CARMAX INC (Form: 8-K, Received: 10/22/2010 08:34:42)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 18, 2010

___________

CARMAX, INC.

(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation)	1-31420 (Commission File Number)		54-1821055 (I.R.S. Employer Identification No.)

12800 Tuckahoe Creek Parkway Richmond, Virginia (Address of principal executive offices)		23238 (Zip Code)

Registrant’s telephone number, including area code: (804) 747-0422

Not applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02.

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Appointment of Thomas W. Reedy as Chief Financial Officer

On October 18, 2010, the CarMax, Inc. (the “Company”) board of directors (the “Board”) appointed Thomas W. Reedy as Senior Vice President and Chief Financial Officer of the Company, effective immediately. Keith D. Browning, who had served as the Company’s Chief Financial Officer, will remain employed by the Company as Executive Vice President, Finance and will assist with Mr. Reedy’s transition to his new role.

Mr. Reedy, age 46, joined CarMax in 2003 as its Vice President and Treasurer and, in January 2010, was promoted to Senior Vice President, Finance. As Chief Financial Officer, Mr. Reedy will receive an annual base salary of $430,000 and his annual bonus target under CarMax’s Annual Performance-Based Bonus Plan will be 40% of his annual base salary. Pursuant to the terms of the CarMax, Inc. 2002 Stock Incentive Plan, as amended and restated, CarMax will grant to Mr. Reedy options to purchase CarMax common stock with an aggregate grant date fair value of $187,500 and market stock units (“MSUs”) with an aggregate grant date fair value of $62,500. In accordance with the Company’s Employee Equity Grant Policy, these equity awards will be granted on December 27, 2010, three business days after the Company releases its fiscal 2011 third quarter earnings release. The terms of Mr. Reedy’s employment with CarMax will continue to be governed by his CarMax, Inc. Severance Agreement, dated August 27, 2007, as amended.

In conjunction with the Company’s chief financial officer transition described above, Kim D. Orcutt, age 48, Vice President and Controller, has been appointed as the Company’s principal accounting officer, effective immediately. No compensatory changes were made related to this appointment.

There are no family relationships between either of Mr. Reedy or Ms. Orcutt and any director or executive officer of the Company. Neither Mr. Reedy nor Ms. Orcutt has any direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.

Amendments to Form of Notice of Stock Option Grant and Form of Notice of MSU Grant

On October 18, 2010, the Company’s Compensation and Personnel Committee approved amendments to the Company’s form of notice of stock option grant and the form of notice of MSU grant. The amendments to each of the forms of notice clarified the definition of “cause” in the context of a termination from employment. Pursuant to the terms of each of the forms of notice, if a CarMax associate is terminated for cause, his/her options or MSUs, as applicable, would be forfeited.

Copies of the form of notice of stock option grant and the form of notice of MSU grant are attached hereto as Exhibits 10.1 and 10.2, respectively, and are hereby incorporated by reference herein.

Item 5.03.

Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On October 18, 2010, the Board approved amendments to the Company’s Bylaws, as amended and restated (the “Bylaws”), principally to: (a) conform language used in the prior version of our Bylaws to the current related provisions of the Virginia Stock Corporation Act; (b) add emergency bylaw provisions to enable the ongoing operability of the Board during a catastrophic event; and (c) clarify and enhance the Company’s advance notice provisions related to nominations for director elections and shareholder proposals.

As a result of changes to the Company’s advance notice provisions, notices from shareholders of proposed items of business to be conducted or nominations of candidates to be elected as directors at the Company’s 2011 annual meeting must (a) be received by the Secretary of the Company not later than the close of business on January 14, 2011 and not earlier than the close of business on December 15, 2010 and (b) comply with Sections 1.3 or 2.3 of the Bylaws, as applicable.

The description of the amendments to the Bylaws herein does not purport to be complete and is qualified in its entirety by reference to the full text of the Bylaws, as amended and restated October 18, 2010, which is filed herewith as Exhibit 3.1 and incorporated by reference herein.

Item 8.01.

Other Events.

On October 20, 2010, the Company issued a press release announcing the appointment of Mr. Reedy as the Company’s Senior Vice President and Chief Financial Officer. A copy of the Company’s press release is furnished with this Form 8-K and attached hereto as Exhibit 99.1. Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that section, and shall not be deemed to be incorporated by reference into any Company filing under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01.

Financial Statements and Exhibits.

(d) Exhibits.

	Exhibit Number	Description of Exhibit
	3.1	CarMax, Inc. Bylaws, as amended and restated October 18, 2010
	10.1	Form of Notice of Stock Option Grant between CarMax, Inc. and certain named and other executive officers
	10.2	Form of Notice of Market Stock Unit Grant between CarMax, Inc. and certain named and other executive officers
	99.1	Press release titled, “CarMax Announces Chief Financial Officer Transition: Tom Reedy Promoted to CFO”

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	CARMAX, INC.
	(Registrant)


Dated: October 22, 2010	By:	/s/ Eric M. Margolin
		Eric M. Margolin
		Senior Vice President,
		General Counsel and Corporate Secretary

INDEX TO EXHIBITS

Exhibit Number	Exhibit
3.1	CarMax, Inc. Bylaws, as amended and restated October 18, 2010
10.1	Form of Notice of Stock Option Grant between CarMax, Inc. and certain named and other executive officers
10.2	Form of Notice of Market Stock Unit Grant between CarMax, Inc. and certain named and other executive officers
99.1	Press release titled, “CarMax Announces Chief Financial Officer Transition: Tom Reedy Promoted to CFO”

CARMAX, INC.

