<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>sip.txt
<DESCRIPTION>STOCK INCENTIVE PLAN, AMENDED & RESTATED 6/21/05
<TEXT>
                                  CARMAX, INC.
                            2002 STOCK INCENTIVE PLAN
                     (AS AMENDED AND RESTATED JUNE 21, 2005)
 
 
1. Purpose. The purpose of this CarMax, Inc. 2002 Stock Incentive Plan (the
"Plan") is to further the long term stability and financial success of CarMax,
Inc. (the "Company") by attracting and retaining key employees of the Company
through the use of stock incentives. It is believed that ownership of Company
Stock will stimulate the efforts of those employees upon whose judgment and
interest the Company is and will be largely dependent for the successful conduct
of its business. It is also believed that Incentive Awards granted to employees
under this Plan will strengthen their desire to remain with the Company and will
further the identification of those employees' interests with those of the
Company's shareholders.
 
2. Definitions. As used in the Plan, the following terms have the meanings
indicated:
 
         (a)      "Act" means the Securities Exchange Act of 1934, as amended.
 
         (b)      "Applicable Withholding Taxes" means the minimum aggregate
                  amount of federal, state and local income and payroll taxes
                  that the Company is required by applicable law to withhold in
                  connection with any Incentive Award.
 
         (c)      "Board" means the Board of Directors of the Company.
 
         (d)      "Change of Control" means the occurrence of either of the
                  following events: (i) a third person, including a "group" as
                  defined in section 13(d)(3) of the Act, becomes, or obtains
                  the right to become, the beneficial owner of Company
                  securities  having 20% or more of the combined  voting power
                  of the then outstanding securities of the Company that may be
                  cast for the election of directors to the Board of the Company
                  (other than as a result of an issuance of securities initiated
                  by the Company in the ordinary course of business); or (ii) as
                  the result of, or in connection with, any cash tender or
                  exchange offer, merger or other business combination, sale of
                  assets or contested election, or any combination of the
                  foregoing transactions, the persons who were directors of the
                  Company before such transactions shall cease to constitute a
                  majority of the Board or of the board of directors of any
                  successor to the Company.
 
         (e)      "Code" means the Internal Revenue Code of 1986, as amended. A
                  reference to any provision of the Code shall include reference
                  to any successor or replacement provision of the Code.
         (f)      "Committee" means the committee appointed by the Board as
                  described under Section 14.
 
         (g)      "Company" means CarMax, Inc., a Virginia corporation.
 
<PAGE>
 
 
         (h)      "Company Stock" means the common stock of the Company. In the
                  event of a change in the capital structure of the Company, the
                  shares resulting from such a change shall be deemed to be
                  Company Stock within the meaning of the Plan.
 
         (i)      "Date of Grant" means the date on which an Incentive Award is
                  granted by the Committee.
 
         (j)      "Disability" or "Disabled" means, as to an Incentive Stock
                  Option, a Disability within the meaning of Code section
                  22(e)(3). As to all other forms of Incentive Awards, the
                  Committee shall determine whether a Disability exists and such
                  determination shall be conclusive.
 
         (k)      "Fair Market Value" means, for any given date, the fair market
                  value of the Company Stock as of such date, as determined by
                  the Committee based on the then prevailing prices of the
                  Company Stock on the exchange on which it generally has the
                  greatest trading volume.
 
         (l)      "Incentive Award" means, collectively, the award of an Option,
                  Stock Appreciation Right, or Restricted Stock under the Plan.
 
         (m)      "Incentive Stock Option" means an Option intended to meet the
                  requirements of, and qualify for favorable federal income tax
                  treatment under, Code section 422.
 
         (n)      "Mature Shares" means shares of Company Stock for which the
                  holder thereof has good title, free and clear of all liens and
                  encumbrances and which such holder either (i) has held for at
                  least six (6) months or (ii) has purchased on the open market.
 
         (o)      "Nonstatutory Stock Option" means an Option that does not meet
                  the requirements of Code section 422 or, even if meeting the
                  requirements of Code section 422, is not intended to be an
                  Incentive Stock Option and is so designated.
 
         (p)      "Option" means a right to purchase Company Stock granted under
                  Section 7 of the Plan, at a price determined in accordance
                  with the Plan.
 
         (q)      "Parent" means, with respect to any corporation, a parent of
                  that corporation within the meaning of Code section 424(e).
 
         (r)      "Participant" means any employee who receives an Incentive
                  Award under the Plan.
 
         (s)      "Reload Feature" means a feature of an Option described in a
                  Participant's stock option agreement that authorizes the
                  automatic grant of a Reload Option in accordance with the
                  provisions of Section 9(e).
 
<PAGE>
 
         (t)      "Reload Option" means an Option automatically granted to a
                  Participant equal to the number of shares of Mature Shares
                  delivered by the Participant in payment of the exercise price
                  of an Option having a Reload Feature.
 
