Document:

Benefit Restoration Plan

 Exhibit 10.2 
  
 CARMAX, INC. 
 BENEFIT RESTORATION PLAN 
  
 AS AMENDED AND
RESTATED 
  
 October 19, 2004 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page

	 	  	Section I	  	 
	 	  	Purpose of the Plan	  	 
			
	 1.1
	  	Purpose	  	1
	 1.2
	  	Structure	  	1
	 1.3
	  	Definitions	  	1
			
	 	  	Section II	  	 
	 	  	Eligibility	  	 
			
	 2.1
	  	Eligible Employees	  	2
	 2.2
	  	Participation	  	2
	 2.3
	  	No Duplication of Benefits	  	2
			
	 	  	Section III	  	 
	 	  	Benefits	  	 
			
	 3.1
	  	Minimum Service Requirement	  	3
	 3.2
	  	Supplemental Benefit	  	3
	 3.3
	  	Adjustment for Early or Late Commencement	  	3
	 3.4
	  	Maximum Benefit	  	4
	 3.5
	  	Additional Benefit Service	  	4
			
	 	  	Section IV	  	 
	 	  	Computation and Payment of Retirement Benefit	  	 
			
	 4.1
	  	Computation	  	5
	 4.2
	  	Payment	  	5
	 4.3
	  	Distribution of Accrued Benefit	  	5
			
	 	  	Section V	  	 
	 	  	Computation and Payment of Survivor Benefit	  	 
			
	 5.1
	  	Pre-Retirement Survivor Benefit	  	6
	 5.2
	  	Post-Retirement Survivor Benefit	  	6
	 5.3
	  	Computation	  	7
	 5.4
	  	Payment	  	7

  

 i 

					
	 	  	Section VI	  	 
	 	  	Administration	  	 
			
	 6.1
	  	Amendment and Termination	  	7
	 6.2
	  	Plan Administrator	  	7
	 6.3
	  	Claims Procedure	  	7
	 6.4
	  	Qualified Domestic Relations Orders	  	8
			
	 	  	Section VII	  	 
	 	  	Change of Control	  	 
			
	 7.1
	  	Effect of Change of Control	  	9
	 7.2
	  	Definition of Change of Control	  	9
			
	 	  	Section VIII	  	 
	 	  	Miscellaneous	  	 
			
	 8.1
	  	Tax Matters	  	9
	 8.2
	  	Rights Under the Plan	  	9
	 8.3
	  	Effect on Employment	  	10
	 8.4
	  	Successors; Governing Law	  	10
	 8.5
	  	Assumption of Liabilities from Predecessor Plan	  	10

  

 ii 

 CARMAX, INC. 
 BENEFIT RESTORATION PLAN 
  
 Section I 
 Purpose of the Plan 
  
 1.1 Purpose. CarMax, Inc. (the “Company”) maintains this CarMax, Inc. Benefit Restoration Plan (the “Plan”) to provide deferred
compensation for certain key employees of the Company and its Affiliated Companies who are expected to contribute significantly to the growth of the Company and its Affiliated Companies. The Board of Directors of the Company (the “Board”)
has determined that the benefits to be provided under the Plan are reasonable and appropriate compensation for the services rendered and to be rendered. 
  
 1.2 Structure. This Plan provides benefits as set forth in Sections III, IV and V below for a select group of management or highly compensated
employees (and their Beneficiaries) with compensation in excess of the limit on compensation under Section 401(a)(17) of the Code, or whose benefits are limited under the Retirement Plan by the maximum benefit limit under Section 415 of the Code.

  
 1.3 Definitions. Whenever used in the Plan, the
following terms shall have the meanings set forth below. 
  
 (a) “Affiliated Company” means any company or business organization that is under common control with the Company and that has adopted the Retirement Plan as a Related Company. 
  
 (b) “Code” means the Internal Revenue Code of
1986, as amended. 
  
 (c) “Effective
Date” means October 1, 2002. 
  
 (d)
“Maximum Benefit” means the maximum annual Supplemental Benefit payable from the Plan as determined under Section 3.4. 
  
