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CARMAX, INC.
ANNUAL PERFORMANCE-BASED BONUS PLAN
(as amended and restated, effective April 24, 2006)

1.  Purpose. The purpose of the CarMax, Inc. Annual Performance-Based Bonus Plan
(the “Plan”) is to provide an annual performance based incentive for executive
officers who are in a position to contribute materially to the success of the
Company and its Subsidiaries.

2. Definitions.

(a)
“Award” means an award made pursuant to the Plan.

(b)
“Award Agreement” means the agreement entered into between the Company and a
Participant, setting forth the terms and conditions applicable to an Award
granted to the Participant.

(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
Securities Exchange Act of 1934, as amended, 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.

(f)
“Code Section 162(m) Award” means an Award intended to satisfy the requirements
of Code Section 162(m) and designated as such in an Award Agreement.

(g)
“Committee” means the committee appointed by the Board as described under
Section 5.

(h)
“Company” means CarMax, Inc., a Virginia corporation.

(i)
“Covered Employee” means a covered employee within the meaning of Code Section
162(m)(3).

(j)
“Executive Employee” means all executive officers (as defined in Rule 3b-7 under
the Securities Exchange Act of 1934, as amended) of the Company (or any Parent
or Subsidiary of the Company, whether now existing or hereafter created or
acquired).

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(k)
“Parent” means, with respect to any corporation, a parent of that corporation
within the meaning of Code Section 424(e).

(l)
“Participant” means an Executive Employee selected from time to time by the
Committee to participate in the Plan.

(m)
“Performance Adjustment” means the percentage(s), as set forth in an award
schedule, that will, when multiplied by a Participant’s Target Bonus, determine
the amount of a Participant’s Award.

(n)
“Performance Criteria” means the criteria selected by the Committee to measure
performance for a Plan Year from among one or more of the following: (i) Pre tax
earnings, as shown in the Company’s annual report to shareholders, calculated in
accordance with generally accepted accounting principles consistently applied by
the Company; and (ii) Earnings per share, as shown in the Company’s annual
report to shareholders, calculated in accordance with generally accepted
accounting principles consistently applied by the Company.

(o)
“Performance Goal” means one or more levels of performance as to each
Performance Criteria, as established by the Committee, that will result in the
Performance Adjustment that is established by the Committee for each such level
of performance.

(p)
“Plan Year” means the fiscal year of the Company.

(q)
“Retirement” means, with respect to a Participant, the earliest date on which
the Participant is eligible to retire under any qualified Code Section 401(a)
plan of the Company, or, if there is no such plan, age 65.

(r)
“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.

(s)
“Target Bonus” means the bonus payable to a Participant if there is a 100
percent Performance Adjustment for each Performance Criteria.

3.  Eligibility. All present and future Executive Employees shall be eligible to
receive Awards under the Plan. The Committee shall have the
power and complete discretion to select eligible Executive Employees to receive
Awards and to determine for each Participant the terms and conditions and the
amount of each Award.

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4.  Awards.

(a)
Each Award shall be evidenced by an Award Agreement setting forth the
Performance Goals for each Performance Criteria, the Target Bonus, the maximum
bonus payable and such other terms and conditions applicable to the Award, as
determined by the Committee, not inconsistent with the terms of the Plan.
Anything else in this Plan to the contrary notwithstanding, the aggregate
maximum amount payable under the Plan to any Participant in any Plan Year shall
be the lesser of 200 percent of the Participant’s base salary or $2,000,000. In
the event of any conflict between an Award Agreement and the Plan, the terms of
the Plan shall govern.

(b)
The Committee shall establish the Performance Goals for the Company and/or its
Subsidiaries each Plan Year. The Committee shall also determine the extent to
which each Performance Criteria shall be weighted in determining Awards. The
Committee may vary the Performance Criteria, Performance Goals and weightings
from Participant to Participant, Award to Award and Plan Year to Plan Year. The
Committee may increase, but not decrease, any Performance Goal during a Plan
Year.

(c)
The Committee shall establish for each Award the percentage of the Target Bonus
for such Participant payable at specified levels of performance, based on the
Performance Goal for each Performance Criteria and the weighting established for
such criteria. The Award payable to any Participant may range from zero (0) to
two hundred percent of the Participant’s Target Bonus, depending upon whether,
or the extent to which, the Performance Goals have been achieved. All such
determinations regarding the achievement of any Performance Goals will be made
by the Committee; provided, however, that the Committee may not increase during
a Plan Year the amount of the Award that would otherwise be payable upon
achievement of the Performance Goal or Goals.

(d)
The actual Award for a Participant will be calculated by multiplying the
Participant’s Target Bonus by the Performance Adjustments in accordance with the
Award. All calculations of actual Awards shall be made by the Committee.

(e)
Awards will be paid, in a lump sum cash payment, as soon as practicable after
the close of the Plan Year for which they are earned; provided, however, that no
Awards shall be paid except to the extent that the Committee has certified in
writing that the Performance Goals have been met. Notwithstanding the foregoing
provisions of this Section 4(e), the Committee shall have the right to allow
Participants to elect to defer the payment of Awards subject to such terms and
conditions as the Committee may determine.

(f)
Whenever payments under the Plan are to be made, the Company and/or the
Subsidiary will withhold therefrom an amount sufficient to satisfy any
applicable governmental withholding tax requirements related thereto.

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(g)
Nothing contained in the Plan will be deemed in any way to limit or restrict the
Company, its Subsidiaries, or the Committee from making any award or payment to
any person under any other plan, arrangement or understanding, whether now
existing or hereafter in effect.

