Entry into Material Agreement, Financial Statements and Exhibits
Item 1.01. Entry into a Material Definitive Agreement. On December 23, 2005, CarMax, Inc. (the "Company") issued stock options to Austin Ligon, the Company's President and Chief Executive Officer, to purchase 199,481 shares of common stock of the Company at an exercise price of $28.26 per share, which exercise price was equal to the fair market value of the Company's common stock on the date of grant (the "New Option Grant"). Twenty-five percent of these options become vested and exercisable on each of the first four anniversaries of the date of grant. The term of the option grant is eight and a half years. The description of the New Option Grant herein is a summary of the material terms of the grant and does not purport to be complete, and is qualified in its entirety by reference to the form of incentive award agreement between the Company and Mr. Ligon for the New Option Grant which is filed herewith as Exhibit 10.1 and is hereby incorporated by reference.
On October 6, 2005, Mr. Ligon announced that he would retire as President and Chief Executive Officer of the Company in calendar year 2006 following the naming of his successor. In reviewing Mr. Ligon's compensation-related agreements in connection with his retirement, the Company discovered that the terms of the incentive award agreements used to grant options to Mr. Ligon in fiscal year 2005 and fiscal year 2006, respectively (the "Prior Option Grants"), did not accurately reflect the terms intended by the Company. Specifically, the terms of the Prior Option Grants provide that Mr. Ligon or his representatives must exercise vested options within three months of the effective date of his retirement, or within one year of his death or disability, or such options will expire. The Company had intended that the Prior Option Grants be consistent with the Company's fiscal year 2004 option grants, which provide that all options vested at the time of retirement, death or disability be exercisable at any time before the expiration date of the option grant. In order to fulfill this intent, the Company is issuing the New Option Grant with terms that provide that all options vested at the time of retirement, death or disability be exercisable at any time before the expiration date of the option grant. The terms of the New Option Grant, the Prior Option Grants and the Company's fiscal year 2004 option grants provide that all unvested options immediately vest upon termination of employment of the option holder due to retirement, death or disability. The Prior Option Grants remain effective and are not affected in any way by the New Option Grant.
I'm not sure what you mean by "buying on the way out". It sounds like KMX has extended the term of his previous option grant, and granted new options that "freeze" his buy price for 8� years at todays stock price. He will only exercise his options if the stock price rises above $28.26 before 2012. At least that's how I read it; how do you read it?
Right you are Loudonn!. Few here understand how options work.....and fewer understand that as part of normal compensation for Executives, that excercising those Options isn't necessarily a bad thing for the Company....It's the Boss paying off his Vacation home!