BYLAWS

AS AMENDED AND RESTATED

October 18, 2010

TABLE OF CONTENTS

ARTICLE I MEETINGS OF SHAREHOLDERS
1.1	Place and Time of Meetings	1
1.2	Organization and Order of Business	1
1.3	Annual Meeting	1
1.4	Special Meetings	3
1.5	Record Dates	3
1.6	Notice of Meetings	4
1.7	Waiver of Notice; Attendance at Meeting	4
1.8	Quorum and Voting Requirements	4
1.9	Proxies	5
ARTICLE II DIRECTORS
2.1	General Powers	5
2.2	Number and Term	5
2.3	Nomination of Directors	5
2.4	Election	7
2.5	Removal; Vacancies	7
2.6	Annual and Regular Meetings	8
2.7	Special Meetings	8
2.8	Notice of Meetings	8
2.9	Waiver of Notice; Attendance at Meeting	8
2.10	Quorum; Voting	9
2.11	Telephonic Meetings	9
2.12	Action Without Meeting	9
2.13	Compensation	9
2.14	Chairman and Vice Chairman	9
ARTICLE III COMMITTEES OF DIRECTORS
3.1	Committees	9
3.2	Authority of Committees	10
3.3	Executive Committee	10
3.4	Audit Committee	10
3.5	Nominating and Governance Committee	10
3.6	Compensation and Personnel Committee	10
3.7	Committee Meetings; Miscellaneous	10

ARTICLE IV OFFICERS
4.1	Officers	11
4.2	Election; Term	11

4.3	Removal of Officers	11
4.4	Duties of the President	11
4.5	Duties of the Vice President	11
4.6	Duties of the Secretary	11
4.7	Duties of the Chief Financial Officer	12
4.8	Duties of the Assistant Secretary	12
4.9	Duties of Other Officers	12
4.10	Voting Securities of Other Corporations	12
4.11	Compensation	12
ARTICLE V EVIDENCE OF SHARES
5.1	Form	13
5.2	Transfer	13
5.3	Restrictions on Transfer	13
5.4	Lost or Destroyed Share Certificates	13
5.5	Registered Shareholders	13
ARTICLE VI MISCELLANEOUS PROVISIONS
6.1	Corporate Seal	14
6.2	Fiscal Year	14
6.3	Amendments	14
ARTICLE VII EMERGENCY BYLAWS
7.1	Application	14
7.2	Operation	14

CARMAX, INC.

BYLAWS

ARTICLE I

MEETINGS OF SHAREHOLDERS

1.1 Place and Time of Meetings. Meetings of shareholders shall be held at the principal office of the Corporation or at such place, in or out of the Commonwealth of Virginia, and at such time as may be provided in the notice of the meeting and approved by the Board of Directors.

1.2 Organization and Order of Business. The Chairman or, in the Chairman’s absence, the President, shall preside over all meetings of the shareholders. In the absence of the Chairman and the President, the Chair of the Nominating and Governance Committee shall preside. In the absence of the Chair of the Nominating and Governance Committee, the Chair of the Audit Committee shall preside. In the absence of the Chair of the Audit Committee, the Chair of the Compensation and Personnel Committee shall preside. In the absence of all of the foregoing, a majority of the shares entitled to vote at a meeting may appoint any person entitled to vote at the meeting to act as chairman.

The Secretary or, in the Secretary’s absence, an Assistant Secretary shall act as secretary at all meetings of the shareholders. In the event that neither the Secretary nor an Assistant Secretary is present, the chairman of the meeting may appoint any person to act as secretary of the meeting.

The chairman shall have the authority to make such rules and regulations, to establish such procedures and to take such steps as he or she may deem necessary or desirable for the proper conduct of each meeting of the shareholders, including, without limitation, the authority to make the agenda and to establish procedures for (i) dismissing of business not properly presented, (ii) maintaining of order and safety, (iii) placing limitations on the time allotted to questions or comments on the affairs of the Corporation, (iv) placing restrictions on attendance at a meeting by persons or classes of persons who are not shareholders or their proxies, (v) restricting entry to a meeting after the time prescribed for the commencement thereof and (vi) commencing, conducting and closing voting on any matter.

Any business which might properly have been conducted on an original meeting date may come before an adjourned meeting when reconvened.

1.3 Annual Meeting. The annual meeting of shareholders shall be held in the month of June of each year on such day and convening at such time as shall be determined by the Board of Directors of the Corporation. Alternatively, the annual meeting may be held on such other day as may be provided in the notice of the meeting and approved by the Board of Directors.

At each annual meeting of shareholders, only such business shall be conducted as is proper to consider and has been brought before the meeting (i) by or at the direction of the Board of Directors or (ii) by a shareholder who is a shareholder of record of a class of shares entitled to vote on the business such shareholder is proposing and who is such a shareholder of

record, both at the time of the giving of the shareholder’s notice described in this Section 1.3 and on the record date for such annual meeting, and who complies with the notice procedures set forth in this Section 1.3; provided that the nomination and the election of directors is exclusively governed by Section 2.3.

