SONIC AUTOMOTIVE INC, DEF 14A, 2000-05-01

SONIC AUTOMOTIVE INC
DEF 14A, 2000-05-01
AUTO DEALERS & GASOLINE STATIONS

Previous: INVESTORS MARK SERIES FUND INC, 485BPOS, 2000-05-01

Next: COVAD COMMUNICATIONS GROUP INC, PRE 14A, 2000-05-01

<PAGE>

SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934

Filed by the registrant [X]

Filed by a party other than the registrant [_]

Mark the appropriate item:

[_] Preliminary proxy statement

[X] Definitive proxy statement

[_] Definitive additional materials

[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12

SONIC AUTOMOTIVE, INC.
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
Payment of filing fee (Mark the appropriate item):

[X] No fee required.

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

- -------------------------------------------------------------------------------

(2) Aggregate number of securities to which transactions applies:

- -------------------------------------------------------------------------------

(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:

- -------------------------------------------------------------------------------

(4) Proposed maximum aggregate value of transaction:

- -------------------------------------------------------------------------------

(5) Total fee paid:

- -------------------------------------------------------------------------------

[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of filing.

(1) Amount previously paid:

--------------------------------------------------------------------------

(2) Form, schedule or registration statement no.:

--------------------------------------------------------------------------

(3) Filing party:

--------------------------------------------------------------------------

(4) Date filed:

--------------------------------------------------------------------------
<PAGE>

[SONIC AUTOMOTIVE INC(TM) LOGO]

5401 East Independence Boulevard
Charlotte, North Carolina 28212

May 1, 2000

Dear Stockholder:

You are cordially invited to attend the Annual Meet-
ing of Stockholders to be held at 10:00 a.m. on June 5,
2000, at the Speedway Club, located at the Lowe's Motor
Speedway, Smith Tower, Fifth Floor, U.S. Highway 29
North, Concord, North Carolina. We look forward to
greeting personally those stockholders who are able to
attend.

The accompanying formal Notice of Meeting and Proxy
Statement describe the matters on which action will be
taken at the meeting.

Whether or not you plan to attend the meeting on June
5th, it is important that your shares be represented. To
ensure that your vote will be received and counted,
please sign, date and mail the enclosed proxy at your
earliest convenience. Your vote is important regardless
of the number of shares you own.

On behalf of the Board of Directors

Sincerely,

/s/ O. Bruton Smith
O. Bruton Smith
Chairman and Chief Executive Officer
<PAGE>

VOTING YOUR PROXY IS IMPORTANT

PLEASE SIGN AND DATE YOUR PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE

SONIC AUTOMOTIVE, INC.

--------------------
NOTICE OF MEETING

--------------------
Charlotte, NC
May 1, 2000

The Annual Meeting of Stockholders of Sonic Automotive, Inc. ("Sonic") will
be held at the Speedway Club, located at the Lowe's Motor Speedway, Smith Tow-
er, Fifth Floor, U.S. Highway 29 North, Concord, North Carolina on June 5,
2000, at 10:00 a.m. (the "Annual Meeting"), for the following purposes as de-
scribed in the accompanying Proxy Statement.

1. To elect three (3) directors.

2. To consider and vote upon an amendment and restatement of the Sonic Au-
tomotive, Inc. 1997 Stock Option Plan.

3. To consider and vote upon an amendment to the Sonic Automotive, Inc. Em-
ployee Stock Purchase Plan (the "Employee Plan") to increase the number
of options to purchase shares of Class A Common Stock that may be
granted pursuant to the Employee Plan from 1,200,000 to 1,800,000.

4. To ratify the appointment of Deloitte & Touche LLP as Sonic's indepen-
dent public auditors for the fiscal year ending December 31, 2000.

5. To transact such other business as may properly come before the meeting.

Only holders of record of Sonic's Class A Common Stock, Class B Common
Stock and Class A Convertible Preferred Stock (collectively, the "Voting
Stock") at the close of business on April 19, 2000 will be entitled to notice
of, and to vote at, such meeting.

Whether or not you plan to attend the meeting, you are urged to complete,
sign, date and return the enclosed proxy promptly in the envelope provided.
Returning your proxy does not deprive you of your right to attend the meeting
and to vote your shares in person.

/s/ Stephen K. Coss
Stephen K. Coss
Secretary

Important Note: To vote shares of Voting Stock at the Annual Meeting (other
than in person at the meeting), a stockholder must return a proxy. The return
envelope enclosed with the proxy card requires no postage if mailed in the
United States of America.
<PAGE>

SONIC AUTOMOTIVE, INC.

------------------
PROXY STATEMENT
------------------

May 1, 2000

GENERAL
Introduction

The Annual Meeting of Stockholders of Sonic Automotive, Inc. ("Sonic") will
be held on June 5, 2000 at 10:00 a.m., at the Speedway Club, located at the
Lowe's Motor Speedway, Smith Tower, Fifth Floor, U.S. Highway 29 North, Con-
cord, North Carolina (the "Annual Meeting"), for the purposes set forth in the
accompanying notice. Only holders of record of Sonic's Class A Common Stock,
par value $.0l per share (the "Class A Common Stock"), Class B Common Stock,
par value $.0l per share (the "Class B Common Stock" and, together with the
Class A Common Stock, the "Common Stock") and Class A Convertible Preferred
Stock, par value $.10 per share (the "Preferred Stock", and together with the
Common Stock, the "Voting Stock") at the close of business on April 19, 2000
(the "Record Date") will be entitled to notice of, and to vote at, such meet-
ing. This Proxy Statement is furnished to stockholders in connection with the
solicitation by the Board of Directors of proxies to be used at such meeting
and at any and all adjournments thereof and is first being sent to stockholders
on or about the date hereof.

Proxies in the accompanying form, properly executed and duly returned and
not revoked, will be voted at the meeting, including adjournments. Where a
specification is made by means of the ballot provided in the proxies regarding
any matter presented at the Annual Meeting, such proxies will be voted in ac-
cordance with such specification. If no specification is made, proxies will be
voted (i) in favor of electing Sonic's three (3) nominees to the Board of Di-
rectors; (ii) in favor of the amendment and restatement (the "Stock Option Plan
Amendment") of the Sonic Automotive, Inc. 1997 Stock Option Plan (the "Stock
Option Plan"); (iii) in favor of the amendment (the "Employee Plan Amendment")
to the Sonic Automotive, Inc. Employee Stock Purchase Plan (the "Employee
Plan"); (iv) in favor of the proposal to ratify the appointment of Deloitte &
Touche LLP as the principal independent auditors of Sonic and its subsidiaries
(collectively, the "Company") for the fiscal year ending December 31, 2000, and
(v) in the discretion of the proxy holders on such other business as may prop-
erly come before the meeting. The Board of Directors currently knows of no
other business that will be presented for consideration at the Annual Meeting.

The Company's principal executive offices are located at 5401 East Indepen-
dence Boulevard, Charlotte, North Carolina 28212. However, proxies should not
be sent to that address, but to First Union National Bank of North Carolina,
1525 West W.T. Harris Boulevard, Mail Code 3C3, Charlotte, North Carolina
28288.

Ownership of Capital Securities

The following table sets forth certain information regarding the beneficial
ownership of Sonic's Voting Stock as of April 19, 2000, by (i) each stockholder
known by Sonic to own beneficially five percent or more of a class of the out-
standing Voting Stock, (ii) each director and nominee to the Board of Directors
of Sonic, (iii) each executive officer of Sonic (including the Chief Executive
Officer), and (iv) all directors and executive officers of Sonic as a group.
Holders of Class A Common Stock are entitled to one vote per share on all mat-
ters submitted to a vote of the stockholders of Sonic. Holders of Class B Com-
mon 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 Sonic or proposed by all the holders of the Class B
Common Stock or as to which any holder of Class B Common Stock (the "Smith
Group") or any affiliate thereof has a material financial interest other than
as a then existing stockholder of Sonic constituting a (a) "going private"
transaction (as defined), (b) disposition of substantially all of Sonic's as-
sets, (c) transfer resulting in a change in the nature of Sonic'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. In the event of
any transfer outside of the Smith Group or if 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. Holders of Pre-
ferred Stock are entitled to one vote per each share of Class A Common Stock
into which such Preferred Stock is convertible as of the Record Date on all
matters submitted to a vote of the stockholders of Sonic at the Annual Meeting.
Except as otherwise indicated below, each of the persons named in the table has
sole voting and investment power with respect to the securities beneficially
owned by them as set forth opposite their name, subject to community property
laws where applicable.

1
<PAGE>

<TABLE>
<CAPTION>
Number of Percentage of Number of
Shares of Outstanding Shares of Percentage of Number of Percentage of Percentage of
Class A Class A Class B Outstanding Shares of Outstanding All
Common Common Common Class B Preferred Preferred Outstanding
Beneficial Owner Stock(1) Stock Stock Common Stock Stock Stock Voting Stock(2)
- ---------------- --------- ------------- ---------- ------------- --------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
O. Bruton Smith(3)..... 545,400 1.7% 10,952,500(4) 89.4% -- -- 26.4%
Sonic Financial
Corporation(3)........ -- -- 8,881,250(4) 72.5% -- -- 20.6%
B. Scott Smith(3)...... 313,167(5) 1.0% 956,250 7.8% -- -- 2.9%
Thomas A. Price(6)..... 1,794,393(7)(8) 5.8% -- -- -- -- 4.2%
Theodore M. Wright..... 204,392(9) * -- -- -- -- *
Jeffrey C. Rachor...... 64,717(10) * -- -- -- -- *
William R. Brooks...... 30,000(11) * -- -- -- -- *
William P. Benton...... 32,500(12) * -- -- -- -- *
William I. Belk........ 26,000(13) * -- -- -- -- *
Mark J. Iuppenlatz..... 8,000(14) * -- -- -- -- *
H. Robert Heller....... 7,289(15) * -- -- -- -- *
All directors and
executive officers as
a group (10 persons).. 3,030,858 9.5% 11,908,750 97.2% -- -- 34.7%
Bud C. Hatfield(16).... -- -- -- -- 2,428 20.1% *
Dan E. Hatfield(16).... -- -- -- -- 1,014 8.4% *
John H. Newsome,
Jr.(17)............... 176,030 * -- -- 3,150 26.0% *
Winton M. Blount
III(18)............... -- -- -- -- 2,457 20.3% *
Todd R. Strange(18).... -- -- -- -- 1,443 11.9% *
Fidelity International
Limited (and related
persons)(19).......... 2,889,800 9.4% -- -- -- -- 6.7%
Neuberger Berman, Inc.
and Neuberger Berman,
LLC(20)............... 1,632,600 5.3% -- -- -- -- 3.8%
</TABLE>
- -------
* Less than one percent.

(1) Includes those shares shown below as to which the following persons cur-
rently have a right, or will have the right within 60 days after April
19, 2000, to acquire beneficial ownership through the exercise of stock
options: (i) Messrs. Bruton Smith, 450,000 shares; Scott Smith, 283,167
shares; Wright, 200,917 shares; Rachor, 54,083 shares; Brooks, 30,000
shares; Benton, 30,000 shares; Belk, 10,000 shares; and Heller, 1,289
shares; and (ii) all directors and executive officers as a group,
1,059,456 shares.

(2) The percentage of total voting power of Sonic is as follows: (i) O. Bruton
Smith, 71.0%; Sonic Financial Corporation, 57.4%; B. Scott Smith, 6.6%;
Fidelity International Limited (and related persons), 1.9%; Thomas A.
Price, 1.2%; Neuberger Berman, Inc. and Neuberger Berman, LLC, 1.1%; and
less than 1% for all other stockholders shown, and (ii) all directors and
executive officers as a group, 79.0%.

(3) The address of such person or entity is 5401 East Independence Boulevard,
Charlotte, NC, 28212.

(4) The amount of Class B Common Stock shown for O. Bruton Smith consists of
2,071,250 shares owned directly by Mr. Smith and 8,881,250 shares owned
directly by Sonic Financial Corporation ("SFC"). Mr. Smith owns the sub-
stantial majority of SFC's outstanding capital stock.

(5) The amount of Class A Common Stock shown for B. Scott Smith does not in-
clude options to purchase an aggregate of 196,583 shares of Class A Common
Stock, which options are currently unvested. These options will vest as
follows: (i) options to purchase 66,583 shares will vest in October 2000,
(ii) options to purchase 80,000 shares will vest in four equal annual in-
stallments beginning in May 2001, and (iii) subject to stockholder ap-
proval of the Stock Option Plan Amendment, options to purchase 50,000
shares will vest in three equal annual installments beginning in April
2001.

