SONIC AUTOMOTIVE INC, S-1, 1997-08-08

SONIC AUTOMOTIVE INC
S-1, 1997-08-08

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 8, 1997
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SONIC AUTOMOTIVE, INC.

(Exact name of registrant as specified in its charter)

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<S> <C> <C>
DELAWARE 5511 56-2010790
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>

5401 EAST INDEPENDENCE BOULEVARD
P.O. BOX 18747
CHARLOTTE, NORTH CAROLINA 28218
TELEPHONE (704) 532-3301

(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
MR. O. BRUTON SMITH
CHIEF EXECUTIVE OFFICER
SONIC AUTOMOTIVE, INC.
5401 EAST INDEPENDENCE BOULEVARD
P.O. BOX 18747
CHARLOTTE, NORTH CAROLINA 28218
TELEPHONE (704) 532-3301

(Name, address, including zip code, and telephone number, including
area code, of agent for service)
COPIES TO:

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<S> <C>
GARY C. IVEY, ESQ. STUART H. GELFOND, ESQ.
PARKER, POE, ADAMS & BERNSTEIN L.L.P. FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
2500 CHARLOTTE PLAZA ONE NEW YORK PLAZA
CHARLOTTE, NORTH CAROLINA 28244 NEW YORK, NEW YORK 10004
TELEPHONE (704) 372-9000 TELEPHONE (212) 859-8000
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. ( )
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ( )
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ( ) .
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ( )
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
<S> <C> <C>
TITLE OF CLASS OF SECURITIES PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE (1)(2) REGISTRATION FEE
<S> <C> <C>
Class A Common Stock,
par value $.01 per share.............. $104,000,000 $31,516
</TABLE>

(1) Includes shares that the Underwriters have the option to purchase to cover
over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8 (A), MAY DETERMINE.

<PAGE>
SONIC AUTOMOTIVE, INC.

CROSS-REFERENCE SHEET
PURSUANT TO SECTION 501(B)(4) OF REGULATION S-K SHOWING LOCATION
IN THE PROSPECTUS OF INFORMATION REQUIRED BY
ITEMS OF PART I OF FORM S-1

<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND CAPTION PROSPECTUS HEADING OR LOCATION

<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus.......... Facing Page; Outside Front Cover Page

2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Inside Front and Outside Back Cover Pages; Additional Information

3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges....................... Prospectus Summary; Risk Factors

4. Use of Proceeds................................. Prospectus Summary; Use of Proceeds

5. Determination of Offering Price................. Outside Front Cover Page; Underwriting

6. Dilution........................................ Dilution

7. Selling Security Holders........................ Not Applicable

8. Plan of Distribution............................ Outside Front Cover Page; Underwriting

9. Description of Capital Stock to be Registered... Outside Front Cover Page; Dividend Policy; Description of Capital
Stock

10. Interests of Named Experts and Counsel.......... Not Applicable

11. Information with Respect to the Registrant...... Outside Front Cover Page; Prospectus Summary; Risk Factors; The
Reorganization; The Acquisitions; Use of Proceeds; Dividend Policy;
Capitalization; Selected Combined and Consolidated Financial Data;
Pro Forma Combined and Consolidated Financial Data; Management's
Discussion and Analysis of Financial Condition and Results of
Operations; Business; Management; Certain Transactions; Principal
Stockholders; Description of Capital Stock; Shares Eligible for
Future Sale; Financial Statements

12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.. Not Applicable
</TABLE>

<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE

SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1997
PROSPECTUS
SHARES
[LOGO TO COME] SONIC AUTOMOTIVE, INC.
CLASS A COMMON STOCK

All of the shares of Class A Common Stock, par value $.01 per share
(the "Class A Common Stock"), offered hereby are being sold by Sonic Automotive,
Inc. ("Sonic" or the "Company").
Each share of Class A Common Stock entitles its holder to one vote per
share. Each share of Class B Common Stock, par value $.01 per share (the "Class
B Common Stock," and together with the Class A Common Stock, the "Common
Stock"), entitles the holder to ten votes per share, except in certain limited
circumstances. All of the shares of Class B Common Stock are held by the members
of the Smith Group (as defined herein), who are all of the stockholders of the
Company prior to the consummation of the Offering. After consummation of the
Offering, the Smith Group will beneficially own shares representing
approximately % of the combined voting power of the Company's Common Stock
(approximately % if the underwriters' over-allotment option is exercised in
full). See "Description of Capital Stock -- Common Stock."
Prior to the Offering, there has been no public market for the Class A
Common Stock. It is currently estimated that the initial public offering price
will be between $ and $ per share. For a discussion of factors to be
considered in determining the initial public offering price, see "Underwriting."
The Company intends to apply for listing of the Class A Common Stock on the
New York Stock Exchange under the symbol "DLR."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE CLASS A COMMON STOCK
OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share........................................... $ $ $
Total (3)........................................... $ $ $
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to an aggregate of additional
shares of Class A Common Stock solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."

The shares of Class A Common Stock are being offered by the several
Underwriters, subject to prior sale, when, as and if issued to and accepted by
them, subject to approval of certain legal matters by counsel for the
Underwriters and certain other conditions. The Underwriters reserve the right to
withdraw, cancel or modify such offer and to reject orders in whole or in part.
It is expected that delivery of the shares of Class A Common Stock will be made
in New York, New York on or about , 1997.

MERRILL LYNCH & CO.
MONTGOMERY SECURITIES
WHEAT FIRST BUTCHER SINGER

The date of this Prospectus is , 1997.

<PAGE>
[Photographs of various of the Company's dealerships and a map of the United
States showing locations of the Company's operations]

The Company intends to furnish its stockholders with annual reports
containing financial statements audited by its independent public accountants
and will make available copies of its quarterly reports for the first three
quarters of each year.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF COMMON STOCK
TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

This Prospectus includes statistical data regarding the retail automotive
industry. Unless otherwise indicated herein, such data is taken or derived from
information published by a division of Intertec Publishing Corp. in its "Ward's
Dealer Business", Crain's Communications, Inc. in its "Automotive News" and
"1997 Market Data Book" and by the Industry Analysis Division of the National
Automobile Dealers Association ("NADA") in its "Industry Analysis and Outlook"
and "Automotive Executive Magazine" publications.

No Manufacturer (as defined in this Prospectus) has been involved, directly
or indirectly, in the preparation of this Prospectus or in the Offering being
made hereby. Although, as described in this Prospectus, Manufacturers will have
granted consents for various of the Acquisitions (as defined herein) and for
this Offering, no Manufacturer has made any statements or representations for
the purpose of such statements or representations being included in this
Prospectus, and no Manufacturer has any responsibility for the accuracy or
completeness of this Prospectus.

<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
(INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS. REFERENCES
IN THIS PROSPECTUS TO "SONIC" OR THE "COMPANY" (I) ARE TO SONIC AUTOMOTIVE, INC.
AND, UNLESS THE CONTEXT INDICATES OTHERWISE, ITS CONSOLIDATED SUBSIDIARIES AND
THEIR RESPECTIVE PREDECESSORS, (II) GIVE EFFECT TO A RECENTLY COMPLETED
REORGANIZATION (AS DEFINED BELOW) OF THE COMPANY AND (III) ASSUME THAT THE
COMPANY HAS CONSUMMATED THE ACQUISITION OF THE ASSETS OR ALL THE CAPITAL STOCK
OF SIX ADDITIONAL DEALERSHIPS OR DEALERSHIP GROUPS, AS DESCRIBED HEREIN, IN
NORTH CAROLINA, TENNESSEE, FLORIDA, GEORGIA AND SOUTH CAROLINA (THE
"ACQUISITIONS"). SEE "THE ACQUISITIONS." REFERENCES TO THE "OFFERING" ARE TO THE
OFFERING OF CLASS A COMMON STOCK MADE HEREBY. UNLESS OTHERWISE INDICATED, ALL
INFORMATION IN THIS PROSPECTUS GIVES RETROACTIVE EFFECT TO A -FOR-1 STOCK
SPLIT TO BE CONSUMMATED IMMEDIATELY PRIOR TO THE CONSUMMATION OF THE OFFERING
(THE "STOCK SPLIT") AND ASSUMES THAT THE UNDERWRITERS'OVER-ALLOTMENT OPTION IS
NOT EXERCISED. THE ACQUISITIONS WILL BE CONSUMMATED ON OR BEFORE THE CLOSING OF
THE OFFERING.

THE COMPANY

Sonic Automotive, Inc. is one of the leading automotive retailers in the
United States, operating 20 dealerships, four standalone used vehicle facilities
and eight collision repair centers in the southeastern and southwestern United
States. Sonic sells new and used cars and light trucks, sells replacement parts,
provides vehicle maintenance, warranty, paint and repair services and arranges
related financing and insurance ("F&I") for its automotive customers. The
Company's business is geographically diverse, with dealership operations in the
Charlotte, Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta
markets, each of which the Company believes are experiencing favorable
demographic trends. Sonic sells 17 domestic and foreign brands, which consist of
BMW, Cadillac, Chrysler, Dodge, Eagle, Ford, Honda, Infiniti, Jaguar, Jeep, KIA,
Oldsmobile, Plymouth, Saturn, Toyota, Volkswagen and Volvo. In several of its
markets, the Company has a significant market share for new cars and light
trucks, including 13.7% in Charlotte and 12.6% in Chattanooga in 1996. Pro forma
for the Acquisitions, the Company had revenues of $916.1 million and retail
unit sales of 24,114 new and 13,453 used vehicles in 1996. The Company believes
that in 1996, based on pro forma retail unit sales it would have been one of the
ten largest dealer groups out of a total of more than 15,000 dealer groups in
the United States and, based on pro forma revenues, it would have had three of
the top 100 single-point dealerships in the United States.

The Company's founder and Chief Executive Officer, O. Bruton Smith, has
over 30 years of automotive retailing experience. In addition, the Company's
other executive officers, regional vice presidents and executive managers have
on average 18 years of automotive retailing experience. The Company's
dealerships have won the highest attainable awards from various manufacturers
measuring quality and customer satisfaction. These awards include the Five Star
Award from Chrysler, the Chairman's Award from Ford, the President's Award from
BMW and the President's Circle Award from Infiniti. In addition, the Company was
named to Ford's Top 100 Club, which consists of Ford's top 100 retailers based
on retail volume and consumer satisfaction. Also, various members of the
management team have served on several manufacturer dealer councils which act as
liaisons between the manufacturers and dealer groups. As an example of the
industry's recognition of the Company's executives, Nelson E. Bowers, II, the
Company's Executive Vice President, participated in the development of the
Saturn brand and was awarded in 1990 the first Saturn dealership in the United
States.

The Company intends to pursue an acquisition growth strategy led by a
management team that has experience in the consolidation of both automotive
retailing as well as motor sports businesses. Bruton Smith, who is also the
Chief Executive Officer of Speedway Motorsports, Inc., the owner and operator of
several motor sports facilities, first entered the automotive retailing business
in the mid-1960's. Mr. Smith will devote approximately 50% of his business time
to the Company. Since 1990, Mr. Smith has successfully acquired three
dealerships and increased revenues from his dealerships from $199.4 million in
1992 to $376.6 million in 1996, without giving effect to the Acquisitions. In
the Tennessee market, Mr. Bowers has acquired or opened eight dealerships since
1992 and increased revenues from $36.0 million in 1992 to $181.9 million in
1996.

The Company believes the competitive advantages which differentiate it from
its local competitors include the reputation of the Company's management in the
automotive retailing industry, regional and national economies of scale, brand
and geographic diversity, and the established customer base and local name
recognition of the Company's dealerships. The Company has developed and
implemented several growth strategies to capitalize on these competitive
advantages. One of these is to continue to expand its operations in the
Southeast and Southwest by acquiring additional dealerships both within its
current markets and in new markets. The Company also is seeking additional
growth from the increased sale of higher margin products and services such as
wholesale parts, after-market products, collision repair services and F&I.

<PAGE>
The Company believes that an opportunity exists for dealership groups with
significant equity capital and experience in identifying, acquiring and
professionally managing dealerships, to acquire additional dealerships and
capitalize on changes in the automotive retailing industry. With approximately
$640 billion in 1996 sales, automotive retailing is the largest consumer retail
market in the United States. The industry today is highly fragmented, with the
largest 100 dealer groups generating less than 10% of total sales revenues and
controlling less than 5% of all new vehicle dealerships. The Company believes
that these factors, together with increasing capital costs of operating
automobile dealerships, the lack of alternative exit strategies (especially for
larger dealerships) and the aging of many dealership owners provide attractive
consolidation opportunities.

GROWTH STRATEGY

NEW MARKETS. The Company looks to acquire well-managed dealerships in
geographic markets it does not currently serve, principally in the
Southeast and Southwest regions of the United States. The Company will
target dealers having superior operational and financial management.
Generally, the Company will seek to retain the acquired dealerships'
operational and financial management, and thereby benefit from their market
knowledge, name recognition and local reputation.

(Bullet) PURSUE OPPORTUNITIES IN ANCILLARY PRODUCTS AND SERVICES. The Company
intends to pursue opportunities to increase its sales of higher-margin
products and services by expanding its collision repair centers and its
wholesale parts and after-market products businesses, which, other than
after market products, are not directly related to the new vehicle
cycle.

COLLISION REPAIR CENTERS. The Company's collision repair business
provides favorable margins and is not significantly affected by economic
cycles or consumer spending habits. The Company believes that, because of
the high capital investment required for collision repair shops, and the
cost of complying with environmental and worker safety regulations, large
volume body shops will be more successful in the future than smaller volume
shops. The Company believes that this industry will consolidate and that it
will be able to expand its collision repair business. The Company believes
that opportunities exist for those automotive retailers that can establish
relationships with major insurance carriers. The Company currently
participates in 35 direct repair programs with major insurance companies
and its relationships with these carriers provide a source of collision
repair customers. The Company currently has eight collision repair centers
accounting for approximately $8.9 million in pro forma revenue for the year
ended 1996.

WHOLESALE PARTS. Over time, the Company plans to capitalize on its
growing representation of numerous manufacturers in order to increase its
sales of factory authorized parts to wholesale buyers such as independent
mechanical and body repair garages and rental and commercial fleet
operators.

AFTER-MARKET PRODUCTS. The Company intends to expand its offerings of
after-market products in many of its dealership locations. After-market
products, such as custom wheels, performance parts, telephones and other
accessories, enable the dealership to capture incremental revenue on new
and used vehicle sales.

(Bullet) ENHANCE PROFIT OPPORTUNITIES IN FINANCE AND INSURANCE. The Company
offers its customers a wide range of financing and leasing alternatives
for the purchase of vehicles, as well as credit life, accident and
health and disability insurance and extended service contracts. As a
result of its size and scale, the Company believes it will be able to
negotiate with the lending institutions that purchase its financing
contracts to increase the Company's revenues. Likewise, the Company
expects to negotiate to increase the commissions it earns on extended
service and insurance products.

(Bullet) INCREASE USED VEHICLE SALES. The Company believes that there will be
opportunities to improve the used vehicle departments at several of its
dealerships. The Company currently operates four standalone used
vehicle facilities. In 1998, the Company intends to convert part of an
existing facility in Nashville to a used vehicle facility. It also
intends to develop facilities in other markets where management
believes an opportunity exists.

<PAGE>
OPERATING STRATEGY

(Bullet) OPERATE MULTIPLE DEALERSHIPS IN GEOGRAPHICALLY DIVERSE MARKETS. The
Company operates dealerships in Charlotte, Chattanooga, Nashville,
Tampa-Clearwater, Houston and Atlanta. By operating in several
locations throughout the United States, the Company believes it will be
better able to insulate its earnings from local economic downturns. In
addition, the Company believes that by establishing a significant
market presence in its operating regions, it will be able to provide
superior customer service through a market-specific sales, service,
marketing and inventory strategy. The Company's market share in its
Charlotte and Chattanooga markets was 13.7% and 12.6%, respectively in
1996.

(Bullet) ACHIEVE HIGH LEVELS OF CUSTOMER SATISFACTION. Customer satisfaction has
been and will continue to be a focus of the Company. The Company's
personalized sales process is intended to satisfy customers by
providing high-quality vehicles in a positive, "consumer friendly"
buying environment. Manufacturers generally measure customer
satisfaction with an index ("CSI"), which is a result of a survey given
to new vehicle buyers. Some Manufacturers offer specific performance
incentives, on a per vehicle basis, if certain CSI levels (which vary
by Manufacturer) are achieved by a dealer. Manufacturers can withhold
approval of acquisitions if a dealer fails to maintain a minimum CSI
score. Historically, the Company has not been denied Manufacturer
approval of acquisitions based on CSI scores or other reasons. To keep
management focused on customer satisfaction, the Company includes CSI
results as a component of its incentive compensation program.

(Bullet) TRAIN AND DEVELOP QUALIFIED MANAGEMENT. Sonic requires all of its
employees, from service technicians to regional vice presidents, to
participate in in-house training programs. The Company leverages the
experience of senior management, along with third party trainers from
manufacturers, industry affiliates and vendors, to formally train all
employees. This training has also become a convenient and effective way
to share best practices among the Company's employees at all levels of
the various dealerships. The Company is developing an off-site
education center (the "Education Center") to be equipped with
classrooms specifically designed on a departmental basis. The Company
believes that its comprehensive training of all employees at every
level of their career path offers the Company a competitive advantage
over other dealership groups in the development and retention of its
workforce.

(Bullet) CAPITALIZE ON EFFICIENCIES IN OPERATIONS. Because management
compensation is based primarily on dealership performance, expense
reduction and operating efficiencies are a significant management
focus. As the Company pursues its acquisition strategy, the Company's
size and market presence should enable it to negotiate favorable
contracts on such expense items as advertising, purchasing, bank
financings, employee benefit plans and other vendor contracts.

(Bullet) UTILIZE PROFESSIONAL MANAGEMENT PRACTICES AND INCENTIVE BASED
COMPENSATION PROGRAMS. As a result of Sonic's size and geographic
dispersion, the Company's senior management has instituted a
multi-tiered management structure to supervise effectively its
dealership operations. In an effort to align management's interest with
that of stockholders, a portion of the incentive compensation program
for each officer, vice president and executive manager is provided in
the form of Company stock options, with additional incentives based on
the performance of individual profit centers. Sonic believes that this
organizational structure, with room for advancement and the opportunity
for equity participation, serves as a strong motivation for its
employees.

(Bullet) APPLY TECHNOLOGY THROUGHOUT OPERATIONS. The Company believes that, with
the customized technology it has introduced in certain markets, it has
been able to improve its operations over time by integrating its
systems into all aspects of its business. In these markets the Company
uses computer-based technology to monitor its dealerships' operating
performance and quickly adjust to market changes, and to integrate
computer systems into its sales, F&I and parts and service operations.
The Company intends to expand this computer system into all of its
dealerships and markets as the existing contracts for computer systems
expire.

THE REORGANIZATION

The Company was recently incorporated and capitalized with the stock of the
existing automobile dealerships that have been under the control of Bruton Smith
comprised of Town & Country Ford, Town & Country Toyota, Lone Star Ford, Fort

<PAGE>
Mill Ford and Frontier Oldsmobile-Cadillac (the "Sonic Dealerships"). As of June
30, 1997, the Company effected a reorganization (the "Reorganization") pursuant
to which: (i) the Company acquired all of the capital stock or limited liability
company interests of the Sonic Dealerships (the "Dealership Securities"); and
(ii) the Company issued Class B Common Stock in exchange for the Dealership
Securities. In connection with the Reorganization and the Offering, the Company
intends to convert from the last-in-first-out method (the "LIFO Method") of
inventory accounting to the first-in-first-out method (the "FIFO Method") of
inventory accounting (the "FIFO Conversion"), conditioned upon the closing of
the Offering. The FIFO Conversion will increase retained earnings by
approximately $7.5 million and will result in a tax liability of approximately
$5.5 million as of June 30, 1997 in connection with a restatement of the
Company's financial statements. See "The Reorganization."

THE ACQUISITIONS

In the past four months, the Company has consummated or signed definitive
agreements to purchase six dealerships or dealership groups for an aggregate
purchase price of approximately $100.7 million. These acquisitions consist of
Ken Marks Ford located in Clearwater, Florida (the "Ken Marks Acquisition"), the
Bowers Transportation Group, which consists of eight dealerships in Chattanooga,
Tennessee and one dealership in Nashville, Tennessee (the "Bowers Acquisition"),
Lake Norman Dodge and Lake Norman Chrysler-Plymouth-Jeep Eagle located in
Cornelius, North Carolina (the "Lake Norman Acquisition"), Dyer & Dyer Volvo
located in Atlanta, Georgia (the "Dyer Acquisition"), Jeff Boyd
Chrysler-Plymouth-Dodge, located in Fort Mill, South Carolina (the "Fort Mill
Acquisition"), and Williams Motors located in Rock Hill, South Carolina (the
"Williams Acquisition") (collectively, the "Acquisitions"). The dealerships
underlying the Acquisitions had aggregate total revenues of approximately $569.4
million in 1996 and enhance the Company's market presence in the Southeast. See
"The Acquisitions."

The Company's principal executive office is located at 5401 East
Independence Boulevard, Charlotte, North Carolina. Its mailing address is P.O.
Box 18747, Charlotte, North Carolina 28218, and its telephone number is (704)
532-3301.

<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock Offered by the Company........... shares (1)
Common Stock to be outstanding after the Offering:
Class A Common Stock................................ shares (2)
Class B Common Stock................................ shares
Total.......................................... shares
Voting Rights......................................... The Class A Common Stock and Class B Common Stock vote as a single
class on all matters, except as otherwise required by law, with each
share of Class A Common Stock entitling its holders to one vote and
each share of Class B Common Stock entitling its holder to ten votes
except with respect to certain limited matters. See "Description of
Capital Stock."
Use of proceeds....................................... The net proceeds of the Offering will be used to fund the
Acquisitions, including repaying indebtedness incurred by the Company
in connection with the Acquisitions. See "The Acquisitions" and "Use
of Proceeds."
Listing............................................... The Company intends to apply for listing of the Class A Common Stock
on the New York Stock Exchange (the "NYSE"), under the symbol "DLR."
</TABLE>

<PAGE>
(1) Does not include up to an aggregate of shares of Class A Common Stock
that may be sold by the Company upon exercise of the over-allotment option
granted to the Underwriters. See "Underwriting."

(2) Excludes shares of Class A Common Stock reserved for future issuance
to Company employees under the Company's stock option plan (including up to
shares of Class A Common Stock reserved for issuance upon exercise of
options granted to date pursuant to the Company's Stock Option Plan (as
defined herein)) and excludes shares of Class A Common Stock
( shares if the Underwriters' over-allotment option is exercised)
reserved for issuance under the Dyer Warrant (defined herein). See "The
Acquisitions -- The Dyer Acquisition" and "Management -- Stock Option Plan."

<PAGE>
SUMMARY HISTORICAL AND PRO FORMA COMBINED AND CONSOLIDATED FINANCIAL DATA

The following summary historical and pro forma combined and consolidated
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Combined and
Consolidated Financial Statements of the Company and the related notes and "Pro
Forma Combined and Consolidated Financial Data" included elsewhere in this
Prospectus. The Company acquired Fort Mill Ford, Inc. and Fort Mill
Chrysler-Plymouth-Dodge in February 1996 and in June 1997, respectively. Both of
these acquisitions were accounted for using the purchase method of accounting.
As a result the Summary Historical Combined and Consolidated Financial Data
below does not include the results of operations of these dealerships prior to
the date they were acquired by the Company. Accordingly, the actual historical
data for the periods after the acquisition may not be comparable to data
presented for periods prior to the acquisitions of Fort Mill Ford and Fort Mill
Chrysler-Plymouth-Dodge. Additionally, the Summary Historical and Pro Forma
Combined and Consolidated Financial Data below is not necessarily indicative of
the results of operations or financial position which would have resulted had
the Reorganization, FIFO Conversion, the Acquisitions and Offering occurred
during the periods presented.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PRO
ACTUAL FORMA ACTUAL
1992 1993 1994 1995 1996(2) 1996(1) 1996(2) 1997(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AND VEHICLES UNIT DATA)
COMBINED AND CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Vehicle sales...................... $171,065 $203,630 $227,960 $267,308 $326,842 $802,528 $164,333 $185,078
Parts, service and collision
repair........................... 24,543 30,337 33,984 35,860 42,644 96,098 21,005 22,906
Finance and insurance.............. 3,743 3,711 5,181 7,813 7,118 17,483 4,277 4,763
Total revenues................... 199,351 237,678 267,125 310,981 376,604 916,109 189,615 212,747
Cost of sales........................ 174,503 210,046 234,461 272,179 332,407 800,583 167,191 188,368
Gross profit (4)..................... 24,848 27,632 32,664 38,802 44,197 115,526 22,424 24,379
Selling, general and administrative
expenses........................... 20,251 22,738 24,632 29,343 33,678 87,461 16,590 18,413
Depreciation and amortization........ 682 788 838 832 1,076 3,772 360 396
Operating income..................... 3,915 4,106 7,194 8,627 9,443 24,293 5,474 5,570
Interest expense floor plan.......... 2,215 2,743 3,001 4,505 5,968 11,493 2,801 3,018
Interest expense, other.............. 290 263 443 436 433 973 184 269
Other income......................... 1,360 613 609 449 619 3,135 369 274
Income before income taxes and
minority interest (4).............. 2,770 1,713 4,359 4,135 3,661 14,962 2,858 2,557
Provision for income taxes........... 108 107 1,560 1,675 1,400 6,085 1,093 937
Income before minority interest...... 2,662 1,606 2,799 2,460 2,261 8,877 1,765 1,620
Minority interest in (earnings) loss
of subsidiary...................... 31 22 15 22 114 -- 41 47
Net income........................... $ 2,693 $ 1,628 $ 2,784 $ 2,438 $ 2,147 $ 8,877 $ 1,724 $ 1,573
Net income per share (5)............. $ --

<CAPTION>
PRO
FORMA
1997(1)
<S> <C>
COMBINED AND CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues:
Vehicle sales...................... $426,820
Parts, service and collision
repair........................... 51,125
Finance and insurance.............. 9,781
Total revenues................... 487,726
Cost of sales........................ 427,898
Gross profit (4)..................... 59,828
Selling, general and administrative
expenses........................... 43,754
Depreciation and amortization........ 1,731
Operating income..................... 14,343
Interest expense floor plan.......... 6,373
Interest expense, other.............. 583
Other income......................... 1,736
Income before income taxes and
minority interest (4).............. 9,123
Provision for income taxes........... 3,571
Income before minority interest...... 5,552
Minority interest in (earnings) loss
of subsidiary...................... --
Net income........................... $ 5,552
Net income per share (5)............. $ --
</TABLE>

OTHER COMBINED AND
CONSOLIDATED OPERATING DATA:
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
New vehicle units sold............... 8,060 9,429 9,686 10,273 11,693 24,114 6,027 6,553
Used vehicle units sold -- retail
(6)................................ 3,892 4,104 4,374 5,172 5,488 13,453 2,836 2,638
New vehicle revenues................. $126,230 $152,525 $164,361 $186,517 $233,146 $549,285 $117,850 $136,798
Used vehicle revenues -- retail
(6)................................ 33,636 37,719 47,489 60,758 68,053 186,828 35,200 32,666
Parts, service and collision repair
revenues........................... 22,543 30,337 33,984 35,860 42,644 96,098 21,005 22,906
Gross profit margin (FIFO) (7)....... 12.6% 12.2% 12.8% 12.9% 12.1% 12.6% 11.6% 11.2%
New vehicle gross margin (FIFO)
(7)................................ 6.9% 7.2% 7.0% 7.3% 7.4% 7.4% 6.5% 6.6%
Used vehicle gross margin (retail)
(FIFO) (7)(6)...................... 10.4% 16.1% 10.9% 9.5% 8.4% 9.1% 8.4% 8.5%
Parts, service and collision repair
gross margin....................... 36.4% 36.5% 35.9% 36.1% 36.5% 42.4% 35.4% 35.8%

<CAPTION>
New vehicle units sold............... 12,816
<S> <C>
Used vehicle units sold -- retail
(6)................................ 7,222
New vehicle revenues................. $289,909
Used vehicle revenues -- retail
(6)................................ 98,992
Parts, service and collision repair
revenues........................... 51,126
Gross profit margin (FIFO) (7)....... 12.3%
New vehicle gross margin (FIFO)
(7)................................ 7.2%
Used vehicle gross margin (retail)
(FIFO) (7)(6)...................... 8.9%
Parts, service and collision repair
gross margin....................... 42.5%
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, JUNE 30, 1997
1996 ACTUAL PRO FORMA
<S> <C> <C> <C>
COMBINED AND CONSOLIDATED BALANCE SHEET DATA:
Working capital.............................................................. $ 6,201 $ 4,287 $ 51,169
Total assets................................................................. 94,930 106,859 317,489
Long-term debt............................................................... 5,286 5,137 10,422
Total liabilities............................................................ 79,181 86,499 189,049
Minority interest............................................................ 314 -- --
Stockholders' equity (4)..................................................... 15,749 20,360 128,440
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

<PAGE>
(1) For information regarding the pro forma adjustments made to the Company's
historical financial data, which give effect to the Reorganization, the FIFO
Conversion, the Acquisitions, and the Offering, see "Pro Forma Combined and
Consolidated Financial Data."
(2) The actual statement of operations data for the year ended December 31, 1996
includes the results of Fort Mill Ford, Inc. from the date of acquisition,
February 1, 1996.
(3) The actual statement of operations data for the six months ended June 30,
1997 include the results of Fort Mill Chrysler-Plymouth-Dodge, Inc. from the
date of acquisition June 6, 1997.
(4) The Company currently utilizes the LIFO Method of inventory accounting. See
Note 3 to the Company's Combined and Consolidated Financial Statements. The
Company intends to file an election with the Internal Revenue Service to
convert, upon the closing of the Offering, to the FIFO Method of inventory
accounting and report its earnings for tax purposes and in its financial
statements on the FIFO Method. If the Company had previously utilized the
FIFO Method, gross profit and income before income taxes and minority
interest for the periods shown in the table, and stockholders' equity as of
December 31, 1996 and June 30, 1997, would have been as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
1992 1993 1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Gross profit............................ $28,192 $29,034 $34,114 $40,103 $45,571 $22,423 $27,434
Income before income taxes and minority
interest.............................. 2,560 3,102 5,809 5,436 5,021 2,858 2,612
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1996 JUNE 30, 1997
<S> <C> <C>
(IN THOUSANDS)
Stockholders' equity..................................................................... $18,215 $20,360
</TABLE>

(5) Historical net income per share is not presented, as the historical capital
structure of the Company prior to the Offering is not comparable with the
capital structure that will exist after the Offering.
(6) The term "retail" describes sales to consumers as compared to sales to
wholesalers.
(7) Data is presented on the FIFO Method of inventory accounting. The Company
has historically used the LIFO Method of inventory accounting and intends to
convert to the FIFO Method conditioned and effective upon the closing of the
Offering. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview."

<PAGE>
RISK FACTORS

THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THESE FORWARD-LOOKING STATEMENTS
AS A RESULT OF CERTAIN OF THE RISK FACTORS SET FORTH BELOW AND ELSEWHERE IN THIS
PROSPECTUS. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER AND EVALUATE ALL OF
THE INFORMATION SET FORTH IN THIS PROSPECTUS, INCLUDING THE RISK FACTORS SET
FORTH BELOW.

DEPENDENCE ON AUTOMOBILE MANUFACTURERS

Each of the Company's dealerships operates pursuant to a franchise
agreement between the applicable automobile manufacturer (or authorized
distributor thereof) (the "Manufacturer") and the subsidiary of the Company that
operates such dealership. The Company is dependent to a significant extent on
its relationship with such Manufacturers.

After giving effect to the Reorganization and the Acquisitions, vehicles
manufactured by Ford Motor Company ("Ford"), Chrysler Corporation ("Chrysler"),
Toyota Motor Sales (U.S.A.) ("Toyota") and Volvo Motors ("Volvo"), accounted for
approximately 62.3%, 16.9%, 5.8% and 5.7%, respectively, of the Company's 1996
pro forma unit sales of new vehicles. No other Manufacturer accounted for more
than 5% of the new vehicle sales of the Company during 1996. See
"Business -- New Vehicle Sales," and " -- Relationships with Manufacturers."
Accordingly, a significant decline in the sale of Ford, Chrysler, Toyota, or
Volvo new cars could have a material adverse effect on the Company.
Manufacturers exercise a great degree of control over dealerships, and the
franchise agreement provides for termination or non-renewal for a variety of
causes. The Company believes that it is in compliance in all material respects
with all its franchise agreements except that, as set forth in Note 8 to the
Combined Financial Statements for Lake Norman Dodge, Inc. and Affiliated
Companies, Lake Norman Dodge (one of the dealerships whose assets are being
purchased in the Lake Norman Acquisition) is in violation of its franchise
agreement with Chrysler. The Company does not have any reason to believe that
this will have an effect on its ability to consummate the Lake Norman
Acquisition. The Company's franchise agreements generally expire at various
times between 1997 and 2000, although some franchise agreements have no specific
expiration date and continue in effect unless terminated pursuant to certain
limited circumstances. The Company has no reason to believe that it will not be
able to renew all of its franchise agreements upon expiration, but there can be
no assurance that any of such agreements will be renewed or that the terms and
conditions of such renewals will be favorable to the Company. If a Manufacturer
terminates or declines to renew one or more of the Company's significant
franchise agreements, such action could have a material adverse effect on the
Company and its business. Actions taken by Manufacturers to exploit their
superior bargaining position in negotiating the terms of such renewals or
otherwise could also have a material adverse effect on the Company. See
"Business -- Relationships with Manufacturers."

The Company also depends on its Manufacturers to provide it with a
desirable mix of popular new vehicles that produce the highest profit margins
and which may be the most difficult to obtain from the Manufacturers. If the
Company is unable to obtain a sufficient allocation of the most popular
vehicles, its profitability may be materially adversely affected. In some
instances, in order to obtain additional allocations of these vehicles, the
Company purchases a larger number of less desirable models than it would
otherwise purchase and its profitability may be materially adversely affected
thereby. The Company's dealerships depend on the Manufacturers for certain sales
incentives and other programs that are intended to promote dealership sales or
support dealership profitability. Manufacturers have historically made many
changes to their incentive programs during each year. A reduction or
discontinuation of a Manufacturer's incentive programs may materially adversely
affect the profitability of the Company.

The success of each of the Company's dealerships depends to a great extent
on the financial condition, marketing, vehicle design, production capabilities
and management of the Manufacturers which the Company represents. Events such as
strikes and other labor actions by unions, or negative publicity concerning a
particular Manufacturer or vehicle model, may materially and adversely affect
the Company. Although, the Company has attempted to lessen its dependence on any
one Manufacturer by establishing dealer relationships with a number of different
domestic and foreign automobile Manufacturers, adverse conditions affecting
Ford, Chrysler, Toyota and Volvo in particular, could have a material adverse
affect on the Company. See "Business -- New Vehicle Sales" and " -- Relationship
with Manufacturers."

Many Manufacturers attempt to measure customers' satisfaction with their
sales and warranty service experiences through systems, which vary from
Manufacturer to Manufacturer but which are generally known as CSI. These
Manufacturers may use a dealership's CSI scores as a factor in evaluating
applications for additional dealership acquisitions and other matters such as
vehicle inventory allocations. The components of CSI have been modified from
time to time in the past, and there is no assurance that such components will
not be further modified or replaced by different systems in the future. To date,
the Company has not been adversely affected by these standards and has not been
denied approval of any acquisition.

<PAGE>
However, there can be no assurance that the Company will be able to comply with
such standards in the future. Failure of the Company's dealerships to comply
with the standards imposed by Manufacturers at any given time may have a
material adverse effect on the Company.

The Company must also obtain approvals by the applicable Manufacturer for
any of its acquisitions. See " -- Risks Associated with Acquisitions."

COMPETITION

Automobile retailing is a highly competitive business with over 22,000
franchised automobile dealerships in the United States at the beginning of 1996.
The Company's competition includes franchised automobile dealerships selling the
same or similar makes of new and used vehicles offered by the Company in the
same markets as the Company and sometimes at lower prices than those of the
Company. These dealer competitors may be larger and have greater financial and
marketing resources than the Company. Other competitors include other franchised
dealers, private market buyers and sellers of used vehicles, used vehicle
dealers, service center chains and independent service and repair shops. Gross
profit margins on sales of new vehicles have been declining since 1986. The
Company has also had margin pressure on its used vehicle sales over the last 18
months. The used car market faces increasing competition from non-traditional
outlets such as used-car "superstores," which use sales techniques such as one
price shopping and the Internet. Several groups have begun to establish
nationwide networks of used vehicle superstores. In Charlotte and Atlanta, where
the Company has significant operations, CarMax Superstores operate in
competition with the Company. In addition, car superstores operate in many of
the Company's other markets. "No negotiation" sales methods are also being tried
for new cars by at least one of these superstores and by dealers for Saturn and
other dealerships. Some recent market entrants may be capable of operating on
smaller gross margins compared to the Company. In addition, certain
Manufacturers have publicly announced that they may directly enter the retail
market in the future which could have a material adverse effect on the Company.
The increased popularity of short-term vehicle leasing also has resulted, as
these leases expire, in a large increase in the number of late model vehicles
available in the market, which puts added pressure on margins. As the Company
seeks to acquire dealerships in new markets, it may face increasingly
significant competition (including from other large dealer groups and dealer
groups that have publicly-traded equity) as it strives to gain market share
through acquisitions or otherwise.

The Company's franchise agreements (other than with Saturn) do not give the
Company the exclusive right to sell a Manufacturer's product within a given
geographic area. The Company could be materially adversely affected if any of
its Manufacturers award franchises to others in the same markets where the
Company is operating. A similar adverse affect could occur if existing competing
franchised dealers increase their market share in the Company's markets. The
Company's gross margins may decline over time as it expands into markets where
it does not have a leading position. These and other competitive pressures could
materially adversely affect the Company's results of operations. See
"Business -- Competition."

OPERATING CONDITION OF ACQUIRED BUSINESSES

Although the Company has conducted what it believes to be a prudent level
of investigation regarding the operating condition of the assets to be purchased
in the Acquisitions in light of the circumstances of each transaction, certain
unavoidable levels of risk remain regarding the actual operating condition of
these assets. Until the Company actually assumes operating control of such
assets, it will not be able to ascertain their actual value and, therefore, will
be unable to ascertain whether the price paid for the Acquisitions represented a
fair valuation. The same risk regarding the actual operating condition of
businesses to be acquired will also apply to future acquisitions by the Company.

RISKS OF CONSOLIDATING OPERATIONS AS A RESULT OF THE ACQUISITIONS

In connection with the Acquisitions, Sonic acquired six dealerships or
dealership groups. Each of these dealerships or groups has been operated and
managed as a separate independent entity to date, and the Company's future
operating results will depend on its ability to integrate the operations of
these businesses and manage the combined enterprise. The Company's management
group has been expanded in connection with these Acquisitions. There can be no
assurance that the management group will be able effectively and profitably
integrate in a timely manner each of the dealerships included in the
Acquisitions or any future acquisitions, or to manage the combined entity. The
inability of the Company to do so could have a material adverse effect on the
Company's business, financial condition and results of operations.

<PAGE>
RISKS ASSOCIATED WITH ACQUISITIONS

The retail automobile industry is considered a mature industry in which
minimal growth is expected in unit sales of new vehicles. Accordingly, the
Company's future growth will depend in large part on its ability to acquire
additional dealerships as well as on its ability to manage expansion, control
costs in its operations and consolidate dealership acquisitions, including the
Acquisitions, into existing operations. In pursuing a strategy of acquiring
other dealerships, including the Acquisitions, the Company faces risks commonly
encountered with growth through acquisitions. These risks include, but are not
limited to, incurring significantly higher capital expenditures and operating
expenses, failing to assimilate the operations and personnel of the acquired
dealerships, disrupting the Company's ongoing business, dissipating the
Company's limited management resources, failing to maintain uniform standards,
controls and policies, impairing relationships with employees and customers as a
result of changes in management and causing increased expenses for accounting
and computer systems, as well as integration difficulties. Installing new
computer systems has in the past disrupted existing operations as management and
salespersons adjust to new technologies. In addition, as contracts with existing
suppliers of the Company's computer systems expire, the Company's strategy may
be to install new systems at its existing dealerships. The Company expects that
it will take one to two years to fully integrate an acquired dealership into the
Company's operations and realize the full benefit of the Company's strategies
and systems. There can be no assurance that the Company will be successful in
overcoming these risks or any other problems encountered with such acquisitions,
including in connection with the Acquisitions. Acquisitions may also result in
significant goodwill and other intangible assets that are amortized in future
years and reduce future stated earnings. See "The Acquisitions," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Growth Strategy."

Although there are many potential acquisition candidates that fit the
Company's acquisition criteria, there can be no assurance that the Company will
be able to consummate any such transactions in the future or identify those
candidates that would result in the most successful combinations or that future
acquisitions will be able to be consummated at acceptable prices and terms. The
magnitude, timing and nature of future acquisitions will depend upon various
factors, including the availability of suitable acquisition candidates,
competition with other dealer groups for suitable acquisitions, the negotiation
of acceptable terms, the Company's financial capabilities, the availability of
skilled employees to manage the acquired companies and general economic and
business conditions.

In addition, the Company's future growth as a result of its acquisition of
automobile dealerships will depend on its ability to obtain the requisite
Manufacturer approvals. There can be no assurance that Manufacturers will grant
such approvals. It is also possible that one or more Manufacturers might object
to ownership by one company of many of its franchises. For example, it is
currently the policy of Toyota to restrict any company from holding more than
seven Toyota or more than three Lexus franchises and to impose restrictions
based on the number of franchises held within certain geographic areas. Although
the Company has been to date able to obtain Manufacturer approvals for its
acquisitions on acceptable terms, there can be no assurance that it will be able
to do so in the future.

In certain cases, the Company may be required to file applications and
obtain clearances, under applicable federal antitrust laws before consummation
of an acquisition. These regulatory requirements may restrict or delay the
Company's acquisitions, and may increase the cost of completing such
transactions.

FINANCIAL RESOURCES AVAILABLE FOR ACQUISITIONS

The Company intends to finance acquisitions with cash on hand, through
issuances of equity or debt securities and through borrowings under credit
arrangements. The Company is currently negotiating new credit arrangements,
although none has been consummated and no assurance can be given that any
lending or credit arrangement will be consummated or that such arrangements will
adequately meet the Company's financing needs on acceptable terms. Similarly,
there is no assurance that the Company will be able to obtain additional debt or
equity securities financing. Using cash to complete acquisitions could
substantially limit the Company's operating or financial flexibility. Using
stock to consummate acquisitions may result in significant dilution of
stockholders' percentage interest in the Company, which dilution may be
prohibited by the Company's franchise agreements with Manufacturers. See
" -- Stock Ownership/Issuance Limits." If the Company is unable to obtain
financing on acceptable terms, the Company may be required to reduce
significantly the scope of its presently anticipated expansion, which could
materially adversely affect the Company's business. See "The Acquisitions,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources" and "Business -- Growth Strategy."

In addition, the Company is dependent to a significant extent on its
ability to finance the purchase of inventory, which in the automotive retail
industry involves significant sums of money in the form of floor plan financing.
As of June 30, 1997 on

<PAGE>
a pro forma basis for the Acquisitions, the Company had approximately $140.6
million of floor plan indebtedness. Substantially all the assets of the
Company's dealerships are pledged to secure such indebtedness, which may impede
the Company's ability to borrow from other sources. Many floor plan lenders are
associated with Manufacturers with whom the Company has franchise agreements.
Consequently, deterioration of the Company's relationship with a Manufacturer
could adversely affect its relationship with the affiliated floor plan lender
and vice-versa. In addition, the Company must obtain new floor plan financing or
obtain consents to assume such financing in connection with its acquisition of
dealerships. See " -- Dependence on Automobile Manufacturers."

STOCK OWNERSHIP/ISSUANCE LIMITS

Standard automobile franchise agreements prohibit transfers of any
ownership interests of a dealership and its parent, such as Sonic, and,
therefore, often do not by their terms accommodate public trading of the capital
stock of a dealership or its parent. While, prior to the Offering and as a
condition thereto, all of the Manufacturers of which Company subsidiaries are
franchisees will have agreed to permit the Offering and trading in the Class A
Common Stock, a number of Manufacturers will continue to impose restrictions
upon the transferability of the Common Stock. Any transfer of shares of the
Company's Common Stock, including a transfer by members of the Smith Group, will
be outside the control of the Company and, if such transfer results in a change
in control of the Company, could result in the termination or non-renewal of one
or more of its franchise agreements. Moreover, these issuance limitations may
impede the Company's ability to raise capital through additional equity
offerings or to issue Common Stock as consideration for, and therefore, to
consummate, future acquisitions. Such restrictions also may prevent or deter
prospective acquirors from acquiring control of the Company and, therefore, may
adversely impact the Company's equity value. See " -- Financial Resources
Available for Acquisitions."

Upon consummation of the Offering, % of the Common Stock (on a fully
diluted basis) will be publicly owned (assuming full exercise of the
Underwriters' over-allotment option). The Company has contractual obligations to
provide "piggyback" registration rights to holders of Class B Common Stock to
register their shares under the Securities Act under certain circumstances.
Additionally, such shares will become in the future, eligible for sale pursuant
to the terms of Rule 144 under the Securities Act ("Rule 144"). See "Certain
Transactions -- Registration Rights Agreement" and "Shares Eligible for Future
Sale."

POTENTIAL CONFLICTS OF INTEREST

Bruton Smith, the Chairman and Chief Executive Officer of the Company, will
continue to serve as the Chairman and Chief Executive Officer of Speedway
Motorsports. Accordingly, the Company will compete with Speedway Motorsports for
the management time of Mr. Smith. Under his employment agreement with the
Company, Mr. Smith is required to devote approximately 50% of his business time
to the affairs of the Company. The remainder of his business time may be devoted
to other entities including Speedway Motorsports.

The Company has in the past and will likely in the future enter into
transactions with entities controlled by either Mr. Smith, Nelson Bowers or Ken
Marks or other affiliates of the Company. The Company believes that all of these
arrangements are favorable to the Company and were entered into on terms that,
taken as a whole, reflect arms'-length negotiations, although certain lease
provisions included in such transactions may be at below-market rates. Since no
independent appraisals evaluating these business transactions were obtained,
there can be no assurance that such transactions are on terms no less favorable
than could have been obtained from unaffiliated third parties. Certain of the
existing arrangements will continue after the Offering. Potential conflicts of
interest could also arise in the future between the Company and these affiliated
parties in connection with the enforcement, amendment or termination of these
arrangements. See "Certain Transactions." The Company anticipates renegotiating
its leases with all related parties at lease expiration at fair market rentals,
which may be higher than current rents. For further discussion of these related
party leases, see "Certain Transactions -- Certain Dealership Leases."

In addition to his interest and responsibilities with the Company, Nelson
Bowers has ownership interests in several non-Company entities, including a
Toyota dealership in Cleveland, Tennessee, an auto body shop in Chattanooga,
Tennessee and a used-car auction house. These enterprises are involved in
businesses that are related to, and that compete with, the businesses of the
Company. Pursuant to his employment agreement, Mr. Bowers is not permitted to
participate actively in the operation of those businesses and is only permitted
to maintain a passive investment in these enterprises.

Under Delaware Law generally, a corporate insider is precluded from acting
on a business opportunity in his individual capacity if that opportunity is one
which the corporation is financially able to undertake, is in the line of the
corporation's

<PAGE>
business, is of practical advantage to the corporation and is one in which the
corporation has an interest or reasonable expectancy. Accordingly, corporate
insiders are generally required to engage in new business opportunities of the
Company only through the Company unless a majority of the Company's
disinterested directors decide under the standards discussed above that it is
not in the best interest of the Company to pursue such opportunities.

The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") contains provisions providing that transactions between the
Company and its affiliates must be no less favorable to the Company than would
be available in corporate transactions in arms'-length dealing with an unrelated
third party. Moreover, any such transactions involving aggregate payments in
excess of $500,000 must be approved by a majority of the Company's directors and
a majority of the Company's independent directors. Otherwise, the Company must
obtain an opinion as to the financial fairness of the transaction to be issued
by an investment banking or appraisal firm of national standing.

LACK OF INDEPENDENT DIRECTORS

As of the date hereof, all of the members of the Company's Board of
Directors are employees and/or majority shareholders of the Company or
affiliates thereof. Although the Company intends to appoint at least two
independent directors following completion of the Offering, such directors will
not constitute a majority of the Board, and the Company's Board may not have a
majority of independent directors in the future. In the absence of a majority of
independent directors, the Company's executive officers, who also are principal
stockholders and directors, could establish policies and enter into transactions
without independent review and approval thereof, subject to certain restrictions
under the Certificate. In addition, although the Company intends to establish
audit and compensation committees which will consist entirely of outside
directors, until those committees are established, audit and compensation
policies could be approved without independent review. These and other
transactions could present the potential for a conflict of interest between the
Company and its stockholders generally and the controlling officers,
stockholders or directors. See "Management."

DEPENDENCE ON KEY PERSONNEL AND LIMITED MANAGEMENT AND PERSONNEL RESOURCES

The Company's success depends to a significant degree upon the continued
contributions of its management team (particularly its senior management) and
service and sales personnel. The loss of the services of one or more of these
key employees could have a material adverse effect on the Company. Although the
Company has employment agreements with Bruton Smith, Bryan Scott Smith, Nelson
Bowers, Theodore M. Wright, O. Ken Marks, Jr. and Jeffrey C. Rachor, the Company
will not have employment agreements in place with other key personnel. In
addition, as the Company expands it may need to hire additional managers. The
market for qualified employees in the industry and in the regions in which the
Company operates, particularly for general managers and sales and service
personnel, is highly competitive and may subject the Company to increased labor
costs in periods of low unemployment. The loss of the services of key employees
or the inability to attract additional qualified managers could have a material
adverse effect on the Company. In addition, the lack of qualified management or
employees employed by the Company's potential acquisition candidates may limit
the Company's ability to consummate future acquisitions. See "Business -- Growth
Strategy," "Business -- Competition" and "Management."

MATURE INDUSTRY; CYCLICAL AND LOCAL NATURE OF AUTOMOBILE SALES

The United States automobile dealership industry generally is considered a
mature industry in which minimal growth is expected in unit sales of new
vehicles. As a consequence, growth in the Company's revenues and earnings are
likely to be significantly affected by the Company's success in acquiring and
integrating dealerships and the pace and size of such acquisitions. See
" -- Risks Associated with Acquisitions" and "Business -- Growth Strategy."

The automobile industry is cyclical and historically has experienced
periodic downturns, characterized by oversupply and weak demand. Many factors
affect the industry, including general economic conditions and consumer
confidence, the level of discretionary personal income, interest rates and
credit availability. For the six months ended June 30, 1997, industry retail
sales were down 2% as a result of retail car sales declines of 5.3% and retail
truck sales gains of 2.4% from the same period in 1996. Future recessions may
have a material adverse effect on the Company's business.

Local economic, competitive and other conditions also affect the
performance of dealerships. The Sonic Dealerships are located in the Charlotte
and Houston markets. Pursuant to the Acquisitions, the Company is acquiring
dealerships in the metropolitan areas of Charlotte, Chattanooga, Nashville,
Tampa-Clearwater and Atlanta. While the Company intends to pursue acquisitions
outside of these markets, the Company expects that the majority of its
operations will continue to be concentrated in these areas for the foreseeable
future. As a result, the Company's results of operations will depend
substantially on general economic conditions and consumer spending habits in the
Southeast and, to a lesser extent, in the Houston market, as

<PAGE>
well as various other factors, such as tax rates and state and local
regulations, specific to North Carolina, Tennessee, Florida, Texas, Georgia and
South Carolina. There can be no assurance that the Company will be able to
expand geographically, or that any such expansion will adequately insulate it
from the adverse effects of local or regional economic conditions. See
"Business -- Growth Strategy."

SEASONALITY

The Company's business is seasonal, with a disproportionate amount of sales
occurring in the second, third and fourth fiscal quarters. See "Managements's
Discussion and Analysis of Financial Condition and Results of Operations."

IMPORTED PRODUCTS

Certain motor vehicles retailed by the Company, as well as certain major
components of vehicles retailed by the Company, are of foreign origin.
Accordingly, the Company is subject to the import and export restrictions of
various jurisdictions and is dependent to some extent upon general economic
conditions in and political relations with a number of foreign countries,
particularly Japan. Additionally, fluctuations in currency exchange rates may
adversely affect the Company's sales of vehicles produced by foreign
manufacturers. Imports into the United States may also be adversely affected by
increased transportation costs.

GOVERNMENTAL REGULATIONS; ENVIRONMENTAL MATTERS

The Company is subject to a wide range of federal, state and local laws and
regulations, such as local licensing requirements, consumer protection laws and
regulations relating to gasoline storage, waste treatment and other
environmental matters. Future acquisitions by the Company may also be subject to
regulation, including antitrust reviews. The Company believes that it complies
in all material respects with all laws and regulations applicable to its
business, but future regulations may be more stringent and require the Company
to incur significant additional costs.

The Company's facilities and operations are subject to federal, state and
local laws and regulations relating to environmental protection and human health
and safety, including those governing wastewater discharges, air emissions, the
operation and removal of underground storage tanks, the use, storage, treatment,
transportation and disposal of solid and hazardous materials and the remediation
of contamination associated with such disposal. Certain of these laws and
regulations may impose joint and several liability on certain statutory classes
of persons for the costs of investigation or remediation of contaminated
properties, regardless of fault or the legality of the original disposal. These
persons include the present or former owner or operator of a contaminated
property and companies that generated, disposed of or arranged for the disposal
of hazardous substances found at the property.

Past and present business operations of the Company subject to such laws
and regulations include the use, storage handling and contracting for recycling
or disposal of hazardous or toxic substances or wastes, including
environmentally sensitive materials such as motor oil, waste motor oil and
filters, transmission fluid, antifreeze, freon, waste paint and lacquer thinner,
batteries, solvents, lubricants, degreasing agents, gasoline and diesel fuels.
The Company is subject to other laws and regulations as a result of the past or
present existence of underground storage tanks at many of the Company's
properties. The Company, like many of its competitors, has incurred, and will
continue to incur, capital and operating expenditures and other costs in
complying with such laws and regulations. In addition, soil and groundwater
contamination exist at certain of the Company's properties, and there can be no
assurance that other properties have not been contaminated by any leakage from
underground storage tanks or by any spillage or other releases of hazardous or
toxic substances or wastes.

Certain laws and regulations, including those governing air emissions and
underground storage tanks, have been amended so as to require compliance with
new or more stringent standards as of future dates. The Company cannot predict
what other environmental legislation or regulations will be enacted in the
future, how existing or future laws or regulations will be administered or
interpreted or what environmental conditions may be found to exist in the
future. Compliance with new or more stringent laws or regulations, stricter
interpretation of existing laws or the future discovery of environmental
conditions may require additional expenditures by the Company, some of which may
be material. See "Business -- Governmental Regulations and Environmental
Matters."

CONCENTRATION OF VOTING POWER AND ANTI-TAKEOVER PROVISIONS

The Common Stock is divided into two classes with different voting rights,
which allows for the maintenance of control of the Company by the holders of the
Class B Common Stock. Holders of Class A Common Stock are entitled to one vote
per share on all matters submitted to a vote of the stockholders of the Company.
Holders of Class B Common Stock are entitled

<PAGE>
to ten votes per share on all matters, except that the Class B Common Stock is
entitled to only one vote per share with respect to any transaction proposed or
approved by the Company's Board of Directors, proposed by or on behalf of the
holders of the Class B Common Stock or their affiliates or as to which any
members of the Smith Group or any affiliate thereof has a material financial
interest (other than as a then existing stockholder of the Company) constituting
a (a) "going private" transaction (as defined herein), (b) disposition of
substantially all of the Company's assets, (c) transfer resulting in a change in
the nature of the Company's business, or (d) merger or consolidation in which
current holders of Common Stock would own less than 50% of the Common Stock
following such transaction. The two classes vote together as a single class on
all matters, except where class voting is required by Delaware Law, which
exception would apply, among other situations, to a vote on any proposal to
modify the voting rights of the Class B Common Stock. See "Description of
Capital Stock." Upon completion of this Offering (assuming the Underwriters'
over-allotment option is not exercised), the existing holders of Class B Common
Stock will have approximately % of the combined voting power of the Common
Stock (in those circumstances in which the Class B Common Stock has ten votes
per share) and % of the outstanding Common Stock. Accordingly such holders of
Class B Common Stock will effectively have the ability to elect all of the
directors of the Company and to control all other matters requiring the approval
of the Company's stockholders. In addition, the Company may issue additional
shares of Class B Common Stock to members of the Smith Group in the future for
fair market value. See "Principal Stockholders."

The disproportionate voting rights of the Class B Common Stock under the
above-mentioned circumstances could have a material adverse effect on the market
price of the Class A Common Stock. Such disproportionate voting rights may make
the Company a less attractive target for a takeover than it otherwise might be,
or render more difficult or discourage a merger proposal, a tender offer or a
proxy contest, even if such actions were favored by a majority of the holders of
the Class A Common Stock.

Certain provisions of the Certificate and the Company's Bylaws make it more
difficult for stockholders of the Company to effect certain corporate actions.
See "Description of Capital Stock -- Delaware Law, Certain Charter and Bylaw
Provisions and Certain Franchise Agreement Provisions." Under the Company's
Stock Option Plan, options outstanding thereunder become immediately exercisable
upon a change in control of the Company. See "Management -- Employment
Agreements" and " -- Stock Option Plan." The agreements, corporate documents and
laws described above, as well as provisions of the Company's franchise
agreements described in " -- Dependence on Automobile Manufacturers" above
permitting Manufacturers to terminate such agreements upon a change of control,
may have the effect of delaying or preventing a change in control of the Company
or preventing stockholders from realizing a premium on the sale of their shares
of Class A Common Stock upon an acquisition of the Company.

The Certificate authorizes the Board of Directors of the Company to issue
three million shares of "blank check" preferred stock with such designations,
rights and preferences as may be determined from time to time by the Board of
Directors. Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights or preferences that could adversely affect the voting
power or other rights of the holders of the Class A Common Stock. In the event
of issuance, the preferred stock could be utilized, under certain circumstances,
as a method of discouraging, delaying, or preventing a change in control of the
Company. The issuance of preferred stock could also prevent stockholders from
realizing a premium upon the sale of their shares of Class A Common Stock upon
an acquisition of the Company. Although the Company has no present intention to
issue any shares of its preferred stock, there can be no assurance that the
Company will not do so in the future. See "Description of Capital Stock."

Additionally, the Company's Bylaws provide: (i) for a Board of Directors
divided into three classes serving staggered terms; (ii) that special meetings
of stockholders may be called only by the Chairman or by the Company's Secretary
or Assistant Secretary at the request in writing of a majority of the Board of
Directors; (iii) that no stockholder action may be taken by written consent; and
(iv) that stockholders seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as directors at an annual
or a special meeting of stockholders must provide timely notice thereof in
writing. These provisions will impair the stockholders' ability to influence or
control the Company or to effect a change in control of the Company, and may
prevent stockholders from realizing a premium on the sale of their shares of
Class A Common Stock upon an acquisition of the Company. See "Description of
Capital Stock."

NO PRIOR PUBLIC MARKET FOR CLASS A COMMON STOCK AND POSSIBLE VOLATILITY OF STOCK
PRICE

Prior to the Offering, there has been no public market for the Class A
Common Stock. The Company intends to apply for a listing of the Class A Common
Stock on the NYSE. The initial public offering price of the Class A Common Stock
will be determined by negotiations among the Company and representatives of the
Underwriters. See "Underwriting." There can

<PAGE>
be no assurance that the market price of the Class A Common Stock prevailing at
any time after this Offering will equal or exceed the initial public offering
price. Quarterly and annual operating results of the Company, variations between
such results and the results expected by investors and analysts, changes in
local or general economic conditions or developments affecting the automobile
industry, the Company or its competitors could cause the market price of the
Class A Common Stock to fluctuate substantially. As a result of these factors,
as well as other factors common to initial public offerings, the market price
could fluctuate substantially from the initial offering price. In addition, the
stock market has, from time to time, experienced extreme price and volume
fluctuations, which could adversely effect the market price for the Class A
Common Stock without regard to the financial performance of the Company.

DILUTION

Purchasers of Class A Common Stock in the Offering will experience
immediate and substantial dilution in the amount of $ per share in net
tangible book value per share from the initial offering price. See "Dilution."

SHARES ELIGIBLE FOR FUTURE SALE

The shares of Class B Common Stock owned beneficially by existing
stockholders of the Company and the shares of Class A Common Stock underlying
options granted by the Company under the Stock Option Plan and to an outstanding
warrant issued in connection with the Dyer Acquisition, are "restricted
securities" as defined in Rule 144 under the Securities Act, and may in the
future be resold in compliance with Rule 144. See "Management -- Stock Option
Plan" and "The Acquisitions -- The Dyer Acquisition." In addition, shares
of Common Stock constituting restricted securities are subject to certain
piggyback registration rights. See "Certain Transactions -- Registration Rights
Agreements." No prediction can be made as to the effect that resale of shares of
Common Stock, or the availability of shares of Common Stock for resale, will
have on the market price of the Class A Common Stock prevailing from time to
time. The resale of substantial amounts of Common Stock, or the perception that
such resales may occur, could materially and adversely affect prevailing market
prices for the Common Stock and the ability of the Company to raise equity
capital in the future. The Company has agreed not to issue, and all executive
officers of the Company and all owners of the Class B Common Stock have agreed
not to resell, any shares of Common Stock or other equity securities of the
Company for 180 days after the date of this Prospectus without the prior written
consent of the representatives of the Underwriters. See "Management -- Stock
Option Plan," "Shares Eligible for Future Sale" and "Underwriting."

<PAGE>
THE REORGANIZATION

The Company was recently incorporated and capitalized with the stock of the
Sonic Dealerships, which have been under the control of Bruton Smith and which
are comprised of Town & Country Ford, Town & Country Toyota, Lone Star Ford,
Fort Mill Ford and Frontier Oldsmobile-Cadillac. As of June 30, 1997, the
Company effected the Reorganization pursuant to which: (i) the Company acquired
all of the Dealership Securities; and (ii) the Company issued Class B Common
Stock in exchange for the Dealership Securities. See "Certain
Transactions -- Other Transactions." Subsequent to the Reorganization, the
Company intends to convert from the LIFO Method of inventory accounting to the
industry standard FIFO Method of inventory accounting, conditioned upon the
closing of the Offering. As a result of the Reorganization and the FIFO
Conversion, the historical combined financial information included in this
Prospectus is not necessarily indicative of the results of operations, financial
position and cash flows of the Company in the future or of those which would
have resulted had the Reorganization and FIFO Conversion been in effect during
the periods presented in the Company's Combined and Consolidated Financial
Statements included elsewhere in this Prospectus. Upon election of the FIFO
Method, the Company will be required under generally accepted accounting
principles to restate its historical financial statements. The FIFO Conversion
will increase retained earnings by $7.5 million and will result in a tax
liability of approximately $5.5 million as of June 30, 1997. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

THE ACQUISITIONS

In the last four months, the Company consummated or signed definitive
agreements to purchase six additional dealerships or dealership groups for an
aggregate purchase price of approximately $100.7 million. These acquisitions
consist of the Ken Marks Acquisition, the Bowers Acquisition, the Lake Norman
Acquisition, the Dyer Acquisition, the Fort Mill Acquisition and the Williams
Acquisition.

The closing of the Offering is contingent upon the Company consummating the
Acquisitions. The Company intends to use the proceeds from the Offering to pay
the purchase prices of the Acquisitions and to repay indebtedness, if any,
incurred in connection with the Acquisitions. See "Use of Proceeds." In
addition, the Company intends to refinance all of the floor plan indebtedness of
the dealerships constituting the Acquisitions.

THE KEN MARKS ACQUISITION. Ken Marks Ford is located in Clearwater,
Florida. Ken Marks, Jr., together with the other stockholders of Ken Marks Ford,
and the Company entered into a definitive stock purchase agreement in July 1997,
providing for the acquisition by the Company of all of the outstanding stock of
Ken Marks Ford. Ken Marks Ford had retail sales of approximately 4,369 new and
1,764 used vehicles, had aggregate revenues of approximately $147.4 million in
1996, and, based on revenues, is one of the 20 largest Ford dealerships in the
United States. This acquisition further implements the Company's growth strategy
by adding a well-managed dealership with significant presence in a new market.
Ken Marks, Jr., with over 13 years of automotive retailing experience in central
Florida, will continue to serve as the Executive Manager of Ken Marks Ford and
will join the senior management team of the Company as the Regional Vice
President for Florida.

In the Ken Marks Acquisition, the Company has agreed to purchase all of the
outstanding capital stock of Ken Marks Ford for a total of approximately $25.0
million. At closing, the Company will pay the stockholders of Ken Marks Ford the
sum of approximately $25.0 million, less $0.5 million which will be deposited
into escrow for certain contingencies. The $25.0 million sum will be adjusted
downward to the extent that the net book value of Ken Marks Ford as of the
closing is less than approximately $5.1 million. At the closing, Ken Marks Ford
will lease its facilities from an affiliate of the original stockholders of Ken
Marks Ford. See "Business -- Facilities" and "Certain Transactions -- Certain
Dealership Leases." If the Company fails to perform its obligation to close the
Ken Marks Acquisition by October 15, 1997, it has agreed to pay a termination
fee.

THE BOWERS ACQUISITION. European Motors of Nashville (a BMW and Volkswagen
dealership), European Motors (a BMW and Volvo dealership), Jaguar of Chattanooga
(a Jaguar and Infiniti dealership), Cleveland Chrysler-Plymouth-Jeep-Eagle,
Nelson Bowers Dodge, Cleveland Village Imports (a Honda dealership), Saturn of
Chattanooga, Nelson Bowers Ford, L.P. and KIA of Chattanooga (a KIA and
Volkswagen dealership), (collectively, the "Bowers Dealerships") and the
Company, as well as the persons and entities controlling the Bowers Dealerships,
have entered into a definitive asset purchase agreement dated as of June 24,
1997. The Bowers Dealerships are located in the Chattanooga, Tennessee
metropolitan area, with the exception of European Motors of Nashville, which is
located in Nashville, Tennessee. The Bowers Dealerships had retail sales of
approximately 3,196 new and 2,388 used vehicles, and had aggregate revenues of
approximately $127.1 million in 1996. The Bowers Dealerships estimate that their
combined market share of total new vehicle unit sales in the Chattanooga
metropolitan market was approximately 12.6% for 1996. This acquisition serves
the Company's growth strategy by

<PAGE>
adding a group of well-managed dealerships with a substantial portion of its
sales in luxury vehicles. Nelson Bowers, the Bowers Dealerships' chief
executive, and Jeffrey Rachor, their chief operating officer, have over 20 and
10 years of experience in the automotive industry, respectively. Mr. Bowers will
join the Company's senior management team as Executive Vice President. Mr.
Rachor will be the Company's Regional Vice President for Tennessee, Georgia,
Kentucky and Alabama.

The Company will acquire substantially all the Bowers Dealerships' assets,
excluding real property, and assume substantially all the liabilities associated
with the purchased assets. For the Bowers Acquisition, the Company agreed to pay
up to $33.5 million. At closing, the Company will pay $27.5 million in cash to
the sellers and will deposit $1.0 million into an escrow account, all subject to
certain potential downward adjustments based on the net book value of the
purchased assets and assumed liabilities as of the closing. The balance (up to
$5.0 million) of the purchase price will be evidenced by the Company's
promissory notes that will be payable in 28 equal quarterly installments and
will bear interest at NationsBank's prime rate less 0.5%. The sellers or their
affiliates will retain ownership of certain real property underlying some of the
dealerships and will lease such property to the Company. See
"Business -- Facilities" and "Certain Transactions -- Certain Dealership
Leases." In the event the Company fails to close the Bowers Acquisition by
October 31, 1997, it has agreed to pay a termination fee.

THE LAKE NORMAN ACQUISITION. Lake Norman Chrysler-Plymouth-Jeep-Eagle and
Lake Norman Dodge (collectively, the "Lake Norman Dealerships") are both located
in Cornelius, North Carolina approximately 20 miles north of Charlotte. The Lake
Norman Dealerships had retail sales of approximately 3,572 new and 2,320 used
vehicles, and had aggregate revenues of approximately $137.7 million in 1996.
The existing management of the Lake Norman Dealerships will continue with the
Company.

The Company will acquire substantially all the Lake Norman Dealerships'
assets, excluding real property, and assume substantially all of the sellers'
liabilities. For the Lake Norman Acquisition, the Company agreed in May 1997 to
pay up to $18.2 million. At closing, the Company will pay $17.7 million in cash
to the sellers and deposit $0.5 million into an escrow account. At the sellers'
option, the payment of the total purchase price may be made in two installments:
one at closing and one on January 1, 1998, the second being evidenced by a
Company promissory note. The purchase price will be adjusted downward based on
the net book value of the purchased assets and assumed liabilities as of the
closing date, to be determined after the closing. The sellers of the assets will
retain ownership of the three tracts of real property underlying the dealerships
and will lease such property to the Company. See "Business -- Facilities." In
the event the Company fails to close the Lake Norman Acquisition by September
30, 1997, it has agreed to pay a termination fee secured by a letter of credit.

THE DYER ACQUISITION. Dyer & Dyer, Inc. ("Dyer Volvo"), which is located in
Atlanta, Georgia, is the largest Volvo dealership in the United States in terms
of retail unit sales. For 1996, Dyer Volvo had retail sales of approximately
1,284 new and 1,493 used vehicles, and had aggregate revenues of approximately
$72.6 million. This acquisition is a significant step in the Company's growth
strategy in that it adds a large, well-managed dealership in a new geographic
market and increases the Company's presence in the luxury car market. Richard
Dyer, who has over 25 years in the automotive retailing industry, will continue
as the Company's Executive Manager of Dyer Volvo.

The Company will acquire all of the operating assets of Dyer Volvo for
$18.0 million plus assumption of substantially all of Dyer Volvo's existing
recorded liabilities and obligations. The $18.0 million purchase price is
subject to adjustment in the event that net book value of the purchased assets,
less assumed liabilities, is more or less than $10.5 million as of the date of
the closing. At the closing, the Company will pay $17.0 million in cash to the
seller and deposit $1.0 million into an escrow account. In addition, the Company
will issue a warrant to Richard Dyer to purchase 0.375% of the Company's
outstanding shares of Common Stock (in the form of Class A Common Stock) after
consummation of the Offering ( shares if the Underwriters' over-allotment
option is exercised in full) pursuant to his employment agreement with the
Company at a per share exercise price equal to the initial public offering per
share price (the "Dyer Warrant"). The Dyer Warrant is exercisable immediately
and will expire five years after the consummation of the Dyer Acquisition. The
Dyer Warrant is in addition to stock options that are to be granted to Richard
Dyer pursuant to the Company's Stock Option Plan. Dyer Volvo leases its
dealership premises and the Company will assume Dyer Volvo's obligations under
the leases at the closing. See "Business -- Facilities." The closing of the Dyer
acquisition will occur no later than November 1, 1997. If the Company fails to
perform its obligation to close by that date, it has agreed to pay a termination
fee.

THE FORT MILL ACQUISITION. Fort Mill Chrysler-Plymouth-Dodge is located in
Fort Mill, South Carolina, which is a part of the Charlotte market. In 1996,
Jeff Boyd Chrysler-Plymouth-Dodge (the predecessor to Fort Mill
Chrysler-Plymouth-Dodge) had retail sales of approximately 632 new and 842 used
vehicles, and had total revenues of $20.3 million.

The Company purchased in June 1997 certain dealership assets, excluding
real property, of Jeff Boyd Chrysler-

<PAGE>
Plymouth-Dodge for a total purchase price of approximately $3.7 million in cash
and assumed the floor plan liabilities of the sellers. Of the $3.7 million
purchase price paid, $3.5 million was advanced to the Company by Bruton Smith
and is to be repaid with proceeds from the Offering. See "Certain
Transactions -- The Smith Advance." An affiliate of Jeff Boyd
Chrysler-Plymouth-Dodge will retain ownership of the real property underlying
the dealership and will lease the property to the Company. See
"Business -- Facilities."

THE WILLIAMS ACQUISITION. Williams Motors, Inc.
(Chrysler-Plymouth-Jeep-Eagle dealerships) is located in Rock Hill, South
Carolina, approximately 35 miles south of Charlotte. In 1996, Williams Motors
had retail sales of approximately 248 new and 280 used vehicles, and had total
revenues of $9.6 million.

The Company has entered into a definitive asset purchase agreement to
acquire substantially all of the operating assets of Williams Motors (excluding
primarily used car inventory and real estate) for up to $1.8 million plus
assumption of floor plan indebtedness to Chrysler Credit Corporation. The exact
price will depend upon the net book value of the purchased assets, less assumed
liabilities, as of the closing. The Company will also lease the dealership
premises from the sellers for one to five years, at the Company's option. See
"Business -- Facilities."

FUTURE ACQUISITIONS. The Company intends to pursue acquisitions in the
future that will be financed with cash or debt or equity financing or a
combination thereof. Although the Company has identified and has held
preliminary discussions with several potential acquisition candidates, at this
time, the Company has no agreements to effect any such acquisitions other than
the Acquisitions. There is no assurance that the Company will consummate any
future acquisition, that they will be on favorable terms to the Company or that
financing for such acquisitions will be available. All future acquisitions by
the Company will be contingent upon the consent of the applicable manufacturer.
Although no assurance can be given that any such consents will be obtained, the
Company historically has not been denied manufacturer approval of acquisitions.
The Company is currently negotiating with several lending institutions for
credit arrangements to finance acquisitions and general corporate purposes,
although there can be no assurance that the Company will obtain any such
financing. See "Risk Factors -- Risks Associated with Acquisitions" and
" -- Financial Resources Available for Acquisitions," "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Class A Common
Stock offered hereby are estimated to be approximately $ million ($
million if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $ per share (the midpoint of
the range of the initial public offering price set forth on the cover page of
this Prospectus) and after deducting the underwriting discount and estimated
expenses of the Offering. The net proceeds will be used to pay the purchase
price for the Acquisitions or repay short-term borrowings incurred to finance
any of the Acquisitions that close before the consummation of the Offering,
including approximately $3.5 million to repay a loan advanced by Bruton Smith in
connection with the Acquisitions, which bears interest at 3.83% per annum. See
"The Acquisitions" and "Certain Transactions -- The Smith Advance."