         (u)      "Restricted Stock" means Company Stock awarded upon the terms
                  and subject to the restrictions set forth in Section 6.
 
         (v)      "Restricted Stock Award" means an award of Restricted Stock
                  granted under the Plan.
 
         (w)      "Rule 16b-3" means Rule 16b-3 adopted pursuant to section
                  16(b) of the Act. A reference in the Plan to Rule 16b-3 shall
                  include a reference to any corresponding rule (or number
                  redesignation) of any amendments to Rule 16b-3 adopted after
                  the effective date of the Plan's adoption.
 
         (x)      "Stock Appreciation Right" means a right to receive amounts
                  from the Company awarded upon the terms and subject to the
                  restrictions set forth in Section 8.
 
         (y)      "Subsidiary" means any business entity (including, but not
                  limited to, a corporation, partnership or limited liability
                  company) of which a company directly or indirectly owns one
                  hundred percent (100%) of the voting interests of the entity
                  unless the Committee determines that the entity should not be
                  considered a Subsidiary for purposes of the Plan. If a company
                  owns less than one hundred percent (100%) of the voting
                  interests of the entity, the entity will be considered a
                  Subsidiary for purposes of the Plan only if the Committee
                  determines that the entity should be so considered. For
                  purposes of Incentive Stock Options, Subsidiary shall be
                  limited to a subsidiary within the meaning of Code section
                  424(f).
 
         (z)      "10% Shareholder" means a person who owns, directly or
                  indirectly, stock possessing more than 10% of the total
                  combined voting power of all classes of stock of the Company
                  or any Parent or Subsidiary of the Company. Indirect ownership
                  of stock shall be determined in accordance with Code section
                  424(d).
 
3. General.  Incentive  Awards may be granted under the Plan in the form of
Options,  Stock Appreciation Rights, and Restricted Stock. Options granted under
the Plan may be Incentive  Stock  Options or  Nonstatutory  Stock  Options.  The
provisions of the Plan referring to Rule 16b-3 shall apply only to  Participants
who are subject to section 16 of the Act.
 
4. Stock.  Subject to Section 13 of the Plan,  there shall be reserved  for
issuance  under the Plan an aggregate  of  16,750,000  shares of Company  Stock,
which shall be  authorized,  but unissued  shares.  Subject to Section 13 of the
Plan,  no more than  1,500,000  shares of Company  Stock may be allocated to the
Incentive  Awards  that are  granted  to any one  Participant  during any single
calendar year.  Shares of Company Stock that have not been issued under the Plan
and that are  allocable to Incentive  Awards or portions  thereof that expire or
otherwise  terminate  unexercised  may again be subjected to an Incentive  Award
 
<PAGE>
 
under the Plan. Similarly,  if any shares of Restricted Stock issued pursuant to
the Plan are  reacquired  by the  Company  as a result of a  forfeiture  of such
shares  pursuant to the Plan, such shares may again be subjected to an Incentive
Award  under the Plan.  For  purposes  of  determining  the  number of shares of
Company  Stock that are  available  for  Incentive  Awards under the Plan,  such
number  shall  include the number of shares of Company  Stock under an Incentive
Award  surrendered  by a  Participant  or  retained by the Company in payment of
Applicable Withholding Taxes.
 
5. Eligibility.
 
         (a)      All present and future employees of the Company (or any Parent
                  or Subsidiary of the Company, whether now existing or
                  hereafter created or acquired) shall be eligible to receive
                  Incentive Awards under the Plan. The Committee shall have the
                  power and complete discretion, as provided in Section 14, to
                  select which employees shall receive Incentive Awards and to
                  determine for each such Participant the terms and conditions,
                  the nature of the award and the number of shares to be
                  allocated to each Participant as part of each Incentive Award.
 
         (b)      The grant of an Incentive Award shall not obligate the Company
                  or any Parent or Subsidiary of the Company to pay a
                  Participant any particular amount of remuneration, to continue
                  the employment of the Participant after the grant or to make
                  further grants to the Participant at any time thereafter.
 
6. Restricted Stock Awards.
 
         (a)      Whenever the Committee deems it appropriate to grant a
                  Restricted Stock Award, notice shall be given to the
                  Participant stating the number of shares of Restricted Stock
                  for which the Restricted Stock Award is granted and the terms
                  and conditions to which the Restricted Stock Award is subject.
                  This notice may be given in writing or in electronic form and
                  shall be the award agreement between the Company and the
                  Participant. A Restricted Stock Award may be made by the
                  Committee in its discretion without cash consideration.
 
         (b)      Restricted Stock issued pursuant to the Plan shall be subject
                  to the following restrictions:
 
                  (i)      None of such shares may be sold, assigned,
                           transferred, pledged, hypothecated, or otherwise
                           encumbered or disposed of until the restrictions on
                           such shares shall have lapsed or shall have been
                           removed pursuant to paragraph (d) or (e) below.
 