In order to bring before an annual meeting of shareholders any business which may properly be considered and which a shareholder has not sought to have included in the Corporation’s proxy statement for the meeting, a shareholder who meets the requirements set forth in the preceding paragraph must give the Corporation timely written notice. To be timely, a shareholder’s notice must be given, either by personal delivery to the Secretary at the principal office of the Corporation or by United States certified mail, postage prepaid, addressed to the Secretary at the principal office of the Corporation, and received not later than the close of business on the one hundred twentieth day and not earlier than the close of business on the one hundred fiftieth day prior to the first anniversary of the date that the Corporation mailed its proxy materials for the prior year’s annual meeting; provided, however, that if the date of the annual meeting has changed by more than 30 days from the prior year, notice must be received a reasonable time before the Corporation mails its proxy materials, which time shall be not earlier than the close of business on the one hundred twentieth day prior to such annual meeting and not later than the close of business on the later of the ninetieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period, or extend any new time period, for the giving of a shareholder’s notice as described above.

Each such shareholder’s notice shall set forth as to each matter the shareholder proposes to bring before the annual meeting the following information, correct and complete as of the date of the notice:

(i) a brief description of the business desired to be brought before the annual meeting, including the complete text of any resolutions to be presented at the annual meeting, and the reasons for conducting such business at the annual meeting;

(ii) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the proposal is made: (a) the name and address, as they appear on the Corporation’s stock transfer books, of such shareholder proposing such business; (b) the name and address of such beneficial owner, if any; (c) a representation that the shareholder intends to appear in person or by proxy at such meeting to bring the business specified in the notice before the meeting; (d) the class and number of shares of stock of the Corporation beneficially owned, directly or indirectly, by the shareholder and by such beneficial owner, if any; and (e) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the shareholder’s notice by, or on behalf of, the shareholder or any of its affiliates or associates, the effect or intent of which is to mitigate loss, manage risks or benefit from changes in the share price of the Corporation’s stock, or to increase or decrease the voting power of the shareholder or any of its affiliates or

associates with respect to shares of the Corporation’s stock, and a representation that the shareholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the annual meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed;

(iii) a description of all agreements, arrangements and understandings between the shareholder or beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by the shareholder;

(iv) any other information relating to the shareholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the proposal pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder; and

(v) any material interest of the shareholder or the beneficial owner, if any, in such business.

The information in the shareholder notice shall be updated with information current as of the record date by the shareholder and beneficial owner, if any, not later than ten days after the record date of the applicable meeting.

The Secretary shall deliver each shareholder’s notice that has been timely received to the Chairman for review.

Notwithstanding the foregoing provisions of this Section 1.3, a shareholder seeking to have a proposal included in the Corporation’s proxy statement for an annual meeting of shareholders (other than the nomination of a director, which is exclusively governed by Section 2.3) shall comply with the requirements, including but not limited to the notice requirements, of Regulation 14A under the Securities Exchange Act of 1934, as amended from time to time, or with any successor regulation.

Notwithstanding anything in these Bylaws to the contrary, with the exception of Section 2.3, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 1.3. The chairman of an annual meeting shall, if the facts warrant, determine that the business was not brought before the annual meeting in accordance with the procedures prescribed by this Section 1.3 and declare such determination to the meeting. Business not properly brought before the annual meeting shall not be transacted.

1.4 Special Meetings. Special meetings of the shareholders may be called only by the Chairman, the President or the Board of Directors. Only business within the purpose or purposes described in the notice for a special meeting of shareholders may be conducted at the meeting.

1.5 Record Dates. The Board of Directors shall fix, in advance, a record date or dates to make a determination of shareholders entitled to notice of or to vote at any meeting of shareholders or to receive any dividend or for any purpose, such date or dates to be not more than 70 days before the meeting or action requiring a determination of shareholders.

When a determination of shareholders entitled to notice of or to vote at any meeting of shareholders has been made, such determination shall be effective for any adjournment of the meeting unless the Board of Directors fixes a new record date or dates, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

1.6 Notice of Meetings. Written notice stating the date, time and place of each meeting of shareholders and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than 10 nor more than 60 days before the date of the meeting (except when a different time is required in these Bylaws or by law) to each shareholder of record entitled to vote at such meeting.

Notice of a shareholder’s meeting to act on (i) an amendment of the Articles of Incorporation,

(ii) a plan of merger, share exchange, domestication or entity conversion (iii) the sale, lease, exchange or other disposition of the Corporation’s assets that would leave the Corporation without a significant continuing business activity or (iv) the dissolution of the Corporation, shall be given, in the manner provided above, not less than 25 nor more than 60 days before the date of the meeting. Any notice of a meeting to act on such a matter shall state that the purpose, or one of the purposes, of the meeting is to consider such an act and shall be accompanied by (x) a copy of the proposed amendment, (y) a copy of the proposed plan of merger, share exchange, domestication or entity conversion or (z) a summary of the agreement pursuant to which the proposed transaction will be effected. If only a summary of the agreement is sent to the shareholders, the Corporation shall also send a copy of the agreement to any shareholder who requests it.

If a meeting is adjourned to a different date, time or place, notice need not be given if the new date, time or place is announced at the meeting before adjournment. However, if a new record date for an adjourned meeting is fixed, notice of the adjourned meeting shall be given to shareholders entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.

1.7 Waiver of Notice; Attendance at Meeting. A shareholder may waive any notice required by law, the Articles of Incorporation or these Bylaws before or after the date and time of the meeting that is the subject of such notice. The waiver shall be in writing, be signed by the shareholder entitled to the notice and be delivered to the Secretary for inclusion in the minutes or filing with the corporate records.

A shareholder’s attendance at a meeting (i) waives objection to lack of notice or defective notice of the meeting unless the shareholder, at the beginning of the meeting, objects to holding the meeting or transacting business at the meeting and (ii) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice unless the shareholder objects to considering the matter when it is presented.