DIVIDEND POLICY

The Company intends to retain all of its earnings to finance the growth and
development of its business, including future acquisitions, and does not
anticipate paying any cash dividends on its Common Stock for the foreseeable
future. Any future change in the Company's dividend policy will be made at the
discretion of the Board of Directors of the Company and will depend upon the
Company's operating results, financial condition, capital requirements, general
business conditions and such other factors as the Board of Directors deems
relevant. In addition, any lending arrangement negotiated by the Company is
expected to include limitations on the ability of the Company to pay dividends
without the consent of the lender. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Description of Capital Stock."

<PAGE>
CAPITALIZATION

The following table sets forth, as of June 30, 1997, the capitalization of
the Company (a) on an actual basis, including the Reorganization which is
effective as of June 30, 1997, (b) on a pro forma basis, as adjusted to reflect
the FIFO Conversion and the Acquisitions, and (c) on a pro forma basis,
additionally adjusted to reflect the Offering and the application of the
estimated net proceeds to be received by the Company. See "Use of Proceeds."
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the unaudited Pro
Forma Combined and Consolidated Financial Statements of the Company and the
related notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
PRO FORMA
FOR THE
FIFO CONVERSION PRO FORMA
AND THE FOR THE
ACTUAL ACQUISITIONS(1) OFFERING(2)
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Short-term debt:
Notes payable -- floor plan.................................................... $67,855 $144,490 $ 144,490
Current maturities of long-term debt........................................... 487 1,286 1,286
Total short-term debt....................................................... $68,342 $145,776 $ 145,776
Long-term debt................................................................... $ 5,137 $ 10,422 $ 10,422
Stockholders' equity:
Preferred Stock, $.10 par value, 3,000,000 shares authorized; no shares issued
and outstanding............................................................. -- -- --
Class A Common Stock, $.01 par value, 50,000,000 shares authorized; no shares
issued and outstanding, actual; shares issued and outstanding, as
adjusted (3)(4)............................................................. -- --
Class B Common Stock, $.01 par value, 15,000,000 shares authorized; 10,000
shares issued and outstanding, actual; shares issued and outstanding,
as adjusted (5)............................................................. -- --
Additional paid-in capital..................................................... 16,604 16,604 116,604
Retained earnings and members' and partners' equity............................ 6,486 14,566 14,566
Due from Affiliates............................................................ (2,633) (2,633) (2,633)
Unrealized loss on marketable equity securities............................. (97) (97) (97)
Total stockholders' equity.................................................. 20,360 28,440 128,440
Total capitalization...................................................... $25,497 $ 38,862 $ 138,862
</TABLE>

(1) Adjusted to give pro forma effect to the FIFO Conversion and the
Acquisitions. See "Pro Forma Combined and Consolidated Financial Data."

(2) Adjusted to give pro forma effect to the FIFO Conversion, the Acquisitions
and the Offering.

(3) shares if the Underwriters' overallotment option is exercised in
full. Excludes shares of Class A Common Stock reserved for future issuance
under the Company's Stock Option Plan (including up to shares of
Class A Common Stock reserved for issuance upon exercise of options granted
to date pursuant to the Stock Option Plan) and excludes shares of
Class A Common Stock ( shares if the Underwriters' over-allotment
option is exercised in full) reserved for issuance under the Dyer Warrant.
See "The Acquisitions -- The Dyer Acquisition" and "Management -- Stock
Option Plan."

(4) The number of shares of Class A Common Stock offered hereby, may be reduced
to the extent the Company elects to finance a portion of the purchase price
of the Acquisitions through borrowings under a revolving credit facility or
other form of indebtedness. In such event, pro forma debt will increase by
the amount of such borrowings.

(5) Actual shares of Class B Common Stock do not include the effect of the Stock
Split (which will be effected in the form of a stock dividend).

<PAGE>
DILUTION

The pro forma net tangible book value of the Company (after giving effect
to the FIFO Conversion and the Acquisitions) as of June 30, 1997 was $ per
share of Common Stock. Pro forma net tangible book value per share is determined
by dividing the pro forma tangible net worth of the Company (pro forma total
assets less goodwill less pro forma total liabilities) by the total number of
outstanding shares of Common Stock. After giving effect to the sale of the
shares of Class A Common Stock offered hereby and the receipt of an assumed
$ million of net proceeds from the Offering (based on an assumed initial
public offering price of $ per share and net of the underwriting discounts
and estimated offering expenses), pro forma net tangible book value of the
Company at June 30, 1997 would have been $ per share. This represents an
immediate increase in pro forma net tangible book value of $ per share to
existing stockholders and an immediate dilution of $ per share to the new
investors purchasing Class A Common Stock in the Offering. The following table
illustrates the per share dilution:

<TABLE>
<S> <C>
Assumed initial public offering price per share................................................. $
Pro forma net tangible book value per share before giving effect to the Offering..............
Increase in pro forma net tangible book value per share attributable to the Offering..........
Pro forma net tangible book value per share after giving effect to the Offering.................
Dilution per share to new investors............................................................. $
</TABLE>

The following table sets forth, on a pro forma basis as of June 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company and the average price per share paid to the
Company by existing stockholders and new investors purchasing shares from the
Company in the Offering (before deducting underwriting discounts and commissions
and estimated offering expenses):

<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders (1)............................................... % $ % $
New investors (2).......................................................
Total.............................................................. 100.0% $ 100.0%
</TABLE>

(1) Does not reflect the possible exercise of options to purchase
shares of Class A Common Stock reserved for issuance under the Company's
Stock Option Plan including options to purchase shares of Class A
Common Stock that will be granted immediately before the completion of the
Offering with an exercise price equal to the initial public offering price
and the possible exercise of the Dyer Warrant to purchase shares of
Class A Common Stock. See "Management -- Stock Option Plan" and "Certain
Transactions."

(2) Assumes that the Underwriters' over-allotment option is not exercised. Sales
pursuant to the exercise by the Underwriters of the over-allotment option
will cause the total number of shares purchased by new investors, total
consideration paid by new investors, percent of total consideration paid by
new investors and average price per share for all investors to increase to
, $ , % and $ , respectively.

<PAGE>
SELECTED COMBINED AND CONSOLIDATED FINANCIAL DATA

The selected combined and consolidated statement of operations data for the
years ended December 31, 1994, 1995 and 1996 and the selected combined balance
sheet data as of December 31, 1995 and 1996 are derived from the Company's
audited financial statements, which are included elsewhere in this Prospectus.
The selected combined and consolidated statement of operations data for the
years ended December 31, 1992 and 1993 and the selected combined and
consolidated balance sheet data as of December 31, 1992, 1993 and 1994 are
derived from the Company's unaudited financial statements, which are not
included in this Prospectus. The selected combined and consolidated results of
operations data for the six months ended June 30, 1996 and 1997, and the
selected combined and consolidated balance sheet data at June 30, 1997, are
derived from the unaudited financial statements of the Company, which are
included elsewhere in this Prospectus. In the opinion of management, these
unaudited financial statements reflect all adjustments necessary for a fair
presentation of its results of operations and financial condition. All such
adjustments are of a normal recurring nature. The results of operations for an
interim period are not necessarily indicative of results that may be expected
for a full year or any other interim period. This selected combined and
consolidated financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Combined and Consolidated Financial Statements and related notes included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
1992 1993 1994 1995 1996(1)(5) 1996(1)(5) 1997(2)(5)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
COMBINED AND CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
Vehicle sales......................... $171,065 $203,630 $227,960 $267,308 $326,842 $164,333 $185,078
Parts, service and collision repair... 24,543 30,337 33,984 35,860 42,644 21,005 22,906
Finance and insurance................. 3,743 3,711 5,181 7,813 7,118 4,277 4,763
Total revenues..................... 199,351 237,678 267,125 310,981 376,604 189,615 212,747
Cost of sales........................... 174,503 210,046 234,461 272,179 332,407 167,191 188,368
Gross profit(3)......................... 24,848 27,632 32,644 38,802 44,197 22,424 24,379
Selling, general and administrative
expenses.............................. 20,251 22,738 24,632 29,343 33,678 16,590 18,413
Depreciation and amortization........... 682 788 838 832 1,076 360 396
Operating income........................ 3,915 4,106 7,194 8,627 9,443 5,474 5,570
Interest expense, floor plan............ 2,215 2,743 3,001 4,505 5,968 2,801 3,018
Interest expense, other................. 290 263 443 436 433 184 269
Other income............................ 1,360 613 609 449 619 369 274
Income before income taxes and minority
interest(3)........................... 2,770 1,713 4,359 4,135 3,661 2,858 2,557
Provision for income taxes.............. 108 107 1,560 1,675 1,400 1,093 937
Income before minority interest......... 2,662 1,606 2,799 2,460 2,261 1,765 1,620
Minority interest in (earnings) loss of
subsidiary............................ 31 22 15 22 114 41 47
Net income(4)........................... $ 2,693 $ 1,628 $ 2,784 $ 2,438 $ 2,147 $ 1,724 $ 1,573

COMBINED AND CONSOLIDATED BALANCE SHEET
DATA:
Working capital (deficit)............... $ (1,985) $ 160 $ 2,327 $ 5,920 $ 6,201 $ 8,405 $ 4,287
Total assets............................ 40,656 45,448 58,142 67,242 94,930 87,236 106,859
Long-term debt.......................... 3,904 4,142 3,773 3,561 5,286 4,825 5,137
Total liabilities....................... 40,035 42,905 52,602 57,980 79,181 68,719 86,499
Minority interest....................... 139 161 177 200 314 240 --
Stockholders' equity(3)................. 482 2,382 5,166 9,062 15,749 18,517 20,360
</TABLE>

(1) The statement of operations data includes the results of Fort Mill Ford,
Inc. from the date of acquisition, February 1, 1996.

(2) The statement of operations data for the six months ended June 30, 1997
includes the results of Fort Mill Chrysler-Plymouth-Dodge, Inc. from the
date of acquisition, June 3, 1997.

(FOOTNOTES CONTINUED ON NEXT PAGE)

<PAGE>
(3) The Company currently utilizes the LIFO Method of inventory accounting.
See Note 3 to the Company's Combined and Consolidated Financial
Statements. The Company intends to file an election with the IRS to
convert, effective January 1, 1997, to the FIFO Method of inventory
accounting and report its earnings for tax purposes and in its
financial statements on the FIFO Method. If the Company had previously
utilized the FIFO Method, gross profit and income before income taxes
and minority interest for the periods shown in the table, and
stockholders' equity as of December 31, 1996 and June 30, 1997, would
have been as follows:

<TABLE>
<CAPTION>
AS OF AS OF
DECEMBER 31, 1996 JUNE 30, 1997
<S> <C> <C>
(IN THOUSANDS)
Stockholders' equity............................................................... $18,215 $20,360
</TABLE>

(4) Historical net income per share is not presented, as the historical
capital structure of the Company prior to the Offering is not
comparable with the capital structure that will exist after the
Offering.

(5) The Company acquired Fort Mill Ford, Inc. and Fort Mill
Chrysler-Plymouth-Dodge in February 1996 and in June 1997,
respectively. Both of these acquisitions were accounted for using the
purchase method of accounting. As a result, the Selected Combined and
Consolidated Financial Data below does not include the results of
operations of these dealerships prior to the date they were acquired by
the Company. Accordingly, the actual historical data for periods after
the acquisition may not be comparable to data presented for periods
prior to the acquisition of Fort Mill Ford and Fort Mill
Chrysler-Plymouth-Dodge.

<PAGE>
PRO FORMA COMBINED AND CONSOLIDATED FINANCIAL DATA

The following unaudited pro forma combined and consolidated statements of
operations for the year ended December 31, 1996 and for the six months ended
June 30, 1997 reflect the historical accounts of the Company for those periods,
adjusted to give pro forma effect to the Reorganization, the FIFO Conversion,
the Acquisitions and the Offering, as if these events had occurred at January 1,
1996. The following unaudited pro forma consolidated balance sheet as of June
30, 1997 reflects the historical accounts of the Company as of that date
adjusted to give pro forma effect to the FIFO Conversion, the Acquisitions and
the Offering as if these events had occurred on June 30, 1997. The Acquisitions
will be consummated on or before the closing of the Offering and are conditions
precedent to the closing of the Offering. The Company intends to convert to the
FIFO Method of inventory accounting conditioned and effective upon the closing
of the Offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."

The pro forma combined and consolidated financial data and accompanying
notes should be read in conjunction with the Combined and Consolidated Financial
Statements and related notes of the Company as well as the financial statements
and related notes of the Bowers Dealerships, the Lake Norman Dealerships, Ken
Marks Ford and Dyer Volvo, all of which are included elsewhere in this
Prospectus. The Company believes that the assumptions used in the following
statements provide a reasonable basis on which to present the pro forma
financial data. The pro forma combined financial data is provided for
informational purposes only and should not be construed to be indicative of the
Company's financial condition or results of operations had the transactions and
events described above been consummated on the dates assumed, and are not
intended to project the Company's financial condition on any future date or its
results of operation for any future period.

<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
COMPANY
PRO FORMA
ADJUSTMENTS THE ACQUISITIONS
FOR THE PRO FORMA
REORGANI- ADJUSTMENTS FOR
ZATION AND BOWERS THE
THE FIFO DEALERSHIPS LAKE NORMAN KEN MARKS DYER ACQUISITIONS
ACTUAL (1) CONVERSION PRO FORMA (2) DEALERSHIPS FORD (3) VOLVO (4)(5)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Vehicle sales............... $ 326,842 $ $ 159,417 $ 124,539 $ 130,859 $60,871 $
Parts, service and collision
repair.................... 42,644 18,579 9,543 14,224 11,163 (55)(11)
Finance and insurance....... 7,118 3,888 3,617 2,317 543
Total revenues............ 376,604 181,884 137,699 147,400 72,577 (55)
Cost of sales................. 332,407 (1,360)(8) 156,910 121,806 128,850 62,547 (545)(12)
(31)(11)
Gross profit.................. 44,197 1,360 24,974 15,893 18,550 10,030 522
Selling, general and
administrative expenses..... 33,677 20,366 14,215 16,190 6,921 (1,333)(13)
(3,355)(14)
127 (11)
(527)(15)
Depreciation and
amortization................ 1,076 75(9) 846 89 94 202 (8)(11)
(193)(16)
1,654(17)
63(15)
Operating income.............. 9,444 1,285 3,762 1,589 2,266 2,907 3,420
Interest expense, floor
plan(6)..................... 5,968 1,545 1,553 2,054 373
Interest expense, other....... 433 383 49 400(18)
(292)(15)
Other income.................. 618 742 258 1,064 453
Income before income taxes and
minority interest........... 3,661 1,285 2,576 245 1,276 2,987 3,312
Provision for income taxes.... 1,400 513(10) 61 546 955 (1,401) (9)
(2,254)(20)
(61)(21)
955(22)
Income before minority
interest.................... 2,261 772 2,515 245 730 2,032 550
Minority interest in earnings
of subsidiary............... 114 114(9)
Net income.................... $ 2,147 $ 886 $ 2,515 $ 245 $ 730 $ 2,032 $ 550
Net income per share (7)......
Weighted average shares
outstanding.................

<CAPTION>
PRO FORMA
FOR THE
REORGANI-
ZATION, FIFO
CONVERSION,
PRO FORMA THE
ADJUSTMENTS ACQUISITIONS
FOR THE AND THE
OFFERING OFFERING
<S> <C> <C>
Revenues:
Vehicle sales............... $ $802,528
Parts, service and collision
repair.................... 96,098
Finance and insurance....... 17,483
Total revenues............ 916,109
Cost of sales................. 800,583
Gross profit.................. 115,526
Selling, general and
administrative expenses..... 380(23) 87,461
Depreciation and
amortization................ 3,772
Operating income.............. (380) 24,293
Interest expense, floor
plan(6)..................... 11,493
Interest expense, other....... 973
Other income.................. 3,135
Income before income taxes and
minority interest........... (380) 14,962
Provision for income taxes.... (152) (24) (6,085)
Income before minority
interest.................... (228) 8,877
Minority interest in earnings
of subsidiary...............
Net income.................... $ (228) $ 8,877
Net income per share (7)...... $ .89
Weighted average shares
outstanding................. 10,000
</TABLE>

<PAGE>
PRO FORMA COMBINED AND CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
COMPANY
PRO FORMA
ADJUSTMENTS THE ACQUISITIONS
FOR THE PRO FORMA
REORGANI- ADJUSTMENTS
ZATION AND BOWERS FOR THE
THE FIFO DEALERSHIPS LAKE NORMAN KEN MARKS ACQUISITIONS
ACTUAL(1) CONVERSION PRO FORMA (2) DEALERSHIPS FORD (3) DYER VOLVO (4)(5)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenues:
Vehicle sales................ $ 185,077 $ $75,874 $69,798 $ 64,698 $31,373 $
Parts, service and collision
repair..................... 22,907 12,184 5,321 5,999 5,960 (1,246)(11)
Finance and insurance........ 4,763 1,910 1,950 1,029 129
Total revenues............. 212,747 89,968 77,069 71,726 37,462 (1,246)
Cost of sales.................. 188,367 54(8) 76,541 68,272 63,402 32,377 (372)(12)
(743)(11)
Gross profit................... 24,380 (54) 13,427 8,797 8,324 5,085 (131)
Selling, general and
administrative expenses.... 18,413 10,358 6,937 7,547 3,498 (1,421)(13)
(1,743)(14)
(324)(11)
263(15)
Depreciation and
amortization............... 397 36(9) 445 47 47 151 (45)(11)
(100)(16)
827(17)
(38)(15)
Operating income............... 5,570 (90) 2,624 1,813 730 1,436 2,450
Interest expense, floor plan
(6).......................... 3,018 969 1,185 925 276
Interest expense, other........ 269 211 68 200(18)
(165)(15)
Other income................... 274 489 176 550 247
Income before income taxes and
minority interest............ 2,557 (90) 1,933 736 355 1,407 2,415
Provision for income taxes..... 937 (36)(10) 31 147 894(19)
1,591(20)
83(21)
Income before minority
interest..................... 1,620 (54) 1,902 736 208 1,407 (153)
Minority interest in earnings
of subsidiary................ 47 (47)(9)
Net income..................... $ 1,573 $ (7) $1,902 $ 736 $ 208 $1,407 $ (153)
Net income per share (7).......
Weighted average shares
outstanding..................

<CAPTION>
PRO FORMA FOR THE
REORGANI-
PRO FORMA ZATION, FIFO
ADJUSTMENTS CONVERSION, THE
FOR THE ACQUISITIONS AND THE
OFFERING OFFERING
<S> <C> <C>
Revenues:
Vehicle sales................ $ $426,820
Parts, service and collision
repair..................... 51,125
Finance and insurance........ 9,781
Total revenues............. 487,726
Cost of sales.................. 427,898
Gross profit................... 59,828
Selling, general and
administrative expenses.... -- (43,718)
190(23)
Depreciation and
amortization............... (1,767)
Operating income............... (190) 14,343
Interest expense, floor plan
(6).......................... 6,373
Interest expense, other........ -- 583
Other income................... 1,736
Income before income taxes and
minority interest............ (190) 9,123
Provision for income taxes..... (76) (24) (3,571)
Income before minority
interest..................... (114) 5,552
Minority interest in earnings
of subsidiary................
Net income..................... $ (114) $ 5,552
Net income per share (7)....... $
Weighted average shares
outstanding..................
</TABLE>

(1) The actual combined statement of operations data for the Company includes
the results of Fort Mill Ford from February 1, 1996, the effective date of
its acquisition. Pro forma adjustments have not been presented to include
the results of operations for Fort Mill Ford for the one month period ended
February 1, 1996 because management believes such results are not material.
The actual consolidated statement of operations data for the six months
ended June 30, 1997 include the results of Fort Mill
Chrysler-Plymouth-Dodge from June 3, 1997, the date of its acquisition.

(FOOTNOTES CONTINUED ON NEXT PAGE)

<PAGE>
(2) During 1996 and 1997, Nelson Bowers acquired three automobile dealerships
whose operating results, from their respective dates of acquistion, are
included in the historical combined and consolidated statement of
operations in the table below. The results of operations of one of the
acquisitions, European Motors of Chattanooga, for the period from January
1, 1996 to May 1, 1996 (the date of its acquisition), have been excluded
because the former owner of this dealership would not provide the Company
with this information. The Company believes the exclusion of such results
is not material to the Bowers Dealerships pro forma combined statements of
operations. The following table adjusts the historical combined and
consolidated statements of operations to include two of the acquirees as if
two of the acquisitions, European Motors of Nashville and Nelson Bowers
Dodge, had occurred on January 1, 1996.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
BOWERS EUROPEAN NELSON BOWERS
DEALERSHIPS(A) MOTORS OF BOWERS PRO FORMA DEALERSHIPS
(HISTORICAL) NASHVILLE(B) DODGE(B) ADJUSTMENTS (PRO FORMA)
<S> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Vehicle sales............................................. $113,363 $ 21,827 $24,227 $ $159,417
Parts, service and collision repair....................... 10,405 4,740 3,434 18,579
Finance and insurance..................................... 3,348 199 341 3,888
Total revenues.......................................... 127,116 26,766 28,002 181,884
Cost of sales............................................... 109,373 23,054 24,483 156,910
Gross profit................................................ 17,743 3,712 3,519 24,974
Selling, general and administrative expenses................ 14,887 2,636 2,843 20,366
Depreciation and amortization............................... 515 86 106 139(d) 846
Operating income............................................ 2,341 990 570 139 3,762
Interest expense, floor plan................................ 1,288 208 49 1,545
Interest expense, other..................................... 380 -- 3 383
Other income................................................ 158 166 418 742
Income before income taxes and minority interest............ 831 948 936 139 2,576
Provision for income taxes.................................. 61 61

Net Income.................................................. $ 770 $ 948 $ 936 $ 139 $ 2,515
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
BOWERS NELSON BOWERS
DEALERSHIPS(A) BOWERS PRO FORMA DEALERSHIPS
(HISTORICAL) DODGE(C) ADJUSTMENTS (PRO FORMA)
<S> <C> <C> <C> <C>
(IN THOUSANDS)
Revenues:
Vehicle sales.......................................................... $ 72,605 $ 3,269 $ $ 75,874
Parts, service and collision repair.................................... 11,597 587 12,184
Finance and insurance.................................................. 1,868 42 1,910
Total revenues....................................................... 86,070 3,898 89,967
Cost of sales............................................................ 73,096 3,445 76,541
Gross profit............................................................. 12,974 453 13,426
Selling, general and administrative expenses............................. 9,908 450 10,358
Depreciation and amortization............................................ 416 14 15(d) 445
Operating income......................................................... 2,650 (11) 15 2,624
Interest expense, floor plan............................................. 965 4 969
Interest expense, other.................................................. 211 -- 211
Other income............................................................. 452 37 489
Income before income taxes and minority interest......................... 1,926 22 15 1,933
Provision for income taxes............................................... 31 31

Net Income............................................................... $ 1,895 $ 22 $ 15 $ 1,902
</TABLE>

(a) The historical statement of operations data for the Bowers Dealerships
includes the results of Nelson Bowers Dodge from March 1, 1997, the
date of its acquisition by the owners of the Bowers Dealerships. Such
statement also includes the results of European Motors of Nashville
and European Motors of Chattanooga from October 1, 1996 and May 1,
1996, respectively, which were acquired by the owners of the Bowers
Dealerships on those dates.

(FOOTNOTES CONTINUED ON NEXT PAGE)

<PAGE>
(b) Reflects the results of operations of (i) Nelson Bowers Dodge for the
year ended December 31, 1996; and (ii) European Motors of Nashville
for the period from January 1, 1996 to October 1, 1996, the date of
its acquisition by the owners of the Bowers Dealerships. Such data was
obtained from monthly financial statements prepared by the dealership
as required by the manufacturers.

(c) Reflects the results of operations of (i) Nelson Bowers Dodge for the
period from January 1, 1997 to March 1, 1997, the date of its
acquisition by the owners of the Bowers Dealerships. Such data was
obtained from monthly financial statements prepared by the dealership
as required by the manufacturers.

(d) Reflects the amortization of goodwill resulting from the acquisition
of Nelson Bowers Dodge, European Motors of Nashville and European
Motors of Chattanooga over an assumed amortization period of 40 years
for the period not included in the historical financial statements,
assuming that such acquisitions were consummated on January 1, 1996.

(3) Ken Marks Ford's fiscal year ends on April 30 of each year. Accordingly,
the Statement of Operations data for Ken Marks Ford for the year ended
December 31, 1996 was derived by adjusting the data for the year ended
April 30, 1997 to include results from January 1, 1996 through April 30,
1996, and exclude results from January 1, 1997 through April 30, 1997. The
Statement of Operations data for the six months ended June 30, 1997 was
similarly derived by adjusting the historical financial statements for the
year ended April 30, 1997 to include results from May 1, 1997 through June
30, 1997, and excludes results from May 1, 1996 through December 31, 1996.

(4) The Company has excluded (i) the results of operations of Fort Mill
Chrysler-Plymouth-Dodge for the year ended December 31, 1996 and the period
ended June 3, 1997 and (ii) the historical results of operations and
related pro forma adjustments related to the Williams Acquisition because
management believes such results and adjustments are not material to the
Pro Forma Combined and Consolidated Statement of Operations.

(5) Prior to the Company's acquisition of the Lake Norman Dealerships, its
former owners directed $550,000 and $150,000 in contributions to charitable
organizations during the year ended December 31, 1996 and the six months
ended June 30, 1997, respectively. It is the Company's intention to
maintain the level of charitable contributions already reflected in the
Company's historical combined financial statements. Although no pro forma
adjustment to eliminate this expense has been included in the accompanying
Pro Forma Combined and Consolidated Statements of Operations, the Company
believes disclosure and consideration of the Lake Norman Dealerships
contributions is appropriate to understand the continuing impact on the
Company's results of operations of the acquisition of the Lake Norman
Dealerships.

(6) The Company intends to raise sufficient funds in the Offering to fund the
Acquisitions. In the event that the Company determines not to raise
sufficient funds in the Offering to acquire the dealerships being acquired
in the Acquisitions, the Company would incur additional indebtedness and
the related interest expense. The Pro Forma Combined and Consolidated
Statements of Operations do not give effect to any additional interest
expense that would be incurred.

(7) Pro forma net income per share is based upon the assumption that
shares of Class A Common Stock are outstanding after the
Offering. This amount represents shares of Class A Common Stock
to be issued in the Offering, and shares of Common Stock owned by
the Company's stockholders immediately following the Reorganization and the
Acquisitions. See "Principal Stockholders" and Note 1 to the Company's
Combined and Consolidated Financial Statements included elsewhere in this
Prospectus.

(8) Reflects the conversion from the LIFO Method of inventory accounting to the
FIFO Method of inventory accounting. The Company intends to convert to the
FIFO Method conditioned and effective upon the closing of the Offering. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

(9) Reflects the elimination of minority interest in earnings as a result of
the acquisition of the 31% minority ownership interest in Town & Country
Toyota, Inc. for $3.2 million of Class B Common Stock in connection with
the Reorganization, and the amortization of approximately $2.8 million in
related goodwill over 40 years arising from such acquisition.

(10) Reflects the net increase in the provision for income taxes due to the
conversion to the FIFO Method and the amortization of goodwill related to
the acquisition of the minority interest pursuant to the Reorganization,
calculated at the effective rate of 39.9%.

(11) Reflects the elimination of the operations of one of the Bowers
Dealerships' collision repair businesses that will not be acquired by the
Company.

(12) Adjustment reflects the conversion from the LIFO Method of inventory
accounting to the FIFO Method of inventory accounting at the Lake Norman
Dealerships, Ken Marks Ford and Dyer Volvo in the amount of $169,000,
$572,000 and $116,000, respectively for the year ended December 31, 1996
and $324,000, $47,000 at the Lake Norman Dealerships and Ken Marks Ford for

<PAGE>
period ended June 30, 1997. The Company intends to convert to the FIFO
Method conditioned upon the closing of the Offering. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

(13) Reflects the net decrease in selling, general and administrative expenses
related to the net reduction in salaries and fringe benefits of owners and
officers of the acquired dealerships who will become employees of the
Company after the Offering, consistent with reduced salaries pursuant to
employment agreements with the Company, effective upon consummation of the
Offering.

(14) The decrease in selling, general and administrative expenses reflects the
elimination of salaries paid to owners of certain dealerships acquired in
the Acquisitions whose positions and salaries will be eliminated in
conjunction with the Offering.

(15) Reflects the Company's estimate of the increase in rent expense related to
lease agreements entered into with the sellers of the Bowers Dealerships
for the dealerships' real property that will not be acquired by the
Company, and decreases in depreciation expense and interest expense related
to mortgage indebtedness encumbering such property.

(16) Reflects the elimination of amortization expense related to goodwill that
arose in previous acquisitions in the Bowers Dealerships, assuming that
each of the acquisitions giving rise to goodwill was consummated on January
1, 1996. See Note 5.

(17) Reflects the amortization over an assumed amortization period of 40 years
of approximately $66.2 million in intangible assets, which consist
primarily of goodwill, resulting from the Acquisitions which were assumed
to occur on January 1, 1996. See "Acquisitions" and "Pro Forma Combined and
Consolidated Balance Sheet."

(18) In connection with the Bowers Acquisition, the Company will issue a
promissory note of up to $5.0 million that will bear interest at
NationsBank's prime rate less 0.5%. This adjustment reflects an increase in
interest expense related to the promissory note assuming a prime rate of
8.5%.

(19) Reflects the net increase in provision for income taxes resulting from
adjustments 11 through 18 above, computed using effective income tax rates
ranging from 38.5% to 40.9%.

(20) Certain of the Bowers Dealerships, the Lake Norman Dealerships, and Dyer
Volvo were not subject to federal and state income taxes because they were
either S corporations, partnerships, or limited liability companies during
the period indicated. This adjustment reflects an increase in the federal
and state income tax provision as if these entities had been taxable at the
combined statutory income tax rate of 39%. Upon completion of the
Acquisitions, these businesses that have historically not been subject to
corporate income tax will thereafter be subject to federal and state income
tax as C corporations.

(21) Reflects an increase from the Company's historical effective tax rate
resulting from a higher statutory tax rate used due to an increase in
taxable income to above $10.0 million for the pro forma combined entity and
from an additional pro forma permanent difference for non-taxable goodwill
amortization.

(22) Reflects the elimination of federal and state tax expense which were
assessed on the recapture of the LIFO inventory reserve which was required
by tax law pursuant to the conversion of Dyer Volvo from a C corporation to
an S corporation during 1997.

(23) Reflects the increase in salaries of existing and new officers who have
entered into employment agreements with the Company, effective upon
consummation of the Offering.

(24) Reflects the net increase in provision for income taxes resulting from
adjustment 23 above, computed using an effective income tax rate of 40.6%.

(FOOTNOTES CONTINUED ON NEXT PAGE)

<PAGE>
PRO FORMA COMBINED AND CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
<TABLE>
<CAPTION>
PRO-FORMA THE ACQUISITIONS
ADJUSTMENTS FOR PRO-FORMA
ACTUAL FIFO BOWERS LAKE NORMAN KEN MARKS ADJUSTMENTS FOR
ASSETS (1) CONVERSION DEALERSHIPS DEALERSHIPS FORD DYER VOLVO THE ACQUISITIONS
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Current Assets:
Cash and cash equivalents... $ 9,238 $ 5,797 $ 3,467 $ 3,711 $ 173 $ (88,267)(3)
Marketable equity
securities................ 769
Receivables................. 12,897 3,398 2,535 1,473 2,535 (76)(4)
Inventories................. 59,885 13,580(2) 34,071 22,778 14,802 11,129 4,332(5)
(88)(4)

Deferred income taxes....... 256 95
Other current assets........ 818 2,453 244 277 32
Total current assets.... 83,863 13,580 45,719 29,024 20,358 13,869 (84,099)
Property and equipment, net... 13,270 8,744 567 489 1,156 (4,052)(6)
400(18)
Goodwill, net................. 9,463 8,286 (1,887)(4)
66,150(3)
(8,285)(7)
Other assets.................. 263 257 462 14 297 (20)(4)
Total assets............ $106,859 $13,580 $63,006 $30,053 $20,861 $ 15,322 $ (32,193)
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable-floor plan.... $ 67,855 $29,071 $25,865 $16,165 $ 5,534
Notes payable-other......... 4,590 28
Trade accounts payable...... 3,848 1,425 1,352 622 (89)(4)
Accrued interest............ 492 178
Other accrued liabilities... 3,394 1,739 472 1,582 512 (33)(4)
Taxes payable............... 917(2) 243 239 170(8)
Payable to Company's
chairman.................. 3,500
Current maturities of
long-term debt............ 487 558 71 357(3)
Total current
liabilities........... 79,576 917 37,561 27,788 18,611 6,285 406
Long-term debt................ 5,137 4,365 786 (3,157)(6)
4,643(3)
(1,351)(4)
Payable to affiliated
companies.................... 855
Deferred income taxes......... 931 4,583(2) 24 850(8)
Other long-term liabilities... 238
Minority interest.............
Stockholders' Equity:
Common Stock of combined
companies................. 1,000 75 1 153 (1,229)(3)
Class A Common Stock........
Class B Common Stock........
Warrant (3)
Paid-in capital............. 16,604 600 424 28 (1,052)(3)
Treasury stock.............. (4,976) 4,976(7)
Retained earnings and
members' and partners'
equity.................... 6,486 8,080(2) 20,941 804 1,801 13,594 4,332(5)
(1,020)(8)
(894)(6)
(30,673)(3)
(599)(4)
(8,286)(7)
Due from affiliates......... (2,633) (861) 861(3)
Unrealized loss on
marketable equity
securities................ (97)
Total stockholders'
equity................ 20,360 8,080 21,080 1,479 2,226 8,798 (33,584)
Total liabilities and
stockholders' equity......... $106,859 $13,580 $63,006 $30,053 $20,861 $ 15,322 $ (32,193)

<CAPTION>
PRO-FORMA
ADJUSTMENTS FOR
ASSETS THE OFFERING TOTAL
<S> <C> <C>
Current Assets:
Cash and cash equivalents... 100,000(9) $ 34,119
Marketable equity
securities................ 769
Receivables................. 22,762
Inventories................. 160,488
Deferred income taxes....... 351
Other current assets........ 3,824
Total current assets.... 100,000 222,314
Property and equipment, net... 18,287
Goodwill, net................. 75,613
Other assets.................. 1,275
Total assets............ $ 100,000 $317,489
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current Liabilities:
Notes payable-floor plan.... $144,490
Notes payable-other......... 4,618
Trade accounts payable...... 7,157
Accrued interest............ 669
Other accrued liabilities... 7,668
Taxes payable............... 1,568
Payable to Company's
chairman.................. 3,500
Current maturities of
long-term debt............ 1,474
Total current
liabilities........... 171,145
Long-term debt................ 10,422
Payable to affiliated
companies.................... 855
Deferred income taxes......... 6,388
Other long-term liabilities... 239
Minority interest.............
Stockholders' Equity:
Common Stock of combined
companies.................
Class A Common Stock........ --
Class B Common Stock........
Warrant (3)
Paid-in capital............. 100,000(9) 116,604
Treasury stock..............
Retained earnings and
members' and partners'
equity.................... 14,566
Due from affiliates......... (2,633)
Unrealized loss on
marketable equity
securities................ (97)
Total stockholders'
equity................ 100,000 128,440
Total liabilities and
stockholders' equity......... $ 100,000 $317,489
</TABLE>

(FOOTNOTES CONTINUED ON NEXT PAGE)

<PAGE>
(1) The Reorganization, including the acquisition of the 31% minority interest
in Town & Country Toyota for $3.2 million in Class B Common Stock in
exchange therefor, was effective as of June 30, 1997 and is therefore
reflected in the actual balance sheet as of that date. The acquisition of
the minority interest resulted in the recognition of $2.8 million of
additional goodwill.

(2) Reflects the conversion from the LIFO Method of inventory accounting to the
FIFO Method of inventory accounting and the amount of taxes payable that
will result from this conversion. The Company intends to convert to the FIFO
Method conditioned upon the closing of the Offering. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

(3) Reflects the preliminary allocation of the aggregate purchase price of the
Acquisitions based on the estimated fair value of the net assets acquired.
Because the carrying amount of the net assets acquired, which primarily
consist of accounts receivable, inventory, equipment accounts receivable and
floor plan indebtedness, approximates their fair value, management believes
the application of purchase accounting will not result in an adjustment to
the carrying amount of those net assets. Under the acquisition agreement,
the negotiated purchase prices for the Acquisitions will be adjusted
downward to the extent that the fair value of the tangible net assets as of
the closing is less than an agreed upon amount. The Company expects that the
sellers of these dealerships will withdraw cash or other assets from these
dealerships to the extent that the carrying amount of the tangible net
assets sold exceeds the negotiated minimum value. Under the provisions of
purchase accounting, the Company has one year from the date of acquisition
to finalize the allocation of the purchase price to the assets and
liabilities acquired. Thus, the amount of goodwill and the corresponding
amortization may ultimately be different from the amounts estimated here.
The estimated purchase price allocation consists of the following:

<TABLE>
<CAPTION>
BOWERS DEALERSHIPS KEN MARKS FORD LAKE NORMAN DEALERSHIPS DYER VOLVO TOTAL
<S> <C> <C> <C> <C> <C>
Estimated total consideration:
Cash.............................. $ 28,500 $ 25,500 $18,200 $ 18,000 $90,200
Promissory note issued............ 5,000 5,000
Warrant issued....................
Total......................... 33,500 25,500 18,200 18,000 95,200
Less negotiated minimum fair value
of tangible net assets acquired... 10,500 5,050 3,000 10,500 29,050
Excess of purchase price over fair
value of net tangible assets
acquired.......................... $ 23,000 $ 20,450 $15,200 $ 7,500 $66,150
</TABLE>

In connection with the acquisition of Dyer Volvo, the Company will issue a
warrant that will entitle the holder to acquire Class A shares representing a
0.375% ownership interest in the Company at an exercise price per share equal
to the price offered in the Company's public offering. Because the number of
underlying shares and the exercise price of the underlying shares is not
determinable at this time, the Company is currently not able to value this
warrant. Accordingly, the Pro Forma Combined and Consolidated Balance Sheet
does not give effect to the issuance of this warrant, however, management
believes the effect on the Company's financial position and results of
operations would not be materially different from that which is presented.
The difference between the purchase price and the fair market value of the
net tangible assets acquired will be allocated to intangible assets,
primarily goodwill and amortized over 40 years.

(4) Reflects the elimination of the assets and liabilities of one of the Bowers
Dealerships' collision repair businesses that will not be acquired by the
Company.

(5) Reflects the conversion from the LIFO Method of inventory accounting to the
FIFO Method of inventory accounting at the Lake Norman Dealerships, Ken
Marks Ford and Dyer Volvo in the amounts of $1,564,000, $2,652,000 and
$116,000, respectively. The Company intends to convert to the FIFO Method
conditioned upon the closing of the Offering. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Overview."

(6) Reflects the distribution of real property of the Bowers Dealerships with a
net depreciated cost of approximately $4.1 million, which are not being
acquired in the Acquisitions, and the related mortgage indebtedness in the
amount of approximately $3.2 million. See "Certain Transactions."

(7) Reflects the elimination of goodwill that arose in previous acquisitions of
the Bowers Dealerships.

(8) Reflects the amount of taxes payable that will result from the FIFO
conversion at Ken Marks Ford in the amount of $1,020,000.

(9) Reflects the issuance of Class A Common Stock in the Offering. See "Use of
Proceeds."

<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the results of operations and financial
condition should be read in conjunction with the Sonic Automotive, Inc. and
Affiliated Companies Combined and Consolidated Financial Statements and the
related notes thereto included elsewhere in this Prospectus.

OVERVIEW

Sonic Automotive, Inc. is one of the leading automotive retailers in the
United States, operating 20 dealerships, four standalone used vehicle facilities
and eight collision repair centers in the southeastern and southwestern United
States. Sonic sells new and used cars and light trucks, sells replacement parts,
provides vehicle maintenance, warranty, paint and repair services and arranges
related F&I for its automotive customers. The Company's business is
geographically diverse, with dealership operations in the Charlotte,
Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta markets, each of
which the Company believes are experiencing favorable demographic trends. Sonic
sells 17 domestic and foreign brands, which consist of BMW, Cadillac, Chrysler,
Dodge, Eagle, Ford, Honda, Infiniti, Jaguar, Jeep, KIA, Oldsmobile, Plymouth,
Saturn, Toyota, Volkswagen and Volvo. In several of its markets, the Company has
a significant market share for new cars and light trucks, including 13.7% in
Charlotte and 12.6% in Chattanooga in 1996. Pro forma for the Acquisitions, the
Company had revenues of $916.1 million and retail unit sales of 24,114 new and
13,453 used vehicles in 1996. The Company believes that in 1996, based on pro
forma retail unit sales it would have been one of the ten largest dealer groups
out of a total of more than 15,000 dealer groups in the United States and, based
on pro forma revenues, it would have had three of the top 100 single-point
dealerships in the United States.

New vehicle revenues include the sale and lease of new vehicles. Used
vehicle revenues include amounts received for used vehicles sold to retail
customers, other dealers and wholesalers. Other operating revenues include parts
and services revenues, fees and commissions for arranging F&I and sales of third
party extended warranties for vehicles (collectively, "F&I transactions"). In
connection with vehicle financing contracts, the Company receives a fee (a
"finance fee") from the lender for originating the loan. If within 90 days of
origination the customer pays off the loans through refinancing or
selling/trading in the vehicle, or defaults on the loan the finance company will
assess a charge (a "chargeback") for a portion of the original commission. The
amount of the chargeback depends on how long the related loan was outstanding.
As a result, the Company has established reserves based on its historical
chargeback experience. The Company also sells warranties provided by third party
vendors, and recognizes a commission at the time of sale.

While the automotive retailing business is cyclical, Sonic sells several
products and services that are not closely tied to the sale of new and used
vehicles. Such products and services include the Company's parts and service and
collision repair businesses, both of which are not dependent upon near-term new
vehicle sales volume. One measure of cyclical exposure in the automotive
retailing business is based on the dealerships' ability to cover fixed costs
with gross profit from revenues independent of vehicle sales. According to this
measurement of "fixed coverage," a higher percentage of non-vehicle sales
revenue to fixed costs indicates a lower exposure to economic cycles. Each
manufacturer requires its dealerships to report fixed coverage according to a
specific method, and the methods used vary widely among the manufacturers and
are not comparable. However, on an aggregate basis, the Company believes its
exposure to cyclicality may be measured by dividing the sum of the gross profit
for parts, service and collision repair by the sum of all operating expenses
with the exception of advertising expenses and variable payroll ("Fixed
Coverage"). Under this definition, the Company's Fixed Coverage was 89.3% in
1996. For the first half of 1997, the Sonic Dealership's Fixed Coverage was
84.2% compared to 89.7% in the first half of 1996.

The Company's cost of sales and profitability are also affected by the
allocations of new vehicles which its dealerships receive from Manufacturers.
When the Company does not receive allocations of new vehicle models adequate to
meet customer demand, it purchases additional vehicles from other dealers at a
premium to the manufacturer's invoice, reducing the

<PAGE>
gross margin realized on the sales of such vehicles. In addition, the Company
follows a disciplined approach in selling vehicles to other dealers and
wholesalers when the vehicles have been in the Company's inventory longer than
the guidelines set by the Company. Such sales are frequently at or below cost
and, therefore, affect the Company's overall gross margin on vehicle sales. The
Company's salary expense, employee benefits costs and advertising expenses
comprise the majority of its selling, general and administrative ("SG&A")
expenses. The Company's interest expense fluctuates based primarily on the level
of the inventory of new vehicles held at its dealerships, substantially all of
which is financed (such financing being called "floor plan financing").

The Company has historically accounted for all of its dealership
acquisitions using the purchase method of accounting and, as a result, does not
include in its financial statements the results of operations of these
dealerships prior to the date they were acquired by the Company. The combined
and consolidated financial statements of the Company discussed below reflect the
results of operations, financial position and cash flows of each of the
Company's dealerships acquired prior to June 30, 1997. As a result of the
foregoing effects of the Reorganization, as well as the effects of the
Acquisitions and the Offering, the historical combined and consolidated
financial information described in the Management's Discussion and Analysis is
not necessarily indicative of the results of operations, financial position and
cash flows of the Company in the future or the results of operations, financial
position and cash flows which would have resulted had the Reorganization and
Acquisitions occurred at the beginning of the periods presented in the Combined
and Consolidated Financial Statements.

The Company's total revenues have increased from $199.4 million in 1992 to
$376.6 million in 1996, for a compound annual growth rate of 17.2%. Operating
income during this period experienced faster growth, with operating income
increasing from $3.9 million in 1992 to $9.4 million in 1996, for a 24.6% annual
compounded growth rate. Income before income taxes and minority interest,
however, has only increased at a compound annual growth rate of 7.2% primarily
because interest expense on floor plan obligations has increased from 1.1% of
total revenues in 1992 to 1.6% of total revenues in 1996. Inventory and floor
plan balances increased during 1995 and 1996 to support the Company's strategy
of increasing market share. In early 1997, the Company instituted additional
inventory controls in order to reduce interest costs to levels typical of the
industry. Interest expense on floor plan obligations as a percentage of total
revenues has improved from 1.5% for the six months ended June 30, 1996 to 1.4%
for the six months ended June 30, 1997.

As of June 30, 1997, the Company effected the Reorganization pursuant to
which the Company (i) acquired all of the capital stock of the Sonic Dealerships
and (ii) issued Class B Common Stock in exchange for the Dealer Securities. The
Company will acquire these minority interests in purchase transactions at a
price in excess of their book value by approximately $2.5 million. This excess
will be capitalized as goodwill and amortized over forty years. In May, June and
July 1997, the Company consummated or signed definitive agreements to purchase
six additional dealerships or dealership groups for an aggregate purchase price
of $100.7 million. The Company intends to use the proceeds from the Offering to
pay the purchase price of the Acquisitions. In connection with the Acquisitions,
the Company will book approximately $66.2 million of goodwill which will be
amortized over forty years.

The Company currently utilizes the LIFO Method of accounting for inventory
but intends to convert to the FIFO Method of accounting, upon the closing of the
Offering, effective January 1, 1997. If the FIFO Method of inventory accounting
had been used by the Company in prior periods, income before taxes and minority
interest would have been higher by $1.5 million, $1.3 million and $1.4 million
for the years ended December 31, 1994, 1995 and 1996, respectively, and
immaterially changed for the six months ended June 30, 1996 and 1997,
respectively, from the reported results under the LIFO Method. Upon election of
the FIFO Method, the Company will be required under generally accepted
accounting principles to restate its historical financial statements. The
Company estimates that it will incur a tax liability of approximately $5.5
million in connection with this conversion to the FIFO Method.

The automobile industry is cyclical and historically has experienced
periodic downturns, characterized by oversupply and weak demand. Many factors
affect the industry including general economic conditions and consumer
confidence, the level of discretionary personal income, interest rates and
available credit. During the five years ended December 31, 1996, the automobile
industry was generally in a growth period with new vehicles sales growing at a
compound rate of 10.5% as a result of price increases of 6.2% and unit sales
increases of 4.0%. During the first six months of 1997, however, industry sales
of new cars declined by 2.0%, although the Company's new car and light truck
unit sales increased by 7.0% during the period. During these periods, interest
rates were relatively stable.

<PAGE>
RESULTS OF OPERATIONS

The following table summarizes, for the periods presented, the percentages
of total revenues represented by certain items reflected in the Company's
statement of operations.

<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES FOR
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Revenues:
New vehicle sales........................................................ 61.5 % 60.0 % 61.9 % 61.0 % 64.4 %
Used vehicle sales....................................................... 23.9 % 26.0 % 24.9 % 25.6 % 22.6 %
Parts, service and collision repair...................................... 12.7 % 11.5 % 11.3 % 11.1 % 10.8 %
Finance and insurance.................................................... 1.9 % 2.5 % 1.9 % 2.3 % 2.2 %
Total revenues........................................................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales............................................................ 87.8 % 87.5 % 88.3 % 88.2 % 88.5 %
Gross profit............................................................. 12.2 % 12.5 % 11.7 % 11.8 % 11.5 %
Selling, general and administrative...................................... 9.2 % 9.4 % 8.9 % 8.8 % 8.7 %
Operating income......................................................... 2.7 % 2.8 % 2.5 % 2.6 % 2.4 %
Interest expense......................................................... 1.3 % 1.6 % 1.7 % 1.6 % 1.6 %
Income before income taxes............................................... 1.6 % 1.3 % 1.0 % 1.4 % 1.2 %
</TABLE>

SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996

REVENUES. Revenues grew in each of the Company's primary revenue areas,
except for used vehicles, for the first half of 1997 as compared with the first
half of 1996, causing total revenues to increase 12.2% to $212.7 million. New
vehicle sales revenue increased 18.4% to $137.0 million, compared with $115.7
million. New vehicle unit sales increased from 6,027 to 6,553, accounting for
47.3% of the increase in vehicle sales revenues. The remainder of the increase
was primarily due to a 8.9% increase in the average selling price resulting from
changes in vehicle prices, particularly a shift in customer preference to higher
cost light trucks and sport utility vehicles.

Used vehicle revenues from retail sales declined 7.2% from $35.2 million in
the first half of 1996 to $32.7 million in the first half of 1997. The decline
in used vehicle revenues was due principally to declines in used vehicle unit
sales at the Company's Town & Country Ford and Lone Star Ford locations, which
related to weak consumer demand.

The Company's parts, service and collision repair revenue increased 9.0% to
$22.9 million from $21.0 million, and declined as a percentage of revenue to
10.8% from 11.1%. The increase in service and parts revenue was due principally
to increased parts revenue, including wholesale parts, from the Company's Lone
Star Ford and Fort Mill Ford locations. F&I revenue increased $0.5 million, due
principally to increased new vehicle sales and related financings.

GROSS PROFIT. Gross profit increased 8.7% in the 1997 period to $24.4
million from $22.4 million in the 1996 period due to increases in revenues of
new vehicles principally at the Company's Lone Star Ford and Fort Mill Ford
locations. Parts and service revenue increases also contributed to the increase
in gross profit. Gross profit as a percentage of sales declined from 11.8% to
11.5% due principally to reductions in higher margin used vehicle sales from the
prior period.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased 10.9%
from $16.6 million to $18.4 million. These expenses increased due to increases
in sales volume as well as expenses associated with the Acquisitions and the
Offering.

INTEREST EXPENSE. The Company's interest expense increased 10.8% from $3.0
million to $3.3 million. The increase in interest expense was due to the
acquisition of Fort Mill Chrysler Plymouth Dodge dealership in June of 1997,
increases in interest rates on floor plan debt and increased new vehicle
inventory levels at existing dealerships.

NET INCOME. As a result of the factors noted above, the Company's net
income decreased by $0.2 million in the first half of 1997 compared to the first
half of 1996.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

REVENUES. The Company's total revenue increased 21.1% to $376.6 million in
1996 from $311.0 million in 1995. New vehicle sales increased 25.0% to $233.1
million in 1996 from $186.5 million in 1995, primarily because of the
acquisition in

<PAGE>
February 1996 of the Company's Fort Mill Ford dealership. The inclusion of the
results of the Fort Mill Ford dealership accounted for 65.3% of the Company's
overall increase in new vehicle sales in 1996. Of the increase in sales, 55.3%
was attributable to increases in unit sales from 1995 to 1996. The remainder of
the increase in new vehicle sales in 1996 was largely attributable to an
increase in average unit selling costs of 9.8% which the Company believes was
primarily due to changes in inventory mix (particularly shifting customer
preferences to light trucks and sport utility vehicles) and general increases in
new vehicle sales prices.

Used vehicle revenues from retail sales increased 12.0% to $68.0 million in
1996 from $60.8 million in 1995. The inclusion of the results of the Company's
Fort Mill Ford dealership accounted for substantially all of this increase in
used vehicle sales. The Company attributes the remainder of the increase in its
used vehicle sales in 1996 to increases of approximately 5.6% in the average
retail selling price per vehicle sold. Increases in average retail selling
prices were due to changes in product mix and general price increases.

The Company's parts, service and collision repair revenue increased 19.0%
to $42.6 million for 1996, compared to $35.9 million in 1995. Of this increase,
$4.4 million and 64.5% was due to the inclusion of the Company's Fort Mill Ford
dealership in the 1996 results of operations. The remainder of the increase was
principally the result of improved service operations and wholesale parts
distribution at the Company's Town and Country Ford dealership. F&I revenues
declined $0.7 million, or 8.9%, due principally to reductions in sales of
finance and insurance products at Town and Country Ford.

GROSS PROFIT. Gross profit increased 13.9% in 1996 to $44.2 million from
$38.8 million in 1995 primarily due to the addition of the Fort Mill Ford
dealership. Gross profit decreased from 12.5% to 11.7% as a percentage of sales
due principally to declines in F&I income and declines in gross profit margins
on the sale of used vehicles. Gross margins on new vehicles increased primarily
due to increases in the average selling price per unit due to a change in mix of
new vehicles sold, particularly higher margin light trucks and sport utility
vehicles.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company's SG&A expenses
increased $4.3 million, or 14.8%, from $29.3 million in 1995 to $33.7 million in
1996. However, as a percentage of revenue, SG&A expenses decreased from 9.4% to
8.9%. Expenses associated with the Fort Mill Ford dealership acquired by the
Company in 1996 accounted for approximately 97.1% of this increase. The Company
attributes the remainder of the increase in selling, general and administrative
expenses primarily to higher compensation levels in 1996 and to an increase in
advertising expenses.

INTEREST EXPENSE. The Company's interest expense in 1996 increased 29.6% to
$6.4 million from $4.9 million in 1995. Of this increase $1.0 million or 70.0%
is attributable to floor plan financing at the Company's Fort Mill Ford
dealership acquired in February 1996. The remainder of the increase primarily
reflects interest expense on the debt assumed in the acquisition of Fort Mill
Ford and an increase in floor plan interest rates during 1996.

NET INCOME. The Company's net income in 1996 decreased 11.9% to $2.1
million from $2.4 million in 1995. This decrease was principally caused by
increased interest costs related to floor plan financing and debt assumed in the
acquisition of Fort Mill Ford.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

REVENUES. The Company's total revenue increased 16.4% to $311.0 million in
1995 from $267.1 million in 1994. New vehicle sales increased 13.5% to $186.5
million in 1995 from $164.4 million in 1994. The Company attributes the increase
in new vehicle sales to unit sales increases of 6.1% primarily from the Town &
Country Ford and Lone Star Ford dealerships which increased 9.3% and 7.1%,
respectively. The remainder of the increase was due to increased sales of higher
priced light trucks and sport utility vehicles and general price increases.

Used vehicle revenues from retail sales increased by 27.9% to $60.8 million
in 1995, compared with $47.5 million in 1994. The increase in used vehicle unit
sales was due principally to increases at the Company's Lone Star Ford, Town &
Country Ford and Frontier Cadillac-Oldsmobile locations. Unit sales volume
increased 18.2%, or 798 units, accounting for 65.3% of the increase in used
vehicle revenues. The remainder of the increase was due to improvements in
product mix and general increases in used vehicle selling prices.

The Company's parts, service and collision repair revenue increased 5.5% or
$1.9 million, from $34.0 million in 1994 to $35.9 million in 1995. Wholesale
parts sale increases at the Company's Lone Star Ford dealership and improved
service operations at the Company's Town and Country Toyota dealership account
for the majority of the increase. F&I revenue increased $2.6 million due
principally to additional sales of F&I products at the Company's Town and
Country Ford and Lone Star Ford dealerships.

<PAGE>
GROSS PROFIT. Gross profit increased 18.8% in 1995 to $38.8 million from
$32.6 million in 1994. Gross profit as a percentage of sales increased from
12.2% to 12.5% due principally to a 50.8% increase in high margin finance and
insurance product sales. Gross margins on used vehicles improved due to the
Company's strategy of improved inventory management and the purchase of quality
used vehicles.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company's SG&A expenses
increased $4.7 million to $29.3 million or 19.1% and represented 9.4% in total
revenues in 1995 from $24.6 million or 9.2% of total revenues in 1994.

INTEREST EXPENSE. The Company's interest expense in 1995 increased 43.4% to
$4.9 million from $3.4 million in 1994. Increased interest expense was due to
increases in inventory levels and related floor plan borrowings.

NET INCOME. The Company's net income in 1995 decreased 12.4% to $2.4
million from $2.8 million in 1994. This decrease was caused by the increase in
floor plan financing due to an increase in vehicle inventory levels.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal needs for capital resources are to finance
acquisitions, debt service and working capital requirements. Historically, the
Company has relied primarily upon internally generated cash flows from
operations, borrowing under its various credit facilities and borrowings and
capital contributions from its stockholders to finance its operations and
expansion. After the Offering, the Company does not expect to receive any
additional financing from its existing stockholders.

The Company has historically maintained a separate revolving floor plan
credit facility for each dealership which has been used to finance vehicle
inventory. The Company currently has floor plan credit facilities with Ford
Motor Credit, Chrysler Financial Corporation and World Omni Financial
Corporation. As of June 30, 1997 there was an aggregate of $67.9 million
outstanding under the floor plan credit facilities. These floor plan facilities
bear interest at variable rates ranging from LIBOR plus 2.75% to prime plus
1.0%. The Company makes monthly interest payments on the amount financed under
the floor plan lines but is not required to make loan principal repayments prior
to the sale of the vehicles. The underlying notes are due when the related
vehicles are sold and are collateralized by vehicle inventories and other assets
of the Company. The floor plan financing agreements contain a number of
covenants, including among others, covenants restricting the Company with
respect to limitations on liens and changes in ownership, officers and key
management personnel.

Prior to consummation of the Offering, the Company intends to consolidate
its new vehicle floor plan lines and obtain an additional revolving line of
credit. The Company is currently negotiating with credit sources for more
favorable terms. Based on current discussions with these lenders, the Company
expects the interest rate on its floor plan debt to decrease compared to the
interest rates currently being charged. The additional credit facility will be
used principally for acquisitions.

The Company leases various facilities and equipment under operating lease
agreements including leases with related parties. See "Certain
Transaction -- Leases."

During the first six months of 1997, the Company generated net cash of $5.6
million from operating activities. Net cash used for operating activities was
$2.1 million in 1996 and was primarily attributable to increased inventory
levels and accounts receivable, partially offset by increased floor plan
indebtedness and accounts payable. The increase in inventory levels in 1996
reflects an increase in the volume of sales and the timing of shipments from the
Manufacturers. Increased receivables reflect increased sales primarily
attributable to Fort Mill Ford and Fort Mill Chrysler-Plymouth-Dodge acquired in
1996 and 1997, respectively. The Company generated net cash from operations of
$3.0 million in 1995 and 1994.

Cash used for investing activities was approximately $2.9 million for the
first six months of 1997 and related primarily to acquisitions of property and
equipment. Cash provided by (used in) investing activities was ($11.5) million,
$0.3 million and ($1.7) million in 1996, 1995 and 1994, respectively, including
$1.9 million, $1.5 million and $1.4 million of capital expenditures during such
periods.

In 1996, cash provided by financing activities reflected the purchase of
capital stock by a stockholder of the Company, the proceeds of which were used
to fund the acquisition of Fort Mill Ford and the purchase of stock by a
stockholder of Town & Country Ford. Cash used in financing activities for the
six months ended June 30, 1997 was $0.2 million principally due to scheduled
payments on long-term debt.

Capital expenditures, excluding amounts paid in acquisitions, were $0.9
million, $1.9 million, $1.5 million and $1.4 million in the first six months of
1997 and in 1996, 1995 and 1994, respectively. The Company's principal capital
expenditures typically include building improvements and equipment for use in
the Company's dealerships. Capital expenditures in

<PAGE>
1996 and 1995 were primarily attributable to expenditures for the addition of a
used car lot in 1996 and other capital improvements at the Lone Star Ford
dealership. Excluding the purchase price for the Acquisitions and future
acquisitions, the Company is anticipating total capital expenditures in the
second half of 1997 to be approximately $1.0 million. The Company expects to
increase its capital expenditures over the next few years as part of its
acquisition and growth strategy.

The Company believes that funds generated through future operations and
availability of borrowings under the floor plan financing (or any replacements
thereof) and its other credit arrangements, and the proceeds from the Offering
will be sufficient to fund its debt service and working capital requirements and
any seasonal operating requirements, including its currently anticipated
internal growth for the foreseeable future. The Company estimates that it will
incur a tax liability of approximately $5.5 million in connection with the
change in its tax basis of accounting for inventory from LIFO to FIFO. The
Company believes that it will be required to pay this liability in three to six
equal annual installments, beginning in March 1998, and believes that it will be
able to pay such obligation with cash provided by operations. The Company
expects to fund any future acquisitions from its future cash flow from
operations, additional debt financing, or Class A Common Stock issuances. The
Company does not currently have in place any credit facilities for acquisitions.
There can be no assurance that additional financing can be obtained on terms
favorable to the Company, or that the Company will be able to use its common
stock to fund any future acquisitions. See "Risk Factors -- Financial Resources
Available for Acquisitions."

SEASONALITY

The Company's operations are subject to seasonal variations. The first
quarter generally contributes less revenue and operating profits than the
second, third and fourth quarters. Seasonality is principally caused by weather
conditions and timing of manufacturer incentive programs and model changeovers.

Set forth below is revenue information with respect to the Company's
operations for the most recent six quarters.

<TABLE>
<CAPTION>
1996 1997
1ST 2ND 3RD 4TH 1ST 2ND
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
<S> <C> <C> <C> <C> <C> <C>
Revenues................................................ $85,382 $103,659 $93,509 $94,053 $98,426 $113,694
</TABLE>

EFFECTS OF INFLATION

Due to the relatively low levels of inflation in 1994, 1995 and 1996 and
the first half of 1997, inflation did not have a significant effect on the
Company's results of operations for those periods.

NEW ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share." This Statement
specifies the computation, presentation and disclosure requirements for earnings
per share. The Company believes that the adoption of such Statement would not
result in earnings per share materially different than pro forma earnings per
share presented in the accompanying statements of income.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
standard establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for the Company's fiscal year ending December 31,
1998, and the Company does not intend to adopt this statement prior to the
effective date. Had the Company adopted this Statement as of January 1, 1994, it
would have reported comprehensive income of $2.8 million, $2.4 million and $2.1
million for the years ended December 31, 1994, 1995 and 1996, respectively.

<PAGE>
BUSINESS

OVERVIEW

Sonic Automotive, Inc. is one of the leading automotive retailers in the
United States, operating 20 dealerships, four standalone used vehicle facilities
and eight collision repair centers in the southeastern and southwestern United
States. Sonic sells new and used cars and light trucks, sells replacement parts,
provides vehicle maintenance, warranty, paint and repair services and arranges
related F&I for its automotive customers. The Company's business is
geographically diverse, with dealership operations in the Charlotte,
Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta markets, each of
which the Company believes are experiencing favorable demographic trends. Sonic
sells 17 domestic and foreign brands, which consist of BMW, Cadillac, Chrysler,
Dodge, Eagle, Ford, Honda, Infiniti, Jaguar, Jeep, KIA, Oldsmobile, Plymouth,
Saturn, Toyota, Volkswagen and Volvo. In several of its markets, the Company has
a significant market share for new cars and light trucks, including 13.7% in
Charlotte and 12.6% in Chattanooga in 1996. Pro forma for the Acquisitions, the
Company had revenues of $916.1 million and retail unit sales of 24,114 new and
13,453 used vehicles in 1996. The Company believes that in 1996, based on pro
forma retail unit sales it would have been one of the ten largest dealer groups
out of a total of more than 15,000 dealer groups in the United States and, based
on pro forma revenues, it would have had three of the top 100 single-point
dealerships in the United States.

The Company's founder and Chief Executive Officer, O. Bruton Smith, has
over 30 years of automotive retailing experience. In addition, the Company's
other executive officers, regional vice presidents and executive managers have
on average 18 years of automotive retailing experience. The Company's
dealerships have won the highest attainable awards from various manufacturers
measuring quality and customer satisfaction. These awards include the Five Star
Award from Chrysler, the Chairman's Award from Ford, the President's Award from
BMW and the President's Circle Award from Infiniti. In addition, the Company was
named to Ford's Top 100 Club, which consists of Ford's top 100 retailers based
on retail volume and consumer satisfaction. Also, various members of the
management team have served on several manufacturer dealer councils which act as
liaisons between the manufacturers and dealer groups. As an example of the
industry's recognition of the Company's executives, Nelson Bowers, the Company's
Executive Vice President, participated in the development of the Saturn brand
and was awarded in 1990 the first Saturn dealership in the United States.

The Company intends to pursue an acquisition growth strategy led by a
management team that has experience in the consolidation of both automotive
retailing as well as motor sports businesses. Bruton Smith, who is also the
Chief Executive Officer of Speedway Motorsports, Inc., the owner and operator of
several motor sports facilities, first entered the automotive retailing business
in the mid-1960's. Mr. Smith will devote approximately 50% of his business time
to the Company. Since 1990, Mr. Smith has successfully acquired three
dealerships and increased revenues from his dealerships from $199.4 million in
1992 to $376.6 million in 1996, without giving effect to the Acquisitions. In
the Tennessee market, Mr. Bowers has acquired or opened 8 dealerships since 1992
and increased revenues from $36.0 million in 1992 to $181.9 million in 1996.

GROWTH STRATEGY

The Company's objective is to capitalize on the consolidation of the
automotive retailing industry. Key elements of the Company's strategy to achieve
this objective include the acquisition of additional dealerships and the
leveraging of the Company's new vehicle franchises to increase sales of higher
margin products and services.

(Bullet) ACQUIRE DEALERSHIPS. The Company plans to implement a "hub and spoke"
acquisition program primarily by pursuing (i) well-managed dealerships
in new metropolitan and growing suburban geographic markets, and (ii)
dealerships that will allow the Company to capitalize on regional
economies of scale, offer a greater breadth of products and services in
any of its markets or increase brand diversity. The growth generated
through acquisitions creates opportunities for economies of scale,
including more favorable financing terms from lenders and cost savings
from the consolidation of administrative functions such as employee
benefits, risk management and employee training.

<PAGE>
NEW MARKETS. The Company looks to acquire well-managed dealerships in
geographic markets it does not currently serve, principally in the
Southeast and Southwest regions of the United States. The Company will
target dealers having superior operational and financial management.
Generally, the Company will seek to retain the acquired dealerships'
operational and financial management, and thereby benefit from their market
knowledge, name recognition and local reputation. The Company also
anticipates that management teams at the acquired dealerships will enable
the Company to identify more effectively additional acquisition
opportunities in these markets.

EXISTING MARKETS. The Company seeks growth in its operations within
existing markets by acquiring dealerships that increase the brands,
products and services offered in those markets. These acquisitions should
produce opportunities for additional operating efficiencies, promote
increased name recognition and provide the Company with better
opportunities for repeat and referral business. Such acquisitions should
also create opportunities for regional economies of scale in areas such as
vendor consolidation, facility and personnel utilization and advertising
spending. Additionally, cost savings may be achieved by consolidating
certain administrative functions on a regional basis that would not be
efficient on a national basis, such as accounting, information systems,
title work, credit and collection.

COLLISION REPAIR CENTERS. The Company's collision repair business
provides favorable margins and is not significantly affected by economic
cycles or consumer spending habits. The Company believes that, because of
the high capital investment required for collision repair shops, and the
cost of complying with environmental and worker safety regulations, large
volume body shops will be more successful in the future than smaller volume
shops. The Company believes that this industry will consolidate and that it
will be able to capitalize on this trend by expanding its collision repair
business. The Company also believes that opportunities exist for those
automotive retailers that can establish relationships with major insurance
carriers. The Company currently participates in 35 direct repair programs
with major insurance companies and its relationships with these carriers
provide a source of collision repair customers. The Company currently has
eight collision repair centers accounting for approximately $8.9 million in
pro forma revenue for the year ended 1996. Sonic intends over the next
several years to establish collision repair centers at various of its other
facilities as market conditions warrant.

OPERATING STRATEGY

Sonic's operating objectives are to focus on customer satisfaction
throughout the organization in order to build long-term customer relationships
and to capitalize on operating efficiencies which will enhance its financial
performance. The Company seeks to achieve these objectives by implementing the
following operating strategies.

<PAGE>
(Bullet) OPERATE MULTIPLE DEALERSHIPS IN GEOGRAPHICALLY DIVERSE MARKETS. The
Company operates dealerships in Charlotte, Chattanooga, Nashville,
Tampa-Clearwater, Houston and Atlanta. By operating in several
locations throughout the United States, the Company believes it will be
better able to insulate its earnings from local economic downturns. In
addition, the Company believes that by establishing a significant
market presence in its operating regions, it will be able to provide
superior customer service through a market-specific sales, service,
marketing and inventory strategy. It is the Company's strategy, for
instance, that the savings in a market on reduced advertising costs
will be re-deployed into customer service and customer retention
programs. The Company's market share in its Charlotte and Chattanooga
markets was 13.7% and 12.6%, respectively in 1996.

(Bullet) ACHIEVE HIGH LEVELS OF CUSTOMER SATISFACTION. Customer satisfaction has
been and will continue to be a focus of the Company. The Company's
personalized sales process is intended to satisfy customers by
providing high-quality, affordable vehicles in a positive, "consumer
friendly" buying environment. The Company's service department also
seeks to provide its customers with a professional and reliable service
experience of a consistently high standard. Beyond establishing strong
consumer loyalty, this focus on customer satisfaction engenders good
relations with Manufacturers. Manufacturers generally measure CSI,
which is a result of a survey given to new vehicle buyers. Some
Manufacturers offer specific performance incentives, on a per vehicle
basis, if certain CSI levels (which vary by Manufacturer) are achieved
by a dealer. Manufacturers can withhold approval of acquisitions if a
dealer fails to maintain a minimum CSI score. Historically, the Company
has not been denied Manufacturer approval of acquisitions based on CSI
scores or other reasons. To keep management focused on customer
satisfaction, the Company includes CSI results as a component of its
incentive compensation program.

(Bullet) TRAIN AND DEVELOP QUALIFIED MANAGEMENT. Sonic requires all of its
employees, from service technicians to regional vice presidents, to
participate in in-house training programs. The Company leverages the
experience of senior management, along with third party trainers from
manufacturers, industry affiliates and vendors, to formally train all
employees. This training regimen has resulted in many of the Company's
regional vice presidents, executive managers and salespeople being
certified by NADA, and has become a convenient and effective way to
share best practices among the Company's employees at all levels of the
various dealerships. The Company is developing the Education Center to
be equipped with classrooms specifically designed on a departmental
basis. The F&I classroom in the Education Center, for example, is to be
equipped with simulation software that replicates the dealers' systems
and allows the employee to handle all facets of an F&I transaction. The
Company believes that its comprehensive training of all employees at
every level of their career path offers the Company a competitive
advantage over other dealership groups in the development and retention
of its workforce.

(Bullet) OFFER A DIVERSE RANGE OF AUTOMOTIVE PRODUCTS AND SERVICES. Sonic offers
a broad range of automotive products and services, including a wide
selection of new and used vehicles, vehicle financing and insurance
programs, replacement parts and maintenance and repair programs. The
Company offers 17 product lines ranging from economy to luxury brands
consisting of BMW, Cadillac, Chrysler, Dodge, Eagle, Ford, Honda,
Infiniti, Jaguar, Jeep, KIA, Oldsmobile, Plymouth, Saturn, Toyota,
Volkswagen and Volvo. The Company also offers a variety of used
vehicles at a broad range of prices. Offering numerous new vehicle
brands enables the Company to satisfy a variety of customers, reduces
dependence on any one Manufacturer and reduces exposure to supply
problems and product cycles.

(Bullet) UTILIZE PROFESSIONAL MANAGEMENT PRACTICES AND INCENTIVE BASED
COMPENSATION PROGRAMS. As a result of Sonic's size and geographic
dispersion, the Company's senior management has instituted a
multi-tiered management structure to supervise effectively its
dealership operations. In addition to the officers of the Company, this
structure includes executive managers who are responsible for
individual dealership operations, as well as regional vice presidents
responsible for various regions throughout the country. In an effort to
align management's interest with that of stockholders, a portion of the
incentive compensation program for each officer, vice president and
executive manager is provided in the form of Company stock options,
with additional incentives based on the performance of individual
profit centers. Sonic believes that this organizational structure, with
room for advancement and the opportunity for equity participation,
serves as a strong motivation for its employees.

<PAGE>
(Bullet) APPLY TECHNOLOGY THROUGHOUT OPERATIONS. The Company believes that, with
the customized technology it has introduced in certain markets, it has
been able to improve its operations over time by integrating its
systems into all aspects of its business. In these markets the Company
uses computer-based technology to monitor its dealerships' operating
performance and quickly adjust to market changes, and to integrate
computer systems into its sales, F&I and parts and service operations.
For example, sales managers use a database to identify and solicit
prospective customers, and to design appropriate financing packages for
prospective buyers. Service and parts managers utilize computer
technology to coordinate between the two departments and to service
customers more efficiently. In addition to these uses, the Company's
technology also plays a role in its inventory management. The Company
intends to expand this computer system into all of its dealerships and
markets as the existing contracts for computer systems expire.

INDUSTRY OVERVIEW

Automotive retailing, with approximately $640 billion in 1996 retail sales,
is the largest consumer retail market in the United States, representing
approximately 8% of the domestic gross product based on data collected by NADA
and the U.S. Department of Commerce. Retail sales of new vehicles, which are
sold exclusively through new vehicle dealers, were approximately $328 billion.
In addition, used vehicle retail sales in 1996 were estimated at $311 billion,
with approximately $260 billion in sales by franchised and independent dealers
and the balance in privately negotiated transactions. From 1992 to 1996, new
vehicles sales have grown at an annual compound rate of 10.5%, while used
vehicle sales have grown at a rate of 15.8% for retail used vehicle sales and
6.7% for wholesale used vehicle sales. This significant increase in sales
revenue is primarily because the average price of a new vehicle has risen at a
compound average rate of 6.2% from 1992 to 1996 and newer, high-quality used
vehicles now comprise a larger part of the used vehicle market. During this
period, unit sales grew at rates of only 4.0% for new vehicles, 6.4% for retail
used vehicles and 1.4% for wholesale used vehicles. For the six months ended
June 30, 1997, industry retail sales were down 2% as a result of retail car
sales declines of 5.3% and retail truck sales gains of 2.4% from the same period
in 1996.

