Exhibit 4.3
SUBORDINATION AGREEMENT
This Subordination Agreement (as the same may from time to time be
amended, modified or restated, the "Agreement") is dated as of May 7, 2002 and
is entered into by and between O. XXXXXX XXXXX (the "Junior Creditor") and U.S.
Bank National Association (the "Trustee"), a bank organized under the laws of
the United States, as Trustee under an Indenture dated as of May 7, 2002 (the
"Indenture") among Sonic Automotive, Inc. (the "Issuer"), and the Trustee, and
acting hereunder for the benefit of the holders (the "Holders") of the Issuer's
5 1/4% Convertible Senior Subordinated Notes Due 2009 of up to $149,500,000 in
principal amount (the "Issuer's Senior Notes") issued pursuant to the Indenture
(in such capacity, "Senior Creditor").
W I T N E S S E T H:
WHEREAS, the Junior Creditor has a financial interest in the Issuer
relating to the Issuer's obligation to repay the Junior Creditor a debt in the
principal amount of $5,500,000 evidenced by the Issuer's Subordinated Promissory
Note dated December 15, 1997 (collectively with any instrument that may be
substituted for such note, the "Subordinated Note");
WHEREAS, the Issuer and the Trustee have entered into the Indenture for
the benefit of the Holders and providing for the issuance by the Issuer's Senior
Notes;
WHEREAS, the Junior Creditor acknowledges that the issuance of the
Issuer's Senior Notes and the Issuer's receipt of the proceeds from the sale
thereof is of direct pecuniary value to the Junior Creditor;
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged by the Junior Creditor, and in order to induce the
Holders to purchase the Issuer's Senior Notes for the benefit of the Issuer and
to provide the ranking of the Issuer's Senior Notes among the Issuer's debt as
disclosed in the Issuer's Prospectus Supplement dated May 1, 2002 relating to
the sale of the Issuer's Senior Notes, the Junior Creditor hereby agrees with
Trustee, for the benefit of the Holders, as hereinafter set forth.
1. Certain Defined Terms. In addition to the terms defined above and
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elsewhere in this Agreement, the following terms used in this Agreement shall
have the following meanings, applicable both to the singular and the plural
forms of the terms defined:
As used in this Agreement:
"Issuer" shall mean Sonic Automotive, Inc., a Delaware corporation or
any successor assign or assign of Sonic Automotive, Inc., including, without
limitation, a receiver, trustee or debtor-in-possession.
"Senior Debt" shall mean (a) the indebtedness evidenced by the Issuer's
Senior Notes and all other obligations, liabilities, and indebtedness issued or
arising pursuant to the Indenture, in each case whether now existing or
hereafter arising (and whether such indebtedness arises or accrues before or
after the commencement of any bankruptcy, insolvency or receivership
proceedings) directly between Issuer and the Senior Creditor, or acquired
outright, conditionally or as collateral security from another by the Senior
Creditor, including, without limitation, interest and fees accruing pre-petition
or post-petition at the rate or rates prescribed in Issuer's Senior Notes and
costs, expenses, and attorneys' and paralegals' fees, whenever incurred (and
whether or not such claims, interest, costs, expenses or fees are allowed or
allowable in any such proceeding); and (b) amounts disbursed or advanced
(including, without limitation in connection with the provision of any financing
or other financial accommodations pursuant to Section 364 of the Bankruptcy
Code) by the Senior Creditor which the Senior Creditor, in its good faith
discretion and to the extent the same may be permitted under the Indenture,
deems necessary or desirable to preserve or protect any collateral now or
hereafter securing all or any portion of the Senior Debt or to enhance the
likelihood or maximize the amount of repayment of the Senior Debt, including,
but not limited to, all protective advances, costs, expenses, and attorneys' and
paralegals' fees, whensoever made, advanced or incurred by the Senior Creditor
in connection with the Senior Debt or the collateral therefor ("Preservation
Debt").
"Subordinated Debt" shall mean (a) all principal of, and premium, if
any, and interest on, the Subordinated Note, and (b) all other indebtedness,
fees, expenses, obligations and liabilities of the Issuer (or any other person,
firm, partnership or corporation for the benefit of Issuer) to the Junior
Creditor, whether now existing or hereafter incurred or created, under or with
respect to the Subordinated Note, in each case, whether such amounts are due or
not due, direct or indirect, absolute or contingent.