1.8 Quorum and Voting Requirements. Unless otherwise required by law, a majority of the votes entitled to be cast on a matter constitutes a quorum for action on that matter. Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting

unless a new record date is or shall be set for that adjourned meeting. If a quorum exists, action on a matter, other than the election of directors, is approved if the votes cast favoring the action exceed the votes cast opposing the action unless a greater number of affirmative votes is required by law. Directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. The chairman of the meeting or a majority of the shares represented at the meeting may adjourn the meeting from time to time, whether or not there is a quorum.

1.9 Proxies. A shareholder may vote his or her shares in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for such shareholder by signing an appointment form or by an electronic transmission, either personally or by his or her attorney-in-fact. An appointment of a proxy is effective when received by the inspectors of election or the officer or agent of the Corporation authorized to tabulate votes and is valid for eleven (11) months unless a longer period is expressly provided in the appointment form or electronic transmission. An appointment of a proxy is revocable unless the appointment form or electronic transmission conspicuously states that it is irrevocable and the appointment is coupled with an interest.

ARTICLE II

DIRECTORS

2.1 General Powers. The Corporation shall have a Board of Directors. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation managed under the direction of, its Board of Directors, subject to any limitation set forth in the Articles of Incorporation.

2.2 Number and Term. The number of directors shall be eleven (11). This number may be increased or decreased from time to time by amendment to these Bylaws to the extent permitted by law and by the Corporation’s Articles of Incorporation. Except as provided in Section 2.5, directors shall be elected for terms of up to three (3) years in the manner set forth in the Articles of Incorporation and shall serve until the election of their successors. No decrease in the number of directors shall have the effect of changing the term of any incumbent director. Unless a director resigns or is removed by the majority vote of the shareholders, every director shall hold office for the term elected or until a successor to such director shall have been elected.

2.3 Nomination of Directors. Nominations for the election of directors may be made by the Board of Directors or by any shareholder entitled to vote in the election of directors generally. However, any such shareholder may nominate one or more persons for election as directors at a meeting only if written notice of such shareholder’s intent to make such nomination or nominations has been given, either by personal delivery to the Secretary at the principal office of the Corporation or by United States certified mail, postage prepaid, addressed to the Secretary at the principal office of the Corporation, and received: (i) with respect to an election to be held at an annual meeting of shareholders, not later than the close of business on the one hundred twentieth day and not earlier than the close of business on the one hundred fiftieth day prior to the date that the Corporation mailed its proxy materials for the prior year’s annual meeting; provided, however, that if the date of the annual meeting has changed by more than 30 days from the prior year, notice must be received a reasonable time before the Corporation mails its proxy materials, which time shall be not earlier than the close of business on the one hundred twentieth day prior to such annual

meeting and not later than the close of business on the later of the ninetieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation; and (ii) with respect to a special meeting of shareholders for the election of directors, not later than the close of business on the seventh day following the date on which notice of such meeting is first given to shareholders. No person shall be eligible for election as a director unless nominated in accordance with the procedures set forth in this Section 2.3. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period, or extend any time period, for the giving of a shareholder’s notice as described above.

Each such shareholder’s notice shall set forth the following information, correct and complete as of the date of the notice: (a) as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination is made: (i) the name and address, as they appear on the Corporation’s stock transfer books, of such shareholder; (ii) the name and address of such beneficial owner, if any; (iii) a representation that the shareholder is a shareholder of record and intends to appear in person or by proxy at such meeting to nominate the person or persons specified in the notice; (iv) the class and number of shares of stock of the Corporation beneficially owned, directly or indirectly, by the shareholder and by such beneficial owner, if any; and (v) a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, hedging transactions, and borrowed or loaned shares) that has been entered into as of the date of the shareholder’s notice by, or on behalf of, the shareholder or any of its affiliates or associates, the effect or intent of which is to mitigate loss, manage risks or benefit from changes in the share price of the Corporation’s stock, or to increase or decrease the voting power of the shareholder or any of its affiliates or associates with respect to shares of stock of the Corporation, and a representation that the shareholder will notify the Corporation in writing of any such agreement, arrangement or understanding in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed; (b) as to each person the shareholder proposes to nominate for election or reelection to the Board of Directors: (i) the name, age, business address and, if known, residence address of such person; (ii) the principal occupation or employment of such person; (iii) the class and number of shares of stock of the Corporation which are beneficially owned by such person; (iv) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (v) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such shareholder or beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the shareholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; (c) a description of all agreements, arrangements and understandings between the shareholder or beneficial owner, if any, and any other person or

persons (including their names) in connection with the nomination by the shareholder; (d) any other information relating to the shareholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for the election of directors in a contested election pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder; and (e) any material interest of the shareholder or the beneficial owner, if any, in such nomination. The information in the shareholder notice shall be updated with information current as of the record date by the shareholder and beneficial owner, if any, not later than ten days after the record date of the applicable meeting.

Any proposed nominee shall promptly furnish to the Corporation such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such nominee.

In addition to the provisions of this Section 2.3, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 2.3. Nothing in this Section 2.3 shall be construed to require that the Corporation include any nomination on the proxy card disseminated by the Corporation with respect to any meeting or in any proxy statement filed in connection therewith. For the avoidance of doubt, this Section 2.3 shall apply to all director nominations intended to be brought before a shareholder meeting irrespective of whether any such nomination is intended to be included in the Corporation’s proxy statement, a competing proxy solicitation, or otherwise.