 (e) “Participant” means an individual who is eligible to participate in the Plan under Section II. 
  
 (f) “Pre-Retirement Survivor Benefit” means the
benefit payable under the Plan to a surviving Spouse of a Participant as determined under Section 5.1. 
  
 (g) “Post-Retirement Survivor Benefit” means the benefit payable under the Plan to a Beneficiary of a Participant as determined
under Section 5.2. 
  
 (h) “Retirement
Plan” means the Retirement Plan of CarMax, Inc. as in effect from time to time. 
  

 1 

 (i) “Supplemental Benefit” means the benefit payable under the Plan as
determined by Section 3.2, subject to adjustments as provided in the Plan. 
  
 (j) “Tax Limits” means both (1) the limit on compensation under Section 401(a)(17) of the Code (as adjusted from time to time under the terms of the Retirement Plan), and (2) the maximum benefit limit under
Section 415(b)(1)(A) of the Code (as adjusted from time to time under the terms of the Retirement Plan). 
  
 (k) The following terms shall have the meanings provided in the Retirement Plan: Actuarial Equivalent, Alternate Payee, Beneficiary,
Benefit Service, Disability Pension, Early Retirement Date, Normal Retirement Date, Permanent Disability, Plan Year, Qualified Pre-Retirement Survivor Annuity, Qualified Domestic Relations Order, Related Company, and Spouse. 
  
 Section II 
 Eligibility 
  
 2.1 Eligible Employees. Each participant in the Retirement Plan who is an employee of the Company or an Affiliated Company on or after the Effective Date, and whose retirement benefits under the Retirement Plan are limited by either
or both of the Tax Limits, shall be a Participant. In addition, any participant in the Retirement Plan who had a benefit under the Circuit City Stores, Inc. Benefit Restoration Plan as of the Effective Date that is assumed under Section 8.5 shall
become a Participant as of the Effective Date. 
  
 2.2
Participation. A Participant shall commence participation in the Plan on the later of the Effective Date or the first day of the Plan Year beginning after the Participant’s future retirement benefits under the Retirement Plan are limited
by either or both of the Tax Limits. An individual shall cease to be a Participant when the individual’s future retirement benefits under the Retirement Plan are no longer limited by either of the Tax Limits or when the individual and his or
her Beneficiary have received all benefits payable under the Plan. 
  
 2.3 No Duplication of Benefits. All benefits described in the Plan are subject to the provisions of Section 3.4. Notwithstanding anything in the Plan to the contrary, there shall be no duplication of benefits under this Plan and the
Retirement Plan. 
  

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 Section III 
 Benefits 
  
 3.1 Minimum
Service Requirement. To receive a Supplemental Benefit, a Participant must commence benefits under the Retirement Plan and meet one or more of the following criteria: 
  

	 	(a)	Have fifteen (15) years of Benefit Service at termination of employment with the Company or an Affiliated Company (any Benefit Service credited after termination of employment
during a period of Permanent Disability also shall be included in years of Benefit Service for this purpose), 

  

	 	(b)	Either (i) have reached the Participant’s Early Retirement Date at the date of termination of employment with the Company or an Affiliated Company or (ii) have reached the
Participant’s Early Retirement Date and have had a continuous Permanent Disability from the date of termination of employment until the Early Retirement Date, or 

  

	 	(c)	Either (i) have reached the Participant’s Normal Retirement Date at the date of termination of employment with the Company or an Affiliated Company or (ii) have reached the
Participant’s Normal Retirement Date and have had a continuous Permanent Disability from the date of termination of employment until the Normal Retirement Date. 

  
 3.2 Supplemental Benefit. If a Participant begins receiving a retirement benefit from the Retirement Plan, the
Participant shall receive a Supplemental Benefit under this Plan equal to the amount (if any) determined as follows: 
  
 (a) The retirement benefit that would have been paid from the Retirement Plan (i) had the Participant’s benefit not been limited by
the Tax Limits and (ii) additionally if applicable, had the Participant actually earned any Benefit Service imputed under Section 3.5, 
  
 REDUCED BY 
  
 (b) The total retirement benefit that is payable to the Participant under the Retirement Plan. 
  
