Document:

exv10w1

 

Exhibit 10.1

CARMAX, INC.

EMPLOYMENT AGREEMENT

FOR

EXECUTIVE OFFICER

     THIS EMPLOYMENT AGREEMENT (“Agreement”) is made, entered into and is effective this
October 17, 2006 (“Effective Date”) by and between CarMax, Inc., a Virginia corporation,
and its affiliated companies (collectively, the “Company”), and Thomas J. Folliard (the
“Executive”).

     WHEREAS, the Company recognizes the Executive’s intimate knowledge and experience in the
business of the Company, and has appointed the Executive as its President and Chief Executive
Officer (“CEO”);

     WHEREAS, the Executive will develop and come in contact with the Company’s proprietary and
confidential information that is not readily available to the public, and that is of great
importance to the Company and that is treated by the Company as secret and confidential
information;

     WHEREAS, the Company and the Executive desire to agree upon the terms, conditions,
compensation and benefits of the Executive’s future employment;

     WHEREAS, upon execution of this Agreement, any prior employment agreement between the
Executive and the Company, whether oral or written, will have no force and effect with respect to
the terms and conditions of Executive’s employment and will be replaced and superseded by the terms
of this Agreement; and

     WHEREAS, pursuant to the Executive’s appointment as the Company’s President and CEO, the
Company has granted the Executive an award of options to purchase 100,000 shares of Company common
stock pursuant to the Company’s 2002 Stock Incentive Plan, as amended and restated;

     NOW, THEREFORE, in consideration of the Executive’s appointment as the Company’s President and
CEO, and the award of options, and of the premises, mutual covenants and agreements of the parties
set forth in this Agreement, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound,
agree as follows:

Article 1. Term

     1.1 Initial Term. The Company hereby agrees to employ the Executive and the Executive
hereby accepts employment as President and CEO of the Company, in accordance with the terms and
conditions set forth herein, for an initial period of two (2) years, commencing as of the Effective
Date of this Agreement (“Initial Term”); subject, however, to earlier termination as
expressly provided herein.

 

 

     1.2 Renewal Periods. The Initial Term will automatically be extended for an
additional period of one (1) year at the end of the Initial Term, and then again each successive
year thereafter (collectively, the “Renewal Period(s),” which, together with the
Initial Term, constitute the “Term” of this Agreement); subject, however, to earlier
termination as expressly provided herein.

     1.3 Expiration of Term. The Term of this Agreement will not be extended if either
party gives notice of non-renewal, delivered at least ninety (90) days before the end of the
Initial Term or any Renewal Period, as the case may be. If the Executive’s employment continues
beyond the expiration of the Term of this Agreement, such employment shall be at-will.

Article 2. Position and Responsibilities

     During the Term, the Executive agrees to serve as President and CEO of the Company. In his
capacity as President and CEO of the Company, the Executive shall report directly to the Board of
Directors of the Company (“Board”) and shall have the duties and responsibilities of
President and CEO of the Company and such other duties and responsibilities not inconsistent with
the performance of his duties as President and CEO of the Company. As soon as may be practicable,
the Executive shall be appointed as a member of the Board. The Executive’s principal work location
shall be the corporate headquarters of the Company located in the Richmond, Virginia metropolitan
area.

Article 3. Standard of Care

     3.1 General. During the Term, the Executive shall devote his full business time,
attention, knowledge and skills to the Company’s business and interests. The Executive covenants,
warrants, and represents that he shall:

	 	(a)	 	Devote his best efforts and talents to the performance of his
employment obligations and duties for the Company;
	 
	 	(b)	 	Exercise the highest degree of loyalty and the highest
standards of conduct in the performance of his duties;
	 
	 	(c)	 	Observe and conform to the Company’s bylaws and other rules,
regulations, and policies established or issued by the Company; and
	 
	 	(d)	 	Refrain from taking advantage, for himself or others, of any
corporate opportunities of the Company.

     3.2 Forfeiture and Return of Incentive Compensation. It is the Company’s expectation
that the Executive will discharge his duties hereunder with utmost attention to the standards set
forth in Section 3.1. In the event the Board determines that the Executive has engaged in conduct
constituting Cause (as defined in Section 7.6(a)), which conduct directly results in the filing of
a restatement of any financial statement previously filed with the Securities and Exchange
Commission (or other governmental agency) under the Federal securities laws, the Executive shall
immediately (a) forfeit all unpaid Affected Compensation (as defined below) and (b) upon demand by
the Company repay to the Company all Affected Compensation received or realized by the Executive
together with interest at the prime rate in effect from time to time as reported in The Wall Street
Journal; provided, however, that the

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forfeiture and repayment provisions of this Section 3.2 shall not apply to conduct
constituting “gross negligence” under Section 7.6(a)(ii) or to conduct under Section 7.6(a)(iii),
Section 7.6(a)(vii) or Section 7.6(a)(viii). “Affected Compensation” means any payment to
the Executive, any award or vesting of any equity or other short-term or long-term incentive
compensation to the Executive, or any before-tax proceeds of a sale of previously awarded equity
compensation realized by the Executive, in any instance in which (i) the payment, award or vesting
of the foregoing was expressly conditioned upon the achievement of certain financial results that
were subsequently the subject of such restatement, and (ii) a lesser amount of payment, award or
vesting or before-tax proceeds of a sale of any of the foregoing would have been made to, vested in
or otherwise earned or realized by, the Executive based upon such restated financial results.

Article 4. Other Activities

     During the Term, the Executive shall comply with the provisions of Article 8 herein.
Furthermore, during his employment, the Executive agrees to obtain the Board’s written consent
before entering into any other occupation, even if dissimilar to that of the Company, including,
without limitation, service as a member of a board of directors of one or more other companies.
Such consent may be granted or withheld, in the Board’s sole discretion. The Executive may
participate on charitable and civic boards, and in educational, professional, community and
industry affairs, without Board consent, provided that such participation does not interfere with
the performance of his duties.

Article 5. Compensation and Benefits

     As remuneration for all services to be rendered by the Executive during the Term, and as
consideration for complying with the covenants herein during and after the termination or
expiration of the Term, the Company shall pay and provide to the Executive the following
compensation and benefits:

     5.1 Base Salary. During the Term, the Company shall pay the Executive a base salary
(“Base Salary”) in an amount established and approved by the Compensation and Personnel
Committee of the Board (“Compensation Committee”); provided, however, that such Base Salary
shall be established at a rate of not less than $700,000 per year, except as otherwise provided in
this Section 5.1 below. This Base Salary shall be subject to all appropriate federal and state
withholding taxes and payable in accordance with the normal payroll practices of the Company. The
Compensation Committee shall review and adjust the Base Salary as it deems appropriate at least
annually during the Term; provided, however, that the Executive’s Base Salary shall not be
decreased without the Executive’s written consent, other than across-the-board reductions
applicable to all senior officers of the Company. If adjusted, the Base Salary shall be so
adjusted for all purposes of this Agreement.

     5.2 Annual Bonus. In addition to his Base Salary, the Executive shall be entitled to
participate in the Company’s Annual Performance-Based Bonus Plan (“Annual Bonus Plan”), as
such Annual Bonus Plan may exist from time to time during the Term. Under the Company’s Annual
Bonus Plan, the Executive has the opportunity to earn an annual bonus with respect to any fiscal
year of the Company (“Annual Bonus”). The Annual Bonus will be determined by a

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formula approved each fiscal year by the Compensation Committee (the “Annual Bonus
Formula”) in its sole discretion. At the beginning of each fiscal year, the Compensation
Committee will authorize, in accordance with the Annual Bonus Plan, the Executive’s Annual Bonus
for that fiscal year, which shall be targeted at one hundred percent (100%) of the Executive’s Base
Salary for that fiscal year (“Target Bonus Rate”). The specified Target Bonus Rate may be
increased from time to time by the Compensation Committee but shall not be decreased without the
Executive’s written consent. Depending upon the actual financial performance recorded by the
Company for any given fiscal year, the Executive’s Annual Bonus may be increased or decreased
solely in accordance with the Annual Bonus Formula and otherwise in accordance with the Annual
Bonus Plan.

     5.3 Long-Term Incentives. During the Term, the Executive shall be eligible to
participate in the Company’s 2002 Stock Incentive Plan, as amended and restated (or any successor
incentive plan thereto), to the extent that the Compensation Committee, in its sole discretion,
determines is appropriate. The Compensation Committee will make its determination consistent with
the methodology used by the Company for compensating the Executive’s peer executives.
Additionally, the Executive shall be entitled to participate in all other incentive plans, whether
equity-based or cash-based, applicable generally to his peer executives within the Company.

