Document:

exhibit101.htm

CARMAX, INC.

NOTICE OF STOCK OPTION GRANT

[Date]

%%FIRST_NAME%-% %%LAST_NAME%-%

%%ADDRESS_LINE_1%-%

%%ADDRESS_LINE_2%-%

%%CITY%-% , %%STATE%-%  %%ZIPCODE%-%

Dear %%FIRST_NAME%-% %%LAST_NAME%-%

The Board of Directors of CarMax, Inc. (the “Company”) wants to provide you with an opportunity to share in the success of our Company.  Accordingly, I am pleased to inform you that, as of %%OPTION_DATE%_% the Compensation and Personnel Committee of the Board of Directors of the Company (the “Committee”) exercised its authority pursuant to the CarMax, Inc. 2002 Stock Incentive Plan, as amended and restated (the “Plan”) and granted you non-statutory options to purchase shares of the common stock of CarMax, Inc. (the “Options”) as set forth herein.  The Options are not qualified for Incentive Stock Option tax treatment. Limited stock appreciation rights (“SARs”), described below, were also granted in connection with these Options.

The Options and SARs are subject to the provisions of the Plan.  The Committee administers the Plan.  The terms of the Plan are incorporated into this notice of Stock Option Grant (the “Notice of Grant”) and in the case of any conflict between the Plan and this Notice of Grant, the terms of the Plan shall control.  All capitalized terms not defined herein shall have the meaning given to them in the Plan.  Please refer to the Plan for certain conditions not set forth in this Notice of Grant.  Additionally, a copy of a Prospectus for the Plan, which describes material terms of the Plan, can be found on The CarMax Way.  Copies of the Prospectus, the Plan and the Company’s annual report to shareholders on Form 10-K for fiscal year 20__ are available from the Company’s corporate secretary at (804) 747-0422.

 

 

	Number of Shares Subject to Option: 	%%TOTAL_SHARES_GRANTED%-%
	Option Price Per Share:	%%OPTION_PRICE%-%

 

                                                                                                                                          

Vesting of Options

Except as otherwise provided in this Notice of Grant, the Options will vest and become exercisable according to the following schedule:  one-fourth on %%VEST_DATE_PERIOD1%-% , one-fourth on %%VEST_DATE_PERIOD2%-% , one-fourth on %%VEST_DATE_PERIOD3%-% , and one-fourth on %%VEST_DATE_PERIOD4%-% provided you continue to be employed by the Company on such dates.

Termination of Options

The unexercised Options shall terminate upon the earliest to occur of the following conditions:

	
1.

	
Expiration.  The Options will expire on %%EXPIRE_DATE_PERIOD1%-% (the “Expiration Date”).

 

	
2.  

	
Termination Without Cause or, if applicable, for Good Reason; Immediate Vesting.

If (a) the Company terminates your employment with the Company for any reason other than Cause (as defined in the “Cause” section below), or (b) you have an effective severance or employment agreement with the Company (or a subsidiary of the Company) and you terminate your employment for “Good Reason” (as defined in such agreement), if applicable, then all of your Options will become immediately vested and exercisable, effective as of the date of the termination of your employment. Except as otherwise provided in the “Age and Service Vesting” section set forth below, you, your personal representative, distributees, or legatees, must exercise your Options within three (3) months of the effective date of such termination.

 

 

  

  

  

 

	
3.  

	
Termination For Cause. Upon termination of your employment with the Company for Cause, and notwithstanding the terms of the “Age and Service Vesting” section set forth below, your unexercised vested and unvested Options will terminate immediately.

 

	
4.  

	
Change in Full-Time Employment Status.  In the event that your employment with the Company changes from full-time to part-time for any reason, and notwithstanding the terms of the “Age and Service Vesting” section set forth below, your unvested Options will expire on the date of the change.  Your vested Options will be unaffected and remain subject to the terms of this Notice of Grant.

 

	
5.  

	
Resignation; Leave.  Except as otherwise provided in the “Age and Service Vesting” section set forth below, in the event that you resign your employment with the Company, you must exercise your vested Options within three (3) months of your resignation date or they will expire.  Options that have not vested by your resignation date will expire on your resignation date.  Employees on authorized leave (as determined under the Company’s authorized leave policy) will not be considered as having terminated merely by reason of the leave and will continue to be eligible to exercise and sell their Options during the period of the leave.