 3.3 Adjustment for Early or Late Commencement. If a Supplemental
Benefit commences before the Participant’s Normal Retirement Date, the benefit under Section 3.2(a) shall be calculated in accordance with any early retirement reduction provided under the Retirement Plan. If a Supplemental Benefit commences
after a Participant’s Normal Retirement Date, the benefit under Section 3.2(a) shall be calculated in 

  

 3 

 
accordance with the provisions of the Retirement Plan for benefits commencing after Normal Retirement Date. If a Supplemental Benefit commences when a
Participant starts a Disability Pension under the Retirement Plan, the benefit under Section 3.2(a) shall be calculated by including Benefit Service during the period of Permanent Disability in accordance with the provisions of the Retirement Plan
for a Disability Pension. 
  
 3.4 Maximum Benefit.

  
 (a) Notwithstanding any other provision of
the Plan to the contrary, the annual Supplemental Benefit payable to a Participant under this Plan shall not exceed (i) the Maximum Benefit reduced by (ii) the total annual retirement benefit that is payable to the Participant under the
Retirement Plan. The Maximum Benefit is based on the payment of the Supplemental Benefit as a straight life annuity (with no ancillary benefits). If benefits are payable in any other form, the Maximum Benefit shall be actuarially reduced to be the
Actuarial Equivalent of the Maximum Benefit payable as a straight life annuity (with no ancillary benefits). 
  
 (b) The Maximum Benefit is an annual amount equal to $400,000, as adjusted below. The Maximum Benefit shall be subject to increase in the
same percentage as the Section 415 dollar limit is adjusted under Section 415(d)(1)(A) of the Code from time to time. The adjustment will be made effective as of each March 1 beginning with March 1, 2003, based on the percentage adjustment
applicable to that calendar year. If no adjustment is made under Section 415(d)(1)(A) of the Code for a calendar year, there shall be no adjustment in the Maximum Benefit for that year. In addition, the Maximum Benefit shall be proportionately
adjusted for increases in the statutory maximum dollar limit under Section 415(b)(1)(A) of the Code. The Maximum Benefit is not actuarially increased or decreased if the Participant commences payments other than at Normal Retirement Date.

  
 (c) A Participant’s Maximum Benefit
shall be determined as of the commencement of payment of the Supplemental Benefit to the Participant and shall not be subject to future adjustment. The Supplemental Benefit shall not be reduced if additional benefits become payable from the
Retirement Plan for any reason. A Participant’s Supplemental Benefit shall not be increased if the Maximum Benefit is increased under Section 3.4(b) after the commencement of payments under the Plan. 
  
 3.5 Additional Benefit Service. At its discretion, the Board of
Directors or the Compensation Committee of the Board may provide that any Participant shall be credited with additional imputed Benefit Service for purposes of Section 3.2(a). The Board or Compensation Committee shall have complete discretion to
determine the amount of additional Benefit Service to be imputed and any other terms and conditions of the additional service crediting. Any imputed Benefit Service shall be treated the same as actual Benefit Service for purposes of this Plan.

  

 4 

 Section IV 
 Computation and Payment of Retirement Benefit 
  
 4.1 Computation. The amount of the Supplemental Benefit described in Section III will initially be determined by assuming that the benefits payable under this Plan and the Retirement Plan are paid in the form
of a single life annuity payable for the Participant’s lifetime, beginning on the date on which payments actually begin to be made to the Participant from the Retirement Plan and ending at the Participant’s death. 
  
 4.2 Payment. A Participant’s Supplemental Benefit under this Plan
will be paid at the same time and in the same form of payment as benefits for the Participant under the Retirement Plan, except as provided in Section 4.3. If the benefit is to be paid in a form other than the single life annuity form described
above, the Supplemental Benefit described in Section III will be actuarially adjusted, using the actuarial assumptions then in effect under the Retirement Plan. Except as provided below, a Participant’s Supplemental Benefit will begin to be
paid on the date on which the Participant begins receiving benefits under the Retirement Plan and will be paid in cash or a cash equivalent. 
  