     5.4 Retirement and Deferred Compensation Plans. During the Term, the Executive shall
be entitled to participate in all tax-qualified and nonqualified retirement and deferred
compensation plans, policies and programs applicable generally to his peer executives within the
Company, subject to the eligibility and participation requirements of such plans, policies and
programs.

     5.5 Welfare Benefit Plans. During the Term, the Executive and the Executive’s family
will be entitled to participate in all welfare benefit plans, policies and programs, including
those defined under Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended, provided by the Company to his peer executives within the Company, subject to the
eligibility requirements and other provisions of such plans, policies and programs.

     5.6 Fringe Benefits. During the Term, the Executive will be entitled to fringe
benefits in accordance with the plans, policies and programs of the Company in effect for his peer
executives within the Company.

     5.7 Vacation. During the Term, the Executive will be entitled to participate in the
Company’s Time Away paid time off program for salaried employees (or successor paid time off
program) as that program is administered by the Company and as it may be amended or modified from
time to time; provided, in all events, the Executive will be entitled to not less than 30 days of
paid vacation each fiscal year.

     5.8 Right to Change Plans. By reason of Sections 5.4, 5.5, 5.6 and 5.7 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing, amending, or
discontinuing any benefit plan, policy or program, so long as such changes are similarly applicable
to the Executive’s peer executives.

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Article 6. Expenses

     During the Term, the Company shall pay or reimburse the Executive for all ordinary and
necessary expenses, in a reasonable amount, that the Executive incurs in performing his duties
under this Agreement including, but not limited to, travel, entertainment, professional dues and
subscriptions, and all dues, fees, and expenses associated with membership in various professional,
business, and civic associations and societies in which the Company finds that the Executive’s
participation is in the best interests of the Company. The payment or reimbursement of expenses
shall be subject to such rules concerning documentation of expenses and the type or magnitude of
such expenses as the Compensation Committee or the Company, as applicable, may establish from time
to time.

Article 7. Employment Termination

     7.1 Date of Termination. The Company or the Executive may terminate the Executive’s
employment in accordance with the provisions of this Article 7. The “Date of Termination”
of the Executive’s employment shall be as determined in Sections 7.2, 7.3, 7.4, 7.5, 7.6, and 7.7
below.

     7.2 Termination Due to Retirement or Death.

          (a) In the event the Executive’s employment ends by reason of Retirement (as defined below),
the Date of Termination shall be the date set forth in a notice by the Executive, which notice
shall be given to the Company at least ninety (90) days prior to such date. In the event of the
Executive’s death, the Date of Termination shall be the date of death. In either case, the
Executive’s benefits shall be determined in accordance with the Company’s retirement, survivor’s
benefits, insurance and other applicable plans and programs of the Company then in effect. For the
purposes of this Agreement, “Retirement” shall mean the Executive’s voluntary termination
of employment at a time during which he is eligible for “Normal Retirement” or “Early Retirement”
as such terms are defined in the CarMax, Inc. Pension Plan as of the Effective Date.

          (b) Upon the Date of Termination due to the Executive’s Retirement or death, the Company shall
be obligated to pay the Executive or, if applicable, the Executive’s beneficiary or estate, the
following “Accrued Obligations”: (i) any Base Salary that was accrued but not yet paid as
of the Date of Termination; (ii) the unpaid Annual Bonus, if any, earned with respect to the fiscal
year preceding the Date of Termination; (iii) any compensation previously deferred by the Executive
by his own election; and (iv) all other employee welfare and retirement benefits to which the
Executive is entitled on the Date of Termination in accordance with the terms of the applicable
plan or plans. The Accrued Obligations payable under the above clauses (i) and (ii) shall be paid
to the Executive in a lump sum cash payment within ten (10) days after the Date of Termination or
as soon thereafter as may be practicable. The Accrued Obligations payable under clauses (iii) and
(iv) shall be paid in accordance with the terms of the plan under which they are due.

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          (c) Upon the Date of Termination due to the Executive’s Retirement, the Executive shall be
entitled to a pro rata share of the Annual Bonus based on actual performance
for the fiscal year in which the Date of Termination occurs (such proration to be based on the
fraction, the numerator of which is the number of full completed days of employment during the
fiscal year through the Date of Termination, and the denominator of which is 365) (“Pro Rata
Actual Bonus”). The Pro Rata Actual Bonus, if any, shall be paid to the Executive when annual
bonuses are paid to other senior officers of the Company for such fiscal year.

          (d) Upon the Date of Termination due to the Executive’s death, the Executive’s beneficiary or
estate shall be entitled to a pro rata share of the Annual Bonus at the Target Bonus Rate for the
fiscal year in which the Date of Termination occurs (such proration to be based on the fraction,
the numerator of which is the number of full completed days of employment during the fiscal year
through the Date of Termination, and the denominator of which is 365) (“Pro Rata Target
Bonus”). The Pro Rata Target Bonus shall be paid to the Executive’s beneficiary or estate in a
lump sum cash payment within ten (10) days after the date of the Executive’s death or as soon as
practicable thereafter.

          (e) Upon the termination of the Executive’s employment due to his Retirement or death, the
terms and conditions of the awards and agreements applicable to the Executive’s outstanding stock
options, stock grants, stock appreciation rights, performance-based grants, and all other forms of
long-term incentive compensation, regardless of whether such compensation is equity or cash based,
will govern the consequences of the termination of the Executive’s employment under this Section
7.2.

     7.3 Termination Due to Disability.

          (a) The Company shall have the right to terminate the Executive’s employment for his
Disability (as defined below). The Date of Termination due to Disability shall be the date set
forth in a notice to the Executive, which notice shall be given by the Company at least thirty (30)
days prior to such date. For the purposes of this Agreement, “Disability” or
“Disabled” shall mean any physical or mental illness or injury that causes the Executive
(i) to be considered “disabled” for the purpose of eligibility to receive income-replacement
benefits in accordance with the Company’s long-term disability plan in which the Executive is a
participant, or (ii) if the Executive does not participate in any such plan, to be unable to
substantially perform the duties of his position for 180 days in the aggregate during any period of
twelve (12) consecutive months and a physician selected by the Company (and reasonably acceptable
to the Executive) shall have furnished to the Company certification that the return of the
Executive to his normal duties is impossible or improbable. The Board shall review the foregoing
information and shall determine in good faith if the Executive is Disabled. The Board’s decision
shall be binding on the Executive. Notwithstanding the foregoing, if the Executive incurs a
physical or mental illness or injury that does not constitute a Disability, such physical or mental
illness or injury shall not constitute a failure by the Executive to perform his duties hereunder
and shall not be deemed a breach or default of this Agreement by the Executive.

          (b) Upon the Date of Termination due to the Executive’s Disability, the Executive shall be
entitled to his Accrued Obligations and a Pro Rata Target Bonus. The Accrued Obligations provided
under Section 7.2(b)(i) and (ii) and the Pro Rata Target Bonus shall be paid to the Executive in a
lump sum cash payment within ten (10) days after the Date of Termination or as soon as practicable
thereafter. The Accrued Obligations provided under

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Section 7.2(b)(iii) and (iv) shall be paid in accordance with the terms of the plan under
which they are due.

          (c) Upon the termination of the Executive’s employment due to his Disability, the terms and
conditions of the awards and agreements applicable to the Executive’s outstanding stock options,
stock grants, stock appreciation rights, performance-based grants, and all other forms of long-term
incentive compensation, regardless of whether such compensation is equity or cash based, will
govern the consequences of the termination of the Executive’s employment under this Section 7.3.

     7.4 Voluntary Termination by the Executive Without Good Reason. The Executive may
terminate his employment at any time without Good Reason (as defined in Section 7.7) by giving the
Company at least forty five (45) days notice, which notice shall state the Date of Termination.
The Company reserves the right to require the Executive not to work during the notice period but
shall pay the Executive his accrued and unpaid Base Salary, at the rate then in effect provided in
Section 5.1 herein, through the Date of Termination (but not to exceed forty-five (45) days), and
such payment shall be made to the Executive within ten (10) days after the Date of Termination or
as soon thereafter as may be practicable. The Company shall also pay the Executive any
compensation previously deferred by the Executive by his own election and all other employee
welfare and retirement benefits to which the Executive is entitled on the Date of Termination, all
in accordance with the terms of the applicable plan or plans under which they are due. In the
event of the Executive’s voluntary termination of employment without Good Reason, the terms and
conditions of the awards and agreements applicable to the Executive’s outstanding stock options,
stock grants, stock appreciation rights, performance-based grants, and all other forms of long-term
incentive compensation, regardless of whether such compensation is equity or cash based, will
govern the consequences of the termination of the Executive’s employment under this Section 7.4.