 

Cause

For purposes of this Notice of Grant, “Cause” shall mean the following:

	
1.

	
If you have an effective severance or employment agreement with the Company (or a subsidiary of the Company), then “Cause” shall have the meaning set forth in your employment or severance agreement.

	
2.

	
If you do not have an effective severance or employment agreement with the Company (or a subsidiary of the Company), then “Cause” shall mean that the Company (or any of its subsidiaries) has any reason to believe any of the following:

	
  

	
a)

	
you have committed fraud, misappropriation of funds or property, embezzlement or other similar acts of dishonesty;

	
  

	
b)

	
you have been convicted of a felony or other crime involving moral turpitude (or pled nolo contendere thereto);

	
  

	
c)

	
you have used, possessed or distributed any illegal drug;

	
  

	
d)

	
you have committed any misconduct that may subject the Company to criminal or civil liability;

	
  

	
e)

	
you have breached your duty of loyalty to the Company, including, without limitation, the misappropriation of any of the Company’s corporate opportunities;

	
  

	
f)

	
you have committed a serious violation or violations of any Company policy or procedure;

	
  

	
g)

	
you refuse to follow the lawful instructions of Company management;

	
  

	
h)

	
you have committed any material misrepresentation in the employment application process;

	
  

	
i)

	
you have committed deliberate actions, including neglect or failure to perform the job, which are contrary to the best interest of the Company; or

	
  

	
j)

	
you have continually failed to perform substantially your duties with the Company.

 

 

  

2

  

 

Exercise of Options

When the Options are exercisable, you may purchase shares of Company common stock under your Option by:

	
1.

	
Giving written notice to the Company, signed by you, stating the number of shares you have elected to purchase; and

 

	
2.

	
Remitting payment of the purchase price in full (You may deliver Mature Shares of Company common stock that you own in satisfaction of all or any part of the purchase price or make other arrangements satisfactory to the Company and permitted by the Plan regarding payment of the purchase price); and

 

	
3.

	
Remitting payment to satisfy the income tax withholding requirements for non-statutory options or making other arrangements to satisfy such withholding that are satisfactory to the Company and permitted by the Plan.

 

Death or Disability

If your employment by the Company terminates because you die or become disabled, all of your Options covered by this Notice of Grant will become immediately vested and exercisable, effective as of the date of the termination of your employment, and you, your personal representative, distributees, or legatees, as applicable, may exercise your vested Options at any time before the Expiration Date.

Age and Service Vesting

If your employment with the Company is terminated and such termination is not for Cause, and, as of the date if the termination you have:

	
1.

	
Attained 55 years of age and completed ten years of continuous employment with the Company; 

 

	
2.

	
Attained 62 years of age and completed seven years of continuous employment with the Company; or

 

	
3.

	
Attained 65 years of age and completed five years of continuous employment with the Company;

   

then, all of your Options covered by this Notice of Grant will become immediately vested and exercisable, effective as of the date of the termination of your employment, and you, your personal representative, distributees, or legatees, as applicable, may exercise your vested Options at any time before the Expiration Date.

Transferability of Options

Except as provided below, the Options are not transferable by you other than by will or by the laws of descent and distribution and is exercisable during your lifetime only by you.  You may transfer your rights under the Option during your lifetime subject to the following limitations:

 

1.           Transfers are allowed only to the following transferees:

 

	
  

	
a)

	
Your spouse, children, step-children, grandchildren, step-grandchildren or other lineal descendants (including relationships arising from legal adoptions).  Such individuals are hereinafter referred to as “Immediate Family Members”.

 

	
  

	
b)

	
Trust(s) for the exclusive benefit of any one or more of your Immediate Family Members.

 

	
  

	
c)

	
Partnership(s), limited liability company(ies) or other entity(ies), the only partners, members or interest holder of which are among your Immediate Family Members.

