CARMAX, INC. 2002 NON-EMPLOYEE DIRECTORS
STOCK INCENTIVE PLAN
(AS AMENDED AND RESTATED JUNE 21, 2005)
1. Purpose. The purpose of this CarMax, Inc. 2002 Non-Employee Directors Stock
Incentive Plan (the "Plan") is to encourage ownership in CarMax, Inc. (the
"Company") by non-employee members of the Board of Directors of the Company, in
order to promote long-term shareholder value and to provide non-employee
directors with an incentive to continue as directors of the Company.
2. Definitions. As used in the Plan, the following terms have the meanings
indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" means the Board of Directors of the Company.
(c) "Change of Control" means the occurrence of either of the
following events: (i) a third person, including a "group"
as defined in section 13(d)(3) of the Act, becomes, or
obtains the right to become, the beneficial owner of Company
securities having 20% or more of the combined voting power
of the then outstanding securities of the Company that may
be cast for the election of directors to the Board of the
Company (other than as a result of an issuance of securities
initiated by the Company in the ordinary course of business);
or (ii) as the result of, or in connection with, any cash
tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any
combination of the foregoing transactions, the persons who
were directors of the Company before such transactions shall
cease to constitute a majority of the Board or of the board of
directors of any successor to the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Company" means CarMax, a Virginia corporation.
(f) "Company Stock" means shares of CarMax Common Stock subject to
the limits of Section 4. Such shares shall be subject to
adjustment as provided in Section 14.
(g) "Date of Grant" means the date on which an Incentive Award is
granted by the Board.
(h) "Disability" or "Disabled" means a disability as determined by
the Board.
(i) "Fair Market Value" means, for any given date, the fair market
value of the Company Stock as of such date, as determined by
the Board based on the then prevailing prices of the Company
Stock on the exchange on which it generally has the greatest
trading volume.
(j) "Incentive Award" means, collectively, the award of an Option,
Stock Appreciation Right, Restricted Stock, or Stock Grants
under the Plan.
(k) "Nonstatutory Stock Option" means an Option that does not meet
the requirements of Code section 422 or, even if meeting the
requirements of Code section 422, is not intended to be an
incentive stock option under Code section 422 and is so
designated.
(l) "Option" means a right to purchase Company Stock granted under
the Plan, at a price determined in accordance with the Plan.
(m) "Participant" means any non-employee member of the Board who
receives an Incentive Award under the Plan.
(n) "Restricted Stock" means Company Stock awarded upon the terms
and subject to the restrictions set forth in Section 6.
(o) "Restricted Stock Award" means an award of Restricted Stock
granted under the Plan.
(p) "Rule 16b-3" means Rule 16b-3 adopted pursuant to section
16(b) of the Act. A reference in the Plan to Rule 16b-3 shall
include a reference to any corresponding rule (or number
redesignation) of any amendments to Rule 16b-3 adopted after
the effective date of the Plan's adoption.
(q) "Stock Appreciation Right" means a right to receive amounts
from the Company awarded upon the terms and subject to the
restrictions set forth in Section 8.
(r) "Stock Grant" means Company Stock awarded without restrictions
in accordance with Section 9.
3. General. Incentive Awards may be granted under the Plan in the form of
Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, and
Stock Grants.
4. Stock. Subject to Section 14 of the Plan, there shall be reserved for
issuance under the Plan (i) an aggregate of 250,000 shares of CarMax Common
Stock, which shall be authorized, but unissued shares. Shares of CarMax Common
Stock that have not been issued and allocated to options or portions thereof
that expire or otherwise terminate unexercised may be subjected to an Incentive
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Award under the Plan. Shares of a series of Company Stock that have not been
issued under the Plan and that are allocable to Incentive Awards or portions
thereof that expire or otherwise terminate unexercised may again be subjected to
an Incentive Award under the Plan relating to shares of the same series of
Company Stock. Similarly, if any shares of Restricted Stock issued pursuant to
the Plan are reacquired by the Company as a result of a forfeiture of such
shares pursuant to the Plan, such shares may again be subjected to an Incentive
Award under the Plan relating to shares of the same series of Company Stock as
those reacquired.
5. Eligibility.
(a) Each director of the Company who is not a full-time employee
of the Company or any parent or subsidiary of the Company
shall be eligible to receive Incentive Awards under the Plan.
The Board shall have the power and complete discretion, as
provided in Section 15, to select which directors shall
receive Incentive Awards and to determine for each such
Participant the terms and conditions, the nature of the award
and the number of shares to be allocated to each Participant
as part of each Incentive Award.