The Secretary of the Corporation shall deliver each such shareholder’s notice containing the information required by this Section 2.3 that has been timely received to the Board of Directors or a committee designated by the Board of Directors for review. Any person nominated for election as director by the Board of Directors or any committee designated by the Board of Directors shall, upon the request of the Board of Directors or such committee, furnish to the Secretary of the Corporation all such information pertaining to such person that is required to be set forth in a shareholder’s notice of nomination. The chairman of the meeting of shareholders shall, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed by this Section 2.3 and declare such determination to the meeting. The defective nomination shall be disregarded.

2.4 Election. Except as provided in Section 2.5, the directors shall be elected by the holders of the common shares at each annual meeting of shareholders or at a special meeting called for such purpose. Those persons who receive the greatest number of votes shall be deemed elected even though they do not receive a majority of the votes cast. No individual shall be named or elected as a director without such individual’s prior consent.

2.5 Removal; Vacancies. The shareholders may remove one or more directors with or without cause. If a director is elected by a voting group, only the shareholders of that voting group may elect to remove the director. Unless the Articles of Incorporation require a greater vote, a director may be removed if the number of votes cast to remove the director

constitutes a majority of the votes entitled to be cast at an election of directors of the voting group or voting groups by which such director was elected. A director may be removed by the shareholders only at a meeting called for the purpose of removing such director and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the director.

A vacancy on the Board of Directors, including a vacancy resulting from the removal of a director or an increase in the number of directors, may be filled by (i) the shareholders, (ii) the Board of Directors or (iii) the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors and may, in the case of a resignation that will become effective at a specified later date, be filled before the vacancy occurs but the new director may not take office until the vacancy occurs. Any director elected by the Board of Directors shall serve until the next annual meeting of shareholders or until the election of a successor to such director.

2.6 Annual and Regular Meetings. An annual meeting of the Board of Directors, which shall be considered a regular meeting, shall be held as soon as practicable following each annual meeting of shareholders for the purpose of electing officers and carrying on such other business as may properly come before the meeting. The Board of Directors may also adopt a schedule of additional meetings which shall be considered regular meetings. Regular meetings shall be held at such times and at such places, in or out of the Commonwealth of Virginia, as the Chairman, the President or the Board of Directors shall designate from time to time. If no place is designated, regular meetings shall be held at the principal office of the Corporation.

2.7 Special Meetings. Special meetings of the Board of Directors may be called by the Chairman, the President, the Board of Directors or any two Directors of the Corporation and shall be held at such times and at such places, in or out of the Commonwealth of Virginia, as the person or persons calling the meetings shall designate. If no such place is designated in the notice of a meeting, it shall be held at the principal office of the Corporation.

2.8 Notice of Meetings. No notice need be given of regular meetings of the Board of Directors. Notices of special meetings of the Board of Directors shall be given to each director in person or delivered to his or her residence or business address (or such other place as the director may have directed in writing) or otherwise communicated to him or her not less than twenty-four (24) hours before the meeting by mail, e-mail, messenger, telecopy, telegraph or other means of written communication or by telephoning such notice to the director. Any such notice shall set forth the time and place of the meeting.

2.9 Waiver of Notice; Attendance at Meeting. A director may waive any notice required by law, the Articles of Incorporation or these Bylaws before or after the date and time stated in the notice and such waiver shall be equivalent to the giving of such notice. Except as provided in the next paragraph of this section, the waiver shall be in writing, signed by the director entitled to the notice and filed with the minutes or corporate records.

A director’s attendance at or participation in a meeting waives any required notice to such director of the meeting unless the director, at the beginning of the meeting or promptly upon arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

2.10 Quorum; Voting. A majority of the number of directors fixed in these Bylaws shall constitute a quorum for the transaction of business at a meeting of the Board of Directors. If a quorum is present when a vote is taken, the affirmative vote of a majority of the directors present is the act of the Board of Directors. A director who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless (i) the director objects, at the beginning of the meeting or promptly upon arrival, to holding it or transacting specified business at the meeting or (ii) the director votes against or abstains from the action taken.

2.11 Telephonic Meetings. Any or all directors may participate in any regular or special meeting of the Board of Directors or any committee thereof, or conduct such meeting, through the use of any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.

2.12 Action Without Meeting. Action required or permitted to be taken by the Board of Directors may be taken without a meeting if each director signs a consent describing the action to be taken and delivers it to the Corporation. Action taken under this section shall be effective when the last director signs the consent unless the consent specifies a different effective date, in which event the action taken is effective as of the date specified therein provided the consent states the date of execution by each director.

2.13 Compensation. Directors shall not receive a stated salary for their services, but directors may be paid a fixed sum and expenses for attendance at any regular or special meeting of the Board of Directors or any meeting of any Committee and such other compensation as the Board of Directors shall determine. A director may serve or be employed by the Corporation in any other capacity and receive compensation therefor.

2.14 Chairman and Vice Chairman. The Chairman of the Board, if one is designated by the Board of Directors, shall preside at all meetings of the Board and of shareholders and perform such other duties as the Board shall assign from time to time. The Vice Chairman of the Board, if one is designated by the Board of Directors, shall, at the request of or in the absence of the Chairman of the Board, preside at meetings of the Board and of shareholders and, when requested to do so by the Board, shall perform all of the functions of the Chairman of the Board during the absence or incapacity of the latter.