 

 

  

3

  

 

	
  

	
d)

	
Pursuant to a court issued divorce decree or Domestic Relations Order (as defined in the Code or Title I of the Employee Retirement Income Security Act (or rules thereunder)).

 

	
2.  

	
You may not receive any consideration in connection with the transfer.

 

	
3.  

	
Transferees may not subsequently transfer their rights under the Option except by will or by the laws of descent or distribution.

 

	
4.  

	
Following the transfer, the Option will continue to be subject to the same terms and conditions as were applicable immediately prior to transfer (except that the transferee may deliver the Option exercise notice and payment of the exercise price).

 

	
5.  

	
You must give written notice of the transfer to the Company and the Company may require that any transfer is conditioned upon the transferee executing any document or agreement requested by the Company.

 

Any Option transferred in accordance with the terms hereof shall be accompanied by the associated SAR.

Change of Control; SARs

Notwithstanding the vesting schedule set forth in the “Vesting of Options” section hereof, in the event of a Change of Control, all unvested Options granted hereunder shall vest in accordance with the following:

	
·  

	
50% of your unvested Options shall vest upon the date of the Change of Control; and

 

	
·  

	
50% of your unvested Options shall vest upon the one year anniversary of the date of the Change of Control.  Notwithstanding the foregoing, in the event that any of your unvested Options would have vested sooner than the one year anniversary of the date of the Change of Control (based upon the vesting schedule set forth in the “Vesting of Options” section hereof or any other terms or conditions affecting vesting rights contained herein), such sooner vesting date shall apply to such unvested Options.

You shall have the right during the period beginning on the applicable vesting date set forth above and ending on the Expiration Date to exercise any and all vested Options in accordance with the provisions of this Notice of Grant.

Pursuant to this Notice of Grant, you have been granted one (1) SAR for every Option granted to you hereunder.  Following a Change of Control, you may choose to exercise the SARs granted hereunder in lieu of exercising your vested Options.  Doing so will relieve you of the obligation to pay for the exercise of your Options as described above and, instead, will allow you to receive a cash payment of the net value of your SARs as calculated below without having to remit any payment to the Company.  The SARs granted in connection with the Options are limited SARs and may be exercised in accordance with the Plan and the terms hereof as follows:

	
1.

	
The SARs shall only be exercisable if a Change of Control occurs.  In such event, the SARs will be exercisable at any time during a period of 90 days beginning on the date the Change of Control occurs.  To the extent that the SARs or their underlying Options are not exercised during an exercise period, the SARs will become unexercisable again until such time as another Change of Control occurs or %%EXPIRE_DATE_PERIOD1%-% , when they expire.

 

	
2.

	
When the SARs become exercisable, you may exercise the SARs by giving written notice to the Company, signed by you, stating the number of SARs that you are exercising.

 

	
3.

	
Upon exercise of the SARs, you shall receive in exchange from the Company an amount equal to the excess of (x) the value of the Company’s common stock on the date of exercise, over (y) the exercise price of the underlying Option.  For purposes of this paragraph, the value of the Company’s common stock shall be the Fair Market Value of the Company’s common stock on the date of exercise; provided, however, if the net after tax benefit to you, after considering all applicable taxes, interest and penalties, including taxes, interest and penalties imposed under Code section 409A, would be greater if the value was determined based on the highest closing price of the Company’s common stock, on the exchange on which it is then traded, during the 90 days immediately preceding the Change of Control, the value of the Company’s common stock shall be such higher amount.  The determination of the net after tax benefit to you shall be made by the Company in its reasonable discretion.

 

 

  

4

  

 

	
4.

	
The Company’s obligation arising upon exercise of the SARs shall be paid in cash and shall be subject to required income tax withholdings.

 

	
5.

	
To the extent a SAR is exercised, the underlying Option must be surrendered.  The underlying Option, to the extent surrendered, shall no longer be exercisable.

 

Change in Capital Structure

If the number of outstanding shares of the Company’s common stock is increased or decreased as a result of a stock dividend, stock split, subdivision or consolidation of shares, or other similar change in capitalization, the number of Company shares for which you have unexercised Options and the exercise price will automatically be adjusted, as provided in the Plan, (i) so as to preserve the ratio that existed immediately before the change between the number of such shares and the total number of shares of Company stock previously outstanding, and (ii) so that your aggregate Option price remains the same; provided, however, that the Company will not be required to issue any fractional shares upon exercise of your Options as a result of such adjustment.