(6) The address of such person is 601 Brannan Street, San Francisco, Califor-
nia 94107.

(7) The amount of Class A Common Stock shown for Thomas A. Price does not in-
clude options to purchase an aggregate of 300,000 shares of Class A Common
Stock, which options are currently unvested. These options will vest in
three equal annual installments beginning in December 2000.

(8) The Schedule 13D filed by the beneficial owner indicates that such shares
are held by Thomas A. Price as trustee for the Price Trust utd October 5,
1984.

(9) The amount of Class A Common Stock shown for Theodore M. Wright does not
include options to purchase an aggregate of 205,459 shares of Class A Com-
mon Stock, which options are currently unvested. These options will vest
as follows: (i) options to purchase 25,459 shares will vest in October
2000, (ii) options to purchase an additional 100,000 shares will vest in
October 2000 and (iii) options to purchase 80,000 shares will vest in four
equal annual installments beginning in May 2001.

2
<PAGE>

(10) The amount of Class A Common Stock shown for Jeffrey C. Rachor does not
include options to purchase an aggregate of 170,750 shares of Class A
Common Stock, which options are currently unvested. These options will
vest as follows: (i) options to purchase 27,417 shares will vest in Octo-
ber 2000, (ii) options to purchase 13,333 shares will vest in two equal
annual installments beginning in December 2000, (iii) options to purchase
80,000 shares will vest in four equal annual installments beginning in
May 2001, and (iv) subject to stockholder approval of the Stock Option
Plan Amendment, options to purchase 50,000 shares will vest in three
equal annual installments beginning in April 2001.

(11) The amount of Class A Common Stock shown for William R. Brooks does not
include options to purchase an aggregate of 35,000 shares of Class A Com-
mon Stock, which options are currently unvested. These options will vest
as follows: (i) options to purchase 10,000 shares will vest in September
2000, and (ii) subject to stockholder approval of the Stock Option Plan
Amendment, options to purchase 25,000 shares will vest in three equal an-
nual installments beginning in April 2001.

(12) The amount of Class A Common Stock shown for William P. Benton does not
include options to purchase an aggregate of 10,000 shares of Class A Com-
mon Stock, which options are currently unvested. These options will vest
in September 2000.

(13) The amount of Class A Common Stock shown for William I. Belk does not in-
clude options to purchase an aggregate of 10,000 shares of Class A Common
Stock, which options are currently unvested. These options will vest in
September 2000.

(14) The amount of Class A Common Stock shown for Mark J. Iuppenlatz does not
include options to purchase an aggregate of 30,000 shares of Class A Com-
mon Stock, which options are currently unvested. These options will vest
in three equal annual installments beginning in November 2000.

(15) The amount of Class A Common Stock shown for H. Robert Heller does not
include options to purchase an aggregate of 15,158 shares of Class A Com-
mon Stock, which options are currently unvested. These options will vest
as follows: (i) options to purchase 10,000 shares will vest in September
2000 and (ii) options to purchase 5,158 shares will vest in six equal an-
nual installments beginning in January 2001.

(16) The address of such person is 1500 Automall Drive, Columbus, Ohio 43228.

(17) The address of such person is 54 Cheraw Way, Georgetown, South Carolina
29440.

(18) The address of such person is 4000 Eastern Bypass, Montgomery, Alabama
36116.

(19) The address of such entity is Pembroke Hall, 42 Crowlane, Hamilton, Ber-
muda. The information provided is based on a Schedule 13G filed by Fidel-
ity International Limited (and related persons) on or about February 10,
2000. That filing indicates that Fidelity International Limited has sole
voting and dispositive power as to 444,000 of the shares shown, that Fi-
delity Management & Research Company and its control persons, Edward C.
Johnson, 3d and FMR Corp., have sole voting and dispositive power as to
1,648,900 of such shares, and that Fidelity Management Trust Company and
its control persons, Edward C. Johnson, 3d and FMR Corp., have sole vot-
ing and investment power as to the remaining 796,900 shares. FMR Corp.
and Mr. Johnson, on February 14, 2000, filed an additional Schedule 13G
indicating that they, along with Fidelity Management & Research Company
and Fidelity Management Trust Company, have ceased to be the beneficial
owners of 5% of the Class A Common Stock. Fidelity International Limited
was not a party to such subsequent Schedule 13G filing.

(20) The address of such entities is 605 Third Avenue, New York, New York
10158-3698. The Schedule 13G filed by Neuberger Berman, Inc. and Neu-
berger Berman, LLC on or about February 10, 2000 indicates that these en-
tities have sole voting power as to 1,365,400 of the 1,632,600 shares
shown with no voting power as to the remainder, and shared dispositive
power over all of the 1,632,600 shares shown. Neuberger Berman, Inc. owns
100% of Neuberger Berman, LLC.

Number of Shares Outstanding and Voting

Sonic currently has authorized under its Amended and Restated Certificate
of Incorporation (the "Charter") 100,000,000 shares of Class A Common Stock,
of which 30,851,187 shares were issued and outstanding as of April 19, 2000
and entitled to be voted at the Annual Meeting, 30,000,000 shares of Class B
Common Stock, of which 12,250,000 shares were issued and outstanding as of
April 19, 2000 and entitled to be voted at the Annual Meeting, and 3,000,000
shares of Preferred Stock, of which 12,102 shares were issued and outstanding
as of April 19, 2000 and entitled to be voted at the Annual Meeting. At the
meeting, holders of Class A Common Stock will have one vote per share, holders
of Class B Common Stock will have ten votes per share, and holders of Pre-
ferred Stock will have one vote per each share of Class A Common Stock into
which such Preferred Stock is convertible as of the Record Date, or an aggre-
gate total of 1,257,628 votes attributable to such outstanding Preferred
Stock. All outstanding shares of Voting Stock are entitled to vote on all pro-
posals submitted to a vote at the Annual Meeting. A quorum being present, di-
rectors will be elected by a plurality of the

3
<PAGE>

votes cast and the actions proposed in the remaining items referred to in the
accompanying Notice of Meeting will become effective if a majority of the
votes cast by shares entitled to vote on the subject matter is cast in favor
thereof. Broker non-votes will not be counted in determining the number of
shares voted for or against any director-nominee or for or against any propos-
al.

A holder of Voting Stock who signs a proxy card may withhold votes as to
any director-nominee by writing the name of such nominee in the space provided
on the proxy card.

Revocation of Proxy

Stockholders who execute proxies may revoke them at any time before they
are exercised by delivering a written notice to Stephen K. Coss, the Secretary
of Sonic, either at the Annual Meeting or prior to the meeting date at Sonic's
offices at 5401 East Independence Boulevard, Charlotte, North Carolina 28212,
by executing and delivering a later-dated proxy, or by attending the meeting
and voting in person.

Expenses of Solicitation

Sonic will pay the cost of solicitation of proxies, including the cost of
assembling and mailing this Proxy Statement and the materials enclosed here-
with. In addition to the use of the mails, proxies may be solicited personal-
ly, or by telephone or telegraph, by corporate officers and employees of the
Company without additional compensation. Sonic intends to request brokers and
banks holding stock in their names or in the names of nominees to solicit
proxies from their customers who own such stock, where applicable, and will
reimburse them for their reasonable expenses of mailing proxy materials to
their customers.

2001 Stockholder Proposals

In order for stockholder proposals intended to be presented at the 2001 An-
nual Meeting of Stockholders to be eligible for inclusion in Sonic's proxy
statement and the form of proxy for such meeting, they must be received by
Sonic at its principal offices in Charlotte, North Carolina no later than Jan-
uary 2, 2001.

ELECTION OF DIRECTORS

Nominees for Election as Directors of Sonic

Directors of Sonic are elected at the annual meetings of stockholders of
Sonic to serve staggered terms of three years and until their successors are
elected and qualified. The Board of Directors of Sonic currently consists of
nine (9) directors, three of whom must be elected at the Annual Meeting.

The proxies in the accompanying form are intended by Sonic to be voted at
the meeting for the election to the Board of Directors of the following nomi-
nees, each of whom has consented to serve if elected: O. Bruton Smith, Jeffrey
C. Rachor and William R. Brooks, each to serve a three year term until the
2003 annual meeting of stockholders and until his successor shall be elected
and shall qualify, except as otherwise provided in Sonic's Charter and Bylaws.
All of the nominees are presently directors of Sonic. If for any reason any
nominee named above is not a candidate when the election occurs, proxies in
the accompanying form are intended by Sonic to be voted for the election of
the other nominees named above and may be voted for any substitute nominee or,
in lieu thereof, the Board of Directors may reduce the number of directors in
accordance with Sonic's Charter and Bylaws.

Directors and Executive Officers

The name, age, present principal occupation or employment and the material
occupations, positions, offices or employments for the past five years of each
director, director-nominee and executive officer of Sonic are set forth below.

O. Bruton Smith, 73, has been the Chairman, Chief Executive Officer and a
director of Sonic since its organization in 1997, and he currently is a direc-
tor and executive officer of each of Sonic's dealerships. Mr. Smith has worked
in the retail automobile industry since 1966. Mr. Smith is also the Chairman
and Chief Executive Officer, a director and controlling stockholder of Speed-
way Motorsports, Inc. ("SMI"). SMI is a public company traded on the New York
Stock Exchange (the "NYSE"). Among other things, it owns and operates the fol-
lowing NASCAR racetracks: Atlanta Motor Speedway, Bristol Motor Speedway,
Lowe's Motor Speedway, Las Vegas Motor Speedway, Sears Point Raceway and Texas
Motor Speedway. He is also an executive officer and a director of each of
SMI's operating subsidiaries. Under his employment agreement with Sonic, Mr.
Smith is required to devote approximately 50% of his business time to Sonic's
business. Mr. Smith is standing for election as a director of Sonic at the An-
nual Meeting.

4
<PAGE>

Thomas A. Price, 56, was appointed Vice Chairman and a director of Sonic
effective January 1, 2000. Before joining Sonic, Mr. Price had been Chairman
of the board of directors of FirstAmerica Automotive, Inc. ("FirstAmerica")
since August 1999 and FirstAmerica's Chief Executive Officer, President and a
director since September 1996. From March 1976 to June 1997, Mr. Price owned
and operated nine vehicle dealerships. Mr. Price has worked in the automotive
industry since 1963 in various capacities, including marketing and field as-
signments at Ford Motor Company. Mr. Price is currently a member of the Lexus
National Dealer Advisory Board and he is a charter member of the J.D. Power
Superdealer Roundtable. Mr. Price's term as a director of Sonic will expire at
the 2002 annual stockholders meeting.

B. Scott Smith, 32, has been the President and Chief Operating Officer of
Sonic since April 1997 and a Sonic director since its organization in 1997.
Mr. Smith also serves as a director and executive officer of many of Sonic's
subsidiaries. Mr. Smith, who is the son of Bruton Smith, has been an executive
officer of Town and Country Ford since 1993, and was a minority owner of both
Town and Country Ford and Fort Mill Ford before Sonic's acquisition of those
dealerships in 1997. Mr. Smith became the General Manager of Town & Country
Ford in November 1992 where he remained until his appointment as President and
Chief Operating Officer of Sonic in April 1997. Mr. Smith's term as a director
of Sonic will expire at the 2001 annual stockholders meeting.

Theodore M. Wright, 37, has been the Chief Financial Officer, Vice Presi-
dent-Finance and Treasurer of Sonic since April 1997 and a Sonic director
since June 1997. He served as Sonic's Secretary until February 9, 2000. Mr.
Wright also serves as a director and executive officer of many of Sonic's sub-
sidiaries. Before joining Sonic, Mr. Wright was a Senior Manager and in charge
of the Columbia, South Carolina office of Deloitte & Touche LLP. Before join-
ing 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 term as a director of Sonic will expire at the 2002
annual stockholders meeting.

Jeffrey C. Rachor, 38, is Sonic's Executive Vice President of Retail Opera-
tions. In May 1999, Mr. Rachor was appointed a director of Sonic and promoted
to executive officer status. He originally joined Sonic as its Regional Vice
President - Mid-South Region upon Sonic's 1997 acquisition of dealerships in
Chattanooga, Tennessee and was subsequently promoted to Vice President of Re-
tail Operations in September 1998. Mr. Rachor has over 14 years of experience
in automobile retailing and was the Chief Operating Officer of the Chattanooga
dealerships from 1989 until their acquisition by Sonic in 1997. During this
period, Mr. Rachor also served at various times as the general manager of
Toyota, Saturn and Chrysler-Plymouth-Jeep-Eagle dealerships. Before then, Mr.
Rachor was an assistant regional manager with America Suzuki Motor Corporation
from 1987 to 1989 and a metro sales manager and district sales manager with
GM's Buick Motor Division from 1983 to 1987. Mr. Rachor is standing for elec-
tion as a director of Sonic at the Annual Meeting.