ARTICLE III

COMMITTEES OF DIRECTORS

3.1 Committees. The Board of Directors may create one or more committees and appoint members of the Board of Directors to serve on them. Unless otherwise provided in these Bylaws, each committee shall have two or more members who serve at the pleasure of the Board of Directors. The creation of a committee and appointment of members to it shall be approved by a majority of all of the directors in office when the action is taken.

3.2 Authority of Committees. To the extent specified by the Board of Directors, each committee may exercise the authority of the Board of Directors, except that a committee may not (i) approve or recommend to shareholders action that is required by law to be approved by shareholders, (ii) fill vacancies on the Board of Directors or on any of its committees, (iii) amend the Articles of Incorporation, (iv) adopt, amend, or repeal these Bylaws, (v) approve a plan of merger not requiring shareholder approval, (vi) authorize or approve a distribution, except according to a general formula or method prescribed by the Board of Directors or (vii) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and rights, preferences, and limitations of a class or series of shares, except that the Board of Directors may authorize a committee, or a senior executive officer of the Corporation, to do so subject to such limits, if any, as may be prescribed by the Board of Directors or by law.

3.3 Executive Committee. The Board of Directors may appoint an Executive Committee consisting of not less than two directors, which committee shall have all of the authority of the Board of Directors except to the extent such authority is limited by the provisions of Section 3.2.

3.4 Audit Committee. The Board of Directors shall appoint each year an Audit Committee, which shall be composed of at least three members of the Board, all of whom shall satisfy the independence and other requirements of the New York Stock Exchange and the Securities and Exchange Commission as then in effect. Subject to the approval of the Board of Directors, the Audit Committee shall adopt and from time to time assess and revise a written charter which will specify how the Committee will carry out its responsibilities and such other matters as the Board and the Audit Committee determine are necessary or desirable.

3.5 Nominating and Governance Committee. The Board of Directors shall appoint each year a Nominating and Governance Committee, which shall be composed of at least two members of the Board, all of whom shall satisfy the independence and other requirements of the New York Stock Exchange and the Securities and Exchange Commission as then in effect. Subject to the approval of the Board of Directors, the Nominating and Governance Committee shall adopt and from time to time assess and revise a written charter which will specify how the Committee will carry out its responsibilities and such other matters as the Board and the Nominating and Governance Committee determine are necessary or desirable.

3.6 Compensation and Personnel Committee. The Board of Directors shall appoint each year a Compensation and Personnel Committee, which shall be composed of at least three members of the Board, all of whom shall satisfy the independence and other requirements of the New York Stock Exchange and the Securities and Exchange Commission as then in effect.

Subject to the approval of the Board of Directors, the Compensation and Personnel Committee shall adopt and from time to time assess and revise a written charter which will specify how the Committee will carry out its responsibilities and such other matters as the Board and the Compensation and Personnel Committee determine are necessary or desirable.

3.7 Committee Meetings; Miscellaneous. The provisions of these Bylaws which govern meetings, action without meetings, notice and waiver of notice, and quorum and voting requirements of the Board of Directors shall apply to committees of directors and their members as well.

ARTICLE IV

OFFICERS

4.1 Officers. The officers of the Corporation shall be a President, a Secretary, a Chief Financial Officer, and, in the discretion of the Board of Directors or the President, one or more Vice-Presidents and such other officers as may be deemed necessary or advisable to carry on the business of the Corporation. Any two or more offices may be held by the same person.

4.2 Election; Term. Officers shall be elected by the Board of Directors. The President may, from time to time, appoint other officers. Officers elected by the Board of Directors shall hold office, unless sooner removed, until the next annual meeting of the Board of Directors or until their successors are elected. Officers appointed by the President shall hold office, unless sooner removed, until their successors are appointed. The action of the President in appointing officers shall be reported to the next regular meeting of the Board of Directors after it is taken. Any officer may resign at any time upon written notice to the Board of Directors or the President and such resignation shall be effective when notice is delivered unless the notice specifies a later effective date.

4.3 Removal of Officers. The Board of Directors may remove any officer at any time, with or without cause. The President may remove any officer appointed by the President at any time, with or without cause. Such action shall be reported to the next regular meeting of the Board of Directors after it is taken.

4.4 Duties of the President. The President shall be the Chief Executive Officer of the Corporation and a member of the Board of Directors. The President, in the absence of the Chairman of the Board and the Vice Chairman of the Board: shall preside at all meetings of the Board of Directors and shareholders; shall have power to call special meetings of the shareholders and directors for any purpose; may hire, appoint and discharge employees and agents of the Corporation and fix compensation for employees who are not executive officers; may make and sign deeds, mortgages, deeds of trust, notes, leases, powers of attorney, contracts and agreements in the name and on behalf of the Corporation; shall have power to carry into effect all directions of the Board of Directors; and shall have general supervision of the business of the Corporation, except as may be limited by the Board of Directors, the Articles of Incorporation, or these Bylaws.

4.5 Duties of the Vice President. Vice Presidents, in the order designated by the Board of Directors from time to time, shall exercise all of the functions of the President during the absence or incapacity of the latter and shall perform such other duties as may be assigned to them by the Board of Directors or the President.

4.6 Duties of the Secretary. The Secretary shall be the ex-officio clerk of the Board of Directors and shall give, or cause to be given, notices of all meetings of shareholders and directors, and all other notices required by law or by these Bylaws. The Secretary shall record the proceedings of the meetings of the shareholders, Board of Directors and committees of the Board of Directors in books kept for that purpose and shall keep the seal of the Corporation and attach it to all documents requiring such impression unless some other officer is

designated to do so by the Board of Directors. The Secretary shall also perform such other duties as may be assigned by the Board of Directors or the President.