                  (ii)     The restrictions on such shares must remain in effect
                           and may not lapse for a period of three years
                           beginning on the Date of Grant, except as provided
                           under paragraph (d) or (e) in the case of Disability,
                           retirement, death or a Change in Control.
 
                  (iii)    If a Participant ceases to be employed by the Company
                           or a Parent or Subsidiary of the Company, the
                           Participant shall forfeit to the Company any shares
                           of Restricted Stock, the restrictions on which shall
 
<PAGE>
 
                           not have lapsed or shall not have been removed
                           pursuant to paragraph (d) or (e) below, on the date
                           such Participant shall cease to be so employed.
 
                  (iv)     The Committee may establish such other restrictions
                           on such shares that the Committee deems appropriate,
                           including, without limitation, events of forfeiture.
 
         (c)      Upon the acceptance by a Participant of a Restricted Stock
                  Award, such Participant shall, subject to the restrictions set
                  forth in paragraph (b) above, have all the rights of a
                  shareholder with respect to the shares of Restricted Stock
                  subject to such Restricted Stock Award, including, but not
                  limited to, the right to vote such shares of Restricted Stock
                  and the right to receive all dividends and other distributions
                  paid thereon. Certificates representing Restricted Stock shall
                  bear a legend referring to the restrictions set forth in the
                  Plan and the Participant's award agreement. If shares of
                  Restricted Stock are issued without certificates, notice of
                  the restrictions set forth in the Plan and the Participant's
                  Award Agreement must be given to the shareholder in the
                  manner required by law.
 
         (d)      The Committee shall establish as to each Restricted Stock
                  Award the terms and conditions upon which the restrictions set
                  forth in paragraph (b) above shall lapse. Such terms and
                  conditions may include, without limitation, the lapsing of
                  such restrictions as a result of the Disability, death or
                  retirement of the Participant or the occurrence of a Change of
                  Control.
 
         (e)      Notwithstanding the forfeiture provisions of paragraph
                  (b)(iii) above, the Committee may at any time, in its sole
                  discretion, accelerate the time at which any or all
                  restrictions will lapse or remove any and all such
                  restrictions.
 
         (f)      Each Participant shall agree at the time his Restricted Stock
                  Award is granted, and as a condition thereof, to pay to the
                  Company or make arrangements satisfactory to the Company
                  regarding the payment to the Company of, Applicable
                  Withholding  Taxes. Until such amount has been paid or
                  arrangements satisfactory to the Company have been made, no
                  stock certificates free of a legend reflecting the
                  restrictions set forth in paragraph (b) above shall be issued
                  to such Participant. If Restricted Stock is being issued to a
                  Participant without the use of a stock certificate, the
                  restrictions set forth in paragraph (b) shall be communicated
                  to the shareholder in the manner required by law. As an
                  alternative to making a cash payment to the Company to satisfy
                  Applicable Withholding Taxes, if the grant so provides, or the
                  Committee by separate action so permits, the Participant may
                  elect to (i) deliver Mature Shares or (ii) have the Company
                  retain that number of shares of Company Stock that would
                  satisfy all or a specified portion of the Applicable
                  Withholding Taxes. Any such election shall be made only in
                  accordance with procedures established by the Committee. The
                  Committee has the express authority to change any election
                  procedure it establishes at any time.
 
<PAGE>
 
7. Stock Options.
 
         (a)      Whenever the Committee deems it appropriate to grant Options,
                  notice shall be given to the Participant stating the number of
                  shares for which Options are granted, the Option price per
                  share, whether the Options are Incentive Stock Options or
                  Nonstatutory Stock Options, the extent, if any, to which Stock
                  Appreciation Rights are granted, and the conditions to which
                  the grant and exercise of the Options are subject. This notice
                  may be given in writing or in electronic form and shall be the
                  stock option agreement between the Company and the
                  Participant.
 
         (b)      The exercise price of shares of Company Stock covered by an
                  Incentive Stock Option shall be not less than 100% of the Fair
                  Market Value of such shares on the Date of Grant; provided
                  that if an Incentive Stock Option is granted to an employee
                  who, at the time of the grant, is a 10% Shareholder, then the
                  exercise price of the shares covered by the Incentive Stock
                  Option shall be not less than 110% of the Fair Market Value of
                  such shares on the Date of Grant.
 
         (c)      The exercise price of shares of Company Stock covered by a
                  Nonstatutory Stock Option shall be not less than 100% of the
                  Fair Market Value of such shares on the Date of Grant.
 