Mark J. Iuppenlatz, 40, has been Sonic's Vice President of Corporate Devel-
opment since August 1999. Before joining Sonic, Mr. Iuppenlatz served as the
Executive Vice President-Acquisitions and Chief Operating Officer of Mar Mar
Realty Trust ("MMRT"), a real estate investment trust specializing in
sale/leaseback financing of automotive-related real estate, from September
1998 to August 1999. From 1996 to September 1998, Mr. Iuppenlatz was employed
by Brookdale Living Communities, Inc., a publicly-traded company, where he was
responsible for that company's development operations. From 1994 to 1996, he
served as Vice President of Schlotzky's, Inc., a publicly-traded company,
where his responsibilities included the development of over 30 new restaurant
locations in more than 10 states. From 1991 to 1994, Mr. Iuppenlatz served in
Spain as the director of marketing and the assistant director of development
for Kepro S.A., an affiliate of The Prime Group. During his service with Kepro
S.A., Mr. Iuppenlatz was responsible for the marketing and development of a
mixed use planned development comprised of 22 office buildings, a two million
square foot shopping mall, apartments, cultural facilities and a major urban
park. From 1989 to 1991, Mr. Iuppenlatz served as the director of leasing for
The Prime Group in Chicago, where his responsibilities included the marketing,
negotiating and closing of lease agreements for commercial space in a one mil-
lion square foot office tower.

William R. Brooks, 50, has been a director of Sonic since its formation.
Mr. Brooks also served as Sonic's initial Treasurer, Vice President and Secre-
tary 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, Chief Financial Officer and a director of SMI. Mr.
Brooks also serves as an executive officer and a director for various operat-
ing subsidiaries of SMI. Before the formation of SMI in December 1994, Mr.
Brooks was the Vice President of Lowe's Motor Speedway (formerly the Charlotte
Motor Speedway) and a Vice President and director of Atlanta Motor Speedway.
Mr. Brooks joined SFC, an entity controlled by Bruton Smith, from Price
Waterhouse in 1983. At SFC, he was promoted from manager to controller in 1985
and again to Chief Financial Officer in 1989. Mr. Brooks is standing for elec-
tion as a director of Sonic at the Annual Meeting.

5
<PAGE>

William P. Benton, 76, became a director of Sonic in December 1997. Since
January 1997, Mr. Benton has been the executive director of Ogilvy & Mather, a
world-wide advertising agency. Mr. Benton has been a director of SMI since
February 1995 and a director of Allied Holdings, Inc. since February 1998. He
is also a consultant to the chairman and chief executive officer of TI Group.
Before his appointment at Ogilvy & Mather, Mr. Benton served as Vice Chairman
of Wells, Rich, Greene/BDDP, Inc., an advertising agency with offices in New
York and Detroit. Mr. Benton retired from Ford Motor Company as its Vice Pres-
ident of marketing worldwide in 1984 after a 37-year career with that company.
Mr. Benton's term as a Sonic director will expire at the 2001 annual stock-
holders meeting.

William I. Belk, 50, became a director of Sonic in March 1998. Mr. Belk is
currently the Vice President and a director for Monroe Hardware Company, a di-
rector for Piedmont Ventures, Inc., and Treasurer and a director for Old Well
Water, Inc. Mr. Belk previously held the position of Chairman and director for
certain Belk stores, a privately held retail department store chain. Mr.
Belk's term as a Sonic director will expire at the 2001 annual stockholders
meeting.

H. Robert Heller, 60, was appointed a director of Sonic on January 1, 2000.
Mr. Heller served as a director of FirstAmerica from January 1999 until its
acquisition by Sonic in December 1999. Mr. Heller has been a director and Ex-
ecutive Vice President of Fair, Issac and Company since 1994. At Fair, Isaac
and Company, he is responsible for strategic relationships and marketing. From
1991 to 1993, Mr. Heller was President and Chief Executive Officer of Visa
U.S.A. Mr. Heller is a former Governor of the Federal Reserve System, and has
had an extensive career in banking, international finance, government service
and education. Mr. Heller's term as a Sonic director will expire at the 2002
annual stockholders meeting.

Sonic's Board of Directors is divided into three classes, each of which
serves for a three year term, with one class being elected at Sonic's annual
stockholders meeting each year. As indicated above, Messrs. Bruton Smith,
Rachor and Brooks belong to the class of directors whose term expires at the
Annual Meeting, Messrs. Scott Smith, Benton and Belk belong to the class whose
term expires in 2001 and Messrs. Wright, Price and Heller belong to the class
whose term expires in 2002. The executive officers are elected annually by,
and serve at the discretion of, Sonic's Board of Directors.

Committees of the Board

There are two standing committees of Sonic's Board of Directors, the Audit
Committee and the Compensation Committee. The Audit Committee currently con-
sists of Messrs. Benton, Belk and Heller. The Compensation Committee currently
consists of Messrs. Bruton Smith, Benton and Belk. Set forth below is a sum-
mary of the principal functions of each committee.

Audit Committee. The Audit Committee, which held 2 meetings in 1999, recom-
mends the appointment of Sonic's independent auditors, determines the scope of
the annual audit to be made, reviews the conclusions of the auditors and re-
ports the findings and recommendations thereof to the Board, reviews with Son-
ic's auditors the adequacy of Sonic's system of internal control and proce-
dures and the role of management in connection therewith, reviews transactions
between Sonic and its officers, directors and principal stockholders, and per-
forms such other functions and exercises such other powers as the Board from
time to time may determine.

Compensation Committee. The Compensation Committee, which held 3 meetings
in 1999, administers certain compensation and employee benefit plans of Sonic,
annually reviews and determines compensation, including annual salaries, bonus
performance goals, bonus plan allocations, stock option grants and other bene-
fits, direct and indirect, of all executive officers and other senior officers
of Sonic. The Compensation Committee administers the Stock Option Plan and the
Employee Plan, and certain other employee stock plans, approves individual
stock option grants under the plans it administers and periodically reviews
Sonic's executive compensation programs and takes action to modify programs
that yield payments or benefits not closely related to Sonic's or its execu-
tives' performance. The policy of the Compensation Committee is to link execu-
tive officer pay to business strategy and performance in order to attract, re-
tain and reward key executives while also providing performance incentives and
equity-based compensation to align the long-term interests of executive offi-
cers with those of Sonic's stockholders. The Compensation Committee's objec-
tive is to offer salaries and incentive performance pay opportunities that are
competitive in the marketplace.

Sonic currently has no standing nominating committee.

During 1999, there were 5 meetings of the Board of Directors of Sonic. Ex-
cept for Mr. Benton, each director attended all of the meetings of the Board
of Directors and committees on which they served during 1999. Mr. Benton at-
tended all but one of the Board meetings (and the related Audit Committee and
Compensation Committee meetings held on the same day).

6
<PAGE>

PROPOSED AMENDMENT AND RESTATEMENT OF STOCK OPTION PLAN

The Board of Directors of Sonic has approved an amendment and restatement
of the Stock Option Plan, subject to stockholder approval. The Board of Direc-
tors has determined that the interests of Sonic and its stockholders can be
better served by amending and restating the Stock Option Plan to enhance Son-
ic's efforts to continue providing competitive stock incentives that attract
and retain key personnel.

The amendment and restatement of the Stock Option Plan also is intended to
preserve Sonic's ability to claim tax deductions related to options granted
under the Stock Option Plan in accordance with Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code") and related regulations. Under
Section 162(m) of the Code, the Company is not entitled to a federal income
tax deduction for compensation paid to certain covered employees (generally,
the Chief Executive Officer and the four other most highly compensated offi-
cers) in excess of $1 million unless the compensation satisfies certain excep-
tions. Compensation that is "performance-based" is an exception to this limit.
Certain of the amendments to the Stock Option Plan are intended to allow op-
tions granted under the Stock Option Plan to continue to qualify as "perfor-
mance-based" compensation. One of the conditions of this exception is that the
stockholders approve the material terms of the Stock Option Plan, as amended.

The Stock Option Plan was originally adopted by the Board of Directors of
Sonic and approved by the stockholders of Sonic on October 9, 1997 and has
been subsequently amended several times. The original and continuing purpose
of the Stock Option Plan is to attract, retain and provide incentives to key
personnel upon whose efforts the Company's success and future growth depends.

Summary of Amendments to the Stock Option Plan. The Stock Option Plan
Amendment changes the Stock Option Plan in the following principal respects:

. As amended, the number of shares of Class A Common Stock that may be issued
under the Stock Option Plan will increase from 4,500,000 to 6,000,000 to
allow additional option grants to key personnel.

. A new annual limitation on individual grants has been added to the Stock
Option Plan so that no person can be granted options in any calendar year
to purchase more than 500,000 shares of Class A Common Stock thereunder.

. As amended, the Stock Option Plan will require that all options have an ex-
ercise price per share of Class A Common Stock that is no less than the
fair market value per share on the date of grant. Fair market value is gen-
erally determined based on the closing price of the Class A Common Stock on
the NYSE for the last trading date preceding the date of grant.

Certain other minor amendments also are made in order to, among other things,
facilitate plan administration.

Summary Description of the Stock Option Plan. The following is a summary of
the Stock Option Plan, as amended, and is qualified in its entirety by refer-
ence to the Stock Option Plan, a copy of which has been submitted to the Secu-
rities and Exchange Commission (the "SEC") with this Proxy Statement. As
amended, the Stock Option Plan is administered by the Compensation Committee
(or a subcommittee thereof) which determines, among other things, the persons
who are to receive options, the number of shares of Class A Common Stock to be
subject to each option, the option period, the option exercise price and the
vesting schedule applicable to options. Subject to the terms of the Stock Op-
tion Plan, the Compensation Committee has plenary authority in its discretion
to establish rules and regulations, make determinations and interpretations,
and take such other administrative actions as it deems necessary or advisable
for the administration of the Stock Option Plan.

As indicated, if the Stock Option Plan Amendment is approved by the stock-
holders, the number of shares of Class A Common Stock reserved for purchase
under the Stock Option Plan will be increased from 4,500,000 to 6,000,000. The
number of shares of Class A Common Stock reserved for issuance under the Stock
Option Plan is subject to adjustment in the event of certain changes in the
capital stock of Sonic due to a reorganization, stock split, stock dividend,
merger, or other similar event.

Options may be granted under the Stock Option Plan to key employees of the
Company and to officers, directors, consultants and other individuals provid-
ing services to the Company. In selecting individuals for options and deter-
mining the terms thereof, the Compensation Committee may consider any factors
it deems relevant, including present and potential contributions to the suc-
cess of the Company. No person can be granted options in any calendar year un-
der the Stock Option Plan, as amended, to purchase more than 500,000 shares of
Class A Common Stock (subject to adjustment in the event of certain changes in
the capital stock of Sonic due to a reorganization, stock split, stock divi-
dend, merger, or other similar

7
<PAGE>

event). The Compensation Committee can grant "incentive stock options"
("ISOs") intended to qualify under Section 422 of the Code, and "nonstatutory
stock options" ("NSOs") under the Stock Option Plan; however, ISOs can be
granted only to employees.

Options to purchase a total of approximately 1,535,624 shares of Class A
Common Stock were granted to approximately 171 plan participants in 1999 under
the Stock Option Plan. At present, after taking into account the cancellation
of certain options, including the cancellation of options after December 31,
1999 (and without giving effect to the Stock Option Plan Amendment), options
to purchase a total of approximately 4,393,099 shares are currently outstand-
ing or have been exercised. Options to purchase an additional 656,500 shares
have been granted, subject to stockholder approval of the Stock Option Plan
Amendment, leaving 950,401 additional shares available for future grant if the
Stock Option Plan Amendment is approved. There has been no decision with re-
spect to the number or terms of options that may be granted hereafter or the
number or identity of future optionees under the Stock Option Plan.