     7.5 Involuntary Termination by the Company Without Cause. Upon notice to the
Executive, the Company may terminate the Executive’s employment at any time for any reason other
than for Cause and other than due to Disability (“Involuntary Termination Without Cause”).
The Date of Termination shall be the date stated in such notice.

          (a) If the Company gives the Executive notice of nonrenewal of the Term of this Agreement, in
accordance with Section 1.3, and pursuant to such notice the Executive’s employment is terminated
by the Company on the date of the expiration of the Term and at any time prior to the Executive’s
attainment of age 65, such termination shall be deemed an Involuntary Termination Without Cause.

          (b) In the event of the Executive’s Involuntary Termination Without Cause, which occurs prior
to the occurrence of a Change in Control or an Asset Sale (each as defined in Section 11.2) or
after the conclusion of the Change in Control Employment Period (defined at Section 11.4), the
Executive shall receive the following payments and benefits:

          (i) The Company shall pay to the Executive, in equal monthly installments over the
twenty-four (24) month period following the Date of Termination, an amount equal to the
product of two (2) times the sum of (x) the Executive’s Base

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Salary and (y) the amount of the last Annual Bonus for the Executive as determined by
the Compensation Committee in accordance with the Annual Bonus Plan, regardless of the Date
of Termination.

          (ii) The Executive’s participation in the Company’s health, dental, and vision plans
will end on the last day of the month in which the Date of Termination occurs. The
Executive may elect to continue coverage under the health, dental and/or vision plans for
himself and his eligible dependents in accordance with the terms and procedures of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”). If
the Executive elects COBRA coverage, the Executive shall be responsible for remitting the
COBRA premium to the Company (or to a COBRA administrator designated by the Company) in
accordance with the terms of the Company’s health, dental and vision plans and applicable
COBRA requirements. If the Executive elects COBRA coverage, the Company shall reimburse the
Executive for a portion of the cost of such coverage until the end of the COBRA coverage
period, up to a maximum period of eighteen (18) months. The amount of the Company’s
reimbursement shall be equal to the sum of (1) the amount the Company would have otherwise
paid for such coverage if the Executive had remained an active employee of the Company, and
(2) the COBRA administration fee. If the Executive does not elect COBRA coverage, the
Company shall have no obligation to the Executive with respect to health, dental and vision
benefits following the Date of Termination.

          (iii) The Company shall provide the Executive with outplacement services not to exceed
a cost of $50,000.

          (iv) The Executive shall be entitled to his Accrued Obligations and a Pro Rata Actual
Bonus. The Accrued Obligations provided under Section 7.2(b)(i) and (ii) shall be paid to
the Executive in a lump sum cash payment within ten (10) days after the Date of Termination
or as soon thereafter as may be practicable. The Accrued Obligations provided under Section
7.2(b)(iii) and (iv) shall be paid in accordance with the terms of the plan under which they
are due. The Pro Rata Actual Bonus, if any, shall be paid to the Executive when annual
bonuses are paid to other senior officers of the Company for such fiscal year.

          (v) The terms and conditions of the awards and agreements applicable to the Executive’s
outstanding stock options, stock grants, stock appreciation rights, performance-based
grants, and all other forms of long-term incentive compensation, regardless of whether such
compensation is equity or cash based, will govern the consequences of the termination of the
Executive’s employment under this Section 7.5.

          (c) Amounts payable under this Section 7.5 shall be in lieu of any amounts otherwise payable
under any severance plan or agreement covering senior officers of the Company.

     7.6 Termination For Cause. The Company may terminate the Executive’s employment at
any time for Cause, without notice or liability for doing so. The Date of Termination shall be the
date that Cause is determined as provided below.

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          (a) For purposes of this Agreement, “Cause” means a good faith determination by the
Board that one (1) or more of the following has occurred:

          (i) The Executive has committed a material breach of this Agreement, which breach was
not cured or waived by the Company, within ten (10) days of receipt by the Executive of
notice from the Company specifying the breach;

          (ii) The Executive has committed gross negligence in the performance of his duties
hereunder, intentionally fails to perform his duties, engages in intentional misconduct or
intentionally refuses to abide by or comply with the directives of the Board or the
Company’s policies and procedures, as applicable, which actions continued for a period of
ten (10) days after receipt by the Executive of notice of the need to cure or cease;

          (iii) The Executive has willfully and continuously failed to perform substantially his
duties (other than any such failure resulting from the Executive’s Disability or incapacity
due to bodily injury or physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board that specifically identifies the
manner in which the Board believes that the Executive has not substantially performed his
duties;

          (iv) The Executive has willfully violated a material requirement of the Company’s code
of conduct or breached his fiduciary duty to the Company;

          (v) The Executive’s conviction of (or a plea of guilty or nolo contendere to) a felony
or any crime involving moral turpitude, dishonesty, fraud, theft or financial impropriety;

          (vi) The Executive has engaged in illegal conduct, embezzlement or fraud with respect
to the business or affairs of the Company;

          (vii) The Executive has failed to disclose to the Board a conflict of interest of which
the Executive knew or with reasonable diligence should have known in connection with any
transaction entered into on behalf of the Company; or

          (viii) The Executive has failed to agree to a modification of the Agreement pursuant to
Section 17.3 hereof when the purpose of the modification is to comply with applicable
federal, state or local laws or regulations, or when such modification is designed to
further define the restrictions of Article 8 or otherwise enhance the enforcement of Article
8 without increasing the duration or scope of the Article 8 restrictions.

No act or failure to act on the Executive’s part will be considered “willful” if conducted by the
Executive in good faith and with a reasonable belief that the Executive’s act or omission was in,
and not opposed to, the best interests of the Company.

          (b) If the Executive’s employment is terminated for Cause during the Term, this Agreement will
terminate without further obligation of the Company to the Executive other

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than (i) the payment to the Executive of his accrued and unpaid Base Salary through the Date
of Termination, and (ii) the payment of any compensation previously deferred by the Executive by
his own election and all other employee welfare and retirement benefits to which the Executive is
entitled on the Date of Termination, all in accordance with the terms of the applicable plan or
plans under which they are due. In the event of the Executive’s termination of employment for
Cause, the terms and conditions of the awards and agreements applicable to the Executive’s
outstanding stock options, stock grants, stock appreciation rights, performance-based grants, and
all other forms of long-term incentive compensation, regardless of whether such compensation is
equity or cash based, will govern the consequences of the termination of the Executive’s employment
under this Section 7.6.

     7.7 Termination for Good Reason. At any time during the Term, the Executive may
terminate his employment for Good Reason (as defined below) upon notice to the Company. Such
notice shall state the intended Date of Termination and shall be given to the Company at least
forty-five (45) days prior to such date and shall set forth in detail the facts and circumstances
claimed to provide grounds for such termination. The Company shall have the right to cure the
facts and circumstances giving rise to such grounds for termination for Good Reason. If the
Company does not so cure within such forty-five (45) day notice period, then the Executive’s
employment shall terminate on the Date of Termination stated in the notice.

          (a) For purposes of this Agreement, “Good Reason” shall mean, without the Executive’s
express written consent, the occurrence of any one (1) or more of the following:

          (i) A reduction in the Executive’s Base Salary (other than, prior to the occurrence of
a Change in Control or Asset Sale, a reduction across-the-board affecting all senior
officers in substantially like percentages of their base salaries) or Target Bonus Rate;

          (ii) A material reduction in the Executive’s duties or authority as President and CEO
of the Company, or any removal of the Executive from or any failure to reappoint or reelect
the Executive to such positions (except in connection with the termination of the
Executive’s employment for Cause or Disability, as a result of the Executive’s death or
Retirement or by the Executive other than for Good Reason);

          (iii) The Executive being required to relocate to a principal place of employment more
than 35 miles from the Company’s headquarters except, prior to the occurrence of a Change in
Control or Asset Sale, in connection with the relocation of substantially all senior Company
executives pursuant to the relocation of the Company’s headquarters;

          (iv) The failure by the shareholders of the Company to elect or to reelect the
Executive as a director of the Board or the removal of the Executive from such position; or

          (v) The failure of the Company to obtain an agreement from any successor to all or
substantially all of the assets or business of the Company to assume

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and agree to perform this Agreement within fifteen (15) days after a merger,
consolidation, sale or similar transaction.