(b) The grant of an Incentive Award shall not obligate the Company
to pay a Participant any particular amount of remuneration or
to make further grants to the Participant at any time
thereafter.
6. Restricted Stock Awards.
(a) Whenever the Board deems it appropriate to grant a Restricted
Stock Award, notice shall be given to the Participant stating
the number of shares of Restricted Stock for which the
Restricted Stock Award is granted and the terms and conditions
to which the Restricted Stock Award is subject. This notice
shall become an award agreement between the Company and the
Participant. A Restricted Stock Award may be made by the Board
in its discretion without cash consideration.
(b) Restricted Stock issued pursuant to the Plan shall be subject
to the following restrictions:
(i) None of such shares may be sold, assigned,
transferred, pledged, hypothecated, or otherwise
encumbered or disposed of until the restrictions on
such shares shall have lapsed or shall have been
removed pursuant to paragraph (d) or (e) below.
(ii) The restrictions on such shares must remain in effect
and may not lapse for a period of three years
beginning on the date of grant, except as provided
under paragraph (d) or (e) in the case of Disability,
retirement, death or a Change in Control.
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(iii) If a Participant ceases to be a director of the
Company, the Participant shall forfeit to the Company
any shares of Restricted Stock, the restrictions on
which shall not have lapsed or shall not have been
removed pursuant to paragraph (d) or (e) below, on
the date such Participant shall cease to serve as a
member of the Board.
(iv) The Board may establish such other restrictions on
such shares that the Board deems appropriate,
including, without limitation, events of forfeiture.
(c) Upon the acceptance by a Participant of a Restricted Stock
Award, such Participant shall, subject to the restrictions set
forth in paragraph (b) above, have all the rights of a
shareholder with respect to the shares of Restricted Stock
subject to such Restricted Stock Award, including, but not
limited to, the right to vote such shares of Restricted Stock
and the right to receive all dividends and other distributions
paid thereon. Certificates representing Restricted Stock shall
bear a legend referring to the restrictions set forth in the
Plan and the Participant's award agreement. If shares of
Restricted Stock are issued without certificates, notice of
the restrictions set forth in the Plan and the Participant's
Award Agreement must be given to the shareholder in the
manner required by law.
(d) The Board shall establish as to each Restricted Stock Award
the terms and conditions upon which the restrictions set forth
in paragraph (b) above shall lapse. Such terms and conditions
may include, without limitation, the lapsing of such
restrictions as a result of the Disability, death or
retirement of the Participant or the occurrence of a Change of
Control.
(e) Notwithstanding the forfeiture provisions of paragraph
(b)(iii) above, the Board may at any time, in its sole
discretion, accelerate the time at which any or all
restrictions will lapse or remove any and all such
restrictions.
7. Stock Options.
(a) Whenever the Board deems it appropriate to grant Options,
notice shall be given to the eligible non-employee director
stating the number of shares for which Options are granted,
the Option price per share, the extent, if any, to which Stock
Appreciation Rights are granted, and the conditions to which
the grant and exercise of the Options are subject. This notice
shall become a stock option agreement between the Company and
the eligible non-employee director.
(b) The exercise price of shares of Company Stock covered by a
Nonstatutory Stock Option shall be not less than 100% of the
Fair Market Value of such shares on the Date of Grant.
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(c) The Board may, in its discretion, grant Options that by their
terms become fully exercisable Options may be exercised in
whole or in part at such times as may be specified by the
Board in the Participant's stock option agreement.
(d) Upon a Change of Control notwithstanding other conditions on
exercisability in the stock option agreement.
8. Stock Appreciation Rights.
(a) Whenever the Board deems it appropriate, Stock Appreciation
Rights may be granted. The terms and conditions of the award
shall be set forth in a stock appreciation rights agreement
between the Company and the Participant. The following
provisions apply to all Stock Appreciation Rights that are
granted:
(i) Stock Appreciation Rights shall entitle the
Participant, upon the exercise of all or any part of
the Stock Appreciation Rights, to receive from the
Company an amount equal to the excess of (x) the fair
market value on the date of exercise of the Company
Stock covered by the Stock Appreciation Rights over
(y) the fair market value on the Date of Grant of the
Company Stock covered by the Stock Appreciation
Rights. The Board may limit the amount that the
Participant may be entitled to receive upon exercise
of the Stock Appreciation Right.
(ii) Stock Appreciation Rights shall be exercisable, in
whole or in part, at such times as the Board shall
specify in the Participant's stock appreciation
rights agreement.
