Exhibit 10.3

AMENDED AND RESTATED

SONIC AUTOMOTIVE, INC. INCENTIVE COMPENSATION PLAN

AMENDED AND RESTATED AS OF APRIL 19, 2007

Section 1.    Purposes

The purpose of the Sonic Automotive, Inc. Incentive Compensation Plan is to
provide incentives to highly-qualified executives and other key employees in an
effort to motivate them to continue service with the Company, devote their best
efforts to the Company and improve the Company’s economic performance, thus
enhancing the value of the Company for the benefit of shareholders. An
additional purpose of the Plan is to serve as a qualified performance-based
compensation program under Section 162(m) of the Internal Revenue Code of 1986,
as amended, in order to preserve the Company’s tax deduction for compensation
paid under the Plan to Covered Employees.

Section 2.    Definitions

Throughout this Plan, when capitalized the following terms shall have the
respective meanings set forth below:

(a) “Board” shall mean the Board of Directors of the Company.

(b) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

(c) “Committee” shall mean the Compensation Committee of the Board or a
subcommittee thereof, provided that the Committee shall consist of two or more
members each of whom is an outside director within the meaning of Section 162(m)
of the Code.

(d) “Company” shall mean Sonic Automotive, Inc., a corporation organized under
the laws of the State of Delaware, or any successor corporation.

(e) “Covered Employee” shall have the meaning set forth in Section 162(m)(3) of
the Code (or any successor provision).

(f) “Incentive Award” shall mean an incentive compensation award granted
pursuant to the Plan, the payment of which shall be contingent upon the
attainment of Performance Goals with respect to a Performance Period.

(g) “Participant” shall mean an executive officer or other key employee of the
Company or one of its Subsidiaries who is selected by the Committee to
participate in the Plan.

(h) “Performance Goals” shall mean the criteria and objectives that must be met
during the Performance Period as a condition of the Participant’s receipt of
payment with respect to an Incentive Award, as described in Section 5 hereof.

(i) “Plan” shall mean this Sonic Automotive, Inc. Incentive Compensation Plan,
as amended from time to time.

(j) “Performance Period” shall mean the period designated by the Committee
during which the Performance Goals with respect to a particular Participant will
be measured.

(k) “Subsidiary” shall mean any subsidiary or other business organization in
which the Company owns, directly or indirectly, more than 50% of the voting
power, stock or capital interest.

Section 3.    Administration

The Plan shall be administered by the Committee. The Committee shall have the
authority in its sole discretion, subject to the provisions of the Plan, to
administer the Plan and to exercise all of the powers and authorities either
specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority to
grant Incentive Awards, to determine the persons to whom and the time or times
at which Incentive Awards shall be granted, to determine the terms, conditions,
restrictions, Performance Period and Performance Goals relating to any

 

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Incentive Award, to adjust compensation payable upon attainment of Performance
Goals (subject to the limitations of the Plan), to construe and interpret the
Plan and any Incentive Awards, to prescribe, amend and rescind rules and
regulations relating to the Plan, and to make all other determinations deemed
necessary or advisable for the administration of the Plan.

All decisions, determinations and interpretations of the Committee shall be
final and binding on all persons, including the Company, the Participant (or any
person claiming any rights under the Plan through any Participant) and any
shareholder.

No member of the Board or the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Incentive Award
granted hereunder.

Section 4.    Eligibility

Executive officers of the Company and key employees of the Company and its
Subsidiaries who are designated by the Committee may participate in the Plan. In
determining the persons who may participate in the Plan, the Committee may take
into account such factors as the Committee shall deem relevant in connection
with accomplishing the purposes of the Plan. The fact that an executive officer
or key employee has been designated to participate in the Plan for one
Performance Period does not assure that such person will be eligible to
participate in any subsequent Performance Period.

Section 5.    Incentive Awards and Performance Goals

(a) In General.    The Committee shall establish in writing for each Participant
the applicable Performance Period, the amount of or the formula for determining
the actual Incentive Award for such Participant (which may include the
establishment of a target Incentive Award) with respect to such Performance
Period, the Performance Goal(s) that must be achieved in order for the
Participant to receive an Incentive Award under the Plan with respect to such
Performance Period, and any other conditions that the Committee deems
appropriate and consistent with the Plan, and in the case of Covered Employees,
with Section 162(m) of the Code. All of the foregoing must be established in
writing by the Committee within ninety (90) days after the beginning of the
Performance Period (or, if earlier, by the date on which twenty-five percent
(25%) of the Performance Period has elapsed), provided that achievement of the
Performance Goals must be substantially uncertain at the time they are
established.