2. Standby; Subordination. The payment and performance of the
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Subordinated Debt is hereby subordinated to the Senior Debt and, except as set
forth in Section 3 below, the Junior Creditor will not accelerate, ask, demand,
xxx for, take or receive from Issuer, by setoff or in any other manner, the
whole or any part of the Subordinated Debt, including, without limitation, the
taking of any negotiable instruments evidencing such amounts, nor any security
for any of the Subordinated Debt, unless and until all of the Senior Debt shall
have been fully and indefeasibly paid and satisfied in cash. The Junior Creditor
also hereby agrees that, regardless of whether the Senior Debt is secured or
unsecured, then the Senior Creditor shall be subrogated for the Junior Creditor
with respect to the Junior Creditor's claims against the Issuer and the Junior
Creditor's rights, liens and security interests, if any, in any of the Issuer's
assets or any other assets securing the Senior Debt and the proceeds thereof
until all of the Senior Debt has been fully and indefeasibly paid and satisfied
in cash.
3. Permitted Payments. Notwithstanding the provisions of Section 2 of
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this Agreement, until the occurrence of a "Default" or an "Event of Default" (as
these terms are defined in the Indenture), and provided that (i) there shall not
then exist any breach of this Agreement by the Junior Creditor which has not
been waived, in writing, by the Senior Creditor, and (ii) the payment described
below, if made, would not give rise to the occurrence of an Event of Default,
Issuer may pay to the Junior Creditor, and the Junior Creditor may accept from
Issuer, regularly scheduled payments of interest and principal, when due, on an
unaccelerated basis, pursuant to the Subordinated Note provided the maximum
interest rate at which such payments shall be permitted shall not exceed the
"Prime Rate" announced from time to time by Bank of America N.A. in Charlotte,
North Carolina, or any successor, plus 0.5% per annum ("Permitted Payments"), it
being understood and agreed by the Junior Creditor that the Subordinated Note
may not be modified or amended without the prior written consent of the Senior
Creditor.
4. Enforcement Rights. Prior to the indefeasible payment in full in
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cash of the Senior Debt and the termination of all financing arrangements
between Issuer and the Senior Creditor, the Junior Creditor shall not have any
right to enforce any claim with respect to the Subordinated Debt, including,
without limitation, any Permitted Payment, or otherwise to take any action
against the Issuer or the Issuer's property without the Senior Creditor's prior
written consent.
5. Liens; Permitted Transfers. The Junior Creditor hereby represents as
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of the date hereof that the Junior Creditor has not been granted or obtained any
liens or security interests in any assets of the Debtor Parties or any other
assets securing the Senior Debt. The Junior Creditor agrees that, without the
prior written consent of the Senior Creditor, the Junior Creditor shall not take
any liens on or security interests in any assets of the Issuer or any other
assets securing the Senior Debt. The Junior Creditor
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acknowledges and agrees that, to the extent the terms and provisions of this
Agreement are inconsistent with the Subordinated Note, the Subordinated Note
shall be deemed to be subject to this Agreement. The Junior Creditor agrees
that, without the prior written consent of the Senior Creditor, the Junior
Creditor shall not take any liens on or security interests in any assets of the
Issuer or any other assets securing the Senior Debt. In the event that the
Issuer proposes to sell, assign, transfer, lease, convey or otherwise dispose of
any of its property (a "Transfer") and such Transfer is either permitted
pursuant to the Indenture or pursuant to a separate consent executed by the
Senior Creditor, then such Transfer shall be deemed to be permitted and
consented to by the Junior Creditor and shall not constitute a violation or
breach of any terms contained in the Subordinated Note. The Junior Creditor
acknowledges and agrees that, to the extent the terms and provisions of this
Agreement are inconsistent with the Subordinated Note, the Subordinated Note
shall be deemed to be subject to this Agreement.
6. Subordinated Debt Owed Only to the Junior Creditor. The Junior
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Creditor warrants and represents that (a) the Junior Creditor has not previously
assigned any interest in the Subordinated Debt or any security interest in
connection therewith, if any; (b) no other party owns an interest in the
Subordinated Debt or security therefor other than the Junior Creditor (whether
as joint holders of the Subordinated Debt, participants or otherwise); and that
the entire Subordinated Debt is owing only to the Junior Creditor. The Junior
Creditor covenants that the entire Subordinated Debt shall continue to be owing
only to the Junior Creditor and all security therefor, if any, shall continue to
be held solely for the benefit of the Junior Creditor.