Legal Fees

The grant of these Options does not obligate the Company to continue your employment.  If there is any litigation involving Options, each party will bear its own expenses, including all legal fees, except that in the event of an action brought by you under this Notice of Grant following a Change of Control, then insofar as such action is not deemed to be frivolous by the arbitrator, the Company shall bear all expenses related to the arbitration, including all legal fees incurred by you.  The Committee shall have the authority to interpret and administer this Notice of Grant.

 

Acceptance

By accepting this grant on-line, this Notice of Grant, together with the Plan, will become a Stock Option Agreement between you and the Company that is governed by and construed and enforced in accordance with the laws of the Commonwealth of Virginia.  By accepting this grant online, you agree that you are in compliance with, and will abide by, the Company’s “Policy Against Insider Trading” which can be found on The CarMax Way.

Sincerely,

[Name, Title]

ACCEPTED:

Signature

	 	 	 
	 	 	 
	Printed Name 	 	Employee ID Number 

                                                                          

 

 

 

5exhibit102.htm

 

 

CARMAX, INC.

NOTICE OF MARKET STOCK UNIT GRANT

[Date]

 

 

 

	 
	 
	 
	 
	Dear	 	 :

 

The Board of Directors of CarMax, Inc. (the “Company”) wants to provide you with an opportunity to share in the success of our Company.  Accordingly, I am pleased to inform you that, as of _________________ (the “Grant Date”), the Compensation and Personnel Committee of the Board of Directors of the Company (the “Committee”) exercised its authority pursuant to the CarMax, Inc. 2002 Stock Incentive Plan, as amended and restated (the “Plan”) and granted you Market Stock Units of the Company (the “Market Stock Units”) as set forth herein.

The Market Stock Units are a form of Restricted Stock Units under the Plan and are subject to the provisions of the Plan.  The Committee administers the Plan.  The terms of the Plan are incorporated into this Notice of Market Stock Unit Grant (the “Notice of Grant”) and in the case of any conflict between the Plan and this Notice of Grant, the terms of the Plan shall control.  All capitalized terms not defined herein shall have the meaning given to them in the Plan.  Please refer to the Plan for certain conditions not set forth in this Notice of Grant.  Additionally, a copy of a Prospectus for the Plan, which describes material terms of the Plan, can be found on The CarMax Way.  Copies of the Prospectus, the Plan and the Company’s annual report to shareholders on Form 10-K for fiscal year 20__ are available from the Company’s corporate secretary at (804) 747-0422.

 

	Number of Market Stock Units:	 
	Grant Date Fair Market Value:	 

 

Vesting of Market Stock Units

Except as otherwise provided in this Notice of Grant, the Market Stock Units will vest and become nonforfeitable on [THREE YEAR ANNIVERSARY DATE] or such earlier date as may be provided in this Notice of Grant or the Plan (the “Vesting Date”) provided you continue to be employed by the Company from the Grant Date until the Vesting Date.  Prior to the Vesting Date, the Market Stock Units are not transferable by you by means of sale, assignment, exchange, pledge or otherwise.

Additional Vesting and Forfeiture Provisions

 

	
1.

	
Termination Without Cause or, if applicable, for Good Reason. 

If (a) the Company terminates your employment with the Company for any reason other than Cause (as defined in the “Cause” section below), or (b) you have an effective severance or employment agreement with the Company (or a subsidiary of the Company) and you terminate your employment for “Good Reason” (as defined in such agreement), if applicable, then all of your Market Stock Units will become immediately vested and nonforfeitable, effective as of the date of the termination of your employment.  In such instance, the Payment Date shall be the Vesting Date.

 

	
2.

	
Termination For Cause. Upon termination of your employment with the Company for Cause, and notwithstanding the terms of the “Age and Service Vesting” section set forth below, your Market Stock Units will be immediately forfeited, effective as of the date of your termination.

 

 

  

  

  

 

	
3.