4.7 Duties of the Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept full and accurate books of account, and may make and sign deeds, mortgages, deeds of trust, notes, leases, powers of attorney, contracts and agreements in the name and on behalf of the Corporation. Whenever required by the Board of Directors or the President, the Chief Financial Officer shall render a financial statement showing all transactions of the Corporation and the financial condition of the Corporation.

4.8 Duties of the Assistant Secretary. There may be one or more Assistant Secretaries who shall exercise all of the functions of the Secretary during the absence or incapacity of the latter and such other duties as may be assigned from time to time by the Board of Directors or the President.

4.9 Duties of Other Officers. The other officers of the Corporation, which may include Assistant Vice Presidents, a Treasurer, Assistant Treasurers, a Controller or Assistant Controllers, shall have such authority and perform such duties as shall be prescribed by the Board of Directors or by officers authorized by the Board of Directors to appoint them to their respective offices. To the extent that such duties are not so stated, such officers shall have such authority and perform the duties which generally pertain to their respective offices, subject to the control of the President or the Board of Directors.

4.10 Voting Securities of Other Corporations. Unless otherwise provided by the Board of Directors, each of the President and the Chief Financial Officer, in the name and on behalf of the Corporation, may appoint from time to time himself or herself or any other person (or persons) proxy, attorney or agent for the Corporation to cast the votes which the Corporation may be entitled to cast as a shareholder, member or otherwise in any other corporation, partnership or other legal entity, domestic or foreign, whose stock, interests or other securities are held by the Corporation, or to consent in writing to any action by such other entity, or to exercise any or all other powers of this Corporation as the holder of the stock, interests or other securities of such other entity. Each of the President and the Chief Financial Officer may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent and may execute or cause to be executed on behalf of the Corporation and under its corporate seal such written proxies, consents, waivers, or other instruments as may be deemed necessary or proper. Each of the President and the Chief Financial Officer may attend any meeting of the holders of stock, interests or other securities of any such other entity and vote or exercise any or all other powers of this Corporation as the holder of the stock, interest or other securities of such other entity.

4.11 Compensation. The Board of Directors shall have the authority to fix the compensation of all officers of the Corporation.

ARTICLE V

EVIDENCE OF SHARES

5.1 Form. Shares of the Corporation shall, when fully paid, be evidenced by certificates containing such information as is required by law and approved by the Board of Directors. Alternatively, the Board of Directors may authorize the issuance of some or all shares without certificates. In such event, within a reasonable time after issuance, the Corporation shall send to the shareholder a written confirmation of its records with respect to such shares containing the information required by law. When issued, certificates shall be signed by the Chairman of the Board, the President or a Vice President designated by the Board and the Secretary or an Assistant Secretary and may (but need not) be sealed with the seal of the Corporation. The seal of the Corporation and any or all of the signatures on a share certificate may be facsimile. If any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such individual were such officer, transfer agent or registrar on the date of issue.

5.2 Transfer. The Board of Directors may make rules and regulations concerning the issue, registration and transfer of shares and/or certificates representing the shares of the Corporation. Transfers of shares and/or of the certificates representing such shares shall be made upon the books of the Corporation by surrender of the certificates representing such shares, if any, accompanied by written assignments given by the record owners thereof or their attorneys-in-fact.

5.3 Restrictions on Transfer. A lawful restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction complies with the requirements of law and its existence is noted conspicuously on the front or back of any certificate representing the shares or has been otherwise communicated in accordance with the requirements of law. Unless so noted or communicated, a restriction is not enforceable against a person without knowledge of the restriction.

5.4 Lost or Destroyed Share Certificates. The Corporation may issue a new share certificate or a written confirmation of its records with respect to shares in the place of any certificate theretofore issued which is alleged to have been lost or destroyed and may require the owner of such certificate, or such owner’s legal representative, to give the Corporation a bond, with or without surety, or such other agreement, undertaking or security as the Board of Directors shall determine is appropriate, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction or the issuance of any such new certificate.

5.5 Registered Shareholders. The Corporation shall be entitled to treat the holder of record of any share or shares of stock as the owner thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person. The Corporation shall not be liable for registering any transfer of shares which are registered in the name of a fiduciary unless done with actual knowledge of facts which would cause the Corporation’s action in registering the transfer to amount to bad faith.

ARTICLE VI

MISCELLANEOUS PROVISIONS

6.1 Corporate Seal. The corporate seal of the Corporation shall be circular and shall have inscribed thereon, within and around the circumference, the name of the Corporation. In the center shall be the word "SEAL".

6.2 Fiscal Year. The fiscal year of the Corporation shall begin on the first day of March of each year and end on the last day of February in the next succeeding year.

6.3 Amendments. The power to alter, amend or repeal th ese Bylaws or adopt new bylaws shall be vested in the Board of Directors unless otherwise provided in the Articles of Incorporation. Bylaws adopted by the Board of Directors may be repealed or changed or new bylaws adopted by the shareholders, and the shareholders may prescribe that any bylaw adopted by them may not be altered, amended or repealed by the Board of Directors.

