d)
                  

              	
                The
                  actual Award for a Participant will be calculated by multiplying
                  the
                  Participant’s Target Bonus by the Performance Adjustments in accordance
                  with the Award. All calculations of actual Awards shall be made
                  by the
                  Committee.

              

      

      

      
        	
                (e)
                  

              	
                Awards
                  will be paid, in a lump sum cash payment, as soon as practicable
                  after the
                  close of the Plan Year for which they are earned; provided, however,
                  that
                  no Awards shall be paid except to the extent that the Committee
                  has
                  certified in writing that the Performance Goals have been met.
                  Notwithstanding the foregoing provisions of this Section 4(e),
                  the
                  Committee shall have the right to allow Participants to elect to
                  defer the
                  payment of Awards subject to such terms and conditions as the Committee
                  may determine.

              

      

      

      
        	
                (f)
                  

              	
                Whenever
                  payments under the Plan are to be made, the Company and/or the
                  Subsidiary
                  will withhold therefrom an amount sufficient to satisfy any applicable
                  governmental withholding tax requirements related
                  thereto.

              

      

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

      
        	
                (g)
                  

              	
                Nothing
                  contained in the Plan will be deemed in any way to limit or restrict
                  the
                  Company, its Subsidiaries, or the Committee from making any award
                  or
                  payment to any person under any other plan, arrangement or understanding,
                  whether now existing or hereafter in
                  effect.

              

      

      

      5.
         Administration.
        The
        Plan shall be administered by a Committee, which shall be appointed by the
        Board, consisting of not less than two members of the Board. Subject to
        paragraph (d) below, the Committee shall be the Compensation and Personnel
        Committee unless the Board shall appoint another Committee to administer
        the
        Plan. The Committee shall have general authority to impose any limitation
        or
        condition upon an Award the Committee deems appropriate to achieve the
        objectives of the Award and the Plan and, in addition, and without limitation
        and in addition to powers set forth elsewhere in the Plan, shall have the
        following specific authority: 

      

      
        	
                (a)
                  

              	
                The
                  Committee shall have the power and complete discretion to determine
                  (i)
                  which Executive Employees shall receive an Award and the nature
                  of the
                  Award, (ii) the amount of each Award, (iii) the time or times when
                  an
                  Award shall be granted, (iv) whether a disability exists, (v) the
                  terms
                  and conditions applicable to Awards, and (vi) any additional requirements
                  relating to Awards that the Committee deems
                  appropriate.

              

      

      

      
        	
                (b)
                  

              	
                The
                  Committee may adopt rules and regulations for carrying out the
                  Plan. The
                  interpretation and construction of any provision of the Plan by
                  the
                  Committee shall be final and conclusive. The Committee may consult
                  with
                  counsel, who may be counsel to the Company, and shall not incur
                  any
                  liability for any action taken in good faith in reliance upon the
                  advice
                  of counsel.

              

      

      

      
        	
                (c)
                  

              	
                A
                  majority of the members of the Committee shall constitute a quorum,
                  and
                  all actions of the Committee shall be taken by a majority of the
                  members
                  present. Any action may be taken by a written instrument signed
                  by all of
                  the members, and any action so taken shall be fully effective as
                  if it had
                  been taken at a meeting.

              

      

       

      
        
          	
                  (d)

                	
                  All
                    members of the Committee must be “outside directors” as described in Code
                    Section 162(m).

                

        

        

        
          	
                  (e)

                	
                  The
                    Board from time to time may appoint members previously appointed
                    and may
                    fill vacancies however caused

                  in
                    the Committee.

                

        

      

      

      
        	
                (f)
                  

              	
                As
                  to any Code Section 162(m) Awards, it is the intent of the Company
                  that
                  this Plan and any Code Section 162(m) Awards hereunder satisfy,
                  and be
                  interpreted in a manner that satisfy, the applicable requirements
                  of Code
                  Section 162(m). If any provision of this Plan or if any Code Section
                  162(m) Award would otherwise conflict with the intent expressed
                  in this
                  Section 5(f), that provision to the extent possible shall be interpreted
                  so as to avoid such conflict. To the extent of any remaining
                  irreconcilable conflict with such intent, such provision shall
                  be deemed
                  void as applicable to Covered Employees. Nothing herein shall be
                  interpreted to preclude a Participant who is or may be a Covered
                  Employee
                  from receiving an Award that is not a Code Section 162(m)
                  Award.

              

      

      

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      
        	
                (g)

              	
                The
                  Committee’s determinations under the Plan need not be uniform and may be
                  made by it selectively among persons who receive, or are eligible
                  to
                  receive, Awards under the Plan, whether or not such persons are
                  similarly
                  situated. Without limiting the generality of the foregoing, the
                  Committee
                  will be entitled, among other things, to make non uniform and selective
                  determinations and to establish non

                uniform
                  and selective Performance Criteria, Performance Goals, the weightings
                  thereof, and Target Bonuses.

              

      

      

      6.
         Change
        of Control.
        In the
        event of a Change of Control of the Company, in addition to any action required
        or authorized by the terms of an Award Agreement, the Committee may, in its
        sole
        discretion, take any of the following actions as a result, or in anticipation,
        of any such event to assure fair and equitable treatment of Participants:
        (a)
        accelerate time periods for purposes of vesting in, or receiving any payment
        with regard to, any outstanding Award, or (b) make adjustments or modifications
        to outstanding Awards as the Committee deems appropriate to maintain and
        protect
        the rights and interests of Participants following such Change of Control.
        Any
        such action approved by the Committee shall be conclusive and binding on
        the
        Company and all Participants.

      

      7.
         Nontransferability
        of Awards.
        An
        Award shall not be assignable or transferable by the Participant except by
        will
        or by the laws of descent and distribution.