The following table sets forth information regarding vehicle sales by new
vehicle dealerships for the periods indicated.

<TABLE>
<CAPTION>
UNITED STATES NEW VEHICLE DEALERS' VEHICLE SALES
(1)
1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
(UNITS IN MILLIONS; DOLLARS IN BILLIONS)
New vehicle unit sales................................................. 12.9 13.9 15.1 14.7 15.1
New vehicle sales (2).................................................. $220.3 $253.3 $289.1 $301.2 $328.4
Used vehicle unit sales-retail......................................... 9.3 9.9 10.9 11.5 11.9
Used vehicle sales-retail (2).......................................... $ 77.1 $ 90.7 $110.6 $126.9 $137.9
Used vehicle unit sales-wholesale...................................... 6.9 6.4 6.9 7.0 7.3
Used vehicle sales -- wholesale (2).................................... $ 26.2(3) $ 24.3 $ 27.9 $ 30.4 $ 33.9
Total vehicle sales.................................................... $323.6 $368.3 $427.6 $458.5 $500.2
Annual growth in total vehicle sales................................... -- 13.8% 16.1% 7.2% 9.1%
</TABLE>

(1) Reflects new vehicle dealership sales at retail and wholesale. In addition,
sales by independent retail used vehicle dealers were approximately $81,
$100, $134, $130 and $122 billion, respectively, and casual used car sales
were estimated at approximately $36, $33, $40, $52 and $51 billion,
respectively, for each of the five years ended December 31, 1996.

(2) Sales figures are calculated by multiplying unit sales by the average sales
price for the year.

(3) The NADA did not report the averages sales price for wholesale transactions
prior to 1993. As a result, the 1992 wholesale used vehicle sales were
calculated using the 1993 average wholesale price for used vehicles.

In addition to new and used vehicles, dealerships offer a wide range of
other products and services, including repair and warranty work, replacement
parts, extended warranty coverage, financing and credit insurance. In 1996, the
average dealership's revenue consisted of 57.7% new vehicles sales, 30.4% used
vehicle sales, and 11.9% other products and services. As a result of intense
competition for new vehicle sales, the average dealership generates the majority
of its profits from the sale of used vehicles and other products and services,
including finance and insurance, mechanical and collision repair, and parts and
service. In 1996, for example, a used vehicle earned an average gross margin of
11.0% as compared to a new vehicle's average gross margin of 6.4%, in each case
for sales by new vehicle dealerships. As is typical in the retailing industry,
dealership profitability varies widely across different stores and, ultimately,
profitability depends on effective management of inventory, competition,
marketing, quality control and, most importantly, responsiveness to the
customer.

<PAGE>
NEW VEHICLE SALES. Franchised dealerships were originally established by
automobile manufacturers for the distribution of their new vehicles. In return
for exclusive distribution rights within specified territories, manufacturers
exerted significant influence over their dealers by limiting the transferability
of ownership in dealerships, designating the dealerships location, and managing
the supply and composition of the dealership's inventory. These arrangements
resulted in the proliferation of small, single-owner operations that, at their
peak in the late 1940's, totaled almost 50,000. As a result of competitive,
economic and political pressures during the 1970's and 1980's, significant
changes and consolidation occurred in the automotive retail industry. One of the
most significant changes was the increased penetration by foreign manufacturers
and the resulting loss of market share by domestic car makers, which forced many
dealerships to close or sell to better-capitalized dealership groups. According
to industry data, the number of franchised dealerships has declined from
approximately 25,000 dealerships in 1990 to approximately 22,000 in 1996.
Although significant consolidation has taken place since the automotive
retailing industry's inception, the industry today remains highly fragmented,
with the largest 100 dealer groups generating less than 10% of total sales
revenues and controlling less than 5% of all franchised dealerships.

USED VEHICLE SALES. Sales of used vehicles have increased over the past
five years, primarily as a result of the substantial increase in new vehicle
prices and the greater availability of newer used vehicles due to the increased
popularity of short-term leases. Like the new vehicle market, the used vehicle
market is highly fragmented, with approximately 22,000 new vehicle dealers
accounting for approximately $172 billion in 1996 sales. In addition, an even
greater number of independent used car dealers accounted for approximately $122
billion in 1996 sales. Privately negotiated transactions accounted for the
remaining 1996 sales, estimated at $51 billion. In addition, an increasing
number of used vehicles are being sold by "superstore" outlets, which market
only used vehicles and offer a wide selection of low mileage, popular models. In
1996, the top 100 new vehicle dealer groups accounted for less than 2% of used
vehicle sales.

INDUSTRY CONSOLIDATION. The Company believes that further consolidation is
likely due to increased capital requirements of dealerships, the limited number
of viable alternative exit strategies for dealership owners, and the desire of
certain manufacturers to strengthen their brand identity by consolidating their
franchised dealerships. The Company also believes that an opportunity exists for
dealership groups with significant equity capital, and experience in
identifying, acquiring and professionally managing dealerships, to acquire
additional dealerships for cash, stock, debt or a combination thereof. Publicly
owned dealer groups, such as the Company, are able to offer prospective sellers
tax advantaged transactions through the use of publicly traded stock which may,
in certain circumstances, make them more attractive to prospective sellers.

DEALERSHIP OPERATIONS

Upon completion of the Reorganization and the Acquisitions, the Company
will own eight dealerships in the Charlotte market, eight dealerships in the
Chattanooga market, one dealership in the Nashville market, one dealership in
the Houston market, one dealership in the Clearwater market and one dealership
in the Atlanta market.

The following table sets forth, for each of those areas, information
relating to the Company's pro forma performance for the year ended December 31,
1996 and the six months ended June 30, 1997:

<TABLE>
<CAPTION>
NASHVILLE/ TAMPA/
CHARLOTTE CHATTANOOGA HOUSTON CLEARWATER ATLANTA
MARKET MARKET MARKET MARKET MARKET TOTAL
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, 1996 SALES:
New vehicles........................................ $ 229,179 $ 108,089 $ 83,763 $ 88,262 $39,940 $549,233
Used vehicles....................................... 105,034 51,277 33,402 42,597 20,931 253,241
Parts, service and collision repair................. 33,317 18,524 18,927 14,224 11,163 96,155
Finance and insurance............................... 7,396 3,887 3,338 2,317 542 17,480
Total............................................. 374,926 181,777 139,430 147,400 72,576 916,109
SIX MONTHS ENDED JUNE 30, 1997 SALES:
New vehicles........................................ $ 123,130 $ 45,972 $ 55,902 $ 45,308 $19,597 $289,909
Used vehicles....................................... 57,979 29,901 17,865 19,390 11,778 136,913
Parts, service and collision repair................. 18,542 10,261 10,363 5,999 5,960 51,125
Finance and insurance............................... 4,464 1,910 2,249 1,029 129 9,781
Total............................................. 204,115 88,044 86,379 71,726 37,464 487,728
</TABLE>

<PAGE>
Since 1990 the Company has grown significantly, as a result of the
acquisition and integration of new vehicle dealerships and an increase in
revenues at its existing dealerships. The following table sets forth the name,
brands, year of acquisition and location of the dealerships acquired by or
awarded to the Company or one of the Bowers Dealerships since 1990:

<TABLE>
<CAPTION>
YEAR
ACQUIRED LOCATION
<S> <C> <C>
DEALERSHIP AND BRANDS CURRENTLY REPRESENTED
SONIC AUTO WORLD
Town & Country Toyota............................................................. 1990 Charlotte
Fort Mill Ford.................................................................... 1996 Charlotte
Fort Mill Chrysler-Plymouth-Dodge................................................. 1997 Charlotte
BOWERS DEALERSHIPS
Nelson Bowers Ford................................................................ 1993 Chattanooga
Cleveland Village Honda/Infiniti.................................................. 1994 Chattanooga
Cleveland Chrysler-Plymouth-Jeep-Eagle............................................ 1995 Chattanooga
Jaguar of Chattanooga (awarded franchise)......................................... 1995 Chattanooga
European Motors of Nashville
"BMW, Volkswagen"............................................................... 1996 Nashville
European Motors
"BMW, Volvo".................................................................... 1996 Chattanooga
Nelson Bowers Dodge............................................................... 1997 Chattanooga
KIA -- VW of Chattanooga (awarded franchise)...................................... 1997 Chattanooga
</TABLE>

DEALERSHIP MANAGEMENT

Operations of the dealerships are overseen by Regional Vice Presidents, who
report to the Company's Chief Operating Officer. Each of the Company's
dealerships is managed by an Executive Manager who is responsible for the
operations of the dealership and the dealership's financial and customer
satisfaction performance. The Executive Manager is responsible for selecting,
training and retaining dealership personnel. All Executive Managers report to
the Company's senior management on a regular basis and prepare a comprehensive
monthly financial and operating statement of their dealership. In addition, the
Company's senior management meets on a monthly basis with its Executive Managers
to address changing customer preferences, operational concerns and to share best
practices, such as maintaining a customer-friendly buying environment,
maximizing potential revenues per new vehicle sale through increased F&I
penetration, using customer calling and coupon programs to attract and retain
service customers, and continued training of dealership personnel.

Each Executive Manager is complemented by a team which includes two senior
managers that aid in the operation of the dealership. The General Sales Manager
is primarily responsible for the operations, personnel, financial performance
and customer satisfaction performance of the new vehicle sales, used vehicle
sales, and finance and insurance departments. The Parts and Service Director is
primarily responsible for the operations, personnel, financial and customer
satisfaction performance of the service, parts and collision repair departments
(if applicable). Each of the departments of the dealership typically has a
manager who reports to the General Sales Manager or Parts and Service Director.

Each Executive Manager is complemented by a team which includes two senior
managers that aid in the operation of the dealership. The General Sales Manager
is primarily responsible for the operations, personnel, financial performance
and customer satisfaction performance of the new vehicle sales, used vehicle
sales, and finance and insurance departments. The Parts and Service Director is
primarily responsible for the operations, personnel and financial and customer
satisfaction performance of the service, parts and collision repair departments
(if applicable). Each of the departments of the dealership typically has a
manager who reports to the General Sales Manager or Parts and Service Director.

After the Acquisitions, the Company's Regional Vice Presidents will be as
listed, with their region of responsibility and other information, on the
following table:

<TABLE>
<CAPTION>
NAME AGE REGION OF RESPONSIBILITY
<S> <C> <C>
Ken Marks, Jr. 35 Florida
Jeffrey C. Rachor 35 Tennessee, Georgia, Kentucky and Alabama
Ivan A. Tufty 57 Texas
William Sullivan 65 North Carolina and South Carolina
</TABLE>

NEW VEHICLE SALES

The Company sells 17 brands of cars, light trucks and sport utility
vehicles. The products have a broad range of prices from lower priced, or
economy vehicles, to luxury vehicles. The Company believes that its brand,
product and price diversity

<PAGE>
reduces the risk of changes in customer preferences, product supply shortages
and aging products. Sales of new vehicles in 1996 were approximately 43% cars
and 57% trucks. Approximately 14% of sales in 1996 were luxury brands (BMW,
Cadillac, Infiniti, Jaguar and Volvo). See "Risk Factors -- Dependence on
Automobile Manufacturers."

The following table sets forth, by vehicle brand, information relating to
the Company's pro forma new vehicle sales for 1996 and the first six months of
1997:
<TABLE>
<CAPTION>
NEW VEHICLE SALES
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 (1) JUNE 30,
PERCENTAGE OF 1997 (1)
NEW VEHICLE NEW VEHICLE NEW VEHICLE
REVENUES REVENUES REVENUES
<S> <C> <C> <C>
(REVENUE AMOUNTS IN THOUSANDS)
VEHICLE BRAND/MANUFACTURER
BMW................................................................... $ 10,838 2.1% $ 13,993
Cadillac.............................................................. 2,029 0.4% 770
Chrysler/Dodge/Plymouth/Jeep/Eagle.................................... 88,951 17.5% 50,935
Ford.................................................................. 297,169 58.3% 164,768
Honda................................................................. 11,599 2.3% 4,992
Infiniti.............................................................. 6,618 1.3% 3,247
Jaguar................................................................ 2,296 0.5% 1,405
KIA................................................................... -- -- 685
Oldsmobile............................................................ 2,212 0.4% 1,055
Saturn................................................................ 13,488 2.6% 4,984
Toyota................................................................ 30,520 6.0% 19,246
Volvo................................................................. 43,060 8.5% 21,478
Volkswagen............................................................ 732 0.1% 257
Total............................................................... $ 509,512 100.0% $ 287,815

<CAPTION>
PERCENTAGE OF
NEW VEHICLE
REVENUES
<S> <C>
VEHICLE BRAND/MANUFACTURER
BMW................................................................... 4.9%
Cadillac.............................................................. 0.3%
Chrysler/Dodge/Plymouth/Jeep/Eagle.................................... 17.7%
Ford.................................................................. 57.2%
Honda................................................................. 1.7%
Infiniti.............................................................. 1.1%
Jaguar................................................................ 0.5%
KIA................................................................... 0.2%
Oldsmobile............................................................ 0.4%
Saturn................................................................ 1.7%
Toyota................................................................ 6.7%
Volvo................................................................. 7.5%
Volkswagen............................................................ 0.1%
Total............................................................... 100.0%
</TABLE>

(1) Does not include Nelson Bowers Dodge as it was purchased March 1997 and
KIA-VW of Chattanooga which was purchased April 1997. European Motors of
Nashville and European Motors were purchased in October 1996 and May 1996,
respectively, and information for such dealerships is included from their
purchase dates through December 1996.

The Company seeks to provide customer oriented service and build lasting
customer relationships that will result in repeat and referral business. Sales
techniques and processes vary depending on the product line and local market
conditions. All of the Company's dealerships use computer technology for
prospecting and customer follow-up and extensively train sales staff to meet the
needs of customers. Certain of the dealerships use computer kiosks to allow
customers to browse vehicle inventories at their leisure. Depending on brand and
local market, dealerships may use "greeters" rather than sales people to
initially assist customers entering a dealership.

Substantially all of the Company's new vehicles are acquired from
Manufacturers. Allocation of vehicle inventory from Manufacturers is based
primarily on sales volume and input from dealers. Vehicle purchases are financed
through revolving credit facilities known in the industry as floor plan lending.

The following table presents information with respect to the Company's new
vehicle sales:
<TABLE>
<CAPTION>
SONIC DEALERSHIPS
SONIC DEALERSHIPS SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PRO FORMA
FOR THE
ACTUAL ACQUISITIONS ACTUAL
1992 1993 1994 1995 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT VEHICLE UNIT DATA)
Unit sales............ 8,060 9,429 9,686 10,273 11,693 24,114 6,027 6,553
Sales revenue......... $126,230 $152,525 $164,361 $186,517 $233,146 $549,285 $117,850 $136,798
Gross profit.......... $ 8,799 $ 8,872 $ 10,043 $ 12,338 $ 15,809 $ 39,811 $ 7,672 $ 8,892
Gross profit margin... 7.0% 5.8% 6.1% 6.6% 6.8% 7.3% 6.6% 6.5%

PRO FORMA
FOR THE
ACQUISITIONS
1997
<S> <C>

Unit sales............ 12,816
Sales revenue......... $289,908
Gross profit.......... $ 20,881
Gross profit margin... 7.2%
</TABLE>

New vehicle sales include retail lease transactions and lease-type
transactions, both of which are arranged by the Company. New vehicle leases
generally have short terms. Lease customers, therefore, return to the new
vehicle market more

<PAGE>
frequently. Leases also provide a source of late-model, generally low mileage,
vehicles for its used vehicle inventory. Generally, leased vehicles are under
warranty for the entire lease term, which allows the Company to provide repair
service to the lessee throughout the term of the lease.

USED VEHICLE SALES

The Company sells a broad variety of makes and models of used cars, vans,
trucks and sport utility vehicles. In 1996, the Company sold 9,541 used car and
3,949 used truck (including sport utility vehicles) units. Used vehicle retail
sales for 1996 represented 38.7% of pro forma total retail unit sales.

Used vehicles are obtained by the Company through customer trade-ins, at
"closed" auctions which may be attended only by new vehicle dealers and which
offer off-lease, rental and fleet vehicles, and at "open" auctions which offer
repossessed vehicles and vehicles sold by other dealers. The Company sells its
used vehicles to retail customers and, in the case of vehicles in poor condition
or vehicles which remain unsold for a specified period of time, to other dealers
or wholesalers. Sales to other dealers or wholesalers are frequently close to or
below cost and therefore negatively affect the Company's gross margin on used
vehicle sales.

The Company emphasizes retail sales of used vehicles in order to offer a
wider variety of vehicles and to benefit from the higher gross margins from used
vehicle sales. To improve the marketability of used vehicles the Company employs
both manufacturer supported and in-house used car certification programs and
sale of extended warranties on used vehicles. At certain locations, the Company
provides a five day money back guarantee on the sale of all used vehicles. The
Company intends to expand this guarantee program to all locations.

After the Acquisitions, the Company will operate four standalone used car
facilities. As the Company enters new markets and gains market share in existing
markets, the Company intends to expand its standalone used car facilities to
take advantage of the high quality sources of vehicles available to new vehicle
retailers.

The following table sets forth information on the Company's used vehicle
sales:
<TABLE>
<CAPTION>
SONIC DEALERSHIPS
SONIC DEALERSHIPS SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PRO FORMA
FOR THE
ACTUAL ACQUISITIONS ACTUAL
1992 1993 1994 1995 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT VEHICLE UNIT DATA)
Retail units sold.......... 3,891 4,104 4,372 5,172 5,488 13,453 2,836 2,638
Retail revenue............. $33,636 $37,742 $47,537 $60,766 $68,054 $186,828 $35,200 $32,666
Retail gross profit........ 3,545 3,964 5,182 5,776 5,748 14,761 2,968 2,772
Retail gross margin........ 10.5% 10.5% 10.9% 9.5% 8.5% 7.9% 8.4% 8.5%
Wholesale unit sales....... 3,756 4,189 4,656 5,009 5,344 12,469 2,751 2,750
Wholesale revenue.......... $$11,198 $13,362 $16,109 $20,025 $25,642 $ 66,415 $13,411 $15,342
Wholesale gross profit..... 16 27 43 (45) (23) 1,160 (12) (145)
Wholesale gross margin..... 0.1% 0.2% 0.3% (0.2)% (0.1)% 1.8% (0.9)% (1.0)%
Total unit sales........... 7,647 8,293 9,028 10,181 10,832 25,922 5,587 5,388
Total revenue.............. $44,834 $51,104 $63,646 $80,791 $93,696 $253,243 $48,611 $48,008
Total gross profit......... 3,561 3,991 5,225 5,731 5,725 15,921 2,956 2,627
Total gross margin......... 7.9% 7.8% 8.2% 7.1% 6.1% 6.3% 6.1% 5.5%

PRO FORMA
FOR THE
ACQUISITIONS
1997
<S> <C>

Retail units sold.......... 7,222
Retail revenue............. $ 98,992
Retail gross profit........ 6,463
Retail gross margin........ 6.5%
Wholesale unit sales....... 6,639
Wholesale revenue.......... $ 37,921
Wholesale gross profit..... 2,060
Wholesale gross margin..... 5.4%
Total unit sales........... 13,861
Total revenue.............. $ 136,913
Total gross profit......... 8,523
Total gross margin......... 6.2%
</TABLE>

SERVICE AND PART SALES

The Company provides service and parts at each of its franchised
dealerships. The Company provides maintenance and repair services at its 20 new
vehicle dealerships and three used vehicle facilities. The Company utilizes
approximately 400 service bays in providing both warranty and non-warranty
services. Service and parts sales provide higher gross margins than vehicle
sales. In 1996, the Company's service and parts operations generated $76.8
million in revenues and $31.2 million in gross profit, representing 8.9% and
30.7% of total revenues and gross profit, respectively.

Historically, the automotive repair industry has been highly fragmented.
However, the Company believes the increased use of advanced technology in
vehicles has made it difficult for independent repair shops to perform major or
technical repairs. Additionally, manufacturers permit warranty work to be
performed only at franchised dealerships. Given the increasing technological
complexity of motor vehicles and the trend to long term warranties, the Company
believes an increasing percentage of repair work will be performed at franchised
dealerships.

The Company regards its service operations as an integral part of its
overall approach to customer service. Vehicle service provides additional
opportunities to build long-term customer relationships. The Company uses
customer calling,

<PAGE>
coupon programs and other techniques to attract and retain service customers.
Although individual dealerships vary based on markets and brands, many Company
dealerships use service "teams" and variable rate or "menu" pricing structures
to improve customer satisfaction with repair service.

Sales of factory authorized equipment and parts to wholesale customers are
an integral component of parts operations at certain of the Company's
dealerships. For example, the Company's Lone Star Ford dealership sold
approximately $9.3 million in wholesale parts in 1996. The Company plans to
capitalize on its representation of numerous manufacturers and its experience as
a wholesale parts distributor in order to increase sales of factory authorized
equipment and parts to wholesale customers.

The following table sets forth information regarding the Company's parts
and service sales:
<TABLE>
<CAPTION>
SONIC DEALERSHIPS
SONIC DEALERSHIPS SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PRO FORMA
FOR THE
ACTUAL ACQUISITIONS ACTUAL
1992 1993 1994 1995 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales Revenue.............. $21,778 $27,242 $30,298 $31,957 $35,764 $ 87,168 $18,603 $20,220
Gross Profit............... 7,307 9,540 10,344 11,003 13,106 32,161 6,317 6,822
Gross Profit Margin........ 33.6% 35.0% 34.1% 34.4% 36.7% 36.9% 34.0% 33.7%

PRO FORMA
FOR THE
ACQUISITIONS
1997
<S> <C>

Sales Revenue.............. $ 46,582
Gross Profit............... 17,780
Gross Profit Margin........ 38.2%
</TABLE>

COLLISION REPAIR

The Company operates collision repair centers, or body shops, at eight of
its dealership locations. In 1996, collision repair accounted for $8.9 million,
or 1.0%, of the Company's pro forma revenues and 4.5% of the Company's gross
profit. The Company's collision repair business provides favorable margins and,
similar to service and parts, is not significantly affected by business cycles
or consumer preferences. In addition, because of the higher cost of used
vehicles, insurance adjusters are more hesitant to declare a vehicle a total
loss, resulting in more significant, and higher cost, repair jobs. The Company
believes that, because of the high capital investment required for collision
repair shops and the cost of complying with governmental regulations, large
volume body shops will be more successful in the future than smaller volume
shops. The Company believes the collision repair business will consolidate and
that it will be able to capitalize on this consolidation.

The following table sets forth information regarding the Company's
collision repair operations:
<TABLE>
<CAPTION>
SONIC
DEALERSHIPS
SONIC DEALERSHIPS SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
PRO FORMA
FOR THE
ACTUAL ACQUISITIONS ACTUAL
1992 1993 1994 1995 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Sales Revenue...................... $2,765 $3,093 $3,685 $3,903 $4,942 $8,930 $2,398 $2,687
Gross Profit....................... 1,232 1,516 1,816 1,947 2,452 4,975 1,201 1,284
Gross Profit Margin................ 44.6% 49.0% 49.3% 49.9% 49.6% 55.7% 50.1% 47.8%

PRO FORMA
FOR THE
ACQUISITIONS
1997
<S> <C>

Sales Revenue...................... $6,478
Gross Profit....................... 3,371
Gross Profit Margin................ 52.0%
</TABLE>

FINANCE AND INSURANCE

The Company offers its customers a wide range of financing and leasing
alternatives for the purchase of vehicles. In addition, as part of each sale,
the Company offers customers credit life, accident and health and disability
insurance to cover the financing cost of their vehicle, as well as warranty or
extended service contracts. During the past five years, the Company's pro forma
revenue from financing, insurance and extended warranty transactions has grown
from $6.9 million in 1992 to $18.1 million in 1996.

The Company believes that its customers' ability to obtain financing at its
dealerships significantly enhances the Company's ability to sell new and used
vehicles. The Company provides a variety of financing and leasing alternatives
in order to meet the specific needs of each potential customer. The Company
believes its ability to obtain customer-tailored financing on a "same day" basis
provides it with an advantage over many of its competitors, particularly smaller
competitors which do not generate sufficient volume to attract the diversity of
financing sources that are available to the Company. The dealership will then be
able to provide a customer with a broader array of lease payment alternatives
and, consequently, appeal to a term buyer who is trying to purchase a vehicle of
choice at or below a specific monthly payment. During 1996, the Company arranged
for financing for approximately 44.7% of its new vehicle sales and 53.6% of its
used vehicle sales.

<PAGE>
The Company assigns its vehicle financing contracts and leases to other
parties, instead of directly financing sales, which reduces the Company's
exposure to loss from financing activities. The Company receives a commission
from the lender for originating and assigning the loan or lease but is assessed
a chargeback fee by the lender if a loan is canceled, in most cases, within 120
days of making the loan. Early cancellation can result from early repayment
because of refinancing of the loan, the sale or trade-in of the vehicle, or
default on the loan. The Company establishes an allowance to absorb estimated
chargebacks and refunds. The Company believes that its high volume of business
makes the Company's retail contracts more attractive to lenders, which may
enable the Company to negotiate higher commission rates in contrast to lower
volume dealerships.

In addition to its financing activities, the Company offers extended
service contracts in connection with the sale of new and used vehicles. Extended
service contracts on new vehicles supplement the warranties offered by the
vehicle manufacturer, and on used vehicles, such contracts supplement any
remaining manufacturer warranty or serve as the primary service contract on the
vehicle. The extended service contracts sold by the Company are issued by
third-party insurers that pay the Company a commission upon sale of the
contract. In 1996, the Company sold extended service contracts on 24.0% and
36.1% respectively, of its new and used retail vehicle sales. The Company also
offers its customers credit life, health and accident insurance when they
finance an automobile purchase, and receives a commission on each policy sold.

SALES AND MARKETING

The Company's marketing and advertising activities vary among its
dealerships and among its markets. Generally, the Company advertises primarily
through television, newspapers, radio and direct mail and regularly conducts
special promotions designed to focus vehicle buyers on its product offerings.
The Company intends to continue tailoring its marketing efforts to the relevant
marketplace in order to reach the Company's targeted customer base. The Company
also has computer technology to aid sales people in prospecting for customers.
Under arrangements with manufacturers, the Company receives a subsidy for a
portion of its advertising expenses incurred in connection with a manufacturer's
vehicles. Because of the Company's leading market presence in certain markets,
the Company believes it has been able to realize cost savings on its advertising
expenses due to volume discounts and other concessions from media. The Company
also believes its consolidated marketing campaigns within particular markets
result in enhanced name recognition and sales volume when compared with smaller
competitors in the same market.

RELATIONSHIPS WITH MANUFACTURERS

Each of the Company's dealerships operates under a separate franchise or
dealer agreement (a "Dealer Agreement") which governs the relationship between
the dealership and the Manufacturer. In general, each Dealer Agreement specifies
the location of the dealership for the sale of vehicles and for the performance
of certain approved services in a specified market area. The designation of such
areas generally does not guarantee exclusivity within a specified territory. In
addition, most Manufacturers allocate vehicles on a "turn and earn" basis which
rewards high volume. A Dealer Agreement requires the dealer to meet specified
standards regarding showrooms, the facilities and equipment for servicing
vehicles, inventories, minimum net working capital, personnel training, and
other aspects of the business. The Dealer Agreement with each dealership also
gives each Manufacturer the right to approve the dealership's general manager
and any material change in management or ownership of the dealership. Each
Manufacturer may terminate a Dealer Agreement under certain circumstances, such
as a change in control of the dealership without Manufacturer approval, the
impairment of the reputation or financial condition of the dealership, the
death, removal or withdrawal of the dealership's general manager, the conviction
of the dealership or the dealership's owner or general manager of certain
crimes, a failure to adequately operate the dealership or maintain wholesale
financing arrangements, insolvency or bankruptcy of the dealership or a material
breach of other provisions of the Dealer Agreement. In connection with the
Offering, the Company is amending its Dealer Agreements to revise those
provisions which would have prohibited the Company from selling its Common Stock
to the public. See "Description of Capital Stock -- Delaware Law, Certain
Charter and Bylaw Provisions and Certain Franchise Agreement Provisions."

Many automobile manufacturers are still developing their policies regarding
public ownership of dealerships. The Company believes that these policies will
continue to change as more dealership groups sell their stock to the public, and
as the established, publicly-owned dealership groups acquire more franchises. To
the extent that new or amended manufacturer policies restrict the number of
dealerships which may be owned by a dealership group, or the transferability of
the Company's Common Stock, such policies could have a material adverse effect
on the Company. See "Risk Factors -- Dependence on Automobile Manufacturers" and
" -- Concentration of Voting Power and Anti-Takeover Provisions."

Certain state statutes in Florida and other states limit manufacturers'
control over dealerships. Under Florida law, notwithstanding any contrary terms
in a dealer agreement, manufacturers may not unreasonably withhold approval for
the sale of

<PAGE>
a dealership. Acceptable grounds for disapproval include material shortcomings
in the character, financial condition or business experience of the proposed
transferee. In addition, dealerships may challenge manufacturers' attempts to
establish new dealerships in the dealer's markets, and state regulators may deny
applications to establish new dealerships for a number of reasons, including a
determination that the manufacturer is adequately represented in the area.
Manufacturers must have "good cause" for any termination or failure to renew a
dealer agreement, and automaker's license to distribute vehicles in Florida may
be revoked if, among other things, the automaker has forced or attempted to
force an automobile dealer to accept delivery of motor vehicles not ordered by
that dealer.

Under Texas law, despite the terms of contracts between manufacturers and
dealers, manufacturers may not unreasonably withhold approval of a transfer of a
dealership. It is unreasonable under Texas law for a manufacturer to reject a
prospective transferee of a dealership who is of good moral character and who
otherwise meets the manufacturer's written, reasonable and uniformly applied
standards or qualifications relating to the prospective transferee's business
experience and financial qualifications. In addition, under Texas law and the
laws of other states, franchised dealerships may challenge manufacturers'
attempts to establish new franchises in the franchised dealers' markets, and
state regulators may deny applications to establish new dealerships for a number
of reasons, including a determination that the manufacturer is adequately
represented in the region. Texas law limits the ability of manufacturers to
terminate or fail to renew franchises. In addition, other laws in Texas and
elsewhere limit the ability of manufacturers to withhold their approval for the
relocation of a franchise or require that disputes be arbitrated. In addition, a
manufacturer's license to distribute vehicles in Texas may be revoked if, among
other things, the manufacturer has forced or attempted to force an automobile
dealer to accept delivery of motor vehicles not ordered by that dealer.

Georgia law provides that no manufacturer may arbitrarily reject a proposed
change of control or sale of an automobile dealership, and any manufacturer
challenging such a transfer of a dealership must provide written reasons for its
rejection to the dealer. Manufacturers bear the burden of proof to show that any
disapproval of a proposed transfer of a dealership is not arbitrary. If a
manufacturer terminates a franchise agreement due to a proposed transfer of the
dealership or for any other reason not considered to constitute good cause under
Georgia law, such termination will be ineffective. As an alternative to
rejecting or accepting a proposed transfer of a dealership or terminating the
franchise agreement, Georgia law provides that a manufacturer may offer to
purchase the dealership on the same terms and conditions offered to the
prospective transferee.

Under Tennessee law, a manufacturer may not modify, terminate or refuse to
renew a franchise agreement with a dealer except for good cause, as defined in
the statutes. Further, a manufacturer may be denied a Tennessee license, or have
an existing license revoked or suspended if the manufacturer modifies,
terminates, or suspends a franchise agreement due to an event not constituting
good cause. Good cause includes material shortcomings in the character,
financial condition or business experience of the dealer. A manufacturer's
Tennessee license may also be revoked if the manufacturer prevents or attempts
to prevent the sale or transfer of the dealership by unreasonably withholding
consent to the transfer.

COMPETITION

The retail automotive industry is highly competitive. Depending on the
geographic market, the Company competes with both dealers offering the same
brands and product line as the Company and dealers offering other automakers'
vehicles. The Company also competes for vehicle sales with auto brokers and
leasing companies. The Company competes with small, local dealerships and with
large multi-franchise auto dealerships. Many of the Company's larger competitors
are larger and have greater financial and marketing resources and are more
widely known than the Company. Some of the Company's competitors also may
utilize marketing techniques, such as Internet visibility or "no negotiation"
sales methods, not currently used by the Company.

The Company also competes with regional and national car rental companies,
which sell their used rental cars, and used automobile "superstores," such as
AutoNation and CarMax. In the future, new competitors may enter the automotive
retailing market, including automobile manufacturers that may decide to open
additional retail outlets or acquire other dealerships. In addition, the used
vehicle superstores generally offer a greater and more varied selection of
vehicles than the Company's dealerships. As the Company seeks to acquire
dealerships in new markets, it may face significant competition (including
competition from other publicly-owned dealer groups) as it strives to gain
market share. See "Risk Factors -- Competition"

The Company believes that the principal competitive factors in vehicle
sales are the marketing campaigns conducted by automakers, the ability of
dealerships to offer a wide selection of the most popular vehicles, the location
of dealerships and the quality of customer service. Other competitive factors
include customer preference for makes of automobiles, pricing (including
manufacturer rebates and other special offers) and warranties.

<PAGE>
In addition to competition for vehicle sales, the Company also competes
with other auto dealers, service stores, auto parts retailers and independent
mechanics in providing parts and service. The Company believes that the
principal competitive factors in parts and service sales are price, the use of
factory-approved replacement parts, the familiarity with a dealer's makes and
models and the quality of customer service. A number of regional and national
chains offer selected parts and service at prices that may be lower than the
Company's prices.

In arranging or providing financing for its customers' vehicle purchases,
the Company competes with a broad range of financial institutions. The Company
believes that the principal competitive factors in offering financing are
convenience, interest rates and contract terms.

The Company's success depends, in part, on national and regional
automobile-buying trends, local and regional economic factors and other regional
competitive pressures. The Company sells its vehicles in the Charlotte,
Chattanooga, Nashville, Tampa-Clearwater, Houston and Atlanta markets.
Conditions and competitive pressures affecting these markets, such as
price-cutting by dealers in these areas, or in any new markets the Company
enters, could adversely affect the Company, although the retail automobile
industry as a whole might not be affected. See "Risk Factors -- Competition."

GOVERNMENTAL REGULATIONS AND ENVIRONMENTAL MATTERS

A number of regulations affect the Company's business of marketing,
selling, financing and servicing automobiles. The Company also is subject to
laws and regulations relating to business corporations generally.

Under North Carolina, South Carolina, Tennessee, Florida, Georgia and Texas
law as well as the laws of other states into which the Company may expand, the
Company must obtain a license in order to establish, operate or relocate a
dealership or operate an automotive repair service. These laws also regulate the
Company's conduct of business, including its advertising and sales practices.
Other states may have similar requirements.

The Company's operations are also subject to laws governing consumer
protection. Automobile dealers and manufacturers are subject to so-called "Lemon
Laws" that require a manufacturer or the dealer to replace a new vehicle or
accept it for a full refund within one year after initial purchase if the
vehicle does not conform to the manufacturer's express warranties and the dealer
or manufacturer, after a reasonable number of attempts, is unable to correct or
repair the defect. Federal laws require certain written disclosures to be
provided on new vehicles, including mileage and pricing information.

The imported automobiles purchased by the Company are subject to United
States customs duties and, in the ordinary course of its business, the Company
may, from time to time, be subject to claims for duties, penalties, liquidated
damages, or other charges. Currently, United States customs duties are generally
assessed at 2.5% of the customs value of the automobiles imported, as classified
pursuant to the Harmonized Tariff Schedule of the United States. See "Risk
Factors -- Imported Products."

The Company's financing activities with its customers are subject to
federal truth-in-lending, consumer leasing and equal credit opportunity
regulations as well as state and local motor vehicle finance laws, installment
finance laws, usury laws and other installment sales laws. Some states regulate
finance fees that may be paid as a result of vehicle sales. State and federal
environmental regulations, including regulations governing air and water quality
and the storage and disposal of gasoline, oil and other materials, also apply to
the Company.

The Company believes that it complies in all material respects with the
laws affecting its business. Possible penalties for violation of any of these
laws include revocation of the Company's licenses and fines. In addition, many
laws may give customers a private cause of action.

As with automobile dealerships generally, and service parts and body shop
operations in particular, the Company's business involves the use, storage,
handling and contracting for recycling or disposal of hazardous or toxic
substances or wastes, including environmentally sensitive materials such as
motor oil, waste motor oil and filters, transmission fluid, antifreeze, freon,
waste paint and lacquer thinner, batteries, solvents, lubricants, degreasing
agents, gasoline and diesel fuels. The Company's business also involves the past
and current operation and/or removal of aboveground and underground storage
tanks containing such substances or wastes. Accordingly, the Company is subject
to regulation by federal, state and local authorities establishing health and
environmental quality standards, and liability related thereto, and providing
penalties for violations of those standards. The Company is also subject to
laws, ordinances and regulations governing remediation of contamination at
facilities it operates or to which it sends hazardous or toxic substances or
wastes for treatment, recycling or disposal.

The Company believes that it does not have any material environmental
liabilities and that compliance with environmental laws and regulations will
not, individually or in the aggregate, have a material adverse effect on the
Company's

<PAGE>
results of operations or financial condition. However, soil and groundwater
contamination is known to exist at certain properties used by the Company.
Furthermore, environmental laws and regulations are complex and subject to
frequent change. There can be no assurance that compliance with amended, new or
more stringent laws or regulations, stricter interpretations of existing laws or
the future discovery of environmental conditions will not require additional
expenditures by the Company, or that such expenditures will not be material. See
"Risk Factors -- Government Regulation; Environmental Matters."

<PAGE>
FACILITIES

The Company's principal executive offices are located at 5401 East
Independence Boulevard, Charlotte, North Carolina 28218, and its telephone
number is (704) 532-3301. These executive offices are located on the premises
owned by Town & Country Ford. The following table identifies, for each of the
properties to be utilized by the Company's dealership operations the location,
the owner/lessor, and the term and rental rate of the Company's lease for such
property, if applicable:
<TABLE>
<CAPTION>
1997
OWNERSHIP MONTHLY EXPIRATION
DEALERSHIP STATUS OWNER/LESSOR RENT (2) DATE FACILITY
<S> <C> <C> <C> <C> <C>
Town & Country Ford.................. Lease STC Properties (1) $ 34,083 2000 Main Bldg.
Body Shop
5401 East Independence Blvd.,
Charlotte
Lone Star Ford....................... Lease Viking Investments (1) $ 30,000 2005 Main Bldg.
Used Car Bldg.
8477 North Freeway, Houston Body Shop
Fleet Bldg.
Fort Mill Ford....................... Own -- -- -- Main Bldg.
Body Shop
788 Gold Hill Rd., Fort Mill, SC
Fort Mill Chrysler-Plymouth-Dodge.... Lease Jeffrey Boyd $ 16,667 2002 Main Bldg.
Used Car Bldg.
3310 Hwy. 51, Fort Mill, SC
Town & Country Toyota................ Own -- -- -- Main Bldg.
Body Shop
9101 South Blvd., Charlotte
Frontier Olsmobile-Cadillac.......... Lease Landers Oldsmobile-Cadillac $ 17,000 1998(3 ) Main Bldg.
Body Shop
2501 Roosevelt Blvd., Monroe, NC Used Car Bldg.
Ken Marks Ford....................... Lease Marks Holding Company (1) $ 95,000 2007(3 ) Main Bldg.
24825 US Hwy. 19 North, Clearwater
&
3925 Tampa Rd., Oldsmar, FL
Dyer Volvo........................... Lease D&R Investments (1) $ 50,000 2009(3 ) Main Bldg.
5260 Peachtree Industrial Blvd.,
Atlanta
Lake Norman Lease Phil M. and Quinton M. Gandy $ 40,000 (4) 2007(3 ) Main Bldg.
Chrysler-Plymouth-Jeep-Eagle....... and affiliates
Chartwell Center Dr., Cornelius, NC
Lake Norman Dodge.................... Lease Phil M. and Quinton M. Gandy $ 40,000 (4) 2007(3 ) Main Bldg.
and affiliates Truck Center
I-77 & Torrence Chapel Rd.,
Cornelius, NC
KIA/VW of Chattanooga................ Lease KIA Land Development (1) $ (5) 2007(3 ) Main Bldg.
6015 International Dr., Chattanooga
European Motors of Nashville......... Lease Third National Bank, $ 21,070 1998(3 ) Main Bldg.(7)
David P'Pool,
630 Murfreeboro Pike, Nashville Stella P'Pool
European Motors...................... Lease Nelson Bowers (1) $ 16,846 (4) 2007(3 ) Main Bldg.
5949 Brainerd Rd., Chattanooga
Jaguar of Chattanooga................ Lease JAG Properties LLC, Thomas $ 22,010 2017(3 ) Main Bldg.
Green, Jr. and
5915 Brainerd Rd., Chattanooga Nelson Bowers (1)
Cleveland Lease Cleveland Properties LLC (1) $ 14,000 2011(3 ) Main Bldg.
Chrysler-Plymouth-Jeep-Eagle.......
2496 South Lee Hwy., Cleveland, TN
Nelson Bowers Dodge.................. Lease Edward & Barbara Wright $ 16,800 2001(3 ) Main Bldg.
402 West Martin Luther King Blvd.,
Chattanooga
Cleveland Village Imports............ Lease Thomas Green, Jr. and Nelson $ 8,398 1997(3 ) Main Bldg.(8)
Bowers (1)
2490 & 2492 South Lee Hwy.,
Cleveland, TN
Saturn of Chattanooga................ Lease Nelson Bowers (1) $ 27,054 (4) 2007(3 ) Main Bldg.
6025 International Dr., Chattanooga
Nelson Bowers Ford................... Lease Robert G. Card, Jr. $ 9,000 Month to ) Main Bldg.
Month(3
717 South Lee Hwy., Cleveland, TN
Williams Motors...................... Lease J.T. Williams $ 15,000 1998(6 ) Main Bldg.
803 North Anderson Rd., Rock Hill,
SC

<CAPTION>
DEALERSHIP SQ. FT. ACRES
<S> <C> <C>
Town & Country Ford.................. 85,013 12.48
24,768
5401 East Independence Blvd.,
Charlotte
Lone Star Ford....................... 79,725 24.76
2,125
8477 North Freeway, Houston 26,450
1,500
Fort Mill Ford....................... 34,162 10.00
11,275
788 Gold Hill Rd., Fort Mill, SC
Fort Mill Chrysler-Plymouth-Dodge.... 9,809 5.50
1,470
3310 Hwy. 51, Fort Mill, SC
Town & Country Toyota................ 50,800 5.70
17,840
9101 South Blvd., Charlotte
Frontier Olsmobile-Cadillac.......... 14,825 7.08
11,250
2501 Roosevelt Blvd., Monroe, NC 2,200
Ken Marks Ford....................... 79,100 22.00
24825 US Hwy. 19 North, Clearwater
&
3925 Tampa Rd., Oldsmar, FL
Dyer Volvo........................... 60,000 6.00
5260 Peachtree Industrial Blvd.,
Atlanta
Lake Norman 26,000 6.00
Chrysler-Plymouth-Jeep-Eagle.......
Chartwell Center Dr., Cornelius, NC
Lake Norman Dodge.................... 25,000 6.00
5,000
I-77 & Torrence Chapel Rd.,
Cornelius, NC
KIA/VW of Chattanooga................ 8,445 3.75
6015 International Dr., Chattanooga
European Motors of Nashville......... 49,385 4.00
630 Murfreeboro Pike, Nashville
European Motors...................... 40,295 12.24
5949 Brainerd Rd., Chattanooga
Jaguar of Chattanooga................ 34,850 3.57
5915 Brainerd Rd., Chattanooga
Cleveland 17,750 5.60
Chrysler-Plymouth-Jeep-Eagle.......
2496 South Lee Hwy., Cleveland, TN
Nelson Bowers Dodge.................. 30,000 4.88
402 West Martin Luther King Blvd.,
Chattanooga
Cleveland Village Imports............ 15,760 2.05
2490 & 2492 South Lee Hwy.,
Cleveland, TN
Saturn of Chattanooga................ 20,100 6.22
6025 International Dr., Chattanooga
Nelson Bowers Ford................... 19,725 1.40
717 South Lee Hwy., Cleveland, TN
Williams Motors...................... 15,000(9) 3.0(9)
803 North Anderson Rd., Rock Hill,
SC
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

<PAGE>
(1) These lessors are affiliates of the Company's stockholders and/or executive
officers. See "Risk Factors -- Potential Conflicts of Interest," "Certain
Transactions -- Certain Dealership Leases" and "Principal Stockholders."

(2) All of the Company's leases are "triple net" leases and require the Company
to pay all real estate taxes, maintenance and insurance costs for the
property.

(3) Each of these leases provides for two renewal terms of five years each, at
the option of the Company.

(4) Monthly rent expense based on estimate from the purchase agreement relating
to the Acquisition.

(5) Lease rent currently under negotiation.

(6) This lease provides for four renewal terms of one year each, at the option
of the Company.

(7) European Motors of Nashville has entered into a 20-year lease with H.G. Hill
Realty Company, an entity unaffiliated with the Company, regarding a new BMW
facility to be constructed at a site separate from its existing facility.
The monthly rent payments under this lease are not presently fixed and will
depend upon the final construction costs of the new facility. The lease term
will begin when the Company occupies these premises.

(8) Cleveland Village Imports also leases a used-car lot across the street from
its main facility from individuals not affiliated with the Company for a
term expiring in 2002 and providing for $3,000 in monthly rent.

(9) Estimated size.

All of the Company's dealerships are located along major U.S. or interstate
highways. One of the principal factors considered by the Company in evaluating
an acquisition candidate is its location. The Company prefers to acquire
dealerships located along major thoroughfares, primarily interstate highways
with ease of access, which can be easily visited by prospective customers.

The Company owns certain of the real estate associated with Town & Country
Toyota and Frontier Oldsmobile-Cadillac. The remainder of the properties
utilized by the Company's dealership operations are leased as set forth in the
foregoing table. The Company believes that its facilities are adequate for its
current needs. In connection with its acquisition strategy, the Company intends
to lease the real estate associated with a particular dealership whenever
practicable.

Under the terms of its franchise agreements, the Company must maintain an
appropriate appearance and design of its facilities and is restricted in its
ability to relocate its dealerships. See " -- Relationships with Manufacturers."

EMPLOYEES

As of June 30, 1997 the Company employed 1,574 people, of whom
approximately 210 were employed in managerial positions, 594 were employed in
non-managerial sales positions, 346 were employed in non-managerial parts and
service positions and 424 were employed in administrative support positions.

The Company believes that many dealerships in the retail automobile
industry have difficulty in attracting and retaining qualified personnel for a
number of reasons, including the historical inability of dealerships to provide
employees with an equity interest in the profitability of the dealerships. The
Company intends, upon completion of the Offering, to provide certain executive
officers, managers and other employees with stock options and all employees with
a stock purchase plan and believes this type of equity incentive will be
attractive to existing and prospective employees of the Company. See
"Management -- Stock Option Plan" and " -- Employee Stock Purchase Plan" and
"Risk Factors -- Dependence on Key Personal and Limited Management and Personnel
Resources."

The Company believes that its relationship with its employees is good. None
of the Company's employees is represented by a labor union. Because of its
dependence on the Manufacturers, however, the Company may be affected by labor
strikes, work slowdowns and walkouts at the Manufacturer's manufacturing
facilities. See "Risk Factors -- Dependence on Automobile Manufacturers."

LEGAL PROCEEDINGS AND INSURANCE

From time to time, the Company is named in claims involving the manufacture
of automobiles, contractual disputes and other matters arising in the ordinary
course of the Company's business. Currently, no legal proceedings are pending
against or involve the Company that, in the opinion of management, could
reasonably be expected to have a material adverse effect on the business,
financial condition or results of operations of the Company.

<PAGE>
Because of their vehicle inventory and nature of business, automobile
retail dealerships generally require significant levels of insurance covering a
broad variety of risks. The Company's insurance includes an umbrella policy as
well as insurance on its real property, comprehensive coverage for its vehicle
inventory, general liability insurance, employee dishonesty coverage and errors
and omissions insurance in connection with its vehicle sales and financing
activities.

<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS; KEY PERSONNEL

The executive officers, directors and key personnel of the Company, and
their ages as of the date of this Prospectus, are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION(S) WITH THE COMPANY
<S> <C> <C>
O. Bruton Smith..................... 70 Chairman, Chief Executive Officer and Director*
Bryan Scott Smith................... 29 President, Chief Operating Officer and Director*
Nelson E. Bowers, II................ 53 Executive Vice President and Director Nominee*
Theodore M. Wright.................. 35 Chief Financial Officer, Vice President-Finance, Secretary and Director*
William R. Brooks................... 47 Director
Jeffrey C. Rachor................... 35 Regional Vice President-Mid South Region
O. Ken Marks, Jr.................... 35 Regional Vice President-Florida
Ivan A. Tufty....................... 57 Regional Vice President-Texas
William M. Sullivan................. 65 Regional Vice President-North and South Carolina
</TABLE>

* Executive Officer

O. BRUTON SMITH has been the Chairman, Chief Executive Officer and a
director of the Company since its organization in 1997 and presently is the
controlling shareholder of the Company through his direct and indirect ownership
of Class B Common Stock. Mr. Smith has been the president and controlling
shareholder of Sonic Financial since its formation, which prior to the
Reorganization owned a controlling interest in all of the Company's dealerships
except Town & Country Toyota and presently owns a controlling interest in the
Company's Common Stock. Mr. Smith, prior to the Reorganization, owned a
controlling interest in Town & Country Toyota. Mr. Smith currently is, and since
their acquisition by Sonic Financial has been, a director and the president of
each of the Company's dealerships. Mr. Smith has worked in the retail automobile
industry since 1966. Mr. Smith's initial term as a director of the Company will
expire at the annual meeting of stockholders of the Company to be held in 2000.
Mr. Smith is also the chairman and chief executive officer, a director and
controlling shareholder, either directly or through Sonic Financial, of Speedway
Motorsports, Inc. ("SMI"). SMI is a public company traded on the NYSE. Among
other things, it owns and operates the following NASCAR racetracks: Atlanta
Motor Speedway, Bristol Motor Speedway, Charlotte Motor Speedway, Sears Point
Raceway and Texas Motor Speedway. He is also the executive officer and a
director of each of SMI's operating subsidiaries. Under his employment agreement
with the Company, Mr. Smith is required to devote approximately 50% of his
business time to the Company's business.

BRYAN SCOTT SMITH has been the President, Chief Operating Officer and a
director of the Company since its organization in 1997. Mr. Smith, who is the
son of Bruton Smith, has been the Vice President since 1993 and, prior to the
Reorganization, the minority owner of Town & Country Ford. Mr. Smith joined the
Company's predecessor in January 1991 on a full-time basis as an assistant used
car manager. In August of 1991, Mr. Smith became the used car manager at Town &
Country Ford. Mr. Smith was promoted to General Manager of Town & Country Ford
in November 1992 where he remained until his appointment to President and Chief
Operating Officer of the Company in March of 1997. Mr. Smith's initial term as a
director of the Company will expire at the annual meeting of stockholders of the
Company to be held in 1998.

NELSON E. BOWERS, II will be appointed the Executive Vice President and a
director of the Company upon consummation of the Bowers Acquisition. Mr. Bowers
owns a controlling interest in the dealerships that are the subject of the
Bowers Acquisition and has worked in the retail automobile industry since 1974.
Mr. Bowers has served on national dealer councils for BMW and Volvo and has
owned and operated dealerships since 1979. Mr. Bowers' initial term as a
director of the Company will expire at the annual meeting of stockholders to be
held in 1999.

THEODORE M. WRIGHT has been the Chief Financial Officer, Vice
President-Finance, Secretary and a director of the Company since April 1997.
Before joining the Company, Mr. Wright was a Senior Manager and in charge of the
Columbia, South Carolina office of Deloitte & Touche LLP. Prior to joining the
Columbia office, Mr. Wright was a Senior Manager in Deloitte & Touche LLP's
National Office Accounting Research and SEC Services Departments from 1994 to
1995. From 1992 to 1994 Mr. Wright was an audit manager with Deloitte & Touche
LLP. Mr. Wright's initial term as a director of the Company will expire at the
annual meeting of stockholders to be held in 1999.

WILLIAM R. BROOKS has been a director of the Company since its formation.
Mr. Brooks also served as the Company's Chief Financial Officer, Vice
President-Finance and Secretary from its organization in February 1997 to April
1997 when Mr. Wright was appointed to those positions. Since December 1994, Mr.
Brooks has been the Vice President, Treasurer,

<PAGE>
Chief Financial Officer and a director of SMI. Mr. Brooks also serves as an
executive officer and a director for various operating subsidiaries of SMI.
Before the formation of SMI in December 1994, Mr. Brooks was the Vice President
of the Charlotte Motor Speedway and a Vice President and a director of Atlanta
Motor Speedway. Mr. Brooks joined Sonic Financial from Price Waterhouse in 1983.
At Sonic Financial, he was promoted from Manager to Controller in 1985 and again
to Chief Financial Officer in 1989. Mr. Brooks' initial term as a director of
the Company will expire at the annual meeting of stockholders to be held in
2000.

JEFFREY C. RACHOR will be appointed Regional Vice President upon
consummation of the Bowers Acquisition. Mr. Rachor has over 13 years experience
in automobile retailing and has been the chief operating officer at the Bowers
Dealerships since 1989. During this period, Mr. Rachor has also served at
various times as the general manager of Toyota, Saturn and
Chrysler-Plymouth-Jeep-Eagle dealerships. Prior to joining the Bowers
organization, Mr. Rachor was an assistant regional manager with American Suzuki
Motor Corporation from 1987 to 1989 and a Metro Sales Manager and a District
Sales Manager with GM's Buick Motor Division from 1983 to 1987.

O. KEN MARKS, JR. owns a controlling interest in Ken Marks Ford and has
operated that dealership as its chief executive since 1992. Mr. Marks is a
Chairman's award winner from Ford and has over 13 years experience in auto
retailing. Mr. Marks will be appointed a Regional Vice President upon
consummation of the Offering.

IVAN A. TUFTY has been Executive Manager of Lone Star Ford since 1990 and
will be appointed a Regional Vice President upon consummation of the Offering.
Mr. Tufty has over 40 years of experience in auto retailing and was a dealer
principal and equity owner for 12 years.

WILLIAM M. SULLIVAN has been Vice-President of Town & Country Ford since
prior to 1992 and will be appointed a Regional Vice President upon consummation
of the Offering. Mr. Sullivan has over 25 years experience in auto retailing as
an Executive Manager, head of F&I and in other roles.

As soon as practicable after the Offering, the Company intends to name two
or three individuals not employed by or affiliated with the Company to the
Company's Board of Directors.

The Board of Directors of the Company is divided into three classes, each
of which, after a transitional period, will serve for three years, with one
class being elected each year. The executive officers are elected annually by,
and serve at the discretion of, the Company's Board of Directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Since the Company's organization in February 1997, all matters concerning
executive officer compensation have been addressed by the entire Board of
Directors. Bruton Smith, Scott Smith and Theodore Wright were executive officers
of the Company and, together with William R. Brooks, will constitute the entire
Board until the consummation of the Offering when Nelson Bowers, an executive
officer of the Company, is to be appointed. Bruton Smith serves as Chairman of
the Board of SMI. William R. Brooks, an executive officer of SMI, serves on the
Board of the Company. As soon as practicable after the Offering, the Company
intends to name at least two independent directors who will comprise the
Company's compensation committee. See "Management."

LIMITATIONS OF DIRECTORS LIABILITY

The Certificate includes a provision that effectively eliminates the
liability of directors to the Company or to the Company's stockholders for
monetary damages for breach of the fiduciary duties of a director, except for
breaches of the duty of loyalty, acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, certain actions
with respect to unlawful dividends, stock repurchases or redemptions and any
transaction from which the director derived an improper personal benefit. This
provision does not prevent stockholders from seeking nonmonetary remedies
covering any such action, nor does it affect liabilities under the federal
securities laws. The Company's Bylaws further provide that the Company shall
indemnify each of its directors and officers, to the fullest extent authorized
by Delaware Law, with respect to any threatened, pending or completed action,
suit or proceeding to which such person may be a party by reason of serving as a
director or officer. Delaware Law currently authorized a corporation to
indemnify its directors and officers against expenses (including attorney's
fees), judgments, fines and amount paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by a
third party if such officers or directors acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reason to believe their conduct was unlawful. Indemnification is

<PAGE>
permitted in more limited circumstances with respect to derivative actions. The
Company believes that these provisions of the Certificate and the Bylaws are
necessary to attract and retain qualified persons to serve as directors and
officers.

COMMITTEES OF THE BOARD

The Board of Directors will establish a Compensation Committee and an Audit
Committee consisting of independent directors upon the election of at least two
independent directors. The Compensation Committee will review and approve
compensation for the executive officers, and administer, and determine awards
under, the Stock Option Plan and any other incentive compensation plans for
employees of the Company. See " -- Stock Option Plan" and " -- Employee Stock
Purchase Plan." The Audit Committee will recommend the selection of auditors for
the Company and will review the results of the audit and other reports and
services provided by the Company's independent auditors. The Company has not
previously had any of these committees.

DIRECTOR COMPENSATION

Members of the Board of Directors who are not employees of the Company will
be compensated for their services in amounts to be determined. The Company will
also reimburse all directors for their expenses incurred in connection with
their activities as directors of the Company. Directors who are also employees
of the Company receive no compensation for serving on the Board of Directors.

EXECUTIVE COMPENSATION

Sonic was incorporated on January 31, 1997 and did not conduct any
operations prior to that time. The Company anticipates that during 1997 its most
highly compensated executive officers with annual salaries exceeding $100,000,
and their annual base salaries for 1997, will be: Bruton Smith -- $350,000,
Scott Smith -- $300,000, Nelson Bowers, -- $400,000, and Theodore
Wright -- $180,000.

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with Messrs. Bruton
Smith, Scott Smith, Bowers, Wright, Marks and Rachor (the "Employment
Agreements"), effective upon consummation of the Offering, which provide for an
annual base salary and certain other benefits. Pursuant to the Employment
Agreements, the 1997 base salaries of Messrs. Bruton Smith, Scott Smith, Bowers,
Wright, Marks and Rachor will be $350,000, $300,000, $400,000, $180,000,
$48,000, and $150,000, respectively. The executives will also receive such
additional increases as may be determined by the Compensation Committee. The
Employment Agreements, except those of Messrs. Rachor and Marks, provide for the
payment of annual performance-based bonuses equal to a percentage of the
executive's base salary, upon achievement by the Company (or relevant region) of
certain performance objectives, based on the Company's pre-tax income, to be
established by the Compensation Committee. The Employment Agreements of Messrs.
Rachor and Marks provide for the payment of annual performance-based bonuses,
paid in equal installments on a monthly basis, equal to a percentage of the
pre-tax earnings, of subsidiaries of the Company located within his regions of
responsibility, in the case of Mr. Rachor, and of Ken Marks Ford in the case of
Mr. Marks. See " -- Incentive Compensation Plan." Under the terms of the
Employment Agreements, the Company will employ Mr. Bruton Smith through
September 2000. Under the terms of their respective Employment Agreements, the
Company will employ Messrs. Scott, Smith, Bowers, Wright, Marks and Rachor for
five years or until their respective Employment Agreements are terminated by the
Company or the executive. Messrs. Scott Smith, Bowers, Wright, Marks and Rachor
also receive under their Employment Agreements, options pursuant to the
Company's Stock Option Plan, for shares, shares, shares, shares
and shares, of the Class A Common Stock, respectively, exercisable at the
initial public offering price, vesting in three equal annual installments
beginning October 1998 and expiring in October 2007.

Each of the Employment Agreements contain similar noncompetition
provisions. These provisions (i) prohibit the disclosure or use of confidential
Company information, and (ii) for a period of two years following the expiration
or termination of an Employment Agreement, prohibit competition with the Company
for the Company's employees and its customers, interference with the Company's
relationships with its vendors, and employment with any competitor of the
Company in specified territories. With respect to Messrs. Bruton Smith, Scott
Smith and Wright, the geographic restrictions apply in any Standard Metropolitan
Statistical Area ("SMSA") or county in which the Company has a place of business
at the time their employment ends. With respect to Messrs. Bowers and Rachor,
the restrictions apply only in the SMSA's for Houston, Charlotte, Chattanooga,
and Nashville. With respect to Mr. Marks, the territorial restrictions apply
only in the SMSA's or counties in which the Company has a place of business and
about which Marks had access to confidential information or for which he had
operational or managerial involvement.

<PAGE>
Set forth below is information for the years ended December 31, 1996, 1995
and 1994 with respect to compensation for services to the Company's predecessors
of the Company's executive officers.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
OTHER NUMBER OF SHARES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) YEAR SALARY (1) BONUS (2) COMPENSATION OPTIONS (4) COMPENSATION (5)
<S> <C> <C> <C> <C> <C> <C>
O. Bruton Smith 1996 $ 164,750 $ 33,350(3) -- --
Chairman, Chief Executive Officer 1995 142,200 41,350(3) -- --
and Director 1994 142,200 41,000(3) -- --
Bryan Scott Smith 1996 $ 48,000 $ 230,714 (5) -- --
President, Chief 1995 48,000 168,670 (5) -- --
Operating Officer 1994 48,000 134,537 (5) -- --
and Director
</TABLE>

(1) Does not include the dollar value of perquisites and other personal
benefits.

(2) The amounts shown are cash bonuses earned in the specified year and paid in
the first quarter of the following year.

(3) The Company provides Mr. Smith with the use of automobiles for personal use,
the annual cost of which is reflected as Other Annual Compensation.

(4) The Company's Stock Option Plan was adopted in August 1997. Therefore, no
options were granted to any of the Company's executive officers in 1996,
1995 or 1994.

(5) The aggregate amount of perquisites and other personal benefits received did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for such executive officer.

The Compensation Committee is expected to deliberate upon matters
concerning executive compensation, including possible changes in the components
and amounts of such compensation.

STOCK OPTION PLAN

In August 1997, the Board of Directors and stockholders of the Company
adopted the Company's 1997 Stock Option Plan (the "Stock Option Plan") in order
to attract and retain key personnel. The following discussion of the material
features of the Stock Option Plan is qualified by reference to the text of such
Plan filed as an exhibit to the Registration Statement of which this Prospectus
is a part.

Under the Stock Option Plan, options to purchase up to an aggregate of
shares of Class A Common Stock may be granted to key employees of the
Company and its subsidiaries and to officers, directors, consultants and other
individuals providing services to the Company. Members of the Board of Directors
who serve on the Compensation Committee must qualify as "non-employee
directors," as that term is defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and may not
participate in the Stock Option Plan.

The Compensation Committee of the Board of Directors of the Company will
administer the Stock Option Plan and will determine, among other things, the
persons who are to receive options, the number of shares to be subject to each
option and, the vesting schedule of options. The Board of Directors of the
Company will determine the terms and conditions upon which the Company may make
loans to enable an optionee to pay the exercise price of an option. In selecting
individuals for options and determining the terms thereof, the Compensation
Committee may consider any factors it considers relevant, including present and
potential contributions to the success of the Company. Options granted under the
Stock Option Plan must be exercised within a period fixed by the Compensation
Committee, which period may not exceed ten years from the date of grant of the
option or, in the case of incentive stock options ("ISOs") granted to any holder
on the date of grant of more than ten percent of the total combined voting power
of all classes of stock of the Company, five years from the date of grant of the
option. Options may be made exercisable in whole or in installments, as
determined by the Compensation Committee.

Options may not be transferred other than by will or the laws of descent
and distribution. During the lifetime of an optionee, options may be exercised
only by the optionee. The exercise price of options that are not ISOs will be
determined at the discretion of the Compensation Committee. The exercise price
of ISOs may not be less than the market value of the Class A Common Stock on the
date of grant of the option. In the case of ISOs granted to any holder on the
date of grant of more

<PAGE>
than ten percent of the total combined voting power of all classes of stock of
the Company and its subsidiaries, the exercise price may not be less than 110%
of the market value per share of the Class A Common Stock on the date of grant.
Unless designated as "incentive stock options" intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), options
granted under the Stock Option Plan are intended to be "nonstatutory stock
options" ("NSOs"). The exercise price may be paid in cash, in shares of Class A
Common Stock owned by the optionee, in NSOs granted under the Stock Option Plan
(except that the exercise price of an ISO may not be paid in NSOs) or in any
combination of cash, shares and NSOs.

Options granted under the Stock Option Plan will include the right to
acquire a "reload" option. In such a case, if a participant pays all or part of
the exercise price of an option with shares of Class A Common Stock held by the
participant for at least six months, then, upon exercise of the option, the
participant is granted a second option to purchase, at the fair market value as
of the date of grant of the second option, the number of shares of Class A
Common Stock transferred to the Company by the participant in payment of the
exercise price of the original option. A reload option is not exercisable until
one year after the grant date of such reload option or the expiration date of
the original option. If the exercise price of a reload option is paid for with
shares of Class A Common Stock that have been held by the optionee for more than
six months, then another reload option will be issued. Shares of Class A Common
Stock covered by a reload option will not reduce the number of shares of Class A
Common Stock available under the Stock Option Plan.

The Stock Option Plan provides that, in the event of changes in the
corporate structure of the Company or certain events affecting the shares of the
Company, adjustments will automatically be made in the number and kind of shares
available for issuance and in the number and kind of shares covered by
outstanding options. It further provides that, in connection with any merger or
consolidation in which the Company is not the surviving corporation and which
results in the holders of the outstanding voting securities of the Company
owning less than a majority of the surviving corporation or any sale or transfer
by the Company of all or substantially all its assets or any tender offer or
exchange offer for or the acquisition, directly or indirectly, by any person or
group of all or a majority of the then-outstanding voting securities of the
Company, all outstanding options under the Stock Option Plan will become
exercisable in full on and after (i) the 15th day prior to the effective date of
such merger, consolidation, sale, transfer or acquisition or (ii) the date of
commencement of such tender offer or exchange offer, as the case may be.

The Board of Directors of the Company, on August , 1997, granted NSOs and
ISOs to purchase an aggregate of shares of Class A Common Stock under the
Stock Option Plan to three executive officers, five regional vice presidents and
one dealer manager of the Company. Messrs. Scott Smith, Bowers, and Wright were
granted NSOs to purchase shares, shares, and shares,
respectively at an exercise equal to the public offering price of the Class A
Common Stock sold in the Offering. Messrs. Scott Smith, Bowers and Wright were
also granted ISOs to purchase shares, shares and shares,
respectively, at an exercise price equal to the public offering price of the
Class A Common Stock sold in the Offering. All these options will become
exerciseable in three equal annual installments beginning in October 1998 with
the last installment vesting in October 2000, and all these options will expire
in October 2007. Consequently, all executive officers as a group were granted
NSOs to purchase an aggregate of shares and ISOs to purchase an aggregate
of shares. Non-executive officer employees were granted NSOs and ISOs to
purchase an aggregate of shares and shares, respectively. See
" -- Employment Agreements."

The issuance of the aforementioned NSO's under the Stock Option Plan is
being treated by the Company as a deferred tax asset, valued at $ as
of . See Note to Combined and Consolidated Financial
Statements.

While the issuance and exercise of ISOs generally have no ordinary income
tax consequences to the holder, upon the exercise of an ISO, the holder will
treat the excess of the fair market value on the date of exercise over the
exercise price as an item of tax adjustment for alternative minimum tax
purposes. The issuance and exercise of ISOs have no federal income tax
consequences to the Company. The disposition of Class A Common Stock acquired
from the exercise of an ISO will ordinarily result in capital gains or loss to
the holder for federal income tax purposes equal to the difference between the
amount realized on disposition of the Class A Common Stock and the option
exercise price. If the holder of Class A Common Stock acquired upon the exercise
of an ISO disposes of such stock before the later of (i) two years following the
grant of the ISO and (ii) one year following the exercise of the ISO (a
"Disqualifying Disposition"), the holder will recognize ordinary income for
federal income tax purposes in an amount equal to the lesser of (i) the excess
of the Class A Common Stock's fair market value on the date of exercise over the
option exercise price, and (ii) the excess of the amount realized on disposition
of the Class A Common Stock over the option exercise price. Any additional gain
upon the disposition will be taxed as capital gains. The Company will be
entitled to a compensation expense deduction for the Company's taxable year in
which the disposition occurs equal to the amount of ordinary income recognized
by the holder.

<PAGE>
The issuance of NSOs has no federal income tax consequences to the Company
or the holder. Upon the exercise of an NSO, the Company generally will be
allowed a federal income tax deduction equal to the amount by which the fair
market value of the underlying shares on the date of exercise exceeds the
exercise price. NSO holders will recognize ordinary income for federal income
tax purposes at the time of option exercise in the same amount. Any gains or
losses upon the disposition of shares acquired by exercise of a NSO will be
taxed to the holder as capital gains or losses.

Registration of the shares underlying the Stock Option Plan is presently
not contemplated. Such shares may be issued upon option exercise in reliance
upon the private offering exemption codified in Section 4(2) of the Securities
Act. Resale of such shares may be permitted subject to the limitations of Rule
144.

EMPLOYEE STOCK PURCHASE PLAN

In August 1997, the Board of Directors and stockholders of the Company
adopted the Sonic Employee Stock Purchase Plan (the "ESPP"). The ESPP is
intended to promote the interests of the Company by providing employees of the
Company the opportunity to acquire a proprietary interest in the Company through
the purchase of Class A Common Stock. The following discussion of the material
features of the ESPP is qualified by reference to the text of such Plan filed in
an exhibit to the Registration Statement of which this Prospectus is a part.

The ESPP is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Code. The ESPP is administered by the Compensation Committee,
which, subject to the terms of the ESPP, has plenary authority in its discretion
to interpret and construe the ESPP. The Compensation Committee will construe the
provisions of the ESPP so as to extend and limit participation in a manner
consistent with the requirements of that Code section. A total of shares
of Class A Common Stock have been reserved for purchase under the ESPP.

On January 1 of each year during the term of the ESPP (the "Grant Date"),
all eligible employees electing to participate in the ESPP ("Participating
Employees") will be granted an option to purchase shares of Class A Common
Stock. Prior to each Grant Date, the Compensation Committee will determine the
number of shares of Class A Common Stock available for purchase under each
option, with the same number of shares to be available under each option granted
on the same Grant Date. No Participating Employee may be granted an option which
would permit such employee to purchase stock under the ESPP and all other
employee stock purchase plans of the Company at a rate which exceeds $25,000 of
the fair market value of such stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any time.

A Participating Employee may elect to designate a limited percentage of
such employee's compensation (as defined in the ESPP) to be deferred by payroll
deduction as a contribution to the ESPP. A Participating Employee instead may
elect to make contributions by direct cash payment to the ESPP rather than by
payroll deduction. To the extent a Participating Employee has accumulated enough
funds, his or her contributions to the ESPP will be used to exercise the option
granted under the ESPP through purchases of Class A Common Stock on the last
business day of March, June, September and December on which the principal
trading market for the Class A Common Stock is open for trading and on any other
interim dates during the year which the Compensation Committee designates for
such purpose (the "Exercise Date"). Contributions which are not enough to
purchase a whole share of Class A Common Stock will be carried forward and
applied on the next Exercise Date in that calendar year; provided that
contributions remaining after the last Exercise Date of the calendar year may be
distributed to the Participating Employee at his election.

The purchase price at which Class A Common Stock will be purchased through
the ESPP shall be 85% of the lesser of (i) the fair market value of the Class A
Common Stock on the applicable Grant Date, and (ii) the fair market value of the
Class A Common Stock on the applicable Exercise Date. Any option granted to a
Participating Employee will be exercised automatically on each Exercise Date
during the calendar year of the option's Grant Date in whole or in part such
that the Participating Employee's accumulated contributions as of such Exercise
Date, either through direct cash payment or payroll deduction, will be applied
to the purchase of the maximum number of whole shares of Class A Common Stock
that such contribution will permit at the applicable option price, limited to
the number of shares available for purchase under the option.

Any option granted to a Participating Employee will expire on the last
Exercise Date of the calendar year in which granted. However, if a Participating
Employee withdraws from the ESPP or terminates employment prior to such Exercise
Date, the option may expire earlier.

Upon termination of a Participating Employee's employment for any reason
other than cause, death or leave of absence in excess of ninety days, such
employee may, at his election, request the return of contributions not yet used
to purchase Class A Common Stock or continue participation in the ESPP until the
Exercise Date next following the date of termination

<PAGE>
of employment such that any unexpired option held will be exercised
automatically such Exercise Date. If a Participating Employee dies while
employed by the Company or prior to the Exercise Date next following termination
of employment, such employee's estate will have the right to elect to withdraw
all contributions not yet used to purchase Class A Common Stock or to exercise
the Participating Employee's option for the purchase of Class A Common Stock on
the Exercise Date next following the date of such employee's death.

The Board of Directors of the Company may at any time amend, suspend or
terminate the ESPP; provided, however, that the ESPP may not be amended to (i)
increase the maximum number of shares of Class A Common Stock for which options
may be granted under the ESPP, other than in connection with a change in
capitalization, (ii) materially modify the requirements as to the class of
employees eligible to receive options and purchase Class A Common Stock under
the ESPP, or (iii) materially increase the benefits accruing to Participating
Employees under the ESPP without in any such case obtaining approval of Sonic
stockholders.

The ESPP is intended to meet the requirements of an "employee stock
purchase plan" under Code Section 423. No federal taxable income will be
recognized by Participating Employees upon the grant of an option to purchase
Class A Common Stock under the ESPP. In addition, a Participating Employee will
not recognize federal taxable income on the exercise of an option granted under
the ESPP.