7. Senior Creditor Priority. In the event of any distribution,
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division, or application, partial or complete, voluntary or involuntary, by
operation of law or otherwise, of all or any part of the assets of Issuer or the
proceeds thereof to the creditors of Issuer or readjustment of the obligations
and Subordinated Debt of Issuer, whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action or proceeding involving the readjustment of all or any part of the Senior
Debt or the Subordinated Debt, or the application of the assets of Issuer to the
payment or liquidation thereof, or upon the dissolution or other winding up of
Issuer's business, or upon the sale of all or substantially all of Issuer's
assets (an "Insolvency or Liquidation Proceeding"), then, and in any such event,
(i) the Senior Creditor shall be entitled to receive indefeasible payment in
full in cash of any and all of the Senior Debt prior to the payment of all or
any part of the Subordinated Debt, and (ii) any payment or distribution of any
kind or character, whether in cash, securities or other property, which shall be
payable or deliverable upon or with respect to any or all of the Subordinated
Debt shall be paid or delivered directly to the Senior Creditor for application
on any of the Senior Debt, due or not due, until the Senior Debt shall have
first been fully and indefeasibly paid and satisfied in cash.
8. Grant of Authority to the Senior Creditor. In the event of the
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occurrence of any Insolvency or Liquidation Proceeding, and in order to enable
the Senior Creditor to enforce its rights hereunder in any of the aforesaid
actions or proceedings, the Senior Creditor is hereby irrevocably authorized and
empowered, in the Senior Creditor's discretion, to file, make and present for
and on behalf of the Junior Creditor such proofs of claims against the Issuer on
account of the Subordinated Debt or other motions or pleadings as the Senior
Creditor may deem expedient or proper and to vote such proofs of claims in any
such proceeding and to receive and collect any and all dividends or other
payments or disbursements made thereon in whatever form the same may be paid or
issued and to apply the same on account of any portion of the Senior Debt. In
voting such proofs of claim in any proceeding, the Senior Creditor may act in a
manner consistent with its sole interest and shall have no duty to take any
action to optimize or maximize the Junior Creditor's recovery with respect to
its claim. The Junior Creditor irrevocably authorizes and empowers the Senior
Creditor to demand, xxx for, collect and receive each of the aforesaid payments
and distributions described in Section 7 above and give acquittance therefor and
to file claims and take such other actions, in the Senior Creditor's own name or
in the name of the Junior Creditor or otherwise, as the Senior Creditor may deem
necessary or advisable. To the extent that
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payments or distributions are made in property other than cash, the Junior
Creditor authorizes the Senior Creditor to sell such property to such buyers and
on such terms as the Senior Creditor, in its sole discretion, shall determine.
The Junior Creditor will execute and deliver to the Senior Creditor such powers
of attorney, assignments and other instruments or documents, including notes and
stock certificates (together with such assignments or endorsements as the Senior
Creditor shall deem necessary), as may be requested by the Senior Creditor in
order to enable the Senior Creditor and to enforce any and all claims of the
Senior Creditor upon or with respect to any or all of the Subordinated Debt and
to collect and receive any and all payments and distributions which may be
payable or deliverable at any time upon or with respect to the Subordinated
Debt, all for the Senior Creditor's own benefit. Following the indefeasible
payment in full in cash of the Senior Debt, the Senior Creditor shall remit to
the Junior Creditor, all dividends or other payments or distributions paid to
and held by the Senior Creditor in excess of the Senior Debt. Each of the powers
and authorizations granted to the Senior Creditor in this Section 8, being
coupled with an interest, is irrevocable.
9. Payments Received by the Junior Creditor. Except for Permitted
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Payments received by the Junior Creditor prior to the occurrence of an a
"Default" or "Event of Default" as provided in Section 3 above, should any
payment or distribution or security or instrument or proceeds thereof be
received by the Junior Creditor upon or with respect to the Subordinated Debt or
any other obligations of the Issuer to the Junior Creditor prior to the
indefeasible payment in full in cash of all of the Senior Debt and termination
of all financing arrangements between the Issuer and the Senior Creditor, the
Junior Creditor shall receive and hold the same in a segregated account in
trust, as trustee, for the benefit of the Senior Creditor, and shall forthwith
deliver the same to the Senior Creditor, in precisely the form received (except
for the endorsement or assignment of the Junior Creditor where necessary), for
application on any of Senior Debt, due or not due, and, until so delivered, the
same shall be held in trust by the Junior Creditor as the property of the Senior
Creditor. In the event of the failure of the Junior Creditor to make any such
endorsement or assignment to the Senior Creditor, the Senior Creditor, or any of
its officers or employees, is hereby irrevocably authorized to make the same
(which authorization, being coupled with an interest, is irrevocable).