      

      8.
         Termination,
        Modification, Change.
        If not
        sooner terminated by the Board, this Plan shall terminate at the close of
        business on February 29, 2012. No Awards shall be granted under the Plan
        after
        its termination. The Board may terminate the Plan or may amend the Plan in
        such
        respects as it shall deem advisable; provided that, if and to the extent
        required by the Code, no change shall be made that changes the Performance
        Criteria, or materially increases the maximum potential benefits for
        Participants under the Plan, unless such change is authorized by the
        shareholders of the Company. Notwithstanding the foregoing, the Board may
        unilaterally amend the Plan and Awards as it deems appropriate to cause Awards
        to meet the requirements of Code Section 162(m), and regulations thereunder.
        Except as provided in the preceding sentence, a termination or amendment
        of the
        Plan shall not, without the consent of the Participant, adversely affect
        a
        Participant’s rights under an Award previously granted to him.

      

      9.
         Unfunded
        Plan.
        The
        Plan
        shall be unfunded. No provision of the Plan or any Award Agreement will require
        the Company or its Subsidiaries, for the purpose of satisfying any obligations
        under the Plan, to purchase assets or place any assets in a trust or other
        entity to which contributions are made or otherwise to segregate any assets,
        nor
        will the Company or its Subsidiaries maintain separate bank accounts, books,
        records or other evidence of the existence of a segregated or separately
        maintained or administered fund for such purposes. Participants will have
        no
        rights under the Plan other than as unsecured general creditors of the Company
        and its Subsidiaries, except that insofar as they may have become entitled
        to
        payment of additional compensation by performance of services, they will
        have
        the same rights as other employees under generally applicable law.

      

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

      10.
         Liability
        of Company.
        Any
        liability of the Company or a Subsidiary to any Participant with respect
        to an
        Award shall be based solely upon contractual obligations created by the Plan
        and
        the Award Agreement. Neither the Company nor a Subsidiary, nor any member
        of the
        Board or of the Committee, nor any other person participating in any
        determination of any question under the Plan, or in the interpretation,
        administration or application of the Plan, shall have any liability to any
        party
        for any action taken or not taken in good faith under the Plan. Status as
        an
        eligible Executive Employee shall not be construed as a commitment that any
        Award will be made under this Plan to such eligible Executive Employee or
        to
        eligible Executive Employees generally. Nothing contained in this Plan or
        in any
        Award Agreement (or in any other documents related to this Plan or to any
        Award
        or Award Agreement) shall confer upon any Executive Employee or Participant
        any
        right to continue in the employ or other service of the Company or a Subsidiary
        or constitute any contract or limit in any way the right of the Company or
        a
        Subsidiary to change such person’s compensation or other benefits.

      

      11.
         Interpretation.
        If
        any
        term or provision contained herein will to any extent be invalid or
        unenforceable, such term or provision will be reformed so that it is valid,
        and
        such invalidity or unenforceability will not affect any other provision or
        part
        hereof. The Plan, the Award Agreements and all actions taken hereunder or
        thereunder shall be governed by, and construed in accordance with, the laws
        of
        the Commonwealth of Virginia without regard to the conflict of law principles
        thereof.

      

      12.
         Effective
        Date of the Plan.

      

      
        	
                (a)
                  

              	
                The
                  Plan shall be effective as of date the Company is separated from
                  Circuit
                  City Stores, Inc. and shall be submitted to the shareholders of
                  Circuit
                  City Stores, Inc. for approval prior to the separation. No Award
                  shall be
                  payable to a Covered Employee until the Plan has been approved
                  by the
                  shareholders.

              

      

      

      
        	
                (b)

              	
                As
                  of the date of separation between the Company and Circuit City
                  Stores,
                  Inc., this Plan shall assume obligations, including outstanding
                  awards for
                  the current Fiscal Year, from the Circuit City Stores, Inc. Annual
                  Performance Based Bonus Plan, to the extent provided in an agreement
                  between the Company and Circuit City Stores,
                  Inc.

              

      

      

      
        	 	
                CARMAX,
                  INC.

              
	 	 
	 	
                By:  /s/
                  Keith D. Browning  

              
	 	 	
                Keith
                  D. Browning

              
	 	 	
                Executive
                  Vice President &

              
	 	 	
                Chief
                  Financial Officer

              

      

      
6CarMax, Inc. 2002 Stock Incentive Plan

    
      

    

    CARMAX,
      INC.

    2002
      STOCK INCENTIVE PLAN

    (AS
      AMENDED AND RESTATED APRIL 24, 2006)

    

     

    1. Purpose.
      The
      purpose of this CarMax, Inc. 2002 Stock Incentive Plan (the “Plan”) is to
      further the long term stability and financial success of CarMax, Inc. (the
      “Company”) by attracting and retaining key employees of the Company through the
      use of stock incentives. It is believed that ownership of Company Stock will
      stimulate the efforts of those employees upon whose judgment and interest the
      Company is and will be largely dependent for the successful conduct of its
      business. It is also believed that Incentive Awards granted to employees under
      this Plan will strengthen their desire to remain with the Company and will
      further the identification of those employees’ interests with those of the
      Company’s shareholders. 

     

    2. Definitions.
      As used
      in the Plan, the following terms have the meanings indicated: 

     

    (a) “Act”
      means the Securities Exchange Act of 1934, as amended.

    

    (b) “Applicable
      Withholding Taxes” means the minimum aggregate amount of federal, state and
      local income and payroll taxes that the Company is required by applicable law
      to
      withhold in connection with any Incentive Award.

    

    (c) “Board”
      means the Board of Directors of the Company.

    

    (d) “Change
      of Control” means the occurrence of either of the following events: (i) any
      individual, entity or group (as defined in Section 13(d)(3) of the Act) becomes,
      or obtains the right to become, the beneficial owner (as defined in Rule
      13(d)(3) under the Act) of Company securities having 20% or more of the combined
      voting power of the then outstanding securities of the Company that may be
      cast
      for the election of directors to the Board of the Company (other than as a
      result of an issuance of securities initiated by the Company in the ordinary
      course of business); or (ii) as the result of, or in connection with, any cash
      tender or exchange offer, merger or other business combination, sale of assets
      or contested election, or any combination of the foregoing transactions, the
      persons who were directors of the Company before such transactions shall cease
      to constitute a majority of the Board or of the board of directors of any
      successor to the Company.