	
Change in Full-Time Employment Status.  In the event that your employment with the Company changes from full-time to part-time for any reason, and notwithstanding the terms of the “Age and Service Vesting” section set forth below, your Market Stock Units will be immediately forfeited, effective as of the date of the change.

 

	
4.

	
Resignation; Leave.  In the event that you resign your employment with the Company, your Market Stock Units will be immediately forfeited, effective as of your resignation date, except as otherwise provided in the “Age and Service Vesting” section set forth below.  Employees on authorized leave (as determined under the Company’s authorized leave policy) will not be considered as having terminated merely by reason of the leave.

 

Cause

For purposes of this Notice of Grant, “Cause” shall mean the following:

	
1.

	
If you have an effective severance or employment agreement with the Company (or a subsidiary of the Company), then “Cause” shall have the meaning set forth in your employment or severance agreement.

	
2.

	
If you do not have an effective severance or employment agreement with the Company (or a subsidiary of the Company), then “Cause” shall mean that the Company (or any of its subsidiaries) has any reason to believe any of the following:

	
  

	
a)

	
you have committed fraud, misappropriation of funds or property, embezzlement or other similar acts of dishonesty;

	
  

	
b)

	
you have been convicted of a felony or other crime involving moral turpitude (or pled nolo contendere thereto);

	
  

	
c)

	
you have used, possessed or distributed any illegal drug;

	
  

	
d)

	
you have committed any misconduct that may subject the Company to criminal or civil liability;

	
  

	
e)

	
you have breached your duty of loyalty to the Company, including, without limitation, the misappropriation of any of the Company’s corporate opportunities;

	
  

	
f)

	
you have committed a serious violation or violations of any Company policy or procedure;

	
  

	
g)

	
you refuse to follow the lawful instructions of Company management;

	
  

	
h)

	
you have committed any material misrepresentation in the employment application process;

	
  

	
i)

	
you have committed deliberate actions, including neglect or failure to perform the job, which are contrary to the best interest of the Company; or

 

	
  

	
j)

	
you have continually failed to perform substantially your duties with the Company.

 

Payment for Market Stock Units

Payment for your Market Stock Units shall be made in shares of Company Stock as soon as practicable following [THREE YEAR ANNIV DATE], but in no event later than the last day such payment may be made while still qualifying for the short–term deferral exception from Code Section 409A.  [THREE YEAR ANNIV DATE] shall be referred to herein as the “Payment Date.”

 

  

2

  

 

Number of Shares of Company Stock To Be Awarded on the Payment Date

The number of shares of Company Stock that will be awarded to you on the Payment Date shall be determined in accordance with the following formula:

(Number of Market Share Units granted in this Notice of Grant)

 

multiplied by

 

((the Payment Date Fair Market Value) divided by (the Grant Date Fair Market Value)).

 

 For purposes of the formula set forth above:

 

	
1.

	
The Grant Date Fair Market Value, which is set forth on page one of this Notice of Grant, shall be equal to the volume-weighted average trading price of the Company Stock occurring on the New York Stock Exchange on the Grant Date.

 

	
2.

	
The Payment Date Fair Market Value shall be equal to the average of the closing price of the Company Stock occurring on the New York Stock Exchange on the Payment Date and the 39 trading dates preceding the Payment Date.

 

	
3.

	
Notwithstanding the calculation set forth in the preceding paragraph, the Payment Date Fair Market Value shall be capped at two times the Grant Date Fair Market Value.

 

Shareholder Rights

The Market Stock Units shall not represent an equity security of the Company and shall not carry any voting or dividend rights, except the right to receive payments equivalent to dividends as set forth below.

Dividend Equivalent Rights

You shall accumulate dividend equivalent rights on all Market Stock Units in an amount equal to the dividends paid, if any, with respect to a share of Company Stock on each date that a dividend is paid on the Company Stock prior to the Payment Date.  The dividend equivalent rights shall be converted into additional Market Stock Units based on the Fair Market Value of a share of Company Stock on the date the dividend is paid and shall accumulate and be paid in additional shares of Company Stock when the payment for the corresponding Market Stock Units is made.  Such additional Market Stock Units shall be subject to the same forfeiture restrictions as apply to the Market Stock Units to which they relate and shall be converted into shares of Company Stock using the same formula, Grant Date Fair Market Value and Payment Date Fair Market Value set forth above.