10. Instrument Legend. Any instrument evidencing any of the
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Subordinated Debt (including, without limitation, the Subordinated Note), or any
portion thereof, will, on the date hereof, be inscribed with a legend
conspicuously indicating that payment thereof is subordinated to the claims of
the Senior Creditor pursuant to the terms of this Agreement, and a copy thereof
will be delivered to the Senior Creditor on the date hereof. Any instrument
evidencing any of the Subordinated Debt, or any portion thereof, which is
hereafter executed by Issuer, will, on the date thereof, be inscribed with the
aforesaid legend and a copy thereof will be delivered to the Senior Creditor on
the date of its execution or within five (5) business days thereafter.
11. Reimbursements for Expenses and Borrowings from Issuer; Restriction
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on Assignment of Claims. Except as permitted in Section 3 hereof, the Junior
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Creditor agrees that until the Senior Debt has been indefeasibly paid in full in
cash and satisfied and all financing arrangements between the Debtor Parties and
the Senior Creditor have been terminated, the Junior Creditor will not, directly
or indirectly, accept or receive the benefit of any remuneration or
reimbursement for expenses on account of the Subordinated Debt from or on behalf
of any Debtor Party and will not assign or transfer to others any claim the
Junior Creditor has or may have against Issuer, unless such assignment or
transfer is made expressly subject to this Agreement.
12. Continuing Nature of Subordination. This Agreement shall be
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effective and may not be terminated or otherwise revoked by the Junior Creditor
until the Senior Debt shall have been indefeasibly paid in full in cash and
satisfied and all financing arrangements among Debtor Parties and the Senior
Creditor have been terminated. The Junior Creditor hereby waives to the fullest
extent permitted by
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applicable law any right it may have to terminate or revoke this Agreement or
any of the provisions of this Agreement. In the event the Junior Creditor shall
have any right under applicable law otherwise to terminate or revoke this
Agreement which right cannot be waived, such termination or revocation shall not
be effective until written notice of such termination or revocation, signed by
the Junior Creditor, is actually received by the Senior Creditor's officer
responsible for such matters In the absence of the circumstances described in
the immediately preceding sentence, this is a continuing agreement of
subordination and the Senior Creditor may continue, at any time and without
notice to the Junior Creditor, to extend credit or other financial
accommodations and loan monies to or for the benefit of a Debtor Party on the
faith hereof. Any termination or revocation described hereinabove shall not
affect this Agreement in relation to (a) any of the Senior Debt which arose or
was committed to prior to receipt thereof, or (b) any of the Senior Debt created
after receipt thereof if such Senior Debt is Preservation Debt.
13. Additional Agreements between the Senior Creditor and Issuer. The
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Senior Creditor at any time and from time to time, either before or after any
such aforesaid notice of termination or revocation, may enter into such
agreement or agreements with Issuer as the Senior Creditor may deem proper,
extending the time of payment of or renewing or otherwise altering the terms,
including, without limitation increasing the principal amount thereof, of all or
any portion of the Senior Debt or affecting the security underlying any or all
of the Senior Debt, and may exchange, sell, release, surrender or otherwise deal
with any such security, without in any way thereby impairing or affecting this
Agreement.
14. Junior Creditor's Waivers. All of the Senior Debt shall be deemed
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to have been made or incurred in reliance upon this Agreement. The Junior
Creditor expressly waives all notice of the acceptance by the Senior Creditor of
the subordination and other provisions of this Agreement and all other notices
not specifically required pursuant to the terms of this Agreement whatsoever,
and the Junior Creditor expressly waives reliance by the Senior Creditor upon
the subordination and other agreements as herein provided. In the event that the
Junior Creditor has or at any time acquires any lien upon or security interest
in the assets securing the Senior Debt, or any part thereof, to the fullest
extent permitted by applicable law, the Junior Creditor hereby waives any right
that the Junior Creditor may have whether such right arises under Sections 9-504
or 9-505 of the Uniform Commercial Code or other applicable law, to receive
notice of the Senior Creditor's intended disposition of such assets (or a
portion thereof) or of the Senior Creditor's proposed retention of such assets
in satisfaction of the Senior Debt (or a portion thereof). The Junior Creditor
further agrees that in the event Issuer consents or fails to object to a
proposed retention of such assets (or a portion thereof) by the Senior Creditor
in satisfaction of the Senior Debt (or a portion thereof), the Junior Creditor
hereby consents to such proposed retention regardless of whether the Junior
Creditor is provided with notice of such proposed retention. The Junior Creditor
agrees that the Junior Creditor will not interfere with or in any manner oppose
a disposition of any assets securing the Senior Debt by the Senior Creditor. The
Junior Creditor agrees that the Senior Creditor has not made any warranties or
representations with respect to the due execution, legality, validity,
completeness or enforceability of the Issuer's Senior Notes, or the
collectibility of the Senior Debt, that the Senior Creditor shall be entitled to
manage and supervise its financial accommodations to Issuer in accordance with
applicable law and its usual practices, modified from time to time as deemed
appropriate under the circumstances, without regard to the existence of any
rights that the Junior Creditor may now or hereafter have in or to any of the
assets of Issuer, and that Senior Creditor shall have no liability to the Junior
Creditor for, and waive any claim which the Junior Creditor may now or hereafter
have against, the Senior Creditor arising out of any and all actions which the
Senior Creditor, in good faith, takes or omits to take (including, without
limitation, actions with respect to the creation, perfection or continuation of
liens or security interests in any collateral now or hereafter securing any of
the Senior Debt, actions with respect to the occurrence of an Event of Default,
actions with respect to the foreclosure upon, sale, release, or depreciation of,
or failure to realize upon, any of the Collateral and actions with respect to
the collection of any claim for all or any part of the Senior Debt from any
account debtor, guarantor or any other party) with respect to the Senior Debt or
any agreement related thereto or to the collection of the
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Senior Debt or the valuation, use, protection or release of the collateral now
or hereafter securing any of the Senior Debt for the Senior Debt.