          (b) In the event of the Executive’s voluntary termination of employment for Good Reason, which
occurs prior to the occurrence of a Change in Control or an Asset Sale or after the conclusion of
the Change in Control Employment Period, the Executive shall receive the following payments and
benefits:

          (i) The Company shall pay to the Executive, in equal monthly installments over the
twenty-four (24) month period following the Date of Termination, an amount equal to the
product of two (2) times the sum of (x) the Executive’s Base Salary and (y) the amount of
the last Annual Bonus for the Executive as determined by the Compensation Committee in
accordance with the Annual Bonus Plan, regardless of the Date of Termination.

          (ii) The Executive’s participation in the Company’s health, dental, and vision plans
will end on the last day of the month in which the Date of Termination occurs. The
Executive may elect to continue coverage under the health, dental and/or vision plans for
himself and his eligible dependents in accordance with the terms and procedures of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”). If
the Executive elects COBRA coverage, the Executive shall be responsible for remitting the
COBRA premium to the Company (or to a COBRA administrator designated by the Company) in
accordance with the terms of the Company’s health, dental and vision plans and applicable
COBRA requirements. If the Executive elects COBRA coverage, the Company shall reimburse the
Executive for a portion of the cost of such coverage until the end of the COBRA coverage
period, up to a maximum period of eighteen (18) months. The amount of the Company’s
reimbursement shall be equal to the sum of (1) the amount the Company would have otherwise
paid for such coverage if the Executive had remained an active employee of the Company, and
(2) the COBRA administration fee. If the Executive does not elect COBRA coverage, the
Company shall have no obligation to the Executive with respect to health, dental and vision
benefits following the Date of Termination.

          (iii) The Company shall provide the Executive with outplacement services not to exceed
a cost of $50,000.

          (iv) The Executive shall be entitled to his Accrued Obligations and his Target Bonus
for the fiscal year in which the Date of Termination occurs. The Target Bonus and the
Accrued Obligations provided under Section 7.2(b)(i) and (ii) shall be paid to the Executive
in a lump sum cash payment within ten (10) days after the Date of Termination or as soon
thereafter as may be practicable. The Accrued Obligations provided under Section
7.2(b)(iii) and (iv) shall be paid in accordance with the terms of the plan under which they
are due.

          (v) The terms and conditions of the awards and agreements applicable to the Executive’s
outstanding stock options, stock grants, stock appreciation rights, performance-based
grants, and all other forms of long-term incentive compensation,
regardless of whether such compensation is equity or cash based, will govern the
consequences of the termination of the Executive’s employment under this Section 7.7.

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          (c) The Executive’s right to terminate his employment for Good Reason shall not be affected by
the Executive’s incapacity due to physical or mental illness not constituting a Disability.
Amounts payable under this Section 7.7 shall be in lieu of any amounts otherwise payable under any
severance plan or agreement covering senior officers of the Company.

     7.8 Conditions on Company Obligations. All payments and benefits made or provided
pursuant to Article 7 are subject to the Executive’s:

          (a) Compliance with the provisions of Article 8, Article 9, Article 10 and Section 17.2
hereof;

          (b) Except with respect to payment of the Executive’s Accrued Obligations, delivery to the
Company of an executed Agreement and General Release, which shall be substantially in the form
attached hereto as Exhibit A (with such changes or additions as needed under then applicable law to
give effect to its intent and purpose) (“Agreement and General Release”) within twenty-one
(21) days of presentation thereof by the Company to the Executive. Notwithstanding the due date of
any post-employment termination payments hereunder, any amounts due following a termination of
employment under this Agreement shall not be due until after the expiration of any revocation
period applicable to the Agreement and General Release without the Executive having revoked such
Agreement and General Release; and

          (c) Compliance with Section 409A of the Internal Revenue Code of 1986, as amended
(“Code”).

After payment of all amounts and benefits under this Article 7, the Company thereafter shall have
no further obligation under this Agreement.

Article 8. Covenant Not to Compete; Intellectual Property

     8.1 Acknowledgement and Agreement Regarding Covenant Not to Compete.

          (a) The Executive acknowledges and agrees as follows: (i) the Company operates a unique
business concept in the United States regarding the sale and servicing of new and used vehicles in
a highly competitive industry; (ii) the Company’s competitors have attempted to duplicate the
Company’s business concept in various markets throughout the United States, including markets where
the Company does not currently have a business location, and may continue to do so; and (iii) in
connection with the Executive’s employment, he will receive access to, and training regarding, the
Company’s business concept and will, accordingly, acquire commercially valuable knowledge of, and
insight into, the Company’s operations and its proprietary and confidential information, any of
which if made available to the Company’s competitors could place the Company at an unfair
competitive disadvantage.

          (b) The Executive and the Company acknowledge that the Executive’s services are of a special,
extraordinary, and intellectual character that gives the Executive unique value, that the Company’s
business is highly competitive, and that violation of the Covenant Not

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to Compete (as defined in Section 8.2 below) provided herein would cause immediate,
immeasurable, and irreparable harm, loss, and damage to the Company not adequately compensable by a
monetary award. In the event of any breach or threatened breach by the Executive of the Covenant
Not to Compete, the Company shall be entitled to such equitable and injunctive relief as may be
available to restrain the Executive from violating the provisions hereof. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available at law or in equity
for such breach or threatened breach, including the recovery of damages and the immediate
termination of the employment of the Executive hereunder for Cause.

          (c) The Executive and the Company have examined in detail the Covenant Not to Compete
contained herein and agree that the restraint imposed upon the Executive is reasonable in light of
the legitimate business interests of the Company and is not unduly harsh upon the Executive’s
ability to earn a livelihood. If any provision of the Covenant Not to Compete relating to the time
period, geographic area or scope of restricted activities shall be declared by a court of competent
jurisdiction to exceed the maximum time period, geographic area or scope of activities, as
applicable, that such court deems reasonable and enforceable, such time period, geographic area or
scope of activities shall be deemed to be, and thereafter shall become, the maximum time period or
largest geographic area or scope of activities that such court deems reasonable and enforceable and
this Agreement shall automatically be considered to have been amended and revised to reflect such
determination.

     8.2 Covenant Not to Compete. In order to protect the Company’s legitimate business
interests from competitors and to protect the Company’s critical interest in its proprietary and
confidential information, and in return for the consideration set forth in this Agreement, the
Executive covenants and agrees to the following “Covenant Not to Compete”:

          (a) During the Executive’s employment and for a period of two (2) years following the last day
of the Executive’s employment, the Executive will not, directly or indirectly, compete with the
Company by acting “in a competitive capacity” (as defined in Section 8.2(c)), whether as an
individual, partner, or joint venturer, for, or on behalf of, any person or entity operating or
developing the same or similar business as the Company within any Metropolitan Statistical Area (as
defined under applicable regulations of the Census Bureau of the U.S. Department of Commerce) in
which the Company has a business location or in which the Company is engaged in real estate site
selection. Entities (including the affiliates of such entities) engaged, or which could become
engaged, in the same or similar business as the Company include, but are not limited to: Sonic
Automotive, Inc.; Lithia Motors, Inc.; Group 1 Automotive, Inc.; UnitedAuto Group; AutoNation,
Inc.; Penske Motors; Asbury Automotive Group; Price One; Hendrick Automotive Group; CarMotive;
Saturn Group; Hertz; Enterprise; and any automotive retail operation affiliated with, owned,
operated, or controlled by Home Depot, Inc., Lowe’s Companies, Inc., Target Corporation, Wal-Mart
Stores, Inc., Sears, Roebuck and Company, Carrefour, Costco Wholesale Corporation, Royal
Dutch/Shell Group of Companies, Exxon Mobil Corporation, ChevronTexaco Corp., or Gulliver
International Co., Ltd.

          (b) A business will not be considered to be in competition with the Company for purposes of
this Section 8.2 if the business, or operating unit of the business, in which the Executive will be
employed does not have, nor is expected to have within the two (2) years
following the Executive’s termination of employment, annual gross revenues of at least
$5,000,000 derived from the sale and servicing of new or used vehicles.