 4.3 Distribution of Accrued Benefit. 
  
 (a) Notwithstanding anything in the Plan to the contrary, the Company may distribute, or cause to be distributed in a single lump sum, to
a Participant (or, after his death, to his Beneficiary) the Actuarial Equivalent of the Supplemental Benefit of the Participant (or Beneficiary) under the Plan as of a specified date. The distribution may be made at any time deemed appropriate by
the Company. The lump sum shall be distributed in cash or a cash equivalent. The Company shall indicate in writing that the distribution is intended to be a distribution of the Participant’s (or Beneficiary’s) accrued benefit under the
Plan. The Company may take into account the tax consequences of the distribution when computing the amount to be distributed under this Section 4.3. 
  
 (b) After a distribution under this Section 4.3, the Company shall have no further liability with respect to the Supplemental Benefit. The
Company has the sole discretion to determine when and if a distribution is to be made under this Section 4.3, and to determine the amount of any distribution, and no Participant or Beneficiary shall have any right to receive a distribution under
this Section 4.3. 
  

 5 

 Section V 
 Computation and Payment of Survivor Benefit 
  
 5.1 Pre-Retirement Survivor Benefit. A Pre-Retirement Survivor Benefit shall be payable to the surviving Spouse of a Participant if (i) the Participant had at least ten years of Benefit Service at death, and
(ii) the Participant’s surviving Spouse is entitled to a Qualified Pre-Retirement Survivor Annuity under the Retirement Plan. 
  
 (a) The Spouse will be entitled to receive a Pre-Retirement Survivor Benefit from this Plan equal to the amount (if any) determined as
follows: 
  
 (i) The survivor benefit that would
have been payable to the Spouse under the Retirement Plan had the Participant’s Supplemental Benefit (as adjusted under Sections 3.3 and 3.4) and benefit from the Retirement Plan been paid entirely from the Retirement Plan, 
  
 REDUCED BY 
  
 (ii) The total survivor benefit that is payable to the Spouse under the Retirement Plan. 
  
 (b) A Pre-Retirement Survivor Benefit is payable in the same
form as the survivor benefit is payable under the Retirement Plan, including benefit forms that may provide payments after the death of the surviving Spouse. 
  
 5.2 Post-Retirement Survivor Benefit. A Post-Retirement Survivor Benefit shall be payable to the surviving Beneficiary of a Participant if (i) the
Participant is receiving a form of benefit under the Retirement Plan that provides for a survivor benefit, and (ii) a survivor benefit is payable to the Beneficiary under the Retirement Plan. 
  
 (a) The Beneficiary will be entitled to receive a
Post-Retirement Survivor Benefit from this Plan equal to the amount (if any) determined as follows: 
  
 (i) The survivor benefit that would have been payable to the Beneficiary under the Retirement Plan had the Participant’s Supplemental
Benefit (as adjusted under Sections 3.3 and 3.4) and benefit from the Retirement Plan been paid entirely from the Retirement Plan, 
  
 REDUCED BY 
  
 (ii) The total survivor benefit that is payable to the Beneficiary under the Retirement Plan. 
  

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 (b) A Post-Retirement Survivor Benefit is payable to a surviving Spouse or any other
Beneficiary of a Participant who is receiving a survivor benefit under the Retirement Plan. 
  
 5.3 Computation. The Pre-Retirement Survivor Benefit described in Section 5.1 and the Post-Retirement Survivor Benefit described in Section 5.2 will be computed as if the survivor benefits under this Plan and
the Retirement Plan were paid in the form payable under the Retirement Plan. The actuarial assumptions used for purposes of the Retirement Plan will be used to determine the benefits payable under this Plan. 
  