If the Participating Employee holds shares of Class A Common Stock acquired
upon the exercise of an option granted under the ESPP until a date that is more
than two years from the grant date of the relevant option and one year from the
date of option exercise (or dies while owning such shares), the employee must
report as ordinary income in the year of disposition of the shares (or at death)
the lesser of (a) the excess of the fair market value of the shares at the time
of disposition (or death) over the option exercise price and (b) the excess of
the fair market value of the shares on the date the relevant option was granted
over the option exercise price. For this purpose the option exercise price is
85% of the fair market value of the shares on the date the relevant option was
granted (assuming the shares are offered at a 15% discount). Any additional
income is treated as long-term capital gain. If these holding period
requirements are met, the Company is not entitled to any deduction for tax
purposes. If the Participating Employee does not meet the holding period
requirements, the employee recognizes at the time of disposition of the shares
ordinary income equal to the difference between the price paid for the shares
and the fair market value on the date of exercise, irrespective of the price at
which the employee disposes of the shares, and an amount equal to such ordinary
income is generally deductible by the Company. Any gain or loss realized on the
disposition of the shares will be capital gain or loss, and will be long-term
gain or loss if the shares were held for more than one year.

Because the ESPP is based on voluntary participation, benefits thereunder
are not determinable.

Registration of the shares underlying the ESPP is presently not
contemplated. Such shares may be issued upon option exercise in reliance upon
the private offering exemption codified in Section 4(2) of the Securities Act.
Resale of such shares may be permitted subject to the limitations of Rule 144.

CERTAIN TRANSACTIONS

REGISTRATION RIGHTS AGREEMENT

As part of the Reorganization, the Company entered into a Registration
Rights Agreement dated as of June 30, 1997 (the "Registration Rights
Agreements") with Sonic Financial, Bruton Smith, Scott Smith and William S.
Egan. Sonic Financial, Bruton Smith, Scott Smith and Egan Group, LLC, an
assignee of Mr. Egan (the "Egan Group") currently are the owners of record of
, , and shares of Class B Common Stock,
respectively. Upon the registration of any of their shares or as otherwise
provided in the Certificate, such shares will automatically be converted into a
like number of shares of Class A Common Stock. Subject to certain limitations,
the Registration Rights Agreements provide Sonic Financial, Bruton Smith, Scott
Smith and the Egan Group with certain piggyback registration rights that permit
them to have their shares of Common Stock, as selling security holders, included
in any registration statements pertaining to the registration of Class A Common
Stock for issuance by the Company or for resale by other selling security
holders, with the exception of registration statements on Forms S-4 and S-8
relating to exchange offers (and certain other transactions) and employee stock
compensation plans, respectively. These registration rights will be limited or
restricted to the extent an underwriter of an offering, if an underwritten
offering, or the Company's Board of Directors, if not an underwritten offering,
determines that the amount to be registered by Sonic Financial, Bruton Smith,
Scott Smith or the Egan Group would not permit the sale of Class A Common Stock
in the quantity and at the price originally sought by the Company or the
original selling security holders, as the case may be. The Registration Rights
Agreement expires on the tenth anniversary of the closing of the Offering. Sonic
Financial is controlled by the Company's Chairman and Chief Executive Officer,
Bruton Smith.

<PAGE>
THE SMITH ADVANCE

In connection with the Fort Mill Acquisition, Mr. Smith advanced
approximately $3.5 million to the Company (the "Smith Advance"). The Smith
Advance was used by the Company to pay a portion of the cash consideration for
the Fort Mill Acquisition at closing. The Smith Advance is evidenced by a demand
note bearing interest at the minimum statutory rate of 3.83% per annum. The
Company anticipates seeking additional cash advances or credit support in the
form of guarantees or collateral from Mr. Smith in order to meet cash payment
obligations in the remaining Acquisitions, which close prior to the consummation
of the Offering. The Company intends to repay the principal and interest on the
Smith Advance and any similar future advances from Mr. Smith used to fund the
Acquisitions from the proceeds of this Offering.

CERTAIN DEALERSHIP LEASES

Certain of the properties leased by the Company's dealership subsidiaries
are owned by officers, directors or holders of 5% or more of the Common Stock of
the Company or their affiliates. Town & Country Ford operates at facilities
leased from STC Properties, a North Carolina joint venture ("STC"). Town &
Country Ford maintains a 5% undivided interest in STC and Sonic Financial owns
the remaining 95% of STC. The STC lease on the Town & Country Ford facilities
will expire in October 2000. Annual payments under the STC lease were $510,085
for each of 1994, 1995 and 1996. Current minimum rent payments are $409,000
annually ($34,083 monthly) through 1999, and will be decreased to $340,833 in
2000, such rents being below market. When this lease expires, the Company
anticipates obtaining a long-term lease on the Town & Country Ford facility at
fair market rent.

Lone Star Ford operates, in part, at facilities leased from Viking
Investments Associates, a Texas association ("Viking"), which is controlled by
Mr. Bruton Smith. The Viking lease on the Lone Star Ford property expires in
2005. Annual payments under the Viking lease were $351,420, $302,559 and
$360,000 for 1994, 1995 and 1996, respectively. Minimum annual rents under this
lease are $360,000 ($30,000 monthly), such amount being below market. When this
lease expires, the Company anticipates obtaining a long-term lease on the Lone
Star Ford facility at fair market rent.

The dealership leases discussed below will be executed and effective as of
the consummation of the Acquisitions.

KIA of Chattanooga operates at facilities leased from KIA Land Development,
a company in which Nelson Bowers, the Company's Executive Vice President,
maintains an ownership interest. The Company negotiated this lease in connection
with the Bowers Acquisition. This triple net lease expires in 2007 and monthly
rent is currently under negotiation. The Company may renew this lease at its
option for two additional five year terms. At each renewal, the lessor may
adjust lease rents to reflect fair market rents for the property.

European Motors operates at its Chattanooga facilities under a triple net
lease from Mr. Bowers. The Company negotiated this lease in connection with the
Bowers Acquisition. The European Motors lease expires in 2007 and provides for
monthly rent of $16,846. This lease also provides for renewals on terms
identical to the KIA of Chattanooga lease.

Jaguar of Chattanooga operates at facilities leased from JAG Properties, a
company in which Mr. Bowers maintains an ownership interest. The Company
negotiated this lease in connection with the Bowers Acquisition. This triple net
lease expires in 2017 and provides for monthly rent of $22,010. The Company may
renew this lease on terms identical to the KIA of Chattanooga renewal options.

Cleveland Chrysler-Plymouth-Jeep-Eagle leases its facilities from Cleveland
Properties LLC, a limited liability company in which Mr. Bowers maintains an
ownership interest. The Company negotiated this lease in connection with the
Bowers Acquisition. This triple net lease expires in 2011, provides for monthly
rent of $14,000 and may be renewed on terms identical to the KIA of Chattanooga
lease.

Cleveland Village Imports operates at facilities leased from Nelson Bowers
and another individual. Nelson Bowers, the Company's President and a director,
owns a 75% undivided interest in the land and buildings leased by Cleveland
Village Imports, with the remaining interests owned by an unrelated party. Such
land and buildings are leased under two leases: one is a triple net fixed lease
expiring on October 31, 1997 with rent of $7,591 per month and the other,
pertaining to a used car lot, is a month-to-month lease with rent of $807 per
month. In connection with the Bowers Acquisition, the lessors have agreed to
allow the expiration of these leases in October 1997, and to replace them with a
triple net lease at a negotiated rental rate for a 15-year initial term and two
five-year renewals at the option of the Company.

Saturn of Chattanooga leases its facilities from Mr. Bowers pursuant to a
triple net lease. This lease, negotiated by the Company in connection with the
Bowers Acquisition, expires in 2007 and provides for monthly rent of $27,054.
The lease may be renewed by the Company for two additional five year terms at
the Company's option, with the rent at each renewal being adjusted to fair
market rent.

<PAGE>
Dyer Volvo operates at facilities leased from D&R Investments, an entity in
which Richard Dyer, the Company's Executive Manager for Dyer Volvo, maintains an
ownership interest. This triple net lease, negotiated by the Company in
connection with the Dyer Acquisition, expires in 2009 and provides for monthly
rent of $50,000. The Dyer Volvo lease also provides the Company with two
optional renewals of five years each with rent at each renewal being adjusted to
fair market rent.

Ken Marks Ford ("KMF") operates at facilities leased from Marks Holding
Company, a corporation that is owned by Ken Marks, the Company's Regional Vice
President-Florida. In connection with the Ken Marks Acquisition, the lessor has
agreed to enter into a triple net lease with the Company as lessee at a
negotiated rental rate of $95,000 per month for an initial term expiring 2007
with two five-year renewals at the option of the Company.

CHARTOWN TRANSACTIONS

Chartown is a general partnership engaged in real estate development and
management. Before the Reorganization, Town & Country Ford maintained a 49%
partnership interest in Chartown (increased to 50% in connection with the Lease)
with the remaining 51% held by SMDA, LLC, a North Carolina limited liability
company ("SMDA"). Mr. Smith owns a 80% direct membership interest in SMDA with
the remaining 20% owned indirectly through Sonic Financial. In addition, Sonic
Financial also held a demand promissory note for $1.2 million issued by Chartown
(the "Chartown Note"), which was uncollectible due to insufficient funds. As
part of the Reorganization, the Chartown Note was canceled and Town & Country
Ford transferred its partnership interest in Chartown to Sonic Financial for
nominal consideration. In connection with that transfer, Sonic Financial agreed
to indemnify Town & Country Ford for any and all obligations and liabilities,
whether known or unknown, relating to Chartown and Town & Country Ford's
ownership thereof.

OTHER TRANSACTIONS

During each of the three years ended December 31, 1996, Town & Country Ford
has paid $48,000 to Sonic Financial as a management fee. Sonic Financial's
services to Town & Country Ford have included performance of the following
functions, among others: maintenance of lender and creditor relationships; tax
planning; preparation of tax returns and representation in tax examinations;
record maintenance; internal audits and special audits; assistance to
independent public accountants; and litigation support to company counsel.
Payments of fees to and receipt of services from Sonic Financial ceased before
the Reorganization. Since that time, the Company has been providing these
services for itself.

Beginning in early 1997, certain of the Sonic Dealerships have entered into
arrangements to sell to their customers credit life insurance policies
underwritten by American Heritage Life Insurance Company, an insurer
unaffiliated with Sonic ("American Heritage"). American Heritage in turn
reinsures all of these policies with Provident American Insurance Company, a
Texas insurance company ("Provident American"). Under these arrangements, the
Sonic Dealerships paid an aggregate of $140,000 to American Heritage in premiums
for these policies since January 1, 1997. The Company anticipates terminating
this arrangement with American Heritage by 1998. Provident American is a
wholly-owned subsidiary of Sonic Financial.

Town & Country Ford and Lone Star Ford have each made several non-interest
bearing advances to Sonic Financial. As of June 30, 1997, Town & Country Ford
had made approximately $2.1 million of such advances. In preparation for the
Reorganization, a demand promissory note by Sonic Financial evidencing certain
of Town & Country Ford's advances was canceled in exchange for the redemption of
certain shares of the capital stock of Town & Country Ford held by Sonic
Financial. As of June 30, 1997, Lone Star Ford had made approximately $0.5
million of advances to Sonic Financial. In preparation for the Reorganization, a
demand promissory note by Sonic Financial evidencing certain of Lone Star Ford's
advances was canceled pursuant to a dividend. At years ended December 31, 1996,
1995 and 1994, the aggregate balances of such advances due from Sonic Financial
were approximately $2.5 million, $2.6 million and $0, respectively.

Certain subsidiaries of Sonic (such subsidiaries together with Sonic and
Sonic Financial being hereinafter referred to as the "Sonic Group") have joined
with Sonic Financial in filing consolidated federal income tax returns for
several years. Such subsidiaries will join with Sonic Financial in filing for
1996 and for the period ending on June 30, 1997. Under applicable federal tax
law, each corporation included in Sonic Financial's consolidated return is
jointly and severally liable for any resultant tax. Under a tax allocation
agreement dated as of June 30, 1997, however, Sonic agreed to pay to Sonic
Financial, in the event that additional federal income tax is determined to be
due, an amount equal to Sonic's separate federal income tax liability computed
for all periods in which any member of the Sonic Group has been a member of
Sonic Financial's consolidated group. Also pursuant to such agreement, Sonic
Financial agreed to indemnify Sonic for any additional amount determined to be
due from Sonic Financial's consolidated group in excess of the federal income
tax liability of the Sonic Group for such periods. The tax allocation agreement
establishes procedures with respect to tax adjustments, tax claims, tax refunds,
tax credits and other tax attributes relating to periods ending prior to the
time that the Sonic Group shall leave Sonic Financial's consolidated group.

<PAGE>
The Company acquired the Sonic Dealerships in the Reorganization pursuant
to four separate stock subscription agreements (the "Subscription Agreements").
The Subscription Agreements provide for the acquisition of 100% of the capital
stock or membership interests, as the case may be, of each of the Sonic
Dealerships from Sonic Financial, Mr. Smith, the Egan Group (an assignee of Mr.
Egan) and Bryan Scott Smith in exchange for certain amounts of the Company's
issued and outstanding Class B Common Stock. See "Principal Stockholders."

For additional information concerning related party transaction of the
businesses being acquired in the Acquisitions, see the notes to the historical
financial statements for each respective business acquired included in this
Prospectus.

<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of August 1, 1997 by (i) each
stockholder who is known by the Company to own beneficially more than five
percent of the outstanding Common Stock, (ii) each director of the Company,
(iii) each executive officer of the Company, and (iv) all directors and
executive officers of the Company as a group, and as adjusted to reflect the
sale by the Company of the shares of Class A Common Stock in this Offering.
Prior to this Offering, no shares of Class A Common Stock were issued and
outstanding. However, options to acquire shares of Class A Common Stock
will be issued on or before the closing of the Offering to certain of the
Company's officers and employees. Holders of Class A Common Stock are entitled
to one vote per share on all matters submitted to a vote of the stockholders of
the Company. Holders of Class B Common Stock are entitled to ten votes per share
on all matters submitted to a vote of the stockholders, except that the Class B
Common Stock is entitled to only one vote per share with respect to any
transaction proposed or approved by the Board of Directors of the Company or
proposed by all the holders of the Class B Common Stock or as to which any
member of the Smith Group or any affiliate thereof has a material financial
interest other than as a then existing stockholder of the Company constituting a
(a) "going private" transaction (as defined herein), (b) disposition of
substantially all of the Company's assets, (c) transfer resulting in a change in
the nature of the Company's business and (d) merger or consolidation in which
current holders of Common Stock would own less than 50% of the Common Stock
following such transaction. In the event of any transfer outside of the Smith
Group or the Smith Group holds less than 15% of the total number of shares of
Common Stock outstanding, such transferred shares or all shares, respectively,
of Class B Common Stock will automatically convert into an equal number of
shares of Class A Common Stock. See "Description of Capital Stock."

<TABLE>
<CAPTION>
PERCENTAGE OF ALL
OUTSTANDING
NUMBER OF SHARES NUMBER OF SHARES COMMON STOCK
OF CLASS A COMMON OF CLASS B COMMON BEFORE AFTER
NAME (1) STOCK OWNED STOCK OWNED OFFERING OFFERING(2)
<S> <C> <C> <C> <C>
O. Bruton Smith (3)(4) 87.62% %
Sonic Financial Corporation (3) 71.05% %
Bryan Scott Smith (3)(5) 7.65% %
William R. Brooks (3) -- %
Theodore M. Wright (3)(5) -- %
Nelson E. Bowers, II (3)(5) -- %
All directors and executive officers as a group (10 persons) 95.27%
</TABLE>

* Less than one percent.

(1) Unless otherwise noted, each person has sole voting and investment power
over the shares listed opposite his name subject to community property laws
where applicable.

(2) The percentages of total voting power would be as follows: Bruton Smith,
%; Sonic Financial, %; Scott Smith, %; William Brooks, less than 1%;
Theodore Wright, less than 1%; Nelson E. Bowers, II, less than 1%; and all
directors and executive officers as a group, %. Assumes the
Underwriters' over-allotment option is not exercised.

(3) The address of such person is care of the Company at 5401 East Independence
Boulevard, Charlotte, North Carolina 28218.

(4) The shares of Common Stock shown as owned by such person or group include
all of the shares owned by Sonic Financial as indicated elsewhere in the
table. Mr. Smith owns the substantial majority of Sonic's outstanding
capital stock.

(5) All shares of Class A Common Stock beneficially owned by such person
underlie options granted (or, in the case of Mr. Bowers, to be granted upon
the closing of the Bowers Acquisition) by the Company at the public
offering price. One-third of such options become exercisable on October ,
1998, one-third on October , 1999 and one-third on October , 2000. See
"Management -- Stock Option Plan."

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of (i) 50,000,000 shares of
Class A Common Stock, $.01 par value, (ii) 15,000,000 shares of Class B Common
Stock, $.01 par value, and (iii) 3,000,000 shares of preferred stock, $.10 par
value. Upon completion of this Offering, the Company will have
outstanding shares of Class A Common Stock and outstanding shares of
Class B Common Stock and no outstanding shares of preferred stock.

<PAGE>
The following summary description of the Company's capital stock does not
purport to be complete and is qualified in its entirety by reference to the
Company's Certificate, which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and Delaware Law. Reference is
made to such exhibit and Delaware Law for a detailed description of the
provisions thereof summarized below.

COMMON STOCK

The Company's Class A Common Stock and Class B Common Stock are equal in
all respects except for voting rights, conversion rights of the Class B Common
Stock and as required by law, as discussed more fully below.

VOTING RIGHTS; CONVERSION OF CLASS B COMMON STOCK TO CLASS A COMMON STOCK

The voting powers, preferences and relative rights of the Class A Common
Stock and the Class B Common Stock are subject to the following provisions.
Holders of Class A Common Stock have one vote per share on all matters submitted
to a vote of the stockholders of the Company. Holders of Class B Common Stock
are entitled to ten votes per share except as described below. Holders of all
classes of Common Stock entitled to vote will vote together as a single class on
all matters presented to the stockholders for their vote or approval except as
otherwise required by Delaware Law. There is no cumulative voting with respect
to the election of directors. In the event any shares of Class B Common Stock
held by a member of the Smith Group (as defined below) are transferred outside
of the Smith Group, such shares will automatically be converted into shares of
Class A Common Stock. In addition, if the total number of shares of Common Stock
held by members of the Smith Group is less than 15% of the total number of
shares of Common Stock outstanding, all of the outstanding shares of Class B
Common Stock automatically will be reclassified as Class A Common Stock. In any
merger, consolidation or business combination, the consideration to be received
per share by holders of Class A Common Stock must be identical to that received
by holders of Class B Common Stock, except that in any such transaction in which
shares of common stock are distributed, such shares may differ as to voting
rights to the extent that voting rights now differ between the classes of Common
Stock.

Notwithstanding the foregoing, the holders of Class A Common Stock and
Class B Common Stock vote as a single class, with each share of each class
entitled to one vote per share, with respect to any transaction proposed or
approved by the Board of Directors of the Company or proposed by or on behalf of
holders of the Class B Common Stock or as to which any member of the Smith Group
(as defined below) or any affiliate thereof has a material financial interest
other than as a then existing stockholder of the Company constituting a (a)
"going private" transaction, (b) sale or other disposition of all or
substantially all of the Company's assets, (c) sale or transfer which would
cause the nature of the Company's business to be no longer primarily oriented
toward automobile dealership operations and related activities or (d) merger or
consolidation of the Company in which the holders of the Common Stock will own
less than 50% of the Common Stock following such transaction. A "going private"
transaction is defined as any "Rule 13e-3 Transaction," as such term is defined
in Rule 13e-3 promulgated under the Securities Exchange Act of 1934. An
"affiliate" is defined as (i) any individual or entity who or that, directly or
indirectly, controls, is controlled by, or is under common control with any
member of the Smith Group, (ii) any corporation or organization (other than the
Company or a majority-owned subsidiary of the Company) of which any member of
the Smith Group is an officer partner or is, directly or indirectly, the
beneficial owner of 10% or more of any class of voting securities, or in which
any member of the Smith Group has a substantial beneficial interest, (iii) a
voting trust or similar arrangement pursuant to which any member of the Smith
Group generally controls the vote of the shares of Common Stock held by or
subject to such trust or arrangement, (iv) any other trust or estate in which
any member of the Smith Group has a substantial beneficial interest or as to
which any member of the Smith Group serves as trustee or in a similar fiduciary
capacity, or (v) any relative or spouse of any member of the Smith Group or any
relative of such spouse, who has the same residence as any member of the Smith
Group.

As used in this Prospectus, the term the "Smith Group" includes the
following persons: (i) Mr. Smith and his guardian, conservator, committee, or
attorney-in-fact; (ii) William S. Egan and his guardian, conservator, committee,
or attorney-in-fact; (iii) each lineal descendant of Messrs. Smith and Egan (a
"Descendant") and their respective guardians, conservators, committees or
attorneys-in-fact; and (iv) each "Family Controlled Entity" (as defined below).
The term "Family Controlled Entity" means (i) any not-for-profit corporation if
at least 80% of its board of directors is composed of Mr. Smith, Mr. Egan and/or
Descendants; (ii) any other corporation if at least 80% of the value of its
outstanding equity is owned by the Smith Group; (iii) any partnership if at
least 80% of the value of the partnership interests are owned by members of the
Smith Group; and (iv) any limited liability or similar company if at least 80%
of the value of the company is owned by members of the Smith Group. For a
discussion of the effects of the disproportionate voting rights of the Common
Stock, see "Risk Factors -- Concentration of Voting Power and Antitakeover
Provisions."

<PAGE>
Under the Company's Certificate and Delaware Law, the holders of Class A
Common Stock and/or Class B Common Stock are each entitled to vote as a separate
class, as applicable, with respect to any amendment to the Company's Certificate
that would increase or decrease the aggregate number of authorized shares of
such class, increase or decrease the par value of the shares of such class, or
modify or change the powers, preferences or special rights of the shares of such
class so as to affect such class adversely.

DIVIDENDS

Holders of the Class A Common Stock and the Class B Common Stock are
entitled to receive ratably such dividends, if any, as are declared by the
Company's Board of Directors out of funds legally available for that purpose,
provided, that dividends paid in shares of Class A Common Stock or Class B
Common Stock shall be paid only as follows: shares of Class A Common Stock shall
be paid only to holders of Class A Common Stock and shares of Class B Common
Stock shall be paid only to holders of Class B Common Stock. The Company's
Certificate provides that if there is any dividend, subdivision, combination or
reclassification of either class of Common Stock, a proportionate dividend,
subdivision, combination or reclassification of the other class of Common Stock
shall simultaneously be made.

OTHER RIGHTS

Stockholders of the Company have no preemptive or other rights to subscribe
for additional shares. In the event of the liquidation, dissolution or winding
up of the Company, holders of Class A Common Stock and Class B Common Stock are
entitled to share ratably in all assets available for distribution to holders of
Common Stock after payment in full of creditors. No shares of any class of
Common Stock are subject to a redemption or a sinking fund. All outstanding
shares of Common Stock are, and all shares offered by this Prospectus will be,
when sold, validly issued, fully paid and nonassessable.

TRANSFER AGENT AND REGISTRAR

The Company has appointed First Union National Bank as the transfer agent
and registrar for the Class A Common Stock. The Company has not appointed a
transfer agent for the Class B Common Stock.

PREFERRED STOCK

No shares of preferred stock are outstanding. The Company's Certificate
authorizes the Board of Directors to issue up to 3,000,000 shares of preferred
stock in one or more series and to establish such designations and such relative
voting, dividend, liquidation, conversion and other rights, preferences and
limitations as the Board of Directors may determine without further approval of
the stockholders of the Company. The issuance of preferred stock by the Board of
Directors could, among other things, adversely affect the voting power of the
holders of Class A Common Stock and, under certain circumstances, make it more
difficult for a person or group to gain control of the Company.

The issuance of any series of preferred stock, and the relative
designations, rights, preferences and limitations of such series, if and when
established, will depend upon, among other things, the future capital needs of
the Company, the then-existing market conditions and other factors that, in the
judgment of the Board of Directors, might warrant the issuance of preferred
stock. At the date of this Prospectus, there are no plans, agreements or
understandings for the issuance of any shares of preferred stock.

DELAWARE LAW, CERTAIN CHARTER AND BYLAW PROVISIONS AND CERTAIN FRANCHISE
AGREEMENT PROVISIONS

Certain provisions of Delaware Law and of the Company's Amended Certificate
and Bylaws, summarized in the following paragraphs, may be considered to have an
antitakeover effect and may delay, deter or prevent a tender offer, proxy
contest or other takeover attempt that a stockholder might consider to be in
such stockholder's best interest, including such an attempt as might result in
payment of a premium over the market price for shares held by stockholders.

DELAWARE ANTITAKEOVER LAW. The Company, a Delaware corporation, is subject
to the provisions of Delaware Law, including Section 203. In general, Section
203 prohibits a public Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which such person became an interested
stockholder unless: (i) prior to such date, the Board of Directors approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; or (ii) upon becoming an
interested stockholder, the stockholder then owned at least 85% of the voting
stock, as defined in Section 203; or (iii) subsequent to such date, the business
combination is approved by both the Board of Directors and by holders of at
least 66 2/3% of the corporation's outstanding voting stock, excluding shares
owned by the interested stockholder. For these purposes, the term

<PAGE>
"business combination" includes mergers, asset sales and other similar
transactions with an "interested stockholder." An "interested stockholder" is a
person who, together with affiliates and associates, owns (or, within the prior
three years, did own) 15% or more of the corporation's voting stock. Although
Section 203 permits a corporation to elect not to be governed by its provisions,
the Company to date has not made this election.

CLASSIFIED BOARD OF DIRECTORS. The Company's Bylaws provide for the Board
of Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year. Classification of the Board of Directors expands the
time required to change the composition of a majority of directors and may tend
to discourage a takeover bid for the Company. Moreover, under Delaware Law, in
the case of a corporation having a classified board of directors, the
stockholders may remove a director only for cause. This provision, when coupled
with the provision of the Bylaws authorizing only the board of directors to fill
vacant directorships, will preclude stockholders of the Company from removing
incumbent directors without cause, simultaneously gaining control of the Board
of Directors by filing the vacancies with their own nominees.

SPECIAL MEETINGS OF STOCKHOLDERS. The Company's Bylaws provide that special
meetings of stockholders may be called only by the Chairman or by the Secretary
or any Assistant Secretary at the request in writing of a majority of the Board
of Directors of the Company. The Company's Bylaws also provide that no action
required to be taken or that may be taken at any annual or special meeting of
stockholders may be taken without a meeting; the powers of stockholders to
consent in writing, without a meeting, to the taking of any action is
specifically denied. These provisions may make it more difficult for
stockholders to take action opposed by the Board of Directors.

ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. The Company's Bylaws provide that stockholders seeking to bring
business before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual or a special meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be delivered to, or mailed and received at, the principal executive office
of the Company, (i) in the case of an annual meeting that is called for a date
that is within 30 days before or after the anniversary date of the immediately
preceding annual meeting of stockholders, not less than 60 days nor more than 90
days prior to such anniversary date, and, (ii) in the case of an annual meeting
that is called for a date that is not within 30 days before or after the
anniversary date of the immediately preceding annual meeting, or in the case of
a special meeting of stockholders called for the purpose of electing directors,
not later than the close of business on the tenth day following the day on which
notice of the date of the meeting was mailed or public disclosure of the date of
the meeting was made, whichever occurs first. The Bylaws also specify certain
requirements for a stockholder's notice to be in proper written form. These
provisions may preclude some stockholders from bringing matters before the
stockholders at an annual or special meeting or from making nominations for
directors at an annual or special meeting.

CONFLICT OF INTEREST PROCEDURES. The Company's Certificate contains
provisions providing that transactions between the Company and its affiliates
must be no less favorable to the Company than would be available in transactions
involving arms'-length dealing with unrelated third parties. Moreover, any such
transaction involving aggregate payments in excess of $500,000 must be approved
by a majority of the Company's directors and a majority of the Company's
independent directors. Otherwise, the Company must obtain an opinion as to the
financial fairness of the transactions to be issued by an investment banking or
appraisal firm of national standing.

RESTRICTIONS UNDER FRANCHISE AGREEMENTS. The Company's franchise agreements
impose restrictions on the transfer of the Common Stock. A number of
Manufacturers prohibit transactions which affect changes in management control
of the Company. Such restrictions may prevent or deter prospective acquirers
from obtaining control of the Company. See "Risk Factors -- Stock
Ownership/Issuance Limits" and "Business -- Relationships with Manufacturers."

<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have outstanding
shares of Class A Common Stock (assuming no exercise of the Underwriters'
over-allotment option). All of such shares will be freely transferable and may
be resold without further registration under the Securities Act, except for any
shares purchased by an "affiliate" of the Company (as defined below), which
shares will be subject to the resale limitations of Rule 144. The shares
(the "Restricted Shares") of Class B Common Stock outstanding, which are
convertible into Class A Common Stock, are "restricted" securities within the
meaning of Rule 144 irrespective of whether the conversion right is exercised.
The shares of Class A Common Stock, which underlie options granted under
the Company's Stock Option Plan and the Dyer Warrant, may be resold only
pursuant to a registration statement under the Securities Act or an applicable
exemption from registration thereunder such as an exemption provided by Rule
144.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned "restricted securities"
for at least one year may, under certain circumstances, resell within any
three-month period, such number of shares as does not exceed the greater of one
percent of the then-outstanding shares of Class A Common Stock or the average
weekly trading volume of Class A Common Stock during the four calendar weeks
prior to such resale. Rule 144 also permits, under certain circumstances, the
resale of shares without any quantity limitation by a person who has satisfied a
two-year holding period and who is not, and has not been for the preceding three
months, an affiliate of the Company. In addition, holding periods of successive
non-affiliate owners are aggregated for purposes of determining compliance with
these one- and two-year holding period requirements.

Upon completion of this Offering, none of the shares of Class B
Common Stock outstanding on the date of this Prospectus and not sold in the
Offering will have been held for at least one year. Since all such shares are
restricted securities, none of them may be resold pursuant to Rule 144 upon
completion of this Offering. Any transfer of shares of the Class B Common Stock
to any person other than a member of the Smith Group will result in a conversion
of such shares to Class A Common Stock.

The Restricted Shares will not be eligible for sale under Rule 144 until
the expiration of the one-year holding period from the date such Restricted
Shares were acquired.

The availability of shares for sale or actual sales under Rule 144 and the
perception that such shares may be sold may have a material adverse effect on
the market price of the Class A Common Stock. Sales under Rule 144 also could
impair the Company's ability to market additional equity securities.

Additionally, the Company has entered into the Registration Rights
Agreement with Sonic Financial, Bruton Smith, Scott Smith and William Egan. The
Registration Rights Agreement provides piggyback registration rights with
respect to shares of Common Stock in the aggregate. For further
information regarding the Registration Rights Agreement, see "Certain
Transactions -- Registration Rights Agreements."

The Company, executive officers of the Company and the holders of Class B
Common Stock have agreed, subject to certain exceptions, not, directly or
indirectly, to sell, grant an option or otherwise transfer or dispose of any
Class A Common Stock or securities convertible into or exchangeable or
exercisable for Class A Common Stock, including shares of Class B Common Stock,
or file a registration statement under the Securities Act with respect to the
foregoing or (ii) enter into any swap or other agreement or transaction that
transfers, in whole or part, the economic consequences of ownership of the Class
A Common Stock for 180 days from the date of this Prospectus without the prior
written consent of Merrill Lynch.

<PAGE>
UNDERWRITING

Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement"), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Montgomery Securities and
Wheat, First Securities, Inc. are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Company, the
number of shares of Class A Common Stock set forth opposite its name below. In
the Purchase Agreement, the several Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all the shares of Class A
Common Stock offered hereby, if any are purchased. In the event of default by an
Underwriter, the Purchase Agreement provides that, in certain circumstances,
purchase commitments of the nondefaulting Underwriters may be increased or the
Purchase Agreement may be terminated.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................................................................
Montgomery Securities.............................................................................................
Wheat, First Securities, Inc......................................................................................

Total................................................................................................
</TABLE>

The Underwriters have advised the Company that they propose initially to
offer the shares of Class A Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share of
Class A Common Stock. The Underwriters may allow, and such dealers may reallow,
a discount not in excess of $ per share of Class A Common Stock to certain
other dealers. After the initial public offering, the public offering price,
concession and discount may be changed.

At the request of the Company, the Underwriters have reserved up to
shares of Class A Common Stock for sale at the initial public offering price to
directors, officers, employees, business associates and related persons of the
Company. The number of shares of Class A Common Stock available for sale to the
general public will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares which are not so purchased will be offered by the
Underwriters to the general public on the same basis as the other shares offered
hereby.

The Company, all of the executive officers of the Company and all the
holders of Class B Common Stock have agreed, subject to certain exceptions, not
to, directly or indirectly, (i) sell, grant any option to purchase or otherwise
transfer or dispose of any Class A Common Stock or securities convertible into
or exchangeable or exercisable for Class A Common Stock, including shares of
Class B Common Stock, or file a registration statement under the Securities Act
with respect to the foregoing or (ii) enter into any swap or other agreement or
transaction that transfers, in whole or part, the economic consequence of
ownership of the Class A Common Stock, without the prior written consent of
Merrill Lynch, for a period of 180 days after the date of this Prospectus.

The Company has granted an option to the Underwriters, exercisable within
30 days after the date of this Prospectus, to purchase up to an aggregate of
additional shares of Class A Common Stock at the initial public offering
price set forth on the cover page of this Prospectus, less the underwriting
discount. The Underwriters may exercise this option only to cover
over-allotments, if any, made on the sale of the Class A Common Stock offered
hereby. To the extent that the Underwriters exercise this option, each
Underwriter will be obligated, subject to certain conditions, to purchase a
number of additional shares of Class A Common Stock proportionate to such
Underwriter's initial amount reflected in the foregoing table.

<PAGE>
Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price for the Class A Common Stock
will be determined by negotiation between the Company and the Representatives.
The factors considered in determining the initial public offering price, in
addition to prevailing market conditions, are price-earnings ratios of publicly
traded companies that the Representatives believe to be comparable to the
Company, certain financial information of the Company, the history of, and the
prospects for, the Company and the industry in which it competes, and an
assessment of the Company's management, its past and present operations, the
prospects for and the timing of future revenues of the Company, the present
state of the Company's development, and the above factors in relation to market
values and various valuation measures of other companies engaged in activities
similar to the Company. There can be no assurance that an active trading market
will develop for the Class A Common Stock or that the Class A Common Stock will
trade in the public market subsequent to the Offering made hereby at or above
the initial public offering price.

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriters may be required to make
in respect thereof.

The Company intends to apply for listing of the Class A Common Stock on the
NYSE under the symbol "DLR." In order to meet the requirements for listing of
the Class A Common Stock on that exchange, the Underwriters have undertaken to
sell lots of 100 or more shares to a minimum of 2,000 beneficial holders.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of Class A Common Stock offered hereby to any accounts
over which they exercise discretionary authority.

Until the distribution of the Class A Common Stock is completed, rules of
the Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Class A Common
Stock. As an exception to these rules, the Representatives are permitted to
engage in certain transactions that stabilize the price of Class A Common Stock.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Class A Common Stock.

If the Underwriters create a short position in the Class A Common Stock in
connection with the Offering, I.E., if they sell more shares of Class A Common
Stock than are set forth on the cover page of this Prospectus, the
Representatives may reduce that short position by purchasing Class A Common
Stock in the open market. The Representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option described above.

The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Class A Common Stock in the open market to reduce the Underwriters'
short position or to stabilize the price of the Class A Common Stock, they may
reclaim the amount of the selling concession from the Underwriters and selling
group members who sold those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Class A Common Stock. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Representatives will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.

LEGAL MATTERS

Parker, Poe, Adams & Bernstein L.L.P., Charlotte, North Carolina, counsel
to the Company, will render an opinion that the shares of Class A Common Stock
offered hereby, when issued and paid for in accordance with the terms of the
Underwriting Agreement, will be duly authorized, validly issued, fully paid and
nonassessable. Fried, Frank, Harris, Shriver & Jacobson (a partnership including
professional corporations), New York, New York, has served as counsel to the
Underwriters in connection with this Offering.

EXPERTS

The combined and consolidated financial statements of Sonic Automotive,
Inc. and Affiliated Companies as of and for the year ended December 31, 1996,
the balance sheet of Sonic Automotive, Inc. as of May 31, 1997, the financial
statements

<PAGE>
of Dyer & Dyer, Inc., the combined and consolidated financial statements of
Bowers Automotive Group, and the combined and consolidated financial statements
of Lake Norman Dodge, Inc. and Affiliated Companies included in this Prospectus
and the related financial statement schedule of Sonic Automotive, Inc. have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein, and are included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.

The combined and consolidated financial statements of Sonic Automotive,
Inc. and Affiliated Companies as of December 31, 1995 and for the years ended
December 31, 1994 and 1995 have been audited by Dixon, Odom & Co., L.L.P.,
independent auditors, as stated in their report appearing herein, and is
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-1 under the Securities Act with
respect to the shares of Class A Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules thereto. For further information with respect to
the Company and the shares of Class A Common Stock offered hereby, reference is
made to the Registration Statement, including the exhibits and schedules filed
as part thereof. Statements contained in this Prospectus as to the contents of
any contract or any other documents are not necessarily complete, and, in each
such instance, reference is made to the copy of the contract or document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference thereto. The Registration Statement, together
with its exhibits and schedules, may be inspected at the Public Reference
Section of the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the regional offices of the SEC located at 7 World Trade Center, Suite
1300, New York, New York 10048 and at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of all or any part
of such materials may be obtained from any such office upon payment of the fees
prescribed by the SEC. Such information may also be inspected and copied at the
office of the NYSE at 20 Broad Street, New York, New York 10005. The Commission
also maintains a Website (http://www.sec.gov.) that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission.

<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE

<S> <C>
SONIC AUTOMOTIVE, INC. AND AFFILIATED COMPANIES:
INDEPENDENT AUDITORS' REPORTS....................................................................................... F-2-3
COMBINED FINANCIAL STATEMENTS:
Combined and Consolidated Balance Sheets at December 31, 1995 and 1996 and unaudited at June 30, 1997............ F-4
Combined and Consolidated Statements of Income for the years ended December 31, 1994, 1995 and 1996 and unaudited
for the six months ended June 30, 1996 and 1997................................................................. F-5
Combined and Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996 and unaudited for the six months ended June 30, 1997.......................... F-6
Combined and Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and
unaudited for the six months ended June 30, 1996 and 1997....................................................... F-7
Notes to Combined and Consolidated Financial Statements.......................................................... F-8

DYER & DYER, INC.:
INDEPENDENT AUDITORS' REPORT........................................................................................ F-16
FINANCIAL STATEMENTS:
Balance Sheets at December 31, 1995 and 1996 and unaudited at June 30, 1997...................................... F-17
Statements of Income and Retained Earnings for the years ended December 31, 1994, 1995 and 1996 and unaudited for
the six months ended June 30, 1996 and 1997..................................................................... F-18
Statements of Stockholder's Equity for the years ended December 31, 1994, 1995 and 1996 and unaudited for the six
months ended June 30, 1997...................................................................................... F-19
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and unaudited for the six months
ended June 30, 1996 and 1997.................................................................................... F-20
Notes to Financial Statements.................................................................................... F-21

BOWERS DEALERSHIPS AND AFFILIATED COMPANIES:
INDEPENDENT AUDITORS' REPORT........................................................................................ F-25
COMBINED FINANCIAL STATEMENTS:
Combined Balance Sheets at December 31, 1995 and 1996 and unaudited at June 30, 1997............................. F-26
Combined Statements of Income for the years ended December 31, 1995 and 1996 and unaudited for the six months
ended June 30, 1996 and 1997.................................................................................... F-27
Combined Statements of Stockholders' Equity for the years ended
December 31, 1995 and 1996 and unaudited for the six months ended June 30, 1997................................ F-28
Combined Statements of Cash Flows for the years ended December 31, 1995 and 1996 and unaudited for the six months
ended June 30, 1996 and 1997.................................................................................... F-29
Notes to Combined Financial Statements........................................................................... F-30

LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES:
INDEPENDENT AUDITORS' REPORT........................................................................................ F-37
COMBINED FINANCIAL STATEMENTS:
Combined Balance Sheet at December 31, 1996 and unaudited at June 30, 1997....................................... F-38
Combined Statement of Income for the year ended December 31, 1996 and unaudited for the six months ended June 30,
1996 and 1997................................................................................................... F-39
Combined Statement of Stockholders' Equity for the year ended December 31, 1996 and unaudited for the six months
ended June 30, 1997............................................................................................. F-40
Combined Statement of Cash Flows for the year ended December 31, 1996 and unaudited for the six months ended June
30, 1996 and 1997............................................................................................... F-41
Notes to Combined Financial Statements........................................................................... F-42

KEN MARKS FORD, INC.:
FINANCIAL STATEMENTS (Unaudited -- not covered by report of independent auditors):
Balance Sheet at April 30, 1997.................................................................................. F-47
Statement of Income and Retained Earnings for the year endedApril 30, 1997....................................... F-48
Statement of Cash Flows for the year ended April 30, 1997........................................................
Notes to Unaudited Financial Statements.......................................................................... F-50
</TABLE>

F-1

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SONIC AUTOMOTIVE, INC.
Charlotte, North Carolina

We have audited the accompanying combined balance sheet of Sonic Automotive,
Inc. and Affiliated Companies (the "Company"), which are under common ownership
and management, as of December 31, 1996, and the related combined statements of
income, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Sonic Automotive, Inc.
and Affiliated Companies as of December 31, 1996, and the combined results of
their operations and their combined cash flows for the year then ended in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Charlotte, North Carolina

August 7, 1997

F-2

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
SONIC AUTOMOTIVE, INC.
Charlotte, North Carolina

We have audited the accompanying combined balance sheets of Sonic Automotive,
Inc. and Affiliated Companies (the "Company") as of December 31, 1995, and the
related combined statements of income, stockholders' equity, and cash flows for
the years ended December 31, 1994 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Sonic Automotive, Inc.
and Affiliated Companies as of December 31, 1995, and the combined results of
their operations and their combined cash flows for the years ended December 31,
1994 and 1995 in conformity with generally accepted accounting principles.

DIXON, ODOM & CO., L.L.P.
Winston-Salem, North Carolina

April 30, 1997

F-3

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

COMBINED AND CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1995 AND 1996 AND JUNE 30, 1997

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................... $ 8,993,887 $ 6,679,490 $ 9,237,585
Marketable equity securities................................................. 706,126 638,500 769,123
Receivables (Note 5) (net of allowance for doubtful accounts of $160,031 and
$224,789 at December 31, 1995 and 1996,
respectively)............................................................. 9,085,376 11,907,786 12,897,264
Inventories (Notes 3 and 5).................................................. 39,128,041 57,970,020 59,884,909
Deferred income taxes (Note 6)............................................... 117,500 279,896 256,032
Other current assets......................................................... 311,019 332,561 818,171
Total current assets...................................................... 58,341,949 77,808,253 83,863,084
PROPERTY AND EQUIPMENT, NET (Notes 4 and 5).................................... 8,527,338 12,466,713 13,269,789
GOODWILL, NET (Note 1)......................................................... -- 4,266,084 9,463,179
OTHER ASSETS................................................................... 372,610 389,277 263,374
TOTAL ASSETS................................................................... $67,241,897 $94,930,327 $106,859,426
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable -- floor plan (Note 3)......................................... $45,151,111 $63,893,356 $ 67,855,408
Trade accounts payable....................................................... 3,043,180 3,642,572 3,847,922
Accrued interest............................................................. 503,391 521,190 491,341
Other accrued liabilities.................................................... 1,554,713 3,031,473 3,394,178
Payable to affiliated companies (Note 7)..................................... 2,000,000 -- --
Payable to Company's Chairman (Note 2)....................................... -- -- 3,500,000
Current maturities of long-term debt......................................... 169,932 518,979 487,242
Total current liabilities................................................. 52,422,327 71,607,570 79,576,091
LONG-TERM DEBT (Note 5)........................................................ 3,560,766 5,285,862 5,137,210
PAYABLE TO AFFILIATED COMPANIES (Note 7)....................................... 1,219,204 914,339 854,984
DEFERRED INCOME TAXES (Note 6)................................................. 777,600 1,059,380 930,923
MINORITY INTEREST (Note 1)..................................................... 199,522 313,912 --
COMMITMENTS AND CONTINGENCIES (Notes 7 and 10)
STOCKHOLDERS' EQUITY (Notes 8 and 9):
Preferred stock $.10 par 3,000,000 shares authorized and unissued............ -- -- --
Class A Common Stock, $.01 par, 50,000,000 shares authorized and unissued.... -- -- --
Class B Common Stock, $.01 par, 50,000,000 shares authorized,
10,000 shares issued and outstanding...................................... 100 100 100
Paid-in capital.............................................................. 6,331,446 13,395,560 16,604,070
Retained earnings............................................................ 2,766,420 4,913,095 6,486,412
Unrealized loss on marketable equity securities.............................. (35,488) (93,562) (97,433)
Due from affiliates (Note 7)................................................. -- (2,465,929) (2,632,931)
Total stockholders' equity................................................ 9,062,478 15,749,264 20,360,218
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................... $67,241,897 $94,930,327 $106,859,426
</TABLE>

See notes to combined and consolidated financial statements.

F-4

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

COMBINED AND CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Vehicle sales............................ $227,959,827 $267,307,949 $326,841,772 $164,332,724 $185,077,493
Parts, service and collision repair...... 33,984,096 35,859,960 42,643,812 21,005,202 22,906,377
Finance and insurance.................... 5,180,998 7,813,408 7,118,217 4,277,094 4,763,248
Total revenues........................ 267,124,921 310,981,317 376,603,801 189,615,020 212,747,118
COST OF SALES.............................. 234,461,089 272,178,737 332,406,803 167,191,296 188,367,591
GROSS PROFIT............................... 32,663,832 38,802,580 44,196,998 22,423,724 24,379,527
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES................................. 24,631,532 29,343,430 33,677,530 16,590,480 18,413,226
DEPRECIATION AND AMORTIZATION.............. 838,011 832,261 1,075,617 359,628 395,573
OPERATING INCOME........................... 7,194,289 8,626,889 9,443,851 5,473,616 5,570,728
OTHER INCOME AND EXPENSE:
Interest expense, floor plan............. 3,000,622 4,504,526 5,968,430 2,800,778 3,017,903
Interest expense, other.................. 443,409 436,435 433,250 183,898 269,145
Gain on sale of marketable equity
securities............................ -- 107,007 354,922 -- --
Other income............................. 609,088 342,047 263,676 369,412 273,842
Total other expense................... 2,834,943 4,491,907 5,783,082 2,615,264 3,013,206
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST........................ 4,359,346 4,134,982 3,660,769 2,858,352 2,557,522
PROVISION FOR INCOME TAXES
(Note 6)................................. 1,559,750 1,674,900 1,399,704 1,093,034 937,212
INCOME BEFORE MINORITY
INTEREST................................. 2,799,596 2,460,082 2,261,065 1,765,318 1,620,310
MINORITY INTEREST IN EARNINGS
OF SUBSIDIARY............................ 15,564 22,167 114,390 40,612 46,993
NET INCOME................................. $ 2,784,032 $ 2,437,915 $ 2,146,675 $ 1,724,706 $ 1,573,317
PRO FORMA NET INCOME PER SHARE
(Note 1) (unaudited)..................... $ 215 $ 157
PRO FORMA NUMBER OF SHARES
USED TO COMPUTE PER SHARE
DATA (Note 1) (unaudited)................ 10,000 10,000
</TABLE>

See notes to combined and consolidated financial statements.

F-5

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

COMBINED AND CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
THE SIX MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
UNREALIZED LOSS
CLASS B RETAINED ON MARKETABLE DUE
COMMON STOCK PAID-IN EARNINGS EQUITY FROM
SHARES AMOUNT CAPITAL (DEFICIT) SECURITIES AFFILIATES
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993........... 10,000 $ 100 $ 4,837,100 $ (2,455,527) $ -- $ --
Net income........................... -- -- -- 2,784,032 -- --
BALANCE AT DECEMBER 31, 1994........... 10,000 $ 100 4,837,100 328,505 -- --
Capital contribution................. -- -- 1,494,346 -- -- --
Change in net unrealized loss on
marketable equity
securities......................... -- -- -- -- (35,488) --
Net income........................... -- -- -- 2,437,915 -- --
BALANCE AT DECEMBER 31, 1995........... 10,000 100 6,331,446 2,766,420 (35,488) --
Capital contribution -- -- 7,064,114 -- --
Advance to affiliates................ -- -- -- -- -- (2,465,929)
Change in net unrealized loss on
marketable equity
securities......................... -- -- -- -- (58,074) --
Net income........................... -- -- -- 2,146,675 --
BALANCE AT DECEMBER 31, 1996........... 10,000 100 13,395,560 4,913,095 (93,562) (2,465,929)
Capital contribution (unaudited)..... -- -- 3,208,510 -- -- --
Advance to affiliates................ (167,002)
Change in net unrealized loss on
marketable equity securities....... -- -- -- -- (3,871) --
Net income (unaudited)............... -- -- -- 1,573,317 --
BALANCE AT JUNE 30, 1997 (UNAUDITED)... 10,000 $ 100 $ 16,604,070 $ 6,486,412 $ (97,433) $(2,632,931)

<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
<S> <C>
BALANCE AT DECEMBER 31, 1993........... $ 2,381,673
Net income........................... 2,784,032
BALANCE AT DECEMBER 31, 1994........... 5,165,705
Capital contribution................. 1,494,346
Change in net unrealized loss on
marketable equity
securities......................... (35,488)
Net income........................... 2,437,915
BALANCE AT DECEMBER 31, 1995........... 9,062,478
Capital contribution 7,064,114
Advance to affiliates................ (2,465,929)
Change in net unrealized loss on
marketable equity
securities......................... (58,074)
Net income........................... 2,146,675
BALANCE AT DECEMBER 31, 1996........... 15,749,264
Capital contribution (unaudited)..... 3,208,510
Advance to affiliates................ (167,002)
Change in net unrealized loss on
marketable equity securities....... (3,871)
Net income (unaudited)............... 1,573,317
BALANCE AT JUNE 30, 1997 (UNAUDITED)... $ 20,360,218
</TABLE>

See notes to combined and consolidated financial statements.

F-6

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

COMBINED AND CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 AND
THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 2,784,032 $ 2,437,915 $ 2,146,675 $ 1,724,706 $ 1,573,317
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 838,011 832,261 1,075,618 359,630 395,573
Minority interest................................... 15,564 22,167 114,390 40,612 46,993
Loss (gain) on disposal of property and equipment -- (38,721) 79,660
Gain on sale of marketable equity securities........ -- (107,007) (354,922) (278,917) (134,496)
Deferred income taxes............................... 258,400 450,400 (240,548) (62,002) 23,864
Changes in assets and liabilities that relate to
operations:
(Increase) decrease in receivables................ (2,091,063) (228,084) (2,420,651) 287,459 (989,478)
(Increase) decrease in inventories................ (8,942,669) (3,724,725) (12,653,222) (3,511,263) 2,745,061
(Increase) decrease in other current assets....... (66,945) 21,173 (10,455) (189,391) (483,564)
Increase (decrease) in other non-current assets... (679) (14,104) (69,883) 2,851 113,403
Increase in notes payable-floor plan.............. 9,489,146 3,431,241 12,984,772 4,117,088 290,190
Increase (decrease) in accounts payable and
accrued expenses............................... 676,526 (42,224) 1,439,486 1,285,875 396,972
Total adjustments.............................. 176,291 602,377 (55,755) 2,051,942 2,404,579
Net cash provided by operating activities...... 2,960,323 3,040,292 2,090,920 3,776,648 3,977,835
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business, net of cash received............ -- -- (5,126,595) (1,307,402) (3,627,347)
Purchases of property and equipment................... (1,386,877) (1,508,848) (1,906,739) -- (886,149)
Proceeds from sale of property and equipment.......... 32,162 556,789 4,036 -- --
Purchase of marketable equity securities.............. (82,801) (1,622,845) (207,400) -- --
Proceeds from sales of marketable equity securities... -- 1,073,539 514,700 88,900 --
Net (advances to) receipts from affiliate companies... (295,578) 1,772,022 (4,770,794) (3,251,199) 3,273,643
Net cash provided by (used in) investing
activities................................... (1,733,094) 270,657 (11,492,792) (4,469,701) (1,239,853)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions................................. -- 1,494,346 7,064,114 1,000,000 500
Proceeds from long-term debt.......................... 107,284 2,899 599,206 -- (180,387)
Payments of long-term debt............................ (441,500) (269,254) (575,845) (468,970) --
Net cash provided by (used in) financing
activities................................... (334,216) 1,227,991 7,087,475 531,030 (179,887)
NET INCREASE (DECREASE) IN CASH......................... 893,013 4,538,940 (2,314,397) (162,023) 2,558,095
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD............................................. 3,561,934 4,454,947 8,993,887 9,608,406 6,679,490
CASH AND CASH EQUIVALENTS, END OF PERIOD................ $ 4,454,947 $ 8,993,887 $ 6,679,490 $ 9,446,383 $ 9,237,585
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION -- Cash paid during the period for:
Interest.............................................. $ 3,324,678 $ 4,776,504 $ 6,488,657 $ 2,839,031 $ 3,320,996
Income taxes.......................................... $ 998,850 $ 1,522,100 $ 2,042,268 $ 834,000 $ 930,000
</TABLE>

See notes to combined and consolidated financial statements.

F-7

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Sonic Automotive, Inc ("Sonic") was
incorporated in the State of Delaware in February, 1997 in order to effect a
reorganization of certain affiliated companies (the "Reorganization") and to
undertake an initial public offering of Sonic's common stock (the "Offering").
Sonic and affiliated companies (collectively, the "Company") operate automobile
dealerships in the Houston, Texas and Charlotte, North Carolina metropolitan
areas. The Company sells new and used cars and light trucks, sells replacement
parts, provides vehicle maintenance, warranty, paint and repair services and
arranges related financing and insurance. The financial statements for the
periods through June 30, 1997 represent the combined data for the entities under
common interest and control which became subsidiaries of Sonic pursuant to the
Reorganization on June 30, 1997, including the following entities:

<TABLE>
<S> <C>
Town and Country Ford, Inc.................................................... Charlotte
Lone Star Ford, Inc........................................................... Houston
FMF Management, Inc. (d/b/a Fort Mill Ford)................................... Charlotte
Town and Country Toyota, Inc.................................................. Charlotte
Frontier Oldsmobile-Cadillac, Inc............................................. Charlotte
</TABLE>

All material intercompany transactions have been eliminated in the combined
financial statements. Effective June 30, 1997, these five entities became
wholly-owned subsidiaries of Sonic through the exchange of their common stock or
membership interests for 10,000 shares of Sonic's Class B common stock having a
$.01 par value per share. On June 2, 1997 Sonic, through its wholly-owned
subsidiary, Fort Mill Chrysler-Plymouth-Dodge, acquired certain dealership
assets and liabilities of Jeff Boyd Chrysler-Plymouth-Dodge, Inc. (a previously
unrelated entity) for a total purchase price of approximately $3.7 million. The
unaudited consolidated financial statements as of and for the six months ended
June 30, 1997, which give effect to the Reorganization, include the accounts of
the above five entities and also include the accounts and results of operations
of Fort Mill Chrysler-Plymouth-Dodge from the date of its acquisition.

The Reorganization was accounted for at historical cost in a manner similar
to a pooling-of-interests as the entities were under the common management and
control of Mr. O. Bruton Smith. The acquisition of Jeff Boyd
Chrysler-Plymouth-Dodge was accounted for as a purchase.

Prior to the Reorganization, Town and Country Toyota, Inc. was 69% owned by
Mr. O. Bruton Smith, the Company's Chairman and Chief Executive Officer, Lone
Star Ford, Inc. and Frontier Oldsmobile -- Cadillac, Inc. were 100% owned by
Sonic Financial Corporation ("SFC"), which in turn is 100% owned by Mr. Smith
and related family trusts. Town and Country Ford, Inc. was owned 80% by SFC and
20% by Mr. Scott Smith (O. Bruton Smith's son). FMF Management, Inc. was owned
50% by SFC and 50% by Mr. O. Bruton Smith.

In connection with the Reorganization, the Company purchased the 31%
minority interest in Town and Country Toyota, Inc. for $3.2 million in a
transaction accounted for using purchase accounting.

In connection with the anticipated Offering, Sonic expects to issue shares
of its Class A common stock. The Class B common stock entitles the holder to ten
votes per share, except in certain circumstances, while the Class A common stock
entitles its holder to one vote per share.

PRO FORMA NET INCOME PER SHARE -- Pro forma net income per share in the
accompanying financial statements has been prepared based upon the shares
outstanding after the Reorganization and without giving effect to the issuance
of common stock related to the Offering.

REVENUE RECOGNITION -- The Company records revenue when vehicles are
delivered to customers, and when vehicle service work is performed. Finance and
insurance commission revenue is recognized principally at the time the contract
is placed with the financial institution.

F-8

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
Each dealership operates under a dealer agreement with the manufacturer
which generally restricts the location, management and ownership of the
respective dealership. The ability of the Company to acquire additional
franchises from a particular manufacturer may be limited due to certain
restrictions imposed by manufacturers. Additionally, the Company's ability to
enter into other significant acquisitions may be restricted and the acquisition
of the Company's stock by third parties may be limited by the terms of the
franchise agreement.

CASH AND CASH EQUIVALENTS -- The Company considers contracts in transit and
all highly liquid debt instruments with an initial maturity of three months or
less to be cash equivalents. Contracts in transit represent cash in transit to
the Company from finance companies related to vehicle purchases, and was
$2,644,804 and $5,222,589 at December 31, 1995 and 1996, respectively.

INVENTORIES -- Inventories of new vehicles, including demonstrators, are
valued at the lower of last-in, first-out ("LIFO") cost or market. Inventories
of used vehicles are stated at the lower of specific cost or market, and parts
and accessories are stated at the lower first-in, first-out ("FIFO") cost or
market.

PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Depreciation is computed using straight-line and accelerated methods over the
estimated useful lives of the assets. The range of estimated useful lives is as
follows:

<TABLE>
<CAPTION>
USEFUL LIVES
<S> <C>
Building..................................................................... 40
Office equipment and fixtures................................................ 5-7
Parts and service equipment.................................................. 5
Company vehicles............................................................. 5
</TABLE>

Leasehold improvements are amortized over the lesser of the terms of their
respective leases or the estimated useful lives of the related assets.

Expenditures for maintenance and repairs are expensed as incurred.
Significant betterments are capitalized.

GOODWILL -- Goodwill represents the excess of purchase price over the
estimated fair value of the net assets acquired and is being amortized over a 40
year period. The cumulative amount of goodwill amortization at December 31, 1996
was approximately $98,000.

The Company periodically reviews goodwill to assess recoverability. The
Company's policy is to compare the carrying value of goodwill with the expected
undiscounted cash flows from operations of the acquired business.

MARKETABLE EQUITY SECURITIES -- The Company's marketable equity securities
are classified as "available for sale" and are not bought and held principally
for the purpose of selling them in the near term. As such, these securities are
reported at fair value, with unrealized gains and losses, net of tax, excluded
from earnings and reported as a separate component of stockholders' equity.
Realized gains and losses on sales of marketable equity securities are
determined using the specific identification method.

INCOME TAXES -- Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes currently
due plus deferred taxes related primarily to the capitalization of additional
inventory costs for income tax purposes, the recording of chargebacks and
repossession losses on the direct write-off method for income tax purposes, the
direct write-off of uncollectible accounts for income tax purposes, and the
accelerated depreciation method used for income tax purposes. The deferred tax
assets and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. In addition, deferred tax assets are
recognized for state operating losses that are available to offset future
taxable income.

CONCENTRATIONS OF CREDIT RISK -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of cash
on deposit with financial institutions. At times, amounts invested with
financial institutions may exceed FDIC insurance limits.

F-9

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
Concentrations of credit risk with respect to receivables are limited
primarily to automobile manufacturers and financial institutions. Credit risk
arising from trade receivables from commercial customers is reduced by the large
number of customers comprising the trade receivables balances. Trade receivables
are concentrated in the Company's two market areas of Houston, Texas and
Charlotte, North Carolina metropolitan areas.

FAIR VALUE OF FINANCIAL INSTRUMENTS -- As of December 31, 1995 and 1996 the
fair values of the Company's financial instruments including: receivables, due
from affiliates, notes payable-floor plan, trade accounts payable, payables to
affiliated companies and Company Chairman and long-term debt approximate their
carrying values.

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

ADVERTISING -- The Company expenses advertising costs in the period
incurred. Advertising expense amounted to $3,765,363, $4,525,670 and $4,989,283
for 1994, 1995 and 1996, respectively.

IMPAIRMENT OF LONG-LIVED ASSETS -- Effective January 1, 1996, the Company
adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. This statement
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Adoption of SFAS No. 121 did not have a material impact on the
Company's results of operations, financial position, and cash flows.

NEW ACCOUNTING STANDARDS -- In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
"Earnings Per Share." This Statement specifies the computation, presentation and
disclosure requirements for earnings per share. The Company believes that the
adoption of such statement would not result in earnings per share materially
different than pro forma earnings per share presented in the accompanying
statements of income.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income." This
standard establishes standards of reporting and display of comprehensive income
and its components in a full set of general-purpose financial statements. This
Statement will be effective for the Company's fiscal year ending December 31,
1998, and the Company does not intend to adopt this statement prior to the
effective date. Had the Company early adopted this Statement, it would have
reported comprehensive income of $2,784,032, $2,402,427 and $2,088,601 for the
years ended December 31, 1994, 1995 and 1996, respectively.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited financial
information for the six months ended June 30, 1996 and 1997 has been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein. The results
for interim periods are not necessarily indicative of the results to be expected
for the entire fiscal year.

F-10

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

2. BUSINESS ACQUISITIONS

In June 1997, the Company through its wholly-owned subsidiary, Fort Mill
Chrysler-Plymouth-Dodge, acquired certain dealership assets and liabilities of
Jeff Boyd Chrysler-Plymouth-Dodge for a total purchase price of $3.7 million. Of
the total purchase price of $3.7 million, $3.5 million was advanced to the
Company by Mr. O. Bruton Smith, with interest charged at 3.83%. It is
anticipated that this advance will be repaid in full with proceeds from the
Offering. This transaction was accounted for using purchase accounting and the
results of the operations of this dealership have been included from the date of
acquisition through June 30, 1997 in the accompanying Unaudited Combined and
Consolidated Statement of Income. The purchase price has been allocated to the
assets and liabilities acquired at their estimated fair market value at the
acquisition date as follows:

<TABLE>
<S> <C>
Working capital............................................................. $ 977,000
Property and equipment...................................................... 250,000
Goodwill.................................................................... 2,473,000
Totals...................................................................... $3,700,000
</TABLE>

In June, July and August the Company entered into definitive agreements to
purchase six additional dealership groups for an aggregate purchase price of
$100.7 million as follows:

<TABLE>
<S> <C>
Bowers Dealerships................................ Chattanooga, Tennessee
Lake Norman Dodge and Affiliates.................. Cornelius, North Carolina
Ken Marks Ford.................................... Clearwater, Florida
Dyer Volvo........................................ Atlanta, Georgia
Jeff Boyd Chrysler-Plymouth-Dodge................. Fort Mill, South Carolina
Williams Motors, Inc.............................. Rock Hill, South Carolina
</TABLE>

The Jeff Boyd Chrysler-Plymouth-Dodge acquisition has been consummated. The
completion of the remaining acquisitions may be dependent upon the successful
completion of the Offering.

On February 1, 1996, the Company acquired Fort Mill Ford for a total
purchase price of $5,741,114. The acquisition has been accounted for as a
purchase and the results of operations of Fort Mill Ford have been included in
the accompanying combined financial statements from the date of acquisition. The
purchase price has been allocated to the assets and liabilities acquired at
their estimated fair market value at the acquisition date as follows:

<TABLE>
<S> <C>
Working capital............................................................. $7,234,000
Property and equipment...................................................... 3,022,000
Goodwill.................................................................... 4,294,000
Non-current liabilities assumed............................................. (8,809,000)
Total....................................................................... $5,741,000
</TABLE>

The following unaudited pro forma financial data is presented as if Fort
Mill Ford had been acquired at January 1, 1994. Fort Mill Ford results of
operations for 1994 and 1995 are based on application of the first-in, first-out
method of accounting for inventories for all classes of inventory. Pro forma
results of operations for 1996 are not presented because the acquisition
occurred in February 1996, and the pro forma results would not be materially
different from the historical results presented.

<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
Revenues..................................................................................... $300,558,662 $345,198,523
Net income................................................................................... $ 2,939,561 $ 2,874,909
Earnings per share........................................................................... $ 294 $ 287
</TABLE>

The pro forma information presented above is not necessarily indicative of
the operating results that would have occurred had Fort Mill Ford been acquired
on January 1, 1994. These results are also not necessarily indicative of the
results of future operations.

F-11

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN

Inventories at December 31, 1995 and 1996 and June 30, 1997 consist of the
following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
New vehicles.................................................................... $25,675,122 $38,218,187 $42,601,014
Used vehicles................................................................... 8,913,145 14,372,285 11,826,874
Parts and accessories........................................................... 4,185,547 4,939,724 4,997,869
Other........................................................................... 354,227 439,824 459,152
Total........................................................................... $39,128,041 $57,970,020 $59,884,909
</TABLE>

At December 31, 1995 and 1996 and at June 30, 1997, the excess of current
replacement cost over the stated LIFO valuation of new vehicles amounted to
$12,219,953, $13,579,696 and $13,525,047 (unaudited), respectively.

Had the Company used the FIFO method of valuing new vehicle inventory,
pretax earnings would have been $5,809,357, $5,435,709 and $5,020,512 in 1994,
1995 and 1996, respectively.

All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $45,151,111 and
$63,893,356 at December 31, 1996. The floor plan notes bear interest, payable
monthly on the outstanding balance, at the prime rate plus 1% (9 1/4% at
December 31, 1995 and 1996). Total floor plan interest expense amounted to
$3,000,622, $4,504,526 and $5,968,430 in 1994, 1995 and 1996, respectively. The
notes payable are due when the related vehicle is sold. As such, these floor
plan notes payable are shown as a current liability in the accompanying combined
and consolidated balance sheets.

4. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1995 and 1996 and June 30, 1997 is
comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Land............................................................................ $ 1,477,795 $ 2,677,795 $ 2,677,795
Buildings and improvements...................................................... 7,085,878 10,080,659 10,381,145
Office equipment and fixtures................................................... 2,442,965 2,036,980 2,360,424
Parts and service equipment..................................................... 2,955,729 2,866,291 2,941,456
Company vehicles................................................................ 373,683 437,261 512,113
Construction in progress........................................................ 265,677 -- --
Total, at cost.................................................................. 14,601,727 18,098,986 18,872,933
Less accumulated depreciation................................................... (6,074,389) (5,632,273) (5,603,144)
Property and equipment, net..................................................... $ 8,527,338 $12,466,713 $13,269,789
</TABLE>

F-12

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

5. LONG-TERM DEBT

Long-term debt at December 31, 1995 and 1996 and June 30, 1997 consists of
the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1995 1996
<S> <C> <C>
Note payable in monthly installments of $8,333 plus interest at the prime rate plus 1 1/2%,
through July 2001, collateralized by accounts receivable, inventory and equipment............... $ -- $ 458,335
Mortgage payable in monthly installments of $12,222 plus interest at prime plus 3/4%, through May
2004, collateralized by building................................................................ -- 1,087,778
Unsecured note payable in monthly installments of $9,100, including interest at 8%, through March
2004............................................................................................ -- 599,238
Mortgage note payable in monthly installments of $4,203, including interest at 7%, through
November 2008, collateralized by land and building.............................................. 425,751 405,700
Mortgage note payable in monthly installments of $27,415 including interest at prime plus 1/2%,
through April 2001, at which time remaining outstanding principal balance is due, collateralized
by building..................................................................................... 3,135,379 3,062,926
Other notes payable............................................................................... 169,568 190,864
3,730,698 5,804,841
Less current maturities........................................................................... (169,932) (518,979)
Long-term debt.................................................................................... $3,560,766 $5,285,862
</TABLE>

Future maturities of debt at December 31, 1996 are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1997........................................................................ $ 518,979
1998........................................................................ 455,505
1999........................................................................ 434,609
2000........................................................................ 446,374
2001........................................................................ 3,096,525
Thereafter.................................................................. 852,849
Total....................................................................... $5,804,841
</TABLE>

6. INCOME TAXES

The provision (benefit) for income taxes consists of the following
components:

<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Current:
Federal........................................................................... $1,301,350 $1,147,700 $1,374,280
State............................................................................. -- 76,800 265,972
1,301,350 1,224,500 1,640,252
Deferred............................................................................ 244,900 427,200 (189,179)
Change in valuation allowance....................................................... 13,500 23,200 (51,369)
258,400 450,400 (240,548)
Total............................................................................. $1,559,750 $1,674,900 $1,399,704
</TABLE>

F-13

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

6. INCOME TAXES -- Continued
The reconciliation of the statutory federal income tax rate with the
Company's federal and state overall effective income tax rate is as follows:

<TABLE>
<CAPTION>
1994 1995 1996
<S> <C> <C> <C>
Statutory federal rate............................................................................... 34.00% 34.00% 34.00%
State income taxes................................................................................... -- 3.84 3.60
Miscellaneous........................................................................................ 1.78 2.67 .64
Effective tax rates.................................................................................. 35.78% 40.51% 38.24%
</TABLE>

Deferred income taxes reflect the net tax effects of the temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of December 31 are as
follows:

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C>
Deferred tax assets:
Allowance for bad debts......................................................................... $ 62,300 $ 85,992
Inventory reserves.............................................................................. 126,400 160,820
Net operating loss carryforwards................................................................ 183,800 74,931
Other........................................................................................... 1,300 75,656
Total deferred tax assets....................................................................... 373,800 397,399
Valuation allowance............................................................................. (126,300) (75,000)
Deferred tax assets, net........................................................................ 247,500 322,399
Deferred tax liabilities:
Basis difference in fixed assets................................................................ (155,200) (556,384)
Basis difference in equity investment........................................................... (644,400) (478,876)
Other........................................................................................... (108,000) (66,623)
Total deferred tax liability...................................................................... (907,600) (1,101,883)
Net deferred tax liability........................................................................ $(660,100) $ (779,484)
</TABLE>

The net changes in the valuation allowance against deferred tax assets were
an increase of $23,200 for the year ended December 31, 1995 and a decrease of
($51,300) for the year ended December 31, 1996. The increase (decrease) was
related primarily to the generation (expiration) of state net operating loss
carryforwards. At December 31, 1996, the Company had state net operating loss
carryforwards of $1,259,000 which will expire between 1998 and 2002.

The Company expects to convert its method of valuing inventories from the
LIFO method to the FIFO method in 1997 for financial reporting and income tax
reporting purposes. The Company estimates that it will incur a tax liability of
approximately $5.5 million in connection with this conversion.

7. RELATED PARTIES

Due from affiliates represents non-interest bearing advances to SFC. Since
there are no specified repayment terms, the entire amount has been reflected as
a reduction in stockholders' equity at December 31, 1996 and June 30, 1997.

The Company had amounts payable to affiliated companies of $3,219,204 and
$914,339, at December 31, 1995 and 1996, respectively. The balance, consisting
of non-interest bearing loans from affiliates, is classified as noncurrent based
upon its expected repayment date.

The Company operates certain dealerships at facilities leased from
affiliated companies. As of December 31, 1996, future commitments under these
operating leases are $769,200 annually through 1999, $701,000 in 2000, and
$360,000 from 2001 through 2005. Rent expense in 1994, 1995 and 1996 for these
leases amounted to $756,668, $737,076 and $767,200, respectively.

F-14

<PAGE>
SONIC AUTOMOTIVE, INC.
AND AFFILIATED COMPANIES

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

8. PREFERRED STOCK

In 1997, the Company authorized 3,000,000 shares of "blank check" preferred
stock with such designations, rights and preferences as may be determined from
time to time by the Board of Directors. No preferred shares were issued and
outstanding at June 30, 1997

9. EMPLOYEE BENEFIT PLANS

Substantially all of the employees of the company are eligible to
participate in a 401(k) plan maintained by SFC. Contributions by the Company to
the plan were not significant in any period presented.

In August 1997, the Company intends to adopt the 1997 Stock Option Plan
(the "Plan"). Under the provisions of the Plan, options to purchase shares of
Class A Common Stock may be granted to key employees of the Company and its
subsidiaries and to officers, directors, consultants and other individuals
providing services to the Company. The exercise price of the options may not be
less than the market value of the Class A Common Stock on the date of grant.
Vesting periods will range from 5 to 10 years.

In August 1997 the Company intends to adopt the Sonic Employee Stock
Purchase Plan (the "ESPP"). The ESPP provides employees of the Company the
opportunity to purchase Class A Common Stock after completion of the Offering.
Under the terms of the ESPP, on January 1 of each year all eligible employees
electing to participate will be granted an option to purchase shares of Class A
Common Stock. The Company's Compensation Committee will annually determine the
number of shares of Class A Common Stock available for purchase under each
option. The purchase price at which Class A Common Stock will be purchased
through the ESPP will be 90% of the lesser of (i) the fair market value of the
Class A Common Stock on the applicable Grant Date and (ii) the fair market value
of the Class A Common Stock on the applicable Exercise Date. Options will expire
on the last exercise date of the calendar year in which granted.

10. CONTINGENCIES

The Company is contingently liable for customer contracts placed with
financial institutions of approximately $741,000 at December 31, 1996. However,
the Company's potential loss is limited to the difference between the present
value of the installment contract at the date of the repossession and the market
value of the vehicle at the date of sale. Other accrued liabilities include a
provision for repossession losses. The Company provides a reserve for
repossession losses based on the ratio that historical loss experience bears to
the amount of outstanding customer contracts.

The Company has available $1,500,000 under draft-clearing credit lines with
a bank in order to immediately fund the Company's checking account for sold
vehicle contracts from other financial institutions. The Company is contingently
liable to the bank until the contracts are approved by the financial
institutions. At December 31, 1996, $151,227 was outstanding under these lines.