         (d)      Options may be exercised in whole or in part at such times as
                  may be specified by the Committee in the Participant's stock
                  option agreement; provided that the exercise provisions for
                  Incentive Stock Options shall in all events not be more
                  liberal than the following provisions:
 
                  (i)      No Incentive Stock Option may be exercised after the
                           first to occur of:
 
                           (x)      Ten years (or, in the case of an Incentive
                                    Stock Option granted to a 10% Shareholder,
                                    five years) from the Date of Grant,
 
                           (y)      Three months following the date of the
                                    Participant's termination of employment with
                                    the Company and any Parent or Subsidiary of
                                    the Company for reasons other than death or
                                    Disability; or
 
                           (z)      One year following the date of the
                                    Participant's termination of employment by
                                    reason of death or Disability.
 
                  (ii)     Except as otherwise provided in this paragraph, no
                           Incentive Stock Option may be exercised unless the
                           Participant is employed by the Company or a Parent or
                           Subsidiary of the Company at the time of the exercise
                           and has been so employed at all times since the Date
                           of Grant. If a Participant's employment is terminated
                           other than by reason of death or Disability at a time
                           when the Participant holds an Incentive Stock Option
                           that is exercisable (in whole or in part), the
 
<PAGE>
 
                           Participant may exercise any or all of the then
                           exercisable portion of the Incentive Stock Option (to
                           the extent exercisable on the date of termination)
                           within three months after the Participant's
                           termination of employment. If a Participant's
                           employment is terminated by reason of his Disability
                           at a time when the Participant holds an Incentive
                           Stock Option that is exercisable (in whole or in
                           part),  the Participant may exercise any or all of
                           the then exercisable portion of the Incentive Stock
                           Option (to the extent exercisable on the date of
                           Disability) within one year after the Participant's
                           termination of employment. If a Participant's
                           employment is terminated by reason of his death at a
                           time when the Participant holds an Incentive Stock
                           Option that is exercisable (in whole or in part), the
                           then exercisable portion of the Incentive Stock
                           Option may be exercised (to the extent exercisable on
                           the date of death) within one year after the
                           Participant's death by the person to whom the
                           Participant's rights under the Incentive Stock Option
                           shall have passed by will or by the laws of descent
                           and distribution.
 
                  (iii)    An Incentive Stock Option, by its terms, shall be
                           exercisable in any calendar year only to the extent
                           that the aggregate Fair Market Value (determined  at
                           the Date of Grant) of the Company Stock with respect
                           to which Incentive Stock Options are exercisable for
                           the first time during the calendar year does not
                           exceed $100,000 (the "Limitation  Amount"). Incentive
                           Stock Options granted under the Plan and all other
                           plans of the Company and any Parent or Subsidiary of
                           the Company shall be aggregated for purposes of
                           determining whether the Limitation Amount has been
                           exceeded. The Committee may impose such conditions as
                           it deems appropriate on an Incentive Stock Option to
                           ensure that the foregoing requirement is met. If
                           Incentive Stock Options that first become exercisable
                           in a calendar year exceed the Limitation Amount, the
                           excess Options will be treated as Nonstatutory Stock
                           Options to the extent permitted by law.
 
         (e)      The Committee may, in its discretion, grant Options that by
                  their terms become fully exercisable upon a Change of Control
                  notwithstanding other conditions on exercisability in the
                  stock option agreement, and, in such event, paragraph (e)
                  shall not apply.
 
8. Stock Appreciation Rights.
 
         (a)      Whenever the Committee deems it appropriate, Stock
                  Appreciation Rights may be granted in connection with all or
                  any part of an Option, either concurrently with the grant of
                  the Option or, if the Option is a Nonstatutory Stock Option,
                  by an amendment to the Option at any time thereafter during
                  the term of the Option. Stock Appreciation Rights may be
                  exercised in whole or in part at such times and under such
                  conditions as may be specified by the Committee in the
                  Participant's stock option agreement. The following provisions
                  apply to all Stock Appreciation Rights that are granted in
                  connection with Options:
 
<PAGE>
 
 
                  (i)      Stock Appreciation Rights shall entitle the
                           Participant, upon exercise of all or any part of the
                           Stock Appreciation Rights, to surrender to the
                           Company unexercised that portion of the underlying
                           Option relating to the same number of shares of
                           Company Stock as is covered by the Stock Appreciation
                           Rights (or the portion of the Stock Appreciation
                           Rights so exercised) and to receive in exchange from
                           the Company an amount equal to the excess of (x) the
                           Fair Market Value on the date of exercise of the
                           Company Stock covered by the surrendered portion of
                           the underlying Option over (y) the exercise price of
                           the Company Stock covered by the surrendered portion
                           of the underlying Option. The Committee may limit the
                           amount that the Participant will be entitled to
                           receive upon exercise of the Stock Appreciation
                           Right.
 