 5.4 Payment. Except as provided in Section 4.3, the Pre-Retirement
Survivor Benefit and Post-Retirement Survivor Benefit will be paid at the same times and for the same duration as payments under the Retirement Plan, commencing at the time the benefits commence under the Retirement Plan. The Pre-Retirement Survivor
Benefit and Post-Retirement Survivor Benefit will be paid in cash or a cash equivalent. 
  
 Section VI 
 Administration 
  
 6.1 Amendment and Termination. The Board of the Company may amend or terminate the Plan at any time; provided,
however, that no amendment or termination of the Plan shall reduce a Participant’s accrued benefit under the Plan as of the date of the amendment or termination. For this purpose, a Participant’s accrued benefit under the Plan shall be
computed based on the formulas in this Plan and his accrued benefits under the Retirement Plan as of the date of the computation. 
  
 6.2 Plan Administrator. The Plan will be administered by one or more persons appointed by the Board to be responsible for administering the Plan
(the “Plan Administrator”). The Plan shall be administered by the Compensation and Personnel Committee of the Board. The decisions of the Plan Administrator shall be final and binding on all persons. The Plan Administrator will have the
express discretionary authority to interpret and administer the Plan, and to make all decisions with respect to the interpretation and administration of the Plan. 
  
 6.3 Claims Procedure. Each Participant or Beneficiary of a deceased Participant shall be entitled to file with the
Plan Administrator a written claim for benefits under the Plan. The Plan Administrator will review the claim, and, if the claim is denied, in whole or in part, the Plan Administrator will furnish the claimant, within 90 days after the Plan
Administrator’s receipt of the claim (or within 180 days after such receipt, if special circumstances require an extension of time), a written notice of denial of the claim containing the following: 
  
 (a) Specific reasons for the denial, 
  
 (b) Specific reference to the pertinent Plan provisions on
which the denial is based, 
  

 7 

 (c) A description of any additional material or information necessary for the claimant to
perfect the claim, and an explanation of why the material or information is necessary, and 
  
 (d) An explanation of the claims review procedure. 
  
 The claimant may request a review of the claim by an appeals committee appointed by the Board. The review may be requested in writing at any
time within 60 days after the claimant receives written notice of the denial of his claim. The appeals committee shall afford the claimant a full and fair review of the decision denying the claim and, if so requested, shall: 
  
 (a) Permit the claimant to review any documents that are
pertinent to the claim, and 
  
 (b) Permit the
claimant to submit to the committee issues and comments in writing. 
  
 The
appeals committee’s decision on review shall be made in writing and shall be issued within 60 days following receipt of the request for review. The period for decision may be extended to a date not later than 120 days after such receipt if the
committee determines that special circumstances require an extension. The decision on review shall include specific reasons for the decision and specific references to the Plan provisions on which the decision of the committee is based. 

 
 6.4 Qualified Domestic Relations Orders. If the Plan Administrator
receives a Qualified Domestic Relations Order requiring the payment of a Participant’s Supplemental Benefit under this Plan to a person other than the Participant, the Plan Administrator shall take the following steps: 
  
 (a) If benefits are in pay status, the Plan Administrator
shall account separately for the amounts that will be payable to the Alternate Payee; 
  
 (b) The Plan Administrator shall promptly notify the named Participant and the Alternate Payee of the receipt of the Qualified Domestic
Relations Order; and 
  
 (c) The Plan
Administrator shall pay the specified amounts to the Alternate Payee pursuant to the Order; provided, however, that the Plan Administrator may distribute or cause to be distributed in a single lump sum to the Alternate Payee the Actuarial Equivalent
of the Alternate Payee’s Supplemental Benefit under this Plan. 
  

 8 

 Section VII 
 Change of Control 
  
 7.1
Effect of Change of Control. Immediately prior to a Change of Control as defined in Section 7.2, the Company shall immediately fund the CarMax, Inc. Benefit Restoration Plan Trust (the “Trust”) with an amount equal to the then
Actuarial Equivalent of the present value of the Supplemental Benefits of all Participants and the survivor benefits of all Beneficiaries payable as a single lump sum payment. The Trust shall be funded with cash or cash equivalents other than stock
of the Company. 
  