    

    (e) “Code”
      means the Internal Revenue Code of 1986, as amended. A reference to any
      provision of the Code shall include reference to any successor or replacement
      provision of the Code.

    

    (f) “Committee”
      means the committee appointed by the Board as described under Section
      14.

    

    (g) “Company”
      means CarMax, Inc., a Virginia corporation.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (h) “Company
      Stock” means the common stock of the Company. In the event of a change in the
      capital structure of the Company, the shares resulting from such a change shall
      be deemed to be Company Stock within the meaning of the Plan.

    

    (i) “Date
      of
      Grant” means the date on which an Incentive Award is granted by the
      Committee.

    

    (j) “Disability”
      or “Disabled” means, as to an Incentive Stock Option, a Disability within the
      meaning of Code section 22(e)(3). As to all other forms of Incentive Awards,
      the
      Committee shall determine whether a Disability exists and such determination
      shall be conclusive.

    

    (k) “Fair
      Market Value” means, for any given date, the fair market value of the Company
      Stock as of such date, as determined by the Committee on a basis consistently
      applied based on actual transactions in Company Stock on the exchange on which
      it generally has the greatest trading volume.

    

    (l) “Incentive
      Award” means, collectively, the award of an Option, Stock Appreciation Right or
      Restricted Stock under the Plan.

    

    (m) “Incentive
      Stock Option” means an Option intended to meet the requirements of, and qualify
      for favorable federal income tax treatment under, Code section 422.

    

    (n) “Mature
      Shares” means shares of Company Stock for which the holder thereof has good
      title, free and clear of all liens and encumbrances and which such holder either
      (i) has held for at least six (6) months or (ii) has purchased on the open
      market.

    

    (o) “Nonstatutory
      Stock Option” means an Option that does not meet the requirements of Code
      section 422 or, even if meeting the requirements of Code section 422, is not
      intended to be an Incentive Stock Option and is so designated.

    

    (p) “Option”
      means a right to purchase Company Stock granted under Section 7 of the Plan,
      at
      a price determined in accordance with the Plan. 

    

    (q) “Parent”
      means, with respect to any corporation, a parent of that corporation within
      the
      meaning of Code section 424(e).

    

    (r) “Participant”
      means any employee who receives an Incentive Award under the Plan.

    

    (s) “Reload
      Feature” means a feature of an Option described in a Participant’s stock option
      agreement that authorizes the automatic grant of a Reload Option in accordance
      with the provisions of Section 9(e).

    

    (t) “Reload
      Option” means an Option automatically granted to a Participant equal to the
      number of shares of Mature Shares delivered by the Participant in payment of
      the
      exercise price of an Option having a Reload Feature.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (u) “Restricted
      Stock” means Company Stock awarded upon the terms and subject to the
      restrictions set forth in Section 6.

    

    (v) “Restricted
      Stock Award” means an award of Restricted Stock granted under the
      Plan.

    

    (w) “Rule
      16b-3” means Rule 16b-3 adopted pursuant to section 16(b) of the Act. A
      reference in the Plan to Rule 16b-3 shall include a reference to any
      corresponding rule (or number redesignation) of any amendments to Rule 16b-3
      adopted after the effective date of the Plan’s adoption.

    

    (x) “Stock
      Appreciation Right” means a right to receive amounts from the Company awarded
      upon the terms and subject to the restrictions set forth in Section 8.

    

    (y) “Subsidiary”
      means any business entity (including, but not limited to, a corporation,
      partnership or limited liability company) of which a company directly or
      indirectly owns one hundred percent (100%) of the voting interests of the entity
      unless the Committee determines that the entity should not be considered a
      Subsidiary for purposes of the Plan. If a company owns less than one hundred
      percent (100%) of the voting interests of the entity, the entity will be
      considered a Subsidiary for purposes of the Plan only if the Committee
      determines that the entity should be so considered. For purposes of Incentive
      Stock Options, Subsidiary shall be limited to a subsidiary within the meaning
      of
      Code section 424(f). 

    

    (z) “10%
      Shareholder” means a person who owns, directly or indirectly, stock possessing
      more than 10% of the total combined voting power of all classes of stock of
      the
      Company or any Parent or Subsidiary of the Company. Indirect ownership of stock
      shall be determined in accordance with Code section 424(d). 

    

    3. General.
      Incentive Awards may be granted under the Plan in the form of Options, Stock
      Appreciation Rights and Restricted Stock. Options granted under the Plan may
      be
      Incentive Stock Options or Nonstatutory Stock Options. The provisions of the
      Plan referring to Rule 16b-3 shall apply only to Participants who are subject
      to
      section 16 of the Act. 

     

    4. Stock.
      Subject
      to Section 13 of the Plan, there shall be reserved for issuance under the Plan
      an aggregate of 16,750,000 shares of Company Stock, which shall be authorized,
      but unissued shares. Subject to Section 13 of the Plan, no more than 1,500,000
      shares of Company Stock may be allocated to the Incentive Awards that are
      granted to any one Participant during any single calendar year. Shares of
      Company Stock that have not been issued under the Plan and that are allocable
      to
      Incentive Awards or portions thereof that expire or otherwise terminate
      unexercised may again be subjected to an Incentive Award under the Plan.
      Similarly, if any shares of Restricted Stock issued pursuant to the Plan are
      reacquired by the Company as a result of a forfeiture of such shares pursuant
      to
      the Plan, such shares may again be subjected to an Incentive Award under the
      Plan. For purposes of determining the number of shares of Company Stock that
      are
      available for Incentive Awards under the Plan, such number shall include the
      number of shares of Company Stock under an Incentive Award surrendered by a
      Participant or retained by the Company in payment of Applicable Withholding
      Taxes. 