In the event that the Company fails to close the acquisitions of Lake
Norman Dodge and Affiliates, Dyer Volvo, Ken Marks Ford, and the Bowers
Dealerships by certain dates, the Company will be required to pay termination
fees which total approximately $5.5 million.

The Company is involved in various legal proceedings. Management believes
that the outcome of such proceedings will not have a materially adverse effect
on the Company's financial position or future results of operations and cash
flows.

F-15

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDER OF
DYER & DYER, INC.
Atlanta, Georgia

We have audited the accompanying balance sheets of Dyer & Dyer, Inc. (the
"Company") as of December 31, 1995 and 1996, and the related statements of
income, stockholder's equity, and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dyer & Dyer, Inc. as of
December 31, 1995 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Charlotte, North Carolina

August 7, 1997

F-16

<PAGE>
DYER & DYER, INC.

BALANCE SHEETS

DECEMBER 31, 1995 AND 1996 AND JUNE 30, 1997

See notes to financial statements.

F-17

<PAGE>
DYER & DYER, INC.

STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Vehicle sales.................................. $52,245,947 $52,613,480 $60,870,919 $30,767,026 $31,373,513
Parts, service and collision repair............ 8,680,440 9,097,763 11,163,230 5,481,708 5,960,212
Finance and insurance.......................... 203,198 404,505 542,474 213,711 128,911
Total..................................... 61,129,585 62,115,748 72,576,623 36,462,445 37,462,636
COST OF SALES.................................... 54,121,066 55,776,668 62,547,497 31,969,022 32,377,247
GROSS PROFIT..................................... 7,008,519 6,339,080 10,029,126 4,493,423 5,085,389
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES..... 6,160,564 5,621,343 6,921,428 3,353,559 3,498,432
DEPRECIATION AND AMORTIZATION.................... 123,228 90,538 202,214 45,451 150,621
OPERATING INCOME................................. 724,727 627,199 2,905,484 1,094,413 1,436,336
OTHER INCOME AND EXPENSE:
Interest expense, floor plan................... 56,944 171,690 372,590 178,970 276,393
Other income................................... 609,684 314,788 452,063 234,834 247,213
Total other income (expense).............. 552,740 143,098 79,473 55,864 (29,180)
INCOME BEFORE INCOME TAXES....................... 1,277,467 770,297 2,984,957 1,150,277 1,407,156
PROVISION FOR INCOME TAXES (Notes 1
and 5)......................................... 491,365 295,850 954,846 954,846 --
NET INCOME....................................... $ 786,102 $ 474,447 $ 2,030,111 $ 195,431 $ 1,407,156
</TABLE>

See notes to financial statements

F-18

<PAGE>
DYER & DYER, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
TOTAL
COMMON PAID-IN TREASURY RETAINED STOCKHOLDER'S
STOCK CAPITAL STOCK EARNINGS EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE
DECEMBER 31, 1993...................................... $153,100 $27,623 $(4,976,143) $12,448,928 $ 7,653,508
Net income............................................. -- -- -- 786,102 786,102
BALANCE
DECEMBER 31, 1994...................................... 153,100 27,623 (4,976,143) 13,235,030 8,439,610
Net income............................................. -- -- -- 474,447 474,447
BALANCE
DECEMBER 31, 1995...................................... 153,100 27,623 (4,976,143) 13,709,477 8,914,057
Dividends.............................................. -- -- -- (1,526,828) (1,526,828)
Net income............................................. -- -- -- 2,030,111 2,030,111
BALANCE
DECEMBER 31, 1996...................................... 153,100 27,623 (4,976,143) 14,212,760 9,417,340
Dividends (unaudited).................................. -- -- -- (2,026,183) (2,026,183)
Net income (unaudited)................................. -- -- -- 1,407,156 1,407,156
BALANCE
JUNE 30, 1997 (unaudited).............................. $153,100 $27,623 $(4,976,143) $13,593,733 $ 8,798,313
</TABLE>

See notes to financial statements.

F-19

<PAGE>
DYER & DYER, INC.

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................... $ 786,102 $ 474,447 $2,030,111 $ 195,431 $1,407,156
Adjustments to reconcile net income to net cash
provided by operating activities:
(Gain) Loss on disposal of fixed assets........... 8,011 11,757 10,890 -- (116)
Depreciation and amortization..................... 123,228 90,538 202,214 45,451 150,621
Changes in assets and liabilities that relate to
operations:
(Increase) decrease in accounts receivable........ (390,834) 191,714 (768,730) (39,751) (1,355,959)
(Increase) decrease in inventories................ 11,184 (4,213,189) (6,028,157) (1,566,226) 3,942,980
(Increase) decrease in prepaid expenses........... 79,966 (177,992) 171,040 218,576 71,691
Increase (decrease) in notes payable,
floor plan...................................... (127,470) 2,581,585 4,535,310 290,990 (1,612,320)
Increase (decrease) in accounts payable........... 7,048 498,092 620,180 (376,134) (1,131,472)
Increase (decrease) in other accrued
liabilities..................................... 105,201 (187,726) 147,106 170,944 25,008
Increase (decrease) in income taxes payable....... (20,682) 8,484 760,526 760,526 (242,212)
Total adjustments............................... (204,348) (1,196,737) (349,621) (495,624) (151,779)
Net cash provided by (used) in operating
activities................................... 581,754 (722,290) 1,680,490 (300,193) 1,255,377
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................... (18,485) (181,259) (717,969) (14,013) (26,938)
Increase in cash value of life insurance............. (15,398) (26,316) (4,622) (2,311) (5,174)
Deposits held by financial institutions.............. 13,001 10,849 (12,337) 22,238 34,575
Net cash provided by (used) in investing
activities................................... (20,882) (196,726) (734,928) 5,914 2,463
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid....................................... -- -- (1,526,828) (759,810) (2,026,183)
INCREASE (DECREASE) IN CASH............................ 560,872 (919,016) (581,266) (1,054,089) (768,343)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....... 1,880,690 2,441,562 1,522,546 1,522,546 941,280
CASH AND CASH EQUIVALENTS AT END OF PERIOD............. $2,441,562 $1,522,546 $ 941,280 $ 468,457 $ 172,937
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.......................................... $ 57,766 $ 176,464 $ 509,621 $ 247,970 $ 279,460
Income taxes...................................... $ 399,605 $ 438,810 $ 31,826 $ 31,826 $ 242,237
</TABLE>

See notes to financial statements.

F-20

<PAGE>
DYER & DYER, INC.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Dyer & Dyer, Inc. (the "Company") was
incorporated in South Carolina in 1978, and operates a Volvo automobile
dealership in Atlanta, Georgia. The Company sells new and used cars, sells
replacement parts, provides vehicle maintenance, warranty, paint and repair
services and arranges related financing and insurance.

In August 1997, the Company signed a definitive purchase agreement whereby
its net assets would be acquired by Sonic Automotive, Inc. for $18 million. This
acquisition is to be effective prior to the completion of an anticipated public
offering of common stock by Sonic Automotive in 1997.

DEALER AGREEMENTS -- The Company purchases substantially all of its new
vehicles from the manufacturer at the prevailing prices charged by the
manufacturer to its franchised dealers. The Company's sales could be unfavorably
impacted by the manufacturer's unwillingness or inability to supply the
dealership with an adequate supply of new car inventory.

The dealership operates under a dealer agreement with the manufacturer
which generally restricts the location, management and ownership of the
dealership. The ability of the Company to acquire additional franchises may be
limited due to certain restrictions imposed by the manufacturer. Additionally,
the Company's ability to enter into significant acquisitions may be restricted
and the acquisition of the Company's stock by third parties may be limited by
the terms of the franchise agreement.

The manufacturer has implemented various incentive programs for its dealers
that provide for specified payments to the dealers based on the results of
customer satisfaction surveys and the implementation of certain standardized
policies and procedures. These programs are for a limited duration and remain
subject to cancellation by the manufacturer at any time. Incentive payments
credited to cost of sales amounted to approximately $210,000, $267,000 and
$1,326,000 during 1994, 1995 and 1996, respectively, and $290,000 and $912,000
for the six months ended June 30, 1996 and 1997, respectively.

CASH AND CASH EQUIVALENTS -- The Company considers contracts in transit and
all highly liquid debt instruments with an initial maturity of three months or
less to be cash equivalents. Contracts in transit represent cash in transit to
the Company from finance companies related to vehicle purchases, and was
approximately $1,522,000 and $934,000 at December 31, 1995 and 1996,
respectively, and $167,000 at June 30, 1997.

INVENTORIES -- Inventories of new vehicles, including demonstators, are
valued at the lower of last-in, first-out ("LIFO") cost or market. Inventories
of used vehicles are stated at the lower of first-in, first-out ("FIFO") cost or
market, and parts and accessories are stated at the lower of specific cost or
market.

<TABLE>
<CAPTION>
USEFUL LIVES
<S> <C>
Office equipment and fixtures............................................................ 5-7
Parts and service equipment.............................................................. 5
Company vehicles......................................................................... 5
</TABLE>

Leasehold improvements are amortized over the lesser of the terms of their
respective leases or the estimated useful lives of the related assets.
Expenditures for maintenance and repairs are expensed as incurred. Significant
betterments are capitalized.

INCOME TAXES -- For the years ended December 31, 1994 and 1995, the Company
was a C Corporation and, therefore, provided for income taxes using the balance
sheet method. There were no significant deferred tax assets and liabilities as
of December 31, 1995. Effective January 1, 1996, the Company elected to be
treated as an S Corporation for federal and state income tax purposes. As such
the Company's taxable income is included in the stockholder's annual income tax
return. Accordingly, no provision for federal or state income taxes has been
included in the Company's statements of income for the periods beginning after
December 31, 1995.

F-21

<PAGE>
DYER & DYER, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued
CONCENTRATIONS OF CREDIT RISK -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of cash
on deposit with financial institutions. At times, amounts invested with
financial institutions may exceed FDIC insurance limits.

Concentrations of credit risk with respect to receivables are limited
primarily to automobile manufacturers and financial institutions. Credit risk
arising from trade receivables from commercial customers is reduced by the large
number of customers comprising the trade receivables balances. Trade receivables
are concentrated in the Atlanta, Georgia area.

ADVERTISING -- The Company expenses advertising costs in the period
incurred. Advertising expense approximated $709,000, $525,000 and $765,000
during 1994, 1995 and 1996, respectively.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited financial
information for the six months ended June 30, 1996 and 1997 has been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein. The results
of interim periods are not necessarily indicative of results to be expected for
the entire fiscal year.

2. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
New vehicles.................................................................... $ 5,692,043 $ 7,980,256 $ 5,017,765
Used vehicles................................................................... 2,768,230 6,362,410 5,542,979
Parts and accessories........................................................... 503,490 586,129 420,959
Other........................................................................... 79,393 142,518 146,630
Total........................................................................... $ 9,043,156 $15,071,313 $11,128,333
</TABLE>

At December 31, 1995 and 1996 and at June 30, 1997, the excess of current
replacement cost over the stated LIFO valuation of new vehicles, parts and
accessories amount to $2,387,114, $2,503,330 and $2,503,330 (unaudited),
respectively.

Had the Company used the FIFO method of valuing new vehicle, parts and
accessories inventory, pretax earnings would have been $1,335,380, $1,200,776
and $3,101,173 in 1994, 1995 and 1996, respectively.

All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $2,610,935 and
$7,146,245 at December 31, 1995 and 1996, respectively. The floor plan notes
bear interest, payable monthly on the outstanding balance, at the prime rate
plus 1/2% to 1 1/2% (prime rate was 8.25% at December 31, 1996). Total floor
plan interest expense amounted to $56,944, $171,690 and $372,590 in 1994, 1995
and 1996, respectively. The notes payable are due when the related vehicle is
sold. As such, these floor plan notes payable are shown as a current liability
in the accompanying balance sheets.

F-22

<PAGE>
DYER & DYER, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

3. PROPERTY AND EQUIPMENT

Property and equipment is comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Leasehold improvements.............................................................. $1,479,385 $1,885,415 $1,885,415
Furniture and fixtures.............................................................. 1,372,801 1,546,987 1,550,022
Other equipment..................................................................... 565,398 571,778 571,778
Computer equipment.................................................................. 188,851 195,598 198,428
Service vehicles.................................................................... 117,535 122,916 143,989
3,723,970 4,322,694 4,349,632
Less accumulated depreciation and amortization...................................... (2,949,061) (3,042,920) (3,193,425)
Property and equipment, net......................................................... $ 774,909 $1,279,774 $1,156,207
</TABLE>

4. LEASES

The Company leases its business premises under noncancelable operating
leases for five to twenty-five year terms from a partnership partially owned by
the sole stockholder of the Company. Future minimum rental payments required
under noncancelable leases at December 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING:
<S> <C>
1997.................................................................................... $ 754,162
1998.................................................................................... 756,956
1999.................................................................................... 759,832
2000.................................................................................... 762,800
2001.................................................................................... 765,856
Thereafter.............................................................................. 5,551,504
Total................................................................................... $9,351,110
</TABLE>

Rent expense approximated $711,000, $708,000 and $715,000 during 1994, 1995
and 1996, respectively.

5. INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
1994 1995 1996
<S> <C> <C> <C>
Current:
Federal................................................................................ $439,714 $231,720 $811,620
State.................................................................................. 47,463 40,864 143,226
487,177 272,584 954,846
Deferred................................................................................. 4,188 23,266 --
Total.................................................................................... $491,365 $295,850 $954,846
</TABLE>

Effective with the Company's S Corporation election, it was required to
recapture its December 31, 1995 LIFO reserve of approximately $2,400,000 and pay
tax on that amount for both Federal and State income tax purposes. The taxes are
payable in four equal annual installments beginning March 15, 1996. This
conversion to S Corporation status resulted in the recognition of approximately
$955,000 in income tax expense.

As a result of the Company's change to S Corporation status on January 1,
1996 (see Note 1), it is exposed to potential future taxes on built-in gains
which were present on the date of the conversion. If the planned acquisition of
the net assets of

F-23

<PAGE>
DYER & DYER, INC.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

5. INCOME TAXES -- Continued
the Company described in Note 1 is consummated, the disposal of tangible and
intangible property which appreciated prior to the election of S Corporation
status will result in the assessment of the built-in gains tax.

6. RETIREMENT PLAN

The Company has a contributory 401(k) plan covering substantially all
employees. Company contributions to the Plan are equal to 25% of the first 4% of
participant contributions. Company contributions amounted to $1,000, $18,000 and
$18,000 in 1994, 1995 and 1996, respectively.

F-24

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARDS OF DIRECTORS AND STOCKHOLDERS OF
BOWERS DEALERSHIPS AND AFFILIATED COMPANIES
Chattanooga, Tennessee

We have audited the accompanying combined balance sheets of Bowers
Dealerships and Affiliated Companies (the "Company"), which are under common
ownership and management, as of December 31, 1995 and 1996, and the related
combined statements of income, stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Bowers Dealerships
and Affiliated Companies as of December 31, 1995 and 1996, and the combined
results of their operations and their combined cash flows for the years then
ended in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Charlotte, North Carolina
August 7, 1997

F-25

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

COMBINED BALANCE SHEETS

DECEMBER 31, 1995 AND 1996 AND JUNE 30, 1997

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................................... $ 2,331,136 $ 3,422,140 $ 5,797,307
Receivables................................................................... 2,972,607 3,840,311 3,398,335
Inventories (Note 3).......................................................... 13,003,266 23,147,852 34,070,935
Other current assets (Note 6)................................................. 1,182,860 2,119,974 2,452,831
Total current assets..................................................... 19,489,869 32,530,277 45,719,408
PROPERTY AND EQUIPMENT, NET (Note 4)............................................ 2,889,753 7,254,793 8,744,225
GOODWILL, NET (Note 1).......................................................... 978,735 4,374,573 8,285,460
OTHER ASSETS.................................................................... 183,822 161,845 257,464
TOTAL ASSETS.................................................................... $23,542,179 $44,321,488 $63,006,557
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Notes payable -- floor plan (Note 3).......................................... $11,620,942 $19,731,323 $29,070,838
Notes payable -- other (Note 6)............................................... 2,015,025 3,792,610 4,589,869
Trade accounts payable........................................................ 278,001 1,196,660 1,424,997
Accrued interest.............................................................. 69,164 105,505 178,143
Other accrued liabilities..................................................... 897,893 1,742,119 1,738,928
Current maturities of long-term debt (including amounts due to related parties
of $104,189, $104,189 and $172,072 at December 31, 1995 and 1996 and June
30, 1997, respectively).................................................... 468,040 389,658 558,332
Total current liabilities................................................ 15,349,065 26,957,875 37,561,107
LONG-TERM DEBT (Note 6) (including amounts due to related parties of $2,109,815,
$2,005,626 and $1,953,531 at December 31, 1995 and 1996
and June 30, 1997, respectively).............................................. 2,110,016 3,562,249 4,364,746
COMMITMENTS AND CONTINGENCIES (Notes 5 and 10)
EQUITY
Common stock of combined companies (Note 8):.................................. 1,000,000 1,000,000 1,000,000
Retained earnings and members' and partners' equity........................... 5,543,728 13,661,994 20,941,334
Due from affiliates (Note 7).................................................. (460,630) (860,630) (860,630)
Total equity............................................................. 6,083,098 13,801,364 21,080,704
TOTAL LIABILITIES AND EQUITY.................................................... $23,542,179 $44,321,488 $63,006,557
</TABLE>

See notes to combined financial statements

F-26

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
REVENUES:
Vehicle sales............................... $ 91,774,886 $113,362,495 $48,251,281 $72,605,727
Parts, service and collision repair......... 5,813,582 10,405,031 4,472,267 11,596,873
Finance and insurance....................... 2,768,358 3,348,273 1,639,878 1,867,781
Total revenues......................... 100,356,826 127,115,799 54,363,426 86,070,381
COST OF SALES................................. 86,772,544 109,372,977 46,129,292 73,095,919
GROSS PROFIT.................................. 13,584,282 17,742,822 8,234,134 12,974,462
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.................................... 10,748,891 14,886,611 6,486,017 9,908,039
DEPRECIATION AND AMORTIZATION................. 321,170 514,915 193,486 415,899
OPERATING INCOME.............................. 2,514,221 2,341,296 1,554,631 2,650,524
OTHER INCOME AND EXPENSE:
Interest expense, floor plan................ 1,098,757 1,288,021 610,784 965,350
Interest expense, other..................... 270,771 380,060 157,388 211,250
Other income................................ 19,174 157,443 63,539 451,796
Total other expense.................... 1,350,354 1,510,638 704,633 724,804
INCOME BEFORE INCOME TAXES (Note 1)........... 1,163,867 830,658 849,998 1,925,720
PROVISION FOR INCOME TAXES.................... 41,879 60,850 60,215 30,927
NET INCOME.................................... $ 1,121,988 $ 769,808 $ 789,783 $ 1,894,793
</TABLE>

See notes to combined financial statements

F-27

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF EQUITY

YEARS ENDED DECEMBER 31, 1995 AND 1996
AND THE SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
RETAINED
EARNINGS
AND
COMMON MEMBERS'
STOCK OF AND
COMBINED PARTNERS' DUE FROM TOTAL
COMPANIES EQUITY AFFILIATE EQUITY
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994...................................... $1,000,000 $ 3,089,208 $ -- $ 4,089,208
Capital contribution............................................ -- 1,753,736 -- 1,753,736
Distributions................................................... -- (421,204) -- (421,204)
Net income...................................................... -- 1,121,988 -- 1,121,988
Advances to affiliates.......................................... -- -- (460,630) (460,630)
BALANCE AT DECEMBER 31, 1995...................................... 1,000,000 5,543,728 (460,630) 6,083,098
Capital contribution............................................ -- 7,700,000 -- 7,700,000
Distributions................................................... -- (351,542) -- (351,542)
Net income...................................................... -- 769,808 -- 769,808
Advances to affiliates.......................................... -- -- (400,000) (400,000)
BALANCE AT DECEMBER 31, 1996...................................... 1,000,000 13,661,994 (860,630) 13,801,364
Capital contribution (unaudited)................................ -- 5,500,000 -- 5,500,000
Distributions (unaudited)....................................... -- (115,453) -- (115,453)
Net income (unaudited).......................................... -- 1,894,793 -- 1,894,793
BALANCE AT JUNE 30, 1997 (unaudited).............................. $1,000,000 $20,941,334 $ (860,630) $21,080,704
</TABLE>

See notes to combined financial statements.

F-28

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1995 AND 1996 AND
THE SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
1995 1996 1996 1997
<S> <C> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................ $1,121,988 $ 769,808 $ 789,783 $1,894,793
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................. 321,170 514,915 193,486 415,899
Changes in assets and liabilities that relate to operations:
(Increase) decrease in receivables........................... 909,934 (867,704) 639,758 441,976
Increase in inventories...................................... (602,704) (4,300,530) (258,272) (8,205,796)
Increase in other current assets............................. (324,499) (937,114) (966,156) (332,857)
(Increase) decrease in other non-current assets.............. (67,652) 37,947 (110,984) (94,441)
Increase in notes payable -- floor plan...................... 274,484 8,110,381 2,140,955 9,339,515
Increase (decrease) in accounts payable and accrued
expenses.................................................. (1,427,260) 1,799,226 1,146,612 297,784
Total adjustments......................................... (916,527) 4,357,121 2,785,399 1,862,080
Net cash provided by operating activities................. 205,461 5,126,929 3,575,182 3,756,873
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of business, net of cash received........................ -- (9,840,438) (4,790,970) (6,718,465)
Additions to property and equipment............................... (333,741) (4,295,381) (2,570,979) (1,816,218)
Net cash used in investing activities........................ (333,741) (14,135,819) (7,361,949) (8,534,683)
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions............................................. 1,378,208 7,700,000 2,700,000 5,500,000
Due from affiliate................................................ (460,630) (400,000) -- --
Distributions to stockholders..................................... (421,204) (351,542) (351,542) (115,453)
Proceeds from long-term debt...................................... 272,084 1,872,169 1,872,169 1,280,000
Payments of long-term debt........................................ (764,933) (498,318) (192,370) (308,829)
Proceeds from notes payable -- other.............................. 1,410,025 1,981,197 1,600,994 1,059,797
Payments of notes payable -- other................................ (220,000) (203,612) (260,000) (262,538)
Net cash provided by financing activities.................... 1,193,550 10,099,894 5,369,251 7,152,977
NET INCREASE IN CASH................................................ 1,065,270 1,091,004 1,582,484 2,375,167
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...................... 1,265,866 2,331,136 2,331,136 3,422,140
CASH AND CASH EQUIVALENTS, END OF PERIOD............................ $2,331,136 $ 3,422,140 $3,913,620 $5,797,307
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
Cash paid during the period for:
Interest.......................................................... $1,366,071 $ 1,631,740 $ 737,955 $ 877,730
Income taxes...................................................... $ 96,391 $ 76,081 $ 35,636 $ 27,620
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS:
Net liabilities recorded from combining affiliated companies...... $ 372,533 $ -- $ -- $ --
</TABLE>

See notes to combined financial statements.

F-29

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Bowers Dealerships and Affiliated Companies
(the "Company") operates automobile dealerships in the Chattanooga and
Nashville, Tennessee areas. The Company sells new and used cars and light
trucks, sells replacement parts, provides vehicle maintenance, warranty, paint
and repair services and arranges financing and insurance. As of December 31,
1996, the Company had nine dealership locations selling new vehicles
manufactured by BMW, Chrysler, Ford, Honda, Infiniti, Jaguar, Saturn and
Volkswagen. Subsequent to December 31, 1996 the Company acquired a Dodge
dealership. (see Note 2).

The accompanying combined financial statements include the accounts of the
following entities:

<TABLE>
<CAPTION>
NAME LOCATION STRUCTURE
<S> <C> <C>
Cleveland Village Imports, Inc.......................... Chattanooga C Corporation
Saturn of Chattanooga, Inc.............................. Chattanooga S Corporation
Nelson Bowers Ford, L.P................................. Chattanooga Limited Partnership
Infiniti of Chattanooga, Inc............................ Chattanooga C Corporation
Cleveland Chrysler Plymouth Jeep Eagle, LLC............. Chattanooga Limited Liability Company
Jaguar of Chattanooga, LLC.............................. Chattanooga Limited Liability Company
KIA of Chattanooga...................................... Chattanooga Limited Liability Company
European Motors of Nashville LLC........................ Nashville Limited Liability Company
European Motors LLC..................................... Chattanooga Limited Liability Company
</TABLE>

The combined financial statements have been prepared in connection with a
planned acquisition of the net assets of these entities and the aforementioned
Dodge dealership by Sonic Automotive ("Sonic"). In June 1997, the Company signed
a definitive purchase agreement whereby substantially all of its net assets
would be acquired by Sonic for $33,500,000, including $28,500,000 in cash and a
$5,000,000 note payable. Net assets not being acquired are primarily land,
building and the net assets related to a body shop operation. This acquisition
is to be effective prior to the completion of an anticipated public offering of
common stock by Sonic in 1997. The accompanying combined financial statements
reflect the financial position, results of operations, and cash flows of each of
the above listed dealerships. The combination of these entities has been
accounted for at historical cost in a manner similar to a pooling-of-interest
because the entities are under common management and control. All material
intercompany transactions have been eliminated.

Each dealership operates under a dealer agreement with the manufacturer
except Volkswagen of Nashville which operates under a management agreement which
generally restricts the location, management and ownership of the respective
dealership. The ability of the Company to acquire additional franchises from a
particular manufacturer may be limited due to certain restrictions imposed by
manufacturers. Additionally, the Company's ability to enter into significant
acquisitions may be restricted and the acquisition of the Company's stock by
third parties may be limited by the terms of the franchise agreement.

CASH AND CASH EQUIVALENTS -- The Company considers contracts in transit and
all highly liquid debt instruments with an initial maturity of three months or
less to be cash equivalents. Contracts in transit represent cash in transit to
the Company from finance companies related to a vehicle purchase, and was
$1,019,950 and $2,029,314 at December 31, 1995 and 1996, respectively.

F-30

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
INVENTORIES -- Inventories of new and used vehicles, including
demonstrators, are valued at the lower of first-in, first-out ("FIFO") cost or
market, and parts and accessories are stated at the lower of specific cost or
market.

<TABLE>
<CAPTION>
USEFUL LIVES
<S> <C>
Building..................................................................... 31.5-39
Office equipment and fixtures................................................ 5-7
Parts, service equipment and vehicles........................................ 7
</TABLE>

Leasehold improvements are amortized over the lesser of the terms of their
respective leases or the estimated useful lives of the related assets.

Expenditures for maintenance and repairs are expensed as incurred.
Significant betterments are capitalized.

The Company periodically reviews goodwill for impairment by comparing the
carrying amount of goodwill with the estimated undiscounted future cash flows
from operations of the acquired business.

INCOME TAXES -- With the exception of Infiniti of Chattanooga, Inc. and
Cleveland Village Imports, Inc., all entities included in the accompanying
combined financial statements are either S Corporations, Limited Partnerships or
Limited Liability Companies (LLC). As such, these entities do not pay Federal
corporate income taxes on their taxable income. In addition, the Limited
Partnerships and LLC's are not subject to state income taxes. The stockholders
or partners are liable for individual income taxes on their respective shares of
the Company's taxable income.

Because Infiniti of Chattanooga, Inc. and Cleveland Village Imports, Inc.
is a C Corporation, federal and state income taxes are provided for in the
financial statements and consist of taxes currently due plus deferred taxes. In
addition, the S Corporations are subject to Tennessee income taxes which are
provided for in the financial statements. Income taxes are provided for income
taxes using the balance sheet method. Deferred taxes result primarily from
warranty accruals and the accelerated depreciation method used for income tax
purposes. The deferred tax assets and liabilities represent the future tax
return consequences of those differences, which will either be taxable or
deductible when the assets and liabilities are recovered or settled. In
addition, deferred tax assets are recognized for state operating losses that are
available to offset future taxable income.

CONCENTRATIONS OF CREDIT RISK -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of cash
deposits. At times, amounts invested with financial institutions may exceed FDIC
insurance limits.

ADVERTISING -- The Company expenses advertising costs in the period
incurred. Advertising expense amounted to $992,839 and $1,372,775 for 1995 and
1996, respectively.

F-31

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
IMPAIRMENT OF LONG-LIVED ASSETS -- Effective January 1, 1996, the Company
adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. This statement
requires that long-lived assets be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may be
impaired. Adoption of SFAS No. 121 did not have a material impact on the
Company's results of operations or financial position.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited financial
information for the six months ended June 30, 1997 has been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein. The results
of interim periods are not necessarily indicative of results to be expected for
the entire fiscal year.

2. BUSINESS ACQUISITIONS

EUROPEAN MOTORS OF NASHVILLE, INC. AND EUROPEAN MOTORS LLC -- In October
1996, the Company acquired European Motors of Nashville, Inc. and European
Motors LLC. The total purchase price was $9,840,438. These acquisitions have
been accounted for using purchase accounting and the results of operations of
these dealerships have been included in the accompanying combined financial
statements from the date of acquisition. The total purchase price has been
allocated to the assets and liabilities acquired at their estimated fair market
value at acquisition date as follows:

<TABLE>
<S> <C>
Inventory................................................................... $5,862,555
Property and equipment...................................................... 527,883
Goodwill.................................................................... 3,450,000
Total....................................................................... $9,840,438
</TABLE>

DODGE OF CHATTANOOGA -- On March 1, 1997, the Company acquired Dodge of
Chattanooga for a total purchase price of $6,718,465. The acquisition has been
accounted for as a purchase and the results of operations of Dodge of
Chattanooga have been included in the accompanying unaudited combined financial
statements from the date of acquisition through June 30, 1997. The purchase
price has been allocated to the assets and liabilities acquired at their
estimated fair market value at acquisition date as follows:

<TABLE>
<S> <C>
Inventory................................................................... $2,718,465
Goodwill.................................................................... 4,000,000
Total....................................................................... $6,718,465
</TABLE>

3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN

Inventories at December 31, 1995 and 1996 and June 30, 1997 consist of the
following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
New vehicles.................................................................... $ 9,929,971 $16,319,295 $21,837,310
Used vehicles................................................................... 2,369,023 4,821,689 9,870,280
Parts and accessories........................................................... 685,012 1,900,962 2,040,757
Other........................................................................... 19,260 105,906 322,588
Total........................................................................... $13,003,266 $23,147,852 $34,070,935
</TABLE>

All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $11,620,942 and
$19,731,323 at December 31, 1995 and 1996, respectively. The floor plan notes
bear interest, that fluctuates with prime and are payable monthly on the
outstanding balance, ranging from 6.25% to 9.75% at December 31,

F-32

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

3. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN -- Continued
1996. Total floor plan interest expense amounted to $1,098,757 and $1,288,021 in
1995 and 1996, respectively. The notes payable are due when the related vehicle
is sold. As such, these floor plan notes payable are shown as a current
liability in the accompanying combined balance sheets.

4. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1995 and 1996 and June 30, 1997 is
comprised of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Land............................................................................ $ 846,265 $ 1,455,297 $ 1,831,514
Buildings and improvements...................................................... 1,114,984 3,962,427 4,868,637
Office equipment and fixtures................................................... 1,228,579 1,697,617 1,938,612
Parts and service equipment..................................................... 900,005 1,775,271 2,102,199
Leasehold improvements.......................................................... 254,694 262,261 262,261
Total, at cost.................................................................. 4,344,527 9,152,873 11,003,223
Less accumulated depreciation................................................... (1,454,774) (1,898,080) (2,258,998)
Property and equipment, net..................................................... $ 2,889,753 $ 7,254,793 $ 8,744,225
</TABLE>

5. OPERATING LEASES

The Company leases its business premises under nonconcealable operating
leases for one to twenty-six year terms. Future minimum rental payments required
under nonconcealable leases at December 31, 1996 are as follows:

<TABLE>
<S> <C>
Year ending
1997........................................................................ $ 656,237
1998........................................................................ 413,903
1999........................................................................ 387,120
2000........................................................................ 387,120
2001........................................................................ 387,120
Thereafter.................................................................. 4,994,184
Total....................................................................... $7,225,684
</TABLE>

Rent expense amounted to $458,999 and $762,725 during 1995 and 1996,
respectively.

F-33

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

6. FINANCING ARRANGEMENTS

Notes payable-other consists of a demand note to a bank and advances
principally from a stockholder. The stockholder advances are restricted to
investment in a cash management fund sponsored by finance companies. Other
current assets at December 31, 1995 and 1996 include $797,000 and $1,326,000,
respectively, of restricted cash in the cash management fund.

Notes payable-other consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Unsecured demand note payable to bank, interest at
at December 31, 1996................................................ $ -- $ 251,203 $ 600,000
Unsecured stockholder advances restricted for investment -- due on
demand.............................................................. 797,000 1,326,000 1,885,000
Other unsecured stockholder advances due to demand.................... 1,218,025 2,215,407 2,104,869
Notes payable -- other................................................ $2,015,025 $3,792,610 $ 4,589,869
</TABLE>

Long-term debt at December 31, 1995 and 1996 and June 30, 1997 consists of
the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
Mortgage note payable on land and building with a carrying value of
$2,302,487, interest payable at 8.9%, due June 1, 2001.............. $ -- $1,799,152 $ 1,767,753
Mortgage note payable to stockholder on land and building with a
carrying value of $1,535,585, interest payable at 12%, due December
1, 2010............................................................. 1,545,815 1,441,626 1,389,531
Note payable due to stockholder, interest payable at 9.5%, due
December 31, 2001................................................... 564,000 564,000 564,000
Note payable related to purchase of dealership, due February 28,
1999................................................................ -- -- 333,333
Note payable on land and building with a carrying value of $1,813,502,
interest payable at 8.9%, due March 31, 2002........................ -- -- 773,714
Notes payable for equipment with a carrying value of $76,608, interest
payable ranging from 9.6% to 11.18%, payable in full November 15,
1997................................................................ 109,380 76,199 45,332
Note payable on company owned vehicles, with a carrying value of
approximately $20,253, bearing interest at 9.5%..................... 298,861 20,253 --
Note payable to an unrelated car dealership, due December 3, 1999..... 60,000 45,000 45,000
Note payable -- other................................................. -- 5,677 4,415
2,578,056 3,951,907 4,923,078
Less current maturities............................................... (468,040) (389,658) (558,332)
Long-term debt........................................................ $2,110,016 $3,562,249 $ 4,364,476
</TABLE>

F-34

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

6. FINANCING ARRANGEMENTS -- Continued
Future maturities of the above debt at December 31, 1996 are as follows:

<TABLE>
<S> <C>
Year ending December 31:
1997........................................................................ $ 389,658
1998........................................................................ 363,839
1999........................................................................ 477,119
2000........................................................................ 194,018
2001........................................................................ 1,606,592
Thereafter.................................................................. 920,681
Total....................................................................... $3,951,907
</TABLE>

7. RELATED PARTIES

The Company operates certain dealerships at facilities leased from
affiliated companies. The leases are classified as operating leases. Future
minimum rent payments are $387,120 annually through 2001. Rent expense in 1995
and 1996 for these leases amounted to $315,120 and $441,120, respectively.

The Company has accounts receivable from stockholders arising from various
costs paid by the Company for the stockholders totaling $460,630, $860,630 and
$860,630 as of December 31, 1995 and 1996 and June 30, 1997, respectively.

The Company's related party transactions are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
1995 1996
<S> <C> <C>
Extended warranty premiums............................................................................ $477,327 $602,270
Advertising........................................................................................... 600,161 530,057
Auction Fees.......................................................................................... -- 39,000
Auto etching.......................................................................................... 28,200 32,861
Automobile packs...................................................................................... 91,830 107,246
</TABLE>

8. EQUITY

During 1997, an affiliated company began paying the salaries of certain
executive officers and other selling, general and administrative expenses. The
affiliated company charged the Company management fees during the six months
ended June 30, 1997 totaling $864,000 for the services performed by the
executive officers.

The capital structure of the entities included in the combined financial
statements of the Company at December 31, 1995 is as follows:

<TABLE>
<CAPTION>
COMMON STOCK
SHARES RETAINED EARNINGS
PAR SHARES ISSUED AND AND MEMBERS' AND
VALUE AUTHORIZED OUTSTANDING AMOUNT PARTNERS' EQUITY
<S> <C> <C> <C> <C> <C>
Cleveland Village Imports, Inc.......................... No par 2,000 2,000 $ 300,000 $ 552,817
Saturn of Chattanooga, Inc.............................. $ 700 2,000 1,000 700,000 2,470,654
Nelson Bowers Ford, L.P................................. 759,039
Cleveland Chrysler Plymouth Jeep Eagle, LLC............. 596,434
Jaguar of Chattanooga, LLC.............................. 1,164,784
$1,000,000 $ 5,543,728
</TABLE>

F-35

<PAGE>
BOWERS DEALERSHIPS
AND AFFILIATED COMPANIES

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

8. EQUITY -- Continued
The capital structure of the entities included in the combined financial
statements of the Company at December 31, 1996 is as follows:

<TABLE>
<CAPTION>
RETAINED EARNINGS
COMMON STOCK AND
SHARES PARTNERS'
PAR SHARES ISSUED AND AND MEMBERS'
VALUE AUTHORIZED OUTSTANDING AMOUNT EQUITY
<S> <C> <C> <C> <C> <C>
Cleveland Village Imports, Inc.......................... No par 2,000 2,000 $ 300,000 $ 563,672
Saturn of Chattanooga, Inc.............................. $ 700 2,000 1,000 700,000 2,675,993
Nelson Bowers Ford, L.P................................. -- 699,958
Cleveland Chrysler Plymouth Jeep Eagle, LLC............. -- 417,300
Jaguar of Chattanooga, LLC.............................. -- 1,141,782
European Motors of Nashville, LLC....................... -- 5,014,936
European Motors LLC..................................... -- 3,148,353
$1,000,000 $13,661,994
</TABLE>

9. EMPLOYEE BENEFIT PLANS

In April 1997, the Company established a 401(k) plan, whereby substantially
all of the employees of the company meeting certain service requirements are
eligible to participate. Contributions by the Company to the plan were not
significant in any period presented.

10. CONTINGENCIES

F-36

<PAGE>
INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
LAKE NORMAN DODGE, INC.
Cornelius, North Carolina

We have audited the accompanying combined balance sheet of Lake Norman
Dodge, Inc. and Affiliated Companies (the "Company"), which are under common
ownership and management, as of December 31, 1996, and the related combined
statements of income, stockholders' equity, and cash flows for the year then
ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Lake Norman Dodge,
Inc. and Affiliated Companies as of December 31, 1996, and the combined results
of their operations and their combined cash flows for the year then ended in
conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Charlotte, North Carolina

August 7, 1997

F-37

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

COMBINED BALANCE SHEETS

DECEMBER 31, 1996 AND JUNE 30, 1997

<TABLE>
<CAPTION>
DECEMBER
31, JUNE 30,
1996 1997
<S> <C> <C>
(UNAUDITED)
ASSETS (NOTE 4)
CURRENT ASSETS:
Cash and cash equivalents.................................................................... $ 3,491,358 $ 3,466,789
Receivables.................................................................................. 1,998,315 2,535,247
Inventories (Note 2)......................................................................... 23,603,843 22,778,488
Prepaid expenses............................................................................. -- 243,870
Total current assets...................................................................... 29,093,516 29,024,394
PROPERTY AND EQUIPMENT, NET (Note 3)........................................................... 485,880 566,875
OTHER ASSETS (NOTE 6):
Due from employees........................................................................... 281,497 302,628
Due from related partnership................................................................. 159,554 159,554
Total other assets........................................................................ 441,051 462,182
TOTAL ASSETS................................................................................... $30,020,447 $30,053,451
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable-floor plan (Note 2)............................................................ $25,957,314 $25,865,010
Trade accounts payable....................................................................... 1,364,121 1,351,664
Note payable to bank (Note 4)................................................................ 68,168 27,644
Other accrued liabilities.................................................................... 765,620 472,485
Current maturities of long-term debt......................................................... 142,857 71,429
Total current liabilities................................................................. 28,298,080 27,788,232
LONG-TERM DEBT (Note 4)........................................................................ 785,715 785,714
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY:
Common stock of combined companies........................................................... 75,000 75,000
Paid-in capital.............................................................................. 600,009 600,009
Retained earnings............................................................................ 261,643 804,496
Total stockholders' equity................................................................ 936,652 1,479,505
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................... $30,020,447 $30,053,451
</TABLE>

See notes to combined financial statements.

F-38

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF INCOME

YEAR ENDED DECEMBER 31, 1996 AND SIX MONTHS ENDED JUNE 30, 1996 AND 1997

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, JUNE 30,
1996 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
REVENUES:
Vehicle sales................................................................ $124,538,878 $55,071,168 $69,798,274
Finance and insurance........................................................ 3,617,296 1,773,355 1,949,987
Parts and service............................................................ 9,543,187 4,371,529 5,321,329
Total revenues............................................................ 137,699,361 61,216,052 77,069,590
COST OF SALES.................................................................. 121,806,212 53,845,015 68,272,355
GROSS PROFIT................................................................... 15,893,149 7,371,037 8,797,235
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................................... 14,215,002 6,736,729 6,937,071
DEPRECIATION AND AMORTIZATION.................................................. 88,987 37,414 46,900
OPERATING INCOME............................................................... 1,589,160 596,894 1,813,264
OTHER INCOME AND EXPENSE:
Interest expense, floor plan................................................. 1,552,250 588,951 1,185,518
Interest expense, other...................................................... 49,540 2,880 67,647
Other income................................................................. 257,747 113,277 176,322
Total other expense....................................................... 1,344,043 478,554 1,076,843
NET INCOME..................................................................... $ 245,117 $ 118,340 $ 736,421
</TABLE>

See notes to combined financial statements.

F-39

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY

YEAR ENDED DECEMBER 31, 1996 AND SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995.................................. 75 $75,000 $475,009 $728,963 $1,278,972
Capital contribution........................................ -- -- 125,000 -- 125,000
Net income.................................................. -- -- -- 245,117 245,117
Distributions to owners..................................... -- -- -- (712,437) (712,437)
BALANCE AT DECEMBER 31, 1996.................................. 75 75,000 600,009 261,643 936,652
Net income (unaudited)...................................... -- -- -- 736,421 736,421
Distributions to owners (unaudited)......................... -- -- -- (193,568) (193,568)
BALANCE AT JUNE 30, 1997 (unaudited).......................... 75 $75,000 $600,009 $804,496 $1,479,505
</TABLE>

See notes to combined financial statements.

F-40

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

COMBINED STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1996 AND THE SIX MONTHS ENDED JUNE 30, 1997

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED JUNE 30,
DECEMBER 31, 1996 1996 1997
<S> <C> <C> <C>
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................... $ 245,117 $ 118,340 $ 736,421
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Bad debts and repossessions........................................... 44,523 -- 9,910
Depreciation and amortization expense................................. 88,987 37,414 46,900
Increase in LIFO reserve.............................................. 169,316 177,898 324,486
Changes in assets and liabilities that relate to operations:
Increase in receivable.............................................. (533,128) (417,366) (546,842)
Increase (decrease) in inventories.................................. (10,887,995) 1,039,475 500,867
Increase (decrease) in prepaid expenses............................. 15,895 (271,689) (243,870)
(Increase) decrease in accounts payable............................. 109,802 (240,517) (12,456)
(Increase) decrease in notes payable floor plan..................... 13,226,616 547,291 (92,304)
(Increase) decrease in other accrued liabilities.................... 488,012 1,281,747 (293,135)
Total adjustments................................................ 2,722,028 2,154,253 (306,444)
Net cash provided by (used in) operating activities.............. 2,967,145 2,272,593 429,977
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment...................................... (282,711) (141,084) (127,895)
Advances to employees -- net............................................. (86,179) (87,558) (21,131)
Advances to related partnership -- net................................... (159,553) -- --
Net cash used in investing activities............................ (528,443) (228,642) (149,026)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank note.................................................. 100,000 100,000 --
Payments on bank note.................................................... (69,331) (30,214) (40,524)
Proceeds from long-term debt............................................. 1,000,000 1,000,000 --
Payments on long-term debt............................................... (71,429) -- (71,428)
Capital contribution..................................................... 125,000 -- --
Distributions to owners.................................................. (712,437) (540,205) (193,568)
Net cash provided by financing activities........................ 371,803 529,581 (305,520)
NET INCREASE (DECREASE) IN CASH............................................ 2,810,505 2,573,532 (24,569)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD............................. 680,853 680,853 3,491,358
CASH AND CASH EQUIVALENTS, END OF PERIOD................................... $ 3,491,358 $ 3,254,385 $ 3,466,789
SUPPLEMENTAL DISCLOSURES OF CASH FLOW:
Cash paid during the period for interest................................. $ 1,601,790 $ 591,831 $ 1,253,165
</TABLE>

See notes to combined financial statements.

F-41

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Lake Norman Dodge, Inc. and Affiliated
Companies' (the "Company") operates two automobile dealerships in the Charlotte,
North Carolina area. The Company sells new and used cars and light trucks, sells
replacement parts, provides vehicle maintenance, warranty, paint and repair
services and arranges related financing and insurance.

The combined financial statements include the accounts of Lake Norman
Dodge, Inc. ("LND") and its subsidiary, Lake Norman
Chrysler-Plymouth-Jeep-Eagle, LLC ("LNCPJE") and certain proprietorships of Phil
Gandy and Quinton Gandy. LND is 100% owned by Phil Gandy and Quinton Gandy. All
significant intercompany balances and planned transactions have been eliminated
in combination.

The combined financial statements have been prepared in connection with a
planned acquisition of the net assets of these entities by Sonic Automotive,
Inc. ("Sonic"). In May 1997, the Company signed a definitive purchase agreement
whereby its outstanding capital stock would be acquired by Sonic for
$18,200,000. This acquisition is to be effective prior to the completion of an
anticipated public offering of common stock by Sonic in 1997.

The accompanying combined financial statements reflect the financial
position, results of operations, and cash flows of each of the above listed
entities. The combination of these entities has been accounted for at historical
cost in a manner similar to a pooling-of-interest because the entities are under
common management and control. All material intercompany transactions have been
eliminated.

LNCPJE was organized on March 18, 1996, as a North Carolina limited
liability company and commenced operations on July 1, 1996. The certain
proprietorships of Phil Gandy and Quinton Gandy include commissions earned
related to sales of extended warranty contracts through LND and LNCPJE, which
were paid directly to Phil Gandy and Quinton Gandy at the option of LND and
LNCPJE. Earned commissions relating to the sales of these contracts reflect a
recurring transaction relating to the dealerships and therefore these
proprietorships have been included in the accompanying combined financial
statements.

Each dealership operates under a dealer agreement with the manufacturer
which generally restricts the location, management and ownership of the
respective dealership. The ability of the Company to acquire additional
franchises from a particular manufacturer may be limited due to certain
restrictions imposed by manufacturers. Additionally, the Company's ability to
enter into significant acquisitions may be restricted and the acquisition of the
Company's stock by third parties may be limited by the terms of the franchise
agreement.

INVENTORIES -- Inventories of new vehicles, including demonstrators, are
valued at the lower of last-in, first-out ("LIFO") cost or market. Inventories
of used vehicles are stated at the lower of first-in, first-out ("FIFO") cost or
market, and parts and accessories are stated at the lower of specific cost or
market.

PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost.
Depreciation is computed over the estimated useful lives of the assets using
primarily accelerated methods. The range of estimated useful lives is as
follows:

<TABLE>
<CAPTION>
USEFUL LIVES
<S> <C>
Parts and service equipment................................................... 5 years
Office equipment and fixtures................................................. 5-7 years
Company vehicles.............................................................. 5 years
</TABLE>

F-42

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
Leasehold improvements are amortized over the lesser of the terms of their
respective leases or the estimated useful lives of the related assets.

Expenditures for maintenance and repairs are expensed as incurred.
Significant betterments are capitalized.

INCOME TAXES -- LND has elected to be treated as an S Corporation for
federal and state income tax purposes, and LNCPJE is a limited liability company
(LLC). As such the stockholders and members, respectively, include their pro
rata share of the Company's taxable income for the year in their individual
income tax returns. The proprietorship income of Phil and Quinton Gandy combined
herein is also included in their personal income tax returns. Accordingly, no
provision for federal or state income taxes has been included in the
accompanying combined statement of income.

ADVERTISING COSTS -- The Company expenses all costs of advertising when
incurred. Advertising costs of $1,828,534 are included in operating expenses for
1996.

INTERIM FINANCIAL INFORMATION -- The accompanying unaudited financial
information for the six months ended June 30, 1997 has been prepared on
substantially the same basis as the audited financial statements, and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information set forth therein. The results
for interim periods are not necessarily indicative of the results to be expected
for the entire fiscal year.

The combined statement of income for the year ended December 31, 1996
includes expenses approximating $1,200,000 for discretionary bonuses to
stockholders determined at year end. Of this amount approximately $565,000 was
incurred through June 30, 1996. Given the planned acquisition by Sonic, it is
uncertain if a similar discretionary bonus will be awarded in 1997. As such, no
bonus has been accrued through June 30, 1997.

2. INVENTORIES AND RELATED NOTES PAYABLE -- FLOORPLAN

Inventories at December 31, 1996 and June 30, 1997 consist of the
following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
<S> <C> <C>
(UNAUDITED)
New vehicles................................................................................... $ 16,617,268 $18,626,219
Used vehicles.................................................................................. 6,437,598 3,720,437
Parts and accessories.......................................................................... 548,977 431,832
Total.......................................................................................... $ 23,603,843 $22,778,488
</TABLE>

Had the Company used the FIFO method of valuing new vehicle inventory,
inventories would have been $1,564,142 higher and pre-tax income would have been
$414,432 as of and for the year ended December 31, 1996.

All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $25,957,314 at December
31, 1996. The floor plan notes bear interest, payable monthly on the outstanding
balance, at the prime rate plus 0.5% (8.75% at December 31, 1996). Total floor
plan interest expense amounted to $1,552,250 in

F-43

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

2. INVENTORIES AND RELATED NOTES PAYABLE -- FLOORPLAN -- Continued
1996. The notes payable are due when the related vehicle is sold. As such, these
floor plan notes payable are shown as a current liability in the accompanying
balance sheet.

3. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1996 and June 30, 1997 is comprised
of the following:

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
<S> <C> <C>
(UNAUDITED)
Service equipment........................................................ $ 309,944 $ 373,652
Parts and accessory equipment............................................ 35,480 38,876
Vehicles................................................................. 11,809 53,898
Furniture and fixtures................................................... 212,155 278,479
Leasehold improvements................................................... 460,097 497,345
Total at cost............................................................ 1,029,485 1,242,250
Less accumulated depreciation............................................ (543,605) (675,375)
Property and equipment, net.............................................. $ 485,880 $ 566,875
</TABLE>

4. NOTE PAYABLE TO BANK AND LONG-TERM DEBT

The note payable with a balance of $68,168 at December 31, 1996 is due in
monthly installments of $7,172, including interest at 8.25%, through October,
1997. The note is collateralized by modular buildings used in Company
operations.

In July, 1996, the Company borrowed $1,000,000 from Chrysler Financial
Corporation. Payments of $11,905 plus interest at prime plus .5% (8.75% at
December 31, 1996) are due monthly, through July, 2003. The loan is
collateralized by a security interest in all assets of LNCPJE. Principal is due
as follows:

<TABLE>
<S> <C>
1998.......................................................................... $142,857
1999.......................................................................... 142,857
2000.......................................................................... 142,857
2001.......................................................................... 142,857
2002.......................................................................... 142,857
Thereafter.................................................................... 71,430
Total......................................................................... 785,715
Current maturities............................................................ 142,857
Long-term debt................................................................ $928,572
</TABLE>

5. OPERATING LEASES

The Company leases its operating facilities from its shareholders under
three separate leases expiring March, 2000 and June, 2001. Monthly payments
under these leases at December 31, 1996, total $83,000. One of these leases has
an option for renewal for two additional five year terms. The Company pays all
operating costs such as utilities, repairs, maintenance and insurance relating
to these facilities. Total payments made to related parties under these leases
in 1996 were $786,000 exclusive of operating costs.

F-44

<PAGE>
LAKE NORMAN DODGE, INC. AND AFFILIATED COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS -- CONTINUED

5. OPERATING LEASES -- Continued
At December 31, 1996 future minimum rental payments under these operating
leases are as follows:

<TABLE>
<CAPTION>
YEAR
<S> <C>
1997........................................................................ $ 996,000
1998........................................................................ 996,000
1999........................................................................ 996,000
2000........................................................................ 564,000
2001........................................................................ 210,000
Total................................................................ $3,762,000
</TABLE>

The Company leases automobiles through Chrysler Finance under twenty-four
and thirty-six month agreements expiring at various dates. The Company pays
monthly rental of varying amounts. In addition, the Company pays all operating
costs, including insurance, repairs, and maintenance. Payments under automobile
leases were $170,800 in 1996.

At December 31, 1996, minimum future lease payments under these leases are
as follows:

<TABLE>
<S> <C>
1997.......................................................................... $216,000
1998.......................................................................... 81,000
Total.................................................................. $297,000
</TABLE>

6. RELATED PARTIES

DUE FROM RELATED PARTIES -- Due from employees includes $219,878 due from
shareholders. These amounts bear interest at the prevailing U. S. Treasury rates
for short-term debt, are noncollateralized and have no specific repayment terms.

Amounts due from related partnership are noninterest bearing,
noncollateralized and have no specific repayment terms.

7. EMPLOYEE SAVINGS PLAN

The Company operates a savings plan under Section 401(k) of the Internal
Revenue Code. This plan allows employees to defer a portion of their income on a
pre-tax basis through plan contributions. The Company makes matching
contributions up to 2% of employee salary. Company contributions to the plan in
1996 totaled $56,800. The Company also paid plan expenses of $1,312.

F-45

<PAGE>

KEN MARKS FORD, INC.
UNAUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED
APRIL 30, 1997

(NOT COVERED BY REPORT OF INDEPENDENT AUDITORS)

F-46

<PAGE>
KEN MARKS FORD, INC.

BALANCE SHEET

APRIL 30, 1997
(UNAUDITED)

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................................................... $ 3,898,793
Receivables.................................................................................................. 1,056,650
Inventories (Note 2)......................................................................................... 11,216,499
Prepaid expenses............................................................................................. 259,633
Deferred income taxes (Note 5)............................................................................... 96,500
TOTAL CURRENT ASSETS...................................................................................... 16,528,075
PROPERTY AND EQUIPMENT (Note 3)................................................................................ 470,738
OTHER ASSETS................................................................................................... 14,000
TOTAL ASSETS................................................................................................... $17,012,813
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable -- floor plan (Note 2)......................................................................... $12,557,574
Trade accounts payable....................................................................................... 542,092
Other accrued liabilities (Note 7)........................................................................... 1,556,830
Allowance for insurance, service contract and finance income chargebacks..................................... 224,544
Income tax payable (Note 5).................................................................................. 23,948
TOTAL CURRENT LIABILITIES................................................................................. 14,904,988
DEFERRED INCOME TAXES (Note 5)................................................................................. 18,500
COMMITMENTS AND CONTINGENCIES (Notes 6 and 7)
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value, 500 shares authorized and issued.............................................. 500
Paid-in capital.............................................................................................. 423,800
Retained earnings............................................................................................ 1,665,025
Total stockholders' equity................................................................................ 2,089,325
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..................................................................... $17,012,813
</TABLE>

See notes to unaudited financial statements.

F-47

<PAGE>
KEN MARKS FORD, INC.

STATEMENT OF INCOME AND RETAINED EARNINGS

YEAR ENDED APRIL 30, 1997
(UNAUDITED)

<TABLE>
<S> <C>
REVENUES:
Vehicle sales............................................................................................... $129,162,872
Parts, service and collision repairs........................................................................ 13,116,124
Finance and insurance....................................................................................... 2,188,071
Total revenues........................................................................................... 144,467,067
COST OF SALES................................................................................................. 126,870,910
GROSS PROFIT.................................................................................................. 17,596,157
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 7)......................................................... 15,743,940
DEPRECIATION AND AMORTIZATION................................................................................. 100,771
OPERATING INCOME.............................................................................................. 1,751,446
OTHER INCOME AND EXPENSE:
Interest expense, floor plan................................................................................ 2,008,408
Other income................................................................................................ 1,023,289
Total other income and expense........................................................................... 985,119
INCOME BEFORE INCOME TAXES.................................................................................... 766,327
PROVISION FOR INCOME TAXES (Note 5)........................................................................... 300,730
NET INCOME.................................................................................................... 465,597
RETAINED EARNINGS, April 30, 1996............................................................................. 1,219,428
DIVIDENDS PAID TO STOCKHOLDERS ($40 per share)................................................................ (20,000)
RETAINED EARNINGS, April 30, 1997............................................................................. $ 1,665,025
</TABLE>

See notes to unaudited financial statements.

F-48

<PAGE>
KEN MARKS FORD, INC.

STATEMENT OF CASH FLOWS

YEAR ENDED APRIL 30, 1997
(UNAUDITED)

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................................................... $ 465,597
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization............................................................................. 100,771
Deferred income taxes..................................................................................... 16,400
Loss on disposal of property and equipment................................................................ 45,192
Change in operating assets and liabilities:
Increase in accounts receivable......................................................................... (153,935)
Decrease in inventories................................................................................. 5,197,289
Decrease in prepaid expenses............................................................................ 29,467
Decrease in due from related parties.................................................................... 134,141
Decrease in notes payable, floor plan................................................................... (3,401,972)
Increase in trade accounts payable...................................................................... 186,159
Decrease in accrued expenses and other payables......................................................... (1,022,066)
Decrease in allowance for insurance, service contract and finance income chargebacks.................... (85,104)
Decrease in income tax payable.......................................................................... (37,794)
Total adjustments.................................................................................... 1,008,548
Net cash provided by operating activities................................................................. 1,474,145
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment.......................................................................... (183,674)
Net cash used in investing activities..................................................................... (183,674)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid to stockholders............................................................................... (20,000)
Net cash used in financing activities..................................................................... (20,000)
NET INCREASE IN CASH........................................................................................... 1,270,471
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR................................................................... 2,628,322
CASH AND CASH EQUIVALENTS, END OF YEAR......................................................................... $ 3,898,793
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest..................................................................................................... $ 2,008,408
Income taxes................................................................................................. $ 322,064
</TABLE>

See notes to unaudited financial statements.

F-49

<PAGE>
KEN MARKS FORD, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

YEAR ENDED APRIL 30, 1997

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS -- Ken Marks Ford, Inc. (the Company) operates an
automobile dealership in the Tampa-Clearwater areas in Florida. The Company's
products and services include retail sales of new and used automobiles and light
trucks, wholesale sales of used automobiles and trucks, vehicle financing and
insurance and replacement parts and service.

In July 1997, the Company signed a definitive purchase agreement whereby
its outstanding capital stock would be acquired by Sonic Automotive, Inc. for
$24,982,500. This acquisition is to be effective prior to the completion of an
anticipated public offering of common stock by Sonic Automotive, Inc. in 1997.

DEALER AGREEMENTS -- The Company purchases substantially all of its new
vehicles from manufacturers at the prevailing prices charged by the manufacturer
to its franchised dealers. The Company's sales could be unfavorably impacted by
the manufacturer's unwillingness or inability to supply the dealership with an
adequate supply of new car inventory. Each dealership operates under a dealer
agreement with the manufacturer. These agreements generally restrict the
location, management and ownership of the respective dealership.

INVENTORIES -- New vehicle inventory is stated at the lower of cost or
market determined on a last-in, first-out basis (LIFO). The parts inventory is
determined using Ford's replacement cost and then adjusted on a LIFO basis using
the current year parts price index. Used vehicle inventory is valued on a
specific identification basis.

PROPERTY AND EQUIPMENT -- These assets are carried at cost. Major additions
are capitalized while maintenance and repairs which do not improve or extend the
useful life of the respective assets are expensed currently. When property is
retired or otherwise disposed of, the cost of the property is eliminated from
the asset account, accumulated depreciation is charged with an amount equal to
the depreciation provided and the difference, if any, is charged or credited to
income.

Depreciation is provided on both the straight-line and declining balance
methods over the estimated useful lives as follows:

<TABLE>
<S> <C>
Leasehold improvements.................................................................. 18-31 years
Machinery and equipment................................................................. 5-7 years
Furniture and fixtures.................................................................. 5-7 years
</TABLE>

INCOME TAXES -- Deferred income tax assets and liabilities are determined
based on the difference between financial reporting and tax basis of assets and
liabilities, and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

Concentrations of credit risk with respect to receivables are limited
primarily to automobile manufacturers and financial institutions. Credit risk
arising from trade receivables from commercial customers is reduced by the large
number of customers comprising the trade receivables balance. Trade receivables
are concentrated in the Tampa metropolitan area.

F-50

<PAGE>
KEN MARKS FORD, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS -- CONTINUED

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES -- Continued
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.

Advertising -- Advertising costs are charged to operations in the year
incurred and totaled approximately $487,000 for the year ended April 30, 1997.

2. INVENTORIES AND RELATED NOTES PAYABLE -- FLOOR PLAN

Inventories at April 30, 1997 consisted of the following:

<TABLE>
<S> <C>
New vehicles........................................................................... $ 8,431,786
Used vehicles.......................................................................... 2,341,929
Parts and accessories.................................................................. 442,784
Total.................................................................................. $11,216,499
</TABLE>

All new and certain used vehicles are pledged to collateralize floor plan
notes payable to financial institutions in the amount of $12,557,574 at April
30, 1997. The floor plan notes bear interest, payable monthly on the outstanding
balance, at the prime rate plus 1% (9.5% at April 30, 1997). Total floor plan
interest expense amounted to $2,008,408 during the year ended April 30, 1997.
The notes payable become due when the related vehicle is sold. As such, these
floor plan notes payable are shown as a current liability in the accompanying
balance sheet.

Certain inventory items collateralize the demand notes payable described in
Note 4. All new vehicles and demonstrators and substantially all parts and
accessories are purchased from Ford Motor Company.

3. PROPERTY AND EQUIPMENT

Property and equipment as of April 30, 1997 consisted of the following:

<TABLE>
<S> <C>
Parts and service equipment............................................................ $ 333,063
Furniture and fixtures................................................................. 400,152
Leasehold improvements................................................................. 481,815
1,215,030
Less accumulated depreciation.......................................................... (744,292)
Property and equipment, net............................................................ $ 470,738
</TABLE>

4. DEMAND NOTES PAYABLE

The Company has a revolving line of credit with Ford Motor Credit
Corporation in the amount of $2,500,000. At April 30, 1997, no amount was
outstanding relating to this line of credit. The line of credit is
collateralized by a blanket lien on inventory and all assets of the Company.

5. INCOME TAXES

The provision for income taxes consists of the following:

<TABLE>
<S> <C>
Current taxes.......................................................................... $ 290,930
Deferred taxes......................................................................... 9,800
Provision for income taxes............................................................. $ 300,730
</TABLE>

F-51

<PAGE>
KEN MARKS FORD, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS -- CONTINUED

5. INCOME TAXES -- Continued
Amounts for deferred income tax assets and liabilities as of April 30, 1997
are as follows:

<TABLE>
<S> <C>
Deferred tax asset -- current, primarily from differences relating to finance and
insurance reserves and allowance for bad debts....................................... $ 96,500
Deferred tax liability -- long-term, primarily from differences relating to
depreciation......................................................................... (18,500)
Net deferred tax asset................................................................. $ 78,000
</TABLE>

The effective tax rate of the Company for federal and state tax purposes
does not materially vary from the federal and state statutory rates of 34% and
5.5%, respectively.

6. CONTINGENCIES

The Company has an agreement with certain financial institutions whereby
the Company receives a portion of the finance income on contracts financed with
those institutions. Should the financial institution suffer a loss on the
contract through early pay-off, repossession or other related circumstances, the
Company would be contingently liable for a percentage of finance income
previously received. The accompanying financial statements include a liability
for estimated finance income chargebacks of $160,447 at April 30, 1997 for this
contingency.

Ford Motor Company (FMC) owns vehicles which are used as short-term rentals
for which the Company pays FMC monthly fees. A portion of the fees are applied
against the purchase price the Company must pay for the vehicles when they are
no longer used for rental. The contingent liability to FMC to purchase the
vehicles under this program was $1,771,151 at April 30, 1997.

7. COMMITMENTS AND RELATED PARTY TRANSACTIONS

The Company leases its operating facility from a corporation which is owned
by the Company's stockholders. The lease is currently on a month-to-month basis.
Rent charged to expense under this lease was $359,630 for the year ended April
30, 1997. In addition, management fees of $675,000 for the year ended April 30,
1997 were paid by the Company to the above corporation and are included in
selling, general and administrative expenses. In addition, related party
payables of $270,000 were included in other accrued liabilities at April 30,
1997.

F-52
<PAGE>

NO DEALER, SALESPERSON, OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE CLASS A
COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary................................... 3
The Offering......................................... 6
Summary Historical and Pro Forma Combined and
Consolidated Financial Data........................ 8
Risk Factors......................................... 10
The Reorganization................................... 18
The Acquisitions..................................... 18
Use of Proceeds...................................... 21
Dividend Policy...................................... 21
Capitalization....................................... 22
Dilution............................................. 23
Selected Combined And Consolidated Financial Data.... 24
Pro Forma Combined and Consolidated Financial Data... 26
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 34
Business............................................. 40
Management........................................... 56
Certain Transactions................................. 62
Principal Stockholders............................... 66
Description of Capital Stock......................... 67
Shares Eligible for Future Sale...................... 70
Underwriting......................................... 71
Legal Matters........................................ 72
Experts.............................................. 72
Additional Information............................... 73
Index to Financial Statements........................ F-1
</TABLE>

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

SHARES
SONIC AUTOMOTIVE, INC.
CLASS A COMMON STOCK

PROSPECTUS

MERRILL LYNCH & CO.

MONTGOMERY SECURITIES

WHEAT FIRST BUTCHER SINGER

, 1997

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses to be borne by the Registrant
in connection with the issuance and distribution of the securities being
registered hereby other than underwriting discounts and commissions. All the
amounts shown are estimates, except for the registration fee with the Securities
and Exchange Commission, the NASD filing fee and the NYSE fees.

<TABLE>
<S> <C>
SEC Registration fee...................................................................... $ 31,516
NASD filing fee........................................................................... 10,900
NYSE fees.................................................................................
Transfer agent and registrar fees.........................................................
Accounting fees and expenses..............................................................
Legal fees and expenses...................................................................
"Blue Sky" fees and expenses (including legal fees).......................................
Costs of printing and engraving...........................................................
Miscellaneous.............................................................................
Total..................................................................................... $
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant's Bylaws effectively provide that the Registrant shall, to
the full extent permitted by Section 145 of the General Corporation Law of the
State of Delaware, as amended from time to time ("Section 145"), indemnify all
persons whom it may indemnify pursuant thereto. In addition, the Registrant's
Amended and Restated Certificate of Incorporation eliminates personal liability
of its directors to the full extent permitted by Section 102(b)(7) of the
General Corporation Law of the State of Delaware, as amended from time to time
("Section 102(b)(7)").

Section 145 permits a corporation to indemnify its directors and officers
against expenses (including attorney's fees), judgments, fines and amounts paid
in settlements actually and reasonably incurred by them in connection with any
action, suit or proceeding brought by a third party if such directors or
officers acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, indemnification may be made only for expenses
actually and reasonably incurred by directors and officers in connection with
the defense or settlement of an action or suit and only with respect to matter
as to which they shall have acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interest of the corporation, except
that no indemnification shall be made if such person shall have been adjudged
liable to the corporation, unless and only to the extent that the court in which
the action or suit was brought shall determine upon application that the
defendant officers or directors are reasonably entitled to indemnify for such
expenses despite such adjudication of liability.

Section 102(b)(7) provides that a corporation may eliminate or limit the
personal liability of a director to the corporation or its stockholders for
monetary damages for reach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for willful or negligent conduct
in paying dividends or repurchasing stock out of other than lawfully available
funds or (iv) for any transaction from which the director derived an improper
personal benefit. No such provisions shall eliminate or limit the liability of a
director for any act or omission occurring prior to the date when such provision
becomes effective.

The Company intends to obtain, prior to the effective date of the
Registration Statement, insurance against liabilities under the Securities Act
of 1933 for the benefit of its officers and directors.

Section 7 of the Underwriting Agreement (to be filed as Exhibit 1.1 to this
Registration Statement) provides that the Underwriters severally and not jointly
will indemnify and hold harmless the Registrant and each director, officer or
controlling person of the Registrant from and against any liability caused by
any statement or omission in the Registration Statement or Prospectus based upon
information furnished to the Registrant by the Underwriters for use therein.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Except as hereinafter set forth, there have been no sales of unregistered
securities by the Registrant within the past there years.

As of January 30, 1997, as part of the original organization of the
Company, the Registrant issued to Sonic Financial Corporation 100 shares of
Common Stock of the Company (the "Original Shares") in exchange for $500 in
cash.

II-1

<PAGE>
As of June 30, 1997, as part of the Reorganization, the Registrant issued
to (i) its Chief Executive Officer, Bruton Smith, 1,657 shares of the
Registrant's Class B Common Stock in exchange for all his interests in Town &
Country Toyota and Fort Mill Ford, (ii) Sonic Financial Corporation 7,105 shares
of its Class B Common Stock in exchange for all its interests in the Original
Shares, Town & Country Ford, Fort Mill Ford, Lone Star Ford and Frontier
Plymouth-Oldsmobile-Cadillac, (iii) William S. Egan 473 shares of its Class B
Common Stock in exchange for all his interest in Town & Country Toyota, and (iv)
Bryan Scott Smith 765 shares of its Class B Common Stock in exchange for all his
interests in Town & Country Ford and Fort Mill Ford. In each such transaction,
the securities were not registered under the Securities Act, in reliance upon
the exemption from registration provided by Section 4(2) of said Act in view of
the sophistication of the foregoing purchasers, their access to material
information, the disclosures actually made to them by the Registrant and the
absence of any general solicitation or advertising.

On August , 1997, the Registrant issued to nine of its officers and
employees, pursuant to the Registrant's Stock Option Plan, options to purchase
shares of Class A Common Stock in the aggregate. Such securities were not
registered under the Securities Act because such grants were made without
consideration to the Registrant and, consequently, do not constitute offers or
sales within the meaning of Section 5 of the Securities Act.

ITEM 16. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1* Form of Class A Common Stock Certificate
4.2 Registration Rights Agreement dated as of June 30, 1997 among the Company, O. Bruton Smith, Bryan Scott
Smith, William S. Egan and Sonic Financial Corporation
5.1* Opinion letter of Parker, Poe, Adams & Bernstein, L.L.P. regarding the legality of the securities to be
registered
10.1 Form of Lease Agreement to be entered into between the Company (or its subsidiaries) and Nelson E. Bowers,
II or his affiliates
10.2* Form of Lease Agreement to be entered into between the Company (or its subsidiaries) and Marks Holding
Company, Inc.
10.3* Lease Agreement dated as of January 1, 1995 between Lone Star Ford, Inc. and Viking Investment Associates
10.4* Lease Agreement dated as of October 23, 1979 between O. Bruton Smith, Bonnie Smith and Town and Country
Ford, Inc.
10.5* North Carolina Warranty Deed dated as of April 24, 1987 between O. Bruton Smith and Bonnie Smith, as
Grantors and STC Properties, as Grantee
10.6* Lease dated January 13, 1995 between JAG Properties LLC and Jaguar of Chattanooga LLC
10.7* Lease dated October 18, 1991 by and between Nelson E. Bowers II, Thomas M. Green, Jr., and Infiniti of
Chattanooga, Inc.
10.8* Amendment to Lease Agreement dated as of January 13, 1995 among Nelson E. Bowers II, Thomas M. Green, Jr.,
JAG Properties LLC and Infiniti of Chattanooga, Inc.
10.9* Lease dated March 15, 1996 between Cleveland Properties LLC and Cleveland Chrysler-Plymouth-Jeep-Eagle LLC
10.10* Lease Agreement dated January 2, 1993 among Nelson E. Bowers II, Thomas M. Green, Jr. and Cleveland
Village Imports, Inc.
10.11* Ford Motor Credit Company Automotive Wholesale Plan Application for Wholesale Financing dated August 10,
1972 by Lone Star Ford, Inc.
10.12* Ford Motor Credit Company Automotive Wholesale Plan Application for Wholesale Financing and Security
Agreement dated August 22, 1984 by Town and Country Ford, Inc.
10.13* Long Term Debt Agreement dated October 5, 1990 between Marcus David Corporation and World Omni Financial
Corp.
10.14* Demand Promissory Note dated October 5, 1990 of Marcus David Corporation in favor of World Omni Financial
Corp.
10.15* Security Agreement & Master Credit Agreement dated April 24, 1995 between Cleveland Chrysler-
Plymouth-Jeep-Eagle LLC and Chrysler Credit Corporation
10.16* Security Agreement & Master Credit Agreement dated April 24, 1995 between Saturn of Chattanooga and
Chrysler Credit Corporation
</TABLE>

II-2

<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
10.17* Security Agreement & Master Credit Agreement dated April 24, 1995 between Nelson Bowers Ford, L.P. and
Chrysler Credit Corporation
10.18* Floor Plan Agreement dated May 6, 1996 between European Motors, LLC and NationsBank, N.A.
10.19* Floor Plan Agreement dated April 11, 1996 between KIA of Chattanooga, LLC and NationsBank, N.A.
10.20* Floor Plan Agreement dated October 17, 1996 between European Motors of Nashville, LLC and NationsBank,
N.A.
10.21* Floor Plan Agreement dated March 5, 1997 between Nelson Bowers Dodge, LLC and NationsBank, N.A.
10.22* Dealer Agreement dated August 22, 1996 between Lake Norman Chrysler-Plymouth-Jeep-Eagle, LLC and Barnett
Bank
10.23* Security Agreement & Capital Loan Agreement dated May 15, 1996 between Lake Norman Dodge, Inc and Chrysler
Financial Corp.
10.24* Security Agreement-Guaranty dated May 15, 1996 between Lake Norman Chrysler-Plymouth-Jeep-Eagle, LLC and
Chrysler Financial Corp.
10.25* Floor Plan Agreement dated September 1, 1996 between NationsBank, N.A. and Dyer & Dyer, Inc.
10.26* Security Agreement and Master Credit Agreement dated April 21, 1995 between Cleveland Village Imports,
Inc. and Chrysler Credit Corporation
10.27* Jaguar Credit Corporation Automotive Wholesale Plan Application for Wholesale Financing and Security
Agreement dated March 14, 1995 by Jaguar of Chattanooga LLC
10.28* Assignment of Joint Venture Interest in Chartown dated as of June 30, 1997 among Town and Country Ford,
Inc. SMDA LLC and Sonic Financial Corporation
10.29* Form of Employment Agreement between the Company and O. Bruton Smith
10.30 Form of Employment Agreement between the Company and Bryan Scott Smith
10.31 Form of Employment Agreement between the Company and Theodore M. Wright
10.32 Form of Employment Agreement between the Company and Nelson E. Bowers, II
10.33 Tax Allocation Agreement dated as of June 30, 1997 between the Company and Sonic Financial Corporation
10.34 Form of Sonic Automotive, Inc. Stock Option Plan
10.35 Form of Sonic Automotive, Inc. Employee Stock Purchase Plan
10.36 Subscription Agreement dated as of June 30, 1997 between O. Bruton Smith and the Company
10.37 Subscription Agreement dated as of June 30, 1997 between Sonic Financial Corporation and the Company
10.38 Subscription Agreement dated as of June 30, 1997 between Bryant Scott Smith and the Company
10.39 Subscription Agreement dated as of June 30, 1997 between William S. Egan and the Company
21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Dixon Odom & Co.
23.3 Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1 to this Registration Statement)
24 Power of Attorney (included on the signature page to this Registration Statement)
27 Financial Data Schedule
99.1 Consent of Nelson E. Bowers, II
</TABLE>

* To be furnished by Amendment.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes to provide to the
Underwriters, at the closing or closings specified in the Underwriting
Agreement, certificates in such denominations and registered in such names as
may be required by the Underwriters in order to permit prompt delivery to each
purchaser.