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          (c) Acting “in a competitive capacity” shall mean providing to a person or entity
covered by this Section 8.2, directly or indirectly, the same or similar services as the Executive
provided to the Company during his employment, and/or engaging in any business or segment of
business about which the Executive first acquired proprietary or confidential information during
the course of his employment with the Company.

          (d) Notwithstanding the foregoing, nothing herein shall be deemed to prevent or limit the
right of the Executive to invest in the capital stock or other securities (not exceeding two
percent (2%) of such outstanding capital stock or securities) of any corporation whose stock or
securities are regularly traded on any public exchange, nor shall anything contained herein be
deemed to prevent the Executive from investing in real estate for his own benefit, so long as such
investment (i) is not related to or in support of any entity engaged in a business similar to that
of the Company and (ii) does not detract from the Executive’s performance of his duties and
obligations hereunder.

     8.3 Intellectual Property. The Executive understands and acknowledges that any
writing, invention, design, system, process, development or discovery (collectively,
“Intellectual Property”) conceived, developed created or made by the Executive, alone or
with others, both during the Term of this Agreement and in the course of the Executive’s employment
prior to the Term, is the sole and exclusive property of the Company to the extent such
Intellectual Property is related to the Executive’s duties or is within the scope of the Company’s
actual or anticipated business. The Executive agrees to assign to the Company any and all of his
right, title, and interest in and to such Intellectual Property, including, but not limited to,
patent, trademark and other rights. The Executive further agrees to cooperate fully with the
Company to secure, maintain, enforce, or defend the Company’s ownership of and rights in such
Intellectual Property. The rights and remedies of this Section 8.3 are in addition to any rights
and remedies available under applicable law.

Article 9. Non-Solicitation / Non-Hiring of Employees

     The Executive agrees that during the Executive’s employment with the Company and for a period
of two (2) years following the last day of the Executive’s employment, the Executive shall not,
directly or indirectly, solicit or induce, or attempt to solicit or induce, any employee of the
Company to leave the Company for any reason whatsoever or hire any individual employed by the
Company. For purposes of this Article 9, employee shall mean any individual employed by the
Company within the three (3) month period prior to, and including, the last day of the Executive’s
employment.

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Article 10. Confidentiality

     10.1 Protected Information. The Executive understands and agrees that any
information, data and trade secrets about the Company and its suppliers and distributors are the
property of the Company and are essential to the protection of the Company’s goodwill and to
the maintenance of the Company’s competitive position and accordingly should be kept secret.
For purposes of this Agreement, “Protected Information” means trade secrets, confidential
and proprietary business information of or about the Company, and any other information of the
Company, including, but not limited to, Intellectual Property, customer lists (including potential
customers), sources of supply, processes, plans, materials, pricing information, internal
memoranda, marketing plans, promotional plans, internal policies, research, purchasing, accounting
and financial information, computer programs, hardware, software, and products and services that
may be developed from time to time by the Company and its agents or employees, including the
Executive; provided, however, that information that is in the public domain (other than as a result
of a breach of this Agreement), approved for release by the Company or lawfully obtained from third
parties who are not bound by a confidentiality agreement with the Company, is not Protected
Information.

     10.2 Covenant. The Company has advised the Executive, and the Executive acknowledges,
that it is the policy of the Company to maintain as secret and confidential all Protected
Information and that Protected Information has been and will be developed at substantial cost and
effort to the Company. The Executive agrees to hold in strict confidence and safeguard any
Protected Information, gained by the Executive in any manner or from any source during the
Executive’s employment. The Executive shall not, without the prior written consent of the Company,
at any time, directly or indirectly, divulge, furnish, use, disclose or make accessible to any
person, firm, corporation, association, or other entity (otherwise than as may be required in the
regular course of the Executive’s employment with the Company), either during the Executive’s
employment with the Company or subsequent to the last day of the Executive’s employment, any
Protected Information, or cause any such information of the Company to enter the public domain.

     10.3 Nonexclusivity. Nothing contained in this Article 10 is intended to reduce in
any way protection available to the Company pursuant to the Uniform Trade Secrets Act as adopted in
Virginia or any other state or other applicable laws that prohibit the misuse or disclosure of
confidential or proprietary information.

Article 11. Change in Control; Sale of Assets

     11.1 Purpose. The Company recognizes that the possibility of a Change in Control or
Asset Sale exists, and the uncertainty and questions that it may raise among management may result
in the departure or distraction of management personnel to the detriment of the Company.
Accordingly, the purpose of this Article 11 is to encourage the Executive to continue employment
after a Change in Control or Asset Sale by providing reasonable employment security to the
Executive and to recognize the prior service of the Executive in the event of a termination of
employment under certain circumstances after a Change in Control or Asset Sale. This Article 11
shall not become effective, and the Company shall have no obligation hereunder, if the employment
of the Executive with the Company terminates before a Change in Control or Asset Sale.

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     11.2 Definitions.

          (a) “Change in Control” of the Company 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 twenty percent (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.

          (b) “Asset Sale” shall mean a sale of all or substantially all of the assets of the
Company in a single transaction or a series of related transactions.

     11.3 Long-Term Incentive Compensation. The terms and conditions of the awards and
agreements applicable to the Executive’s outstanding stock options, stock grants, stock
appreciation rights, performance-based grants, and all other forms of long-term incentive
compensation, regardless of whether such compensation is equity or cash based, will govern the
consequences to the Executive upon the occurrence of a Change in Control or an Asset Sale or upon a
termination of the Executive’s employment thereafter.

     11.4 Continued Employment Following Change in Control or an Asset Sale.
Notwithstanding the provisions of Article 1, if a Change in Control or an Asset Sale occurs and the
Executive is employed by the Company on the date the Change in Control or Asset Sale occurs (the
“Change in Control Date”), the Term will be for a period beginning on the Change in Control
Date and ending on the second (2nd) anniversary of such date (“Change in Control Employment
Period”). If not sooner terminated and if no notice of non-renewal is given by either party
under Section 1.3, then, at the expiration of the Change in Control Employment Period, the Term
will automatically be extended as provided in Section 1.2.

     11.5 Termination of Employment During Change in Control Employment Period. The
Executive will be entitled to the compensation and benefits described in this Section 11.5 if,
during the Change in Control Employment Period, (a) the Company terminates his employment for any
reason other than for Cause or due to Disability, or (b) the Executive voluntarily terminates his
employment with the Company for Good Reason. The compensation and benefits described in this
Section 11.5 are in lieu of, and not in addition to, any compensation and benefits provided to the
Executive pursuant to Sections 7.5 and 7.7 herein and any amounts otherwise payable under any
severance plan or agreement covering senior officers of the Company. Upon such a termination of
employment, the Executive shall receive the following payments and benefits:

          (a) The Executive shall be entitled to his Accrued Obligations and a Pro Rata Target Bonus.
The Accrued Obligations provided under Section 7.2(b)(i) and (ii) and the Pro Rata Target Bonus
shall be paid to the Executive in a lump sum cash payment within ten (10) days after the Date of
Termination or as soon thereafter as may be practicable. The Accrued
Obligations provided under Section 7.2(b)(iii) and (iv) shall be paid in accordance with the
terms of the plan under which they are due.

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          (b) The Company shall pay to the Executive an amount equal to 2.99 times the Executive’s Final
Compensation. For purposes of this Agreement, “Final Compensation” means the Base Salary
in effect at the Date of Termination, plus the higher Annual Bonus paid or payable for the two (2)
most recently completed fiscal years. This payment will be paid to the Executive in a lump sum
cash payment not later than the forty-fifth (45th) day following the Date of Termination.

          (c) The Executive’s participation in the Company’s health, dental, and vision plans will end
on the last day of the month in which the Date of Termination occurs. The Executive may elect to
continue coverage under the health, dental and/or vision plans for himself and his eligible
dependents in accordance with the terms and procedures of COBRA. If the Executive elects COBRA
coverage, the Executive shall be responsible for remitting the COBRA premium to the Company (or to
a COBRA administrator designated by the Company) in accordance with the terms of the health, dental
and vision plans and applicable COBRA requirements. If the Executive elects COBRA coverage, the
Company shall reimburse the Executive for a portion of the cost of such coverage until the end of
the COBRA coverage period, up to a maximum period of eighteen (18) months. The amount of the
Company’s reimbursement shall be equal to the sum of (1) the amount the Company would have
otherwise paid for such coverage if the Executive had remained an active employee of the Company,
and (2) the COBRA administration fee. If the Executive does not elect COBRA coverage, the Company
shall have no obligation to the Executive with respect to health, dental and vision benefits
following the Date of Termination.