(b) Performance Goals.    The Committee shall establish one or more Performance
Goals for each Participant that are objectively determinable (i.e., such that a
third party with knowledge of the relevant facts could determine whether the
goals have been met). Such Performance Goals shall be based on one or more of
the following, as determined in the sole discretion of the Committee: stock
price; earnings per share; net earnings; operating or other earnings; profits;
revenues; net cash flow; financial return ratios; stockholder return; return on
equity; return on investment; debt rating; Company-wide sales; dealership sales;
expense reduction levels; return on net assets; debt to equity ratio; debt to
capitalization ratio; growth in assets, sales, or market share; customer
satisfaction; or strategic business objectives based on meeting specified
revenue goals, market penetration goals, geographic business expansion goals,
cost targets, or goals relating to acquisitions or divestitures. Performance
Goals may be based on the performance of the Participant’s division, business
unit or employing Subsidiary, based on the performance of one or more divisions,
business units or Subsidiaries, based on the performance of the Company and its
Subsidiaries as a whole, or based on any combination of the foregoing.
Performance Goals may be either absolute in their terms or relative. Performance
Goals may provide for the inclusion or exclusion of items such as the effect of
unusual charges or income items or other events, including acquisitions or
dispositions of businesses or assets, restructurings, reductions in force, or
changes in accounting principles or tax laws that occur during the Performance
Period. The Performance Goals established by the Committee may be (but need not
be) particular to a Participant and/or different each Performance Period. The
Committee also may establish subjective Performance Goals for Participants,
provided that for Covered Employees, the subjective Performance Goals may be
used only to reduce, and not increase, the Incentive Award otherwise payable
under the Plan.

(c) Incentive Awards.    In accordance with subparagraph (a) above, the
Committee must establish in writing the amount of or method for calculating a
Participant’s potential Incentive Award for each Performance Period. The
potential Incentive Award must be expressed in terms of an objective formula or
standard, and shall be expressed as either a dollar amount, a percentage of
salary, a percentage of the applicable criteria underlying the specified
Performance Goal(s) (or a percentage thereof in excess of a threshold amount) or
otherwise. The foregoing also may be expressed in the form of a range, pursuant
to which the actual amount of an Incentive Award payable under the Plan may vary
depending upon the extent to which the Performance Goals for the Performance
Period have been attained. The Committee also may establish a Participant’s

 

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potential Incentive Award as a percentage of a bonus pool; provided, however,
that the amount of the bonus pool (or the formula for determining the amount of
the bonus pool) shall be established in accordance with the requirements of this
Section 5 and that the sum of the individual maximum percentages of the bonus
pool that each Participant potentially could receive shall not exceed 100%.

The formula for determining the actual amount of the Incentive Award must be
such that a third party having knowledge of the extent to which the Performance
Goals have been attained could calculate the amount to be paid to the
Participant. However, the Committee may, in its discretion, reduce or eliminate
the amount payable to any Participant (including a Covered Employee), in each
case based upon such factors as the Committee may deem relevant, but shall not
increase the amount payable to any Covered Employee in a manner that would cause
the Incentive Award to fail to qualify as performance-based compensation under
Section 162(m) of the Code. Notwithstanding any other provision of the Plan, the
maximum amount payable with respect to an Incentive Award to any Participant for
any calendar year shall not exceed $3,000,000.

(d) Payment of Incentive Awards.

(i) Conditions on Payment.    Payment of an Incentive Award shall be made to a
Participant for a particular Performance Period only if: (A) the Committee has
certified in writing that extent to which the applicable Performance Goals and
any other material terms of the Incentive Award have been achieved or exceeded,
and (B) except as otherwise set forth below in Section 5(d)(ii), the Participant
remains employed by the Company or one of its Subsidiaries on the date of
payment of the Incentive Award (or, alternatively, on the last day of the
Performance Period, if the Committee shall have substituted such alternative
requirement for such Participant at the time it established the Performance
Goals for such Performance Period).

(ii) Termination of Employment.    Unless otherwise determined by the Committee,
a Participant shall not be entitled to payment of an Incentive Award if the
Participant does not remain continuously employed by the Company or one its
Subsidiaries until the scheduled date of payment of such Incentive Award.
Notwithstanding the foregoing, unless otherwise determined by the Committee, in
the event a Participant’s employment terminates due to death, disability or
retirement (as determined in the discretion of the Committee), the Participant
(or his or her estate or the persons to whom the right to payment under this
Plan passes by will or the laws of descent and distribution) shall be eligible
to receive the prorated amount of the Incentive Award for which the Participant
otherwise would have been eligible based upon the portion of the Performance
Period during which he or she was so employed so long as the Performance Goals
are subsequently achieved. Payment of such prorated Incentive Award shall be
paid in accordance with the terms of Section 5 (d)(iii) and (iv).

(iii) Timing of Payment.    Following the end of the Performance Period, any
payment to be made with respect to an Incentive Award shall be made as soon as
administratively practicable following the Committee’s certification in
accordance with Section (d)(i) above; provided, however, that in all cases, any
such payment shall be made no later than March 15 of the calendar year following
the calendar year in which such payment is no longer subject to a “substantial
risk of forfeiture” (within the meaning of Section 409A of the Code and
applicable regulations and guidance issued thereunder).

(iv) Form of Payment.    Payment of each Participant’s Incentive Award for a
Performance Period shall be made in cash (or its equivalent) in a lump sum,
subject to applicable tax and other withholding.

Section 6.    Withholding Taxes.

The Company or Subsidiary employing any Participant shall have the right to
deduct from all payments made pursuant to the Plan any and all federal, state
and local taxes or other amounts required by law to be withheld.