The undersigned Registrant hereby further undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed part of this Registration Statement as
of the time it was declared effective.

II-3

<PAGE>
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

II-4

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Charlotte, North Carolina on August
8, 1997.

SONIC AUTOMOTIVE, INC.

By:
O. BRUTON SMITH
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

POWER OF ATTORNEY

We, the undersigned directors and officers of Sonic Automotive, Inc., do
hereby constitute and appoint each of Messrs. O. Bruton Smith, Bryan Scott
Smith, and Theodore M. Wright, each with full power of substitution, our true
and lawful attorney-in-fact and agent to do any and all acts and things in our
names and in our behalf in our capacities stated below, which acts and things
either of them may deem necessary or advisable to enable Sonic Automotive, Inc.
to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with this Registration Statement, including specifically, but not
limited to, power and authority to sign for any or all of us in our names, in
the capacities stated below, any and all amendments (including post-effective
amendments) hereto and any subsequent registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission; and we do hereby ratify and confirm all that
they shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE

<S> <C> <C>
/s/ Chairman and Chief Executive Officer August 8, 1997
O. BRUTON SMITH (principal executive officer)

/s/ President, Chief Operating Officer August 8, 1997
BRYAN SCOTT SMITH and Director

/s/ Vice President, Treasurer, August 8, 1997
THEODORE M. WRIGHT Chief Financial Officer
(principal financial and
accounting officer) and
Director

/s/ Director August 8, 1997
WILLIAM R. BROOKS
</TABLE>

II-5

<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
<C> <S> <C>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1* Form of Class A Common Stock Certificate
4.2 Registration Rights Agreement dated as of June 30, 1997 among the Company, O. Bruton Smith,
Bryan Scott Smith, William S. Egan and Sonic Financial Corporation
5.1* Opinion letter of Parker, Poe, Adams & Bernstein, L.L.P. regarding the legality of the
securities to be registered
10.1 Form of Lease Agreement to be entered into between the Company (or its subsidiaries) and
Nelson E. Bowers, II or his affiliates
10.2* Form of Lease Agreement to be entered into between the Company (or its subsidiaries) and Marks
Holding Company, Inc.
10.3* Lease Agreement dated as of January 1, 1995 between Lone Star Ford, Inc. and Viking Investment
Associates
10.4* Lease Agreement dated as of October 23, 1979 between O. Bruton Smith, Bonnie Smith and Town
and Country Ford, Inc.
10.5* North Carolina Warranty Deed dated as of April 24, 1987 between O. Bruton Smith and Bonnie
Smith, as Grantors and STC Properties, as Grantee
10.6* Lease dated January 13, 1995 between JAG Properties LLC and Jaguar of Chattanooga LLC
10.7* Lease dated October 18, 1991 by and between Nelson E. Bowers II, Thomas M. Green, Jr., and
Infiniti of Chattanooga, Inc.
10.8* Amendment to Lease Agreement dated as of January 13, 1995 among Nelson E. Bowers II, Thomas M.
Green, Jr., JAG Properties LLC and Infiniti of Chattanooga, Inc.
10.9* Lease dated March 15, 1996 between Cleveland Properties LLC and Cleveland Chrysler-
Plymouth-Jeep-Eagle LLC
10.10* Lease Agreement dated January 2, 1993 among Nelson E. Bowers II, Thomas M. Green, Jr. and
Cleveland Village Imports, Inc.
10.11* Ford Motor Credit Company Automotive Wholesale Plan Application for Wholesale Financing dated
August 10, 1972 by Lone Star Ford, Inc.
10.12* Ford Motor Credit Company Automotive Wholesale Plan Application for Wholesale Financing and
Security Agreement dated August 22, 1984 by Town and Country Ford, Inc.
10.13* Long Term Debt Agreement dated October 5, 1990 between Marcus David Corporation and World Omni
Financial Corp.
10.14* Demand Promissory Note dated October 5, 1990 of Marcus David Corporation in favor of World
Omni Financial Corp.
10.15* Security Agreement & Master Credit Agreement dated April 24, 1995 between Cleveland
Chrysler-Plymouth-Jeep-Eagle LLC and Chrysler Credit Corporation
10.16* Security Agreement & Master Credit Agreement dated April 24, 1995 between Saturn of
Chattanooga and Chrysler Credit Corporation
10.17* Security Agreement & Master Credit Agreement dated April 24, 1995 between Nelson Bowers Ford,
L.P. and Chrysler Credit Corporation
10.18* Floor Plan Agreement dated May 6, 1996 between European Motors, LLC and NationsBank, N.A.
10.19* Floor Plan Agreement dated April 11, 1996 between KIA of Chattanooga, LLC and NationsBank,
N.A.
10.20* Floor Plan Agreement dated October 17, 1996 between European Motors of Nashville, LLC and
NationsBank, N.A.
10.21* Floor Plan Agreement dated March 5, 1997 between Nelson Bowers Dodge, LLC and NationsBank,
N.A.
10.22* Dealer Agreement dated August 22, 1996 between Lake Norman Chrysler-Plymouth-Jeep-Eagle, LLC
and Barnett Bank
10.23* Security Agreement & Capital Loan Agreement dated May 15, 1996 between Lake Norman Dodge, Inc
and Chrysler Financial Corp.
10.24* Security Agreement-Guaranty dated May 15, 1996 between Lake Norman Chrysler-
Plymouth-Jeep-Eagle, LLC and Chrysler Financial Corp.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT NO. DESCRIPTION PAGE NO.
<C> <S> <C>
10.25* Floor Plan Agreement dated September 1, 1996 between NationsBank, N.A. and Dyer & Dyer, Inc.
10.26* Security Agreement and Master Credit Agreement dated April 21, 1995 between Cleveland Village
Imports, Inc. and Chrysler Credit Corporation
10.27* Jaguar Credit Corporation Automotive Wholesale Plan Application for Wholesale Financing and
Security Agreement dated March 14, 1995 by Jaguar of Chattanooga LLC
10.28* Assignment of Joint Venture Interest in Chartown dated as of June 30, 1997 among Town and
Country Ford, Inc. SMDA LLC and Sonic Financial Corporation
10.29* Form of Employment Agreement between the Company and O. Bruton Smith
10.30 Form of Employment Agreement between the Company and Bryan Scott Smith
10.31 Form of Employment Agreement between the Company and Theodore M. Wright
10.32 Form of Employment Agreement between the Company and Nelson E. Bowers, II
10.33 Tax Allocation Agreement dated as of June 30, 1997 between the Company and Sonic Financial
Corporation
10.34 Form of Sonic Automotive, Inc. Stock Option Plan
10.35 Form of Sonic Automotive, Inc. Employee Stock Purchase Plan
10.36 Subscription Agreement dated as of June 30, 1997 between O. Bruton Smith and the Company
10.37 Subscription Agreement dated as of June 30, 1997 between Sonic Financial Corporation and the
Company
10.38 Subscription Agreement dated as of June 30, 1997 between Bryant Scott Smith and the Company
10.39 Subscription Agreement dated as of June 30, 1997 between William S. Egan and the Company
21.1 Subsidiaries of the Company
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Dixon Odom & Co.
23.3 Consent of Parker, Poe, Adams & Bernstein L.L.P. (included in Exhibit 5.1 to this Registration
Statement)
24 Power of Attorney (included on the signature page to this Registration Statement)
27 Financial Data Schedule
99.1 Consent of Nelson E. Bowers, II
</TABLE>

* To be furnished by Amendment.

<PAGE>

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
SONIC AUTO WORLD, INC.

Sonic Auto World, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:

1. The name of the corporation is Sonic Auto World, Inc. The date of
filing of its original Certificate of Incorporation with the Secretary of State
was January 30, 1997.

2. This Amended and Restated Certificate of Incorporation amends and
restates the Certificate of Incorporation of this corporation in its entirety as
follows:

ARTICLE I

NAME

The name of the corporation is Sonic Automotive, Inc. (the
"Corporation").

ARTICLE II

REGISTERED OFFICE AND AGENT

The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of the Corporation's registered agent at such address is The
Corporation Trust Company.

ARTICLE III

PURPOSE

The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

ARTICLE IV

CAPITAL STOCK

SECTION 4.01. AUTHORIZED CAPITAL STOCK. The aggregate number of shares
of capital stock which the Corporation shall have authority to issue is
sixty-eight million (68,000,000) shares divided into the following classes:

<PAGE>

(a) Fifty million (50,000,000) shares of Class A Common Stock
with a par value of one cent ($0.01) per share (the "Class A Common Stock");

(b) Fifteen million (15,000,000) shares of Class B Common
Stock with a par value of one cent ($0.01) per share (the "Class B Common
Stock"); and

(c) Three million (3,000,000) shares of Preferred Stock with a
par value of ten cents ($0.10) per share (the "Preferred Stock").

Each share of Class A Common Stock and each share of Class B Common
Stock (collectively, the "Common Stock") shall be identical in all respects and
shall have equal voting powers, preferences and relative rights, except as
otherwise provided in this Article IV.

SECTION 4.02. VOTING.

(a) Each holder of Class A Common Stock shall have one (1)
vote for each share of Class A Common Stock standing in such holder's name on
the stock transfer records of the Corporation with respect to each matter
submitted to a vote of the stockholders. Except as otherwise provided in
subparagraph (b) below, each holder of Class B Common Stock shall have ten (10)
votes for each share of Class B Common Stock standing in such holder's name on
the stock transfer records of the Corporation with respect to each matter
submitted to a vote of the stockholders. Except as otherwise required by law,
the holders of the Class A Common Stock and the holders of the Class B Common
Stock shall in all matters vote together as a single class; provided, however,
that the affirmative vote of the holders of a majority of the shares of the
Class A Common Stock and/or the holders of a majority of the shares of the Class
B Common Stock, each voting separately as a class, as applicable, is required in
order to increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class, or modify
or change the powers, preferences or special rights of the shares of such class
so as to affect such class adversely.

(b) Each holder of Class A Common Stock and Class B Common
Stock shall have one (1) vote for each share of Class A Common Stock or Class B
Common Stock, as the case may be, standing in such holder's name on the stock
transfer records of the Corporation on the following matters proposed or
approved by the Board of Directors of the Corporation or proposed by or on
behalf of the holders of Class B Common Stock or as to which any member of the
Smith Group (as hereinafter defined) or any affiliate thereof has a material
financial interest other than as a then-existing stockholder of the Corporation:

(i) Any vote by the stockholders of the Corporation
on any Rule 13e-3 transaction as such term is defined in Rule 13e-3 promulgated
under the Securities Exchange Act of 1934;

(ii) Any vote by the stockholders of the Corporation
on any sale or other disposition of all or substantially all of the assets of
the Corporation to any other Person;

<PAGE>

(iii) Any vote by the stockholders of the Corporation
on any sale or transfer of assets which would cause the Corporation's business
to no longer be primarily oriented toward automobile dealership operations and
related activities; and

(iv) Any vote by the stockholders of the Corporation
on any merger or consolidation of the Corporation in which the holders of the
Corporation's Common Stock will own less than 50% of the Common Stock following
such transaction.

An "affiliate" is defined as (1) any individual or entity who
or that, directly or indirectly, controls, is controlled by, or is under common
control with any member of the Smith Group, (2) any corporation or organization
(other than the Corporation or a majority-owned subsidiary of the Corporation)
of which any member of the Smith Group is an officer, partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of voting
securities, or in which any member of the Smith Group has a substantial
beneficial interest, (3) a voting trust or similar arrangement pursuant to which
any member of the Smith Group generally controls the vote of the shares of
Common Stock held by or subject to such trust or arrangement, (4) any other
trust or estate in which any member of the Smith Group has a substantial
beneficial interest or as to which any member of the Smith Group serves as
trustee or a similar fiduciary capacity, or (5) any relative or spouse of any
member of the Smith Group or any relative of such spouse, who has the same
residence as any member of the Smith Group.

SECTION 4.03. CONVERSION OF CLASS B COMMON STOCK. Each share of Class B
Common Stock shall be convertible, at the option of the holder thereof, into one
fully paid and nonassessable share of Class A Common Stock. Any such conversion
may be effected by any holder of Class B Common Stock at any time, and from time
to time, by surrendering such holder's certificate or certificates representing
the Class B Common Stock to be converted, duly endorsed, at the office of the
Corporation or any duly appointed and acting transfer agent for the Class B
Common Stock, as applicable, together with a written notice to the Corporation
at such office that such holder elects to convert all or a specified number of
shares of Class B Common Stock represented by such certificate and stating the
name or names in which such holder desires the certificate or certificates
representing the Class A Common Stock to be issued. Any certificate for shares
surrendered for conversion shall be accompanied by instruments of transfer, in
form satisfactory to the Corporation, duly executed by the holder of such shares
or the duly authorized representative of such holder. Promptly thereafter, the
Corporation shall issue and deliver to such holder or such holder's nominee or
nominees a certificate or certificates for the number of shares of Class A
Common Stock to which such holder shall be entitled as herein provided. Such
conversion shall be deemed to have been made immediately and automatically at
the closing of business on the date of receipt by the Corporation or any such
transfer agent, and the person or persons entitled to receive the Class A Common
Stock issuable on such conversion shall be treated for all purposes as the
record holder or holders of such Class A Common Stock at the close of business
on that date. A number of shares of Class A Common Stock equal to the number of
shares of Class B Common Stock outstanding from time to time shall be set aside
and reserved for issuance upon conversion of shares of Class B Common Stock.
Class A Common Stock shall have no conversion rights.

<PAGE>

SECTION 4.04. LIMITATIONS ON TRANSFERABILITY OF CLASS B COMMON STOCK;
DEEMED CONVERSIONS.

(a) A member of the Smith Group who owns shares of Class B
Common Stock (a "Class B Stockholder") may transfer, directly or indirectly,
shares of Class B Common Stock, whether by sale, assignment, gift or otherwise,
only to another member of the Smith Group, and no Class B Stockholder may
otherwise transfer beneficial ownership of any shares of Class B Common Stock.
In the event of any attempted transfer of the beneficial ownership of any shares
of Class B Common Stock in violation of the limitation provided in the preceding
sentence, the shares of Class B Common Stock with respect to which the transfer
of such beneficial ownership has been attempted shall be deemed to have been
converted automatically, without further deed or action by or on behalf of any
person, into shares of Class A Common Stock. Notwithstanding the foregoing, in
the event of a deemed conversion of Class B Common Stock to Class A Common Stock
pursuant to the provisions of this Section 4.04(a), the transfer resulting in
such deemed conversion shall be effective with respect to the Class A Common
Stock issued pursuant thereto.

(b) If the total number of shares of Common Stock held by
members of the Smith Group is less than 15% of the total number of shares of
Common Stock outstanding, all of the outstanding shares of Class B Common Stock
shall automatically be deemed converted to Class A Common Stock.

A member of the Smith Group consists of the following persons:

(i) Mr. O. Bruton Smith and his guardian,
conservator, committee, or attorney in fact;

(ii) Mr. William S. Egan and his guardian,
conservator, committee, or attorney in fact;

(iii) each lineal descendant of Messrs. Smith and
Egan (each, a "Descendant") and their respective guardians, conservators,
committees, or attorneys in fact;

(iv) each Family Controlled Entity (as hereinafter
defined).

The term "Family Controlled Entity" means:

(i) any not for profit corporation if at least 80% of
its Board of Directors is composed of Mr. Smith, Mr. Egan and/or Descendants;

(ii) any other corporation if at least 80% of the
value of its outstanding equity is owned by members of the Smith Group;

(iii) any partnership if at least 80% of the value of
the partnership interests are owned by members of the Smith Group; and

<PAGE>

(iv) any limited liability or similar company if at
least 80% of the value of the company is owned by members of the Smith Group.

Notwithstanding anything to the contrary set forth herein, any
holder of Class B Common Stock may pledge such shares to a pledgee pursuant to a
bona fide pledge of such shares as collateral security for indebtedness due to
the pledgee; provided, however, that such shares may not be transferred to or
registered in the name of the pledgee unless such pledgee is a member of the
Smith Group. In the event of foreclosure or other similar action by the pledgee,
such pledged shares shall automatically, without any act or deed on the part of
the Corporation or any other person, be deemed converted into shares of Class A
Common Stock unless within five (5) business days after such foreclosure or
similar event such pledged shares are returned to the pledgor or transferred to
a member of the Smith Group. The foregoing provisions of this paragraph shall
not be deemed to restrict or prevent any transfer of such shares by operation of
law upon incompetence, death, dissolution or bankruptcy of any Class B
Stockholder or any provision of law providing for, or judicial order of,
forfeiture, seizure or impoundment.

(c) Any transferee of shares of Class B Common Stock pursuant
to a transfer made in violation of this Section 4.04 or pursuant to the last
sentence of Section 4.04(b) other than to a member of the Smith Group shall have
no rights as a holder of Class B Common Stock and no other rights against or
with respect to the Corporation except the right to receive, in accordance with
this Section 4.04, shares of Class A Common Stock upon the conversion of such
transferred shares.

(d) Shares of Class B Common Stock shall not be issuable to
any person other than a member of the Smith Group. Notwithstanding any other
provision of this Amended and Restated Certificate of Incorporation, the
Corporation shall, to the fullest extent permitted by law, be entitled to issue
shares of Class B Common Stock to any member of the Smith Group from time to
time.

(e) The Corporation and any transfer agent of Class B Common
Stock may, as a condition to the transfer or the registration of any transfer of
shares of Class B Common Stock permitted by this Section 4.04 require the
furnishing of such affidavits or other proof as they deem necessary to establish
that such transferee is a member of the Smith Group.

(f) For purposes of this Section 4.04, the term "beneficial
ownership" in respect of shares of Class B Common Stock shall mean possession of
the power of authority, either singly or jointly with another, to vote or
dispose of, or to direct the voting or disposition of, such shares and the term
"beneficial owner" in respect of shares of Class B Common Stock shall mean the
person or persons who possess such power and authority.

SECTION 4.05. DIVIDENDS AND DISTRIBUTIONS ON COMMON STOCK.

(a) Subject to the preferential rights, if any, of the holders
of Preferred Stock, holders of Class A Common Stock and Class B Common Stock
shall be entitled to share ratably as a single class in all dividends and other
distributions of cash, shares of capital stock of the Corporation, other
securities of the Corporation or any other company, or any other right or
property

<PAGE>

as may be declared thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor.

(b) Dividends may be paid in shares of Class A Common Stock or
Class B Common Stock, but shares of Class A Common Stock may be paid only to
holders of Class A Common Stock and shares of Class B Common Stock may be paid
only to holders of Class B Common Stock and the same number of shares shall be
paid in respect of each outstanding share of Class A Common Stock and Class B
Common Stock.

(c) In the event the Corporation shall be liquidated (either
partially or completely), dissolved or wound up, whether voluntarily or
involuntarily, each share of Class A Common Stock and Class B Common Stock shall
be entitled to an equal distribution of net assets.

(d) Whenever the Corporation shall (i) declare a dividend on
shares of any class of Common Stock in shares of such class of Common Stock or
in securities convertible into or exchangeable for shares of such class of
Common Stock, (ii) subdivide the outstanding shares of any class of Common
Stock, (iii) combine the outstanding shares of any class of Common Stock into a
smaller number of shares, or (iv) issue any shares of any class of Common Stock
upon reclassification of such shares, an identical dividend, subdivision,
combination or other adjustment shall be made with respect to the outstanding
shares of the other class or classes of Common Stock.

(e) In any merger, consolidation, or business combination
involving the Corporation or any subsidiary of the Corporation, the
consideration to be received per share by the holders of Class A Common Stock
and Class B Common Stock must be identical for each class of stock, except that
in any such transaction in which shares of Common Stock are to be distributed,
such shares may differ as to voting rights to the extent that voting rights now
differ among the Class A Common Stock and Class B Common Stock.

SECTION 4.06. PREFERRED STOCK.

The Preferred Stock may be issued from time to time in one or
more series, each series to have distinctive designations. The powers,
preferences and rights of each such series of Preferred Stock and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series of Preferred Stock at any time outstanding.
The Board of Directors is hereby expressly granted the authority to cause the
Preferred Stock to be issued in one or more series and, with respect to each
such series, to fix by resolutions, the following characteristics prior to the
issuance thereof:

(a) The designation of the series, which may be by
distinguishing number, letter or title;

(b) The number of shares of the series, which number the Board
of Directors may (except as otherwise provided in the creation of the series)
increase or decrease (but not below the number of shares thereof then
outstanding);

<PAGE>

(c) The voting rights of the shares of the series, which
rights may be full or limited, or which shares may be without voting power;

(d) The dividend rights of the shares of the series, if any,
including without limitation the dividend rates, the dividend payment dates,
whether dividends will be cumulative, adding conditions for payment and any
payment preferences in relation to the dividends payable on any other class or
classes or series of stock of the Corporation;

(e) The redemption rights, if any, and the price or prices for
the shares of the series;

(f) Sinking funds requirements, if any, for the purchase or
redemption of shares of the series;

(g) Rights upon liquidation, dissolution, or winding up of the
Corporation or upon the distribution of the assets of the Corporation;

(h) Whether the shares of the series shall be convertible into
shares of any other class or classes or into shares of any other series of the
same or of any other class or classes of stock, and if so, the conversion price,
any adjustments thereof and all other terms and conditions upon which such
conversion may be made; and

(i) Such other powers, preferences, rights, qualifications,
limitations or restrictions as the Board of Directors shall determine;

all as shall be stated in the Resolution or Resolutions of the Board of
Directors providing for the issuance of such series of preferred stock.

The relative powers, preferences and rights of each series of
Preferred Stock in relation to the powers, preferences and rights of each other
series of Preferred Stock shall, in each case, be as fixed from time to time by
the Board of Directors in the resolution or resolutions adopted pursuant to the
authority granted in this Section 4.06, and the consent, by class or series vote
or otherwise, of the holders of Preferred Stock of such of the series of
Preferred Stock as are from time to time outstanding shall not be required for
the issuance by the Corporation, acting at the direction of the Board of
Directors, of any other series of Preferred Stock, regardless of whether the
powers, preferences and rights of such series shall be fixed by the Board of
Directors as senior to, or on a parity with, the powers, preferences and rights
of such outstanding series, or any of them, unless and to the extent that the
Board of Directors may provide in such resolution or resolutions adopted with
respect to any series of Preferred Stock that the consent of the holders of a
majority (or such other proportions as shall be therein fixed) of the
outstanding shares of such series voting thereon shall be required for the
issuance of any or all other series of Preferred Stock.

The shares of any series of Preferred Stock that (i) have been
redeemed by the Corporation in accordance with the express terms thereof, (ii)
are purchased in satisfaction of any sinking fund requirement provided for
shares of such series, or (iii) are converted in accordance with the express
terms thereof, in each case shall be cancelled and not reissued. Any shares of
Preferred

<PAGE>

Stock otherwise acquired by the Corporation shall resume the status of
authorized and unissued shares of Preferred Stock without series designation.

SECTION 4.07. NO PREEMPTIVE RIGHTS. No holder of shares of any class of
stock of the Corporation shall, as such holder, have any preemptive right to
purchase shares of any class of stock of the Corporation or shares or other
securities convertible into or exchangeable for or carrying rights or options to
purchase shares of any class of stock of the Corporation, whether such class of
stock, shares or other securities are now or hereafter authorized, which at any
time may be proposed to be issued by the Corporation or subjected to rights or
options to purchase granted by the Corporation.

ARTICLE V

STOCKHOLDER ACTION

No action required to be taken or that may be taken at an annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a meeting,
to the taking of any action is specifically denied.

ARTICLE VI

CONFLICTS OF INTEREST

Transactions between the Corporation and its affiliates must be no less
favorable to the Corporation than would be available to the Corporation in
arm's-length transactions dealing with an unrelated third party. In addition,
the Corporation may not enter into transactions between the Corporation and its
affiliates involving aggregate payments in excess of $500,000 unless (i) the
transaction has been approved by a majority of the members of the Corporation's
Board of Directors and a majority of the Corporation's independent directors, or
(ii) the Corporation has received an opinion as to the financial fairness of the
transaction from an investment banking or appraisal firm of national standing.

ARTICLE VII

AMENDMENT OF BYLAWS

In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the Bylaws of the Corporation by a majority vote at any regular or
special meeting of the Board of Directors or by written consent, subject to the
power of the stockholders of the Corporation to amend or repeal any Bylaw
whether adopted by the Board of Directors or the stockholders.

<PAGE>

ARTICLE VIII

LIMITATION OF LIABILITY

No director of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except that the foregoing provision shall not
eliminate or limit the liability of a director (i) for any breach of such
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which such director derived an
improper personal benefit. If the Delaware General Corporation Law hereafter is
amended to authorize the further elimination or limitation on personal liability
of directors, then the liability of a director of the Corporation, in addition
to the limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law.

ARTICLE IX

AMENDMENT OF CERTIFICATE OF INCORPORATION

Any of the provisions of this Amended and Restated Certificate of
Incorporation may, from time to time, be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws
and subject to the provisions of Section 4.02 hereof, all rights at any time
conferred upon the stockholders of the Corporation by this Amended and Restated
Certificate of Incorporation are granted subject to the provisions of this
Article IX.

ARTICLE X

ELECTIONS OF DIRECTORS

Elections of directors need not be by written ballot unless and except
to the extent that the Bylaws of the Corporation shall so require.

3. This Restated Certificate of Incorporation has been duly adopted by
unanimous written consent of the stockholders in accordance with the applicable
provisions of Sections 228, 242 and 245 of the General Corporation Law of the
State of Delaware.

4. This Restated Certificate of Incorporation shall be effective on
filing with the Secretary of State of the State of Delaware.

<PAGE>

IN WITNESS WHEREOF, Sonic Auto World, Inc. has caused its
corporate seal to be hereunto affixed and this Amended and Restated Certificate
of Incorporation to be signed by Bryan Scott Smith, its President, and attested
by Theodore M. Wright, its Secretary, this 7th day of August, 1997.

SONIC AUTO WORLD, INC.

By: /s/
Bryan Scott Smith, President

ATTEST:

By /s/
Theodore M. Wright, Secretary

<PAGE>

BYLAWS

SONIC AUTOMOTIVE, INC.

<PAGE>

TABLE OF CONTENTS

Page

<S> <C>
ARTICLE 1 - REGISTERED AND OTHER OFFICES..........................................................................1
SECTION 1.01. REGISTERED OFFICE.........................................................................1
SECTION 1.02. OTHER OFFICES.............................................................................1

ARTICLE 2 - MEETINGS OF STOCKHOLDERS..............................................................................1
SECTION 2.01. ANNUAL MEETINGS...........................................................................1
SECTION 2.02. SPECIAL MEETINGS..........................................................................1
SECTION 2.03. NOTICE OF MEETINGS........................................................................2
SECTION 2.04. STOCKHOLDER LIST..........................................................................2
SECTION 2.05. QUORUM....................................................................................2
SECTION 2.06. VOTING....................................................................................2
SECTION 2.07. NO ACTION WITHOUT A MEETING...............................................................3
SECTION 2.08. ADVANCE NOTICE OF DIRECTOR NOMINATIONS
AND OTHER BUSINESS............................................................3

ARTICLE 3 - DIRECTORS.............................................................................................4
SECTION 3.01. POWERS....................................................................................4
SECTION 3.02. NUMBER AND TERM...........................................................................4
SECTION 3.03. RESIGNATIONS..............................................................................5
SECTION 3.04. VACANCIES.................................................................................5
SECTION 3.05. REMOVAL...................................................................................5
SECTION 3.06. MEETINGS; PLACE AND TIME..................................................................5
SECTION 3.07. REGULAR ANNUAL MEETING....................................................................5
SECTION 3.08. OTHER REGULAR MEETINGS....................................................................6
SECTION 3.09. SPECIAL MEETINGS; NOTICE..................................................................6
SECTION 3.10. QUORUM....................................................................................6
SECTION 3.11. ACTION WITHOUT MEETING....................................................................6
SECTION 3.12. TELEPHONE MEETINGS........................................................................6
SECTION 3.13. COMMITTEES OF DIRECTORS...................................................................6
SECTION 3.14. COMPENSATION OF DIRECTORS.................................................................7
SECTION 3.15. DIRECTOR CONFLICTS OF INTEREST............................................................7

ARTICLE 4 - OFFICERS..............................................................................................7
SECTION 4.01. OFFICERS..................................................................................7
SECTION 4.02. CHAIRMAN; CHIEF EXECUTIVE OFFICER.........................................................8
SECTION 4.03. PRESIDENT.................................................................................8
SECTION 4.04. CHIEF OPERATING OFFICER..................................................................8
SECTION 4.05. CHIEF FINANCIAL OFFICER..................................................................8
SECTION 4.06. VICE PRESIDENTS OR EXECUTIVE VICE PRESIDENTS.............................................8
SECTION 4.07. TREASURER.................................................................................8
SECTION 4.08. SECRETARY.................................................................................9

<PAGE>

SECTION 4.09. CONTROLLER, ASSISTANT TREASURERS
AND ASSISTANT SECRETARIES.....................................................9
SECTION 4.10. REMOVAL; RESIGNATIONS; VACANCIES..........................................................9
SECTION 4.11. COMPENSATION..............................................................................9
SECTION 4.12. MECHANICAL ENDORSEMENT....................................................................9

ARTICLE 5 - MISCELLANEOUS........................................................................................10
SECTION 5.01. STOCK CERTIFICATES.......................................................................10
SECTION 5.02. STOCKHOLDERS RECORD DATE.................................................................11
SECTION 5.03. REGISTERED STOCKHOLDERS..................................................................11
SECTION 5.04. DIVIDENDS................................................................................11
SECTION 5.05. SEAL.....................................................................................11
SECTION 5.06. FISCAL YEAR..............................................................................11
SECTION 5.07. CHECKS...................................................................................12
SECTION 5.08. NOTICE AND WAIVER OF NOTICE..............................................................12
SECTION 5.09. BOOKS AND RECORDS........................................................................12

ARTICLE 6 - INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS...........................................................................12
SECTION 6.01. INDEMNIFICATION..........................................................................12
SECTION 6.02. PROCEDURE FOR INDEMNIFICATION OF
DIRECTORS AND OFFICERS.......................................................13
SECTION 6.03. PAYMENT OF EXPENSES IN ADVANCE...........................................................14
SECTION 6.04. INDEMNIFICATION NOT EXCLUSIVE............................................................14
SECTION 6.05. OTHER....................................................................................14
SECTION 6.06. INDEMNIFICATION AGREEMENTS...............................................................14
SECTION 6.07. INSURANCE................................................................................14
SECTION 6.08. CONTINUED COVERAGE.......................................................................14

ARTICLE 7- AMENDMENTS............................................................................................15

ARTICLE 8- CONFLICT OF TERMS.....................................................................................15
</TABLE>

<PAGE>

BYLAWS

SONIC AUTOMOTIVE, INC.

ARTICLE 1 - REGISTERED AND OTHER OFFICES

SECTION 1.01. REGISTERED OFFICE.

The address of the initial registered office in the State of Delaware
and the name of the initial registered agent of Sonic Automotive, Inc. (the
"Corporation") at such address are set forth in the Restated Certificate of
Incorporation of the Corporation (the "Certificate of Incorporation"). The
Corporation may, from time to time, designate a different address as its
registered office or a different person as its registered agent, or both;
provided, however, that such designation shall become effective upon the filing
of a statement of such change with the Department of State of the State of
Delaware as is required by law.

SECTION 1.02. OTHER OFFICES.

The Corporation may have other offices, either within or without the
State of Delaware, at such place or places as the Board of Directors (the
"Board") may from time to time determine or the business of the Corporation may
require.

ARTICLE 2 - MEETINGS OF STOCKHOLDERS

SECTION 2.01. ANNUAL MEETINGS.

Annual meetings of stockholders for the election of directors and for
the transaction of any other business properly brought before the stockholders
in accordance with Section 2.08 hereof shall be held at such place, either
within or without the State of Delaware, and at such time and date as the Board,
by resolution, shall determine and as set forth in the notice of the meeting.

If the date of the annual meeting shall fall upon a legal holiday, the
meeting shall be held on the next succeeding business day. At each annual
meeting, the stockholders entitled to vote shall elect directors to succeed
those directors whose term expires at such annual meeting and may transact such
other business as is properly brought before the stockholders in accordance with
Section 2.08 hereof.

SECTION 2.02. SPECIAL MEETINGS.

Special meetings of the stockholders, for any purpose, unless otherwise
prescribed by statute or by the Certificate of Incorporation, may be called only
by the Chairman of the Board and shall be called by the Secretary or any
Assistant Secretary, at the request in writing of a

<PAGE>

majority of the directors. Such request shall state the purpose of the proposed
meeting. At each special meeting, the stockholders may transact only the
business that is properly brought before the stockholders in accordance with
Section 2.08 hereof. If a special meeting is adjourned to another time or place,
the stockholders may only transact business at the adjourned meeting that may
have properly been transacted at the original meeting.

SECTION 2.03. NOTICE OF MEETINGS.

Written notice, stating the place, date and time of any annual or
special meeting, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting in accordance with Delaware law, by or at the direction of
the Board or the person or persons calling the meeting, not less than ten (10)
nor more than sixty (60) days before the date of the meeting. If mailed, then
such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, addressed to the stockholder at his address as it appears
on the stock transfer books of the Corporation.

SECTION 2.04. STOCKHOLDER LIST.

The officer or agent who has charge of the stock ledger of the
Corporation shall, at least ten (10) days before each meeting of stockholders,
prepare a complete alphabetical list of the stockholders entitled to vote at the
ensuing meeting, with the address and the number and class and series, if any,
of shares held by each. Said list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall be available for inspection at
the meeting.

SECTION 2.05. QUORUM.

Except as otherwise required by the General Corporation Law of the
State of Delaware (the "Act"), by the Certificate of Incorporation or by these
Bylaws, a majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of stockholders. When a specified
item of business is required to be voted on by a class or series of stock, a
majority of the shares of such class or series, represented in person or by
proxy, shall constitute a quorum for the transaction of such item of business by
that class or series. After a quorum has been established at a stockholders'
meeting, the subsequent withdrawal of stockholders, so as to reduce the number
of shares entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or any
adjournment thereof.

SECTION 2.06. VOTING.

If a quorum is present, the affirmative vote of a majority of the votes
cast by shares entitled to vote on the subject matter shall be the act of the
stockholders, unless the vote of a greater number or voting by class is required
by the Act, the Certificate of Incorporation or these

<PAGE>

Bylaws. Where a separate vote by class is required, the affirmative vote of a
majority of the votes cast by shares of such class shall be the act of such
class unless the vote of a greater number is required by the Act, the
Certificate of Incorporation or these Bylaws. Each outstanding share, regardless
of class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of stockholders, except as may otherwise be provided by the Act or by
the Certificate of Incorporation. The affirmative vote of a plurality of the
votes cast by shares entitled to vote on the election of directors shall be
sufficient to elect directors. Cumulative voting of shares is prohibited. A
stockholder may vote either in person or by proxy executed in writing by the
stockholder or his duly authorized attorney-in-fact.

SECTION 2.07. NO ACTION WITHOUT A MEETING.

SECTION 2.08. ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND
OTHER BUSINESS.

(a) Director Nominations. Subject to any rights of holders of Preferred
Stock, only persons who are selected and recommended by the Board of Directors
or a committee of the Board of Directors established to make nominations, or who
are nominated by stockholders in accordance with the procedures set forth in
this Section 2.08, shall be eligible for election at any annual or special
stockholders meeting. Nominations of individuals for election to the Board of
Directors of the Corporation at any annual meeting or any special meeting of
stockholders at which directors are to be elected may be made by a stockholder
of the Corporation entitled to vote for the election of directors at that
meeting as hereinafter set forth. Nominations by stockholders shall be delivered
to the Corporation in accordance with subsection 2.08(c) hereof and shall be
made by written notice (a "Nomination Notice"), which shall set forth, (i) as to
each individual nominated, (A) the name, date of birth, business address and
residence address of such individual and (B) such other information regarding
each individual nominated that is to be disclosed in solicitations of proxies
for an election of directors, or is otherwise required, in each case pursuant to
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder, and, (ii) as to the stockholder submitting the Nomination Notice and
any person acting in concert with such stockholder, (w) the name and business
address of such stockholder and each such person, (x) the name and business
address of such stockholder and each such person as they appear on the
Corporation's books along with a representation that such stockholder is a
stockholder of record of shares of the Corporation's capital stock entitled to
vote at the meeting to which the notice pertains and intends to appear in person
or by proxy at the meeting to nominate the person(s) in the notice, (y) a
description of all arrangements, understandings or relationships between the
stockholder and each nominee and any other person or persons (naming such
person(s)) pursuant to which the nomination(s) are to be made by the stockholder
and (z) the class and number of shares of the Corporation which are beneficially
owned by such stockholder and each such person. A written consent to being named
in the proxy statement as a nominee and to serving as a director of the
Corporation if elected, signed by each nominee, shall be filed with any
Nomination Notice. If the presiding officer at any meeting of the stockholders
determines that any nomination was not made in accordance with the

<PAGE>

procedures prescribed by these Bylaws, then he shall so declare to the
stockholders at the meeting, and the defective nomination shall be disregarded.

(b) Stockholder Business. At any meeting of the stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before a meeting, business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board of Directors, (b) otherwise properly brought before the
meeting by or at the direction of the Board of Directors or (c) properly brought
before the meeting by a stockholder of record (who was also a stockholder of
record at the time of giving of the notice) in accordance with the procedures
set forth in this Section 2.08. A stockholder's written notice (a "Business
Notice") shall set forth, as to each matter the stockholder proposes to bring
before the meeting: (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting, (ii) the name and business address of record of the stockholder
proposing such business, (iii) the class and number of shares of the Corporation
which are beneficially owned by the stockholder and (iv) any material interest
of the stockholder in such business. If the presiding officer at any meeting of
stockholders determines that business was not properly brought before the
meeting, then he shall so declare to the stockholders at the meeting, and any
such business not properly brought before the meeting shall not be transacted.

(c) Delivery of Notices. To be timely, any Nomination Notice or
Business Notice must be delivered to, or mailed and received at, the principal
executive office of the Corporation, (i) in the case of an annual meeting that
is called for a date that is within thirty (30) days before or after the
anniversary date of the immediately preceding annual meeting of stockholders,
not less than sixty (60) days nor more than ninety (90) days prior to such
anniversary date, and (ii) in the case of an annual meeting that is called for a
date that is not within thirty (30) days before or after the anniversary date of
the immediately preceding annual meeting, or in the case of a special meeting of
stockholders called for the purpose of electing directors, not later than the
close of business on the tenth day following the day on which notice of the date
of the meeting was mailed or public disclosure of the date of the meeting was
made, whichever occurs first.

ARTICLE 3 - DIRECTORS

SECTION 3.01. POWERS.

The business of the Corporation shall be managed by or under the
direction of the Board, which may exercise all such powers of the Corporation
and do all such lawful acts and things as are not by statute or by the
Certificate of Incorporation or by these Bylaws specifically reserved to the
shareholders.

SECTION 3.02. NUMBER AND TERM.

The Board shall consist of not less than three (3) nor more than ten
(10) directors as a majority of the Board shall from time to time specify. No
reduction in the number of directors shall have the effect of shortening the
term of any incumbent director and when so fixed such number shall continue to
be the authorized number of directors until changed in accordance

<PAGE>

herewith. The Board shall be divided into three classes, as nearly equal in
number as possible. Each of the Class I, Class II and Class III directors shall
initially be elected to serve until the 1998, 1999 and 2000 annual meetings of
stockholders, respectively, and, thereafter, the successors in each class of
directors shall be elected to serve until the third (3rd) annual meeting of
stockholders following his election and qualification. Each director shall serve
until his successor shall have been elected and qualified or until his earlier
resignation, removal or death.

SECTION 3.03. RESIGNATIONS.

Any director or member of a committee may resign at any time. Such
resignation shall be made in writing, and shall take effect at the time
specified therein, and, if no time be specified, at the time of its receipt by
the Chairman of the Board, the President or the Secretary. The acceptance of a
resignation shall not be necessary to make it effective, unless otherwise
specified therein.

SECTION 3.04. VACANCIES.

Subject to any rights of holders of Preferred Stock, any vacancy
occurring in the Board of Directors, including any vacancy created by reason of
an increase in the number of directors, removal, resignation or death, may only
be filled by the affirmative vote of a majority of the remaining directors then
in office though less than a quorum of the Board of Directors, or by a sole
remaining director, as the case may be, and the director(s) so chosen shall hold
office until the next election of the class for which such director(s) has(have)
been chosen, and until his(their) successors are duly elected and qualified, or
until his(their) earlier resignation or removal. In the event of any increase or
decrease in the number of directors, the additional or eliminated directors
shall be classified or chosen so that all classes of directors shall remain or
become as nearly equal in number as possible.

SECTION 3.05. REMOVAL.

Notwithstanding any other provision of these Bylaws to the contrary, a
director may not be removed during his term except for cause.

SECTION 3.06. MEETINGS; PLACE AND TIME.

The Board may hold meetings, both regular and special, either within or
without the State of Delaware, as it may from time to time determine.

SECTION 3.07. REGULAR ANNUAL MEETING.

A regular annual meeting of the Board shall be held immediately
following the annual meeting of stockholders at the same place or at such time
and place as shall be fixed by the vote of the stockholders at the annual
meeting and no notice of such meeting shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a majority of
such Board shall be present.

<PAGE>

SECTION 3.08. OTHER REGULAR MEETINGS.

Regular meetings of the Board may be held without notice at such time
and at such place as shall from time to time be determined by the Board.

SECTION 3.09. SPECIAL MEETINGS; NOTICE.

Special meetings of the Board may be called by the Chairman of the
Board or the President or by the written request of two (2) directors. Written
notice of the time and place of special meetings shall be given to each director
by either personal delivery, telegram, cablegram or telefax at least seven (7)
days before the meeting, or by notice mailed to each director at least ten (10)
days before the meeting. Notice of a meeting need not be given to any director
who submits a waiver of notice, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to him.

SECTION 3.10. QUORUM.

At all meetings of the Board, a majority of the directors then serving
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board, except as may be otherwise specifically provided
by statute or by the Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board, the directors present thereat may adjourn
the meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.

SECTION 3.11. ACTION WITHOUT MEETING.

Unless otherwise restricted by the Certificate of Incorporation, any
action required or permitted to be taken at any meeting of the Board, or of any
committee thereof, may be taken without a meeting, if all members of the Board
or committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.

SECTION 3.12. TELEPHONE MEETINGS.

Unless otherwise restricted by the Certificate of Incorporation,
members of the Board, or of any committee thereof, may participate in a meeting
of the Board or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.

SECTION 3.13. COMMITTEES OF DIRECTORS.

The Board may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of one or more of
the directors of the Corporation. Each such committee may be terminated by the
Board at such time as the Board may determine.

<PAGE>

SECTION 3.14. COMPENSATION OF DIRECTORS.

Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, the Board shall have the authority to fix the compensation of
directors. By resolution of the Board, the directors may be paid their expenses,
if any, of attendance at each meeting of the Board (and any committee thereof),
a fixed sum for attendance at each meeting of the Board (and any committee
thereof), and a stated salary as director. Nothing herein contained shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.

SECTION 3.15. DIRECTOR CONFLICTS OF INTEREST.

No contract or other transaction between the Corporation and one or
more of its directors or between the Corporation and any other corporation,
firm, association or entity in which one or more of the directors of this
Corporation are directors or officers or are financially interested, shall be
void or voidable solely because of such relationship or interest or solely
because such director or directors are present at or participate in the meeting
of the Board or a committee thereof which authorizes, approves or ratifies such
contract or transaction or solely because his or their votes are counted for
such purpose, if:

A. The material facts as to his or their relationship or interest and
as to the contract or transaction are disclosed or are known to the Board or
committee, and the Board or committee in good faith authorizes, approves or
ratifies the contract or transaction by the affirmative votes of a majority of
the disinterested directors, even though the disinterested directors be less
than a quorum; or

B. The material facts as to his or their relationship or interest and
as to the contract or transaction are disclosed or known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of such stockholders, or

C. The contract or transaction is fair as to the corporation at the
time it is authorized, approved or ratified by the Board, a committee or the
stockholders.

Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board or a committee thereof which
authorizes, approves or ratifies such contract or transaction.

ARTICLE 4 - OFFICERS

SECTION 4.01. OFFICERS.

The officers of the Corporation shall consist of a President, a
Treasurer and a Secretary, shall be elected by the Board and shall hold office
until their successors are elected and qualified, unless such officers resign,
die or are removed prior thereto. In addition, the Board may elect a Chairman, a
Vice Chairman, a Chief Executive Officer, a Chief Operating Officer, a Chief
Financial Officer, a Controller, one or more Vice Presidents or Executive Vice
Presidents,

<PAGE>

and such Assistant Secretaries and Assistant Treasurers or other officers as it
may deem proper. None of the officers of the Corporation need be stockholders.
The officers shall be elected at the first meeting of the Board after each
annual meeting. More than two offices may be held by the same person, except the
offices of President and Secretary, unless the Certificate of Incorporation or
these Bylaws otherwise provide. The Board shall designate the Chairman of the
Board or the President as the Chief Executive Officer of the Corporation.

SECTION 4.02. CHAIRMAN; CHIEF EXECUTIVE OFFICER.

The Chairman of the Board, if one is elected, shall preside at all
meetings of the shareholders and of the Board. The Chairman shall also have and
perform such other duties as from time to time may be assigned to him by the
Board. The Chief Executive Officer of the Corporation shall, subject to the
direction of the Board, supervise and control the business and management of the
Corporation. The Chief Executive Officer shall also have and perform such other
duties as from time to time may be assigned to him by the Board.

SECTION 4.03. PRESIDENT.

The President shall have and perform all duties incident to the office
of President and such other duties as from time to time may be assigned to him
by the Board. If designated as the Chief Executive Officer by the Board, the
President shall, subject to the direction of the Board, supervise and control
the business and management of the Corporation. If there is no Chairman, or in
his absence, the President shall preside at all meetings of the stockholders.

SECTION 4.04. CHIEF OPERATING OFFICER.

The Chief Operating Officer, if one is elected, shall have and perform
such duties as from time to time may be assigned to him by the Chief Executive
Officer.

SECTION 4.05. CHIEF FINANCIAL OFFICER.

The Chief Financial Officer, if one is elected, shall have and perform
such duties as from time to time may be assigned to him by the Chief Executive
Officer.

SECTION 4.06. VICE PRESIDENTS OR EXECUTIVE VICE PRESIDENTS.

If Vice Presidents or Executive Vice Presidents be elected, they shall
have such powers and shall perform such duties as shall be assigned to them by
the President.

SECTION 4.07. TREASURER.

The Treasurer shall be responsible for the administration of the
corporate funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Corporation. The Treasurer
shall disburse the funds of the Corporation as may be ordered by the President,
taking proper vouchers for such disbursements. He shall render to the Chairman,
the President and the Board at the regular meetings of the Board, or whenever
they may request it, an account of all his transactions as Treasurer and of the
financial condition

<PAGE>

of the Corporation. If required by the Board, he shall give the Corporation a
bond for the faithful performance of his duties in such amount and with such
surety as the Board shall prescribe.

SECTION 4.08. SECRETARY.

The Secretary shall give, or cause to be given, notice of all meetings
of stockholders and directors, and all other notices required by law or by these
Bylaws, and in case of his absence or refusal or neglect so to do, any such
notice may be given by any person thereunto directed by the Chairman of the
Board, the President or the Board. He shall record all the proceedings of the
meetings of the Corporation and of the Board in a book to be kept for that
purpose. He shall keep in safe custody the seal of the Corporation, and, when
authorized by the Board, shall affix the same to any instrument requiring it,
and when so affixed, it shall be attested by his signature or by the signature
of any Assistant Secretary.

SECTION 4.09. CONTROLLER, ASSISTANT TREASURERS AND ASSISTANT
SECRETARIES.

Controller, Assistant Treasurers and Assistant Secretaries, if any be
elected, shall have such powers and shall perform such duties as shall be
assigned to them, respectively, by the Chairman of the Board or the President.

SECTION 4.10. REMOVAL; RESIGNATIONS; VACANCIES.

Any officer elected or appointed by the Board may be removed at any
time, either for or without cause, by the affirmative vote of a majority of the
Board. Section 3.03 shall apply similarly to resignations of officers. Any
vacancy occurring in any office of the Corporation may be filled by the Board.

SECTION 4.11. COMPENSATION.

The compensation of officers of the Corporation shall be established by
the Board or any compensation committee thereof. The fact that an officer is
also a director shall not preclude such person from receiving compensation as
either a director or officer, nor shall it affect the validity of any resolution
by the Board fixing such compensation. If the Chairman of the Board is also the
Chief Executive Officer of the Corporation, the Chairman shall have authority to
establish the salaries of all other employees of the Corporation. If the
Chairman of the Board is not the Chief Executive Officer of the Corporation, the
President shall have authority to establish the salaries of all other employees
of the Corporation.

SECTION 4.12. MECHANICAL ENDORSEMENT.

The Chairman of the Board, the President, any Executive Vice President,
any Vice President, or the Secretary may authorize any endorsement on behalf of
the Corporation to be made by such mechanical means or stamps as any of such
officers may deem appropriate.

<PAGE>

ARTICLE 5 - MISCELLANEOUS

SECTION 5.01. STOCK CERTIFICATES.

(a) Issuance. The Corporation may issue the shares of stock authorized
by its Certificate of Incorporation and none other. Shares may be issued only
pursuant to a resolution adopted by the Board. Every holder of shares in the
Corporation shall be entitled to have a certificate representing all shares to
which he is entitled. No certificate shall be issued for any share until such
share is fully paid.

(b) Signatures. Certificates representing shares in the Corporation
shall be signed by or in the name of the Corporation by the Chairman or Vice
Chairman, or the President, Executive Vice President or Vice President, and by
the Secretary or an Assistant Secretary, or the Treasurer or an Assistant
Treasurer, and may be sealed with the seal of the Corporation or a facsimile
thereof. Any or all of the signatures on a certificate may be facsimile. In case
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 he were such officer,
transfer agent or registrar at the date of issue.

(c) Form. Each certificate representing shares shall state upon the
face thereof: the name of the Corporation; that the Corporation is organized
under the laws of Delaware; the name of the person or persons to whom it is
issued; the number and class of shares, and the designation of the series, if
any, which such certificate represents; and the par value of each share
represented by such certificate, or a statement that the shares are without par
value. Each certificate shall otherwise comply, in all respects, with the
requirements of the Act.

(d) Transfer of Stock. The Corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney; provided, however,
that the Corporation or its transfer agent may require the signature of such
person to be guaranteed by a commercial bank or trust company or by a member of
the New York or American Stock Exchange.

(e) Lost, Stolen or Destroyed Certificates. The Board may authorize the
Corporation to issue a new stock certificate in the place of any certificate
previously issued if the holder of record of the certificate (i) makes proof in
affidavit form that it has been lost, destroyed or wrongfully taken; (ii)
requests the issue of a new certificate before the Corporation has notice that
the certificate has been acquired by a purchaser for value in good faith and
without notice of any adverse claim; (iii) gives bond in such form, if any, as
the Corporation may direct, to indemnify the Corporation, the transfer agent and
registrar against any claim that may be made on account of the alleged loss,
destruction or theft of a certificate; and (iv) satisfies any other reasonable
requirements imposed by the Corporation.

(f) Transfer Agents; Registrars; Rules Respecting Certificate. The
Board may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars. The Board may make such further
rules and regulations as it may deem expedient concerning the issue, transfer
and registration of stock certificates of the Corporation.

<PAGE>

SECTION 5.02. STOCKHOLDERS RECORD DATE.

In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
and, with respect to record dates to be established in connection with
stockholders meetings, which shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting, or, with respect to record dates to
be established in connection with other actions, which shall not be more than
sixty (60) days prior to such other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board may fix a
new record date for the adjourned meeting.

SECTION 5.03. REGISTERED STOCKHOLDERS.

The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares, and 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, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Delaware.

SECTION 5.04. DIVIDENDS.

Subject to the provisions of the Certificate of Incorporation, the
Board may, out of funds legally available therefor at any regular or special
meeting, declare dividends upon the capital stock of the Corporation as and when
they deem expedient. Dividends may be paid in cash, in property or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation. Before declaring any dividends, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
from time to time in its discretion deems proper for working capital or as a
reserve fund to meet contingencies or for such other purpose as the Board shall
deem conducive to the interests of the Corporation, and the Board may modify or
abolish any such reserve.

SECTION 5.05. SEAL.

The corporate seal shall be circular in form and shall contain the name
of the Corporation and the words "CORPORATE SEAL, DELAWARE." Said seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
otherwise reproduced.

SECTION 5.06. FISCAL YEAR.

The fiscal year of the Corporation shall be determined by the Board.

<PAGE>

SECTION 5.07. CHECKS.

All checks, drafts, or other orders for the payment of money and notes
or other evidences of indebtedness issued in the name of the Corporation shall
be signed by such officer or officers, agent or agents of the Corporation, and
in such manner as shall be determined from time to time by resolution of the
Board. The Treasurer shall deposit all moneys and other valuables in the name
and to the credit of the Corporation in such depositories as may be authorized
by the Chairman of the Board or the President.

SECTION 5.08. NOTICE AND WAIVER OF NOTICE.

Whenever any notice is required by these Bylaws to be given, personal
notice is not meant unless expressly stated, and any notice so required shall be
deemed to be sufficient if given by depositing the same in the United States
mail, airmail postage prepaid, addressed to the person entitled thereto at his
address as it appears on the records of the Corporation, and such notice shall
be deemed to have been given on the day of such mailing. Stockholders not
entitled to vote shall not be entitled to receive notice of any meetings except
as otherwise provided by statute.

Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate of
Incorporation or these Bylaws, a waiver thereof in writing signed by the person
or person entitled to said notice, whether before or after the time stated
therein, shall be deemed proper notice.

SECTION 5.09. BOOKS AND RECORDS.

The Corporation shall keep correct and complete books and records of
accounts and shall keep minutes of the proceedings of its stockholders, the
Board and committees thereof.

ARTICLE 6 - INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS

SECTION 6.01. INDEMNIFICATION.

Any person who has been made or is made a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including an action by
or in the right of the Corporation) (hereinafter a "proceeding"), by reason of
the fact that he is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, fiduciary or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Act, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him

<PAGE>

in connection therewith; provided, however, that the Corporation shall indemnify
any such person seeking indemnification in connection with a proceeding (or part
thereof) that was initiated by such person only if such proceeding (or part
thereof) was authorized or ratified by the Board. The right to indemnification
conferred in this Section 6.01 shall be a contract right.

For purposes of this Section 6.01, reference to the "Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, fiduciaries and agents so that
any person who is or was a director, officer, fiduciary or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, shall stand in the same position under the
provisions of this Section 6.01, with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.

SECTION 6.02. PROCEDURE FOR INDEMNIFICATION OF DIRECTORS AND
OFFICERS.

Any indemnification of a director or officer of the Corporation under
Section 6.01 above or advance of expenses under Section 6.03 below shall be made
promptly, and in any event within thirty (30) days, upon the written request of
the director or officer subject to the following provisions. If a determination
by the Board that the director or officer is entitled to indemnification
pursuant to this Article 6 is required, and the Corporation fails to respond
within sixty (60) days to a written request for indemnity, the Corporation shall
be deemed to have approved the request. If the Corporation denies a written
request for indemnification or advancing of expenses, in whole or in part, or if
payment in full pursuant to such request is not made within thirty (30) days,
the right to indemnification or advances as granted by this Article 6 shall be
enforceable by the director or officer in any court of competent jurisdiction.
Such person's costs and expenses incurred in connection with successfully
establishing his or her right to indemnification, in whole or in part, in any
such action shall also be indemnified by the Corporation. It shall be a defense
to any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Act for the Corporation to indemnify the claimant for the amount claimed,
but the burden of such defense shall be on the Corporation. Neither the failure
of the Corporation (including the Board, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Act, nor
an actual determination by the Corporation (including the Board, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.

<PAGE>

SECTION 6.03. PAYMENT OF EXPENSES IN ADVANCE.

Expenses (including attorneys' fees) incurred by any person described
in Section 6.01 in defending an action, suit or proceeding referred to in
Section 6.01 above may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding as authorized by the Board in the
specific case upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Corporation as authorized in Section
6.01.

SECTION 6.04. INDEMNIFICATION NOT EXCLUSIVE.

The indemnification and right to payment of expenses in advance of
final disposition provided for under this Article 6 shall not be deemed
exclusive of (i) any other rights to which those seeking indemnification may be
entitled under any bylaw, any agreement, any insurance purchased by the
Corporation, vote of stockholders or disinterested directors or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office or (ii) the power of the Corporation to
indemnify any person who is or was an employee or agent of the Corporation or of
another corporation, joint venture, trust or enterprise that he is serving or
has served at the request of the Corporation, to the same extent and in the same
situations and subject to the same determinations with respect to directors and
officers.

SECTION 6.05. OTHER.

Any repeal or modification of this Article 6 by the stockholders of the
Corporation shall be prospective only, and shall not adversely affect the
indemnification of any officer or director of the Corporation existing at the
time of such repeal or modification.

SECTION 6.06. INDEMNIFICATION AGREEMENTS.

The Corporation may enter into indemnification agreements with its
officers and Directors.

SECTION 6.07. INSURANCE.

The Corporation may purchase and maintain insurance on behalf of any
person who is or was a Director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such and which insurance
coverage may extend indemnification protection that is broader and more
comprehensive than the indemnification benefits granted under this Article.

SECTION 6.08. CONTINUED COVERAGE.

Unless otherwise provided herein, the indemnification extended to a
person that has qualified for indemnification under the provisions of this
Article shall not be terminated when the person has ceased to be a director,
officer, employee or agent for all causes of action against

<PAGE>

the indemnified party based on acts and events occurring prior to the
termination of the relationship with the Corporation and shall inure to the
benefit of the heirs, executors and administrators of such person.

ARTICLE 7- AMENDMENTS

In furtherance and not in limitation of the powers conferred by
statute, the Board is expressly authorized to adopt, amend or repeal these
Bylaws by a majority vote at any regular or special meeting of the Board or by
written consent, subject to the power of the stockholders of the Corporation to
amend or repeal any Bylaw whether adopted by the Board or the stockholders.

ARTICLE 8- CONFLICT OF TERMS

Except as otherwise explicitly provided in these Bylaws, if any
provision contained in these Bylaws is in conflict with, inconsistent with, or
imposes greater obligations or burdens than any provision in the Certificate of
Incorporation, the provision contained in the Certificate of Incorporation shall
govern and control to the extent of such conflict, inconsistency or obligation
or burden.

<PAGE>

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") dated as of June
30, 1997, is entered into by and among SONIC AUTO WORLD, INC., a Delaware
corporation (the "COMPANY"), O. BRUTON SMITH, a resident of the State of North
Carolina, BRYAN SCOTT SMITH, a resident of the State of North Carolina, WILLIAM
S. EGAN, a resident of the State of South Carolina and SONIC FINANCIAL
CORPORATION, a North Carolina corporation (collectively, the "STOCKHOLDERS," and
each a "STOCKHOLDER").

WHEREAS, this Agreement is made in connection with the reorganization
of the Company, which occurred as of June 30, 1997 (the "REORGANIZATION");

WHEREAS, in order to induce the Stockholders to enter into certain
agreements with the Company that are a part of the Reorganization, the Company
has agreed to provide the Stockholders the registration rights set forth in this
Agreement;

WHEREAS, O. Bruton Smith, Bryan Scott Smith, William S. Egan and Sonic
Financial Corporation are each the owners of record of shares of the Company's
Class B Common Stock, par value $.01 per share (the "CLASS B COMMON STOCK");

WHEREAS, any shares of Class B Common Stock held by a Stockholder will
be converted into an equal number of shares of the Company's Class A Common
Stock, par value $.01 per share (the "CLASS A COMMON STOCK"), pursuant to the
terms of the Company's Amended and Restated Certificate of Incorporation, which
Amended and Restated Certificate of Incorporation shall be in substantially the
form of Exhibit A hereto and will be filed with the Secretary of the State of
Delaware subsequent to the execution of this Agreement (the "RESTATED
CERTIFICATE"), upon the exercise of any rights by the Stockholder granted under
this Agreement or as otherwise provided in the Restated Certificate; and

WHEREAS, the Company desires to afford the Stockholder with
registration rights with respect to such shares of Class A Common Stock as may
be received by the Stockholder pursuant to any conversion of the Stockholder's
shares of Class B Common Stock owned as of the date hereof or hereafter acquired
(the "CONVERTED COMMON STOCK");

NOW, THEREFORE, in consideration of the premises and the mutual
promises herein contained, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto agree
as follows:

1. DEFINITIONS.

REGISTRATION EXPENSES: Any and all reasonable expenses actually
incurred incident to performance of or compliance with this Agreement other than
underwriting discounts and commissions and transfer taxes, if any, incurred with
respect to the Registrable Securities.

REGISTRABLE SECURITIES: All or part of the shares of Converted Common
Stock; provided, however, that specific shares of Converted Common Stock shall
not be Registrable Securities if and to the extent that (i) a Registration
Statement with respect to such Converted Common Stock

<PAGE>

shall have been declared effective under the Securities Act and such shares of
Converted Common Stock shall have been disposed of in accordance with such
Registration Statement, (ii) such shares of Converted Common Stock shall have
been distributed to the public in accordance with Rule 144 (or any successor
provision) promulgated under the Securities Act, or (iii) such shares of
Converted Common Stock shall have been otherwise transferred to any person other
than a Stockholder and new certificates for them not bearing a legend
restricting further transfer shall have been delivered by the Company.

REGISTRATION STATEMENT: Any registration statement of the Company filed
with the SEC which applies to any of the Registrable Securities (in whole or in
part), including the prospectus included therein, all amendments and any
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.

SEC: The United States Securities and Exchange Commission.

SECURITIES ACT: The Securities Act of 1933, as amended from time to
time, or any successor statute, and the rules and regulations of the SEC
thereunder, all as in effect at the time.

2. REGISTRATION UNDER THE SECURITIES ACT: "PIGGYBACK" REGISTRATIONS.

(a) RIGHT TO "PIGGYBACK". Subject to subsection 2(d) hereof, if at any
time during the ten year period commencing upon the closing of the initial
public offering of the Class A Common Stock, the Company proposes to file a
Registration Statement under the Securities Act with respect to any offering of
the Class A Common Stock, by the Company for its own account and/or on behalf of
any of its security holders (other than (i) a registration on Form S-8 or S-4 or
any successor form, (ii) a registration relating to a transaction subject to
Rule 145 or any successor provision under the Securities Act, or (iii) any
registration of securities as it relates to an offering and sale to management
of the Company pursuant to any employee stock plan or other employee benefit
plan arrangement), then, as soon as practicable (but in no event less than
fifteen (15) days prior to the proposed date of filing such Registration
Statement), the Company shall give written notice of such proposed filing to the
Stockholder, and such notice shall offer the Stockholder the opportunity to
register such number of Registrable Securities as the Stockholder may request (a
"PIGGYBACK REGISTRATION"). Subject to subsection 2(d), the Company shall include
in such Registration Statement all Registrable Securities requested within ten
(10) days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by the Stockholder) to be
included in the registration for such offering pursuant to a Piggyback
Registration (the "STOCKHOLDER'S REQUEST"); provided, however, that if, at any
time after giving written notice of its intention to register Class A Common
Stock and prior to the effective date of the Registration Statement filed in
connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such Class A Common Stock, the
Company may, at its election, give written notice of such determination to the
holder of Registrable Securities and, thereupon, (i) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities in connection with such registration, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such Class A Common Stock; and provided further that the
Stockholder's Request

<PAGE>

shall become irrevocable ten (10) business days prior to the closing of the
offering relating to the Piggyback Registration unless otherwise agreed by the
Company.

(b) "PIGGYBACK" EXPENSES. The Registration Expenses of the holders of
Registrable Securities will be paid by the Company in a Piggyback Registration.
Underwriting discounts and commissions and transfer taxes, if any, incurred with
respect to the Registrable Securities shall be borne by the Stockholder.

(c) UNDERWRITER'S AND BOARD OF DIRECTORS' CUTBACK. Notwithstanding
subsection 2(a), if a Piggyback Registration is (1) an underwritten offering
being made on behalf of the Company, or (2) an offering that is not
underwritten, and the managing underwriter or underwriters advise the Company
that in their opinion, in the case of (1) above, or the Company's Board of
Directors makes a formal determination, such determination to be entered as a
finding in the Company's corporate records, in the case of (2) above, that in
their business judgment the number of shares of Common Stock requested to be
included in such registration exceeds the number which can be sold in such
offering or would be reasonably likely to adversely affect the price or
distribution of the Class A Common Stock offered in such offering or the timing
thereof, then the shares of Class A Common Stock to be included in such
registration shall be the number of shares of Class A Common Stock, adjusted on
a pro rata basis, that, in the opinion of such underwriter or underwriters or in
the judgment of the Board of Directors, as the case may be, can be sold without
an adverse effect on the price, distribution or timing of the Class A Common
Stock to be offered.

3. HOLD-BACK AGREEMENTS.

(a) RESTRICTIONS ON PUBLIC SALE BY THE STOCKHOLDER. During the period
from seven days prior to the effective date of any registration statement
involving an underwritten offering to 180 days after the effective date of such
registration statement effected pursuant to Section 2, each holder of
Registrable Securities will not, without the prior written consent of the
underwriters, (i) directly or indirectly, offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any share of Registrable Securities or any securities convertible
into or exercisable or exchangeable for Registrable Securities or file any
registration statement under the Securities Act (other than the Piggyback
Registration) with respect to any of the foregoing or (ii) enter into any swap
or any other agreement or transaction that transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Registrable
Securities or any securities convertible into or exchangeable for Registrable
Securities, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Registrable Securities or other securities, in
cash or otherwise.

(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY. The Company hereby
agrees that if it shall previously have received a request for registration
pursuant to Section 2, and if such previous registration shall have become
effective and shall not have been withdrawn or abandoned, the Company shall not
effect any registration of any of its securities under the Securities Act,
whether or not for sale for its own account, until a period of 180 days shall
have elapsed from the effective date of such previous registration; and the
Company shall so provide in any registration rights agreements hereafter entered
into with respect to any of its securities.

<PAGE>

4. REGISTRATION PROCEDURES. In connection with the Company's obligations under
Section 2 hereof, the Company shall use it best efforts to effect or cause to be
effected the registration of the Registrable Securities under the Securities Act
to permit offers and sales in accordance with the intended method or methods of
distribution thereof. The Company may require the Stockholder to use best
efforts to furnish to the Company such information regarding the distribution of
the Registrable Securities as the Company may from time to time reasonably
request in writing. In addition, and as a condition to the Stockholder's right
pursuant to Section 2(a), the Stockholder shall execute such underwriting
agreement and otherwise sell the Registrable Securities on the same terms as
applicable to the offering of shares pursuant to such registration generally.

5. INDEMNIFICATION.

(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify, to
the extent permitted by law, each holder of Registrable Securities, its officers
and directors and each person who controls such holder (within the meaning of
the Securities Act) as follows:

(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
prospectus contained in the Registration Statement (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided
that (subject to Section (d) below) any such settlement is effected
with the written consent of the Company; and

(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel), reasonably incurred
in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body,
commenced or threatened or any claim whatsoever based upon any such
untrue statement or omissions, or any such alleged untrue statement or
omission to the extent that any such expense is not paid under (i) or
(ii) above; provided, however, that this indemnity agreement shall not
apply to any loss, liability, claim, damage or expense to the extent
arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with
written information furnished to the Company by any indemnified party
expressly for use in the Registration Statement

<PAGE>

(or any amendment thereto), or in any preliminary prospectus or any
prospectus contained in the Registration Statement (or any amendment or
supplement thereto).

In connection with an underwritten offering, the Company will indemnify and hold
harmless each underwriter and each person, if any, who controls any underwriter
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended) to the same extent as provided
above with respect to the indemnification of the holders of Registrable
Securities.

(b) INDEMNIFICATION OF THE COMPANY AND ITS DIRECTORS AND OFFICERS. In
connection with any registration statement in which a holder of Registrable
Securities is participating, each such holder will furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with any such registration statement or prospectus and, to the
extent permitted by law, will indemnify the Company, its directors and officers
and each Person who controls the Company (within the meaning of the Securities
Act) against any losses, claims, damages, liabilities and expenses resulting
from any untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided that the obligation to indemnify will be several, not joint and
several, among such holders of Registrable Securities and the liability of each
such holder of Registrable Securities will be in proportion to and limited to
the net amount received by such holder from the sale of Registrable Securities
pursuant to such registration statement.

(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to subsection 5(a) above,
counsel to the indemnified parties shall, subject to the terms of any applicable
underwriting agreement, be selected by the Company with the consent of the
indemnified parties, such consent not to be unreasonably withheld and, in the
case of parties indemnified pursuant to subsection 5(b) above, counsel to the
indemnified parties shall be selected by the indemnifying parties with the
consent of the indemnified parties, such consent not to be unreasonably
withheld. An indemnified party may participate at its own expense in the defense
of any such action. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of judgment with respect
to any litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 5 (whether or
not the indemnified parties are actual or potential parties

<PAGE>

thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.

(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
subsection 5(a)(ii) effected without its written consent if (i) such settlement
is entered into more than 45 days after receipt by such indemnifying party of
the aforesaid request, (ii) such indemnifying party shall have received notice
of the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.

(e) CONTRIBUTION. If for any reason the foregoing indemnity is
unavailable or is insufficient to hold harmless an indemnified party under
Sections 5(a) or (b) above, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of any claim in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and the indemnified party, on the other
hand, with respect to such offering of securities. The relative fault shall be
determined by reference to, among other things: whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. If, however, the allocation provided in the second preceding sentence
is not permitted by applicable law, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative faults but also
the relative benefits of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
subsection 5(e) were to be determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the preceding sentences of this subsection 5(e). The amount paid
or payable in respect of any claim shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding anything in this subsection 5(e)
to the contrary, no indemnifying party (other than the Company) shall be
required pursuant to this Section 5 to contribute any amount in excess of the
net proceeds received by such indemnifying party from the sale of Registrable
Securities in the offering to which the losses, claims, damages or liabilities
of the indemnified parties relate, less the amount of any indemnification
payment made pursuant to Sections 5(a) and (b).

(f) SURVIVAL OF INDEMNIFICATION OBLIGATIONS. The indemnification
provided for under this Agreement will remain in full force and effect
regardless of any investigation made by or on

<PAGE>

behalf of the indemnified party or any officer, director or controlling person
or such indemnified party and will survive the transfer of securities and the
termination of this Agreement.

6. MISCELLANEOUS.

(a) NO INCONSISTENT AGREEMENTS. The Company has not entered into and
will not on or after the date of this Agreement enter into any agreement with
respect to the Class A Common Stock which is inconsistent with the rights
granted in this Agreement to the Stockholders or otherwise conflicts with the
provisions hereof.

(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the Company has obtained the written consent to such amendment,
modification, or supplement or waiver or consents to the departure of the
Stockholders.

(c) NOTICES. All notices and other communications provided for or
permitted under this Agreement shall be in writing and given by personal
delivery, or, if mailed, by certified first-class mail, postage prepaid, or by
telex or telecopier with transmission confirmed by telephone:

(i) if to a Stockholder, at the most current address given by
the Stockholder to the Company by means of a notice given in accordance
with the provisions of this Section 6(c).

(ii) if to the Company, at the most current address given by
the Company to the Stockholder by means of a notice given in accordance
with the provisions of this Section 6(c).

(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

(e) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

(f) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of North Carolina.

(g) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.

(h) SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective

<PAGE>

permitted successors and assigns of the parties hereto whether so expressed or
not. In addition, whether or not any express assignment has been made, the
provisions of this Agreement which are for the benefit of the holders of
Registrable Securities are also for the benefit of, and enforceable by, any
subsequent permitted holder of Registrable Securities. The Stockholders are
expressly permitted hereunder to assign their rights under this Agreement to any
member of the Smith Group, as defined in the Company's Restated Certificate.

[Signatures begin on the following page]

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

SONIC AUTO WORLD, INC.