15. Invalidated Payments. To the extent that the Senior Creditor
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receives payments on, or proceeds of collateral for, the Senior Debt which are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
avoided and/or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law, equitable cause or
pursuant to the Indenture, then, to the extent of such payment or proceeds
received, the Senior Debt, or part thereof, intended to be satisfied shall be
revived and continue in full force and effect as if such payments or proceeds
had not been received by the Senior Creditor.
16. Bankruptcy Issues. The Junior Creditor agrees that the Senior
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Creditor may consent to the use of cash collateral or provide financing to a
Issuer (under Section 363 or Section 364 of the Bankruptcy Code or otherwise) on
such terms and conditions and in such amounts as the Senior Creditor, in its
sole discretion, may decide and that, in connection with such cash collateral
usage or such financing, the Issuer (or a trustee appointed for the estate of
the Issuer) may grant to the Senior Creditor liens and security interests upon
all assets of the Issuer, which liens and security interests (i) shall secure
payment of all Senior Debt (whether such Senior Debt arose prior to the filing
of the petition for relief or arise thereafter); and (ii) shall be superior in
priority to the liens and security interests, if any, held by the Junior
Creditor on the assets of the Debtor Parties. All allocations of payments
between the Senior Creditor and the Junior Creditor shall, subject to any court
order, continue to be made after the filing or other commencement of any
Insolvency or Liquidation Proceeding on the same basis that the payments were to
be allocated prior to the date of such filing or commencement. The Junior
Creditor agrees that he will not object to or oppose a sale or other disposition
of any assets securing the Senior Debt (or any portion thereof) free and clear
of security interests, liens or other claims of the Junior Creditor, if any,
under Section 363 of the Bankruptcy Code or any other provision of the
Bankruptcy Code if the Senior Creditor has consented to such sale or disposition
of such assets. In the event that the Junior Creditor has or at any time
acquires any security for the Subordinated Debt, the Junior Creditor agrees not
to assert any right it may have to "adequate protection" of its interest in such
security in any Insolvency or Liquidation Proceeding and agrees that he will not
seek to have the automatic stay lifted with respect to such security, without
the prior written consent of the Senior Creditor. The Junior Creditor waives any
claim he may now or hereafter have arising out of the Senior Creditor's
election, in any proceeding instituted under Chapter 11 of the Bankruptcy Code,
of the application of Section 1111(b)(2) of the Bankruptcy Code, and/or any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code by a Issuer, as debtor in possession. The Junior Creditor agrees not to
initiate or prosecute or encourage any other person to initiate or prosecute any
claim, action or other proceeding (i) challenging the enforceability of the
Senior Creditor's claim, (ii) challenging the enforceability of any liens or
security interests in assets securing the Senior Debt or (iii) asserting any
claims which the Issuer may hold with respect to the Senior Creditor. The Junior
Creditor agrees that he will not seek participation or participate on any
creditors' committee without the Senior Creditor's prior written consent. In the
event that the Senior Creditor consents to such participation, at the request of
the Senior Creditor, the Junior Creditor will resign from his position on such
committee. To the extent that the Senior Creditor receives payments on, or
proceeds of collateral for, the Senior Debt which are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law, or equitable cause, then, to the extent of such
payment or proceeds received, the Senior Debt, or part thereof, intended to be
satisfied shall be revived and continue in full force and effect as if such
payments or proceeds had not been received by the Senior Creditor.