    

    
      
        
        

      

      
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    5. Eligibility. 

    

    (a) All
      present and future employees of the Company (or any Parent or Subsidiary of
      the
      Company, whether now existing or hereafter created or acquired) shall be
      eligible to receive Incentive Awards under the Plan. The Committee shall have
      the power and complete discretion, as provided in Section 14, to select which
      employees shall receive Incentive Awards and to determine for each such
      Participant the terms and conditions, the nature of the award and the number
      of
      shares to be allocated to each Participant as part of each Incentive Award.
      

    

    (b) The
      grant
      of an Incentive Award shall not obligate the Company or any Parent or Subsidiary
      of the Company to pay a Participant any particular amount of remuneration,
      to
      continue the employment of the Participant after the grant or to make further
      grants to the Participant at any time thereafter. 

    

    6. Restricted
      Stock Awards. 

    

    (a) Whenever
      the Committee deems it appropriate to grant a Restricted Stock Award, notice
      shall be given to the Participant stating the number of shares of Restricted
      Stock for which the Restricted Stock Award is granted and the terms and
      conditions to which the Restricted Stock Award is subject. This notice may
      be
      given in writing or in electronic form and shall be the award agreement between
      the Company and the Participant. A Restricted Stock Award may be made by the
      Committee in its discretion without cash consideration. 

    

    (b) Restricted
      Stock issued pursuant to the Plan shall be subject to the following
      restrictions: 

    

    (i) None
      of
      such shares may be sold, assigned, transferred, pledged, hypothecated, or
      otherwise encumbered or disposed of until the restrictions on such shares shall
      have lapsed or shall have been removed pursuant to paragraph (d) or (e) below.
      

    

    (ii) The
      restrictions on such shares must remain in effect and may not lapse for a period
      of three years beginning on the Date of Grant, except as provided under
      paragraph (d) or (e) in the case of Disability, retirement, death or a Change
      in
      Control. 

    

    (iii) If
      a
      Participant ceases to be employed by the Company or a Parent or Subsidiary
      of
      the Company, the Participant shall forfeit to the Company any shares of
      Restricted Stock, the restrictions on which shall not have lapsed or shall
      not
      have been removed pursuant to paragraph (d) or (e) below, on the date such
      Participant shall cease to be so employed. 

    

    (iv) The
      Committee may establish such other restrictions on such shares that the
      Committee deems appropriate, including, without limitation, events of
      forfeiture. 

    

    (c) Upon
      the
      acceptance by a Participant of a Restricted Stock Award, such Participant shall,
      subject to the restrictions set forth in paragraph (b) above, have all the
      rights of a shareholder with respect to the shares of Restricted Stock subject
      to such Restricted Stock Award, including, but not limited to, the right to
      vote
      such shares of Restricted Stock and the right to receive all dividends and
      other
      distributions paid thereon. Certificates representing Restricted Stock shall
      bear a legend referring to the restrictions set forth in the Plan and the

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    Participant’s
      award agreement. If shares of Restricted Stock are issued without certificates,
      notice of the restrictions set forth in the Plan and the Participant’s Award
      Agreement must be given to the shareholder in the manner required by law.

    

    (d) The
      Committee shall establish as to each Restricted Stock Award the terms and
      conditions upon which the restrictions set forth in paragraph (b) above shall
      lapse. Such terms and conditions may include, without limitation, the lapsing
      of
      such restrictions as a result of the Disability, death or retirement of the
      Participant or the occurrence of a Change of Control. 

    

    (e) Notwithstanding
      the forfeiture provisions of paragraph (b)(iii) above, the Committee may at
      any
      time, in its sole discretion, accelerate the time at which any or all
      restrictions will lapse or remove any and all such restrictions.

    

    (f) Each
      Participant shall agree at the time his Restricted Stock Award is granted,
      and
      as a condition thereof, to pay to the Company or make arrangements satisfactory
      to the Company regarding the payment to the Company of, Applicable Withholding
      Taxes. Until such amount has been paid or arrangements satisfactory to the
      Company have been made, no stock certificates free of a legend reflecting the
      restrictions set forth in paragraph (b) above shall be issued to such
      Participant. If Restricted Stock is being issued to a Participant without the
      use of a stock certificate, the restrictions set forth in paragraph (b) shall
      be
      communicated to the shareholder in the manner required by law. As an alternative
      to making a cash payment to the Company to satisfy Applicable Withholding Taxes,
      if the grant so provides, or the Committee by separate action so permits, the
      Participant may elect to (i) deliver Mature Shares or (ii) have the Company
      retain that number of shares of Company Stock that would satisfy all or a
      specified portion of the Applicable Withholding Taxes. Any such election shall
      be made only in accordance with procedures established by the Committee. The
      Committee has the express authority to change any election procedure it
      establishes at any time. 

    

    7. Stock
      Options. 

    

    (a) Whenever
      the Committee deems it appropriate to grant Options, notice shall be given
      to
      the Participant stating the number of shares for which Options are granted,
      the
      Option price per share, whether the Options are Incentive Stock Options or
      Nonstatutory Stock Options, the extent, if any, to which Stock Appreciation
      Rights are granted, and the conditions to which the grant and exercise of the
      Options are subject. This notice may be given in writing or in electronic form
      and shall be the stock option agreement between the Company and the Participant.
      

    

    (b) The
      exercise price of shares of Company Stock covered by an Incentive Stock Option
      shall be not less than 100% of the Fair Market Value of such shares on the
      Date
      of Grant; provided that if an Incentive Stock Option is granted to an employee
      who, at the time of the grant, is a 10% Shareholder, then the exercise price
      of
      the shares covered by the Incentive Stock Option shall be not less than 110%
      of
      the Fair Market Value of such shares on the Date of Grant. 

    

    (c) The
      exercise price of shares of Company Stock covered by a Nonstatutory Stock Option
      shall be not less than 100% of the Fair Market Value of such shares on the
      Date
      of Grant. 