The exercise price of options granted under the Stock Option Plan is deter-
mined at the discretion of the Compensation Committee. However, pursuant to
the Stock Option Plan Amendment, the exercise price per share may not be less
than the fair market value per share of 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 than 10% of the total combined voting power of all classes of
stock of the Company (directly or by attribution through relatives or entities
in which there is an ownership interest), the exercise price may not be less
than 110% of the fair market value per share of the Class A Common Stock on
the date of grant. Under the Stock Option Plan, as amended, fair market value
generally is the closing price per share of the Class A Common Stock on the
NYSE on the last trading date prior to the date of grant. If permitted by the
Compensation Committee, 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 of Class A Common Stock and NSOs.
Cashless exercises also may be permitted. The Board of Directors of Sonic de-
termines the terms and conditions upon which Sonic may make loans to enable an
optionee to pay the exercise price of an option.

Options granted under the Stock Option Plan must be exercised within a pe-
riod fixed by the Compensation Committee, which period may not exceed ten
years from the date of the grant of the option or, in the case of ISOs granted
to any holder on the date of grant of more than 10% of the total combined vot-
ing 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 may vest in
installments, as determined by the Compensation Committee. Options may expire
before the end of the option period due to termination of employment or sever-
ance of the relationship with the Company.

If an optionee's service with the Company terminates for any reason other
than disability, involuntary termination without cause (as defined in the
Stock Option Plan) or death, options will expire and no longer can be exer-
cised. If an optionee is involuntarily terminated without cause, options (to
the extent vested) generally may be exercised during the three months follow-
ing termination. If an optionee's service ceases due to his or her disability,
options (to the extent vested) generally may be exercised during the twelve
months following termination. If the optionee dies while employed or during
the three month or twelve month periods previously described, then options (to
the extent vested) generally may be exercised during the twelve month period
following the optionee's death. In no event can an option be exercised after
the expiration of its term (i.e., the option period fixed by the Compensation
Committee).

Options generally may not be transferred other than by will or the laws of
descent and distribution and during the lifetime of an optionee may be exer-
cised only by the optionee. However, the Compensation Committee, in its abso-
lute discretion, may allow NSOs to be transferred without consideration to
certain family members or family-related trusts, foundations or other enti-
ties, subject to limitations determined by the Compensation Committee.

Options granted under the Stock Option Plan may include the right to ac-
quire a "reload" option. In such a case, if an optionee pays all or part of
the exercise price of an option with shares of Class A Common Stock held by
the optionee for at least six months, then, upon exercise of the option, the
optionee is granted a second option to purchase, at the fair market value as
of the date of exercise of the first option, the number of whole shares used
by the optionee in payment of the exercise price of the first option. A reload
option is not exercisable until one year after the grant date of such option
or the expiration date of the first option.

8
<PAGE>

majority of the outstanding voting securities of the surviving corporation, or
any sale or transfer by Sonic of all or substantially all its assets or any
tender offer or exchange offer for or the acquisition, directly or indirectly,
of all or a majority of the then-outstanding voting securities of Sonic, 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 Sonic may at any time amend or terminate the
Stock Option Plan, subject to the following: (i) no amendment or termination
may, without the consent of an optionee, adversely affect the rights of the
optionee under any option then outstanding, and (ii) approval by the stock-
holders of Sonic is required for an amendment increasing the maximum number of
shares of Class A Common Stock for which options may be granted under the
Stock Option Plan or an amendment of the requirements as to the class of em-
ployees eligible to receive options. Unless terminated earlier by the Board of
Directors, the Stock Option Plan will terminate on October 9, 2007.

For information regarding options granted to the Company's named executive
officers in 1999, see the table entitled "Option Grants in Last Fiscal Year"
under "Executive Compensation." To date in 2000, the Compensation Committee
has granted under the Stock Option Plan NSOs to purchase (i) an aggregate of
867,500 shares of Class A Common Stock to 180 non-executive officers, (ii) an
aggregate of 500,000 shares of Class A Common Stock to four executive officers
and (iii) 25,000 shares of Class A Common Stock to a director-nominee. On
April 27, 2000, the closing price for a share of Class A Common Stock as re-
ported on the NYSE was $11.18. No decision has been made as to the number of
additional stock options that may be awarded to Sonic's executive officers or
other persons in 2000 under the Stock Option Plan, although, pursuant to the
Stock Option Plan Amendment, no one will receive options under the Stock Op-
tion Plan during the year for more than 500,000 shares of Class A Common
Stock. Set forth below is further information with respect to options granted
under the Stock Option Plan to date in 2000 (some of which have been granted
subject to stockholder approval of the Stock Option Plan Amendment).

New Plan Benefits
Stock Option Plan

<TABLE>
<CAPTION>
Name and Position Dollar Value Number of Units
- ----------------- ------------ ---------------
<S> <C> <C>
O. Bruton Smith
Chairman, Chief Executive Officer and Director... -- --
B. Scott Smith
President, Chief Operating Officer and Director.. (1) 50,000(2)
Theodore M. Wright
Chief Financial Officer, Vice President -
Finance, Treasurer and Director................. (1) 100,000(2)
Jeffrey C. Rachor
Executive Vice President of Retail Operations and
Director........................................ (1) 50,000(2)
William R. Brooks
Director......................................... (1) 25,000(3)
Dennis D. Higginbotham
Formerly President of Retail Operations and
Director ....................................... (4) (4)
All current executive officers as a group......... (1) 500,000(2)
All current non-executive officer directors as a
group............................................ (1) 25,000(3)
All current non-executive officer employees as a
group............................................ (1) 867,500(5)
</TABLE>

- -------

(1) The dollar value of the options indicated is not determinable due to fluc-
tuating market prices.

(2) On April 28, 2000, Messrs. Scott Smith and Rachor were each granted, sub-
ject to stockholder approval of the Stock Option Plan Amendment, NSOs for
50,000 shares of Class A Common Stock at an exercise price of $11.19 per
share. These options will vest in three equal annual installments beginning
in April 2001 and have a ten year term. On April 24, 2000, Mr. Wright was
granted NSOs for 100,000 shares of Class A Common Stock at an exercise price
of $10.06 per share. These options will vest in October 2000 and have a ten
year term. On February 9, 2000, another executive officer was granted NSOs
for 300,000 shares of Class A Common Stock at an exercise price of $8.19 per
share. These options will vest in three equal annual installments beginning
in December 2000 and have a ten year term.

9
<PAGE>

(3) On April 28, 2000, Mr. Brooks, a director and nominee for re-election as
director at the Annual Meeting, was granted, subject to stockholder approval
of the Stock Option Plan Amendment, NSOs for 25,000 shares of Class A Common
Stock at an exercise price of $11.19 per share. These options will vest in
three equal annual installments beginning in April 2001 and have a ten year
term.

(4) Mr. Higginbotham resigned as President of Retail Operations and as a di-
rector of Sonic in September 1999.

(5) On February 9, 2000, non-executive officer employees were granted NSOs for
336,000 shares of Class A Common Stock at an exercise price of $8.19 per
share. On April 28, 2000, non-executive officer employees were granted, sub-
ject to stockholder approval of the Stock Option Plan Amendment, NSOs for
531,500 shares of Class A Common Stock at an exercise price of $11.19 per
share. Each of these options will vest in three equal annual installments
beginning on their first anniversary dates, respectively, and have a ten
year term.

Federal Income Tax Consequences. The following summary generally describes
the federal income tax consequences to optionees and Sonic of options granted
under the Stock Option Plan and is based on current laws and regulations. The
summary is general in nature and is not intended to cover all tax consequences
that could apply to a particular optionee or Sonic.

The issuance and exercise of ISOs have no federal income tax consequences
to Sonic. 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.

If the holder of shares of Class A Common Stock acquired upon the exercise
of an ISO under the Stock Option Plan holds such shares until a date which is
more than two years following the grant date of the ISO and one year following
the exercise date of the ISO, the disposition of such shares of Class A Common
Stock will ordinarily result in capital gains or losses to the holder for fed-
eral income tax purposes equal to the difference between the amount realized
on disposition of the shares of Class A Common Stock and the ISO exercise
price. Sonic will not be entitled to any deduction. If the holding
period requirements described above are not met, the holder will recognize or-
dinary income for federal tax purposes upon disposition of the Class A Common
Stock in an amount equal to the excess of the Class A Common Stock's fair mar-
ket value on the date of exercise (or, if less, the amount received on dispo-
sition of the Class A Common Stock) over the ISO exercise price. Any addi-
tional gain (or loss) realized on the disposition of the Class A Common Stock
will be taxed as capital gain (or loss). Sonic will be entitled to a tax de-
duction for the taxable year in which the disposition occurs equal to the
amount of ordinary income recognized by the holder.

The issuance of NSOs has no federal income tax consequences to Sonic or the
holder. Upon the exercise of an NSO, NSO holders will recognize income for
federal income tax purposes at the time of option exercise equal to the amount
by which the fair market value of the underlying shares on the date of exer-
cise exceeds the NSO exercise price. Sonic generally will be allowed a federal
income tax deduction equal to the same amount that the holder recognizes as
ordinary income. In the event of the disposition of the shares of Class A Com-
mon Stock acquired upon exercise of an NSO, any additional gain or loss gener-
ally will be taxed to the holder as capital gain or loss and is not deductible
by Sonic.

If the option exercise price under any NSO is paid for by surrendering
shares of Class A Common Stock previously acquired, then the optionee will
recognize ordinary income on the exercise as described above with respect to
any shares acquired under the option in excess of the number of shares surren-
dered (such shares being treated as having been acquired without considera-
tion), but will not recognize any taxable gain or loss on the difference be-
tween the optionee's basis in the surrendered shares and their current fair
market value. For federal income tax purposes, that number of newly acquired
shares equal to the number of shares surrendered will have the same basis and
holding period as the surrendered shares. Any newly acquired shares in excess
of the number of shares surrendered will have a basis equal to their fair mar-
ket value at exercise and their holding period generally will begin at the
date of exercise, as described above.

PROPOSED AMENDMENT TO EMPLOYEE PLAN

The Board of Directors of Sonic has approved an amendment and restatement
of the Employee Plan. One of the amendments increases the number of shares of
Class A Common Stock that may be issued under the Employee Plan from 1,200,000
to 1,800,000 and is subject to stockholder approval. This Employee Plan Amend-
ment is being proposed to allow future grants to employees. No other amend-
ments to the Employee Plan are proposed for stockholder approval.

10
<PAGE>

The Employee Plan was originally adopted by the Board of Directors of Sonic
and approved by Sonic's stockholders on October 9, 1997 and has been subse-
quently amended several times. The Employee Plan is intended to promote the
interests of the Company by providing its employees the opportunity to acquire
an ownership interest in the Company through the purchase of Class A Common
Stock at a discount from the market value at the time of purchase.

Summary Description of the Employee Plan. The following is a summary of the
Employee Plan, as amended, and is qualified in its entirety by reference to
the Employee Plan, a copy of which has been submitted to the SEC with this
Proxy Statement. The Employee Plan is administered by the Compensation Commit-
tee which, subject to the terms of the Employee Plan, has plenary authority in
its discretion to interpret and construe the Employee Plan, to decide all
questions of employee eligibility, to determine the amount, manner and timing
of options and option exercises, and to make all other determinations and take
all other actions it deems necessary or desirable for the administration of
the Employee Plan.

If the Employee Plan Amendment is approved by the stockholders, the number
of shares of Class A Common Stock reserved for issuance under the Employee
Plan will be increased from 1,200,000 to 1,800,000. The number of shares of
Class A Common Stock reserved for issuance under the Employee Plan is subject
to adjustment in the event of certain changes in the capital stock of Sonic
due to a reorganization, stock split, stock dividend, merger, or other similar
event.

Options generally are granted under the Employee Plan as of each January 1.
All eligible employees of Sonic and of each participating subsidiary under the
Employee Plan will be given the opportunity to participate in the Employee
Plan on each grant date. In order to be eligible, an employee must be employed
by Sonic or one of its participating subsidiaries on a full-time or part-time
basis, regularly scheduled to work more than twenty hours per week, and cus-
tomarily employed more than five months in a calendar year. An employee also
must have completed one year of continuous service with the Company as of the
grant date. In determining whether an employee has met the twelve month serv-
ice requirement, service with an entity prior to its acquisition, or the ac-
quisition of substantially all of its assets, by Sonic will be recognized.
Service with an affiliate of Sonic which directly, or indirectly through one
or more intermediaries, controls or is controlled by, or is under common con-
trol with, Sonic also will be recognized for purposes of eligibility to par-
ticipate in the Employee Plan. Employees who own or hold options to purchase
stock (or who would upon participation in the Employee Plan own or hold op-
tions to purchase stock) possessing 5% or more of the total combined voting
power or value of all classes of stock of Sonic or any subsidiary are not eli-
gible to participate in the Employee Plan. For purposes of this 5% limitation,
employees may be considered to own or hold options to purchase stock through
attribution from relatives or from entities in which the employees have an
ownership interest.