17. Senior Creditor's Waivers. No right of the Senior Creditor to
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enforce the subordination or other terms as provided in this Agreement shall at
any time in any way be prejudiced or impaired by
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any act or failure to act on the part of Issuer or by any act or failure to act
by the Senior Creditor, or by any noncompliance by Issuer with the terms,
provisions and covenants of this Agreement, or the Subordinated Note, regardless
of any knowledge thereof which the Senior Creditor may have or be otherwise
charged with. No waiver shall be deemed to be made by the Senior Creditor of any
of the Senior Creditor's rights hereunder, unless the same shall be in writing
signed on behalf of the Senior Creditor, and each waiver, if any, shall be a
waiver only with respect to the specific instance involved and shall in no way
impair the rights of the Senior Creditor or the obligations of the Junior
Creditor to the Senior Creditor in any other respect at any other time. The
failure of the Senior Creditor to enforce at any time any provision of this
Agreement shall not be construed to be a waiver of such provisions, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
the Senior Creditor thereafter to enforce each and every such provision. No
waiver by the Senior Creditor of any breach of this Agreement shall be held to
constitute a waiver of any other or subsequent breach.
18. Information Concerning Financial Condition of Issuer. The Junior
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Creditor hereby assumes responsibility for keeping informed of the financial
condition of Issuer, any and all endorsers and any and all guarantors of the
Senior Debt and of all other circumstances bearing upon the risk of nonpayment
of the Senior Debt and/or Subordinated Debt that diligent inquiry would reveal,
and the Junior Creditor hereby agrees that the Senior Creditor shall not have
any duty to advise the Junior Creditor of information known to the Senior
Creditor regarding such condition or any such circumstances. In the event the
Senior Creditor, in its sole discretion, undertakes, at any time or from time to
time, to provide any such information to the Junior Creditor, the Senior
Creditor shall be under no obligation (i) to provide any such information to the
Junior Creditor on any subsequent occasion, or (ii) to undertake any
investigation not a part of Senior Creditor's regular business routine and shall
be under no obligation to disclose any information which, pursuant to accepted
or reasonable commercial finance practices, the Senior Creditor wishes to
maintain confidential. The Junior Creditor hereby agrees that all payments
received by the Senior Creditor may be applied, reversed, and reapplied, in
whole or in part, to any portion of the Senior Debt, as the Senior Creditor, in
its sole discretion, deem appropriate and assent to any extension or
postponement of the time of payment of the Senior Debt or to any other
indulgence with respect thereto, to any substitution, exchange or release of
collateral which may at any time secure the Senior Debt and to the addition or
release of any other party or person primarily or secondarily liable therefor.
Without in any way limiting the generality of the foregoing paragraph,
the Senior Creditor, may, at any time and from time to time, without the consent
of, or notice to, the Junior Creditor without incurring any liabilities to the
Junior Creditor and without impairing or releasing the subordination and other
benefits provided in this Agreement (even if any right of subrogation or other
right or remedy of the Junior Creditor is affected, impaired or extinguished
thereby) do any one or more of the following:
(i) change the manner, place or terms of payment or change or extent
the time of payment of, or renew, exchange, amend, increase or alter, the terms
of any of the Senior Debt or any lien in any of any collateral now or hereafter
securing all or any portion of the Senior Debt or guaranty thereof or any
liability of a Issuer or any guarantor, or any liability incurred directly or
indirectly in respect thereof (including, without limitation, any extension of
the Senior Debt, without any restriction as to the tenor or terms of any such
extension), or otherwise amend, renew, exchange, extend, modify, supplement in
any manner the Senior Debt or any related documents.
(ii) sell, exchange, release, surrender, realize upon, enforce or
otherwise deal with in any manner and in any order any part of the Collateral or
other property securing the Senior Debt or any liability of a Issuer or any
guarantor to such holder, or any liability incurred directly or indirectly in
respect thereof;
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(iii) settle or compromise any Senior Debt or any other liability of a
Issuer or any guarantor or any security therefor or any liability incurred
directly or indirectly in respect thereof and apply any sums by whomsoever paid
and however realized to any liability (including, without limitation, the Senior
Debt) in any manner or order; and
(iv) exercise or delay in or refrain from exercising any right or
remedy against a Issuer or any security or any guarantor or any other Person,
elect any remedy and otherwise deal freely with a Issuer and the collateral and
any security and any guarantor or any liability of a Issuer or any guarantor to
such holder or any liability incurred directly or indirectly in respect thereof.