By: /s/
Theodore M. Wright, Vice President

/s/
O. BRUTON SMITH

/s/
BRYAN SCOTT SMITH

/s/
WILLIAM S. EGAN

SONIC FINANCIAL CORPORATION

By: /s/
William R. Brooks, Vice President

<PAGE>

STATE OF TENNESSEE

COUNTY OF HAMILTON LEASE AGREEMENT

THIS LEASE AGREEMENT ("the Lease") is made this _____ day of
___________, 1997, by and between the ____________________ (collectively, the
"Landlord") and SONIC AUTO WORLD, INC., a Delaware corporation, (the "Tenant").
SONIC FINANCIAL CORPORATION ("Guarantor") joins in this lease solely in its
capacity as Guarantor.

WITNESSETH:

That for and in consideration of the mutual promises and agreements
herein contained, the parties herewith agree as follows:

1. Premises. The Landlord hereby leases to the Tenant, and the Tenant
hereby leases from the Landlord, subject to the conditions hereinafter
expressed, the real property more particularly described in EXHIBIT A attached
hereto and incorporated by reference herein, together with the buildings,
parking areas and all improvements thereon (collectively, the "Premises").

2. Term.

(a.) This Lease shall be for a ten (10) year period beginning
__________ ___, 1997 (the "Commencement Date"), and ending at midnight
____________ ___, 2007, unless modified or earlier terminated pursuant to the
terms hereof (the "Initial Term").

(b.) Provided that no Event of Default on the part of the
Tenant shall have occurred and be continuing, the Tenant shall have the option
to renew this Lease for two (2) additional five (5) year periods (the "Renewal
Term(s)"). Subject to Section 3(e)(iv), each Renewal Term shall automatically
commence as of the end of the Initial Term or the preceding Renewal Term, as
applicable, unless the Tenant gives the Landlord written notice of termination
not less than ninety (90) days prior to the expiration of the Initial Term or
not less than ninety (90) days prior to the expiration of the preceding Renewal
Term. As used herein, the Initial Term and the Renewal Term(s), if exercised,
shall be referred to hereinafter as the "Term" or "Lease Term".

3. Rent.

(a.) The Tenant shall pay rental monthly, in advance, on or
before the tenth (10th) day of each calendar month during the Lease Term without
notice or demand (the "Rent"). The Rent for any partial month shall be paid in
advance and prorated daily from such date to the first (1st) day of the next
calendar month. The first (1st) payment of Rent shall be due and payable on or
before the execution of this Lease. Checks shall be made payable to Landlord and
mailed or delivered to the address set forth in Section 19 below or such other
address as Landlord may designate to the Tenant in writing. All past due Rent
shall bear interest at the rate of ten

<PAGE>

twelve percent (12%) per annum, if not received by Landlord, commencing on the
tenth (10th) day of the month.

(b.) During the Initial Term, the monthly rental shall be
($ ).

(c.) During the first Renewal Term, if any, the monthly rental shall be
the Fair Market Monthly Rental (as later defined), established and fixed as the
first day of the first full calendar month of the first Renewal Term.

(d.) During the second Renewal Term, if any, the monthly rental shall
be the Fair Market Monthly Rental, established and fixed as of the first day of
the first full calendar month of the second Renewal Term.

(e.) As used herein, "Fair Market Monthly Rental" with respect to any
calculation date means the then existing fair market arms-length monthly rental
for a property substantially similar in size, nature and location to the
Premises for a five-year lease containing substantially the same terms and
conditions as the Lease. Landlord and Tenant shall negotiate in good faith as to
Fair Market Monthly Rental as follows:

(i.) Not later than one hundred eighty (180) days prior to the
expiration of the Initial Term or the first Renewal Term, as
applicable, Landlord shall notify Tenant in writing of
Landlord's proposed Fair Market Rental and the basis thereof;

(ii.) No later than the latter to occur of [A] the date one hundred
fifty (150) days prior to the expiration of the Initial Term
or the first Renewal Term, as applicable and [B] the date
thirty (30) days after the date upon which Tenant received
Landlord's written notice described in Section 3(e)(i), Tenant
shall by written notice to Landlord either accept or reject
Landlord's proposed Fair Market Monthly Rental. Failure to
timely reject shall constitute acceptance. The rejection
notice, if any, shall contain Tenant's proposed Fair Market
Monthly Rental and the basis thereof;

(iii.) No later than the latter to occur of [A] the date one hundred
twenty (120) days prior to the expiration of the Initial Term
or the first Renewal Term, as applicable and [B] the date
thirty (30) days after the date upon which Landlord received
Tenant's written notice described in Section 3(e)(ii),
Landlord shall by written notice to Tenant either accept or
reject Tenant's proposed Fair Market Monthly Rental. Failure
to timely reject shall constitute acceptance; and

(iv.) If Landlord shall reject Tenant's proposed Fair Market Monthly
Rental, then a real estate professional (broker, appraiser,
etc.)

<PAGE>

mutually agreeable to Landlord and Tenant shall select either
Landlord's proposed Fair Market Monthly Rental or Tenant's
proposed Fair Market Monthly Rental as that most closely
approximating the fair market monthly rental for a property
substantially similar to the Premises then prevailing in the
applicable real estate market. If Landlord and Tenant cannot
agree on a real estate professional, then Landlord and Tenant
shall each designate such a real estate professional and the
two designated real estate professionals shall select a third
real estate professional to make the final determination
between the two proposed Fair Market Monthly Rentals. If
Landlord's proposed Fair Market Monthly Rental shall be
designated by this third real estate professional, and
notwithstanding any earlier renewal by action or inaction of
Tenant, then Tenant may terminate the Lease as of the end of
the Initial Term or the Renewal Term, as applicable.

4. Holding Over. Should the Tenant hold over and remain in possession
of the Premises after the expiration of the Term of this Lease without the
Landlord's written consent, it shall not be deemed or construed to be a renewal
of this Lease but shall only operate to create a month-to-month tenancy-at-will
which may be terminated by either party at the end of any month upon thirty (30)
days prior written notice to the other party, and by such holding over, the
Tenant shall be deemed to have agreed to be bound by all of the terms of this
Lease; except that the Rent shall be one hundred and fifty percent (150%) of the
then current Rent.

5. Use of Leased Premises; Compliance with Laws.

(a.) The Tenant shall use the Premises for an automobile
dealership or for any other lawful purpose. The Tenant's use of the Premises
shall, subject to the right of diligent contest, comply with all laws,
ordinances, orders, regulations or zoning classifications of any lawful
governmental authority, agency or other public or private regulatory authority
(including insurance underwriters or rating bureaus) having jurisdiction over
the Premises; provided, however, that Tenant shall indemnify Landlord for any
costs which Landlord suffers as a result of any contest by Tenant of any such
law, ordinance, order, regulation or zoning classification. The Tenant shall not
perform any act or follow any practice relating to the Premises which shall
constitute a nuisance. The Tenant, without cost or expense to the Landlord,
shall make or cause to be made all alterations, additions and improvements
requiring expenditures in the nature of capital expenditures where such are
required to be made under any applicable laws, ordinances, rules or regulations,
now or hereafter adopted or extended during the Initial Term; provided, however,
such obligations of the Tenant shall be limited to costs and expenses not to
exceed $5,000 for any one item and an aggregate of $25,000 for all items during
the Initial Term. With respect to any such costs or expenses in excess of such
limitations, the bearing of such costs or expenses shall be subject to mutual
agreement of the Landlord and the Tenant. If the parties are unable to agree
mutually on any such excess costs or expenses, then either party may elect to
terminate this Lease upon 90 days written notice to the other party. During such
90-day period, the parties shall continue to negotiate towards a mutual
agreement with respect to such excess

<PAGE>

costs or expenses, it being understood that this Lease shall terminate at the
end of such 90-day period, notwithstanding failure to reach such agreement for
any reason whatsoever.

(b.) Except as described on SCHEDULE 5(B.), Landlord
represents and warrants that the Premises comply with all laws, rules and
regulations (including OSHA, CERCLA and all environmental laws, rules and
regulations) applicable zoning and other laws, ordinances, regulations and
building codes and Landlord has not received any notice of any violation thereof
which has not been remedied.

6. Tenant's Covenant to Repair. The Tenant shall, throughout the Term
of this Lease, at its sole expense, be responsible for all repairs and
maintenance of all parts and components of the Premises, including, without
limitation, the roof and structural repairs. If Tenant shall fail to make such
repairs and such failure shall continue after thirty (30) days written notice to
the Tenant of such failure, the Landlord may, but shall not be required to, make
such repairs for the Tenant's account, and the reasonable expense thereof shall
constitute and be collectible as additional rent.

7. Surrender. The Tenant shall on the last day of the Lease Term, or
upon the sooner termination of this Lease, peaceably and quietly surrender the
Premises to the Landlord, in as good condition as the Premises were when
received, ordinary wear and tear and damage by casualty excepted.

8. Alterations. No structural alteration, addition or improvement to
the Premises shall be made by the Tenant without the consent of the Landlord,
such consent not to be unreasonably withheld or delayed. Any alteration,
addition or improvement made by the Tenant and any fixtures installed as part
thereof, may, at the Tenant's sole option, remain the property of the Tenant or
become a part of the Landlord's property, upon surrender of the Premises, unless
otherwise agreed to in writing by the parties. Tenant hereby agrees to indemnify
and hold harmless Landlord from any costs which Landlord may incur as a result
of any lien on the Premises due to an alteration by Tenant.

9. Utilities and Other Services. The Premises shall be furnished with
and the Tenant shall pay for all water, steam, heat, gas, hot water,
electricity, light and other utilities ("Utilities") used on the Premises. The
Tenant shall cause the provider of the Utilities to bill Tenant directly as soon
as reasonably possible. If the Landlord provides any of the Utilities to Tenant,
the Landlord shall give the Tenant at least twenty-four (24) hours prior written
notice of any interruption or discontinuance of utility service, except in the
case of an emergency. If any services required to be furnished by the Landlord
hereunder are interrupted for more than twenty-four (24) hours and such
interruption was caused by an act or omission the Landlord, its agents or
employees or is within the Landlord's control, then all Rent shall abate until
such services are restored. If any such services provided by Landlord are not
restored within one (1) week, Tenant may, at its option, terminate this Lease.

10. Performance by Tenant of Landlord's Obligations. If the Landlord
defaults in the observance or performance of any term or covenant on the
Landlord's part to be observed or performed under any of the terms or provisions
of this Lease, and such failure shall continue for

<PAGE>

thirty (30) days after written notice from the Tenant of such failure the Tenant
may immediately or at any time thereafter and without further notice, perform
the same for the account of the Landlord, and if the Tenant makes any
expenditures or incurs any obligations for the payment of money in connection
therewith including, but not limited to, attorneys' fees in instituting,
prosecuting or defending any action or proceeding, such sums paid or obligations
incurred with interest at the rate of ten percent (10%) per annum or the highest
rate permitted by law, whichever is less and costs shall be deducted by the
Tenant from any rental due hereunder.

11. Entry. The Landlord, any mortgagee for the Premises and their
agents or representatives may enter the Premises at reasonable times during
normal business hours upon forty-eight (48) hours prior written notice for the
purpose of inspecting the Premises, performing Landlord's repair and maintenance
obligations hereunder, any work which the Landlord elects to undertake made
necessary by reason of the Tenant's default under the terms of this Lease. The
Landlord shall use its best efforts not to disturb the Tenant as a result of any
such entry by the Landlord, its employees or agents. In the case of an
emergency, Landlord may enter the Premises without notice for the purposes of
dealing with the emergency.

12. Assignment and Subletting. The Tenant may, during the Term of this
Lease, assign, mortgage or encumber this Lease or sublet or permit the Premises
or any part thereof to be used by others, without the prior written consent of
the Landlord; provided, however, that (i) if the Tenant assigns this Lease to a
person or entity other than a subsidiary or an affiliate (which means an entity
in which the Tenant has a significant ownership interest) and the agreement
between the Tenant and such third party provides for payment of rent in excess
of 110 percent (110%) of the rental payments due under this Lease (the "Excess
Payments"), then the Landlord shall be entitled to recover from the Tenant the
Excess Payments, and (ii) in no event shall any assignment, mortgage,
encumbrance or sublease release the Tenant or its assigns from its obligations
hereunder without the prior written approval of Landlord.

13. Taxes and Assessments. The Tenant shall pay all real property taxes
assessed or assessable on the Premises and the Tenant shall pay all personal
property taxes and all other taxes, license fees, assessments and charges levied
against or necessary for the operation of the Tenant's business on the Premises.
Landlord agrees to promptly give Tenant a copy of any written notices or bills
received by Landlord concerning the real property taxes. Tenant shall pay the
real property ad valorem taxes attributable to the Premises prior to
delinquency. Tenant shall have the right to protest any tax charges, valuations
or appraisals in its own name or in Landlord's name and Landlord agrees to
cooperate with Tenant if Tenant chooses to do so; provided, however, that such
protest will not result in a forfeiture of Landlord's interest in the property
and provided that Tenant shall indemnify Landlord for any costs which Landlord
suffers as a result of any contest by Tenant of any such tax charges, valuations
or appraisals.

14. Casualty.

(a.) In case of damage to or destruction of any building
forming part of the Premises or of any machinery, fixtures or equipment (except
equipment and furnishings purchased by the Tenant) used in the operation and
maintenance thereof, by fire or otherwise, the Tenant shall, with the insurance
proceeds assigned by Landlord pursuant to Section 15, but, subject to

<PAGE>

Subsection 14(c.) below, use reasonable diligence to restore, repair, replace,
rebuild, or alter the Premises as nearly as possible to the condition such
property was in immediately prior to such damage or destruction. Such
restoration, repair, replacement, rebuilding, or alteration shall be commenced
as soon as practicable after such damage or destruction, and after such work has
been commenced it shall be continuously prosecuted with reasonable diligence to
its completion. Tenant's obligations hereunder shall be limited to the amount of
any insurance proceeds received by assignment from Landlord.

(b.) If Tenant is deprived of the use of all or any portion of
the Premises by reason of such damage or the repair thereof, the Rent and any
other fees or charges payable hereunder (if any) shall be abated or
proportionately reduced according to the extent to which Tenant is deprived of
its use of the Premises. After Tenant has completed its repair of all damage and
restored the Premises to its condition immediately prior to such damage, the
abatement or proportionate reduction of Rent and other charges hereunder shall
terminate on the date which is the earlier of:

(i.) The date on which Tenant resumes normal business
operations in the Premises or the damaged portion
thereof; or

(ii.) The date which is ten (10) days after the date on
which Tenant has completed its repair and so restored
the Premises or the damaged portion thereof.

(c.) Notwithstanding any provision herein to the contrary, if
the Tenant determines, in its sole discretion, that such casualty or the repair
and restoration of the Premises is substantial and materially affects the
Tenant's business, the Tenant may elect to terminate this Lease by written
notice to the Landlord within sixty (60) days after such casualty. Tenant shall
return all insurance proceeds for restoration of the premises to Landlord in
full satisfaction of any claim by Landlord.

15. Insurance.

(a.) Tenant shall at its expense, shall maintain in force
during the Term comprehensive public liability coverage insuring Tenant and
Landlord against liability arising from Tenant's use, occupancy or maintenance
of the Premises. Tenant's coverage shall be in the amount of not less than
$5,000,000 for property damage and bodily injury to or death of one person in
any accident or occurrence and in the amount of not less than $5,000,000 for
property damage and bodily injury to or death of more than one person in any one
accident or occurrence.
Tenant may provide its coverage under a blanket coverage plan.

(b.) Tenant shall at its own expense maintain in force during
the Term (including any renewal period or holdover period) fire, casualty, and
extended coverage insurance covering the full replacement cost of the Premises
and its contents other than Tenant's personal property. Such policy shall name
Tenant only as loss payee, and Landlord hereby assigns all of its current and
future interest in all insurance proceeds from policies insuring the Premises to

<PAGE>

Tenant and agrees to execute any documents reasonably deemed necessary by Tenant
to effect such assignment.

(c.) Tenant shall maintain and pay for all fire and extended
coverage insurance on its personal property located on the Premises, including
trade fixtures, equipment, machinery, inventory or other personal property
belonging to or in the custody of Tenant. Such policy shall name Tenant as loss
payee.

(d.) All coverage maintained by Tenant pursuant to
Subparagraph (a) and (b) shall be provided by companies or trusts which may
legally provide the coverage set forth herein and shall be in form and
substance, and from a company or trust, reasonably satisfactory to Landlord and
Tenant and shall provide that coverage will not be subject to cancellation,
termination, revocation or material change except after 30 days' prior written
notice to Landlord and Tenant.

(e.) Prior to the Commencement Date of this Lease, and
thereafter upon Tenant's or Landlord's written request at least thirty (30) days
prior to the expiration dates of the expiring policies theretofore furnished
pursuant to this Lease, Landlord and Tenant shall furnish to each other
certificates of coverage and certified copies of policies pursuant to
Subparagraphs (a), (b) and (c) and both parties shall also provide certificates
to each other evidencing all renewals of such policies.

(f.) Landlord and Tenant waive and release each other of and
from any and all rights of recovery, claim, action or cause of action, against
each other, their agents, officers and employees, for any insured loss or damage
that may occur to the Premises, or personal property therein or thereon, by
reason of fire or the elements regardless of cause or origin, including
negligence of Landlord or Tenant or their agents, officers and employees to the
extent that such loss or damage is covered by proceeds from an insurance policy
or other coverage maintained hereunder and such proceeds are paid to the injured
party. Because this paragraph will preclude the assignment of any claim
mentioned in it, by way of subrogation or otherwise, to an insurance company or
any other person or provider of coverage hereunder, the parties agree
immediately to give to each insurance company which has issued to it policies of
insurance covering risks of direct physical loss (or company or trust providing
coverage hereunder), written notice of the terms of the mutual waivers contained
in this Section 15, and to have the insurance policies properly endorsed, if
necessary, to prevent the invalidation of the insurance coverage by reason of
the mutual waivers contained in this paragraph, and to secure from their
respective insurers waivers of the insurer's subrogation rights.

16. Environmental Matters.

(a.) Except as otherwise noted in Schedules 3.29 to the Asset
Purchase Agreement to which this Lease is an exhibit, Landlord represents and
warrants to Tenant that there are no chemical substances, asbestos, asbestos
containing materials, oil, gasoline, other petroleum products or by-products,
formaldehyde, polychlorinated biphenals (PCB's), lead or lead dust, fuel storage
tanks, natural or synthetic gas products or any toxic, carcinogenic,
radioactive, dangerous or hazardous material, substance, chemical, waste,
contamination or pollutant the

<PAGE>

generation, use, maintenance, storage or removal of which is regulated,
prohibited or penalized under the Resources Conservation Recovery Act ("RCRA"),
42 U.S.C. Section 6901, et seq; the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601, et seq; and
any other federal, state or local laws pertaining to so-called "hazardous
substances" or "hazardous materials" (collectively, the "Hazardous Materials")
on or within any portion of the Premises; provided, however, that minor
quantities of such substances may be used or stored by Tenant on the Premises on
the condition that such quantities and the use thereof are permitted by or are
exempt from applicable governmental regulations and such quantities shall be
excluded from the definition of Hazardous Materials.

(b.) Throughout the Term of this Lease, Landlord and Tenant
each hereby covenant and agree that they shall not cause, permit or allow any
Hazardous Materials to be placed, stored, dumped, dispensed, released,
discharged, deposited, used, transported or located on any portion of the
Premises; provided, however, that the Tenant shall be permitted to store and use
inventory of substances included within the definition of Hazardous Materials,
and wastes therefrom, so long as such substances are used in the ordinary course
of business of an automobile dealership (including without limitation, repair
and maintenance facilities).

(c.) To the extent not caused by or resulting from the acts or
omissions of Tenant, its agents, servants, employees or contractors, Landlord
agrees to immediately clean up any Hazardous Materials found on or within any
portion of the Premises and to remediate the Premises, to comply with any and
all laws, ordinances, rules or regulations regarding Hazardous Materials and
clean up thereof, and to pay for all clean up and remediation costs at no cost
to Tenant. To the extent caused by or resulting from the acts of Tenant, its
agents, servants, employees, or contractors, Tenant agrees to immediately clean
up any Hazardous Materials found on or within any portion of the Premises and,
with respect to such matters as described herein for which Tenant is
responsible, to remediate the Premises, to comply with any and all laws,
ordinances, rules or regulations regarding Hazardous Materials and clean-up
thereof, and to pay for all clean-up and remediation costs at no cost to
Landlord. Each parties' respective clean-up and/or remediation efforts as
described herein shall mean and refer to those actions which are necessary and
required under applicable laws with respect to the Hazardous Materials in
question.

(d.) To the extent that Landlord is responsible for the same
in accordance with Subparagraph (c) above, Landlord hereby agrees to indemnify,
release and hold Tenant, its successors, assigns, subtenants, officers,
directors, shareholders and employees, harmless from and against all Liabilities
(defined below) incurred in connection therewith, suffered by, incurred by or
assessed against such parties, their agents or other representatives, whether
incurred as a result of legal action taken by any governmental entity or agency,
taken by any private claimant, or taken by Tenant, before or after the
expiration of the term of this Lease as a result of the presence, disturbance,
discharge, release, removal or cleanup of any Hazardous Materials upon or under,
on or off site, associated with or flowing or originating from the Premises. To
the extent that Tenant is responsible for the same in accordance with
Subparagraph (c) above, Tenant hereby agrees to indemnify, release and hold
Landlord its successors, assigns, officers, directors, shareholders and
employees, harmless from and against all Liabilities, suffered by, incurred by
or assessed against such parties, their agents or other representatives, whether
incurred as a result of legal action taken by any governmental entity or agency,
taken by any private claimant, or

<PAGE>

taken by Landlord, before or after the expiration of the term of this Lease as a
result of the presence, disturbance, discharge, release, removal or clean-up of
any Hazardous Materials upon or under, on or off site, associated with or
flowing or originating from the Premises. The term "Liabilities" as used in this
paragraph is hereby defined as any and all liabilities, expenses, demands,
damages, punitive or exemplary damages, consequential damages, costs, cleanup
costs, response costs, losses, causes of action, claims for relief, attorneys
and other legal fees, other professional fees, penalties, fines, assessments and
charges.

17. Default; Remedies.

(a.) Upon the occurrence of any one or more of the following
events (the "Events of Default"), the party not in default shall have, at its
option, the right to exercise any rights or remedies available in this Lease, at
law or in equity. Events of Default shall be:

(i.) Tenant's failure to pay when due any Rent, or either
party's failure to pay when due any other sum of money payable hereunder, and
such failure is not cured within ten (10) days after receipt of written notice
thereof;

(ii.) Failure by either party to perform any other of the
terms, covenants or conditions contained in this Lease to be performed by such
party if not remedied within thirty (30) days after receipt of written notice
thereof, or, if such default cannot reasonably be remedied within such period,
such party does not within thirty (30) days after written notice thereof
commence such act or acts as shall be necessary to remedy the default and shall
not thereafter complete such act or acts within a reasonable time;

(iii.) Either party becomes bankrupt or insolvent, or files
any debtor proceedings, or files pursuant to any statute a petition in
bankruptcy or insolvency or for reorganization, or files a petition for the
appointment of a receiver or trustee for all or substantially all of its assets,
and such petition or appointment shall not have been set aside within sixty (60)
days from the date of such petition or appointment, or if such party makes an
assignment for the benefit of creditors, or if its interest in this Lease are
attached, seized or made subject to any other judicial seizure and such seizure
or attachment is not discharged within sixty (60) days;

(iv.) Either party fails to provide insurance coverage (or
allows such coverage to be canceled or lapse) pursuant to its obligation
hereunder; or

(v.) Breach by the Landlord of its obligations under Section
23.

(b.) In addition to its other remedies, either party, upon an
Event of Default by the other party, shall have the immediate right, after any
applicable grace period expressed herein, to (i) terminate and cancel this
Lease, (ii) pay or perform any obligation on the part of the defaulting party to
be paid or performed, upon demand, including all costs and expenses incurred (or
in the case of the Tenant, the Tenant may offset such amount(s) from any rental
due hereunder), (iii) for any sums due, collect a penalty of ten percent (10%)
of monthly Rent, and/or

<PAGE>

(iv) the right to pursue any other remedy available to the parties under the
laws of the State of Tennessee.

18. Eminent Domain. If any substantial material portion of the Premises
is taken under the power of eminent domain (including any conveyance made in
lieu thereof), then the Landlord shall, with reasonable diligence, repair and
restore the Premises to the best possible tenantable condition and the Rent
shall be equitably reduced. All compensation awarded for any taking (or the
proceeds of a private sale in lieu thereof) shall be the property of the
Landlord, whether such award is for compensation for damages to the Landlord's
or Tenant's interest in the Premises, and Tenant hereby assigns all of its
interest in any such award to Landlord; provided, however, Landlord shall not
have any interest in any separate award made to Tenant for loss of business,
moving expenses or the taking of Tenant's trade fixtures or equipment if a
separate award for such items are made to Tenant. Additionally, if the Tenant
elects in its good faith discretion, that such taking and restoration of the
Premises is substantial and materially affects the Tenant's business, the Tenant
may elect to terminate this Lease by written notice to the Landlord within sixty
(60) days after such taking.

19. Notices. All notices, approvals, requests, consents and other
communications given pursuant to this Lease shall be in writing and shall be
deemed to have been duly given (i) when actually received by the addressee if
hand delivered, sent by facsimile transmission (provided that any notice so sent
shall also be mailed to the recipient), sent by private mail or courier service
or sent by United States regular mail; or (ii) two days after the date on which
the same was deposited in a regularly maintained receptacle for the deposit of
United States mail, if sent by registered or certified mail, postage and charges
prepaid, addressed as follows or at such other address as either party may
specify from time to time by notice to the other party:

TO TENANT: Sonic Auto World, Inc.
P.O. Box 18747
Charlotte, North Carolina 28218
Attention: Theodore Wright
Telephone: (704) 532-3306
Facsimile: (704) 532-3312

TO LANDLORD: c/o John Konvalinka, Esquire
Grant, Konvalinka and Harrison, P.C.
Ninth Floor, Republic Centre
633 Chestnut Street
Chatanooga, Tennessee 37450
Telephone: (423)756-8400
Facsimile: (423) 756-0643

cc: Joel W. Richardson, Jr., Esquire
Miller & Martin
Suite 1000, Volunteer Building
832 Georgia Avenue
Chattanooga, Tennessee 37401

<PAGE>

Telephone: (423) 756-6600
Facsimile: (423) 785-8480

20. No Waiver. No course of dealing between the Landlord and the
Tenant, or any delay or omission of the Landlord or the Tenant to insist upon a
strict performance of any term or condition of this Lease shall be deemed a
waiver of any right or remedy that such party may have, and shall not be deemed
a waiver of any subsequent breach of such term or condition.

21. Tenant Property. The Tenant may install such fixtures and equipment
in the Premises as it desires, so long as such do not affect the structural
integrity of the Premises. Any such fixtures and equipment shall remain the
exclusive property of the Tenant and the Tenant shall have the right at any time
to remove any or all such fixtures and equipment; provided that the Tenant shall
repair any damage to the Premises occasioned by the removal of its fixtures and
equipment.

22. Signs. The Tenant may erect its customer signs used to identify the
business on exterior walls or the roof of the Premises, provided any such signs
conform to all such ordinances pertaining thereto.

23. Quiet Enjoyment. The Landlord covenants and agrees that the Tenant,
upon paying the rent and observing and keeping the covenants, agreements and
stipulations of this Lease on its part to be kept, shall lawfully, peaceably and
quietly hold, occupy and enjoy the Premises during the Term without hindrance,
ejection or molestation. The Landlord covenants and warrants that it is lawfully
seized of the Premises and has good, right and lawful authority to enter into
this Lease for the full term aforesaid, that the Premises are free and clear of
all encumbrances and easements other than routine utility service easements
serving the Premises and not materially and adversely affecting the Tenant's use
of the Premises and that Landlord will put the Tenant in actual possession of
the Premises on the Commencement Date.

24. Subordination. This Lease is subject and subordinate to any and all
mortgages or deeds of trust now on the Premises, and this clause shall be
self-operative without any further instrument necessary to effect such
subordination; provided, however, that such subordination of this Lease is
conditional upon the mortgagee under such mortgage, or the trustee and the
beneficiary under such deed of trust, executing and delivering to the Tenant a
commercially reasonable written instrument in recordable form providing that
this Lease will not be affected by any foreclosure or other default proceeding
under such mortgage or deed of trust. As a condition to receiving such a
non-disturbance agreement, the Tenant shall agree that this Lease will remain in
full force and effect notwithstanding such foreclosure or default proceeding,
and that it shall attorn to the mortgagee, trustee or beneficiary, or their
successors and assigns, or to the purchaser at any foreclosure sale. The
Landlord shall be responsible for paying all legal fees and expenses incurred by
Tenant in obtaining any subordination, non-disturbance and attornment agreement
described herein.

25. Brokers. The Landlord and the Tenant represent and warrant to the
other that neither of them have engaged or contracted with any person, firm or
entity to serve or act as a broker, agent or finder for the purpose of leasing
the Premises, and that no broker's or real estate

<PAGE>

or other similar commissions or fees are or shall be due in respect of the
transaction contemplated by this Lease. The Landlord and the Tenant each agrees
to indemnify, defend and save harmless the other from and against any cost and
expense, including reasonable attorney's fees, incurred by the other as a result
of the untruth of any of the foregoing representations made by it.

26. Invalidity. If any provision of this Lease shall be declared
invalid or unenforceable, the remainder of the Lease shall continue in full
force and effect.

27. Counterparts. This Lease may be executed in two (2) or more
counterparts, which taken together shall be deemed one (1) original.

28. Memorandum of Lease. The parties hereto agree not to record this
Lease. The parties agree to execute and to record in the Public Registry for
Hamilton County, Tennessee, a Memorandum of this Lease in the form attached as
EXHIBIT B.

29. Cumulative. All rights and remedies of Landlord and Tenant herein
shall be cumulative and none shall be exclusive of any other or of any rights
and remedies allowed by law.

30. Governing Law. This Lease shall be governed by, construed, and
enforced in accordance with the laws of the State of Tennessee.

31. Successors and Assigns. The covenants, terms, conditions,
provisions, and undertakings in this Lease shall extend to and be binding upon
the heirs, executors, administrators, successors, and assigns of the respective
parties hereto, and shall be construed as covenants running with the land.

32. Entire Agreement. This Lease, together with any exhibits attached
hereto, contains the entire agreement and understanding between the parties.
There are no oral understandings, terms, or conditions, and neither party has
relied upon any representation, express or implied, not contained in this Lease.
All prior understandings, terms, or conditions are deemed merged in this Lease.
This Lease cannot be changed or supplemented orally, but may be modified or
amended only by a written instrument executed by the parties. Any disputes
regarding the interpretation of any portion of this Lease shall not be
presumptively construed against the drafting party.

33. Survival. Landlord's and Tenant's indemnities set forth in
Paragraph 16 shall survive termination of this Lease.

34. Time of Essence. Time is of the essence under this Lease.

35. Attorney's Fees. In the event of litigation between the parties,
the non-prevailing party in such litigation agrees to pay an additional amount
equal to the reasonable attorney's fees of the prevailing party in such
litigation.

36. Guaranty of Lease. Guarantor hereby guarantees all of the
obligations and duties of Tenant under this Lease. Guarantor shall be
irrevocably released from this guaranty at such

<PAGE>

time as (i) Tenant shall have a net worth of $20,000,000.00 or (ii) Tenant shall
complete an initial public offering of its common stock pursuant to an effective
registration statement under the Securities Act of 1933, as amended, which
initial public offering results in net proceeds to the issuer of not less than
$50,000,000.00.

[SIGNATURE PAGE TO FOLLOW]

<PAGE>

IN WITNESS WHEREOF, Landlord and Tenant have hereunto executed this
Lease the day and year first above written.

TENANT:

SONIC AUTO WORLD, INC.
[CORPORATE SEAL]
By: ________________________________
Title: ________________________________ Attest: _____________________
_________ Secretary
LANDLORD:

[Landlord's signature bloc to be provided.]

GUARANTOR:

SONIC FINANCIAL CORPORATION
[CORPORATE SEAL]
By: ________________________________
Title: ________________________________ Attest: _____________________
_________ Secretary

<PAGE>

EMPLOYMENT AGREEMENT

R E C I T A L S

WHEREAS, Employer desires to retain the services of Employee; and
WHEREAS, Employee is prepared to perform those duties as set forth in
this Agreement.

NOW, THEREFORE, the parties intending to be legally bound agree as
follows:

1. Term of Employment. Employer hereby employs Employee, and
Employee hereby accepts employment from Employer for the period commencing
effective upon consummation of the initial public offering of Employer (the
"Commencement Date") and ending three (3) years thereafter, unless sooner
terminated pursuant to the provisions of paragraph 5 hereof (the "Employment
Period").

2. Duties of Employee. Employee shall be employed by Employer
as President and Chief Operating Officer of Sonic Auto World, Inc. and shall
report directly to the Chairman of the Company's Board of Directors. Employee's
duties shall include, but not be limited to, rendering such executive and
administrative services as the Chairman of the Board of Directors may, from time
to time, assign to Employee. Employee shall serve Employer faithfully in the
performance of Employee's duties and shall devote his full time and best efforts
to his employment, including the regularly established working hours and such
additional time as the requirements of Employer and the performance of the
Employee's duties require. Employee

<PAGE>

agrees to observe and comply with all the rules and regulations of Employer as
adopted and furnished to Employee by Employer's Board of Directors from time to
time.

3. Compensation. For all services rendered by Employee under
this Agreement, he shall be entitled to compensation in accordance with the
following:

(a) Base Salary. During the Employment Period, the
Employee shall receive an annual base salary ("Annual Base Salary") of THREE
HUNDRED THOUSAND AND NO/100 DOLLARS ($300,000.00) which shall be paid in equal
monthly installments in the amount of TWENTY-FIVE THOUSAND NO/100 DOLLARS
($25,000.00)

(b) Additional Salary and Bonus. In addition to the
Annual Base Salary as hereinabove provided, Employer shall pay to the Employee
such additional amounts as may be determined and ratified from time to time by
the Compensation Committee of Employer's Board of Directors. In determining such
additional amounts, the Compensation Committee and Employer shall seek to
provide Employee with total compensation in keeping with the market rates for
employees in similar positions, with similar businesses with similar
profitability and performance.

4. Fringe Benefits. During the Employment Period, Employee
shall receive with other similarly situated employees of the Employer, all the
fringe benefits of Employer, together with the following additional fringe
benefits:

(a) The use of one luxury demonstrator vehicle
annually of Employee's choice, including all reasonable related expenses such as
insurance, maintenance and gasoline.

(b) Medical insurance coverage for Employee and his
dependents and reimbursement of the Employee for the reasonable costs of
disability insurance with a reasonable

<PAGE>

(c) Prompt reimbursement for all reasonable employment,
travel, entertainment and other business related expenses incurred by the
Employee in accordance with the most favorable policies, practices and
procedures of the Employer and its affiliated companies in effect for the
Employee at any time during the ninety (90) day period immediately preceding the
Commencement Date or, if more favorable to the Employee, as in effect generally
at any time thereafter with respect to other peer executives of the Employer and
its affiliated companies.

(d) An office of a size and with furnishings and other
appointments, and secretarial services at least equal to the most favorable
policies, practices and procedures of the Employer and its affiliated companies
in effect for the Employee at any time during the ninety (90) day period
immediately preceding the Commencement Date or, if more favorable to the
Employee, as provided generally at any time thereafter with respect to other
peer executives of the Employer and its affiliated companies.

(e) An annual paid vacation in accordance with the most
favorable policies, practices and procedures of the Employer and its affiliated
companies as in effect for the Employee at any time during the ninety (90) day
period immediately preceding the Commencement Date or, if more favorable to the
Employee, as in effect generally at any time thereafter with respect to other
peer executives of the Employer and its affiliated companies.

<PAGE>

5. Termination of Employment. This Agreement shall terminate
as follows:

(a) Death or Disability. The Employee's employment
shall terminate automatically upon the Employee's death during the Employment
Period. If the Employer determines in good faith that the Employee becomes
unable to perform the essential functions of his position, with or without
reasonable accommodation, then Employer shall give to the Employee written
notice of its intention to terminate the Employee's employment. In such event,
the Employee's employment with the Employer shall terminate effective on the
thirtieth (30th) day after receipt of such notice by the Employee (the
"Disability Effective Date") provided that, within the thirty (30) days after
such receipt, the Employee shall not have returned to full time performance of
the Employee's duties.

(b) Cause. The Employer may terminate the Employee's
employment at any time, without notice and with immediate effect for Cause. For
purposes of this Agreement "Cause" shall mean

(i) a material breach by the Employee of
the Employee's obligations as set forth herein (other
than due to disability) which material breach is not
remedied within five (5) business days after receipt
of written notice from the Employer specifying such a
breach;

(ii) the conviction of the Employee of a
felony;

(iii) actions by Employee involving moral
turpitude;

(iv) willful failure of Employee to comply
with reasonable directives of Employer's Board of
Directors;

(v) chronic absenteeism of Employee;

<PAGE>

(vi) willful misconduct of Employee
resulting in damage to Employer;

(vii) Employee's illegal use of controlled
substances.

(c) Without Cause. Either Employee or Employer may
terminate this Agreement at any time, for any reason or without any reason. Such
a termination shall be deemed a termination "without cause."

6. Obligations of the Employer Upon Termination. The parties
agree as follows:

(a) Death or Disability. If the Employee's employment
is terminated by reason of the Employee's death or disability during the
Employment Period, Employee or Employee's estate shall be paid Employee's Annual
Base Salary together with those fringe benefits described in paragraphs 4(a) and
4(b) hereof through the end of the month during which Employee's death occurs or
during which the Disability Effective Date falls.

(b) Cause. If the Employee's employment shall be
terminated for Cause during the Employment Period, such termination for Cause
shall constitute an immediate termination of Employer's obligations pursuant to
paragraphs 3 and 4 hereof. Employee shall not be entitled to any compensation or
benefits beyond the effective date of such termination for Cause.

(c) Without Cause. If Employee's employment is
terminated by Employer without cause, then Employer shall continue to pay
Employee his Annual Base Salary together with those fringe benefits described in
paragraphs 4(a) and 4(b) hereof throughout the remaining term of this Agreement.

<PAGE>

8. Restrictive Covenants. For purposes of this Agreement,
"Restrictive Covenants" mean the provisions of this paragraph 8. It is
stipulated and agreed that Employer is engaged in the business of owning and
operating automobile and/or truck dealerships, which business includes, without
limitation, the marketing, selling and leasing of new and used vehicles and the
servicing of automobiles and trucks (the "Business"). It is further stipulated
and agreed that as a result of Employee's employment by Employer, and as a
result of Employee's continued employment hereunder, Employee has and will have
access to valuable, highly confidential, privileged and proprietary information
relating to Employer's Business, including, without limitation, existing and
future inventory information, customer lists, sales methods and techniques,
costs and costing methods, pricing techniques and strategies, sales agreements
with customers, profits and product line profitability information, unpublished
present and future

<PAGE>

In consideration of the provisions of this paragraph 8, the
compensation and benefits referred to in paragraphs 3 and 4 hereof, which
Employee acknowledges are legally sufficient to support enforceability by the
Employer of the Restrictive Covenants against Employee, Employee agrees as
follows:

(a) During the term of this Agreement and after its
termination or expiration for any reason, Employee will not, without Employer's
prior written consent, use, divulge, disclose, furnish or make accessible to any
third person, company or other entity, any aspect of the Confidential
Information (other than as required in the ordinary discharge of Employee's
duties hereunder).

(b) During the term of this Agreement and for a
period of two years after the date of the expiration or termination of this
Agreement for any reason (the "Restrictive Period"), Employee shall not,
directly or indirectly:

(i) Employ or solicit the employment of any
person who at any time during the twelve (12)
calendar months immediately preceding the termination
or expiration of this Agreement for any reason was
employed by Employer;

(ii) Provide or solicit the provision of
products or services, similar to those provided by
Employer to any person or entity within the

<PAGE>

(iii) Interfere or attempt to interfere with
the terms or other aspects of the relationship
between Employer and any person or entity from whom
Employer has purchased automobiles, trucks, parts,
supplies, inventory or services at any time during
the twelve (12) calendar months immediately preceding
the termination or expiration of this Agreement for
any reason;

(iv) Engage in competition with Employer or
its respective successors and assigns by engaging,
directly or indirectly, in a business involving the
sale or leasing of automobiles or trucks or which is
otherwise substantially similar to the Business,
within the "Restricted Territory", as hereinafter
defined; or

<PAGE>

(1) all Standard Metropolitan Statistical Areas,
as determined by the United States Office of
Management and Budget, in which Employer has
an office, store or other place of business
on the date of the expiration or termination
of this Agreement for any reason.

(2) all counties in which Employer has an office,
store or other place of business on the date
of the expiration or termination of this
Agreement for any reason.

9. Remedies. It is stipulated that a breach by Employee of the
Restrictive Covenants would cause irreparable damage to Employer. Employer, in
addition to any other rights or remedies which Employer may have, shall be
entitled to an injunction restraining Employee from violating or continuing any
violation of such Restrictive Covenants. Such right to obtain injunctive relief
may be exercised at the option of Employer, concurrently with, prior to, after
or in lieu of, the exercise of any other rights or remedies which Employer may
have as a result of any such breach or threatened breach. Employee agrees that
upon breach of any of the Restrictive Covenants, Employer shall be entitled to
an accounting and repayment of all profits, royalties, compensation, and/or
other benefits that Employee directly or indirectly has realized or may realize
as a result of, or in connection with, any such breach. Employee further agrees
that the Restrictive Period shall be extended by a period of time equal to any
period of time in which any Employee is in violation of the Restrictive
Covenants.

<PAGE>

11. Surrender of Books and Records. Employee acknowledges that
all files, records, lists, designs, specifications, books, products, plans and
other materials owned or used by Employer in connection with conduct of its
business shall at all times remain the property of Employer, and that upon
termination or expiration of this Agreement for any reason, Employee will
immediately surrender to Employer all such materials.

12. Entire Agreement. This Agreement contains the entire
agreement of the parties hereto, and shall not be modified or changed in any
respect except by a writing executed by the parties hereto.

13. Successors and Assigns. The rights and obligations of
Employee under this Agreement shall inure to the benefit of Employer, its
successors and assigns, and shall be binding upon Employee and his respective
successors, heirs and assigns. Employer shall have the right to assign,
transfer, or convey this Agreement to its affiliated companies, successor
entities, or assignees or transferees of substantially all of Employer's
business activities. This

<PAGE>

Agreement, being personal in nature to the Employee, may not be assigned by
Employee without Employer's prior written consent.

14. Notice. All notices required and permitted to be give
hereunder shall be in writing and shall be deemed to have been given when mailed
by certified or registered mail, return receipt requested, addressed to the
intended recipient as follows or at such other address as is provided by either
party to the other:

If to Employer: With a copy to:
Sonic Auto World, Inc. Edward W. Wellman, Jr.
Attention:_____________________ Parker, Poe, Adams & Bernstein, L.L.P.
P.O. Box 18747 2500 Charlotte Plaza
Charlotte, NC 28218 201 South College Street
Charlotte, NC 28244

If to Employee: With a copy to:

Bryan Scott Smith _________________________

15. Governing Law; Forum. This Agreement shall, in all
respects, be governed by and construed according to the laws of the State of
North Carolina. Any dispute or controversy arising out of or relating to this
Agreement shall also be governed by the laws of the State of North Carolina. Any
suit or other proceeding arising out of or relating to this Agreement shall be
instituted and maintained in the state courts of Mecklenburg County, North
Carolina, and the parties hereby waive any objection to such jurisdiction and
venue and irrevocably submit to the jurisdiction of such court in any such
action or proceeding. Each party

<PAGE>

shall bear its own costs and expenses, including without limitation, attorneys'
fees, in connection with any such suit or proceeding.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.

EMPLOYEE:

(SEAL)

Bryan Scott Smith

EMPLOYER:

SONIC AUTO WORLD, INC.

By: ____________________________________
Title: ____________________________________

<PAGE>

EMPLOYMENT AGREEMENT

This Employment Agreement ("Agreement") made this _____day of
_______________, 1997 between SONIC AUTOMOTIVE, INC. its successors or assigns,
subsidiary corporations or affiliates (collectively, the "Employer") and
THEODORE M. WRIGHT ("Employee").
R E C I T A L S
WHEREAS, Employer desires to retain the services of Employee; and
WHEREAS, Employee is prepared to perform those duties as set forth in
this Agreement.
NOW, THEREFORE, the parties intending to be legally bound agree as
follows:
1. Term of Employment. Employer hereby employs Employee, and
Employee hereby accepts employment from Employer for the period commencing
effective upon consummation of the initial public offering of Employer (the
"Commencement Date") and ending three (3) years thereafter, unless sooner
terminated pursuant to the provisions of paragraph 5 hereof (the "Employment
Period").
2. Duties of Employee. Employee shall be employed by Employer
as Chief Financial Officer and Vice President-Finance of Sonic Auto World, Inc.
Employee's duties shall include, but not be limited to, the duties customarily
performed by a chief financial officer of a corporation of similar size and
scope and such additional duties as may from time to time be assigned by the
Employer's Board of Directors. Employee shall serve Employer faithfully in the
performance of Employee's duties and shall devote his full time and best efforts
to his employment, including the regularly established working hours and such
additional time as the requirements of Employer and the performance of the
Employee's duties require. Employee

<PAGE>

agrees to observe and comply with all the rules and regulations of Employer as
adopted and furnished to Employee by Employer's Board of Directors from time to
time.
3. Compensation. For all services rendered by Employee under
this Agreement, he shall be entitled to compensation in accordance with the
following:
(a) Base Salary. During the Employment Period, the
Employee shall receive an annual base salary ("Annual Base Salary") of ONE
HUNDRED EIGHTY THOUSAND AND NO/100 DOLLARS ($180,000.00) which shall be paid in
equal monthly installments in the amount of FIFTEEN THOUSAND AND NO/100 DOLLARS
($15,000.00).
(b) Additional Salary and Bonus. In addition to the
Annual Base Salary as hereinabove provided, Employer shall pay to the Employee
such additional amounts as may be determined and ratified from time to time by
the Compensation Committee of Employer's Board of Directors. In determining such
additional amounts, the Compensation Committee and Employer shall seek to
provide Employee with total compensation in keeping with the market rates for
employees in similar positions, with similar businesses with similar
profitability and performance.
4. Fringe Benefits. During the Employment Period, Employee
shall receive with other similarly situated employees of the Employer, all the
fringe benefits of Employer, together with the following additional fringe
benefits:
(a) The use of one luxury demonstrator vehicle
annually of Employee's choice, including all reasonable related expenses such as
insurance, maintenance and gasoline.
(b) Medical insurance coverage for Employee and his
dependents and reimbursement of the Employee for the reasonable costs of
disability insurance with a reasonable

<PAGE>

monthly benefit for life and with a waiting period of no more than ninety (90)
days. This disability insurance shall contain other provisions so that it will
replace to the extent reasonably possible Employee's Base Salary in case
Employer terminates this Agreement upon Employee's disability as set forth
herein.
(c) Prompt reimbursement for all reasonable
employment, travel, entertainment and other business related expenses incurred
by the Employee in accordance with the most favorable policies, practices and
procedures of the Employer and its affiliated companies in effect for the
Employee at any time during the ninety (90) day period immediately preceding the
Commencement Date or, if more favorable to the Employee, as in effect generally
at any time thereafter with respect to other peer executives of the Employer and
its affiliated companies.
(d) An office of a size and with furnishings and
other appointments, and secretarial services at least equal to the most
favorable policies, practices and procedures of the Employer and its affiliated
companies in effect for the Employee at any time during the ninety (90) day
period immediately preceding the Commencement Date or, if more favorable to the
Employee, as provided generally at any time thereafter with respect to other
peer executives of the Employer and its affiliated companies.

(e) An annual paid vacation in accordance with the
most favorable policies, practices and procedures of the Employer and its
affiliated companies as in effect for the Employee at any time during the ninety
(90) day period immediately preceding the Commencement Date or, if more
favorable to the Employee, as in effect generally at any time thereafter with
respect to other peer executives of the Employer and its affiliated companies.

<PAGE>

5. Termination of Employment. This Agreement shall terminate
as follows:
(a) Death or Disability. The Employee's employment
shall terminate automatically upon the Employee's death during the Employment
Period. If the Employer determines in good faith that the Employee becomes
unable to perform the essential functions of his position, with or without
reasonable accommodation, then Employer shall give to the Employee written
notice of its intention to terminate the Employee's employment. In such event,
the Employee's employment with the Employer shall terminate effective on the
thirtieth (30th) day after receipt of such notice by the Employee (the
"Disability Effective Date") provided that, within the thirty (30) days after
such receipt, the Employee shall not have returned to full time performance of
the Employee's duties.
(b) Cause. The Employer may terminate the Employee's
employment at any time, without notice and with immediate effect for Cause. For
purposes of this Agreement "Cause" shall mean
(i) a material breach by the Employee of the
Employee's obligations as set forth herein (other
than due to disability) which material breach is not
remedied within five (5) business days after receipt
of written notice from the Employer specifying such a
breach;
(ii) the conviction of the Employee of a
felony;
(iii) actions by Employee involving moral
turpitude;
(iv) willful failure of Employee to comply
with reasonable directives of Employer's Board of
Directors;
(v) chronic absenteeism of Employee;

<PAGE>

(vi) willful misconduct of Employee
resulting in damage to Employer;
(vii) Employee's illegal use of controlled
substances.

(c) Without Cause. Either Employee or Employer may
terminate this Agreement at any time, for any reason or without any reason. Such
a termination shall be deemed a termination "without cause."
6. Obligations of the Employer Upon Termination. The
parties agree as follows:
(a) Death or Disability. If the Employee's employment
is terminated by reason of the Employee's death or disability during the
Employment Period, Employee or Employee's estate shall be paid Employee's Annual
Base Salary together with those fringe benefits described in paragraphs 4(a) and
4(b) hereof through the end of the month during which Employee's death occurs or
during which the Disability Effective Date falls.
(b) Cause. If the Employee's employment shall be
terminated for Cause during the Employment Period, such termination for Cause
shall constitute an immediate termination of Employer's obligations pursuant to
paragraphs 3 and 4 hereof. Employee shall not be entitled to any compensation or
benefits beyond the effective date of such termination for Cause.
(c) Without Cause. If Employee's employment is
terminated by Employer without cause, then Employer shall continue to pay
Employee his Annual Base Salary together with those fringe benefits described in
paragraphs 4(a) and 4(b) hereof throughout the remaining term of this Agreement.

<PAGE>

7. Stock Option. If and when Employer completes an initial
public offering of its common stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "IPO"), Employee
shall be eligible to participate in a stock option plan to be developed and
adopted by Employer for its employees at such time (the "Stock Option Plan").
The exercise price of Employer's initial round of grants under the Stock Option
Plan shall be the fair market value of the shares of the common stock on the
date of such initial grant, it being the intention of Employer to set such
initial exercise price at the same price per share of Employer's common stock
sold in the IPO. Any grants of options thereafter under the Stock Option Plan
shall be at the discretion of Employer's Board of Directors. The terms and
conditions of any options granted to Employee pursuant to the Stock Option Plan
shall otherwise be governed by the provisions of the Stock Option Plan.
8. Restrictive Covenants. For purposes of this Agreement,
"Restrictive Covenants" mean the provisions of this paragraph 8. It is
stipulated and agreed that Employer is engaged in the business of owning and
operating automobile and/or truck dealerships, which business includes, without
limitation, the marketing, selling and leasing of new and used vehicles and the
servicing of automobiles and trucks (the "Business"). It is further stipulated
and agreed that as a result of Employee's employment by Employer, and as a
result of Employee's continued employment hereunder, Employee has and will have
access to valuable, highly confidential, privileged and proprietary information
relating to Employer's Business, including, without limitation, existing and
future inventory information, customer lists, sales methods and techniques,
costs and costing methods, pricing techniques and strategies, sales agreements
with customers, profits and product line profitability information, unpublished
present and future

<PAGE>

marketing strategies and promotional programs, and other information regarded by
Employer as proprietary and confidential (the "Confidential Information"). It is
further acknowledged that the unauthorized use or disclosure by Employee of any
of the Confidential Information would seriously damage Employer in its Business.
In consideration of the provisions of this paragraph 8, the
compensation and benefits referred to in paragraphs 3 and 4 hereof, which
Employee acknowledges are legally sufficient to support enforceability by the
Employer of the Restrictive Covenants against Employee, Employee agrees as
follows:
(a) During the term of this Agreement and after its
termination or expiration for any reason, Employee will not, without Employer's
prior written consent, use, divulge, disclose, furnish or make accessible to any
third person, company or other entity, any aspect of the Confidential
Information (other than as required in the ordinary discharge of Employee's
duties hereunder).
(b) During the term of this Agreement and for a
period of two years after the date of the expiration or termination of this
Agreement for any reason (the "Restrictive Period"), Employee shall not,
directly or indirectly:
(i) Employ or solicit the employment of any
person who at any time during the twelve (12)
calendar months immediately preceding the termination
or expiration of this Agreement for any reason was
employed by Employer;
(ii) Provide or solicit the provision of
products or services, similar to those provided by
Employer to any person or entity within the

<PAGE>

"Restricted Territory", as hereinafter defined, who
purchased or leased automobiles, trucks or services
from Employer at any time during the twelve (12)
calendar months immediately preceding the termination
or expiration of this Agreement for any reason;
(iii) Interfere or attempt to interfere with
the terms or other aspects of the relationship
between Employer and any person or entity from whom
Employer has purchased automobiles, trucks, parts,
supplies, inventory or services at any time during
the twelve (12) calendar months immediately preceding
the termination or expiration of this Agreement for
any reason;
(iv) Engage in competition with Employer or
its respective successors and assigns by engaging,
directly or indirectly, in a business involving the
sale or leasing of automobiles or trucks or which is
otherwise substantially similar to the Business,
within the "Restricted Territory", as hereinafter
defined; or
(v) Provide information to, solicit or sell
for, organize or own any interest in (either directly
or thorough any parent, affiliate or subsidiary
corporation, partnership, or other entity), or become
employed or engaged by, or act as agent for, any
person, corporation or other entity that is directly
or indirectly engaged in a business in the
"Restricted Territory", as hereinafter defined, which
is substantially similar to the Business or
competitive with Employer's business; provided,
however, that nothing herein shall preclude the
Employee from holding not more than three

<PAGE>

percent (3%) of the outstanding shares of any
publicly held company which may be so engaged in a
trade or business identical or similar to the
Business of the Employer. As used herein, "Restricted
Territory" means:
(1) all Standard Metropolitan Statistical Areas,
as determined by the United States Office of
Management and Budget, in which Employer has
an office, store or other place of business
on the date of the expiration or termination
of this Agreement for any reason.
(2) all counties in which Employer has an
office, store or other place of business on
the date of the expiration or termination of
this Agreement for any reason.
9. Remedies. It is stipulated that a breach by Employee of the
Restrictive Covenants would cause irreparable damage to Employer. Employer, in
addition to any other rights or remedies which Employer may have, shall be
entitled to an injunction restraining Employee from violating or continuing any
violation of such Restrictive Covenants. Such right to obtain injunctive relief
may be exercised at the option of Employer, concurrently with, prior to, after
or in lieu of, the exercise of any other rights or remedies which Employer may
have as a result of any such breach or threatened breach. Employee agrees that
upon breach of any of the Restrictive Covenants, Employer shall be entitled to
an accounting and repayment of all profits, royalties, compensation, and/or
other benefits that Employee directly or indirectly has realized or may realize
as a result of, or in connection with, any such breach. Employee further agrees
that the Restrictive Period shall be extended by a period of time equal to any
period of time in which any Employee is in violation of the Restrictive
Covenants.

<PAGE>

10. Acknowledgment of Reasonableness. Employee has carefully
read and considered the provisions of this Agreement and has had the opportunity
for consultation with an attorney of Employee's choice and agrees that the
restrictions set forth herein are fair and reasonably required for the
protection of Employer. In the event that any provision relating to the
Restrictive Period, the Restricted Territory or the scope of the restrictions
shall be declared by a court of competent jurisdiction to exceed the maximum
period of time, geographical area or scope that such court deems reasonable and
enforceable under applicable law, such time period, geographical area or scope
of restriction held reasonable and enforceable by the court shall thereafter be
the Restricted Period, Restricted Territory and/or scope under this Agreement.
11. Surrender of Books and Records. Employee acknowledges that
all files, records, lists, designs, specifications, books, products, plans and
other materials owned or used by Employer in connection with conduct of its
business shall at all times remain the property of Employer, and that upon
termination or expiration of this Agreement for any reason, Employee will
immediately surrender to Employer all such materials.
12. Entire Agreement. This Agreement contains the entire
agreement of the parties hereto, and shall not be modified or changed in any
respect except by a writing executed by the parties hereto.
13. Successors and Assigns. The rights and obligations of
Employee under this Agreement shall inure to the benefit of Employer, its
successors and assigns, and shall be binding upon Employee and his respective
successors, heirs and assigns. Employer shall have the right to assign,
transfer, or convey this Agreement to its affiliated companies, successor
entities, or assignees or transferees of substantially all of Employer's
business activities. This

<PAGE>

Agreement, being personal in nature to the Employee, may not be assigned by
Employee without Employer's prior written consent.
14. Notice. All notices required and permitted to be give
hereunder shall be in writing and shall be deemed to have been given when mailed
by certified or registered mail, return receipt requested, addressed to the
intended recipient as follows or at such other address as is provided by either
party to the other:
If to Employer: With a copy to:
Sonic Auto World, Inc. Edward W. Wellman, Jr.
Attention:_____________________ Parker, Poe, Adams & Bernstein, L.L.P.
P.O. Box 18747 2500 Charlotte Plaza
Charlotte, NC 28218 201 South College Street
Charlotte, NC 28244

If to Employee: With a copy to:

Theodore M. Wright --------------------------------
-------------------------------- --------------------------------
-------------------------------- --------------------------------
-------------------------------- --------------------------------

<PAGE>

shall bear its own costs and expenses, including without limitation, attorneys'
fees, in connection with any such suit or proceeding.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.
EMPLOYEE:

/s/ (SEAL)
Theodore M. Wright

EMPLOYER:

SONIC AUTOMOTIVE, INC.

By: ____________________________________
Title: ____________________________________

<PAGE>

EMPLOYMENT AGREEMENT

R E C I T A L S

WHEREAS, Employer desires to acquire certain of the automobile
dealership assets of Employee within the State of Tennessee; and

WHEREAS, Employer desires to retain the services of Employee in order
to manage the existing dealerships and acquire and manage additional
dealerships; and

WHEREAS, Employee is prepared to perform those duties as set forth in
this Agreement.

NOW, THEREFORE, the parties intending to be legally bound agree as
follows:

1. Term of Employment. Employer hereby employs Employee, and
Employee hereby accepts employment from Employer for the period commencing with
the closing of the sale transferring those assets in which Employee has an
interest in various dealerships in the State of Tennessee to Employer (the
"Commencement Date") and ending five (5) years thereafter, unless sooner
terminated pursuant to the provisions of paragraph 5 hereof (the "Employment
Period"). It is the intention of Employer and Employee that this term of
employment coincide with the term of the Non-Competition Agreement entered in
connection that certain Asset Purchase Agreement dated June 24, 1997, pursuant
to which Employer shall acquire certain of the automobile dealership assets of
Employee.

<PAGE>

2. Duties of Employee. Employee shall be employed by Employer
as Executive Vice President of Sonic Auto World, Inc. Employee's duties shall
include, but not be limited to, acquisitions of additional automobile
dealerships for Employer. Employee shall assist in the management and
supervision of all Employer-owned dealerships. Employee shall serve Employer
faithfully in the performance of Employee's duties and shall devote his full
time and best efforts to his employment, including the regularly established
working hours and such additional time as the requirements of Employer and the
performance of the Employee's duties require. Employer agrees to nominate
Employee for service on Employer's Board of Directors for an initial term and to
favorably recommend to Employer's shareholders that they elect Employee for such
initial term. Employee agrees to observe and comply with all the rules and
regulations of Employer as adopted and furnished to Employee by Employer's Board
of Directors from time to time. Employee specifically understands that Employer
shall have final authority over the terms and conditions of all acquisitions. By
its signature below, Sonic Financial Corp. agrees to vote its shares of stock of
Employer for the election of Employee as a director for the initial term
referred to above.

3. Compensation. For all services rendered by Employee under
this Agreement, he shall be entitled to compensation in accordance with the
following:

(a) Base Salary. During the Employment Period, the
Employee shall receive an annual base salary ("Annual Base Salary") of FOUR
HUNDRED THOUSAND AND NO/100 DOLLARS ($400,000.00) which shall be paid in equal
monthly installments in the amount of THIRTY-THREE THOUSAND THREE HUNDRED
THIRTY-THREE AND THIRTY-THREE/100 DOLLARS ($33,333.33).

<PAGE>

(a) The use of two luxury demonstrator vehicles
annually of Employee's choice, including all reasonable related expenses such as
insurance, maintenance and gasoline.

(b) Medical insurance coverage for Employee and his
dependents and reimbursement of the Employee for the reasonable costs of
disability insurance with a reasonable monthly benefit for life and with a
waiting period of no more than ninety (90) days. This disability insurance shall
contain other provisions so that it will replace to the extent reasonably
possible Employee's Base Salary in case Employer terminates this Agreement upon
Employee's disability as set forth herein.

<PAGE>

preceding the Commencement Date or, if more favorable to the Employee, as in
effect generally at any time thereafter with respect to other peer executives of
the Employer and its affiliated companies.

(d) An office of a size and with furnishings and
other appointments, and an exclusive personal secretary and other assistants at
least equal to the most favorable policies, practices and procedures of the
Employer and its affiliated companies in effect for the Employee at any time
during the ninety (90) day period immediately preceding the Commencement Date
or, if more favorable to the Employee, as provided generally at any time
thereafter with respect to other peer executives of the Employer and its
affiliated companies.

(e) An annual paid vacation in accordance with the
most favorable policies, practices and procedures of the Employer and its
affiliated companies as in effect for the Employee at any time during the ninety
(90) day period immediately preceding the Commencement Date or, if more
favorable to the Employee, as in effect generally at any time thereafter with
respect to other peer executives of the Employer and its affiliated companies.

5. Termination of Employment. This Agreement shall terminate
as follows:

<PAGE>

within the thirty (30) days after such receipt, the Employee shall not have
returned to full time performance of the Employee's duties.

(b) Cause. The Employer may terminate the Employee's
employment at any time, without notice and with immediate effect for Cause. For
purposes of this Agreement "Cause" shall mean

(i) a material breach by the Employee of the
Employee's obligations as set forth herein (other
than due to disability) which material breach is not
remedied within five (5) business days after receipt
of written notice from the Employer specifying such a
breach;

(ii) the conviction of the Employee of a
felony;

(iii) actions by Employee involving moral
turpitude; (iv) willful failure of Employee to comply
with reasonable directives of Employer's Board of
Directors;

(v) chronic absenteeism of Employee;

(vi) willful misconduct of Employee
resulting in damage to Employer;

(vii) Employee's illegal use of controlled
substances.

(c) Good Reason. The Employee's employment may be
terminated by the Employee during the Employment Period for good reason. For
purposes of this Agreement, "Good Reason" shall mean:

(i) the assignment to the Employee of any
duties materially inconsistent in any respect with
the Employee's position (including status,

<PAGE>

offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated
by this Agreement or any other action by the Employer
which results in a substantial diminution in such
position, authority, duties or responsibilities,
excluding for this purpose, isolated, unsubstantial
and inadvertent action not taken in bad faith and
which is remedied by the Employer promptly after
receipt of written notice thereof given by the
Employee;

(ii) any failure by the Employer to comply
with any of the material provisions of this Agreement
other than isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by the Employer promptly after receipt of
notice thereof given by the Employee;

(iii) the Employer's requiring the Employee
to be based at any office or location other than in
Tennessee;

(iv) any failure of the Employer to comply
with and satisfy the provisions of paragraph 7 of
this Agreement.

(d) Without Cause. Either Employee or Employer may
terminate this Agreement at any time, for any reason or without any reason. Such
a termination shall be deemed a termination "without cause".

6. Obligations of the Employer Upon Termination. The parties
agree as follows:

(a) Death or Disability. If the Employee's employment
is terminated by reason of the Employee's death or disability during the
Employment Period, Employee or

<PAGE>

Employee's estate shall be paid forty-five percent (45%) of Employee's Annual
Base Salary (i.e., $180,000) together with those fringe benefits described in
paragraphs 4(a) and 4(b) hereof through the remaining term of this Agreement.

(b) Cause. If the Employee's employment shall be
terminated for Cause during the Employment Period, the Employee shall be paid
forty-five percent (45%) of his Annual Base Salary (i.e., $180,000), together
with those fringe benefits described in paragraphs 4(a) and 4(b) hereof
throughout the remaining term of this Agreement.

(c) Good Reason. If, during the Employment Period,
the Employee shall terminate employment for Good Reason, he shall be paid
forty-five percent (45%) his Annual Base Salary (i.e., $180,000) together with
those fringe benefits described in paragraphs 4(a) and 4(b) hereof throughout
the remaining term of this Agreement.

(d) Without Cause. If Employee's employment is
terminated without cause, then Employer shall continue to pay Employee
forty-five percent (45%) of his Annual Base Salary (i.e., $180,000) together
with those fringe benefits described in paragraphs 4(a) and 4(b) hereof
throughout the remaining term of this Agreement.

<PAGE>

initial options shall be the fair market value of the shares of the common stock
on the date of such initial grant, it being the intention of Employer to set
such initial exercise price at the same price per share of Employer's common
stock sold in the IPO. Any grants of options thereafter under the Stock Option
Plan shall be at the discretion of Employer's Board of Directors. The terms and
conditions of any options granted to Employee pursuant to the Stock Option Plan
shall otherwise be governed by the provisions of the Stock Option Plan.

8. Restrictive Covenants. For purposes of this Agreement,
"Restrictive Covenants" mean the provisions of this paragraph 8. It is
stipulated and agreed that Employer is engaged in the business of owning and
operating automobile and/or truck dealerships, which business includes, without
limitation, the marketing and selling of new and used vehicles and the servicing
of automobiles and trucks (the "Business"). It is further stipulated and agreed
that as a result of Employee's employment by Employer, and as a result of
Employee's continued employment hereunder, Employee has and will have access to
valuable, highly confidential, privileged and proprietary information relating
to Employer's Business, including, without limitation, existing and future
inventory information, customer lists, sales methods and techniques, costs and
costing methods, pricing techniques and strategies, sales agreements with
customers, profits and product line profitability information, unpublished
present and future marketing strategies and promotional programs, and other
information regarded by Employer as proprietary and confidential (the
"Confidential Information"). It is further acknowledged that the unauthorized
use or disclosure by Employee of any of the Confidential Information would
seriously damage Employer in its Business.

<PAGE>

(b) During the term of this Agreement and for a
period of two years after the date of the expiration or termination of this
Areement for any reason (the "Restrictive Period"), Employee shall not, directly
or indirectly:

(ii) Provide or solicit the provision of
products or services, similar to those provided by
Employer to any person or entity within the
"Restricted Territory," as hereinafter defined, who
purchased or leased automobiles, trucks or services
from Employer at any time during the twelve (12)
calendar months immediately preceding the termination
or expiration of this Agreement for any reason;

<PAGE>

(v) Provide information to, solicit or sell
for, organize or own any interest in (either directly
or thorough any parent, affiliate or subsidiary
corporation, partnership, or other entity), or become
employed or engaged by, or act as agent for, any
person, corporation or other entity that is directly
or indirectly engaged in a business in the
"Restricted Territory," as hereinafter defined, which
is substantially similar to the Business or
competitive with Employer's business; provided,
however, that nothing herein shall preclude the
Employee from holding not more than three percent
(3%) of the outstanding shares of any publicly held
company which may be so engaged in a trade or
business identical or similar to the Business of the
Employer. As used herein, "Restricted Territory"
means the Standard Metropolitan Statistical Areas, as
determined by the United

<PAGE>

States Office of Management and Budget, for Houston,
Texas; Charlotte, North Carolina; Chattanooga,
Tennessee; and Nashville, Tennessee.

(c) Notwithstanding anything to the contrary
contained in this Agreement, paragraphs 8(b)(ii), 8(b)(iv) and 8(b)(v) shall not
preclude Employee from maintaining his investment in "Phoenix America", Heritage
Insurance Corporation Limited, NEBCO of Cleveland, L.L.C. d/b/a Toyota of
Cleveland, Abra Auto Body and Glass, L.L.C. and Chattanooga Auto Auction,
L.L.C., so long as Employee does not, directly or indirectly, engage in the
active management of or participate in the operation of such entity during the
term of this Agreement or the Restrictive Period, subject to the last sentence
of this paragraph 8(c). Notwithstanding the foregoing sentence, Employee shall
be permitted to engage in the active management and/or participate in the
operation of "Phoenix America", Heritage Insurance Corporation Limited, NEBCO of
Cleveland, L.L.C. d/b/a Toyota of Cleveland, Abra Auto Body and Glass, L.L.C.
and Chattanooga Auto Auction, L.L.C. in the event that Employee's employment
with Employer is terminated "without cause" by Employer.

<PAGE>

royalties, compensation, and/or other benefits that Employee directly or
indirectly has realized or may realize as a result of, or in connection with,
any such breach. Employee further agrees that the Restrictive Period shall be
extended by a period of time equal to any period of time in which any Employee
is in violation of the Restrictive Covenants.

12. Entire Agreement. This Agreement contains the entire
agreement of the parties hereto, and shall not be modified or changed in any
respect except by a writing executed by the parties hereto.

<PAGE>

If to Employer: With a copy to:
Sonic Auto World, Inc. Edward W. Wellman, Jr.
Attention: Bryan Scott Smith, COO Parker, Poe, Adams & Bernstein, L.L.P.
P.O. Box 18747 2500 Charlotte Plaza
Charlotte, NC 28218 201 South College Street

Charlotte, NC 28244

If to Employee: With a copy to:

Nelson E. Bowers, Il H. Wayne Grant, Esq.
217 Colmore Circle Grant, Konvalinka & Harrison, P.C.
Lookout Mountain, TN 37350 9th Floor, Republic Centre
633 Chestnut Street
Chattanooga, TN 37450

<PAGE>

Agreement shall be instituted and maintained in the state courts of Mecklenburg
County, North Carolina, and the parties hereby waive any objection to such
jurisdiction and venue and irrevocably submit to the jurisdiction of such court
in any such action or proceeding. Each party shall bear its own costs and
expenses, including without limitation, attorneys' fees, in connection with any
such suit or proceeding.

16. Guaranty: Guarantor joins in this Agreement for the
purpose of temporarily guaranteeing the obligations of Employer as set forth
herein. Guarantor shall be irrevocably released from this guaranty at such time
as (i) Sonic Auto World, Inc. shall have a net worth of twenty million dollars
($20,000,000), or (ii) Sonic Auto World, Inc. shall complete an initial public
offering of its common stock pursuant to an effective registration statement
under the Securities Act of 1933, as amended, which initial public offering
results in net proceeds to the issuer of not less than fifty million dollars
($50,000,000).

IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.

EMPLOYEE:

(SEAL)
Nelson E. Bowers, II

EMPLOYER:

SONIC AUTOMOTIVE, INC.

By: ______________________________
Title: _______________________________

<PAGE>

The undersigned joins in the execution of this Agreement for the
purpose of (i) guaranteeing the terms hereof in accordance with the provisions
of paragraph 16 above, and (ii) agreeing to vote its shares for the election of
Employee as a director in accordance with the last sentence of paragraph 2
above.

SONIC FINANCIAL CORP.

By: ____________________________________
Title: ____________________________________

<PAGE>

SONIC FINANCIAL CORPORATION
TAX ALLOCATION AGREEMENT

This Tax Allocation Agreement is entered into as of June 30, 1997, by
and between Sonic Financial Corporation, a North Carolina corporation ("Sonic"),
and Sonic Auto World, Inc., a Delaware corporation ("SAW").

R E C I T A L S:

A. Sonic is the parent corporation of an affiliated group of
corporations (the "Sonic Group") within the meaning of section 1504(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), which affiliated group
consists of Sonic, Town & Country Ford, Inc., a North Carolina corporation; Lone
Star Ford, Inc., a Texas corporation; Frontier-Oldsmobile-Cadillac, Inc., a
North Carolina corporation, FMF Management, Inc., a North Carolina corporation;
SAW (hereinafter SAW and the members of the Sonic Group other than Sonic
hereinafter referred to as the "SAW Group").

B. It is contemplated that in connection with an internal restructuring
of the Sonic Group and an initial public offering of common stock of SAW, the
SAW Group will leave the Sonic Group.

C. SAW and Sonic wish to agree with respect to certain federal income
tax matters that may arise after the time the SAW Group leaves the Sonic Group.

NOW, THEREFORE, in consideration of mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:

1. PAYMENTS BY SAW TO SONIC WITH RESPECT TO SAW'S SEPARATE COMPANY
FEDERAL INCOME TAX LIABILITY.

With respect to any period commencing on or after January 1, 1993,
during which any member of the SAW Group was includable in the consolidated
federal income tax return filed or to be filed by Sonic, SAW shall pay to Sonic
an amount equal to SAW's hypothetical separate return federal income tax
liability computed for such period as follows ("Separate Return Liability"):

(a) In computing SAW's Separate Return Liability it shall be
assumed that SAW is a parent of an affiliated group of corporations with respect
to the SAW Group and that SAW files its own consolidated return under the Code
for the SAW Group. To the extent applicable, references to SAW shall include all
members of the SAW Group.

<PAGE>

(b) It is agreed that the Separate Return Liability shall
include any alternative minimum taxes which Sonic shall be assessed to the
extent such taxes are based upon SAW's income.

(c) Each member of the SAW Group hereby agrees that they will
not carryback from any taxable year in which they are not a member of the Sonic
Group any net operating loss, net capital loss, tax credit or other tax
carryover into any year in which they were a member of the Sonic Group except to
the extent required by applicable law. If such carryback is required by law,
Sonic will, if requested by SAW, file an amended return for such consolidated
period and any refund, credit, or other benefit arising from the carryback shall
be paid by Sonic to SAW pursuant to the provisions of Section 3 hereof, relating
to refunds.