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (d) Options
      may be exercised in whole or in part at such times as may be specified by the
      Committee in the Participant’s stock option agreement; provided that the
      exercise provisions for Incentive Stock Options shall in all events not be
      more
      liberal than the following provisions: 

    

    (i) No
      Incentive Stock Option may be exercised after the first to occur of:

    

    (x) Ten
      years
      (or, in the case of an Incentive Stock Option granted to a 10% Shareholder,
      five
      years) from the Date of Grant, 

    

    (y) Three
      months following the date of the Participant’s termination of employment with
      the Company and any Parent or Subsidiary of the Company for reasons other than
      death or Disability; or 

    

    (z) One
      year
      following the date of the Participant’s termination of employment by reason of
      death or Disability. 

    

    (ii) Except
      as
      otherwise provided in this paragraph, no Incentive Stock Option may be exercised
      unless the Participant is employed by the Company or a Parent or Subsidiary
      of
      the Company at the time of the exercise and has been so employed at all times
      since the Date of Grant. If a Participant’s employment is terminated other than
      by reason of death or Disability at a time when the Participant holds an
      Incentive Stock Option that is exercisable (in whole or in part), the
      Participant may exercise any or all of the then exercisable portion of the
      Incentive Stock Option (to the extent exercisable on the date of termination)
      within three months after the Participant’s termination of employment. If a
      Participant’s employment is terminated by reason of his Disability at a time
      when the Participant holds an Incentive Stock Option that is exercisable (in
      whole or in part), the Participant may exercise any or all of the then
      exercisable portion of the Incentive Stock Option (to the extent exercisable
      on
      the date of Disability) within one year after the Participant’s termination of
      employment. If a Participant’s employment is terminated by reason of his death
      at a time when the Participant holds an Incentive Stock Option that is
      exercisable (in whole or in part), the then exercisable portion of the Incentive
      Stock Option may be exercised (to the extent exercisable on the date of death)
      within one year after the Participant’s death by the person to whom the
      Participant’s rights under the Incentive Stock Option shall have passed by will
      or by the laws of descent and distribution.

    

    (iii) An
      Incentive Stock Option, by its terms, shall be exercisable in any calendar
      year
      only to the extent that the aggregate Fair Market Value (determined at the
      Date
      of Grant) of the Company Stock with respect to which Incentive Stock Options
      are
      exercisable for the first time during the calendar year does not exceed $100,000
      (the “Limitation Amount”). Incentive Stock Options granted under the Plan and
      all other plans of the Company and any Parent or Subsidiary of the Company
      shall
      be aggregated for purposes of determining whether the Limitation Amount has
      been
      exceeded. The Committee may impose such conditions as it deems appropriate
      on an
      Incentive Stock Option to ensure that the foregoing requirement is met. If
      Incentive Stock Options that first become exercisable in a calendar year exceed
      the Limitation Amount, the excess Options will be treated as Nonstatutory Stock
      Options to the extent permitted by law. 

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (e) The
      Committee may, in its discretion, grant Options that by their terms become
      fully
      exercisable upon a Change of Control notwithstanding other conditions on
      exercisability in the stock option agreement. 

    

    8. Stock
      Appreciation Rights. 

    

    (a) Whenever
      the Committee deems it appropriate, Stock Appreciation Rights may be granted
      in
      connection with all or any part of an Option, either concurrently with the
      grant
      of the Option or, if the Option is a Nonstatutory Stock Option, by an amendment
      to the Option at any time thereafter during the term of the Option. Stock
      Appreciation Rights may be exercised in whole or in part at such times and
      under
      such conditions as may be specified by the Committee in the Participant’s stock
      option agreement. The following provisions apply to all Stock Appreciation
      Rights that are granted in connection with Options: 

    

    (i) Stock
      Appreciation Rights shall entitle the Participant, upon exercise of all or
      any
      part of the Stock Appreciation Rights, to surrender to the Company unexercised
      that portion of the underlying Option relating to the same number of shares
      of
      Company Stock as is covered by the Stock Appreciation Rights (or the portion
      of
      the Stock Appreciation Rights so exercised) and to receive in exchange from
      the
      Company an amount equal to the excess of (x) the Fair Market Value on the date
      of exercise of the Company Stock covered by the surrendered portion of the
      underlying Option over (y) the exercise price of the Company Stock covered
      by
      the surrendered portion of the underlying Option. The Committee may limit the
      amount that the Participant will be entitled to receive upon exercise of the
      Stock Appreciation Right. 

    

    (ii) Upon
      the
      exercise of a Stock Appreciation Right and surrender of the related portion
      of
      the underlying Option, the Option, to the extent surrendered, shall not
      thereafter be exercisable. 

    

    (iii) The
      Committee may, in its discretion, grant Stock Appreciation Rights in connection
      with Options which by their terms become fully exercisable upon a Change of
      Control, which Stock Appreciation Rights shall only be exercisable following
      a
      Change of Control. The underlying Option may provide that such Stock
      Appreciation Rights shall be payable solely in cash. The terms of the underlying
      Option shall provide the method by which the value of the Company Stock on
      the
      date of exercise shall be calculated based on one of the following
      alternatives:

        (x) the
      Fair
      Market Value of the Company Stock on the day of exercise; 

     

        (y) the
      highest closing price of the Company Stock on the exchange on which it is then
      traded, during the 90 days immediately preceding the Change of Control;
      or  

     

        (z) the
      greater of (x) or (y). 

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (iv) Subject
      to any further conditions upon exercise imposed by the Committee, a Stock
      Appreciation Right shall be exercisable only to the extent that the related
      Option is exercisable, and shall expire no later than the date on which the
      related Option expires. 

    

    (v) A
      Stock
      Appreciation Right may only be exercised at a time when the Fair Market Value
      of
      the Company Stock covered by the Stock Appreciation Right exceeds the exercise
      price of the Company Stock covered by the underlying Option. 