The Senior Creditor shall have no duty to the Junior Creditor with
respect to the preservation or maintenance of any collateral now or hereafter
securing all or any portion of the Senior Debt or the manner in which Senior
Creditor enforces its rights in such collateral or to preserve or maintain the
rights of any Person in such collateral, and the Junior Creditor hereby waive
any and all claims which the Junior Creditor may now or hereafter have against
the Senior Creditor which relate to such preservation, maintenance or
enforcement. The Junior Creditor agrees not to assert and hereby waives, to the
fullest extent permitted by law: any right to demand, request, plead or
otherwise assert or otherwise claim the benefit of, any marshalling,
appraisement, valuation or other similar right that may otherwise be available
under applicable law or any other similar rights a junior creditor may have
under applicable law.
19. CONSENT TO JURISDICTION; SERVICE OF PROCESS.
(A) THE JUNIOR CREDITOR CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN NEW YORK AND WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT, AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
REGISTERED MAIL DIRECTED TO THE JUNIOR CREDITOR AT THE ADDRESS STATED BELOW AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED THREE (3) DAYS AFTER THE SAME
SHALL HAVE BEEN POSTED AS AFORESAID. THE JUNIOR CREDITOR WAIVES ANY OBJECTION
BASED UPON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER. NOTHING IN THIS SECTION 17 SHALL AFFECT THE RIGHT OF THE
SENIOR CREDITOR TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
AFFECT THE RIGHT OF THE SENIOR CREDITOR TO BRING ANY ACTION OR PROCEEDING
AGAINST THE JUNIOR CREDITOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION.
(B) ADVICE OF COUNSEL. EACH OF THE PARTIES REPRESENTS TO EACH OTHER
-----------------
PARTY HERETO THAT IT HAS DISCUSSED THIS AGREEMENT AND, SPECIFICALLY, THE
PROVISIONS OF SECTIONS 17, 18, 19 AND 21, WITH COUNSEL OF ITS CHOICE AND IS
FULLY AWARE OF THE LEGAL CONSEQUENCES AND EFFECTS OF AND HAS KNOWINGLY AGREED TO
THE PROVISIONS HEREOF.
20. ARM'S LENGTH AGREEMENT. EACH OF THE PARTIES TO THIS AGREEMENT
----------------------
AGREES AND ACKNOWLEDGES THAT THIS AGREEMENT HAS BEEN NEGOTIATED IN GOOD FAITH,
AT ARM'S LENGTH, AND NOT BY ANY MEANS FORBIDDEN BY LAW.
21. INJUNCTIVE RELIEF. THE JUNIOR CREDITOR ACKNOWLEDGES AND AGREES THAT
-----------------
ITS COVENANTS AND OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER DOCUMENTS,
INSTRUMENTS AND AGREEMENTS EXECUTED IN CONNECTION HEREWITH ARE INTEGRAL TO THE
SENIOR CREDITOR'S REALIZATION OF ITS RIGHTS AGAINST, AND THE VALUE OF ITS
INTEREST IN, THE ASSETS OF A DEBTOR PARTY AND ITS AFFILIATES, THAT A BREACH OF
ANY OF THE COVENANTS AND OBLIGATIONS OF
8
THE JUNIOR CREDITOR HEREUNDER OR UNDER THE OTHER DOCUMENTS, INSTRUMENTS AND
AGREEMENTS EXECUTED IN CONNECTION HEREWITH SHALL ENTITLE THE SENIOR CREDITOR TO
INJUNCTIVE RELIEF AND SPECIFIC PERFORMANCE WITHOUT THE NECESSITY OF PROVING
IRREPARABLE INJURY TO THE SENIOR CREDITOR OR THAT THE SENIOR CREDITOR DO NOT
HAVE AN ADEQUATE REMEDY AT LAW IN RESPECT OF SUCH BREACH (EACH OF WHICH ELEMENTS
THE JUNIOR CREDITOR ADMITS EXIST) AND, AS A CONSEQUENCE, THE JUNIOR CREDITOR
AGREES THAT EACH AND EVERY COVENANT AND OBLIGATION APPLICABLE TO IT AND
CONTAINED IN THIS AGREEMENT OR THE OTHER DOCUMENTS INSTRUMENTS AND AGREEMENTS
EXECUTED IN CONNECTION HEREWITH SHALL BE SPECIFICALLY ENFORCEABLE AGAINST IT.
THE JUNIOR CREDITOR HEREBY WAIVES AND AGREES NOT TO ASSERT ANY DEFENSES AGAINST
AN ACTION FOR SPECIFIC PERFORMANCE OF ITS RESPECTIVE COVENANTS AND OBLIGATIONS
HEREUNDER AND/OR UNDER THE OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS EXECUTED
IN CONNECTION HEREWITH.