 7.2 Definition of Change of Control.
“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.

  
 Section VIII 
 Miscellaneous 
  
 8.1 Tax Matters. The Company does not represent or guarantee that any particular federal state or local income or payroll tax consequence will
result to any Participant, Beneficiary or Alternate Payee under this Plan. The Company has the right to withhold from any benefit payments to any person under this Plan or take other actions necessary to satisfy the Company’s obligation to
withhold federal, state and local income and payroll taxes. 
  
 8.2 Rights Under the Plan. This Plan is an unfunded deferred compensation plan. Title to and beneficial ownership of all benefits described in the Plan shall at all times remain with the Company. Participation in the Plan and the
right to receive payments under the Plan shall not give a Participant or Beneficiary any proprietary interest in the Company or any of its assets. Benefits under the Plan shall be payable from the general assets of the Company. Subject to Section
7.1, no trust fund may be created in connection with the Plan (other than a trust that, under applicable law, does not affect the characterization of this Plan as an unfunded plan), and there shall be no required funding of amounts that may become
payable under the Plan. A Participant and his Beneficiary shall, for all purposes, be general creditors of the Company. The interest of a Participant and his Beneficiary in the Plan cannot be assigned, anticipated, sold, encumbered or pledged and
shall not be subject to the claims of their creditors. 
  

 9 

 8.3 Effect on Employment. The Plan will not affect the right of the Company or an Affiliated
Company to terminate an employee’s employment at any time. Benefits payable under the Plan will not be considered compensation for purposes of other retirement or benefit plans maintained by the Company or an Affiliated Company. 
  
 8.4 Successors; Governing Law. The Plan is binding on the Company and
its successors and assigns and on Participants and their Beneficiaries, successors, estates, and distributees. The Plan will be administered according to the laws of the Commonwealth of Virginia. 
  
 8.5 Assumption of Liabilities From Predecessor Plan. As of the
Effective Date, the Plan shall assume all of the liabilities of the Circuit City Stores, Inc. Benefit Restoration Plan with respect to any Participant in the Plan. In addition, if any individual became an employee of the Company or an Affiliated
Company before March 1, 2003 who has or had an accrued benefit under the Circuit Stores, Inc. Benefit Restoration Plan, the Plan shall assume all of the liabilities of the Circuit City Stores, Inc. Benefit Restoration Plan with respect to the
individual as of the date of hire by the Company or an Affiliated Company. 
  
 WITNESS the following signature as of the Effective Date. 
  

			
	CARMAX, INC.
		
	By	 	 /s/ Keith D. Browning

	 	 	Keith D. Browning
	 	 	Executive Vice President & Chief Financial Officer

  

 102002 Non-Employee Directors Stock Incentive Plan

 Exhibit 10.3 
  
 CARMAX, INC. 2002 NON-EMPLOYEE DIRECTORS 
 STOCK INCENTIVE PLAN 
 (AS AMENDED AND RESTATED MAY 6, 2005) 
  
 1. Purpose. The purpose of this CarMax, Inc. 2002 Non-Employee Directors Stock
Incentive Plan (the “Plan”) is to encourage ownership in CarMax, Inc. (the “Company”) by non-employee members of the Board of Directors of the Company, in order to promote long-term shareholder value and to provide non-employee
directors with an incentive to continue as directors of the Company. 
  
 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)	“Board” means the Board of Directors of the Company. 

  

	 	(c)	“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 Act,
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. 

  

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

  

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

  

	 	(f)	“Company Stock” means shares of CarMax Common Stock subject to the limits of Section 4. Such shares shall be subject to adjustment as provided in Section 14.

  

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

  

	 	(h)	“Disability” or “Disabled” means a disability as determined by the Board. 

  

	 	(i)	“Fair Market Value” means, for any given date, the fair market value of 

 
the Company Stock as of such date, as determined by the Board based on the then prevailing prices of the Company Stock on the exchange on which it generally
has the greatest trading volume. 
  

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

  

	 	(k)	“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 under Code section 422 and is so designated. 