    

    (b) Whenever
      the Committee deems it appropriate, Stock Appreciation Rights may be granted
      without related Options. The terms and conditions of the award shall be set
      forth in a Stock Appreciation Rights agreement between the Company and the
      Participant in written or electronic form. The following provisions apply to
      all
      Stock Appreciation Rights that are granted without related Options:

    

    (i) Stock
      Appreciation Rights shall entitle the Participant, upon the exercise of all
      or
      any part of the Stock Appreciation Rights, to receive from the Company an amount
      equal to the excess of (x) the Fair Market Value on the date of exercise of
      the
      Company Stock covered by the surrendered Stock Appreciation Rights over (y)
      the
      Fair Market Value on the Date of Grant of the Company Stock covered by the
      Stock
      Appreciation Rights. The Committee may limit the amount that the Participant
      may
      be entitled to receive upon exercise of the Stock Appreciation Right.

    

    (ii) Stock
      Appreciation Rights shall be exercisable, in whole or in part, at such times
      as
      the Committee shall specify in the Participant’s Stock Appreciation Rights
      agreement. 

    

    (c) The
      manner in which the Company’s obligation arising upon the exercise of a Stock
      Appreciation Right shall be paid shall be determined by the Committee and shall
      be set forth in the Participant’s stock option agreement (if the Stock
      Appreciation Rights are related to an Option) or Stock Appreciation Rights
      agreement. The Committee may provide for payment in Company Stock or cash,
      or a
      fixed combination of Company Stock or cash, or the Committee may reserve the
      right to determine the manner of payment at the time the Stock Appreciation
      Right is exercised. Shares of Company Stock issued upon the exercise of a Stock
      Appreciation Right shall be valued at their Fair Market Value on the date of
      exercise. 

    

    9. Method
      of Exercise Of Options And Stock Appreciation Rights. 

    

    (a) Options
      and Stock Appreciation Rights may be exercised by the Participant by giving
      notice of the exercise to the Company, stating the number of shares the
      Participant has elected to purchase under the Option or the number of Stock
      Appreciation Rights he has elected to exercise. In the case of a purchase of
      shares under an Option, such notice shall be effective only if accompanied
      by
      the exercise price in full paid in cash; provided that, if the terms of an
      Option so permit, or the Committee by separate action so permits, the
      Participant may (i) deliver Mature Shares (valued at their Fair Market Value
      on
      the date of exercise) in satisfaction of all or any part of the exercise price,
      or (ii) to the extent permitted under applicable laws and regulations, deliver
      a
      properly executed exercise notice together with irrevocable instructions to
      a
      broker to exercise all or part of the Option, sell a sufficient number of shares
      of Company Stock to cover the exercise price, Applicable 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    Withholding
      Taxes (if required by the Committee) and other costs and expenses associated
      with such sale and deliver promptly the amount necessary to pay the exercise
      price and any Applicable Withholding Taxes. The Participant shall not be
      entitled to make payment of the exercise price other than in cash unless
      provisions for an alternative payment method are included in the Participant’s
      stock option agreement or are agreed to in writing by the Company with the
      approval of the Committee prior to exercise of the Option. 

    

    (b) The
      Company may place on any certificate representing Company Stock issued upon
      the
      exercise of an Option or a Stock Appreciation Right any legend deemed desirable
      by the Company’s counsel to comply with federal or state securities laws, and
      the Company may require of the participant a customary written indication of
      his
      investment intent. Until the Participant has made any required payment,
      including any Applicable Withholding Taxes, and has had issued to him a
      certificate for the shares of Company Stock acquired, he shall possess no
      shareholder rights with respect to the shares. 

    

    (c) Each
      Participant shall agree as a condition of the exercise of an Option or a Stock
      Appreciation Right to pay to the Company Applicable Withholding Taxes, or make
      arrangements satisfactory to the Company regarding the payment to the Company
      of
      such amounts. Until Applicable Withholding Taxes have been paid or arrangements
      satisfactory to the Company have been made, no stock certificate shall be issued
      upon the exercise of an Option or a Stock Appreciation Right. 

    

    As
      an
      alternative to making a cash payment to the Company to satisfy Applicable
      Withholding Taxes if the Option or Stock Appreciation Rights agreement so
      provides, or the Committee by separate action so provides, a Participant may
      elect to (i) deliver Mature Shares or (ii) have the Company retain that number
      of shares of Company Stock that would satisfy all or a specified portion of
      the
      Applicable Withholding Taxes. Any such election shall be made only in accordance
      with procedures established by the Committee. 

    

    (d) Notwithstanding
      anything herein to the contrary, if the Company is subject to section 16 of
      the
      Act, Options and Stock Appreciation Rights shall always be granted and exercised
      in such a manner as to conform to the provisions of Rule 16b-3. 

    

    (e) If
      a
      Participant exercises an Option that has a Reload Feature by delivering Mature
      Shares in payment of the exercise price, the Participant shall automatically
      be
      granted a Reload Option. At the time the Option with a Reload Feature is
      awarded, the Committee may impose such restrictions on the Reload Option as
      it
      deems appropriate, but in any event the Reload Option shall be subject to the
      following restrictions: 

    

    (i) The
      exercise price of shares of Company Stock covered by a Reload Option shall
      be
      not less than 100% of the Fair Market Value of such shares on the Date of Grant
      of the Reload Option; 

    

    (ii) If
      and to
      the extent required by Rule 16b-3, or if so provided in the Option agreement,
      a
      Reload Option shall not be exercisable within the first six months after it
      is
      granted; provided that, subject to the terms of the Participant’s stock option
      agreement, this restriction shall not apply if the Participant becomes Disabled
      or dies during the six-month period; 

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    (iii) The
      Reload Option shall be subject to the same restrictions on exercisability
      imposed on the underlying Option (possessing the Reload Feature) that was
      exercised unless the Committee specifies different limitations; 

    

    (iv) The
      Reload Option shall not be exercisable until the expiration of any retention
      holding period imposed on the disposition of any shares of Company Stock covered
      by the underlying Option (possessing the Reload Feature) that was exercised;
      and

    

    (v) The
      Reload Option shall not have a Reload Feature. 