ARTICLE VII

EMERGENCY BYLAWS

7.1 Application. The Emergency Bylaws provided in this Article VII shall be operative during any emergency, notwithstanding any different provision in these Bylaws or in the Articles of Incorporation or in the Virginia Stock Corporation Act (other than those provisions relating to emergency bylaws). An emergency exists if a quorum of the Board of Directors cannot readily be assembled because of some catastrophic event. To the extent not inconsistent with these Emergency Bylaws, the Bylaws provided in the preceding Articles shall remain in effect during an emergency. Upon the termination of an emergency, the Emergency Bylaws shall cease to be operative unless and until another emergency shall occur.

7.2 Operation. During any such emergency:

(a) Any meeting of the Board of Directors may be called by any officer of the Corporation or by any director. The notice shall specify the date, time and place of the meeting. To the extent feasible, notice shall be given in accordance with Section 2.8 above, but notice may be given only to the directors as it may be feasible to reach at the time, by such means as may be feasible at the time, including publication or radio, and at a time less than twenty-four hours before the meeting if deemed necessary by the person giving notice. Notice shall be similarly given, to the extent feasible, to the other persons referred to in (b) below.

(b) At any meeting of the Board of Directors, a quorum shall consist of a majority of the number of directors fixed at the time by these Bylaws; provided, however, that if the directors present at any particular meeting shall be fewer than the number required for such quorum, other persons present as referred to below and not already serving as directors, up to the number necessary to make up such quorum, shall be deemed directors for such particular meeting as determined by the following provisions and in the following order of priority:

(i) The Executive Vice Presidents in the order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in the order of their seniority in age;

(ii) The Senior Vice Presidents in the order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in the order of their seniority in age;

(iii) The Vice Presidents at the principal office of the Corporation in the order of their seniority of first election to such office, or if two or more shall have been first elected to such office on the same day, in the order of their seniority in age; and

(iv) Any other persons that are designated on a list that shall have been approved by the Board of Directors before the emergency, such persons to be taken in such order of priority and subject to such conditions as may be provided in the resolution approving the list.

(c) The Board of Directors, during as well as before any emergency, may provide, and from time to time modify, lines of succession in the event that during an emergency any or all officers or agents of the Corporation shall for any reason be rendered incapable of discharging their duties.

(d) The Board of Directors, during as well as before any emergency, may, effective in the emergency, change the principal office, or designate several alternative offices, or authorize the officers of the Corporation to do so.

(e) No officer, director or employee shall be liable for any action taken in good faith in accordance with these Emergency Bylaws.

(f) These Emergency Bylaws shall be subject to repeal or change by further action of the Board of Directors or by action of the shareholders, except that no repeal or change shall modify the provisions of Section 7.2(e) above with regard to action or inaction prior to the time of such repeal or change. Any amendment to these Emergency Bylaws may make any further or different provision that may be practical and necessary for the circumstances of the emergency.

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.

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.

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:

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

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

you have used, possessed or distributed any illegal drug;

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

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

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

you refuse to follow the lawful instructions of Company management;

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

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

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

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:

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”.

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

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.

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:

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.

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.	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

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

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.

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.

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:

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

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

you have used, possessed or distributed any illegal drug;

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

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

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

you refuse to follow the lawful instructions of Company management;

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

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

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.”

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.

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.

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

FOR IMMEDIATE RELEASE

CARMAX ANNOUNCES CHIEF FINANCIAL OFFICER TRANSITION

Tom Reedy Promoted to CFO

RICHMOND, Va. (October 22, 2010)—CarMax, Inc., (NYSE: KMX), the nation’s largest retailer of used cars, today announced the promotion of Tom Reedy to senior vice president and chief financial officer.

Reedy, 46, will be responsible for CarMax’s finance organization, including accounting, treasury, financial planning and analysis, tax and risk management. The company will begin recruiting for the position of treasurer, which Reedy previously held.

“Tom has done a great job as treasurer and has played an instrumental role in all financial aspects of the company. Many of the accounting departments already transitioned to his leadership more than a year ago,” said Tom Folliard, CarMax president and CEO. “We look forward to his continued leadership in his new role.”

Reedy will continue to report to Keith Browning, 57, who previously served as CFO and will remain with CarMax in the role of executive vice president, finance. Browning will continue to manage CarMax Auto Finance, consumer finance and investor relations.

Previously, Reedy served as senior vice president, finance. He joined CarMax in 2003 as vice president, treasurer, and was a founding board member of The CarMax Foundation. Prior to CarMax, Reedy served as vice president, corporate development and treasurer at Gateway, Inc., and in various financial roles at both American Airlines and GATX Corporation.

Reedy holds a Bachelor of Arts in Economics from the University of California at Los Angeles, and a Master of Business Administration from the Darden School at the University of Virginia.

About CarMax

CarMax, a FORTUNE 500 company, and one of the FORTUNE 2010 “100 Best Companies to Work For,” is the nation’s largest retailer of used cars. Headquartered in Richmond, Va., we currently operate 103 used car superstores in 49 markets. The CarMax consumer offer is structured around four customer benefits: low, no-haggle prices; a broad selection; high quality vehicles; and customer-friendly service. During the fiscal year ended February 28, 2010, the company retailed 357,129 used vehicles and sold 197,382 wholesale vehicles at our in-store auctions. For more information, access the CarMax website at www.carmax.com.

# # #

Contacts:

Investors:

Katharine Kenny, Vice President, Investor Relations, (804) 935-4591

Celeste Gunter, Manager, Investor Relations, (804) 935-4597

Media:

Laura Donahue, Vice President, Public Affairs, (804) 747-0422, ext. 4434

Trina Lee, Director, Public Affairs (804) 747-0422, ext. 4197