5.  Administration. The Plan shall be administered by a Committee, which shall
be appointed by the Board, consisting of not less than two members of the Board.
Subject to paragraph (d) below, the Committee shall be the Compensation and
Personnel Committee 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 Award the Committee deems appropriate to achieve
the objectives of the Award and the Plan and, in addition, 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 Executive Employees shall receive an Award and the nature of the Award,
(ii) the amount of each Award, (iii) the time or times when an Award shall be
granted, (iv) whether a disability exists, (v) the terms and conditions
applicable to Awards, and (vi) any additional requirements relating to Awards
that the Committee deems appropriate.

(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)
All members of the Committee must be “outside directors” as described in Code
Section 162(m).

(e)
The Board from time to time may appoint members previously appointed and may
fill vacancies however caused
in the Committee.

(f)
As to any Code Section 162(m) Awards, it is the intent of the Company that this
Plan and any Code Section 162(m) Awards hereunder satisfy, and be interpreted in
a manner that satisfy, the applicable requirements of Code Section 162(m). If
any provision of this Plan or if any Code Section 162(m) Award would otherwise
conflict with the intent expressed in this Section 5(f), that provision to the
extent possible shall be interpreted so as to avoid such conflict. To the extent
of any remaining irreconcilable conflict with such intent, such provision shall
be deemed void as applicable to Covered Employees. Nothing herein shall be
interpreted to preclude a Participant who is or may be a Covered Employee from
receiving an Award that is not a Code Section 162(m) Award.

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(g)
The Committee’s determinations under the Plan need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
Awards under the Plan, whether or not such persons are similarly situated.
Without limiting the generality of the foregoing, the Committee will be
entitled, among other things, to make non uniform and selective determinations
and to establish non
uniform and selective Performance Criteria, Performance Goals, the weightings
thereof, and Target Bonuses.

6.  Change of Control. In the event of a Change of Control of the Company, in
addition to any action required or authorized by the terms of an Award
Agreement, the Committee may, in its sole discretion, take any of the following
actions as a result, or in anticipation, of any such event to assure fair and
equitable treatment of Participants: (a) accelerate time periods for purposes of
vesting in, or receiving any payment with regard to, any outstanding Award, or
(b) make adjustments or modifications to outstanding Awards as the Committee
deems appropriate to maintain and protect the rights and interests of
Participants following such Change of Control. Any such action approved by the
Committee shall be conclusive and binding on the Company and all Participants.

7.  Nontransferability of Awards. An Award shall not be assignable or
transferable by the Participant except by will or by the laws of descent and
distribution.

8.  Termination, Modification, Change. If not sooner terminated by the Board,
this Plan shall terminate at the close of business on February 29, 2012. No
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, no change
shall be made that changes the Performance Criteria, or materially increases the
maximum potential benefits for 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 Awards as it deems appropriate to
cause Awards to meet the requirements of Code Section 162(m), 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 Award previously granted to
him.

9.  Unfunded Plan. The Plan shall be unfunded. No provision of the Plan or any
Award Agreement will require the Company or its Subsidiaries, for the purpose of
satisfying any obligations under the Plan, to purchase assets or place any
assets in a trust or other entity to which contributions are made or otherwise
to segregate any assets, nor will the Company or its Subsidiaries maintain
separate bank accounts, books, records or other evidence of the existence of a
segregated or separately maintained or administered fund for such purposes.
Participants will have no rights under the Plan other than as unsecured general
creditors of the Company and its Subsidiaries, except that insofar as they may
have become entitled to payment of additional compensation by performance of
services, they will have the same rights as other employees under generally
applicable law.

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10.  Liability of Company. Any liability of the Company or a Subsidiary to any
Participant with respect to an Award shall be based solely upon contractual
obligations created by the Plan and the Award Agreement. Neither the Company nor
a Subsidiary, nor any member of the Board or of the Committee, nor any other
person participating in any determination of any question under the Plan, or in
the interpretation, administration or application of the Plan, shall have any
liability to any party for any action taken or not taken in good faith under the
Plan. Status as an eligible Executive Employee shall not be construed as a
commitment that any Award will be made under this Plan to such eligible
Executive Employee or to eligible Executive Employees generally. Nothing
contained in this Plan or in any Award Agreement (or in any other documents
related to this Plan or to any Award or Award Agreement) shall confer upon any
Executive Employee or Participant any right to continue in the employ or other
service of the Company or a Subsidiary or constitute any contract or limit in
any way the right of the Company or a Subsidiary to change such person’s
compensation or other benefits.

11.  Interpretation. If any term or provision contained herein will to any
extent be invalid or unenforceable, such term or provision will be reformed so
that it is valid, and such invalidity or unenforceability will not affect any
other provision or part hereof. The Plan, the Award Agreements and all actions
taken hereunder or thereunder shall be governed by, and construed in accordance
with, the laws of the Commonwealth of Virginia without regard to the conflict of
law principles thereof.

12.  Effective Date of the Plan.

(a)
The Plan shall be effective as of date the Company is separated from Circuit
City Stores, Inc. and shall be submitted to the shareholders of Circuit City
Stores, Inc. for approval prior to the separation. No Award shall be payable to
a Covered Employee until the Plan has been approved by the shareholders.

(b)
As of the date of separation between the Company and Circuit City Stores, Inc.,
this Plan shall assume obligations, including outstanding awards for the current
Fiscal Year, from the Circuit City Stores, Inc. Annual Performance Based Bonus
Plan, to the extent provided in an agreement between the Company and Circuit
City Stores, Inc.

 
CARMAX, INC.
     
By:  /s/ Keith D. Browning  
   
Keith D. Browning
   
Executive Vice President &
   
Chief Financial Officer

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