          (d) The Company shall provide the Executive with outplacement services not to exceed a cost of
$50,000.

     11.6 Death, Disability or Retirement Termination During Change In Control Employment
Period. If the Executive’s employment ends by reason of Retirement, the Executive’s death, or
as a result of Disability during the Change in Control Employment Period, this Agreement will
terminate without any further obligation on the part of the Company under this Agreement other
than:

          (a) The Executive (or his beneficiary or his estate in the event of his death) will be
entitled to the payment of the Executive’s Accrued Obligations and a Pro Rata Target Bonus. The
Accrued Obligations provided under Section 7.2(b)(i) and (ii) and the Pro Rata Target Bonus shall
be paid in a lump sum cash payment within ten (10) days after the Date of Termination or as soon
thereafter as may be practicable. The Accrued Obligations provided under Section 7.2(b)(iii) and
(iv) shall be paid in accordance with the terms of the plan under which they are due; and

          (b) The terms and conditions of the awards and agreements applicable to the Executive’s
outstanding stock options, stock grants, stock appreciation rights, performance-based grants, and
all other forms of long-term incentive compensation, regardless of whether such
compensation is equity or cash based, will govern the consequences of the termination of the
Executive’s employment under this Section 11.6.

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     11.7 Termination for Cause and Termination Other Than For Good Reason Following a Change
in Control.

          (a) If the Executive’s employment is terminated for Cause during the Change in Control
Employment Period, this Agreement will terminate without further obligation to the Executive other
than the payment to the Executive of his accrued and unpaid Base Salary through the Date of
Termination, as well as any deferred compensation and other employee welfare and retirement
benefits to which the Executive is entitled on the Date of Termination in accordance with the terms
of the applicable plan or plans under which they are due. The terms and conditions of the awards
and agreements applicable to the Executive’s outstanding stock options, stock grants, stock
appreciation rights, performance-based grants, and all other forms of long-term incentive
compensation, regardless of whether such compensation is equity or cash based, will govern the
consequences of the termination of the Executive’s employment under this Section 11.7(a).

          (b) If the Executive terminates employment during the Change in Control Employment Period
other than for Good Reason, this Agreement will terminate without further obligation to the
Executive other than:

          (i) The Executive (or his beneficiary or his estate in the event of his death) will be
entitled to the payment of the Executive’s Accrued Obligations. The Accrued Obligations
provided under Section 7.2(b)(i) and (ii) shall be paid in a lump sum cash payment within
ten (10) days after the Date of Termination or as soon thereafter as may be practicable.
The Accrued Obligations provided under Section 7.2(b)(iii) and (iv) shall be paid in
accordance with the terms of the plan under which they are due; and

          (ii) The terms and conditions of the awards and agreements applicable to the
Executive’s outstanding stock options, stock grants, stock appreciation rights,
performance-based grants, and all other forms of long-term incentive compensation,
regardless of whether such compensation is equity or cash based, will govern the
consequences of the termination of the Executive’s employment under this Section 11.7(b).

     11.8 Conditions on Company Obligations. All payments and benefits made or provided
pursuant to Article 11 are subject to the Executive’s compliance with the provisions of Section
7.8. After payment of all amounts and benefits under this Article 11, the Company thereafter shall
have no further obligation under this Agreement.

Article 12. Assignment

     12.1 Assignment by Company. This Agreement may and shall be assigned or transferred
to, and shall be binding upon and shall inure to the benefit of, any successor of the Company, and
any such successor shall be deemed substituted for all purposes of the “Company” under the terms of
this Agreement. As used in this Agreement, the term “successor” shall mean any person,
firm, corporation, or business entity which, at any time, whether by
merger, purchase, or otherwise, acquires all or substantially all, or control of all or
substantially all, of the assets or the business of the Company. Except as provided herein, the
Company may not otherwise assign this Agreement.

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     12.2 Assignment by the Executive. The services to be provided by the Executive to the
Company hereunder are personal to the Company and the Executive’s duties may not be assigned by the
Executive; provided, however, that this Agreement shall inure to the benefit of and be enforceable
by the Executive’s personal or legal representatives, executors, and administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive dies while any amounts payable to
the Executive hereunder remain outstanding, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee,
or other designee or, in the absence of such designee, to the Executive’s estate.

Article 13. Dispute Resolution

     Except for actions initiated by the Company to enjoin a breach by, or to recover damages from,
the Executive related to violation of any of the restrictive covenants in Articles 8, 9 or 10 of
this Agreement, and except for actions initiated by the Company or the Executive with respect to
declaratory judgments related to the restrictive covenants in Articles 8, 9 or 10 of this
Agreement, which the Company or the Executive may bring in an appropriate court of law or equity,
any disagreement between the Executive and the Company concerning anything covered by this
Agreement or concerning other terms or conditions of the Executive’s employment or the termination
of the Executive’s employment will be settled by final and binding arbitration pursuant to the
Company’s Dispute Resolution Rules and Procedures. The CarMax Dispute Resolution Agreement and the
Dispute Resolution Rules and Procedures are incorporated herein by reference as if set forth in
full in this Agreement. The decision of the arbitrator will be final and binding on both the
Executive and the Company and may be enforced in a court of appropriate jurisdiction.
Responsibility for all arbitration costs, including legal fees, shall be in accordance with the
Dispute Resolution Rules and Procedures.

Article 14. Litigation By Third Parties

     All litigation or inquiries by third parties (including, but not limited to, those by the
Company’s shareholders or by government agencies) arising out of or in connection with the
Executive’s performance under this Agreement, against either the Company or the Executive or both,
shall be jointly defended or opposed by the parties hereto to support this Agreement. The Company
shall appoint legal counsel for the parties and shall bear the costs, reasonable legal fees and
expenses related to such litigation or inquiry.

Article 15. Indemnity; Limitation of Liability

     As an officer of the Company, the Executive shall be entitled to indemnity and limitation of
liability as provided pursuant to the Company’s Articles of Incorporation, bylaws and any other
governing document, as the same shall be amended from time to time.

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Article 16. Notice

     Any notices, requests, demands, or other communications provided for by this Agreement shall
be in writing, and given by delivery in person or by registered or certified mail, postage prepaid
(in which case notice will be deemed to have been given on the third day after mailing) or by
overnight delivery by a reliable overnight courier service (in which case notice will be deemed to
have been given on the day after delivery to such courier service). Notices to the Executive shall
be directed to the last address he has filed in writing with the Company. Notices to the Company
shall be directed to the Secretary of the Company, with a copy directed to the Chairman of the
Board of the Company.

Article 17. Miscellaneous

     17.1 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto, with respect to the subject matter
hereof, and constitutes the entire agreement of the parties with respect thereto. Without limiting
the generality of the foregoing sentence, this Agreement completely supersedes any and all prior
employment agreements entered into by and between the Company, and the Executive, and all
amendments thereto, in their entirety.

     17.2 Return of Materials. Upon the termination of the Executive’s employment with the
Company, however such termination is effected, the Executive shall promptly deliver to the Company
all property (including Intellectual Property), records, materials, documents, and copies of
documents concerning the Executive’s business and/or its customers (hereinafter collectively
“Company Materials”) which the Executive has in his possession or under his control at the
time of termination of his employment. The Executive further agrees not to take or extract any
portion of Company Materials in written, computer, electronic or any other reproducible form
without the prior written consent of the Board.

     17.3 Modification. This Agreement shall not be varied, altered, modified, canceled,
changed, or in any way amended except by mutual agreement of the parties in a written instrument
executed by the parties hereto or their legal representatives.

     17.4 Severability. It is the intention of the parties that the provisions of the
restrictive covenants herein shall be enforceable to the fullest extent permissible under the
applicable law. If any clause or provision of this Agreement is held to be illegal, invalid, or
unenforceable under present or future laws effective during the Term hereof, then the remainder of
this Agreement shall not be affected thereby, and in lieu of each clause or provision of this
Agreement that is illegal, invalid or unenforceable, there shall be added, as a part of this
Agreement, a clause or provision as similar in terms to such illegal, invalid or unenforceable
clause or provision as may be possible and as may be legal, valid and enforceable.