As of each grant date during the term of the Employee Plan, all eligible
employees electing to participate in the Employee Plan ("Participants") will be
granted an option to purchase shares of Class A Common Stock at an exercise
price per share equal to the lesser of 85% of the fair market value per share of
the Class A Common Stock on the date of grant or 85% of such fair market value
on the date of exercise. The Board of Directors or the Compensation Com-mittee
will approve the number of shares of the 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. Fair market value generally is the
closing price per share of the Class A Common Stock on the NYSE on the last
trading date prior to the date of reference. No Participant may be granted an
option which would permit him or her to purchase stock under the Employee Plan
and all other employee stock purchase plans of Sonic at a rate which exceeds
$25,000 in 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.

In January 2000, each of the 1,747 eligible employees who elected to par-
ticipate in the Employee Plan were granted an option to purchase 300 shares of
Class A Common Stock at an exercise price equal to the lesser of 85% of the
fair market value per share of Class A Common Stock on the date of grant or
85% of such fair market value on the date of exercise. At present, options to
acquire 38,887 shares have been exercised to date in 2000, options to acquire
485,213 shares remain outstanding (subject to any cancellations during the
year) and options with respect to 344,815 additional shares are authorized but
unissued under the Employee Plan (without giving effect to the Employee Plan
Amendment). On April 27, 2000, the closing price of a share of Class A Common
Stock as reported on the NYSE was $11.19.

A Participant may elect to designate a limited percentage of compensation
(as defined in the Employee Plan) to be deferred by after-tax payroll deduc-
tion as a contribution to the Employee Plan. A Participant also may elect to
make contributions by direct payment to the Employee Plan. If a Participant
has made contributions to the Employee Plan, his or her option will be exer-
cised automatically to purchase Class A Common Stock on each exercise date
during the calendar year in which the option is granted. The exercise dates
are 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
any other interim dates during the year which the Compensation Committee des-
ignates for such purpose. The Participant's accumulated and unused contri-

11
<PAGE>

butions as of each exercise date will be applied to purchase the maximum num-
ber of whole shares of Class A Common Stock that such contributions will per-
mit at the applicable option price, limited to the number of shares available
for purchase under the option. 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.

Options granted to Participants will expire on the last exercise date of
the calendar year in which granted. However, if a Participant withdraws from
the Employee Plan or terminates employment prior to such exercise date, the
option may expire earlier.

Once a Participant's employment terminates, the Participant may not make
any more contributions to the Employee Plan. If a Participant's employment
terminates for any reason other than cause, the Participant (or the Partici-
pant's estate if termination of employment is caused by death) can request the
return of contributions not yet used to purchase Class A Common Stock. Alter-
natively, the Participant (or the Participant's estate if termination of em-
ployment is caused by death) can elect to continue participation in the Em-
ployee Plan until the next exercise date in the calendar year of the termina-
tion of employment, so that any unexpired option held by the Participant will
be exercised automatically on that exercise date to the extent the Partici-
pant's remaining contributions will allow.

In the event of certain changes in the capital stock of Sonic due to a re-
organization, stock split, stock dividend, merger, or other similar event,
corresponding adjustments in the number and kind of shares covered by out-
standing options and the exercise price per share automatically will be made.
In connection with any merger or consolidation in which Sonic is not the sur-
viving corporation, and which results in the holders of the outstanding voting
securities of Sonic owning less than a majority of the outstanding voting se-
curities of the surviving corporation, or any sale or transfer by Sonic of all
or substantially all its assets or any tender offer or exchange offer for or
the acquisition, directly or indirectly, of all or a majority of the then-out-
standing voting securities of Sonic, all outstanding options under the Em-
ployee 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 Sonic may at any time amend, suspend or terminate
the Employee Plan, subject to the following: (i) no amendment, suspension or
termination may, without the consent of a Participant, adversely affect the
rights of the Participant under any option then outstanding, and (ii) approval
by the stockholders of Sonic is required for an amendment increasing the maxi-
mum number of shares of Class A Common Stock for which options may be granted
under the Employee Plan or, to the extent required by Code Section 423, an
amendment changing the class of employees eligible to receive options under
the Employee Plan.

Set forth below is information with respect to Employee Plan options
granted in 2000.

New Plan Benefits
Employee Plan

<TABLE>
<CAPTION>
Name and Position Dollar Value Number of Units
- ----------------- ------------ ---------------
<S> <C> <C>
O. Bruton Smith
Chairman and Chief Executive Officer of Sonic.... (1) (1)
B. Scott Smith
President, Chief Operating Officer and Director.. (1) (1)
Theodore M. Wright
Vice President, Treasurer, Chief Financial Offi-
cer and Director................................. (2) 300
Jeffrey C. Rachor
Executive Vice President of Retail Operations and
Director......................................... (3) (3)
Dennis D. Higginbotham
Formerly President of Retail Operations and Di-
rector........................................... (4) (4)
All current executive officers as a group......... (2) 900
All current non-executive officer directors as a
group............................................ (5) (5)
All current non-executive officer employees as a
group............................................ (2) 523,200
</TABLE>
- -------

(1) As a holder of more than 5% of the total voting power of Sonic, Messrs.
Bruton Smith and B. Scott Smith are not eligible to participate in the Em-
ployee Plan.

12
<PAGE>

(2) Dollar amounts of units received in 2000 by the persons or groups indi-
cated in the above-referenced table are not readily determinable since the
value of, and exercise prices for, options granted under the Employee Plan
depend on fluctuating market prices.

(3) Mr. Rachor did not elect to participate in the Employee Plan.

(4) Mr. Higginbotham resigned as President of Retail Operations and as a di-
rector of Sonic in September 1999.

(5) Non-executive officer directors of Sonic are ineligible to participate in
the Employee Plan.

Federal Income Tax Consequences. The following summary generally describes
the federal income tax consequences to Participants and Sonic of options
granted under the Employee Plan and is based on current laws and regulations.
The summary is general in nature and is not intended to cover all tax conse-
quences that could apply to a particular employee or Sonic.

The Employee Plan is intended to meet the requirements of an "employee
stock purchase plan" under Section 423 of the Code. Accordingly, there are no
federal income tax consequences to the Participant or Sonic upon the grant of
an option to purchase Class A Common Stock under the Employee Plan. The Par-
ticipant will not recognize federal taxable income on the exercise of an op-
tion granted under the Employee Plan, but instead will take a tax basis in the
Class A Common Stock received equal to the option exercise price. Sonic will
not receive a tax deduction for federal income tax purposes when an option is
exercised under the Employee Plan.

If the Participant holds the shares of Class A Common Stock acquired upon
the exercise of an option under the Employee Plan until a date that is both
more than two years from the grant date of the relevant option and more than
one year from the option exercise date (or dies while holding such shares),
the Participant will recognize ordinary income for federal income tax purposes
at the time of disposition of the shares of Class A Common Stock (or at death)
equal to the lesser of (i) the excess of the fair market value of the shares
when the option was granted over the option exercise price and (ii) the excess
of the fair market value of the shares at the date of such disposition (or
death) over the option exercise price. For this purpose, the option exercise
price is deemed to be 85% of the fair market value of the shares of Class A
Common Stock on the date the relevant option was granted (assuming the shares
are purchased at a 15% discount). The amount of ordinary income recognized
will increase the Participant's basis in the shares for federal income tax
purposes, and any additional gain (or loss) realized on the disposition of the
shares of Class A Common Stock will be taxed as capital gain (or loss). In the
case where the holding requirements are met, Sonic will not be entitled to a
deduction with respect to any income recognized by the Participant.

If the Participant disposes of the shares of Class A Common Stock acquired
upon the exercise of an option under the Employee Plan within two years after
the grant date of the relevant option or within one year after the option ex-
ercise date, the Participant will recognize ordinary income for federal income
tax purposes at the time of disposition equal to the amount by which the fair
market value of the shares of Class A Common Stock on the option exercise date
exceeds the option exercise price, and an amount equal to such ordinary income
generally is deductible by Sonic. The Participant's tax basis in such shares
will be the option exercise price plus the amount of taxable ordinary income
recognized (i.e., fair market value of the shares on the exercise date). Any
gain in excess of the Participant's tax basis in the shares of Class A Common
Stock will be taxed as capital gain and is not deductible by Sonic. Any loss
recognized on the disposition of the shares of Class A Common Stock generally
will be treated as a capital loss.

SELECTION OF INDEPENDENT AUDITORS

The Board of Directors has selected the firm of Deloitte & Touche LLP to
serve as the principal independent auditors of Sonic for the fiscal year end-
ing December 31, 2000. Deloitte & Touche LLP has acted in such capacity for
Sonic since its organization in 1997.

Representatives of Deloitte & Touche LLP will attend the Annual Meeting.
They will have an opportunity to make a statement if they so desire, and to
respond to appropriate questions.

MANAGEMENT

Directors of Sonic

For information with respect to the Board of Directors of Sonic, see "Elec-
tion of Directors."

13
<PAGE>

Executive Officers of Sonic

Messrs. Bruton Smith, Price, B. Scott Smith, Wright, Rachor and Iuppenlatz
are the executive officers of Sonic. Each executive officer serves as such un-
til his successor is elected and qualified. No executive officer of Sonic was
selected pursuant to any arrangement or understanding with any person other
than Sonic. For further information with respect to Messrs. Bruton Smith,
Price, B. Scott Smith, Wright, Rachor and Iuppenlatz as executive officers of
Sonic, see "Election of Directors."

EXECUTIVE COMPENSATION

Compensation Committee Report on Executive Compensation

1999 Officer Compensation Program

The executive officer compensation for Sonic for 1999 was based on compen-
sation established in each individual's respective employment agreement with
Sonic as discussed herein. Additionally, certain executive officers in 1999
were granted stock options issued under Sonic's Stock Option Plan. Executive
officers (including the Chief Executive Officer) were also eligible in 1999 to
participate in various benefit plans similar to those provided to other em-
ployees of Sonic. Such benefit plans are intended to provide a safety net of
coverage against various events, such as death, disability and retirement.

The employment agreements for the executive officers (including that of the
Chief Executive Officer) were established on the basis of non-quantitative
factors such as positions of responsibility and authority, years of service
and annual performance evaluations. They were targeted to be competitive prin-
cipally in relation to other automotive retailing companies (such as those in-
cluded in the Peer Group Index in the performance graph elsewhere herein), al-
though the Compensation Committee also considered the base salaries of certain
companies not included in the Peer Group Index because the Compensation Com-
mittee considered those other companies to be in relatively comparable indus-
tries.

Awards of stock options under the Stock Option Plan are based on a number
of factors in the discretion of the Compensation Committee, including various
subjective factors primarily relating to the responsibilities of the individ-
ual officers for and contribution to Sonic's operating results (in relation to
Sonic's other optionees), their expected future contributions and the levels
of stock options currently held by the executive officers individually and in
the aggregate. Stock option awards to executive officers have been at then-
current market prices in order to align a portion of an executive's compensa-
tion with returns to Sonic's stockholders. For detail concerning the grant of
options to the executive officers named in the Summary Compensation Table be-
low, see "--Option Grants in 1999" and "--Fiscal Year-End Option Values."

As noted above, Sonic's compensation policy is primarily based upon the
practice of pay-for-performance. Section 162(m) of the Code imposes a limita-
tion on the deductibility of non-performance-based compensation in excess of
$1 million paid to named executive officers. It is intended that compensation
attributable to the exercise of stock options granted under the Stock Option
Plan generally should qualify as deductible performance-based compensation.
The Compensation Committee currently believes that, generally, Sonic should be
able to continue to manage its executive compensation program to preserve fed-
eral income tax deductions. However, the Compensation Committee also must ap-
proach executive compensation in a manner which will attract, motivate and re-
tain key personnel whose performance increases the value of Sonic. According-
ly, the Compensation Committee may from time to time exercise its discretion
to award compensation that may be non-deductible under Section 162(m) when in
its judgment such award would be in the interests of Sonic.

Chief Executive Officer Compensation

The Compensation Committee annually reviews and approves the compensation
of Mr. Smith, Sonic's Chief Executive Officer. Mr. Smith's salary has been es-
tablished through an employment agreement, as discussed herein. The Board of
Directors believes that Mr. Smith is paid a reasonable salary.