  

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

  

	 	(m)	“Participant” means any non-employee member of the Board who receives an Incentive Award under the Plan. 

  

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

  

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

  

	 	(p)	“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. 

  

	 	(q)	“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.

  

	 	(r)	“Stock Grant” means Company Stock awarded without restrictions in accordance with Section 9. 

  
 3. General. Incentive Awards may be granted under the Plan in the form of Nonstatutory Stock Options, Stock Appreciation
Rights, Restricted Stock, and Stock Grants. 
  
 4. Stock. Subject to
Section 14 of the Plan, there shall be reserved for issuance under the Plan (i) an aggregate of 100,000 shares of CarMax Common Stock, which shall be authorized, but unissued shares. Shares of CarMax Common Stock that have not been issued and
allocated to options or portions thereof that expire or otherwise terminate unexercised may be subjected to an Incentive Award under the Plan. Shares of a series 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 relating to shares of the same 

  

 2 

 
series of Company Stock. 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 relating to shares of the same series of Company Stock as those reacquired. 
  
 5. Eligibility. 
  

	 	(a)	Each director of the Company who is not a full-time employee of the Company or any parent or subsidiary of the Company shall be eligible to receive Incentive Awards under the Plan.
The Board shall have the power and complete discretion, as provided in Section 15, to select which directors 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 to pay a Participant any particular amount of remuneration or to make further grants to the Participant at any time
thereafter. 

  
 6. Restricted
Stock Awards. 
  

	 	(a)	Whenever the Board 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 shall become an award agreement between the Company and the Participant. A Restricted Stock Award may be made by the Board 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 a director 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 serve as a member of the Board. 

  

 3 

	 	(iv)	The Board may establish such other restrictions on such shares that the Board 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 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 Board 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 Board 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. 

  
 7. Stock
Options. 
  

	 	(a)	Whenever the Board deems it appropriate to grant Options, notice shall be given to the eligible non-employee director stating the number of shares for which Options are granted, the
Option price per share, 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 shall become a stock option agreement between the Company and the
eligible non-employee director. 

  

	 	(b)	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.

  

	 	(c)	The Board may, in its discretion, grant Options that by their terms become fully exercisable Options may be exercised in whole or in part at such times as may be specified by the
Board in the Participant’s stock option agreement. 

  

	 	(d)	Upon a Change of Control notwithstanding other conditions on exercisability in the stock option agreement. 

  

 4 

 8. Stock Appreciation Rights. 
  

	 	(a)	Whenever the Board deems it appropriate, Stock Appreciation Rights may be granted. The terms and conditions of the award shall be set forth in a stock appreciation rights agreement
between the Company and the Participant. The following provisions apply to all Stock Appreciation Rights that are granted: 

  

	 	(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 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 Board
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 Board shall specify in the Participant’s stock appreciation rights agreement.

  

	 	(b)	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 Board and shall be set forth in
the Participant’s stock appreciation rights agreement. The Board may provide for payment in Company Stock or cash, or a fixed combination of Company Stock or cash, or the Board 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. Stock Grants. 
  

	 	(a)	Whenever the Board deems it appropriate, a Stock Grant may be made to eligible non-employee directors. The Board shall have complete discretion to make such Stock Grants and may do
so whenever it considers it appropriate. 

  

	 	(b)	Whenever the Board deems it appropriate, it may permit eligible non-employee directors to elect to receive a Stock Grant in lieu of retainer, meeting fees or other such fees to
which such directors would otherwise be entitled. The Company Stock to be issued in connection with such a Stock Grant shall have a Fair Market Value equal to such fees otherwise payable, determined as of the date on which such payment of fees would
otherwise become payable to such member of the Board. 

  

 5 

 10. Method of Exercise of Options and Stock Appreciation Rights. 
  

	 	(a)	Options and Stock Appreciation Rights may be exercised by the Participant 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, the Participant may: (i) deliver shares of Participant-owned Company Stock (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 and other costs and expenses associated with such sale and deliver promptly from the proceeds of the sale the amount necessary to pay the exercise price. 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 Board prior to exercise of the
Option. 