     17.5 Section 409A. Notwithstanding any other provision of this Agreement, (i) to the
extent applicable, payment of compensation under this Agreement will be administered in accordance
with the requirements of Code Section 409A, including, without limitation, the postponement for six
(6) months of any one or more payments of such compensation to the Executive, and (ii) if either
the Company or the Executive determines that any provision of this

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Agreement may cause compensation payable to the Executive to be classified as income under
Code Section 409A(a) or (b) and thereby results in tax penalties to the Executive, the Company or
the Executive, as the case may be, shall notify the other party and the parties will jointly
determine if and to what extent the Agreement must be amended to comply with Code Section 409A.

     17.6 Counterparts. This Agreement may be executed in one (1) or more counterparts,
each of which shall be deemed to be an original, but all of which together will constitute one and
the same Agreement.

     17.7 Tax Withholding. The Company may withhold from any benefits payable under this
Agreement all federal, state, city, or other taxes as may be required pursuant to any law or
governmental regulation or ruling.

     17.8 Restrictive Covenants of the Essence. The restrictive covenants of the Executive
set forth herein are of the essence of this Agreement, and they shall be construed as independent
of any other provision in this Agreement; the existence of any claim or cause of action of the
Executive against the Company, whether predicated on this Agreement or not, shall not constitute a
defense to the enforcement by the Company of the restrictive covenants contained herein. The
Company shall at all times maintain the right to seek enforcement of these provisions whether or
not the Company has previously refrained from seeking enforcement of any such provision as to the
Executive or any other individual who has signed an agreement with similar provisions.
Notwithstanding any provision contained within this Agreement, the obligations of the Executive
under Articles 8, 9, 10, 13 and 17 of this Agreement shall continue after the termination of this
Agreement and the Executive’s employment and shall be binding on the Executive’s heirs, executors,
legal representatives and assigns.

     17.9 Beneficiaries. The Executive may designate one (1) or more persons or entities
as the primary or contingent beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing acceptable to the Company’s chief legal
officer. The Executive may make or change such designation at any time.

     17.10 Full Settlement. Except as set forth in this Agreement, the Company’s
obligation to make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including without limitation,
set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may
have against the Executive or others, except to the extent any amounts are due the Company or its
subsidiaries or affiliates pursuant to a judgment against the Executive. In no event shall the
Executive be obligated to seek other employment in mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of employment by
another employer; provided, that continued health, dental and vision benefit plan participation
pursuant to Section 7.5(b)(ii) or Section 11.5(c) herein shall be reduced to the extent that the
Executive becomes eligible to such benefits from a subsequent employer.

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     17.11 Contractual Rights to Benefits. This Agreement establishes and vests in the
Executive a contractual right to the benefits to which he is entitled hereunder. However, nothing
herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit,
the Company to segregate, earmark, or otherwise set aside any funds or other assets in trust or
otherwise to provide for any payments to be made or required hereunder.

     17.12 Resignations. Upon the termination of the Executive’s employment, however such
termination is effected, he shall be deemed to have resigned as of the date of such termination all
offices and directorships he may have held with the Company and all subsidiaries.

Article 18. Governing Law

     To the extent not preempted by federal law, the provisions of this Agreement shall be
construed and enforced in accordance with the laws of the Commonwealth of Virginia, without
reference to Virginia’s choice of law statutes or decisions.

[Signature Page Follows]

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     IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement as of the
Effective Date.

	 	 	 	 	 
	 	CARMAX, INC.:

 	 
	 	By:  	/s/ Keith D. Browning
 	 
	 	Keith D. Browning 	 
	 	Executive Vice President and

Chief Financial Officer 	 
	 
	 	EXECUTIVE:

 	 
	 	/s/ Thomas J. Folliard
 	 
	 	Thomas J. Folliard 	 
	 	 	 

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EXHIBIT A

[Form of Release]

AGREEMENT AND GENERAL RELEASE

     CarMax, Inc., its affiliates, subsidiaries, divisions, successors and assigns in such
capacity, and the current, future and former employees, officers, directors, trustees and agents
thereof (collectively referred to throughout this Agreement as the “Company”) and
_____ (“Executive”), his heirs, executors, administrators, successors and
assigns (together with Executive, collectively referred to throughout this Agreement and General
Release as “Employee”) agree:

     1. Last Day of Employment. The Executive’s last day of employment with the Company is
___, 20___. In addition, effective as of ___, 20___, the Executive resigns from
the Executive’s position as President and CEO of the Company, and will not be eligible for any
benefits or compensation after ___, 20___, other than as specifically provided in Articles
7 or 11, as applicable, of the Employment Agreement between the Company and the Executive dated as
of ___, 200___ (“Employment Agreement”) and the Executive’s continued right to
indemnification and directors and officers liability insurance. In addition, effective as of
___, 20___, the Executive resigns from all offices, directorships, trusteeships, committee
memberships and fiduciary capacities held with, or on behalf of, the Company or any benefit plans
of the Company. These resignations will become irrevocable as set forth in Section 3 below.

     2. Consideration. The parties acknowledge that this Agreement and General Release is
being executed in accordance with Article 7 or Article 11 of the Employment Agreement, as
applicable, and that this Agreement and General Release is a condition to the receipt by Employee
of all payments and benefits thereunder.

     3. Revocation. The Executive may revoke this Agreement and General Release for a
period of seven (7) calendar days following the day the Executive executes this Agreement and
General Release. Any revocation within this period must be submitted, in writing, to the Company
and state, “I hereby revoke my acceptance of our Agreement and General Release.” The revocation
must be personally delivered to the Company’s ___________, or his/her designee, or mailed to
the Company, ___________ and postmarked within seven (7) calendar days of
execution of this Agreement and General Release. This Agreement and General Release shall not
become effective or enforceable until the revocation period has expired. If the last day of the
revocation period is a Saturday, Sunday, or legal holiday in Virginia, then the revocation period
shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday.

     4. General Release of Claims. Employee knowingly and voluntarily releases and forever
discharges the Company from any and all claims, rights, causes of action, demands, fees costs,
expenses, including attorneys’ fees, and liabilities of any kind whatsoever, whether known or
unknown, against the Company, that Employee has, has ever had or may have as of the date of

24

 

execution of this Agreement and General Release, including, but not limited to, any alleged
violation of:

	 	•	 	The Age Discrimination in Employment Act of 1967, as amended;
	 
	 	•	 	The Older Workers Benefit Protection Act of 1990;
	 
	 	•	 	The National Labor Relations Act, as amended;
	 
	 	•	 	Title VII of the Civil Rights Act of 1964, as amended;
	 
	 	•	 	The Civil Rights Act of 1991;
	 
	 	•	 	Sections 1981 through 1988 of Title 42 of the United States Code, as amended;
	 
	 	•	 	The Employee Retirement Income Security Act of 1974, as amended;
	 
	 	•	 	The Immigration Reform and Control Act, as amended;
	 
	 	•	 	The Americans with Disabilities Act of 1990, as amended;
	 
	 	•	 	The Worker Adjustment and Retraining Notification Act, as amended;
	 
	 	•	 	The Occupational Safety and Health Act, as amended;
	 
	 	•	 	The Family and Medical Leave Act of 1993;
	 
	 	•	 	All other federal, state or local civil or human rights laws, whistleblower
laws, or any other local, state or federal law, regulations and ordinances;
	 
	 	•	 	All public policy, contract, tort, or common laws; and
	 
	 	•	 	All allegations for costs, fees, and other expenses including attorneys’ fees
incurred in these matters.

     Notwithstanding anything herein to the contrary, the sole matters to which the Agreement and
General Release do not apply are: (i) Employee’s rights of indemnification and directors and
officers liability insurance coverage to which the Executive was entitled immediately prior to
___, 20___ with regard to the Executive’s service as an officer and director of the
Company (including, without limitation, under Article 15 of the Employment Agreement); (ii)
Employee’s rights under any tax-qualified pension plan or claims for accrued vested benefits under
any other employee benefit plan, policy or arrangement maintained by the Company or under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended; (iii) Employee’s rights under
Article 7 or Article 11 of the Employment Agreement, as the case may be; and (iv) Employee’s rights
as a stockholder of the Company.