(b) The manner in which the Company's obligation arising upon the
exercise of a Stock Appreciation Right shall be paid shall be
determined by the Board and shall be set forth in the
Participant's stock appreciation rights agreement. The Board
may provide for payment in Company Stock or cash, or a fixed
combination of Company Stock or cash, or the Board may reserve
the right to determine the manner of payment at the time the
Stock Appreciation Right is exercised. Shares of Company Stock
issued upon the exercise of a Stock Appreciation Right shall
be valued at their Fair Market Value on the date of exercise.
9. Stock Grants.
(a) Whenever the Board deems it appropriate, a Stock Grant may be
made to eligible non-employee directors. The Board shall have
complete discretion to make such Stock Grants and may do so
whenever it considers it appropriate.
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(b) Whenever the Board deems it appropriate, it may permit
eligible non-employee directors to elect to receive a Stock
Grant in lieu of retainer, meeting fees or other such fees to
which such directors would otherwise be entitled. The Company
Stock to be issued in connection with such a Stock Grant shall
have a Fair Market Value equal to such fees otherwise payable,
determined as of the date on which such payment of fees would
otherwise become payable to such member of the Board.
10. Method of Exercise of Options and Stock Appreciation Rights.
(a) Options and Stock Appreciation Rights may be exercised by the
Participant giving notice of the exercise to the Company,
stating the number of shares the Participant has elected to
purchase under the Option or the number of Stock Appreciation
Rights he has elected to exercise. In the case of a purchase
of shares under an Option, such notice shall be effective only
if accompanied by the exercise price in full paid in cash;
provided that, if the terms of an Option so permit, the
Participant may: (i) deliver shares of Participant-owned
Company Stock (valued at their Fair Market Value on the date
of exercise) in satisfaction of all or any part of the
exercise price; or (ii) to the extent permitted under
applicable laws and regulations, deliver a properly executed
exercise notice together with irrevocable instructions to a
broker to exercise all or part of the Option, sell a
sufficient number of shares of Company Stock to cover the
exercise price and other costs and expenses associated with
such sale and deliver promptly from the proceeds of the sale
the amount necessary to pay the exercise price. The
Participant shall not be entitled to make payment of the
exercise price other than in cash unless provisions for an
alternative payment method are included in the Participant's
stock option agreement or are agreed to in writing by the
Company with the approval of the Board prior to exercise of
the Option.
(b) Until the Participant has made any required payment, and has
had issued to him a certificate for the shares of Company
Stock acquired, he shall possess no shareholder rights with
respect to the shares.
(c) Notwithstanding anything herein to the contrary, if the
Company is subject to section 16 of the Act, Options and Stock
Appreciation Rights shall always be granted and exercised in
such a manner as to conform to the provisions of Rule 16b-3.
(d) Any shares of already owned Company Stock that are delivered
by a Participant in satisfaction of all or any part of the
exercise price of an Option shall be of the same series of
Company Stock as the shares of Company Stock to which such
Incentive Award relates.
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11. Transferability of Incentive Awards. Nonstatutory Stock Options and Stock
Appreciation Rights may be transferable by a Participant and exercisable by a
person other than the Participant, but only to the extent specifically provided
in the Incentive Award; provided, however, that no transfer for value or
consideration will be permitted without the prior approval of the Company's
shareholders.
12. Effective Date of the Plan and Transition.
(a) This Plan shall be effective as of the date of separation
between the Company and Circuit City Stores, Inc., and shall
be submitted to the shareholders of Circuit City Stores, Inc.
for approval prior to the separation. No Option or Stock
Appreciation Right shall be exercisable and no Company Stock
shall be issued under the Plan until (i) the Plan has been
approved by the Company's shareholders, (ii) shares issuable
under the Plan have been registered with the Securities and
Exchange Commission and accepted for listing on the New York
Stock Exchange upon notice of issuance, and (iii) the
requirements of any applicable state securities laws have been
met.
(b) As of the date of separation between the Company and Circuit
City Stores, Inc., this Plan shall assume obligations,
including outstanding awards, from the Circuit City Stores,
Inc. Amended And Restated 1989 Non-Employee Directors Stock
Option Plan, to the extent provided in an agreement between
the Company and Circuit City Stores, Inc.
13. Termination, Modification, Change. If not sooner terminated by the Board,
this Plan shall terminate at the close of business on the day immediately
preceding the tenth anniversary of the separation between the Company and
Circuit City Stores, Inc. No Incentive Awards shall be granted under the Plan
after its termination. The Board may terminate the Plan or may amend the Plan in
such respects as it shall deem advisable; provided that no change shall be made
that increases the total number of shares of Company Stock reserved for issuance
pursuant to Incentive Awards granted under the Plan (except pursuant to Section
14) or permit repricing of options, unless such change is authorized by the
shareholders of the Company. Notwithstanding the foregoing, the Board may
unilaterally amend the Plan and Incentive Awards as it deems appropriate to
ensure compliance with Rule 16b-3. Except as provided in the preceding sentence,
a termination or amendment of the Plan shall not, without the consent of the
Participant, adversely affect a Participant's rights under an Incentive Award
previously granted to him.