                  (ii)     Upon the exercise of a Stock Appreciation Right and
                           surrender of the related portion of the underlying
                           Option, the Option, to the extent surrendered, shall
                           not thereafter be exercisable.
 
                  (iii)    The Committee may, in its discretion, grant Stock
                           Appreciation Rights in connection with Options which
                           by their terms become fully exercisable upon a Change
                           of Control, which Stock Appreciation Rights shall
                           only be exercisable following a Change of Control.
                           The underlying Option may provide that such Stock
                           Appreciation Rights shall be payable solely in cash.
                           The terms of the underlying Option shall provide the
                           method by which Fair Market Value of the Company
                           Stock on the date of exercise shall be calculated
                           based on one of the following alternatives:
 
                           (x)      the closing price of the Company Stock on
                                    the exchange on which it is then traded on
                                    the business day immediately preceding the
                                    day of exercise;
 
                           (y)      the highest closing price of the Company
                                    Stock on the exchange on which it is then
                                    traded, during the 90 days immediately
                                    preceding the Change of Control; or
 
                           (z)      the greater of (x) or (y).
 
                  (iv)     Subject to any further conditions upon exercise
                           imposed by the Committee, a Stock Appreciation Right
                           shall be exercisable only to the extent that the
                           related Option is exercisable, and shall expire no
                           later than the date on which the related Option
                           expires.
 
                  (v)      A Stock Appreciation Right may only be exercised at a
                           time when the Fair Market Value of the Company Stock
                           covered by the Stock Appreciation Right exceeds the
                           exercise price of the Company Stock covered by the
                           underlying Option.
 
<PAGE>
 
         (b)      Whenever the Committee deems it appropriate, Stock
                  Appreciation Rights may be granted without related Options.
                  The terms and conditions of the award shall be set forth in a
                  Stock Appreciation Rights agreement between the Company and
                  the Participant in written or electronic form. The following
                  provisions apply to all Stock Appreciation Rights that are
                  granted without related Options:
 
                  (i)      Stock Appreciation Rights shall entitle the
                           Participant, upon the exercise of all or any part of
                           the Stock Appreciation Rights, to receive from the
                           Company an amount equal to the excess of (x) the Fair
                           Market Value on the date of exercise of the Company
                           Stock covered by the surrendered Stock Appreciation
                           Rights over (y) the Fair Market Value on the Date of
                           Grant of the Company Stock covered by the Stock
                           Appreciation Rights. The Committee may limit the
                           amount that the Participant may be entitled to
                           receive upon exercise of the Stock Appreciation
                           Right.
 
                  (ii)     Stock Appreciation Rights shall be exercisable, in
                           whole or in part, at such times as the Committee
                           shall specify in the Participant's Stock Appreciation
                           Rights agreement.
 
         (c)      The manner in which the Company's obligation arising upon the
                  exercise of a Stock Appreciation Right shall be paid shall be
                  determined by the Committee and shall be set forth in the
                  Participant's stock option agreement (if the Stock
                  Appreciation Rights are related to an Option) or Stock
                  Appreciation Rights agreement. The Committee may provide for
                  payment in Company Stock or cash, or a fixed combination of
                  Company Stock or cash, or the Committee may reserve the right
                  to determine the manner of payment at the time the Stock
                  Appreciation Right is exercised. Shares of Company Stock
                  issued upon the exercise of a Stock Appreciation Right shall
                  be valued at their Fair Market Value on the date of exercise.
 
9. Method of Exercise Of Options And Stock Appreciation Rights.
 
         (a)      Options and Stock Appreciation Rights may be exercised by the
                  Participant by giving notice of the exercise to the Company,
                  stating the number of shares the Participant has elected to
                  purchase under the Option or the number of Stock Appreciation
                  Rights he has elected to exercise. In the case of a purchase
                  of shares under an Option, such notice shall be effective only
                  if accompanied by the exercise price in full paid in cash;
                  provided that, if the terms of an Option so permit, or the
                  Committee by separate action so permits, the Participant may
                  (i) deliver Mature Shares (valued at their Fair Market Value
                  on the date of exercise) in satisfaction of all or any part of
                  the exercise price, or (ii) to the extent permitted under
                  applicable laws and regulations, deliver a properly executed
                  exercise notice together with irrevocable instructions to a
                  broker to exercise all or part of the Option, sell a
                  sufficient number of shares of Company Stock to cover the
 
<PAGE>
 
                  exercise price, Applicable Withholding Taxes (if required
                  by the Committee) and other costs and expenses associated with
                  such sale and deliver promptly from the proceeds of the sale
                  the amount necessary to pay the exercise price and any
                  Applicable Withholding Taxes. The Participant shall not be
                  entitled to make payment of the exercise price other than in
                  cash unless provisions for an alternative payment method are
                  included in the Participant's stock option agreement or are
                  agreed to in writing by the Company with the approval of the
                  Committee prior to exercise of the Option.
 