     5. No Claims Permitted. Except with respect to the filing of a petition for a
declaratory judgment as permitted in Article 13 of the Employment Agreement, Employee waives the
Executive’s right to file any charge or complaint against the Company arising out of

25

 

the Executive’s employment with or separation from the Company before any federal, state or
local court or any state or local administrative agency, except where such waivers are prohibited
by law. This Agreement and General Release, however, does not prevent Employee from filing a
charge with the Equal Employment Opportunity Commission, any other federal government agency, or
any government agency concerning claims of discrimination, although Employee waives the Executive’s
right to recover any damages or other relief in any claim or suit brought by or through the Equal
Employment Opportunity Commission or any other state or local agency on behalf of Employee under
the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 as amended, the
Americans with Disabilities Act, or any other federal or state discrimination law, except where
such waivers are prohibited by law.

     6. Affirmations. Employee affirms the Executive has not filed, has not caused to be
filed, and is not presently a party to, any claim, complaint, or action against the Company in any
forum or form. Employee further affirms that the Executive has been paid or has received all
compensation, wages, bonuses, commissions, and/or benefits to which the Executive may be entitled
and no other compensation, wages, bonuses, commissions and benefits are due to the Executive,
except as provided in Article 7 or Article 11 of the Employment Agreement, as applicable. The
Employee also affirms the Executive has no known workplace injuries.

     7. Cooperation; Return of Property. Employee agrees to reasonably cooperate with the
Company and its counsel in connection with any investigation, administrative proceeding,
arbitration or litigation relating to any matter that occurred during the Executive’s employment in
which the Executive was involved or of which the Executive has knowledge. The Company will
reimburse the Employee for any reasonable out-of-pocket travel, delivery or similar expenses
incurred in providing such service to the Company. Employee represents that the Executive has
returned to the Company all property belonging to the Company, including but not limited to any
leased vehicle, laptop, cell phone, keys, access cards, phone cards and credit cards.

     8. Governing Law and Interpretation. This Agreement and General Release shall be
governed and construed in accordance with the laws of the Commonwealth of Virginia, without
reference to Virginia’s choice of law statutes or decisions. In the event Employee or the Company
breaches any provision of this Agreement and General Release, Employee and the Company acknowledge
that either may institute an action to specifically enforce any term or terms of this Agreement and
General Release pursuant to the dispute resolution provisions of Article 13 of the Employment
Agreement. Should any provision of this Agreement and General Release be declared illegal or
unenforceable by any court of competent jurisdiction and should the provision be incapable of being
modified to be enforceable, such provision shall immediately become null and void, leaving the
remainder of this Agreement and General Release in full force and effect. Nothing herein, however,
shall operate to void or nullify any enforceable general release language contained in this
Agreement and General Release.

     9. No Admission of Wrongdoing. Employee agrees neither this Agreement and General
Release nor the furnishing of the consideration for this Agreement and General Release shall be
deemed or construed at any time for any purpose as an admission by the Company of any liability or
unlawful conduct of any kind.

26

 

     10. Amendment. This Agreement and General Release may not be modified, altered or
changed except upon express written consent of both parties wherein specific reference is made to
this Agreement and General Release.

     11. Entire Agreement. This Agreement and General Release sets forth the entire
agreement between the parties hereto and fully supersedes any prior agreements or understandings
between the parties; provided, however, that notwithstanding anything in this Agreement and General
Release, the provisions in the Employment Agreement which are intended to survive termination of
the Employment Agreement, including but not limited to those contained in Articles 8, 9 and 10, 13
and in Section 17.2 thereof, shall survive and continue in full force and effect. Employee
acknowledges the Executive has not relied on any representations, promises, or agreements of any
kind made to the Executive in connection with the Executive’s decision to accept this Agreement and
General Release.

     EMPLOYEE HAS BEEN ADVISED THAT EXECUTIVE HAS UP TO TWENTY-ONE (21) CALENDAR DAYS TO REVIEW AND
CONSIDER THIS AGREEMENT AND GENERAL RELEASE AND HAS BEEN ADVISED IN WRITING TO CONSULT WITH AN
ATTORNEY PRIOR TO EXECUTION OF THIS AGREEMENT AND GENERAL RELEASE.

     EMPLOYEE AGREES ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT AND GENERAL
RELEASE DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21) CALENDAR DAY
CONSIDERATION PERIOD.

     HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES SET
FORTH HEREIN, AND TO RECEIVE THE SUMS AND BENEFITS SET FORTH IN THE EMPLOYMENT AGREEMENT, TO WHICH
EMPLOYEE WOULD NOT OTHERWISE BE ENTITLED, EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE
CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL RELEASE INTENDING TO WAIVE, SETTLE AND
RELEASE ALL CLAIMS EMPLOYEE HAS OR MIGHT HAVE AGAINST THE COMPANY, AS OF THE DATE OF EXECUTION OF
THIS AGREEMENT.

[Signature Page Follows]

27

 

     IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this Agreement and
General Release as of the date set forth below:

	 	 	 	 	 
	CARMAX, INC.:	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 
	Title:
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	EXECUTIVE/EMPLOYEE:	 	 
	 
	 	 	 	 
	 	 	 
	Name:
	 	 	 	 
	 

	 	 	 	 

28exv10w1

 

EXHIBIT 10.1

SECOND AMENDMENT

TO

EMPLOYMENT AGREEMENT

     Second Amendment, dated as of October 19, 2006 (the “Amendment”), to the Employment Agreement,
dated as of August 25, 2004 (the “Agreement”), among TD Banknorth Inc. (as successor to Banknorth
Group, Inc.), The Toronto-Dominion Bank and William J. Ryan (the “Executive”).

WITNESSETH

     WHEREAS, pursuant to Section 20 of the Agreement, the parties to the Agreement desire to amend
the Agreement;

     NOW THEREFORE, in consideration of the premises, the mutual agreements herein set forth and
such other consideration the sufficiency of which is hereby acknowledged, the parties hereby agree
as follows:

     1. Section 3(a). Section 3(a) of the Agreement is hereby amended to read as follows:

“Through March 1, 2007, the Executive shall serve as the Chairman and Chief
Executive Officer of the Company with such duties and responsibilities as are
customary to such positions. For the remainder of the Term subsequent to March 1,
2007, the Executive shall serve as the Chairman of the Company, a full-time
executive officer position with such duties and responsibilities as are customary to
such position and as may be assigned by the Board of Directors of the Company (the
“Board”). As Chairman and Chief Executive Officer and subsequently as Chairman, the
Executive shall report directly to the Board. Until otherwise determined by the
Board of Directors of the Company, subsequent to March 1, 2007 the chief executive
officer of the Company shall report directly to the Executive. During the Term, the
Executive shall serve on the Board, shall serve as Vice Chairman of TD, reporting to
the President and Chief Executive Officer of TD, and shall serve on the Board of
Directors of TD, but shall not receive any compensation for such service.

     2. Effectiveness. This Amendment shall be deemed effective as of the date first above
written, as if executed on such date. Except as expressly set forth herein, this Amendment shall
not by implication or otherwise alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Agreement, all of which are
ratified and affirmed in all respects and shall continue in full force and effect and shall be
otherwise unaffected.

 

     3. Governing Law. This Amendment shall be governed by and construed in accordance
with the laws the State of Maine.

     4. Counterparts. This Amendment may be executed in any number of counterparts, each
of which shall for all purposes be deemed an original, and all of which together shall constitute
but one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day
and year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	TD BANKNORTH INC.	 	 
	 
	 	 	 	 	 	 	 	 
	Attest:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Carol L. Mitchell

	 	 	 	By:
	 	/s/ Peter J. Verrill	 	 
	 

	 	 	 	 	 	 	 	 
	Name: Carol L. Mitchell

	 	 	 	 	 	Name: Peter J. Verrill	 	 
	Title: Senior Executive Vice President,
          General Counsel and Secretary

	 	 	 	 	 	Title: Vice Chairman
and Chief Operating Officer	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	THE TORONTO-DOMINION BANK	 	 
	 
	 	 	 	 	 	 	 	 
	Attest:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/
Christopher A. Montague

	 	 	 	By:
	 	/s/ W. Edmund Clark	 	 
	 

	 	 	 	 	 	 	 	 
	Name: Christopher A. Montague

	 	 	 	 	 	Name: W. Edmund Clark	 	 
	Title:
Executive Vice President and General           Counsel

	 	 	 	 	 	Title: President and Chief
Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 
	Attest:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Carol L. Mitchell

	 	 	 	 	 	/s/ William J. Ryan	 	 
	 

	 	 	 	 	 	 	 	 
	Name: Carol L. Mitchell

	 	 	 	 	 	Name: William J. Ryan	 	 
	Title: Senior Executive Vice President,
          General Counsel and Secretary

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