    

    10. Nontransferability
      of Incentive Awards.
      Incentive Awards shall not be transferable unless so provided in the award
      agreement or an amendment to the award agreement; provided, however, that no
      transfer for value or consideration will be permitted without the prior approval
      of the Company’s shareholders. Options and Stock Appreciation Rights which are
      intended to be exempt under Rule 16b-3 (to the extent required by Rule 16b-3
      at
      the time of grant or amendment of the award agreement), by their terms, shall
      not be transferable by the Participant except by will or by the laws of descent
      and distribution and shall be exercisable, during the Participant’s lifetime,
      only by the Participant or by his guardian or legal representative.

    

    11. Effective
      Date of the Plan and Transition. 

    

    (a) This
      Plan
      shall be effective as of the date of separation between the Company and Circuit
      City Stores, Inc., and shall be submitted to the shareholders of Circuit City
      Stores, Inc. for approval prior to the separation. No Option or Stock
      Appreciation Right shall be exercisable and no Company Stock shall be issued
      under the Plan until (i) the Plan has been approved by shareholders, (ii) shares
      issuable under the Plan have been registered with the Securities and Exchange
      Commission and accepted for listing on the New York Stock Exchange upon notice
      of issuance, and (iii) the requirements of any applicable state securities
      laws
      have been met. 

    

    (b) As
      of the
      date of separation between the Company and Circuit City Stores, Inc., this
      Plan
      shall assume obligations, including outstanding awards, from the Circuit City
      Stores, Inc. 1988 Stock Incentive Plan and the Circuit City Stores, Inc. 1994
      Stock Incentive Plan with respect to employees of the Company or otherwise,
      to
      the extent provided in an agreement between the Company and Circuit City Stores,
      Inc. 

    

    12. Termination,
      Modification, Change.
      If not
      sooner terminated by the Board, this Plan shall terminate at the close of
      business on the day immediately preceding the tenth anniversary of the date
      of
      separation between the Company and Circuit City Stores, Inc. No Incentive Awards
      shall be granted under the Plan after its termination. The Board may terminate
      the Plan or may amend the Plan in such respects as it shall deem advisable;
      provided that, if and to the extent required by the Code or Rule 16b-3, no
      change shall be made that increases the total number of shares of Company Stock
      reserved for issuance pursuant to Incentive Awards granted under the Plan
      (except pursuant to Section 13), expands the class of persons eligible to
      receive Incentive Awards, or materially increases the benefits accruing to
      Participants under the 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    Plan
      unless such change is authorized by the shareholders of the Company.
      Notwithstanding the foregoing, the Board may unilaterally amend the Plan and
      Incentive Awards as it deems appropriate to ensure compliance with Rule 16b-3
      and to cause Incentive Awards to meet the requirements of the Code, including
      Code sections 162(m) and 422, and regulations thereunder. Except as provided
      in
      the preceding sentence, a termination or amendment of the Plan shall not,
      without the consent of the Participant, adversely affect a Participant’s rights
      under an Incentive Award previously granted to him. In no event shall any change
      be made to the Plan that permits repricing of Options unless such change is
      authorized by the shareholders of the Company. 

    

    13. Change
      in Capital Structure. 

    

    (a) In
      the
      event of a stock dividend, stock split or combination of shares,
      recapitalization, merger in which the Company is the surviving corporation,
      reorganization, reincorporation, consolidation, or other change in the Company’s
      capital stock without the receipt of consideration by the Company (including,
      but not limited to, the creation or issuance to shareholders generally of
      rights, options or warrants for the purchase of common stock or preferred stock
      of the Company), the number and kind of shares of stock or securities of the
      Company to be subject to the Plan and to Incentive Awards then outstanding
      or to
      be granted thereunder, the aggregate and individual maximum number of shares
      or
      securities which may be delivered under the Plan pursuant to Section 4, and
      the
      exercise price and other terms and relevant provisions of Incentive Awards
      shall
      be appropriately adjusted by the Committee, whose determination shall be binding
      on all persons; provided, however, that no adjustment of an outstanding Option
      or Stock Appreciation Right may be made that would create a deferral of income
      or a modification, extension or renewal of such Option or Stock Appreciation
      Right under Code Section 409A except as may be permitted in applicable Treasury
      Regulations. If the adjustment would produce fractional shares with respect
      to
      any Restricted Stock or unexercised Option or Stock Appreciation Right, the
      Committee may adjust appropriately the number of shares covered by the Incentive
      Award so as to eliminate the fractional shares.

    

    (b) If
      the
      Company is a party to a consolidation or merger in which the Company is not
      the
      surviving corporation, a transaction that results in the acquisition of
      substantially all of the Company’s outstanding stock by a single person or
      entity, or a sale or transfer of substantially all of the Company’s assets, the
      Committee may take such actions with respect to outstanding Incentive Awards
      as
      the Committee deems appropriate. 

    

    (c) Any
      determination made or action taken under this Section 13 by the Committee shall
      be final and conclusive and may be made or taken without the consent of any
      Participant. 