Section 7.    Miscellaneous Provisions

(a) Compliance with Legal Requirements.    The Plan and the granting of
Incentive Awards, and the other obligations of the Company under the Plan shall
be subject to all applicable federal and state laws, rules and regulations, and
to such approvals by any regulatory or governmental agency as may be required.

 

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(b) No Right To Continued Employment.    Nothing in the Plan or in any Incentive
Award shall confer upon any Participant the right to continue in the employ of
the Company or any of its Subsidiaries or to be entitled to any remuneration or
benefits not set forth in the Plan or to interfere with or limit in any way the
right of the Company or Subsidiary to terminate such Participant’s employment at
any time for any reason.

(c) Participant Rights.    No person shall have any claim or right to be granted
any Incentive Award under the Plan, and there is no obligation for uniformity of
treatment among Participants.

(d) Unfunded Status of Incentive Awards.    The Plan is intended to constitute
an “unfunded” plan for incentive compensation. Payments shall be made solely
from the general assets of the Company and its Subsidiaries. With respect to any
payments for which a Participant may be eligible pursuant to an Incentive Award,
nothing contained in the Plan or any Incentive Award shall give any such
Participant any rights that are greater than those of a general unsecured
creditor of the Company.

(e) No Transferability of Rights.    A Participant’s rights and interests under
the Plan may not be assigned, pledged, transferred or made subject to any lien,
either directly or by operation of law or otherwise (except for a transfer by
will or the laws of descent and distribution in the event of a Participant’s
death), including, but not by way of limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner.

(f) Governing Law.    The Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws of the State of
North Carolina without giving effect to the choice of law principles thereof,
except to the extent that such law is preempted by federal law.

(g) Other Compensation Plans.    Nothing contained in this Plan shall prevent
the Company from establishing other or additional compensation arrangements.

Section 8.    Effective Date

The Plan originally became effective upon its adoption by the Board on
October 11, 2001, subject to the requisite approval of the shareholders of the
Company at the 2002 Annual Meeting of Stockholders which was obtained on May 8,
2002. Following its adoption by the Committee, this amendment and restatement of
the Plan shall become effective as of April 19, 2007 upon receipt of the
requisite approval of the shareholders of the Company at the 2007 Annual Meeting
of Stockholders. In the absence of such shareholder approval, any outstanding
Incentive Awards for which the terms have been established under this amended
and restated Plan and subject to such shareholder approval shall be null and
void.

Section 9.    Amendment and Termination of the Plan

The Board or the Committee may at any time and from time to time alter, amend,
suspend, or terminate the Plan in whole or in part; provided, however, that any
amendment that increases the maximum amount that can be paid to a Participant
during a Performance Period under the Plan or any other amendment that requires
stockholder approval in order for the Plan to continue to comply with
Section 162(m) of the Code shall be subject to approval by the requisite vote of
the shareholders of the Company. No amendment shall adversely affect any of the
rights of any Participant, without such Participant’s consent, under any
Incentive Award theretofore granted under the Plan. Notwithstanding the
foregoing, the Board or the Committee may amend the Plan or any Incentive Award
in any respect it deems necessary or advisable to comply with applicable law
without obtaining a Participant’s consent, including, but not limited to,
reforming (including on a retroactive basis, if applicable) any terms of an
Incentive Award to comply with or meet an exemption from Section 409A of the
Code and applicable regulations and guidance issued thereunder.

Section 10.    Reapproval of Plan

The Plan must be resubmitted to the shareholders of the Company as necessary to
enable the Plan to qualify as performance-based compensation under
Section 162(m) of the Code. As of the time of the Plan’s adoption,
Section 162(m) requires that the shareholders reapprove the Plan no later than
the first shareholder meeting that occurs in the fifth year following the year
in which the shareholders previously approved the Plan.

 

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Section 11.    Intent to Comply With Code Section 409A

It is the general intent of the Company that neither this Plan nor any Incentive
Awards hereunder be subject to Section 409A of the Code. Notwithstanding the
foregoing, to the extent that any Incentive Awards hereunder may constitute
nonqualified deferred compensation within the meaning of Section 409A of the
Code, the Company intends that such Incentive Awards shall comply with
Section 409A of the Code, and the Committee shall determine and interpret the
terms any such Incentive Awards consistent with such intent. Notwithstanding the
foregoing, the Company does not guarantee to any Participant (or any other
person with an interest in an Incentive Award) that the Plan or any Incentive
Award hereunder complies with or is exempt from Section 409A, and shall not
indemnify or hold harmless any individual with respect to any tax consequences
that arise from any such failure under Section 409A.

Section 12.    Intent to Comply With Code Section 162(m)

It is the intent of the Company that the Plan and Incentive Awards under the
Plan for Covered Employees comply with Section 162(m) of the Code, to the extent
applicable, and all provisions hereof shall be construed in a manner to so
comply. To the extent that any legal requirement of Section 162(m) of the Code
as set forth in the Plan shall be modified or ceases to be required under
Section 162(m) of the Code, the Committee may determine that such provision
shall be correspondingly modified or cease to apply, as the case may be.

 

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