14. Change in Capital Structure.
(a) The number of shares reserved for issuance under the Plan, the
terms of Incentive Awards, and all computations under the Plan
shall be appropriately adjusted by the Board should the
Company effect one or more stock dividends, stock splits,
subdivisions or consolidations of shares, or other similar
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changes in capitalization, or if the par value of Company
Stock is altered. If the adjustment would produce fractional
shares with respect to any unexercised Option, the Board may
adjust appropriately the number of shares covered by the
Option so as to eliminate the fractional shares.
(b) If the Company is a party to a consolidation or merger in
which the Company is not the surviving corporation, a
transaction that results in the acquisition of substantially
all of the Company's outstanding stock by a single person or
entity, or a sale or transfer of substantially all of the
Company's assets, the Board may take such actions with respect
to outstanding Incentive Awards as the Board deems
appropriate.
(c) Any determination made or action taken under this Section 14
by the Board shall be final and conclusive and may be made or
taken without the consent of any Participant.
15. Administration of the Plan. The Plan shall be administered by the Board. The
Board shall have general authority to impose any limitation or condition upon an
Incentive Award that the Board deems appropriate to achieve the objectives of
the Incentive Award and the Plan and, without limitation and in addition to
powers set forth elsewhere in the Plan, shall have the following specific
authority:
(a) The Board shall have the power and complete discretion to
determine (i) which eligible non-employee directors shall
receive an Incentive Award and the nature of the Incentive
Award, (ii) the number of shares of Company Stock to be
covered by each Incentive Award, (iii) when, whether and to
what extent Stock Appreciation Rights shall be granted,
(iv) the fair market value of Company Stock, (v) the time or
times when an Incentive Award shall be granted, (vi) whether
an Incentive Award shall become vested over a period of time
and when it shall be fully vested, (vii) when Options and
Stock Appreciation Rights may be exercised, (viii) whether a
Disability exists, (ix) the manner in which payment will be
made upon the exercise of Options or Stock Appreciation
Rights, (x) conditions relating to the length of time before
disposition of Company Stock received upon the exercise of
Options or Stock Appreciation Rights is permitted, (xi) the
terms and conditions applicable to Restricted Stock Awards,
(xii) the terms and conditions on which restrictions upon
Restricted Stock shall lapse, (xiii) whether to accelerate the
time at which any or all restrictions with respect to
Restricted Stock will lapse or be removed, (xiv) notice
provisions relating to the sale of Company Stock acquired
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under the Plan, and (xv) any additional requirements relating
to Incentive Awards that the Board deems appropriate. The
Board shall have the power to amend the terms of previously
granted Incentive Awards so long as the terms as amended are
consistent with the terms of the Plan and provided that the
consent of the Participant is obtained with respect to any
amendment that would be detrimental to the Participant, except
that such consent will not be required if such amendment is
for the purpose of complying with Rule 16b-3.
(b) The Board may adopt rules and regulations for carrying out the
Plan. The interpretation and construction of any provision of
the Plan by the Board shall be final and conclusive. The Board
may consult with counsel, who may be counsel to the Company,
and shall not incur any liability for any action taken in good
faith in reliance upon the advice of counsel.
(c) A majority of the members of the Board shall constitute a
quorum, and all actions of the Board shall be taken by a
majority of the members present. Any action may be taken by a
written instrument signed by all of the members, and any
action so taken shall be fully effective as if it had been
taken at a meeting.
16. Notice. All notices and other communications required or permitted to be
given under this Plan may be in writing and shall be deemed to have been duly
given if delivered personally or mailed first class, postage prepaid, as
follows: (a) If to the Company--at its principal business address to the
attention of the Secretary; (b) If to any Participant--at the last address of
the Participant known to the sender at the time the notice or other
communication is sent.
17. Miscellaneous. By accepting any Incentive Award under the Plan, each
Participant, and each person claiming under or through such person, shall be
conclusively deemed to have given his or her acceptance and ratification of, and
consent to, any action taken with respect thereto by the Company or the Board.
IN WITNESS HEREOF, this instrument has been executed this 21ST day of June,
2005.
CARMAX, INC.
By: /s/ Keith D. Browning
--------------------------
Keith D. Browning
Executive Vice President &
Chief Financial Officer
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