Security Agreement (2006)Full Document 

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SECURITY AGREEMENT

THIS SECURITY AGREEMENT (this “Security Agreement”) is made and entered into as of February 17, 2006 by SONIC AUTOMOTIVE, INC., a Delaware corporation (the “Company” and a “Grantor”), EACH OF THE UNDERSIGNED SUBSIDIARIES OF THE COMPANY AND EACH OTHER PERSON WHO SHALL BECOME A PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (each a “Guarantor” and a “Grantor”, and collectively with the Company, the “Grantors”), and BANK OF AMERICA, N.A., a national banking association, as Administrative Agent (the “Administrative Agent”) for each of the Lenders now or hereafter party to the Credit Agreement (as defined below) (collectively with the Administrative Agent, and certain other Persons parties to Related Swap Contracts as more particularly described in Section 21 hereof, the “Secured Parties”) now or hereafter party to the Credit Agreement (as defined below). All capitalized terms used but not otherwise defined herein or pursuant to Section 1 hereof shall have the respective meanings assigned thereto in the Credit Agreement (as defined below).

W I T N E S S E T H:

WHEREAS, the Secured Parties have agreed to provide to the Company and certain Subsidiaries of the Company (the “New Vehicle Borrowers” and collectively with the Company, the “Borrowers”) certain credit facilities, including, a revolving credit facility with a letter of credit sublimit and a swing line sublimit, a new vehicle floorplan facility with a swing line sublimit, and a used vehicle floorplan facility with a swing line sublimit, pursuant to the terms of that certain Credit Agreement dated as of the date hereof by and among the Borrowers, the Administrative Agent and the Lenders party thereto (as from time to time amended, restated, supplemented or otherwise modified, the “Credit Agreement”); and

WHEREAS, as collateral security for payment and performance of the Obligations and the obligations and liabilities of any Loan Party now existing or hereafter arising under Related Swap Contracts, each Borrower is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in certain of its personal property and assets pursuant to the terms of this Security Agreement; and

WHEREAS, as collateral security for payment and performance of the Obligations (other than Obligations in respect of the New Vehicle Facility) and the obligations and liabilities of any Loan Party now existing or hereafter arising under Related Swap Contracts, each of the Persons set forth on Schedule 1 (collectively the “Silo Subsidiaries”, and each individually, a “Silo Subsidiary”) is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in certain of its personal property and assets pursuant to the terms of this Security Agreement; and

WHEREAS, each Borrower will materially benefit from the Loans to be made, and the Letters of Credit to be issued, under the Credit Agreement and each Borrower is a party (as signatory or by joinder) to a Guaranty pursuant to which such Borrower guarantees the Obligations of the other Borrowers; and


WHEREAS, each Silo Subsidiary will materially benefit from the Loans to be made, and the Letters of Credit to be issued, under the Credit Agreement and each Silo Subsidiary is a party (as signatory or by joinder) to a Guaranty pursuant to which such Guarantor guarantees the Obligations (other than Obligations in respect of the New Vehicle Facility) of the Borrowers; and

WHEREAS, as collateral security for payment and performance by each Guarantor of its Guarantor’s Obligations (as defined in the Guaranty to which such Guarantor is a party), and the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party, each Guarantor is willing to grant to the Administrative Agent for the benefit of the Secured Parties a security interest in certain of its personal property and assets pursuant to the terms of this Security Agreement; and

WHEREAS, the Secured Parties are unwilling to enter into the Loan Documents unless the Borrowers and the Guarantors enter into this Security Agreement;

NOW, THEREFORE, in order to induce the Secured Parties to enter into the Loan Documents and to make Loans and issue Letters of Credit, and in further consideration of the premises and the mutual covenants contained herein, the parties hereto agree as follows:

1. Certain Definitions. Terms used in this Security Agreement, not otherwise expressly defined herein or in the Credit Agreement, and for which meanings are provided in the Uniform Commercial Code of the State of North Carolina (the “UCC”), shall have such meanings. The term “Qualifying Control Agreement” shall have the meaning set forth on Schedule 2 hereto.

2. Grant of Security Interest. Each Borrower hereby grants as collateral security for the payment, performance and satisfaction of all of its Obligations and the obligations and liabilities of any Loan Party now existing or hereafter arising under Related Swap Contracts, and each Silo Subsidiary hereby grants as collateral security for the payment, performance and satisfaction of all of its Guarantor’s Obligations (as defined in its Guaranty) and the payment and performance of its obligations and liabilities (whether now existing or hereafter arising) hereunder or under any of the other Loan Documents to which it is now or hereafter becomes a party (such obligations and liabilities of the Borrowers and the Silo Subsidiaries referred to collectively as the “Secured Obligations”), to the Administrative Agent for the benefit of the Secured Parties a continuing first priority security interest in and to, and collaterally assigns to the Administrative Agent for the benefit of the Secured Parties, all of the assets of such Grantor or in which such Grantor has or may have or acquire an interest or the power to transfer rights therein, whether now owned or existing or hereafter created, acquired or arising and wheresoever located, including the following:

(a) All accounts, and including accounts receivable, contracts, bills, acceptances, choses in action, and other forms of monetary obligations at any time owing to such Grantor arising out of property sold, leased, licensed, assigned or otherwise disposed of or for services rendered or to be rendered by such Grantor, and all of such Grantor’s rights with respect to any property represented thereby, whether or not delivered, property returned by customers and all rights as an unpaid vendor or lienor,

 

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including rights of stoppage in transit and of recovering possession by proceedings including replevin and reclamation (collectively referred to hereinafter as “Accounts”);

(b) All new and used vehicle inventory (including all inventory consisting of new or used automobiles or trucks with a gross vehicle weight of less than 16,000 pounds) in which such Grantor now or at any time hereafter may have an interest, whether or not the same is in transit or in the constructive, actual or exclusive occupancy or possession of such Grantor or is held by such Grantor or by others for such Grantor’s account (all of the foregoing, collectively referred to hereinafter as “Vehicle Inventory”);

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