         (b)      The Company may place on any certificate representing Company
                  Stock issued upon the exercise of an Option or a Stock
                  Appreciation Right any legend deemed desirable by the
                  Company's counsel to comply with federal or state securities
                  laws, and the Company may require of the participant a
                  customary written indication of his investment intent. Until
                  the Participant has made any required payment, including any
                  Applicable Withholding Taxes, and has had issued to him a
                  certificate for the shares of Company Stock acquired, he shall
                  possess no shareholder rights with respect to the shares.
 
         (c)      Each Participant shall agree as a condition of the exercise of
                  an Option or a Stock Appreciation Right to pay to the Company
                  Applicable Withholding Taxes, or make arrangements
                  satisfactory to the Company regarding the payment to the
                  Company of such amounts. Until Applicable Withholding Taxes
                  have been paid or arrangements satisfactory to the Company
                  have been made, no stock certificate shall be issued upon the
                  exercise of an Option or a Stock Appreciation Right.
 
                  As an alternative to making a cash payment to the Company to
                  satisfy Applicable Withholding Taxes if the Option or Stock
                  Appreciation Rights agreement so provides, or the Committee by
                  separate action so provides, a Participant may elect to
                  (i) deliver Mature Shares or (ii) have the Company retain that
                  number of shares of Company Stock that would satisfy all or a
                  specified portion of the Applicable Withholding Taxes. Any
                  such election shall be made only in accordance with procedures
                  established by the Committee.
 
         (d)      Notwithstanding anything herein to the contrary, if the
                  Company is subject to section 16 of the Act, Options and Stock
                  Appreciation Rights shall always be granted and exercised in
                  such a manner as to conform to the provisions of Rule 16b-3.
 
         (e)      If a Participant exercises an Option that has a Reload Feature
                  by delivering Mature Shares in payment of the exercise price,
                  the Participant shall automatically be granted a Reload
                  Option. At the time the Option with a Reload Feature is
                  awarded, the Committee may impose such restrictions on the
                  Reload Option as it deems appropriate, but in any event the
                  Reload Option shall be subject to the following restrictions:
 
                  (i)      The exercise price of shares of Company Stock covered
                           by a Reload Option shall be not less than 100% of the
                           Fair Market Value of such shares on the Date of Grant
                           of the Reload Option;
 
<PAGE>
 
                   (ii)    If and to the extent required by Rule 16b-3, or if so
                           provided in the Option agreement, a Reload Option
                           shall not be exercisable within the first six months
                           after it is granted; provided that, subject to the
                           terms of the Participant's stock option agreement,
                           this restriction shall not apply if the Participant
                           becomes Disabled or dies during the six-month period;
 
                  (iii)    The Reload Option shall be subject to the same
                           restrictions on exercisability imposed on the
                           underlying Option (possessing the Reload Feature)
                           that was exercised unless the Committee specifies
                           different limitations;
 
                  (iv)     The Reload Option shall not be exercisable until the
                           expiration of any retention holding period imposed on
                           the disposition of any shares of Company Stock
                           covered by the underlying Option (possessing the
                           Reload Feature) that was exercised; and
 
                   (v)     The Reload Option shall not have a Reload Feature.
 
10. Nontransferability of Incentive Awards. Incentive Awards shall not be
transferable unless so provided in the award agreement or an amendment to the
award agreement; provided, however, that no transfer for value or consideration
will be permitted without the prior approval of the Company's shareholders.
Options and Stock Appreciation Rights which are intended to be exempt under Rule
16b-3 (to the extent required by Rule 16b-3 at the time of grant or amendment of
the award agreement), by their terms, shall not be transferable by the
Participant except by will or by the laws of descent and distribution and shall
be exercisable, during the Participant's lifetime, only by the Participant or by
his guardian or legal representative.
 
11. Effective Date of the Plan and Transition.
 
         (a)      This Plan shall be effective as of the date of separation
                  between the Company and Circuit City Stores, Inc., and shall
                  be submitted to the shareholders of Circuit City Stores, Inc.
                  for approval prior to the separation. No Option or Stock
                  Appreciation Right shall be exercisable and no Company Stock
                  shall be issued under the Plan until (i) the Plan has been
                  approved by shareholders, (ii) shares issuable under the Plan
                  have been registered with the Securities and Exchange
                  Commission and accepted for listing on the New York Stock
                  Exchange upon notice of issuance, and (iii) the requirements
                  of any applicable state securities laws have been met.
 
 
         (b)      As of the date of separation between the Company and Circuit
                  City Stores, Inc., this Plan shall assume obligations,
                  including outstanding awards, from the Circuit City Stores,
                  Inc. 1988 Stock Incentive Plan and the Circuit City Stores,
                  Inc. 1994 Stock Incentive Plan with respect to employees of
                  the Company or otherwise, to the extent provided in an
                  agreement between the Company and Circuit City Stores, Inc.
 