O. Bruton Smith, Chairman
William P. Benton
William I. Belk

14
<PAGE>

Compensation of Officers

The following table sets forth compensation paid by or on behalf of Sonic
to the Chief Executive Officer of Sonic and to its other named executive offi-
cers for services rendered during Sonic's fiscal years ended December 31,
1997, 1998 and 1999:

Summary Compensation Table

<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
-------------------------------- -------------------
Number of
Shares
Name and Principal Salary Other Annual Underlying All Other
Position(s) Year (1) Bonus (2) Compensation Options Compensation (3)
- ------------------ ---- -------- --------- ------------- ------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
O. Bruton Smith 1999 $529,933 $400,000 $--(3) 250,000 --
Chairman, Chief
Executive 1998 385,772 350,000 --(3) 200,000 --
Officer and Director 1997 326,704 -- --(3) -- --

B. Scott Smith 1999 $413,275 $250,000 $--(3) 130,000 --
President, Chief
Operating 1998 325,560 250,000 --(3) 100,000 --
Officer and Director 1997 273,767 18,331 --(3) 199,750 --

Theodore M. Wright 1999 $305,076 $200,000 $--(3) 130,355 --
Chief Financial
Officer, 1998 211,551 150,000 --(3) 100,620 --
Vice President-Finance, 1997 (4) (4) --(3) 76,376 --
Treasurer and Director

Jeffrey C. Rachor 1999 $240,000 $526,386 $--(3) 100,000 --
Executive Vice
President of 1998 172,500 449,366 --(3) 20,000 --
Retail Operations and
Director 1997 (4) (4) --(3) 82,250 --

Dennis D. Higginbotham 1999 $316,667 $--(4) $--(3) -- $400,000(6)
Formerly President of
Retail 1998 116,667 -- --(3) 150,000 --
Operations and Director
(5) 1997 (7) (7) (7) (7) (7)
</TABLE>
- -------

(1) Does not include the dollar value of perquisites and other personal bene-
fits.

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

(3) 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.

(4) The amount of salary and bonus earned by the named executive officer in
1997 did not exceed $100,000.

(5) Mr. Higginbotham resigned as President of Retail Operations and as a Di-
rector of Sonic in September 1999.

(6) Mr. Higginbotham received this compensation as a severance payment.

(7) The named executive officer was not employed by Sonic during the year in-
dicated.

Employment Agreements

Sonic has employment agreements with Messrs. Bruton Smith, Scott Smith,
Wright and Rachor (the "Employment Agreements"), which provide for an annual
base salary and certain other benefits. Pursuant to the Employment Agreements,
the 2000 base salaries of Messrs. Bruton Smith, Scott Smith, Wright and Rachor
will be $600,000, $450,000, $400,000 and $240,000, respectively. The execu-
tives will also receive such additional increases as may be determined by the
Compensation Committee. The Employment Agreements provide for the payment of
annual performance-based bonuses equal to a percentage of the executive's base
salary, upon achievement by Sonic of certain performance objectives, based on
Sonic's pre-tax income, to be established by the Compensation Committee. Under
the terms of their respective Employment Agreements, Sonic will employ Messrs.
Bruton Smith, Scott Smith and Wright through November 2000 and Mr. Rachor
through November 2002. In addition, Mr. Scott Smith received in October 1997,
pursuant to his Employment Agreement, ISOs for 40,000 shares and NSOs for
159,750 shares of Class A Common Stock, Mr. Wright received in October 1997,
pursuant to his Employment Agreement, ISOs for 40,000 shares and NSOs for
36,376 shares of Class A Common Stock, and Mr. Rachor received in October
1997, pursuant to his Employment Agreement, ISOs for 40,000 shares and NSOs
for 42,250 shares of Class A Common Stock. All of such options granted to
Messrs. Scott Smith, Wright and Rachor vest in three equal annual installments
beginning in October 1998. Mr. Scott Smith's ISOs are exercisable at $6.60 per
share and expire in October 2002. The NSOs granted to Mr. Scott Smith in 1997
and both the NSOs and ISOs granted to Messrs. Wright and Rachor in

15
<PAGE>

1997 are exercisable at $6.00 per share and expire in October 2007. Mr.
Higginbotham's Employment Agreement terminated in September 1999.

Each of the Employment Agreements contain similar noncompetition provi-
sions. These provisions, during the term of the Employment Agreement (i) pro-
hibit the disclosure or use of confidential Sonic information, and (ii) pro-
hibit competition with Sonic for Sonic's employees and its customers, inter-
ference with Sonic's relationships with its vendors, and employment with any
competitor of Sonic in specified territories. The provisions referred to in
(ii) above shall also apply for a period of two years following the expiration
or termination of an Employment Agreement. With respect to Messrs. Bruton
Smith, Scott Smith and Wright, the geographic restrictions apply in any Stan-
dard Metropolitan Statistical Area ("SMSA") or county in which Sonic has a
place of business at the time their employment ends. With respect to Mr.
Rachor, the geographic restrictions apply to any SMSA in Houston, Texas; Char-
lotte, North Carolina; Chattanooga, Tennessee and Nashville, Tennessee.

Option Grants in 1999

The following table sets forth information regarding all options to acquire
shares of Class A Common Stock granted to the named executive officers during
1999.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
Percent Of Potential Realizable Value
Number Of Total At Assumed Annual Rate Of
Securities Options Exercise Stock Price Appreciation For
Underlying Granted to or Base Option Term
Option Employees in Price Expiration ----------------------------
Name Granted (#) Fiscal Year ($/Sh) Date 0% ($) 5% ($) 10% ($)
---- ----------- ------------ -------- ------------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
O. Bruton Smith......... 200,000(1) 13.8% $15.44(1) May 2009 -- $1,942,026 $4,921,476
50,000(2) 3.5% $10.06(2) November 2009 -- $ 316,334 $ 801,652

B. Scott Smith.......... 100,000(1) 6.9% $15.44(1) May 2009 -- $ 971,013 $2,460,738
30,000(2) 2.1% $10.06(2) November 2009 -- $ 189,800 $ 480,991

Theodore M. Wright...... 100,000(1) 6.9% $15.44(1) May 2009 -- $ 971,013 $2,460,738
30,000(2) 2.1% $10.06(2) November 2009 -- $ 189,800 $ 480,991
355(3) -- (3) December 1999 (3) (3) (3)

Jeffrey C. Rachor....... 100,000(1) 6.9% $15.44(1) May 2009 -- $ 971,013 $2,460,738
</TABLE>
- -------
(1) These options were granted under the Stock Option Plan. Except for the op-
tions granted to Mr. Bruton Smith, all of these options become exercisable
in five equal annual installments beginning in May 2000. Mr. Bruton
Smith's options for 200,000 shares vested in November 1999. The exercise
price per share in each case is the fair market value of the Class A Com-
mon Stock as of the date of grant.

(2) These options were granted under the Stock Option Plan and will vest in
May 2000. The exercise price per share in each case is the fair market
value of the Class A Common Stock as of the date of grant.

(3) These options were granted under the Employee Plan at an exercise price
equal to the lesser of 85% of the fair market value per share of Class A
Common Stock on the date of grant or 85% of such fair market value on the
date of exercise. Mr. Wright exercised such options at September 30, 1999
at an exercise price higher than the $9.75 fair market value of such
shares at December 31, 1999. Because the exercise price for such options
depended on fluctuating market prices, and because such options have al-
ready been exercised, the potential realizable values of such options at
the assumed annual rates of stock price appreciation over the option term
are not meaningful.

16
<PAGE>

Fiscal Year-End Option Values

The following table sets forth information concerning outstanding options
to purchase Class A Common Stock held by the named executive officers of Sonic
as of December 31, 1999:

<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Shares Value Unexercised In-the-Money
Acquired Realized Options at Options at
on Exercise (#) ($) FY-End (#) FY-End ($) (1)
--------------- -------- ------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
O. Bruton Smith......... -- -- 400,000 50,000 $112,500 $ 0
B. Scott Smith.......... -- -- 233,167 196,583 555,626 249,686
Jeffrey C. Rachor....... -- -- 34,087 140,749 102,825 102,810
Theodore M. Wright...... 355 $ 770 150,917 155,459 247,193 95,468
</TABLE>

- -------

(1) Grant date value based on market price at date of grant.

Compensation Committee Interlocks and Insider Participation in Compensation
Decisions

Messrs. Bruton Smith, Benton and Belk serve as the members of the Compensa-
tion Committee. Bruton Smith serves as the Chief Executive Officer of Sonic
and serves as an officer for a substantial majority of Sonic's subsidiaries.

Bruton Smith is the only executive officer to have served on the Compensa-
tion Committee of another entity during 1999. He served as Chairman, Chief Ex-
ecutive Officer, a director and a member of the Compensation Committee of SMI.
Mr. Brooks, a director of Sonic, is also an executive officer and a director
of SMI. Mr. Benton is also a director and member of the Compensation Committee
of SMI.

Bruton Smith received aggregate salary, bonus and other compensation of
$1,039,163 during 1999 from SMI. See "Certain Transactions" for information
concerning certain additional transactions in 1999 in which Mr. Smith had an
interest.

Director Compensation

Members of the Board of Directors who are not employees of Sonic are com-
pensated for their services under the Formula Stock Option Plan for Indepen-
dent Directors (the "Directors Plan") and may also be granted options under
the Stock Option Plan. On February 9, 2000, Sonic's Board of Directors also
approved the payment of a $2,000 stipend per Board meeting attended for each
of the non-employee directors. Sonic will also reimburse all directors for
their expenses incurred in connection with their activities as directors of
Sonic. Directors who are also employees of Sonic receive no additional compen-
sation for serving on the Board of Directors.

The Directors Plan was adopted by the Board of Directors on March 20, 1998
and approved by Sonic's stockholders at the 1998 annual meeting of stockhold-
ers. The Directors Plan authorizes the issuance of options to purchase up to
an aggregate of 600,000 shares of Class A Common Stock. Under the Directors
Plan, each outside director is awarded on or before March 31st of each year an
option to purchase 10,000 shares at an exercise price per share equal to the
fair market value per share of the Class A Common Stock at the date of grant.
Options granted under the Directors Plan become exercisable six months from
the date of grant and generally expire ten years from the date of grant.

Stockholder Performance Graph

Set forth below is a line graph comparing the cumulative stockholder return
on Sonic's Class A Common Stock against the cumulative total return of each of
the Standard and Poor's 500 Stock Index and a Peer Group Index for the time
period commencing November 11, 1997 and ending December 31, 1999. The compa-
nies used in the Peer Group Index consists of AutoNation, Group 1 Automotive,
United Auto Group, Car Max and Lithia Motors, which are all publicly traded
companies

17
<PAGE>

known by Sonic to be involved in the automobile industry. The graph assumes
that $100 was invested on November 11, 1997 in each of Sonic's Class A Common
Stock, the Standard & Poor's 500 Stock Index and the Peer Group Index compa-
nies and that all dividends were reinvested.

[PERFORMANCE GRAPH APPEARS HERE]

COMPANY/INDEX/MARKET 11/11/1997 12/31/1997 12/31/1998 12/31/1999

Sonic Automotive, Inc. 100.00 79.79 286.01 161.66
Peer Group Index 100.00 79.46 52.89 33.32
S&P 500 Index 100.00 106.43 136.84 165.64

CERTAIN TRANSACTIONS

Registration Rights Agreement

When Sonic acquired Town & Country Ford, Lone Star Ford, Fort Mill Ford,
Town & Country Toyota and Frontier Oldsmobile-Cadillac in 1997, Sonic signed a
Registration Rights Agreement dated as of June 30, 1997 with SFC, an entity
controlled by O. Bruton Smith, B. Scott Smith and William S. Egan (collective-
ly, the "Class B Registration Rights Holders"). SFC currently owns 8,881,250
shares of Class B Common Stock; Bruton Smith, 2,071,250 shares; Scott Smith,
956,250 shares; and Egan Group, LLC, an assignee of Mr. Egan (the "Egan
Group"), 341,250 shares, all of which are covered by the Registration Rights
Agreement. The Egan Group also owns certain shares of Class A Common Stock to
which the Registration Rights Agreement applies. If, among other things pro-
vided in Sonic's Charter, offers and sales of shares Class B Common Stock are
registered with the SEC, then such shares will automatically convert into a
like number of shares of Class A Common Stock.

The Class B Registration Rights Holders have certain limited piggyback reg-
istration rights under the Registration Rights Agreement. These rights permit
them to have their shares of Sonic's Common Stock included in any Sonic regis-
tration statement registering Class A Common Stock, except for registrations
on Form S-4, relating to exchange offers and certain other transactions, and
Form S-8, relating to employee stock compensation plans. The Registration
Rights Agreement expires in November 2007.