22. Notices. Except as otherwise provided for herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon either of the
parties by the other, or whenever either of the parties desires to give or serve
upon the other communication with respect to this Agreement, such notice,
demand, request, consent, approval, declaration or other communication shall be
in writing (including, but not limited to, facsimile communication), and shall
either be delivered in person, telecopied, telegraphed, sent by reputable
overnight courier or mailed by first class mail, or registered or certified
mail, return receipt requested, postage prepaid or provided for, addressed as
follows:
(i) If to the Senior Creditor at:
c/o U.S. Bank National Association
Corporate Trust Services
U.S. Bank Trust Center
Mail Code SPFT0210
000 Xxxx Xxxxx Xxxxxx
Xx. Xxxx, Xxxxxxxxx 00000
(ii) If to the Junior Creditor at:
O. Xxxxxx Xxxxx
0000 Xxxx Xxxxxxxxxxxx Xxxxxxxxx
P.O. Box 18747
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
or to such other address as any party designates to the other parties in the
manner herein prescribed.
23. GOVERNING LAW. ANY DISPUTE BETWEEN ANY OF THE JUNIOR CREDITOR AND
-------------
THE SENIOR CREDITOR ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH, THIS AGREEMENT OR
ANY OF THE OTHER DOCUMENTS, INSTRUMENTS OR AGREEMENTS EXECUTED IN CONNECTION
HEREWITH AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE
RESOLVED IN ACCORDANCE WITH THE LAWS (WITHOUT REGARD TO THE CONFLICTS OF LAWS
PROVISIONS) OF THE STATE OF NEW YORK.
9
24. Counterparts; Facsimile Effectiveness. This Agreement may be
-------------------------------------
executed in one or more counterparts, each of which shall be considered an
original counterpart, and shall become a binding agreement when the Senior
Creditor and the Junior Creditor and Issuer have each executed one counterpart.
Each of the parties hereto agrees that a signature transmitted to the Senior
Creditor or its counsel by facsimile transmission shall be effective to bind the
party so transmitting its signature.
25. Complete Agreement; Merger. This Agreement, including the schedules
--------------------------
and exhibits hereto, contain the entire understanding of the parties hereto with
regard to the subject matter contained herein. This Agreement supersedes all
prior or contemporaneous negotiations, promises, covenants, agreements and
representations of every nature whatsoever with respect to the matters referred
to in this Agreement, all of which have become merged and finally integrated
into this Agreement. Each of the parties understands that in the event of any
subsequent litigation, controversy or dispute concerning any of the terms,
conditions or provisions of this Agreement, no party shall be entitled to offer
or introduce into evidence any oral promises or oral agreements between the
parties relating to the subject matter of this Agreement not included or
referred to herein and not reflected by a writing included or referred to
herein.
26. No Third Party Beneficiaries. This Agreement is solely for the
----------------------------
benefit of the Senior Creditor and its respective successors and assigns and the
Junior Creditor and its successors and is not intended to confer upon the Issuer
or any other third party any rights or benefits.
27. Severability. Wherever possible, each provision of this Agreement
------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
28. Section Titles. The section titles contained in this Agreement are
--------------
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.
29. No Strict Construction. The parties (directly and through their
----------------------
counsel) hereto have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto and no presumption or burden of proof shall arise favoring
or disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
[Signatures begin on following page]
10
IN WITNESS WHEREOF, this Subordination Agreement has been signed as of
this 7th day of May, 2002.
----------------------------------------
O. XXXXXX XXXXX
Acknowledged and accepted as of this 7th day of May 2002, by:
U.S. BANK NATIONAL ASSOCIATION
AS TRUSTEE UNDER THAT CERTAIN INDENTURE,
AS SUPPLEMENTED BY THAT CERTAIN FIRST
SUPPLEMENTAL INDENTURE, DATED AS OF MAY
7, 2002 FOR THE BENEFIT OF THE HOLDERS OF
SONIC AUTOMOTIVE, INC.'S 5-1/4% CONVERTIBLE SENIOR
SUBORDINATED NOTES DUE 2009
By:
----------------------------------------------------------
Name:
--------------------------------------------------------
Title:
-------------------------------------------------------
Without in any way establishing any rights with respect to the terms thereof on
behalf of any of the undersigned, the undersigned acknowledges receipt of a copy
of the foregoing Subordination Agreement this 7th day of May, 2002, and agrees
to take no action or refrain from taking action inconsistent with the terms
thereof.
SONIC AUTOMOTIVE, INC.
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
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11