<PAGE>
 
12. Termination, Modification, Change. If not sooner terminated by the Board,
this Plan shall terminate at the close of business on the day immediately
preceding the tenth anniversary of the date of separation between the Company
and Circuit City Stores, Inc. No Incentive Awards shall be granted under the
Plan after its termination. The Board may terminate the Plan or may amend the
Plan in such respects as it shall deem advisable; provided that, if and to the
extent required by the Code or Rule 16b-3, no change shall be made that
increases the total number of shares of Company Stock reserved for issuance
pursuant to Incentive Awards granted under the Plan (except pursuant to Section
13), expands the class of persons eligible to receive Incentive Awards, or
materially increases the benefits accruing to Participants under the Plan unless
such change is authorized by the shareholders of the Company. Notwithstanding
the foregoing, the Board may unilaterally amend the Plan and Incentive Awards as
it deems appropriate to ensure compliance with Rule 16b-3 and to cause Incentive
Awards to meet the requirements of the Code, including Code sections 162(m) and
422, and regulations thereunder. Except as provided in the preceding sentence, a
termination or amendment of the Plan shall not, without the consent of the
Participant, adversely affect a Participant's rights under an Incentive Award
previously granted to him. In no event shall any change be made to the Plan that
permits repricing of Options unless such change is authorized by the
shareholders of the Company.
 
13. Change in Capital Structure.
 
         (a)      In the event of a stock dividend, stock split or combination
                  of shares, recapitalization, merger in which the Company is
                  the surviving corporation, reorganization, reincorporation,
                  consolidation, or other change in the Company's capital stock
                  without the receipt of consideration by the Company
                  (including, but not limited to, the creation or issuance to
                  shareholders generally of rights, options or warrants for the
                  purchase of common stock or preferred stock of the Company),
                  the number and kind of shares of stock or securities of the
                  Company to be subject to the Plan and to Incentive Awards then
                  outstanding or to be granted thereunder, the aggregate and
                  individual maximum number of shares or securities which may be
                  delivered under the Plan pursuant to Section 4, and the
                  exercise price and other terms and relevant provisions of
                  Incentive Awards shall be appropriately adjusted by the
                  Committee, whose determination shall be binding on all
                  persons. If the adjustment would produce fractional shares
                  with respect to any Restricted Stock or unexercised Option or
                  Stock Appreciation Right, the Committee may adjust
                  appropriately the number of shares covered by the Incentive
                  Award so as to eliminate the fractional shares.
 
         (b)      If the Company is a party to a consolidation or merger in
                  which the Company is not the surviving corporation, a
                  transaction that results in the acquisition of substantially
                  all of the Company's outstanding stock by a single person or
                  entity, or a sale or transfer of substantially all of the
                  Company's assets, the Committee may take such actions with
                  respect to outstanding Incentive Awards as the Committee deems
                  appropriate.
 
         (c)      Any determination made or action taken under this Section 13
 
<PAGE>
 
                  by the Committee shall be final and conclusive and may be made
                  or taken without the consent of any Participant.
 
14. Administration Of The Plan. The Plan shall be administered by a Committee,
which shall be appointed by the Board, consisting of not less than three members
of the Board. Subject to paragraph (e) below, the Committee shall be the
Compensation Committee of the Board unless the Board shall appoint another
Committee to administer the Plan. The Committee shall have general authority to
impose any limitation or condition upon an Incentive Award that the Committee
deems appropriate to achieve the objectives of the Incentive Award and the Plan
and, without limitation and in addition to powers set forth elsewhere in the
Plan, shall have the following specific authority:
 