  

	 	(b)	Until the Participant has made any required payment, 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)	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. 

  

	 	(d)	Any shares of already owned Company Stock that are delivered by a Participant in satisfaction of all or any part of the exercise price of an Option shall be of the same series of
Company Stock as the shares of Company Stock to which such Incentive Award relates. 

  
 11. Transferability of Incentive Awards. Nonstatutory Stock Options and Stock Appreciation Rights may be transferable by a Participant and exercisable by a person other than the Participant, but only to
the extent specifically provided in the Incentive Award; provided, however, that no transfer for value or consideration will be permitted without the prior approval of the Company’s shareholders. 
  
 12. 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 

  

 6 

 
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 the Company’s 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.
Amended And Restated 1989 Non-Employee Directors Stock Option Plan, to the extent provided in an agreement between the Company and Circuit City Stores, Inc. 

  
 13. 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 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 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 14) or permit repricing of options, 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. 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. 
  
 14. Change in Capital Structure. 
  

	 	(a)	The number of shares reserved for issuance under the Plan, the terms of Incentive Awards, and all computations under the Plan shall be appropriately adjusted by the Board should the
Company effect one or more stock dividends, stock splits, subdivisions or consolidations of shares, or other similar changes in capitalization, or if the par value of Company Stock is altered. If the adjustment would produce fractional shares with
respect to any unexercised Option, the Board may adjust appropriately the number of shares covered by the Option 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 Board may take such actions with respect to outstanding Incentive Awards as the Board deems appropriate.

  

 7 

	 	(c)	Any determination made or action taken under this Section 14 by the Board shall be final and conclusive and may be made or taken without the consent of any Participant.

  
 15. Administration of the Plan. The Plan shall be
administered by the Board. The Board shall have general authority to impose any limitation or condition upon an Incentive Award that the Board deems appropriate to achieve the objectives of the Incentive Award and the Plan and, without limitation
and in addition to powers set forth elsewhere in the Plan, shall have the following specific authority: 
  

	 	(a)	The Board shall have the power and complete discretion to determine (i) which eligible non-employee directors 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) when, whether and to what extent Stock Appreciation Rights shall be granted, (iv) the fair market value of Company Stock, (v) the time or times when an Incentive
Award shall be granted, (vi) whether an Incentive Award shall become vested over a period of time and when it shall be fully vested, (vii) when Options and Stock Appreciation Rights may be exercised, (viii) whether a Disability exists, (ix) the
manner in which payment will be made upon the exercise of Options or Stock Appreciation Rights, (x) conditions relating to the length of time before disposition of Company Stock received upon the exercise of Options or Stock Appreciation Rights is
permitted, (xi) the terms and conditions applicable to Restricted Stock Awards, (xii) the terms and conditions on which restrictions upon Restricted Stock shall lapse, (xiii) whether to accelerate the time at which any or all restrictions with
respect to Restricted Stock will lapse or be removed, (xiv) notice provisions relating to the sale of Company Stock acquired under the Plan, and (xv) any additional requirements relating to Incentive Awards that the Board deems appropriate. The
Board 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. 

  

	 	(b)	The Board may adopt rules and regulations for carrying out the Plan. The interpretation and construction of any provision of the Plan by the Board shall be final and conclusive. The
Board 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 Board shall constitute a quorum, and all actions of the Board 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. 

  

 8 

 16. Notice. All notices and other communications required or permitted to be given under this Plan may 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. 
  
 17. Miscellaneous. By accepting any Incentive Award under the Plan, each Participant, and each person claiming under or through such person, shall be
conclusively deemed to have given his or her acceptance and ratification of, and consent to, any action taken with respect thereto by the Company or the Board. 
  

IN WITNESS HEREOF, this instrument has been executed this 6TH day of May, 2005. 
  

			
	CARMAX, INC.
		
	By:	 	 /s/ Keith D. Browning

	 	 	Keith D. Browning
	 	 	Executive Vice President &
	 	 	Chief Financial Officer

  

 9

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