Payment of amounts due hereunder shall be made in installments on such
dates and in such amounts as if SAW was a separate taxpayer required to make
federal corporate income tax estimate payments under the Code of its Separate
Return Liability. The parties acknowledge that as of the date this Agreement is
entered into SAW has paid Sonic all amounts due (subject to paragraph 3 below)
for all years.

2. INDEMNIFICATION BY SONIC.

Subject to paragraphs 3 and 4 below, Sonic agrees to indemnify and hold
SAW harmless from and against any and all federal income tax liabilities of the
Sonic Group in excess of SAW's Separate Return Liability.

3. ADJUSTMENTS TO SAW'S TAX LIABILITY.

If, any adjustments are made to Sonic's consolidated federal income tax
return for any period covered by this Agreement, whether by administrative or
judicial process or by an amended return filed by Sonic (an "Adjustment"), which
Adjustment causes any change in the Separate Return Liability of SAW computed as
described in paragraph 1 above, SAW shall pay the amount of any increase in the
Separate Return Liability to Sonic or to the Internal Revenue Service and Sonic
shall pay the amount of any reduction in the Separate Return Liability to SAW.
Sonic shall promptly give notice to SAW in the event of any Adjustment. Payments
under this paragraph 3 shall be due within 30 days following notice by SAW that
an Adjustment has become final and binding or has been otherwise agreed to by
Sonic. In the event such Adjustment results in the payment or receipt of
interest by Sonic, the payments due hereunder shall also include interest
computed from the date such amount would have been originally due through the
date of payment at the federal interest rate applicable to deficiencies under
the Code.

2
<PAGE>

4. COMPUTATION OF APPORTIONED TAX ATTRIBUTES.

In the event SAW shall cease to be a member of the Sonic Group, net
operating loss carryovers, net capital loss carryovers, tax credit carryovers
and other tax attributes under the Code shall be apportioned to SAW as provided
in the Code and the applicable consolidated return regulations, the
determination of which shall be made by Sonic. SAW shall take no position in any
federal income tax return or in any administrative or judicial proceeding
concerning any federal income tax return inconsistent with such determination by
Sonic. The parties acknowledge that in the event of an Adjustment to the
consolidated federal income tax returns of Sonic with respect to a period prior
to the time that SAW leaves the consolidated group, the amount and nature of the
apportioned federal income tax attributes available to SAW may be decreased,
increased or otherwise affected. The parties acknowledge that neither party
shall have any obligation to the other or be required to make any payment with
respect to any utilization, reduction or affect on the federal income tax
attributes that are apportioned to SAW when it leaves the Sonic Group.

5. COOPERATION.

Sonic and SAW shall promptly notify the other of any audit, examination
or other proceeding which may affect the tax liabilities of either party and for
which either party may reasonably be liable under this Tax Allocation Agreement;
provided, however, that failure to give such notice does not relieve either
party of its obligations under this Tax Allocation Agreement, except to the
extent the other party is actually prejudiced thereby. Sonic and SAW shall, at
their own expense, cooperate with respect to the preparation, negotiation, and
conduct of any audit, examination, or other proceeding with respect to which, or
as a result of which, the other may reasonably be liable under this Tax
Allocation Agreement. Notwithstanding any provision in this Tax Allocation
Agreement to the contrary, Sonic will not settle any issue that would give rise
to a payment for which SAW would be liable (or a diminution of a refund or
credit to which SAW would have been entitled) except in good faith and with due
regard to the merits of the issue.

6. MISCELLANEOUS.

A. GOVERNING LAW.

The interpretation and construction of this Agreement, and all
matters relating thereto, shall be governed by the laws of the State of North
Carolina.

B. BINDING EFFECT.

This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns. This
Agreement shall survive the departure of the SAW Group or any member thereof
from the Sonic Group to the extent SAW may owe amounts with respect to periods
prior to the date of the departure, and to the extent SAW may

3
<PAGE>

be required to pay amounts to Sonic with respect to Adjustments and to the
extent Sonic may be required to pay amounts to SAW with respect to Adjustments
and indemnification pursuant to paragraph 2 above.

C. CAPTIONS.

The captions used herein are for reference purposes only, and
shall not affect the meaning or interpretation of this Agreement.

D. NOTICES.

Any notice or other communications required or permitted
hereunder shall be sufficiently given if delivered in person or sent by
facsimile transmission or either registered or certified mail, postage prepaid,
addressed as follows (or such other address for the party as shall be specified
by like notice; provided that notice of change of address shall be effective
only upon receipt thereof):

If to Sonic: Post Office Box 18747
Charlotte, North Carolina 28218
Attention: William R. Brooks

If to SAW: Post Office Box 18747
Charlotte, North Carolina 28218
Attention: Theodore M. Wright

E. COUNTERPARTS, FACSIMILE EXECUTION.

This Agreement may be executed in two or more counterparts,
all of which taken together shall constitute one and the same instrument. Any
execution may be by telefacsimile transmission and any such execution shall have
the same force and effect as any original execution.

F. ENTIRE AGREEMENT.

This Agreement contains the entire understanding of the
parties hereto with respect to the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.

G. AMENDMENTS.

No provision of this Agreement may be waived, amended,
supplemented or modified orally, but only by an agreement in writing signed by
the parties to this Agreement who intend to be bound by such waiver, amendment,
supplement or modification.

4
<PAGE>

H. ACCESS TO INFORMATION.

Each party to this Agreement agrees to cooperate with the
other parties to this Agreement regarding all reasonable requests made of a
party to give any other party (and its professional advisors) access to tax and
accounting records and information needed for the preparation of that party's
financial statements or calculation of its tax liabilities.

IN WITNESS WHEREOF, the parties have executed this Agreement all of the
day and year first written above.

SONIC FINANCIAL CORPORATION, A
NORTH CAROLINA CORPORATION

By: /s/ William R. Brooks
-----------------------------------
William R. Brooks, Vice President

SONIC AUTO WORLD, INC., A
DELAWARE CORPORATION

By: /s/ Theodore M. Wright
------------------------------------
Theodore M. Wright, Vice President

<PAGE>

SONIC AUTOMOTIVE, INC.
1997 STOCK OPTION PLAN

1. PURPOSES OF PLAN. The purposes of the Plan, which shall be known as
the Sonic Automotive, Inc. 1997 Stock Option Plan and is hereinafter referred to
as the "Plan", are (i) to provide incentives for key employees, directors,
consultants and other individuals providing services to Sonic Auto World, Inc.
(the "Company") and its subsidiaries (within the meaning of Section 424(f) of
the Internal Revenue Code of 1986, as amended (the "Code"), each of which is
referred to herein as a "Subsidiary") by encouraging their ownership of the
Class A common stock, $.01 par value, of the Company (the "Stock") and (ii) to
aid the Company in retaining such key employees, directors, consultants and
other individuals upon whose efforts the Company's success and future growth
depends, and attracting other such employees, directors, consultants and other
individuals.

2. ADMINISTRATION. The Plan shall be administered by a committee of the
Board of Directors (the "Committee"). The Committee shall be appointed from time
to time by the Board of Directors and shall consist of not fewer than two of its
members. Each Committee member shall be a "non-employee director" within the
meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended. No member of the Board of Directors who serves on the Committee shall
be eligible to participate in the Plan. In the event that no such Committee
exists or is appointed, then the powers to be exercised by the Committee
hereunder shall be exercised by the Board of Directors.

For purposes of administration, the Committee, subject to the terms of
the Plan, shall have plenary authority to establish such rules and regulations,
to make such determinations and interpretations, and to take such other
administrative actions, as it deems necessary or advisable. All determinations
and interpretations made by the Committee shall be final, conclusive and binding
on all persons, including those granted options hereunder ("Optionees") and
their legal representatives and beneficiaries.

The Committee shall hold its meetings at such times and places as it
may determine. A majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its members. Any
decision or determination reduced to writing and signed by all members shall be
as effective as if it had been made by a majority vote at a meeting duly called
and held. The Committee may appoint a secretary (who need not be a member of the
Committee). No member of the Committee shall be liable for any act or omission
with respect to his service on the Committee, if he acts in good faith and in a
manner he reasonably believes to be in or not opposed to the best interests of
the Company.

3. STOCK AVAILABLE FOR OPTIONS. There shall be available for options
under the Plan a total of [2,000,000] shares of Stock, subject to any
adjustments which may be made pursuant to Section 5(f) hereof. Shares of Stock
used for purposes of the Plan may be either authorized and unissued shares, or
previously issued shares held in the treasury of the Company, or both. Shares of
Stock covered by options which have terminated or expired prior to exercise or
which have been tendered as payment upon exercise of other options pursuant to
Section 5(c), shall be available for further option grants hereunder.

4. ELIGIBILITY. Options under the Plan may be granted to key employees
of the Company or any Subsidiary, including officers or directors of the Company
or any Subsidiary, and to directors,

<PAGE>

consultants and other individuals providing services to the Company or any
Subsidiary. Options may be granted to eligible employees whether or not they
hold or have held options previously granted under the Plan or otherwise granted
or assumed by the Company. In selecting employees for options, the Committee may
take into consideration any factors it may deem relevant, including its estimate
of the employee's present and potential contributions to the success of the
Company and its Subsidiaries. Service as a director, officer or consultant of or
to the Company or Subsidiary shall be considered employment for purposes of the
Plan (and the period of such service shall be considered the period of
employment for purposes of Section 5(d) of the Plan); provided, however, that
incentive stock options may be granted under the Plan only to an individual who
is an "employee" (as such term is used in Section 422 of the Code) of the
Company or any Subsidiary.

5. TERMS AND CONDITIONS OF OPTIONS. The Committee shall, in its
discretion, prescribe the terms and conditions of the options to be granted
hereunder, which terms and conditions need not be the same in each case, subject
to the following:

(a) OPTION PRICE. The price at which each share of Stock
covered by an incentive option granted under the Plan may be purchased
shall not be less than the market value per share of Stock on the date
of grant of the option. In the case of any option intended to be an
incentive stock option granted to an individual owning (directly or by
attribution as provided in Section 424(d) of the Code), on the date of
grant, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Subsidiary (which
individual shall hereinafter be referred to as a "10% Stockholder"),
the price at which each share of Stock covered by the option may be
purchased shall not be less than 110% of the market value per share of
Stock on the date of grant of the option. The date of the grant of an
option shall be the date specified by the Committee in its grant of the
option. The price at which each share of Stock covered by an option
granted under the Plan (but not as an incentive option) may be
purchased shall be the price determined by the Committee, in its
absolute discretion, to be suitable to attain the purposes of this
Plan.

(b) OPTION PERIOD. The period for exercise of an option shall
in no event be more than ten years from the date of grant, or in the
case of an option intended to be an incentive stock option granted to a
10% Stockholder, more than five years from the date of grant. Options
may, in the discretion of the Committee, be made exercisable in
installments during the option period. Any shares not purchased on any
applicable installment date may be purchased thereafter at any time
before the expiration of the option period.

(c) EXERCISE OF OPTIONS. In order to exercise an option, the
Optionee shall deliver to the Company written notice specifying the
number of shares of Stock to be purchased, together with cash or a
certified or bank cashier's check payable to the order of the Company
in the full amount of the purchase price therefor; provided that, for
the purpose of assisting an Optionee to exercise an option, the Company
may make loans to the Optionee or guarantee loans made by third parties
to the Optionee, on such terms and conditions as the Board of Directors
may authorize; and provided further that such purchase price may be
paid in shares of Stock, or in nonstatutory options granted under the
Plan (provided, however, that the purchase price of Stock acquired
under an incentive stock option may not be paid in options), in either
case owned by the Optionee and having a market value on the date of
exercise not less than the aggregate purchase price, or in any
combination of cash, Stock and such options. For purposes of this
Section 5(c), the market value per share of Stock shall be the last
sale price regular way on the date of reference, or, in case no

<PAGE>

sales take place on such date, the average of the closing high bid and
low asked prices regular way, in either case on the principal national
securities exchange on which the Stock is listed or admitted to
trading, or if the Stock is not listed or admitted to trading on any
national securities exchange, the last sale price reported on the
National Market System of the National Association of Securities
Dealers Automated Quotation system ("NASDAQ") on such date, or the
average of the closing high bid and low asked prices of the Stock in
the over-the-counter market reported on NASDAQ on such date, as
furnished to the Committee by any New York Stock Exchange member
selected from time to time by the Committee for such purpose. If there
is no bid or asked price reported on any such date, the market value
shall be determined by the Committee in accordance with the regulations
promulgated under Section 2031 of the Code, or by any other appropriate
method selected by the Committee. For purposes of this Section 5(c),
the market value of an option granted under the Plan shall be the
market value of the underlying Stock, determined as aforesaid, less the
exercise price of the option. If the Optionee so requests, shares of
Stock purchased upon exercise of an option may be issued in the name of
the Optionee or another person. An Optionee shall have none of the
rights of a stockholder until the shares of Stock are issued to him.

(d) EFFECT OF TERMINATION OF EMPLOYMENT.

(i) An option may not be exercised after the Optionee
has ceased to be in the employ of the Company or any
Subsidiary for any reason other than the Optionee's death,
Disability or Involuntary Termination Without Cause. Any
cessation of employment, for purposes of incentive stock
options only, shall include any leave of absence in excess of
90 days unless the Optionee's reemployment rights are
guaranteed by law or by contract. "CAUSE" shall mean any act,
action or series of acts or actions or any omission,
omissions, or series of omissions which result in, or which
have the effect of resulting in, (i) the commission of a crime
by the Optionee involving moral turpitude, which crime has a
material adverse impact on the Company, (ii) gross negligence
or willful misconduct which is continuous and results in
material damage to the Company, or (iii) the continuous,
willful failure of the person in question to follow the
reasonable directives of the Board of Directors. "DISABILITY"
shall mean the inability or failure of a person to perform
those duties for the Company traditionally assigned to and
performed by such person because of the person's then-existing
physical or mental condition, impairment or incapacity. The
fact of disability shall be determined by the Committee, which
may consider such evidence as it considers desirable under the
circumstances, the determination of which shall be final and
binding upon all parties. "INVOLUNTARY TERMINATION WITHOUT
CAUSE" shall mean either (i) the dismissal of, or the request
for the resignation of, a person, by court order, order of any
court-appointed liquidator or trustee of the Company, or the
order or request of any creditors' committee of the Company
constituted under the federal bankruptcy laws, provided that
such order or request contains no specific reference to Cause;
or (ii) the dismissal of, or the request for the resignation
of, a person, by a duly constituted corporate officer of the
Company, or by the Board, for any reason other than for Cause.

(ii) During the three months after the date of the
Optionee's Involuntary Termination Without Cause, the Optionee
shall have the right to exercise the options granted under the
Plan, but only to the extent the option was exercisable on the
date of the cessation of the Optionee's employment.

<PAGE>

(iii) During the twelve months after Termination of
the Optionee's employment with the Company as a result of the
Optionee's Disability, the Optionee shall have the right to
exercise the options granted under the Plan, but only to the
extent the option was exercisable on the date of the cessation
of the Optionee's employment.

(iv) In the event of the death of the Optionee while
employed or, in the event of the death of the Optionee after
cessation of employment described in subparagraph (ii) or
(iii), above, but within the three-month or twelve-month
period described in subparagraph (ii) or (iii), above, the
option shall thereupon become exercisable in full until the
expiration of twelve months following the Optionee's death.
During such extended period, the option may be exercised by
the person or persons to whom the deceased Optionee's rights
under the Option Agreement shall pass by will or by the laws
of descent and distribution, but only to the extent the option
was exercisable on the date of the cessation of the Optionee's
employment. The provisions of the foregoing sentence shall
apply to any outstanding options which are incentive stock
options to the extent permitted by Section 422(d) of the Code
and such outstanding options in excess thereof shall,
immediately upon the occurrence of the event described in the
preceding sentence, be treated for all purposes of the Plan as
nonstatutory stock options and shall be immediately
exercisable as such as provided in the foregoing sentence.

In no event shall any option be exercisable beyond the
applicable exercise period provided in Section 5(b) of the Plan.
Nothing in the Plan or in any option granted pursuant to the Plan (in
the absence of an express provision to the contrary) shall confer on
any individual any right to continue in the employ of the Company or
any Subsidiary or interfere in any way with the right of the Company to
terminate his employment at any time.

(e) NONTRANSFERABILITY OF OPTIONS. During the lifetime of an
Optionee, options held by such Optionee shall be exercisable only by
him. No option shall be transferable other than by will or the laws of
descent and distribution.

(f) ADJUSTMENTS FOR CHANGE IN STOCK SUBJECT TO PLAN. In the
event of a reorganization, recapitalization, stock split, stock
dividend, combination of shares, merger, consolidation, rights offering
or any other change in the corporate structure or shares of the
Company, corresponding adjustments automatically shall be made to the
number and kind of shares available for issuance under this Plan and
the number and kind of shares covered by outstanding options under this
Plan.

(g) ACCELERATION OF EXERCISABILITY OF OPTIONS UPON OCCURRENCE
OF CERTAIN EVENTS. In connection with any merger or consolidation in
which the Company is not the surviving corporation and which results in
the holders of the outstanding voting securities of the Company
(determined immediately prior to such merger or consolidation) owning
less than a majority of the outstanding voting securities of the
surviving corporation (determined immediately following such merger or
consolidation), or any sale or transfer by the Company of all or
substantially all of its assets or any tender offer or exchange offer
for or the acquisition, directly or indirectly, by any person or group
of all or a majority of the then-outstanding voting securities of the
Company, all outstanding options under the Plan shall become
exercisable in full, notwithstanding any other provision of the Plan or
of any outstanding options granted thereunder, on and after (i) the
fifteenth day prior to the effective date of such merger,
consolidation, sale, transfer or acquisition or (ii) the date of
commencement of such tender offer or exchange offer, as the case may
be. The

<PAGE>

provisions of the foregoing sentence shall apply to any outstanding
options which are incentive stock options to the extent permitted by
Section 422(d) of the Code and such outstanding options in excess
thereof shall, immediately upon the occurrence of the event described
in clause (i) or (ii) of the foregoing sentence, be treated for all
purposes of the Plan as nonstatutory stock options and shall be
immediately exercisable as such as provided in the foregoing sentence.
Notwithstanding the foregoing, in no event shall any option be
exercisable after the date of termination of the exercise period of
such option specified in Sections 5(b) and 5(d).

(h) REGISTRATION, LISTING AND QUALIFICATION OF SHARES OF
STOCK. Each option shall be subject to the requirement that if at any
time the Board of Directors shall determine that the registration,
listing or qualification of shares of Stock covered thereby upon any
securities exchange or under any federal or state law, or the consent
or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of
such option or the purchase of shares of Stock thereunder, no such
option may be exercised unless and until such registration, listing,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Board of Directors. The
Company may require that any person exercising an option shall make
such representations and agreements and furnish such information as it
deems appropriate to assure compliance with the foregoing or any other
applicable legal requirement.

(i) OTHER TERMS AND CONDITIONS. The Committee may impose such
other terms and conditions, not inconsistent with the terms hereof, on
the grant or exercise of options, as it deems advisable.

(j) RELOAD OPTIONS. If upon the exercise of an option granted
under the Plan (the "Original Option") the Optionee pays the purchase
price for the Original Option pursuant to Section 5(c) in whole or in
part in shares of Stock owned by the Optionee for at least six months,
the Company shall grant to the Optionee on the date of such exercise an
additional option under the Plan (the "Reload Option") to purchase that
number of shares of Stock equal to the number of shares of Stock so
held for at least six months transferred to the Company in payment of
the purchase price in the exercise of the Original Option. The price at
which each share of Stock covered by the Reload Option may be purchased
shall be the market value per share of Stock (as specified in Section
5(c)) on the date of exercise of the Original Option. The Reload Option
shall not be exercisable until one year after the date the Reload
Option is granted or after the expiration date of the Original Option.
Upon the payment of the purchase price for a Reload Option granted
hereunder in whole or in part in shares of Stock held for more than six
months pursuant to Section 5(c), the Optionee is entitled to receive a
further Reload Option in accordance with this Section 5(j). Shares of
Stock covered by a Reload Option shall not reduce the number of shares
of Stock available under the Plan pursuant to Section 3.

6. ADDITIONAL PROVISIONS APPLICABLE TO INCENTIVE STOCK OPTIONS. The
Committee may, in its discretion, grant options under the Plan to eligible
employees which constitute "incentive stock options" within the meaning of
Section 422 of the Code, provided, however, that (a) the aggregate market value
of the Stock with respect to which incentive stock options are exercisable for
the first time by the Optionee during any calendar year shall not exceed the
limitation set forth in Section 422(d) of the Code and (b) Section 5(d)(ii)
hereof shall not apply to any incentive stock option.

7. AMENDMENT AND TERMINATION. Unless the Plan shall theretofore have
been terminated as hereinafter provided, the Plan shall terminate on, and no
option shall be granted hereunder after, [DATE -- GENERALLY, 10 YEARS FROM THE
EARLIER OF (I) DATE OF ADOPTION, AND (II) DATE OF SHAREHOLDER APPROVAL];

<PAGE>

provided, however, that the Board of Directors may at any time prior to that
date terminate the Plan. The Board of Directors may at any time amend the Plan
or the term of any option outstanding under the Plan; provided, however, that,
except as contemplated in Section 5(f), the Board of Directors shall not,
without approval by a majority of the votes cast by the stockholders of the
Company at a meeting of stockholders at which a proposal to amend the Plan is
voted upon, (i) increase the maximum number of shares of Stock for which options
may be granted under the Plan, (ii) change the minimum option price, (iii)
extend the period during which options may be granted or exercised or, (iv)
except as otherwise provided in the Plan, amend the requirements as to the class
of employees eligible to receive options. No termination or amendment of the
Plan or any option outstanding under the Plan may, without the consent of an
Optionee, adversely affect the rights of such Optionee under any option held by
such Optionee.

8. EFFECTIVENESS OF PLAN. The Plan will not be made effective unless
approved before August 31, 1997 by a majority of the votes cast thereon by the
stockholders of the Company at a meeting of stockholders duly called and held
for such purpose or by unanimous written consent of such stockholders, and no
option granted hereunder shall be exercisable prior to such approval.

9. WITHHOLDING. It shall be a condition to the obligation of the
Company to issue shares of Stock upon exercise of an option that the Optionee
(or any beneficiary or person entitled to act under Section 5(d) hereof) pay to
the Company, upon its demand, such amount as may be requested by the Company for
the purpose of satisfying any other taxes. If the amount requested is not paid,
the Company may refuse to issue such shares of Stock.

10. OTHER ACTIONS. Nothing contained in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including, but not by way of limitation, the right of the Company to grant or
assume options for proper corporate purposes other than under the Plan with
respect to any employee or other person, firm, corporation or association.

<PAGE>

SONIC AUTOMOTIVE, INC.

EMPLOYEE STOCK PURCHASE PLAN

<PAGE>

SONIC AUTOMOTIVE, INC.

EMPLOYEE STOCK PURCHASE PLAN

EFFECTIVE

AS OF

-------------------------

TABLE OF CONTENTS

Page

<S> <C>
ARTICLE I - PURPOSE; DEFINITIONS; CONSTRUCTION....................................................................1
1.1 Purpose of Plan.................................................................................1
1.2 Definitions.....................................................................................1
(a) "Account"..............................................................................1
(b) "Base Pay".............................................................................1
(c) "Board of Directors"...................................................................1
(d) "Business Day".........................................................................1
(e) "Cause"................................................................................1
(f) "Code".................................................................................2
(g) "Committee"............................................................................2
(h) "Company"..............................................................................2
(i) "Company Stock"........................................................................2
(j) "Contributions"........................................................................2
(k) "Effective Date".......................................................................2
(l) "Employee".............................................................................2
(m) "Employer".............................................................................2
(n) "Exercise Date"........................................................................2
(o) "Grant Date"...........................................................................2
(p) "Option"...............................................................................2
(q) "Participant"..........................................................................2
(r) "Plan".................................................................................2
1.3 Construction....................................................................................3

ARTICLE II - ADMINISTRATION.......................................................................................3
2.1 Appointment and Procedures of Committee.........................................................3
2.2 Authority of Committee..........................................................................3

ARTICLE III - PARTICIPATION.......................................................................................3
3.1 Eligibility to Participate......................................................................3
3.2 Restrictions on Participation...................................................................3
3.3 Leave of Absence................................................................................4

<PAGE>

ARTICLE IV - CONTRIBUTIONS........................................................................................4

4.1 Payroll Deductions..............................................................................4
4.2 Direct Payment..................................................................................4
4.3 Leave of Absence................................................................................5
4.4 Contributions to Accounts.......................................................................5
4.5 Withdrawal of Contributions from Plan...........................................................5
4.6 Termination of Employment.......................................................................5

ARTICLE V - OPTIONS...............................................................................................5
5.1 Company Stock Available for Options.............................................................5
5.2 Granting of Options.............................................................................5
5.3 Option Price....................................................................................6
5.4 Option Period...................................................................................6
5.5 Exercise of Options.............................................................................6
(a) Automatic Exercise.....................................................................6
(b) Nontransferability of Options..........................................................7
(c) Effect of Termination of Employment....................................................7
(i) Termination of Employment Related to Cause....................................7
(ii) Termination of Employment Due to Death........................................7
(iii) Other Termination of Employment...............................................7
(d) Leave of Absence.......................................................................8
(e) Delivery of Stock......................................................................8
(f) Acceleration of Exercisability of Options Upon Occurrence of
Certain Events.........................................................................8
(g) Registration, Listing and Qualification of Shares of Stock.............................8

ARTICLE VI - MISCELLANEOUS........................................................................................9
6.1 Adjustments Upon Changes in Capitalization......................................................9
6.2 Approval of Shareholders........................................................................9
6.3 Amendment, Suspension and Termination...........................................................9
6.4 Intent to Comply With Code Section 423..........................................................9
6.5 Equal Rights and Privileges.....................................................................9
6.6 Use of Funds...................................................................................10
6.7 Withholding....................................................................................10
6.8 Effect of Plan.................................................................................10
6.9 No Employment Rights...........................................................................10
6.10 Governing Law..................................................................................10
6.11 Other Actions..................................................................................10
</TABLE>

<PAGE>

SONIC AUTOMOTIVE, INC.

EMPLOYEE STOCK PURCHASE PLAN

EFFECTIVE

AS OF

------------------------------

ARTICLE I

PURPOSE; DEFINITIONS; CONSTRUCTION

1.1 Purpose of Plan. The purpose of the Plan, which shall be known as
the Sonic Automotive, Inc. Employee Stock Purchase Plan (the "Plan"), is to
provide employees of Sonic Automotive, Inc. (the "Company") and its
participating subsidiaries (which hereinafter shall be referred to collectively
with the Company as the "Employer") an opportunity to acquire a proprietary
interest in the Company through the purchase of the common stock, $.01 par
value, of the Company. This Plan is intended to qualify as an "employee stock
purchase plan" within the meaning of Section 423 of the Internal Revenue Code of
1986, as amended (the "Code").

1.2 Definitions. Throughout this Plan, the following terms shall have
the meanings indicated:

(a) "Account" shall mean a memorandum account maintained to
record each Participant's Contributions pending purchase of Company Stock.

(b) "Base Pay" shall mean the Participant's regular cash
compensation (excluding overtime pay, bonuses, shift premiums, commissions,
fringe benefits, other special payments and imputed income) determined without
reduction for Contributions made under this Plan or contributions to any Code
Section 401(k) or Section 125 Plan.

(d) "Business Day" shall mean any day other than a Saturday,
Sunday or holiday.

(e) "Cause" shall mean any act, action or series of acts or
actions or any omission, omissions or series of omissions which, in the opinion
of the Committee, result in, or which have the effect of resulting in, (i) the
commission of a crime by the Participant involving moral turpitude, which crime
has a material adverse impact on the Employer, (ii) gross negligence or willful
misconduct which is continuous and results in material damage to the Employer,
or (iii) the continuous, willful failure of the person in question to follow the
reasonable directives of the Employer.

<PAGE>

(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended, any successor revenue laws of the United States, and the rules and
regulations promulgated thereunder.

(g) "Committee" shall mean the committee of directors of the
Company appointed by the Board of Directors in accordance with Section 2.1 to
administer this Plan, or in the event that no such committee exists or is
appointed, "Committee" shall mean the Board of Directors.

(h) "Company" shall mean Sonic Automotive, Inc., a company
organized and existing under the laws of the State of Delaware.

(i) "Company Stock" shall mean the Class A common stock, $.01
par value, of the Company.

(j) "Contributions" shall mean the after-tax payroll
deductions or other permissible contributions made by Participants to the Plan
pursuant to Article IV.

(k) "Effective Date" shall mean [DATE] .

(l) "Employee" shall mean any person who on or after the
Effective Date (i) is employed on a full-time or part-time basis by a
participating Employer, (ii) is regularly scheduled to work more than twenty
hours per week, and (iii) is customarily employed more than five months in any
calendar year. Independent contractors and outside directors shall not be
included in the definition of Employee for purposes of this Plan.

(m) "Employer" shall mean the Company and any of its present
or future subsidiaries (within the meaning of Section 424(f) of the Code) which
the Committee may designate from time to time as participating Employers under
this Plan.

(n) "Exercise Date" shall mean the last Business Day of March,
June, September and December on which the principal trading market for Company
Stock is open for trading, plus any other interim dates during the year which
the Committee designates as Exercise Dates.

(o) "Grant Date" shall mean January 1 of each calendar year
which begins after the Effective Date.

(p) "Option" shall mean an option to purchase shares of
Company Stock granted by the Committee to a Participant pursuant to this Plan.

(q) "Participant" shall mean an Employee participating in this
Plan in accordance with Article III.

(r) "Plan" shall mean this Sonic Automotive, Inc. Employee
Stock Purchase Plan, as amended from time to time.

<PAGE>

1.3 Construction. The masculine gender, where appearing in the Plan,
shall be deemed to include the feminine gender, unless the context clearly
indicates to the contrary. The words "hereof," "herein," "hereunder" and other
similar compounds of the word "here" shall mean and refer to the entire Plan and
not to any particular provision or Section.

ARTICLE II

ADMINISTRATION

2.1 Appointment and Procedures of Committee. The Plan shall be
administered by the Committee as appointed from time to time by the Board of
Directors. The Committee shall consist of not fewer than two members of the
Board of Directors. Each Committee member shall be a "non-employee director"
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended. No member of the Board of Directors who serves on the
Committee shall be eligible to participate in the Plan. The Committee shall hold
its meetings at such times and places as it may determine. A majority of its
members shall constitute a quorum. All determinations of the Committee shall be
made by a majority of its members. Any decision or determination reduced to
writing and signed by all members shall be as effective as if it had been made
by a majority vote at a meeting duly called and held. The Committee may appoint
a secretary (who need not be a member of the Committee).

2.2 Authority of Committee. The Committee, subject to the terms of the
Plan, shall have plenary authority in its discretion to interpret and construe
the Plan (including, without limitation, any of its terms which are uncertain,
doubtful or disputed); to decide all questions of Employee eligibility
hereunder; to determine the amount, manner and timing of all Options and
purchases of Company Stock hereunder; to establish, amend and rescind rules and
regulations pertaining to the administration of the Plan; and to make
determinations and interpretations and take such other administrative actions as
it deems necessary or advisable for the administration of this Plan. The express
grant in the Plan of any specific power to the Committee shall not be construed
as limiting any power or authority of the Committee. No member of the Committee
shall be liable for any act, determination or omission with respect to his
service on the Committee, if he acts in good faith and in a manner he reasonably
believes to be in or not opposed to the best interest of the Employer. All
expenses of administering this Plan shall be borne by the Employer.

ARTICLE III

PARTICIPATION

3.1 Eligibility to Participate. Subject to the restrictions of Section
3.2 below, an Employee shall be eligible to participate in this Plan as of the
first Grant Date coincident with or next following the first anniversary of his
date of employment with the Employer (provided that the Employee is still
employed on such Grant Date). For this purpose, years of employment prior to the
Effective Date will be considered.

3.2 Restrictions on Participation. Notwithstanding the foregoing
Section 3.1, no Employee shall be eligible to participate in the Plan if such
Employee owns or holds options to

<PAGE>

purchase (or upon participation in this Plan would own or hold options to
purchase) stock possessing an aggregate of 5% or more of the total combined
voting power or value of all classes of stock of the Company or any other
Employer (as determined in accordance with the rules of Section 424(d) of the
Code relating to attribution of stock ownership).

3.3 Leave of Absence. For purposes of becoming a participant in the
Plan, a person on a leave of absence shall be deemed to be an Employee for the
first ninety days of such leave of absence and such Employee's employment shall
be deemed to have terminated at the close of business on the ninetieth day of
such leave of absence unless such Employee shall have returned to regular
full-time or part-time employment prior to the close of business on such
ninetieth day. Termination by the Company of any Employee's leave of absence,
other than termination of such leave of absence on return to regular full-time
or part-time employment, shall terminate an Employee's employment for all
purposes of the Plan.

ARTICLE IV

CONTRIBUTIONS

4.1 Payroll Deductions. By written election, made and filed with the
Committee pursuant to the Committee's rules and procedures, a Participant may
elect to designate a whole percentage between one percent and ten percent (or
such higher or lower percentage as may be allowed by the Committee's rules and
procedures) of his Base Pay to be deferred by payroll deduction as a
Contribution to the Plan. Payroll deductions shall commence as soon as
administratively practicable following the filing of such written election with
the Committee. The Committee in its discretion may develop additional rules and
procedures regarding payroll deduction elections.

A Participant may change or revoke his payroll deduction amount by
filing, on such forms and in accordance with such rules and procedures as the
Committee in its discretion may prescribe, a revised written election with the
Committee. Such modification or revocation shall take effect as soon as
administratively practicable after the Committee's receipt of such revised
election. Notwithstanding the foregoing, a Participant may change his payroll
deduction election only once each calendar quarter, or as otherwise specifically
allowed by the Committee's rules and procedures. If payroll deductions are
discontinued, payroll deductions may not be resumed by the Participant until the
payroll period which begins on or after the next Exercise Date, or as otherwise
specifically allowed by the Committee's rules and procedures. Under no
circumstances may a Participant's payroll deduction election be made, modified
or revoked retroactively.

4.2 Direct Payment. In accordance with such rules and procedures as the
Committee may prescribe in its discretion and in lieu of payroll deductions
pursuant to Section 4.1, a Participant may elect to make Contributions by direct
cash payment (including by check, subject to the Committee's rules and
procedures) to the Plan rather than by payroll deduction. Such direct payments
must be received by the Plan at least ten Business Days prior to an Exercise
Date in order for such payments to be applied in the exercise of an Option for
the purchase of Company Stock on such Exercise Date.

<PAGE>

4.3 Leave of Absence. If a Participant is on a leave of absence, such
Participant shall have the right to elect to (a) withdraw from the Plan and
receive a distribution of the balance in his Account pursuant to Section 4.5,
(b) discontinue Contributions to the Plan but remain a Participant in the Plan,
or (c) remain a Participant in the Plan during such leave of absence,
authorizing deductions to be made from payments by the Company to the
Participant during such leave of absence, or making direct cash payments to the
Plan pursuant to Section 4.2.

4.4 Contributions to Accounts. A memorandum Account shall be
established by the Committee for each Participant for the purpose of accounting
for Contributions. Contributions shall be credited to Accounts as soon as
administratively practicable following payroll withholding or receipt of other
permissible direct cash payment. Amounts credited to Accounts will not accrue
interest.

4.5 Withdrawal of Contributions from Plan. Prior to the end of a
calendar quarter, a Participant may elect to withdraw the Contributions credited
to his Account for that quarter by filing written notice thereof with the
Committee on such forms and in accordance with such procedures as the Committee
may prescribe. The Participant's Contributions shall be distributed to him as
soon as administratively practicable after the Committee's receipt of his notice
of withdrawal and, if applicable, no further payroll deductions shall be made
from his Base Pay.

4.6 Termination of Employment. Upon termination of a Participant's
employment for any reason, such Participant may no longer make Contributions to
the Plan or be granted Options under the Plan. A Participant's right, if any, to
exercise any unexpired Option he holds as of his termination of employment shall
be determined in accordance with Section 5.5(c).

ARTICLE V

OPTIONS

5.1 Company Stock Available for Options. There shall be available for
Options under the Plan an aggregate maximum of [200,000] shares of Company
Stock, subject to any adjustments which may be made pursuant to Section 6.1 of
the Plan in connection with changes in capitalization of the Company. Shares of
Company Stock used for purposes of the Plan may be either authorized and
unissued shares, or previously issued shares held in the treasury of the
Company, or both. Shares of Company Stock covered by Options which have expired
prior to exercise shall be available for further Options granted hereunder.

5.2 Granting of Options. The Plan shall be implemented by annual
offerings of approximately twelve months duration (except as otherwise provided
in Section 5.4). On each Grant Date, all eligible Employees shall be granted an
Option to purchase shares of Company Stock. Prior to each Grant Date, the
Committee shall determine the number of shares of Company Stock available for
purchase under each Option to be granted on such Grant Date; provided that, the
same number of shares must be available under each Option granted on such Grant
Date. No Participant may be granted an Option which permits his rights to
purchase stock under this Plan and all other employee stock purchase plans of
the Company or Employer to accrue at a rate which exceeds $25,000 of the fair
market value of such stock (determined at the

<PAGE>

time such Option is granted) for each calendar year in which such Option is
outstanding at any time.

5.3 Option Price. The purchase price at which shares of Company Stock
may be acquired pursuant to the exercise of all or any portion of an Option
granted under this Plan shall be eighty-five percent of the lesser of (i) the
fair market value of the Company Stock on the applicable Grant Date, and (ii)
the fair market value of the Company Stock on the applicable Exercise Date. For
purposes of this Section 5.3, the fair market value per share of Company Stock
shall be the closing price on the last Business Day prior to the date of
reference, or in the event that no sales take place on such date, the average of
the closing high bid and low asked prices, in either case on the principal
national securities exchange on which the Company Stock is listed or admitted to
trading, or if the Company Stock is not listed or admitted to trading on any
national securities exchange, the last sale price reported on the National
Market System of the National Association of Securities Dealers Automated
Quotation system ("NASDAQ") on such date, or the average of the closing high bid
and low asked prices of the Company Stock in the over-the-counter market
reported on NASDAQ on such date, as furnished to the Committee by any New York
Stock Exchange member selected from time to time by the Committee for such
purposes. If there is no bid or asked price reported on any such date, the
market value shall be determined by the Committee in accordance with the
regulations promulgated under Section 2031 of the Code, or by any other
appropriate method selected by the Committee.

5.4 Option Period. Each Option granted to a Participant under the Plan
shall expire on the earliest of (a) the last Exercise Date of the calendar year
in which the Option was granted, (b) the Participant's voluntary withdrawal from
the Plan following termination of employment, and (c) the date of the
Participant's termination of employment related to Cause, or the Exercise Date
immediately following the Participant's termination of employment for any reason
unrelated to Cause. In no event will the duration of an Option period exceed
twenty-seven months (or such other applicable period permitted under Section
423(b)(7) of the Code) from the date on which such Option is granted.

5.5 Exercise of Options.

(a) Automatic Exercise. Any Option granted to a Participant
shall be exercised automatically on each Exercise Date during the calendar year
of the Option's Grant Date in whole or in part such that the Participant's
accumulated Contributions as of such Exercise Date shall be applied to the
purchase of the maximum number of whole shares of Company Stock that his
Contributions will allow at the applicable Option price (determined in
accordance with Section 5.3), limited to the number of shares subject to such
Option. In the event that the number of shares of Company Stock that may be
purchased by all Participants in the Plan exceeds the number of shares then
available for issuance under the Plan, the Committee shall make a pro rata
allocation of the available shares in as uniform a manner as it determines to be
practicable and equitable. Any remaining Contributions in the Participant's
Account amounting to less than the Option price of a whole share of Company
Stock shall be carried forward and applied on the next Exercise Date; provided
that, Contributions remaining after the last Exercise Date of the calendar year
may be distributed to the Participant at his election.

<PAGE>

(b) Nontransferability of Options. During a Participant's
lifetime, Options held by such Participant shall be exercisable only by that
Participant. No Option shall be transferable other than by will or the laws of
descent and distribution.

(i) Termination of Employment Related to Cause. Upon
termination of a Participant's employment related to Cause, the Participant's
participation in the Plan also shall terminate. Any unexpired Option he holds
will expire as of the date of his termination of employment. Remaining
contributions credited to his Account shall be distributed to the Participant as
soon as administratively practicable following termination of employment.

(ii) Termination of Employment Due to Death. In the
event of the death of the Participant while employed, or during the period
following his termination of employment for any reason unrelated to Cause but
prior to the next Exercise Date, the Participant's estate shall have the right
to elect by written notice to the Committee prior to the earlier of the
expiration of sixty days commencing with the date of the Participant's death and
the Exercise Date next following the date of the Participant's death:

(A) To withdraw all of the Contributions
credited to the Participant's Account under the Plan, or

(B) To exercise any unexercised Option held
by the Participant as of the date of his death for the purchase of Company Stock
on the Exercise Date next following the date of the Participant's death in
accordance with Section 5.5(a) but only to the extent such Option was
exercisable on the date of the Participant's death, with any remaining
Contributions credited to the Participant's Account being distributed to the
Participant's estate as soon as administratively practicable after such Exercise
Date.

In the event that no such written election is timely and properly received by
the Committee, all Contributions credited to the Participant's Account shall be
distributed to the Participant's estate. In no event shall any Option be
exercisable beyond the applicable exercise period specified in Section 5.4 of
the Plan.

(iii) Other Termination of Employment. Upon
termination of a Participant's employment for any reason unrelated to Cause or
death, the Participant may at his election:

(A) Withdraw from the Plan pursuant to
Section 4.5 and request the return of the remaining Contributions then credited
to his Account, or

(B) Continue participation in the Plan,
subject to the provisions of Section 4.6, until the Exercise Date next following
his date of termination of employment for the limited purpose of allowing any
unexpired Option he holds as of his termination of employment to be exercised
automatically in accordance with Section 5.5(a) on the Exercise Date next
following his termination of employment but only to the extent such Option was
exercisable on the date of the Participant's termination of employment, with any
remaining Contributions

<PAGE>

credited to the Participant's Account being distributed to the Participant as
soon as administratively practicable after such Exercise Date.

(d) Leave of Absence. A Participant on a leave of absence
shall, subject to the election made by such Participant pursuant to Section 4.3,
continue to be a Participant in the Plan so long as such Participant is on
continuous leave of absence. A Participant who has been on leave of absence for
more than ninety days and who therefore is not an Employee for the purpose of
the Plan shall not be entitled to participate in any offering commencing on any
Grant Date following the ninetieth day of such leave of absence. Notwithstanding
any other provisions of the Plan, unless a Participant on a leave of absence
returns to regular full-time or part-time employment with the Employer at the
earlier of (i) the termination of such leave of absence, or (ii) three months
from the ninetieth day of such leave of absence, such Participant's
participation in the Plan shall terminate on whichever of such dates first
occurs.

(e) Delivery of Stock. As soon as administratively practicable
after each Exercise Date, the Company or the Committee will deliver to each
Participant, as applicable, certificates evidencing shares of Company Stock
purchased under this Plan.

(f) Acceleration of Exercisability of Options Upon Occurrence
of Certain Events. In connection with any merger or consolidation in which the
Company is not the surviving corporation and which results in the holders of the
outstanding voting securities of the Company (determined immediately prior to
such merger or consolidation) owning less than a majority of the outstanding
voting securities of the surviving corporation (determined immediately following
such merger or consolidation), or any sale or transfer by the Company of all or
substantially all of its assets or any tender offer or exchange offer for or the
acquisition, directly or indirectly, by any person or group of all or a majority
of the then-outstanding voting securities of the Company, all outstanding
Options under the Plan shall become exercisable in full, notwithstanding any
other provision of the Plan or of any outstanding Options granted thereunder, on
and after (i) the fifteenth day prior to the effective date of such merger,
consolidation, sale, transfer or acquisition or (ii) the date of commencement of
such tender offer or exchange offer, as the case may be. Notwithstanding the
foregoing, in no event shall any Option be exercisable after the date of
termination of the exercise period of such Option specified in Section 5.4.

(g) Registration, Listing and Qualification of Shares of
Stock. Each Option shall be subject to the requirement that if at any time the
Board of Directors shall determine that the registration, listing or
qualification of shares of Company Stock covered thereby upon any securities
exchange or under any federal or state law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such option or the purchase of shares of
Company Stock thereunder, no such Option may be exercised unless and until such
registration, listing, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Directors. The Employer may require that any person exercising an Option shall
make such representations and agreements and furnish such information as it
deems appropriate to assure compliance with the foregoing or any other
applicable legal requirement.

<PAGE>

ARTICLE VI

MISCELLANEOUS

6.1 Adjustments Upon Changes in Capitalization. In the event of a
reorganization, stock split, stock dividend, combination of shares, merger,
consolidation, rights offering or any other change in the corporate structure of
shares of the Company, corresponding adjustments shall be made to the number and
kind of shares of Company Stock available for issuance under this Plan and the
number and kind of shares of Company Stock covered by outstanding Options under
this Plan. Any adjustments made pursuant to this Section 6.1 remain subject to
the limitations of Section 423 of the Code (including its $25,000 annual
limitations).

6.2 Approval of Shareholders. Within twelve months before or after the
Plan is originally adopted, this Plan must be approved by a majority of the
votes cast thereon by the stockholders of the Company at a meeting of
stockholders duly called and held for such purpose or by unanimous written
consent of such stockholders, and no Option granted hereunder shall be
exercisable prior to such approval.

6.3 Amendment, Suspension and Termination. The Board of Directors may
at any time amend, suspend or terminate this Plan; provided, however, that the
Board of Directors shall not (i) increase the maximum number of shares of
Company Stock for which Options may be granted under the Plan except as provided
in Section 6.1, (ii) materially modify the requirements as to the class of
employees eligible to receive Options and purchase Company Stock under the Plan,
or (iii) materially increase the benefits accruing to Participants under the
Plan without obtaining approval of the stockholders in the manner described in
Section 6.2. The Plan will continue until terminated by the Board of Directors
or until all of the shares of Company Stock reserved for issuance under the Plan
have been issued, whichever first occurs. No amendment, suspension or
termination of the Plan may, without the consent of the Participants then
holding Options to purchase Company Stock, adversely affect the rights of such
Participants under such Options.

6.4 Intent to Comply With Code Section 423. It is intended that this
Plan qualify as an "employee stock purchase plan" under Section 423 of the Code.
The provisions of this Plan shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that Section of
the Code. In the event of an inconsistency between the Plan and Section 423 of
the Code, the Plan shall be interpreted in a manner which complies with the
requirements of Section 423 of the Code and the regulations thereunder, without
further act or amendment by the Company or the Board of Directors unless
otherwise required pursuant to Section 6.3 of this Plan.

6.5 Equal Rights and Privileges. All Participants granted Options under
this Plan shall have equal rights and privileges within the meaning of Section
423(b)(5) of the Code and the regulations thereunder. The provisions applying to
one Option granted on a Grant Date must apply in the same manner to all other
Options granted on such Grant Date.

<PAGE>

6.6 Use of Funds. All Contributions received and held by the Employer
under this Plan may be used by the Employer for any corporate purpose and the
Employer shall not be obligated to segregate such Contributions.

6.7 Withholding. It shall be a condition to the obligation of the
Company to issue shares of Company Stock upon exercise of an Option that the
Participant (or his estate pursuant to Section 5.5(c)(ii)) pay to the Company,
upon its demand, such amount as may be requested by the Company for the purpose
of satisfying taxes, including taxes owed by the Participant due to the
disposition of Company Stock by the Participant prior to the expiration of the
holding periods described in Section 423(a) of the Code.

6.8 Effect of Plan. This Plan shall be binding upon each Participant
and his successors, including, without limitation, such Participant's estate and
the executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such
Participant.

6.9 No Employment Rights. Nothing in this Plan or in any Option granted
pursuant to the Plan shall be construed as a contract of employment between the
Employer and any employee, or as a right of any employee to continue in the
employ of the Employer, or as a limitation of the right of the Employer to
discharge any of its employees, with or without cause.

6.10 Governing Law. This Plan and all rights and obligations hereunder
shall be construed in accordance with and governed by the laws of the State of
North Carolina, except to the extent such laws are preempted by the laws of the
United States.

6.11 Other Actions. Nothing contained in the Plan shall be construed to
limit the authority of the Company to exercise its corporate rights and powers,
including, but not by way of limitation, the right of the Company to grant or
assume options for proper corporate purposes other than under the Plan with
respect to any employee or other person, firm, corporation or association.

<PAGE>

SUBSCRIPTION AGREEMENT

This Subscription Agreement (the "Agreement"), dated as of June 30,
1997, by and between SONIC AUTO WORLD, INC., a Delaware corporation (the
"Corporation"), and O. BRUTON SMITH, a resident of the State of North Carolina
("Smith"), sets forth the terms and conditions of Smith's subscription for the
capital stock of the Corporation.

WHEREAS, subject to the filing of a Certificate of Amendment (the
"Certificate") to the Certificate of Incorporation of the Corporation, such
Certificate to be substantially in the form attached hereto as Exhibit A, with
and by the Secretary of State of the State of Delaware in accordance with
applicable law, the authorized capital stock of the Corporation consists of (i)
50,000,000 shares of Class A Common Stock with par value of $.01 per share, (ii)
15,000,000 shares of Class B Common Stock with par value of $.01 per share, (the
"Class B Common Stock"), and (iii) 3,000,000 shares of preferred stock with par
value of $.10 per share;

WHEREAS, Smith is the owner of (i) certain shares of the common stock
(the "MDC Shares") of Marcus David Corporation, a North Carolina corporation
("MDC"), and (ii) certain shares of the common stock (the "FMF Management
Shares") of FMF Management, Inc., a South Carolina corporation ("FMF
Management") (the MDC Shares and FMF Management Shares, collectively, the "Smith
Shares");

WHEREAS, in connection with a proposed reorganization of the operations
of the Corporation and various automobile dealerships and the entities having
interests therein substantially as outlined on Exhibit B hereto (the
"Reorganization"), the parties hereto propose to effect an exchange of the Smith
Shares for Class B Common Stock as described herein;

NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties to this Agreement
hereby agree as follows:

1. SUBSCRIPTION FOR SHARES. Smith hereby subscribes to and agrees to
purchase 1,657 shares of the Class B Common Stock in consideration for the
transfer to the Corporation of all of the Smith Shares (the "Smith Transfer").
Smith hereby agrees to take all actions necessary to effect the Smith Transfer.
The Corporation hereby accepts the subscription by Smith for 1,657 shares of the
Class B Common Stock and agrees that, upon consummation of the Smith Transfer,
the Corporation will issue Smith a stock certificate representing 1,657 shares
of the Class B Common Stock and that upon issuance such shares will be validly
issued, fully paid and non-assessable.

2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SMITH. Smith
hereby represents, warrants and covenants that:

(a) Smith has good and valid title to all of the Smith Shares,
free and clear of all liens, pledges, encumbrances, claims, security
interests, charges, voting trusts, voting agreements, other agreements,
rights, options, warrants or restrictions or claims of any kind, nature
or description (except for any of the foregoing to be released or
otherwise terminated pursuant to the Reorganization), and that all such
Smith Shares, in respect of each of MDC and FMF Management, as
applicable, are validly issued, fully paid and non-assessable;

(b) He is purchasing the Class B Common Stock hereby
subscribed for investment only, for his own account, and not with a
view to the distribution thereof;

(c) He understands that the Class B Common Stock hereby
subscribed will be issued without registration with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "Act"), and will be issued under one or more exemptions
from registration in the Act and state securities laws that depend upon
the intent hereby represented and that the Corporation will rely on
such representation in issuing such Class B Common Stock without
registration;

(d) He will make no transfer of his securities acquired
hereunder in violation of the Act, any rules of the SEC, any state
securities law or statute or this Agreement, and will not offer, sell,
mortgage, pledge or otherwise dispose of the securities he acquires
hereunder, unless, in the opinion of counsel satisfactory to the
Corporation, registration under applicable federal or state securities
laws is not required; and

(e) He agrees that the stock certificate issued pursuant to
this Agreement, and any replacements thereof, may be marked with a
legend to the effect that such Class B Common Stock cannot be sold or
transferred without either (i) registration under federal and state
securities laws, or (ii) an opinion of counsel satisfactory to the
Corporation that neither the sale nor the proposed transfer constitutes
a violation of any federal or state securities law.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION.
The Corporation hereby represents, warrants and covenants that:

(a) It is purchasing the stock of MDC and FMF Management
hereby for investment only, for its own account, and not with a view to
the distribution thereof;

(b) It understands that the stock of MDC and FMF Management
will be transferred without registration with the SEC under the Act,
and will be transferred under one or more exemptions from registration
in the Act and state securities laws that depend upon the intent hereby
represented and that Smith will rely on such representation in
transferring such stock without registration;

<PAGE>

securities it acquired hereunder, unless, in the opinion of counsel
satisfactory to Smith, registration under applicable federal or state
securities laws is not required;

(d) The execution and delivery of this Agreement and the
issuance of the Class B Common Stock by the Corporation have been duly
and validly authorized by the Corporation and no other action or
proceeding on the part of the Corporation is necessary to authorize
this Agreement or to consummate the transactions contemplated hereby;
and

(e) The stock certificates issued to it pursuant to this
Agreement, and any replacements thereof, may be marked with a legend to
the effect that such securities cannot be sold or transferred without
either (i) registration under federal and state securities laws, or
(ii) an opinion of counsel satisfactory to Smith that neither the sale
nor the proposed transfer constitutes a violation of any federal or
state securities law.

4. DETERMINATION OF THE VALUE OF THE SMITH SHARES. The parties
acknowledge that the Board of Directors of the Corporation has determined in the
exercise of its reasonable business judgment as of the date hereof the values of
the consideration provided Smith hereunder in relation to the consideration
provided by other subscribers for the Class B Common Stock as of the date hereof
and giving effect to the Reorganization. Therefore, it is understood and agreed
that, after the Smith Transfer and giving effect to the Reorganization, Smith
will own 16.57% of the Class B Common Stock of the Corporation.

5. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to Smith's subscription for
Class B Common Stock of the Corporation and with respect to the Smith Transfer.

6. MODIFICATION. No modification of or amendment to this
Agreement shall be binding unless executed in writing by both parties.

7. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of Delaware.

8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same instrument, and this Agreement
shall be effective when at least one counterpart hereof has been executed by
each of the parties hereto.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

SONIC AUTO WORLD, INC.

By: /s/ Theodore M. Wright
Theodore M. Wright, Vice President

/s/ O. Bruton Smith
O. Bruton Smith

SUBSCRIPTION AGREEMENT

This Subscription Agreement (the "Agreement"), dated as of June 30,
1997, by and between SONIC AUTO WORLD, INC., a Delaware corporation (the
"Corporation"), and SONIC FINANCIAL CORPORATION, a North Carolina corporation
("SFC"), sets forth the terms and conditions of SFC's subscription for the
capital stock of the Corporation.

WHEREAS, SFC is the owner of (i) certain shares of the common stock
(the "SAW Shares") of the Corporation, (ii) certain shares of the common stock
(the "TCF Shares") of Town and Country Ford, Inc., a North Carolina corporation
("TCF"), (iii) certain shares of the common stock (the "Lone Star Shares") of
Lone Star Ford, Inc., a Texas Corporation ("Lone Star"), (iv) certain shares of
the common stock (the "Frontier Shares") of Frontier Oldsmobile-Cadillac, Inc.,
a North Carolina corporation ("Frontier"), and (v) certain shares of the common
stock (the "FMF Management Shares") of FMF Management, Inc., a South Carolina
corporation ("FMF Management") (the SAW Shares, TCF Shares, Lone Star Shares,
Frontier Shares and FMF Management Shares, collectively, the "SFC Shares");

WHEREAS, in connection with a proposed reorganization of the operations
of the Corporation and various automobile dealerships and the entities having
interests therein substantially as outlined on Exhibit B hereto (the
"Reorganization"), the parties hereto propose to effect an exchange of the SFC
Shares for Class B Common Stock as described herein;

NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties to this Agreement
hereby agree as follows:

1. SUBSCRIPTION FOR SHARES. SFC hereby subscribes to and agrees to
purchase 7,105 shares of the Class B Common Stock in consideration for the
transfer to the Corporation of all of the SFC Shares (the "SFC Transfer"). SFC
hereby agrees to take all actions necessary to effect the SFC Transfer. The
Corporation hereby accepts the subscription by SFC for 7,105 shares of the Class
B Common Stock and agrees that, upon consummation of the SFC Transfer, the
Corporation will issue SFC a stock certificate representing 7,105 shares of the
Class B Common Stock and that upon issuance such shares will be validly issued,
fully paid and non-assessable.

2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SFC. SFC hereby
represents, warrants and covenants that:

<PAGE>

(a) It has good and valid title to all of the SFC Shares, free
and clear of all liens, pledges, encumbrances, claims, security
interests, charges, voting trusts, voting agreements, other agreements,
rights, options, warrants or restrictions or claims of any kind, nature
or description and that all such SFC Shares, in respect of each of the
Corporation, TCF, Lone Star, Frontier and FMF Management, as
applicable, are validly issued, fully paid and non-assessable;

(b) It is purchasing the Class B Common Stock hereby
subscribed for investment only, for its own account, and not with a
view to the distribution thereof;

(c) It understands that the Class B Common Stock hereby
subscribed will be issued without registration with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "Act"), and will be issued under one or more exemptions
from registration in the Act and state securities laws that depend upon
the intent hereby represented and that the Corporation will rely on
such representation in issuing such Class B Common Stock without
registration;

(d) It will make no transfer of its securities acquired
hereunder in violation of the Act, any rules of the SEC, any state
securities law or statute or this Agreement, and will not offer, sell,
mortgage, pledge or otherwise dispose of the securities it acquires
hereunder, unless, in the opinion of counsel satisfactory to the
Corporation, registration under applicable federal or state securities
laws is not required; and

(e) It agrees that the stock certificate issued pursuant to
this Agreement, and any replacements thereof, may be marked with a
legend to the effect that such Class B Common Stock cannot be sold or
transferred without either (i) registration under federal and state
securities laws, or (ii) an opinion of counsel satisfactory to the
Corporation that neither the sale nor the proposed transfer constitutes
a violation of any federal or state securities law.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION. The
Corporation hereby represents, warrants and covenants that:

(a) It is purchasing the stock of the Corporation, TCF, Lone
Star, Frontier and FMF Management hereby for investment only, for its
own account, and not with a view to the distribution thereof;

(b) It understands that the stock of the Corporation, TCF,
Lone Star, Frontier and FMF Management will be transferred without
registration with the SEC under the Act, and will be transferred under
one or more exemptions from registration in the Act and state
securities laws that depend upon the intent hereby represented and that
SFC will rely on such representation in transferring such stock without
registration;

2
<PAGE>

(c) It will make no transfer of the securities acquired by it
hereunder in violation of the Act, any rules of the SEC, any state
securities law or statute or this Agreement, and will not offer, sell,
mortgage, pledge or otherwise dispose of the securities it acquired
hereunder, unless, in the opinion of counsel satisfactory to SFC,
registration under applicable federal or state securities laws is not
required;

(e) The stock certificates issued to it pursuant to this
Agreement, and any replacements thereof, may be marked with a legend to
the effect that such securities cannot be sold or transferred without
either (i) registration under federal and state securities laws, or
(ii) an opinion of counsel satisfactory to SFC that neither the sale
nor the proposed transfer constitutes a violation of any federal or
state securities law.

4. DETERMINATION OF THE VALUE OF THE SFC SHARES. The parties
acknowledge that the Board of Directors of the Corporation has determined in the
exercise of its reasonable business judgment as of the date hereof the values of
the consideration provided SFC hereunder in relation to the consideration
provided by other subscribers for the Class B Common Stock as of the date hereof
and giving effect to the Reorganization. Therefore, it is understood and agreed
that, after the SFC Transfer and giving effect to the Reorganization, SFC will
own 71.05% of the Class B Common Stock of the Corporation.

5. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to SFC's subscription for Class B Common
Stock of the Corporation and with respect to the SFC Transfer.

6. MODIFICATION. No modification of or amendment to this Agreement
shall be binding unless executed in writing by both parties.

7. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware.

3
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

SONIC AUTO WORLD, INC.

By: /s/ Theodore M. Wright
-----------------------------------
Theodore M. Wright, Vice President

SONIC FINANCIAL CORPORATION

By: /s/ William R. Brooks
-----------------------------------
William R. Brooks, Vice President

SUBSCRIPTION AGREEMENT

This Subscription Agreement (the "Agreement"), dated as of June 30,
1997, by and between SONIC AUTO WORLD, INC., a Delaware corporation (the
"Corporation"), and BRYAN SCOTT SMITH, a resident of the State of North Carolina
("Smith"), sets forth the terms and conditions of Smith's subscription for the
capital stock of the Corporation.

WHEREAS, Smith is the owner of (i) certain shares of the common stock
(the "TCF Shares") of Town and Country Ford, Inc., a North Carolina corporation
("TCF"), and (ii) a membership interest (the "Fort Mill Ford Interest") in Fort
Mill Ford, LLC, a South Carolina limited liability company ("Fort Mill Ford")
(the TCF Shares and the Fort Mill Ford Interest, collectively, the "Smith
Shares");

NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties to this Agreement
hereby agree as follows:

1. SUBSCRIPTION FOR SHARES. Smith hereby subscribes to and agrees to
purchase 765 shares of the Class B Common Stock in consideration for the
transfer to the Corporation of all of the Smith Shares (the "Smith Transfer").
Smith hereby agrees to take all actions necessary to effect the Smith Transfer.
The Corporation hereby accepts the subscription by Smith for 765 shares of the
Class B Common Stock and agrees that, upon consummation of the Smith Transfer,
the Corporation will issue Smith a stock certificate representing 765 shares of
the Class B Common Stock and that upon issuance such shares will be validly
issued, fully paid and non-assessable.

2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SMITH. Smith hereby
represents, warrants and covenants that:

(a) Smith has good and valid title to the TCF Shares and the
Fort Mill Ford Interest, free and clear of all liens, pledges,
encumbrances, claims, security interests,

<PAGE>

charges, voting trusts, voting agreements, other agreements, rights,
options, warrants or restrictions or claims of any kind, nature or
description, and that each of the TCF Shares and the Fort Mill Ford
Interest are validly issued, fully paid and non-assessable;

(b) He is purchasing the Class B Common Stock hereby
subscribed for investment only, for his own account, and not with a
view to the distribution thereof;

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION. The
Corporation hereby represents, warrants and covenants that:

(a) It is purchasing the stock of TCF and the membership
interest in Fort Mill Ford hereby for investment only, for its own
account, and not with a view to the distribution thereof;

(b) It understands that the stock of TCF and the membership
interest in Fort Mill Ford will be transferred without registration
with the SEC under the Act, and will be transferred under one or more
exemptions from registration in the Act and state securities laws that
depend upon the intent hereby represented and that Smith will rely on
such representation in transferring such stock and interest without
registration;

2
<PAGE>

securities it acquired hereunder, unless, in the opinion of counsel
satisfactory to Smith, registration under applicable federal or state
securities laws is not required;

(e) The stock certificate issued to it pursuant to this
Agreement, and any replacements thereof, may be marked with a legend to
the effect that such securities cannot be sold or transferred without
either (i) registration under federal and state securities laws, or
(ii) an opinion of counsel satisfactory to Smith that neither the sale
nor the proposed transfer constitutes a violation of any federal or
state securities law.

4. DETERMINATION OF THE VALUE OF THE SMITH SHARES. The parties
acknowledge that the Board of Directors of the Corporation has determined in the
exercise of its reasonable business judgment as of the date hereof the values of
the consideration provided Smith hereunder in relation to the consideration
provided by other subscribers for the Class B Common Stock as of the date hereof
and giving effect to the Reorganization. Therefore, it is understood and agreed
that, after the Smith Transfer and giving effect to the Reorganization, Smith
will own 7.65% of the Class B Common Stock of the Corporation.

5. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to Smith's subscription for Class B
Common Stock of the Corporation and with respect to the Smith Transfer.

6. MODIFICATION. No modification of or amendment to this Agreement
shall be binding unless executed in writing by both parties.

7. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware.

3
<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

SONIC AUTO WORLD, INC.

By: /s/ Theodore M. Wright
----------------------------------
Theodore M. Wright, Vice President

/s/ Bryan Scott Smith
------------------------------------------
Bryan Scott Smith

SUBSCRIPTION AGREEMENT

This Subscription Agreement (the "Agreement"), dated as of June 30,
1997, by and between SONIC AUTO WORLD, INC., a Delaware corporation (the
"Corporation"), and WILLIAM S. EGAN, a resident of the State of South Carolina
("Egan"), sets forth the terms and conditions of Egan's subscription for the
capital stock of the Corporation.

WHEREAS, Egan is the owner of certain shares of the common stock (the
"Egan Shares") of Marcus David Corporation, a North Carolina corporation
("MDC");

WHEREAS, in connection with a proposed reorganization of the operations
of the Corporation and various automobile dealerships and the entities having
interests therein substantially as outlined on Exhibit B hereto (the
"Reorganization"), the parties hereto propose to effect an exchange of the Egan
Shares for Class B Common Stock as described herein;

NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties to this Agreement
hereby agree as follows:

1. SUBSCRIPTION FOR SHARES. Egan hereby subscribes to and agrees to
purchase 473 shares of the Class B Common Stock in consideration for the
transfer to the Corporation of all of the Egan Shares (the "Egan Transfer").
Egan hereby agrees to take all actions necessary to effect the Egan Transfer.
The Corporation hereby accepts the subscription by Egan for 473 shares of the
Class B Common Stock and agrees that, upon consummation of the Egan Transfer,
the Corporation will issue Egan, or a corporation, limited liability company,
partnership or other entity with at least 80% of the outstanding equity of such
entity owned by Egan, his spouse or lineal descendants of Egan (an "Egan
Entity"), a stock certificate representing 473 shares of the Class B Common
Stock and that upon issuance such shares will be validly issued, fully paid and
non-assessable.

2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF EGAN. Egan hereby
represents, warrants and covenants that:

(a) He has good and valid title to all of the Egan Shares,
free and clear of all liens, pledges, encumbrances, claims, security
interests, charges, voting trusts, voting agreements, other agreements,
rights, options, warrants or restrictions or claims of any

<PAGE>

kind, nature or description, and that all such Egan Shares, in respect
of MDC, are validly issued, fully paid and non-assessable;

(b) He is purchasing the Class B Common Stock hereby
subscribed for investment only, for his own account, and not with a
view to the distribution thereof; provided, however, that Egan may
transfer or assign such Class B Common Stock or the subscription rights
therefor to an Egan Entity;

(d) Except for an assignment or transfer of the Class B Common
Stock hereby subscribed for or the subscription rights therefor by Egan
to an Egan Entity, he will make no transfer of his securities acquired
hereunder in violation of the Act, any rules of the SEC, any state
securities law or statute or this Agreement, and will not offer, sell,
mortgage, pledge or otherwise dispose of the securities he acquires
hereunder, unless, in the opinion of counsel satisfactory to the
Corporation, registration under applicable federal or state securities
laws is not required; and

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE CORPORATION. The
Corporation hereby represents, warrants and covenants that:

(a) It is purchasing the stock of MDC hereby for investment
only, for its own account, and not with a view to the distribution
thereof;

(b) It understands that the stock of MDC will be transferred
without registration with the SEC under the Act, and will be
transferred under one or more exemptions from registration in the Act
and state securities laws that depend upon the intent hereby
represented and that Egan will rely on such representation in
transferring such stock without registration;

(c) It will make no transfer of the securities acquired by it
hereunder in violation of the Act, any rules of the SEC, any state
securities law or statute or this

2
<PAGE>

Agreement, and will not offer, sell, mortgage, pledge or otherwise
dispose of the securities it acquired hereunder, unless, in the opinion
of counsel satisfactory to Egan, registration under applicable federal
or state securities laws is not required;

(e) The stock certificate issued to it pursuant to this
Agreement, and any replacements thereof, may be marked with a legend to
the effect that such securities cannot be sold or transferred without
either (i) registration under federal and state securities laws, or
(ii) an opinion of counsel satisfactory to Egan that neither the sale
nor the proposed transfer constitutes a violation of any federal or
state securities law.

4. DETERMINATION OF THE VALUE OF THE EGAN SHARES. The parties
acknowledge that the Board of Directors of the Corporation has determined in the
exercise of its reasonable business judgment as of the date hereof the values of
the consideration provided Egan hereunder in relation to the consideration
provided by other subscribers for the Class B Common Stock as of the date hereof
and giving effect to the Reorganization. Therefore, it is understood and agreed
that, after the Egan Transfer and giving effect to the Reorganization, Egan (or
an Egan Entity) will own 4.73% of the Class B Common Stock of the Corporation.

5. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to Egan's subscription for Class B
Common Stock of the Corporation and with respect to the Egan Transfer.

6. MODIFICATION. No modification of or amendment to this Agreement
shall be binding unless executed in writing by both parties.

7. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

SONIC AUTO WORLD, INC.

By: /s/ Theodore M. Wright
----------------------------------
Theodore M. Wright, Vice President

/s/ William S. Egan
---------------------------------------
William S. Egan

<PAGE>
EXHIBIT 21.1

SUBSIDIARIES OF SONIC AUTO WORLD, INC.

1. Town and Country Ford, Inc.
State of Incorporation: North Carolina

2. Marcus David Corporation d/b/a Town & Country Toyota
State of Incorporation: North Carolina

3. Frontier Oldsmobile-Cadillac, Inc.
State of Incorporation: North Carolina

4. FMF Management, Inc. d/b/a Fort Mill Ford
State of Organization: South Carolina

5. Fort Mill Chrysler-Plymouth-Dodge Inc.
State of Incorporation: South Carolina

6. Lone Star Ford, Inc.
State of Incorporation: Texas

7. Sonic Dodge, LLC
State of Incorporation: North Carolina

8. Sonic Chrysler-Plymouth-Jeep-Eagle, LLC
State of Incorporaiton: North Carolina

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES

To the Board of Directors and Stockholders
Sonic Automotive, Inc.

We consent to the use in this Registration Statement relating to shares of
Class A Common Stock of Sonic Automotive, Inc. on Form S-1 of (i) our report
dated August 7, 1997 on the combined financial statements of Sonic Automotive,
Inc. and Affiliated Companies as of and for the year ended December 31, 1996;
(ii) our report dated August 7, 1997 on the financial statements of Dyer & Dyer,
Inc. as of December 31, 1995 and 1996 and for the three years ended December 31,
1996; (iii) our report dated August 7, 1997 on the combined financial statements
of Bowers Dealerships and Affiliated Companies as of December 31, 1995 and 1996
and for the years then ended; and (iv) our report dated August 7, 1997 on the
combined financial statements of Lake Norman Dodge, Inc. and Affiliated
Companies as of and for the year ended December 31, 1996 appearing in the
Prospectus, which is a part of this Registration Statement, and to the reference
to us under the heading "Experts" in such Prospectus.

DELOITTE & TOUCHE LLP

Charlotte, North Carolina
August 7, 1997

<PAGE>
EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

To the Board of Directors and Stockholders
Sonic Automotive, Inc.

We consent to the use in this Registration Statement of Sonic Automotive,
Inc. on Form S-1 of our report dated April 30, 1997 on the combined financial
statements of Sonic Automotive, Inc. and Affiliated Companies as of December 31,
1995 and for the years ended December 31, 1994 and 1995 appearing in the
Prospectus, which is a part of this Registration Statement, and to the
references to us under the heading "Experts" in such Prospectus.

DIXON, ODOM & CO., L.L.P.

Winston-Salem, North Carolina
August 6, 1997

<ARTICLE> 5

<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1994 DEC-31-1995 DEC-31-1996 JUN-30-1996 JUN-30-1997
<CASH> 0 8,993,887 6,679,490 0 9,237,585
<SECURITIES> 0 706,126 638,500 0 769,123
<RECEIVABLES> 0 9,085,376 11,907,786 0 12,897,264
<ALLOWANCES> 0 160,031 224,789 0 0
<INVENTORY> 0 39,128,041 57,970,020 0 59,884,909
<CURRENT-ASSETS> 0 58,341,949 77,808,253 0 88,863,084
<PP&E> 0 14,601,727 18,098,986 0 18,872,933
<DEPRECIATION> 0 6,074,389 5,632,273 0 5,603,144
<TOTAL-ASSETS> 0 67,241,897 94,930,327 0 106,859,426
<CURRENT-LIABILITIES> 0 52,422,327 71,607,570 0 79,576,091
<BONDS> 0 3,560,766 5,285,862 0 5,137,210
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 100 100 0 100
<OTHER-SE> 0 9,062,478 15,749,264 0 20,360,218
<TOTAL-LIABILITY-AND-EQUITY> 0 67,241,897 94,930,327 0 106,859,426
<SALES> 261,943,923 303,167,909 369,485,584 185,337,926 207,983,870
<TOTAL-REVENUES> 267,124,921 310,981,317 376,603,801 189,615,020 212,747,118
<CGS> 234,461,089 272,178,737 332,406,803 167,191,296 188,367,591
<TOTAL-COSTS> 234,461,089 272,178,737 332,406,803 167,191,296 188,367,591
<OTHER-EXPENSES> 25,469,543 30,175,691 34,753,147 16,950,108 18,808,799
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 3,444,031 4,940,961 6,401,680 2,984,676 3,287,048
<INCOME-PRETAX> 4,359,346 4,134,982 3,660,769 2,858,352 2,557,522
<INCOME-TAX> 1,559,750 1,674,900 1,399,704 1,093,034 937,212
<INCOME-CONTINUING> 2,799,596 2,460,082 2,261,065 1,765,318 1,620,310
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 2,784,032 2,437,915 2,146,675 1,724,706 1,573,317
<EPS-PRIMARY> 0 0 0 0 0
<EPS-DILUTED> 0 0 0 0 0

</TABLE>

<PAGE>

CONSENT
OF
NELSON E. BOWERS, II

I, NELSON E. BOWERS, II, hereby consent to being named a "Director
Nominee" of Sonic Automotive, Inc. (the "Company") in a Registration Statement
of the Company on Form S-1 that is to be filed by the Company with the
Securities and Exchange Commission in connection with the Company's initial
public offering.

August 7, 1997 /s/
Nelson E. Bowers, II

<PAGE>