Tax Withholding

On the Payment Date, you will have taxable income equal to the value of the Market Stock Units on that date.  You will be required to reimburse the Company for the amount of taxes required by any government to be withheld or otherwise deducted and paid with respect to the vesting of the Market Stock Units (“Tax Withholdings”).  The Company has the right to retain and withhold from any payment under this Agreement any required Tax Withholdings.  At its discretion, the Company may require you to reimburse it for any Withholding Taxes and withhold any payments, in whole or in part, until the Company is so reimbursed.  The Company shall also have the unrestricted right to withhold from any other cash amounts due (or to become due) from the Company to you, including from your wages or commissions, an amount equal to any Tax Withholdings.

Death or Disability

If your employment by the Company terminates because you die or become disabled, all Market Stock Units covered by this Notice of Grant will become immediately vested and nonforfeitable, effective as of the date of the termination of your employment.

 

 

  

3

  

Age and Service Vesting

If (a) your employment with the Company terminates, (b) such termination is not for Cause and not otherwise covered by Section 1 of the Additional Vesting and Forfeiture Provisions of this Notice of Grant and (c) as of the date if the termination you have:

	
1.

	
Attained 55 years of age and completed ten years or more of continuous employment with the Company;

 

	
2.

	
Attained 62 years of age and completed seven years or more of continuous employment with the Company; or

 

	
3.

	
Attained 65 years of age and completed five years or more of continuous employment with the Company;

 

then all Market Stock Units covered by this Notice of Grant will become immediately vested and nonforfeitable, effective as of the date of the termination of your employment.

Change of Control

Notwithstanding anything to the contrary herein, in the event of a Change of Control, all Market Stock Units covered by this Notice of Grant shall vest in accordance with the following:

 

	
·  

	
50% of your Market Stock Units shall vest effective upon the date of the Change of Control.  In such instance, the Payment Date shall be the Vesting Date.

 

	
·  

	
50% of your Market Stock Units shall vest effective upon the one-year anniversary of the date of the Change of Control.  In such instance, the Payment Date shall be the Vesting Date.

Notwithstanding the foregoing, in the event that any of your Market Stock Units would have vested sooner than the one-year anniversary of the date of the Change of Control (based upon the vesting schedule set forth in the “Vesting of Market Stock Units” section hereof or any other terms or conditions affecting vesting rights contained herein), such sooner vesting date shall apply to such Market Stock Units.

Change of Capital Structure

If the number of outstanding shares of the Company Stock is increased or decreased as a result of a stock dividend, stock split, subdivision or consolidation of shares, or other similar change in capitalization,  the number of Market Stock Units covered by this Notice of Grant and the Grant Date Fair Market Value will automatically be adjusted, as provided in the Plan and as the Committee shall determine to be equitably required so as to preserve the value of the Market Stock Units that existed immediately before the change; provided, however, that the Company will not be required to issue any fractional shares as a result of such adjustment.

Legal Fees

The grant of these Market Stock Units does not obligate the Company to continue your employment.  If there is any litigation involving Market Stock Units, each party will bear its own expenses, including all legal fees, except that in the event of an action brought by you under this Notice of Grant following a Change of Control, then insofar as such action is not deemed to be frivolous by the arbitrator, the Company shall bear all expenses related to the arbitration, including all legal fees incurred by you.  The Committee shall have the authority to interpret and administer this Notice of Grant.

 

  

4

  

Acceptance

By accepting this grant on-line, this Notice of Grant, together with the Plan, will become an agreement between you and the Company that is governed by and construed and enforced in accordance with the laws of the Commonwealth of Virginia.  By accepting this grant online, you agree that you are in compliance with, and will abide by, the Company’s “Policy Against Insider Trading” which can be found on The CarMax Way.

Sincerely,

[Name, Title]

ACCEPTED:

Signature

	
 

 

	 	 
	
 

 

	 	 
	Printed Name	 	Employee ID Number 

                                                                           

 

5

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