    

    14. Administration
      Of The Plan.
      The Plan
      shall be administered by a Committee, which shall be appointed by the Board,
      consisting of not less than three members of the Board. Subject to paragraph
      (e)
      below, the Committee shall be the Compensation Committee of the Board unless
      the
      Board shall appoint another Committee to administer the Plan. The Committee
      shall have general authority to impose any limitation or condition upon an
      Incentive Award that the Committee deems appropriate to achieve the objectives
      of the Incentive Award and the Plan and, 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    without
      limitation and in addition to powers set forth elsewhere in the Plan, shall
      have
      the following specific authority: 

    

    (a) The
      Committee shall have the power and complete discretion to determine (i) which
      eligible employees shall receive an Incentive Award and the nature of the
      Incentive Award, (ii) the number of shares of Company Stock to be covered by
      each Incentive Award, (iii) whether Options shall be Incentive Stock Options
      or
      Nonstatutory Stock Options, (iv) when, whether and to what extent Stock
      Appreciation Rights shall be granted in connection with Options, (v) the Fair
      Market Value of Company Stock, (vi) the time or times when an Incentive Award
      shall be granted, (vii) whether an Incentive Award shall become vested over
      a
      period of time and when it shall be fully vested, (viii) when Options or Stock
      Appreciation Rights may be exercised, (ix) whether a Disability exists, (x)
      the
      manner in which payment will be made upon the exercise of Options or Stock
      Appreciation Rights, (xi) conditions relating to the length of time before
      disposition of Company Stock received upon the exercise of Options or Stock
      Appreciation Rights is permitted, (xii) whether to approve a Participant’s
      election (A) to deliver Mature Shares to satisfy Applicable Withholding Taxes
      or
      (B) to have the Company withhold from the shares to be issued upon the exercise
      of a Nonstatutory Stock Option or a Stock Appreciation Right the number of
      shares necessary to satisfy Applicable Withholding Taxes, (xiii) the terms
      and
      conditions applicable to Restricted Stock Awards, (xiv) the terms and conditions
      on which restrictions upon Restricted Stock shall lapse, (xv) whether to
      accelerate the time at which any or all restrictions with respect to Restricted
      Stock will lapse or be removed, (xvi) notice provisions relating to the sale
      of
      Company Stock acquired under the Plan, and (xvii) any additional requirements
      relating to Incentive Awards that the Committee deems appropriate.
      Notwithstanding the foregoing, no “tandem stock options” (where two stock
      options are issued together and the exercise of one option affects the right
      to
      exercise the other option) may be issued in connection with Incentive Stock
      Options. The Committee shall have the power to amend the terms of previously
      granted Incentive Awards so long as the terms as amended are consistent with
      the
      terms of the Plan and provided that the consent of the Participant is obtained
      with respect to any amendment that would be detrimental to the Participant,
      except that such consent will not be required if such amendment is for the
      purpose of complying with Rule 16b-3 or any requirement of the Code applicable
      to the Incentive Award. 

    

    (b) The
      Committee may adopt rules and regulations for carrying out the Plan. The
      interpretation and construction of any provision of the Plan by the Committee
      shall be final and conclusive. The Committee may consult with counsel, who
      may
      be counsel to the Company, and shall not incur any liability for any action
      taken in good faith in reliance upon the advice of counsel. 

    

    (c) A
      majority of the members of the Committee shall constitute a quorum, and all
      actions of the Committee shall be taken by a majority of the members present.
      Any action may be taken by a written instrument signed by all of the members,
      and any action so taken shall be fully effective as if it had been taken at
      a
      meeting. 

    

    (d) The
      Board
      from time to time may appoint members previously appointed and may fill
      vacancies, however caused, in the Committee. If a Committee of the Board is
      appointed to serve as the Committee, such Committee shall have, in connection
      with the administration of the Plan, 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    the
      powers possessed by the Board, including the power to delegate a subcommittee
      of
      the administrative powers the Committee is authorized to exercise, subject,
      however, to such resolutions, not inconsistent with the provisions of the Plan,
      as may be adopted from time to time by the Board. 

    

    (e) All
      members of the Committee must be “outside directors” as described in Code
      section 162(m). In addition, all members of the Committee must be “non-employee
      directors” as defined in Rule 16b-3. 

    

    15. Notice.
      All
      notices and other communications required or permitted to be given under this
      Plan shall be in writing and shall be deemed to have been duly given if
      delivered personally or mailed first class, postage prepaid, as follows:

    

    (a) If
      to the
      Company—at its principal business address to the attention of the Secretary;

    

    (b) If
      to any
      Participant—at the last address of the Participant known to the sender at the
      time the notice or other communication is sent. 

    

    16. Shareholder
      Rights.
      No
      Participant shall be deemed to be the holder of, or to have any of the rights
      of
      a holder with respect to, any shares of Company Stock subject to an Incentive
      Award unless and until such Participation has satisfied all requirements under
      the terms of the Incentive Award. 

    

    17. No
      Employment or Other Service Rights.
      Nothing
      in the Plan or any instrument executed or Incentive Award granted under the
      Plan
      shall confer upon any Participant any right to continue to serve the Company
      (or
      a Parent or Subsidiary of the Company) in the capacity in effect at the time
      the
      Incentive Award was granted or shall affect the right of the Company (or a
      Parent or Subsidiary of the Company) to terminate the employment of a
      Participant with or without notice and with or without cause. 

    

    18. Interpretation.
      The
      terms of the Plan shall be governed by the laws of the Commonwealth of Virginia,
      without regard to conflict of law provisions at any jurisdiction. The terms
      of
      this Plan are subject to all present and future regulations and rulings of
      the
      Secretary of the Treasury or his delegate relating to the qualification of
      Incentive Stock Options under the Code. If any provision of the Plan conflicts
      with any such regulation or ruling, then that provision of the Plan shall be
      void and of no effect. As to all Incentive Stock Options and all Nonstatutory
      Stock Options with an exercise price of at least 100% of Fair Market Value
      of
      the Company Stock on the Date of Grant, this Plan shall be interpreted for
      such
      Options to be excluded from applicable employee remuneration for purposes of
      Code section 162(m). 

    

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    IN
      WITNESS HEREOF, this instrument has been executed this 24th
      day of
      April, 2006. 

    

    

    
      	 	
              CARMAX,
                INC.

            
	 	 
	 	
              By:  /s/
                Keith D. Browning

            
	 	
              Keith
                D. Browning

            
	 	
              Executive
                Vice President &

            
	 	
              Chief
                Financial Officer

            

    

     

    

     

     

    

     

     

     

     

     

     

    14

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