         (a)      The Committee shall have the power and complete discretion to
                  determine (i) which eligible employees shall receive an
                  Incentive Award and the nature of the Incentive  Award,
                  (ii) the number of shares of Company Stock to be covered by
                  each Incentive Award, (iii) whether Options shall be Incentive
                  Stock Options or Nonstatutory Stock Options, (iv) when,
                  whether and to what extent Stock Appreciation Rights shall be
                  granted in connection with Options, (v) the Fair Market Value
                  of Company Stock, (vi) the time or times when an Incentive
                  Award shall be granted, (vii) whether an Incentive Award shall
                  become vested over a period of time and when it shall be fully
                  vested, (viii) when Options or Stock  Appreciation Rights may
                  be exercised, (ix) whether a Disability exists, (x) the manner
                  in which payment will be made upon the exercise of Options or
                  Stock Appreciation Rights, (xi) conditions relating to the
                  length of time before disposition of Company Stock received
                  upon the exercise of Options or Stock Appreciation Rights is
                  permitted, (xii) whether to approve a  Participant's election
                  (A) to deliver Mature Shares to satisfy Applicable Withholding
                  Taxes or (B) to have the Company withhold from the shares to
                  be issued upon the exercise of a Nonstatutory Stock Option or
                  a Stock Appreciation Right the number of shares necessary to
                  satisfy Applicable Withholding Taxes, (xiii) the terms and
                  conditions applicable to Restricted Stock Awards, (xiv) the
                  terms and conditions on which restrictions upon Restricted
                  Stock shall lapse, (xv) whether to accelerate the time at
                  which any or all restrictions with respect to Restricted Stock
                  will lapse or be removed, (xvi) notice provisions relating to
                  the sale of Company Stock acquired under the Plan,  and (xvii)
                  any additional requirements relating to Incentive Awards that
                  the Committee deems appropriate. Notwithstanding the
                  foregoing, no "tandem stock options" (where two stock options
                  are issued together and the exercise of one option affects the
                  right to exercise the other option) may be issued in
                  connection with Incentive Stock Options. The Committee shall
                  have the power to amend the terms of previously granted
                  Incentive Awards so long as the terms as amended are
                  consistent with the terms of the Plan and provided that the
                  consent of the Participant is obtained with respect to any
                  amendment that would be detrimental to the Participant, except
                  that such consent will not be required if such amendment is
                  for the purpose of complying with Rule 16b-3 or any
                  requirement of the Code applicable to the Incentive Award.
 
<PAGE>
 
 
         (b)      The Committee may adopt rules and regulations for carrying out
                  the Plan. The interpretation and construction of any provision
                  of the Plan by the Committee shall be final and conclusive.
                  The Committee may consult with counsel, who may be counsel to
                  the Company, and shall not incur any liability for any action
                  taken in good faith in reliance upon the advice of counsel.
 
         (c)      A majority of the members of the Committee shall constitute a
                  quorum, and all actions of the Committee shall be taken by a
                  majority of the members present. Any action may be taken by a
                  written instrument signed by all of the members, and any
                  action so taken shall be fully effective as if it had been
                  taken at a meeting.
 
         (d)      The Board from time to time may appoint members previously
                  appointed and may fill vacancies, however caused, in the
                  Committee. If a Committee of the Board is appointed to serve
                  as the Committee, such Committee shall have, in connection
                  with the administration of the Plan, the powers possessed by
                  the Board, including the power to delegate a subcommittee of
                  the administrative powers the Committee is authorized to
                  exercise, subject, however, to such resolutions, not
                  inconsistent with the provisions of the Plan, as may be
                  adopted from time to time by the Board.
 
         (e)      All members of the Committee must be "outside directors" as
                  described in Code section 162(m). In addition, all members of
                  the Committee must be "non-employee directors" as defined in
                  Rule 16b-3.
 
15. Notice. All notices and other communications required or permitted to be
given under this Plan shall be in writing and shall be deemed to have been duly
given if delivered personally or mailed first class, postage prepaid, as
follows:
 
         (a)      If to the Company--at its principal business address to the
                  attention of the Secretary;
 
         (b)      If to any Participant -- at the last address of the
                  Participant known to the sender at the time the notice or
                  other communication is sent.
 
16. Shareholder Rights. No Participant shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares of Company
Stock subject to an Incentive Award unless and until such Participation has
satisfied all requirements under the terms of the Incentive Award.
 
17. No Employment or Other Service Rights. Nothing in the Plan or any instrument
executed or Incentive Award granted under the Plan shall confer upon any
Participant any right to continue to serve the Company (or a Parent or
Subsidiary of the Company) in the capacity in effect at the time the Incentive
Award was granted or shall affect the right of the Company (or a Parent or
Subsidiary of the Company) to terminate the employment of a Participant with or
without notice and with or without cause.
 
<PAGE>
 
18. Interpretation. The terms of the Plan shall be governed by the laws of the
Commonwealth of Virginia, without regard to conflict of law provisions at any
jurisdiction. The terms of this Plan are subject to all present and future
regulations and rulings of the Secretary of the Treasury or his delegate
relating to the qualification of Incentive Stock Options under the Code. If any
provision of the Plan conflicts with any such regulation or ruling, then that
provision of the Plan shall be void and of no effect. As to all Incentive Stock
Options and all Nonstatutory Stock Options with an exercise price of at least
100% of Fair Market Value of the Company Stock on the Date of Grant, this Plan
shall be interpreted for such Options to be excluded from applicable employee
remuneration for purposes of Code section 162(m).
 
 
IN WITNESS HEREOF, this instrument has been executed this 21ST day of June,
2005.
 
                                  CARMAX, INC.
 
 
                                  By:  /s/ Keith D. Browning
                                      ---------------------------------------
                                       Keith D. Browning
                                       Executive Vice President &
                                       Chief Financial Officer
 
 
</TEXT>
</DOCUMENT>