CARMAX (KMX)

Purchase of Shares

Participants in the ESPP authorize payroll deductions for the purchase of shares of company common stock. Currently, the amount of the deductions for a participant may range from 2% to 10% of eligible compensation per month, up to a maximum of $7,500 per year. Subject to these limitations, a participant may authorize subsequent increases or decreases in the amount of payroll deductions by providing the company with a new enrollment form before the first day of the month in which the change is to be effective. The company will accumulate and hold for the participant’s account the amounts deducted from his or her pay until purchases are made. The company does not pay interest on these amounts, and participants assume the risk of fluctuations in the market price of the company’s common stock prior to the time of the purchases. The plan administrator may change the minimum and maximum percentages of compensation that may be contributed to the ESPP.

Purchase of Shares

Participants in the ESPP authorize payroll deductions for the purchase of shares of company common stock. Currently, the amount of the deductions for a participant may range from 2% to 10% of eligible compensation per month, up to a maximum of $7,500 per year. Subject to these limitations, a participant may authorize subsequent increases or decreases in the amount of payroll deductions by providing the company with a new enrollment form before the first day of the month in which the change is to be effective. The company will accumulate and hold for the participant’s account the amounts deducted from his or her pay until purchases are made. The company does not pay interest on these amounts, and participants assume the risk of fluctuations in the market price of the company’s common stock prior to the time of the purchases. The plan administrator may change the minimum and maximum percentages of compensation that may be contributed to the ESPP.

Shares of common stock purchased under the ESPP may be purchased, in the company’s discretion, either (i) on

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the open market by a plan service provider/dealer registered with the SEC and a member of the National Association of Securities Dealers (“plan service provider”) designated by the plan administrator or (ii) directly from the company. The purchase price for shares is 100% of the average cost of all shares purchased for a particular month when the shares are purchased on the open market, or 100% of the closing price of the common stock on the New York Stock Exchange on the last business day of the month when the shares are purchased from the company. As soon as practical after the purchase of shares on the open market or the receipt of shares from the company, the plan service provider credits the shares to the individual accounts of participants. As of February 28, 2006, all shares of common stock purchased under the ESPP had been acquired on the open market.

A participant’s right to purchase shares of common stock under the ESPP through payroll deductions may not be transferred to any other person.

The company matches a portion of the payroll deductions made by participants in the ESPP by contributing to the ESPP an amount equal to 15% of the participant’s contribution. Matching contributions are used to purchase shares of common stock in the same manner as a participant’s purchase through payroll deductions.