The Subordinated Smith Loan

In December 1997, Mr. Smith was required by Ford Motor Credit Company
("Ford Motor Credit") to lend $5.5 million to Sonic to increase Sonic's capi-
talization (the "Subordinated Smith Loan"). Ford Motor Credit required the
Subordinated Smith Loan as a condition to increasing Sonic's borrowing limits
under its secured lending facility (the "Revolving Facility") at that time be-
cause the net offering proceeds from Sonic's November 1997 initial public of-
fering were significantly less than expected by Sonic and Ford Motor Credit.
The Subordinated Smith Loan bears interest at Bank of America's announced
prime rate plus 0.5% and matures on November 30, 2000. Under the terms of cer-
tain subordination agreements

<PAGE>

currently in effect, however, all amounts owed by Sonic to Mr. Smith under the
Subordinated Smith Loan are to be paid only after all amounts owed by Sonic
under the Revolving Facility, Sonic's floor plan financing facility with Ford
Motor Credit and Sonic's senior subordinated notes are fully paid in cash.

The Smith Guarantee and Pledge

Before Sonic's acquisition of FirstAmerica in December 1999, Mr. Smith
guaranteed the obligations of FirstAmerica under FirstAmerica's new acquisi-
tion line of credit with Ford Motor Credit. FirstAmerica obtained this new fi-
nancing to enable it to complete its then pending acquisitions. The borrowing
limit under this credit facility was approximately $138 million prior to
FirstAmerica's acquisition by Sonic. Mr. Smith guaranteed approximately $107
million of this amount, which guarantee was secured by a pledge of 5 million
shares of SMI common stock owned by SFC. Sonic assumed FirstAmerica's obliga-
tions to Ford Motor Credit under the Revolving Facility when it acquired
FirstAmerica. Mr. Smith's secured guarantee in favor of Ford Motor Credit re-
mains in place and now guarantees a portion of Sonic's obligations under the
Revolving Facility.

Transactions with MMRT

In 1998, Sonic entered into an Alliance Agreement with MMRT (an affiliate
of the MMR Group (as defined below)). Bruton Smith served as the chairman of
MMRT's board of trustees. Under the Alliance Agreement, Sonic agreed to refer
real estate acquisition opportunities arising with Sonic's dealership acquisi-
tions to MMRT. In exchange, MMRT agreed to refer dealership acquisition oppor-
tunities and to provide certain real estate development and maintenance serv-
ices to Sonic. MMRT was also to arrange for property inspections and environ-
mental reports for prospective dealership properties at Sonic's cost.

The Alliance Agreement also provided for a form of lease to be used when
MMRT leased real estate to Sonic. Under terms substantially similar to those
of this form of lease, Sonic leased certain properties from MMR Holdings, LLC
and its subsidiaries (the "MMR Group") that until August 1999 were owned by
Bruton Smith and SFC. In August 1999, the MMR Group was acquired by CAR MMR
L.L.C. ("CAR MMR"), a subsidiary of Capital Automotive REIT, which is unaffil-
iated with Sonic. See "-- Certain Dealership Leases" and "-- Payments to Sonic
from the Sale of the MMR Group."

When Mr. Smith and SFC sold the MMR Group to CAR MMR, Sonic terminated the
Alliance Agreement with MMRT.

Prior to the sale to CAR MMR, in January 1999, Sonic sold to the MMR Group
the real estate at two of its dealership subsidiaries, Town and Country Toyota
and Fort Mill Ford, for an aggregate purchase price of approximately $10.6
million and entered into leases for these properties with the MMR Group for a
term of ten years. Sonic realized a gain on the sales of approximately
$3.8 million. These leases were assumed by CAR MMR when it acquired the MMR
Group in August 1999.

Certain Dealership Leases

Several properties leased by Sonic's dealerships were, during a portion of
1999, owned by Sonic's officers or directors or their affiliates. These leases
contained terms comparable to, or more favorable to Sonic than, terms that
would be obtained from unaffiliated third parties. These properties as well as
others were acquired by the MMR Group in 1999.

Sonic leased 50 properties for 42 of its dealerships from the MMR Group at
the time the MMR Group was sold to CAR MMR in August 1999. Sonic's directors
had approved these "triple net leases," which required Sonic to pay all costs
of operating the properties, as well as all taxes, utilities, insurance, re-
pairs, maintenance and other property related expenses. Up until the August
13, 1999 sale of the MMR Group to CAR MMR, Sonic had a 1999 annual aggregate
rent obligation of approximately $19.5 million to the MMR Group. Sonic has en-
tered into new leases with CAR MMR with terms similar to those under Sonic's
former leases with the MMR Group. These leases generally provide Sonic with
renewal options for the lease for two additional five year terms after the ex-
piration of the initial lease term. Sonic has agreed to renew approximately
75% of its lease rental stream for an additional five year period after the
expiration of the initial lease terms.

As indicated above, Sonic acquired FirstAmerica in December 1999. As a part
of that acquisition, Sonic assumed tenant obligations on existing leases cov-
ering two dealership properties, one dealership service repair property and
real property where FirstAmerica maintained an office and service and repair
center. These properties are leased from The Price Trust at the 1999 annual
aggregate rate of approximately $3.0 million. Mr. Price, Sonic's Vice Chair-
man, and his wife are the sole beneficiaries of The Price Trust.

19
<PAGE>

Sonic also leases one dealership property from Bay Automotive LLC, in which
Mr. Price owns a 50% interest. Annual rent under this lease was approximately
$576,000 in 1999.

Payments to Sonic from Sale of the MMR Group

As a part of the August 13, 1999 sale of the MMR Group to CAR MMR, Bruton
Smith and SFC signed agreements with Sonic to induce Sonic to enter into a
real estate financing arrangement with CAR MMR and, among other things, amend
its leases with the MMR Group to standardize their terms. Mr. Smith and SFC,
under these agreements, agreed to pay approximately $2.5 million to Sonic,
which amount represented Mr. Smith's and SFC's profits on the sale of the MMR
Group less their selling expenses and a 14% annual return on their initial in-
vestment in the MMR Group, net of any advances made by Sonic to the MMR Group.

Other Transactions

. Sonic had amounts receivable from affiliates of $4.2 million at December
31, 1999. Of the $4.2 million balance at December 31, 1999, approximately
$2.5 million represented amounts owed by SFC. The remaining balances at
December 31, 1999 primarily represented advances made by Sonic to SFC and
MMRT. The amounts receivable from affiliates are non-interest bearing and
are classified as current based on the expected repayment dates.

. Town and Country Toyota has an amount payable to SFC and Bruton Smith,
which payable totalled approximately $0.7 million as of December 31, 1999.
This loan bears interest at 8.75% per annum and is classified as non-cur-
rent based on the expected repayment dates.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Sonic's executive officers, directors and persons who own more than 10% of
Sonic's Voting Stock to file reports on ownership and changes in ownership
with the SEC. Additionally, SEC regulations require that Sonic identify in its
proxy statements any individuals for whom one of the referenced reports was
not filed on a timely basis during the most recent fiscal year or prior fiscal
years. To Sonic's knowledge, based solely on review of reports furnished to
it, all Section 16(a) filing requirements applicable to its executive offi-
cers, directors and more than 10% beneficial owners were complied with, except
that (i) Messrs. Rachor and Iuppenlatz inadvertently filed late their Form 3
initial statements of beneficial ownership of securities; and (ii) Mr. Benton
inadvertently reported late his June 11, 1999 acquisition of an aggregate to-
tal of 1,500 shares of Class A Common Stock that should have been reported on
a Form 4 statement of changes of beneficial ownership of securities and in-
stead was reported on a Form 5 annual statement of beneficial ownership of se-
curities filed in February 2000.

OTHER MATTERS

In the event that any matters other than those referred to in the accompa-
nying Notice of Meeting should properly come before and be considered at the
Annual Meeting, it is intended that proxies in the accompanying form will be
voted thereon in accordance with the judgment of the person or persons voting
such proxies.

20
<PAGE>

Appendix A

- --------------------------------------------------------------------------------
SONIC AUTOMOTIVE, INC.
Charlotte, North Carolina
PROXY
[This proxy is being solicited on behalf of the Board
of Directors of Sonic Automotive, Inc.]
The undersigned hereby appoints Mr. Theodore M. Wright
and Mr. Thomas A. Price as Proxies, each with the power
to appoint his substitute, and hereby authorizes them
to represent and vote, as designated below, all the
shares of the Voting Stock of Sonic Automotive, Inc.
held of record by the undersigned on April 19, 2000, at
the Annual Meeting of Stockholders to be held on June
5, 2000 or any adjournment thereof.

1. ELECTION OF DIRECTORS
Nominees: O. Bruton Smith, Jeffrey C. Rachor and
William R. Brooks (Mark only one of the following
boxes.)
[_] VOTE FOR all nominees [_] VOTE WITHHELD as to
listed above, except vote all nominees
withheld as to the
following nominee (if
any):

2. APPROVAL OF AMENDMENT AND RESTATEMENT OF THE SONIC
AUTOMOTIVE, INC. 1997 STOCK OPTION PLAN
[_] FOR[_] AGAINST[_] ABSTAIN

3. APPROVAL OF AMENDMENT OF THE SONIC AUTOMOTIVE, INC.
EMPLOYEE STOCK PURCHASE PLAN
[_] FOR[_] AGAINST[_] ABSTAIN

4. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP
[_] FOR[_] AGAINST[_] ABSTAIN

IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE
UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE
THE MEETING.
<PAGE>

- --------------------------------------------------------------------------------

PLEASE MARK, SIGN BELOW, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENVELOPE
FURNISHED.

Please sign exactly as name appears below.

When shares are held by joint tenants, both should sign. When signing as
attorney, as executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.

Class A Common Stock Shares: _____________
Class B Common Stock Shares: _____________
Class A Convertible Preferred Stock:
Series I Preferred Stock Shares: ________
Series II Preferred Stock Shares: _______
Series III Preferred Stock Shares: ______
Dated: _____________________________, 2000
Signature: _______________________________
Printed Name: ___________________________
Signature, if held jointly: ______________
Printed Name: ___________________________

[_] Please mark here if you intend to
attend the Meeting of Stockholders.
<PAGE>

Appendix B

SONIC AUTOMOTIVE, INC.
1997 STOCK OPTION PLAN
----------------------

Amended and Restated as of June 5, 2000

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 Automotive, Inc.
(the "Company") and its subsidiaries and other related entities (each of which
is referred to herein as a "Subsidiary") by encouraging their ownership of the
Class A Common Stock, $.01 par value per share, 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 of the Company or subcommittee thereof (the "Committee").
The Committee shall be appointed from time to time by the Board of Directors of
the Company (the "Board of Directors") and shall consist of not fewer than two
of its members. 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.

Notwithstanding any other provisions of the Plan, the Committee may impose
such conditions on any options as may be required to satisfy the requirements of
Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the "Act") or
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").

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 6,000,000 shares of Stock, subject to any adjustments
which may be made pursuant to
<PAGE>

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, consultants and other individuals providing
services to the Company or any Subsidiary. Options may be granted to eligible
persons whether or not they hold or have held options previously granted under
the Plan or otherwise granted or assumed by the Company; provided, however, that
the maximum number of shares of Stock with respect to which options may be
granted under the Plan to any person during any calendar year shall be 500,000
shares of Stock (subject to adjustment in the same manner as provided in Section
5(f) with respect to shares of Stock subject to options then outstanding). In
selecting recipients for options, the Committee may take into consideration any
factors it may deem relevant, including its estimate of the individual'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 any
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 a Subsidiary
which constitutes a "subsidiary corporation" within the meaning of Section
424(f) of the Code.

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 may be
purchased upon exercise of an option granted under the Plan shall be
determined by the Committee in its discretion, but shall not be less than
the fair 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 may be
purchased upon exercise of the option shall not be less than 110% of the
fair 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. Notwithstanding the foregoing, an
option may be granted with an exercise price lower than that set forth
above if such option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section 424(a)
of the Code.

For purposes of this Section 5(a), "fair market value" shall mean the
last sale

2
<PAGE>

price regular way on the last trading day prior to the date of option
grant, or, in case no 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 fair 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.

(b) Option Period. The period for exercise of an option shall be
determined by the Committee in its discretion but in no event shall the
exercise period 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, subject to Section 5(d) below.

(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 full payment 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. The purchase price may be paid in
(i) cash (or a certified or bank cashier's check payable to the order of
the Company); (ii) shares of Stock owned by the Optionee, (iii)
nonstatutory options granted under the Plan and held by the Optionee
(provided, however, that the purchase price of Stock acquired under an
incentive stock option may not be paid in options); or (iv) any combination
of the foregoing methods. Shares of Stock tendered in payment on the
exercise of an option shall be valued at their fair market value determined
as described in Section 5(a) above, provided that the date of determination
shall be the date of exercise. The fair market value of options tendered
in payment upon exercise of other options shall be the fair market value of
the underlying Stock, determined as aforesaid, less the total exercise
price of the options. In addition, at the request of the Optionee, and
subject to applicable laws and regulations, the Company may (but shall not
be required to) cooperate in a "cashless exercise" of an option (i.e., the
assignment to the Company of the proceeds from a sale of Stock acquired
upon exercise of the option or from the proceeds of a loan from a brokerage
firm). 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

3
<PAGE>

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. A cessation of employment, for purposes of incentive
stock options only, shall be deemed to occur on the ninety-first day
of a leave of absence 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 or
any Subsidiary or which is intended to result in the personal
enrichment of the Optionee at the expense of the Company or one of its
Subsidiaries, (ii) a material violation of the Optionee's
responsibilities, or the Optionee's gross negligence or willful
misconduct, 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 or any Subsidiary
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 any Subsidiary, 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 options were exercisable on the date of the cessation of
the Optionee's employment.

(iii) During the twelve months after the Optionee's employment
with the Company or any Subsidiary ceases 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 options
were exercisable on the date of the cessation of the Optionee's
employment.

4
<PAGE>

(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 options granted under the Plan shall be
exercisable until the expiration of twelve months following the
Optionee's death, but only to the extent the option was exercisable on
the date of the cessation of the Optionee's employment. 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. The
provisions of this subparagraph (iv) shall apply to any outstanding
options which are incentive stock options to the extent permitted by
Sections 421 and 422(d) of the Code and such outstanding options in
excess thereof shall, immediately upon the death of the Optionee, be
treated for all purposes of the Plan as nonstatutory stock options and
shall be exercisable as such as provided in this subparagraph (iv).

In no event shall any option be exercisable beyond the applicable
exercise period determined pursuant to 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 or Subsidiary to
terminate his employment at any time.

(e) Nontransferability of Options. Except as otherwise set forth
herein, during the lifetime of an Optionee, options held by such Optionee
shall be exercisable only by him, and no option shall be transferable other
than by will or the laws of descent and distribution. Notwithstanding the
foregoing, the Committee, in its absolute discretion, may grant
nonstatutory stock options that may be transferred without consideration,
in whole or in part, by the Optionee to (i) the Optionee's child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former
spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, including adoptive
relationships, or any person sharing the Optionee's household (other than a
tenant or employee) ("Family Members"); (ii) a trust in which Family
Members have more than 50% of the beneficial interest; (iii) a foundation
in which Family Members (or the Optionee) control the management of assets;
or (iv) any other entity in which Family Members (or the Optionee) own more
than 50% of the voting interests. In all cases, the Committee must be
notified in advance in writing of the terms of any proposed transfer to a
permitted transferee and such transfers may occur only with the consent of
and subject to the rules and conditions imposed by the Committee. The
transferee and the transferred options shall continue to be subject to the
same terms and conditions as were applicable immediately prior to the
transfer. The provisions of the Plan, including, but not limited to, those
set forth in Section 5(b) and (d), shall continue to apply with respect to
the Optionee and the option shall be exercisable by the transferee only to
the extent and for the periods specified herein and in any applicable
option agreement. The Optionee shall remain subject to withholding taxes
upon exercise of any transferred option by the

5
<PAGE>

transferee.

(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, unless the
Committee should determine otherwise, corresponding adjustments
automatically shall be made to the number and kind of shares available for
issuance under this Plan, the number and kind of shares covered by
outstanding options under this Plan, and the exercise price per share for
outstanding options. In addition, the Committee may make such other
adjustments as it determines to be equitable.

(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 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 determined pursuant to 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.

6
<PAGE>

(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 which constitute
"incentive stock options" within the meaning of Section 422 of the Code to
eligible employees of the Company and its "subsidiary corporations" within the
meaning of Section 424(f) of the Code, provided, however, that the aggregate
market value of the Stock (determined as of the date the incentive stock option
is granted) with respect to which incentive stock options are exercisable for
the first time by the Optionee during any calendar year shall not exceed
$100,000 or such other limitation set forth in Section 422(d) of the Code.

7. Effectiveness of Plan. The Plan became effective when it was adopted
and approved by the Board of Directors and the stockholders of the Company on
October 9, 1997. The Plan was amended and restated effective as of December 3,
1998 and again amended and restated effective as of June 8, 1999; provided,
however, that the amendments to Section 5(e) contained in the June 8, 1999
restatement also shall apply to all outstanding nonstatutory stock options under
the Plan as of June 8, 1999. This amendment and restatement of the Plan shall
be effective as of June 5, 2000, subject to approval by the stockholders of the
Company at the 2000 Annual Meeting of Stockholders.

8. Amendment and Termination. The Board of Directors may at any time
amend the Plan or the terms 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

7
<PAGE>

for which options may be granted under the Plan, or (ii) except as otherwise
provided in the Plan, amend the requirements as to the class of employees
eligible to receive options. The Board of Directors may terminate the Plan at
any time. Unless the Plan shall theretofore have been terminated, the Plan shall
terminate, and no option shall be granted hereunder after, October 9, 2007. No
amendment or termination 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.

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) remit to the
Company, or make arrangements satisfactory to the Company to pay through payroll
withholding or otherwise, such amount as may be requested by the Company to meet
any federal, state or local tax withholding obligations with respect to such
exercise. 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.

8
<PAGE>

Appendix C

SONIC AUTOMOTIVE, INC.

EMPLOYEE STOCK PURCHASE PLAN

AMENDED AND RESTATED

AS OF

JUNE 5, 2000
<PAGE>

SONIC AUTOMOTIVE, INC.
EMPLOYEE STOCK PURCHASE PLAN

AMENDED AND RESTATED
AS OF
JUNE 5, 2000

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. PURPOSE; EFFECTIVE DATE; DEFINITIONS; CONSTRUCTION................. 1
1.1 Purpose of Plan; Effective Date.................................... 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) "Employee".................................................... 2
(l) "Employer".................................................... 2
(m) "Exercise Date"............................................... 2
(n) "Grant Date".................................................. 2
(o) "Option"...................................................... 2
(p) "Participant"................................................. 2
(q) "Plan"........................................................ 2
1.3 Construction....................................................... 2

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

ARTICLE IV. CONTRIBUTIONS..................................................... 4
4.1 Payroll Deductions................................................. 4
4.2 Direct Payment..................................................... 4
4.3 Leave of Absence................................................... 4
4.4 Contributions to Accounts.......................................... 5
4.5 Withdrawal of Contributions from Plan.............................. 5
</TABLE>
<PAGE>

<TABLE>
<S> <C>
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

AMENDED AND RESTATED
AS OF
JUNE 5, 2000

ARTICLE I. PURPOSE; EFFECTIVE DATE; DEFINITIONS; CONSTRUCTION

1.1 Purpose of Plan; Effective Date. 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, within the meaning of Section 424(f) of the
Internal Revenue Code of 1986, as amended (the "Code") (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
Class A Common Stock, $.01 par value per share, of the Company. This Plan is
intended to qualify as an "employee stock purchase plan" within the meaning of
Section 423 of the Code.

The Plan became effective when it was adopted and approved by the Board of
Directors and the shareholders of the Company on October 9, 1997. The Plan was
subsequently amended and restated as of December 3, 1998 and again amended and
restated as of June 8, 1999. The Company hereby amends and restates the Plan as
of June 5, 2000 as set forth herein.

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.

(f) "Code" shall mean the Internal Revenue Code of 1986, as amended,
any
<PAGE>

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 corporation
organized and existing under the laws of the State of Delaware.

(i) "Company Stock" shall mean the Class A Common Stock, $.01 par
value per share, 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) "Employee" shall mean any person who (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 for a participating Employer, and (iii)
is customarily employed more than five months in any calendar year by a
participating Employer. Independent contractors and outside directors shall not
be included in the definition of Employee for purposes of this Plan.

(l) "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.

(m) "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.

(n) "Grant Date" shall mean (i) initially, January 1, 1998, and (ii)
each January 1 thereafter during the term of the Plan.

(o) "Option" shall mean an option to purchase shares of Company Stock
granted by the Committee to a Participant pursuant to this Plan.

(p) "Participant" shall mean an Employee participating in this Plan in
accordance with Article III.

(q) "Plan" shall mean this Sonic Automotive, Inc. Employee Stock
Purchase Plan, as amended from time to time.

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
<PAGE>

2.1 Appointment and Procedures of Committee. The Plan shall be
---------------------------------------
administered by the Board of Directors or a Committee 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. 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 (unless otherwise determined by the Board
of Directors); 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 interests 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, any Employee employed on the date of the closing of the Company's
initial public offering shall be eligible to participate in this Plan as of the
initial Grant Date under the Plan (provided that the Employee is still employed
on such Grant Date). Each other Employee shall be eligible to participate in the
Plan with respect to a Grant Date if, as of such Grant Date, the Employee has
completed a year of service with the Employer (provided that the Employee is
still employed on such Grant Date). For purposes of eligibility to participate
in this Plan, the following service shall be recognized: (a) service with an
entity prior to the acquisition by the Company, or one of its subsidiaries, of a
controlling interest in or substantially all of the assets of such entity, and
(b) service with an affiliate of the Company which directly, or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the Company.

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 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 participation in the Plan, an
----------------
Employee on a leave of absence shall be deemed to continue 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

3
<PAGE>

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 (or unless the Employee's reemployment
is guaranteed by statute or contract). 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.

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) subject to Section 3.3(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
<PAGE>

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 1,800,000 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). As of each Grant Date, all eligible Employees shall be granted
an Option to purchase shares of Company Stock. The Board of Directors or the
Committee shall determine the number of shares of Company Stock available for
purchase under each Option to be granted as of such Grant Date; provided that,
the same number of shares must be available under each Option granted as of 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 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 per share of Company Stock which 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 per share of Company Stock on the applicable Grant Date, and (ii)
the fair market value per share of 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

5
<PAGE>

price reported on any such date, the fair 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.

(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:

6
<PAGE>

(A) To withdraw all of the Contributions then credited to the
Participant's Account under the Plan, or

(B) To allow any unexercised Option held by the Participant as of
the date of his death to be exercised 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
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 and
subject to this Section 5.5(d), 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 purposes of the Plan (unless the right to reemployment is
guaranteed by statute or contract) 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 eligible regular full-time or part-
time employment with the Employer at the earlier of (i) the termination of such
leave of absence, or (ii) the day after the ninetieth day of such leave of
absence, such Participant's employment shall be deemed to have terminated for
purposes of the Plan on whichever of such dates first occurs (unless the
Participant's right to reemployment is guaranteed by statute or contract).

(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.

7
<PAGE>

(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.

ARTICLE VI. MISCELLANEOUS

6.1 Adjustments Upon Changes in Capitalization. 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, unless the Committee should
determine otherwise, corresponding adjustments automatically shall be made to
the number and kind of shares of Company Stock available for issuance under this
Plan, the number and kind of shares of Company Stock covered by outstanding
Options under this Plan, and the exercise price per share for outstanding
Options. In addition, the Committee may make such other adjustments as it
determines to be equitable. 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. The original adoption of the Plan was
------------------------
subject to the approval, within twelve months before or after the adoption of
the Plan by the Board of Directors, 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 was exercisable prior to such approval. Such
approval was obtained on October 9, 1997.

6.3 Amendment, Suspension and Termination. The Board of Directors may at
-------------------------------------
any time

8
<PAGE>

amend, suspend or terminate this Plan; provided, however, that the Board of
Directors shall not 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
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.

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. An Employee granted Options under this Plan shall be
-----------
conclusively deemed to have authorized the Company and his Employer to withhold
from the salary, commissions or other compensation of such Employee funds in
amounts or property (including Company Stock) in value equal to any federal,
state and local income, employment or other withholding taxes applicable to the
income recognized by such Employee and attributable to the Options as, when and
to the extent, if any, required by law; provided; however, that, in lieu of the
withholding of federal, state and local taxes as herein provided, the Company
may require the Participant (or his estate pursuant to Section 5.5(c)(ii)) to
pay to the Company, upon its demand, such amount as may be requested by the
Company for the purpose of satisfying taxes, including taxes that may be 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. If the amount requested is not paid, the Company may refuse to issue the
shares of Company Stock attributable to the Option's exercise.

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

9
<PAGE>

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.