Amend. #2 to Credit Agreement and Security Agreement and Consent

EX-10.36 4 dex1036.htm AMEND. #2 TO CREDIT AGREEMENT AND SECURITY AGREEMENT AND CONSENT Amend. #2 to Credit Agreement and Security Agreement and Consent

Exhibit 10.36

AMENDMENT NO. 2 TO CREDIT AGREEMENT AND SECURITY AGREEMENT

AND CONSENT

This Amendment No. 2 to Credit Agreement and Security Agreement and Consent (this “Agreement”) dated as of April 24, 2007 (the “Agreement Date”) is made by and among SONIC AUTOMOTIVE, INC., a Delaware corporation (the “Company”), CERTAIN SUBSIDIARIES OF THE COMPANY party to the Credit Agreement (as defined below) pursuant to Section 2.24 of the Credit Agreement (each a “New Vehicle Borrower” and together with the Company, the “Borrowers” and each individually a “Borrower”), BANK OF AMERICA, N.A., a national banking association organized and existing under the laws of the United States (“Bank of America”), in its capacity as administrative agent for the Lenders (as defined in the Credit Agreement (as defined below)) (in such capacity, the “Administrative Agent”), and as Revolving Swing Line Lender, New Vehicle Swing Line Lender, Used Vehicle Swing Line Lender and L/C Issuer, each of the Lenders signatory hereto, and each of the Guarantors (as defined in the Credit Agreement) signatory hereto.

W I T N E S S E T H:

WHEREAS, the Company, the New Vehicle Borrowers, Bank of America, as Administrative Agent, Revolving Swing Line Lender, New Vehicle Swing Line Lender, Used Vehicle Swing Line Lender and L/C Issuer, and the Lenders have entered into that certain Credit Agreement dated as of February 17, 2006, as amended by that certain Amendment No. 1 to Credit Agreement and Security Agreement dated as of May 25, 2006 (as hereby amended and as from time to time further amended, modified, supplemented, restated, or amended and restated, the “Credit Agreement”; capitalized terms used in this Agreement not otherwise defined herein shall have the respective meanings given thereto in the Credit Agreement), pursuant to which the Lenders (a) have made available to the Company (i) the Revolving Credit Facility, including a letter of credit facility and a revolving swing line facility, and (ii) the Used Vehicle Floorplan Facility, including a used vehicle floorplan swing line facility, and (b) have made available to the Borrowers the New Vehicle Floorplan Facility, including a new vehicle floorplan swing line facility; and

WHEREAS, the Company has entered into the Company Guaranty pursuant to which it has guaranteed the payment and performance of the obligations of the New Vehicle Borrowers under the Credit Agreement and the other Loan Documents; and

WHEREAS, each of the other Guarantors has entered into a Subsidiary Guaranty pursuant to which it has guaranteed (subject to certain limitations set forth therein with respect to the Guarantors that are Silo Subsidiaries) the payment and performance of the obligations of each Borrower under the Credit Agreement and the other Loan Documents; and

WHEREAS, the Company and the respective Loan Parties that are parties thereto have entered into that certain Security Agreement dated as of February 17, 2006, as amended by that certain Amendment No. 1 to Credit Agreement and Security Agreement dated as of May 25, 2006 (as hereby amended and as from time to time further amended, modified, supplemented, restated, or amended and restated, the “Security Agreement”) securing the Obligations under the Credit Agreement and other Loan Documents; and

WHEREAS, the Company and the respective Loan Parties that are parties thereto have entered into the Pledge Agreement and other Security Instruments, securing the Obligations under the Credit Agreement and other Loan Documents; and

WHEREAS, the Company has advised the Administrative Agent and the Lenders that a structural reorganization involving the conversion or merger of certain of the Company’s Subsidiaries as described on Schedule 1 hereto (the “Reorganization”) could result in increased operational efficiencies and the utilization of unused net operating losses incurred by operating Subsidiaries and, thereby, a potential reduction in the aggregate state tax liability of the Company and its Subsidiaries on a consolidated basis; and the Administrative Agent and the Lenders signatory hereto are willing to consent to such Reorganization on the terms and conditions contained in this Agreement; and

WHEREAS, the Company has advised the Administrative Agent and the Lenders that in connection with a sale of the Finance Receivables Portfolio of Cornerstone Acceptance Corporation to a Person Controlled by, at the time of consummation of such sale, The Goldman Sachs Group, Inc., a Delaware corporation (as permitted by Section 7.05(g) of the Credit Agreement), the Company intends to sell fifty percent (50%) of the Equity Interests of Cornerstone Acceptance Corporation to a Person Controlled by, at the time of consummation of such sale, The Goldman Sachs Group, Inc., a Delaware corporation (the “Cornerstone Acceptance Joint Venture Transaction”); and the Administrative Agent and the Lenders signatory hereto are willing to consent to such Cornerstone Acceptance Joint Venture Transaction on the terms and conditions contained in this Agreement; and

WHEREAS, the Borrowers have advised the Administrative Agent and the Lenders that the Borrowers desire to amend certain provisions of the Credit Agreement and the Security Agreement as set forth below, and the Administrative Agent and the Lenders signatory hereto are willing to effect such amendment on the terms and conditions contained in this Agreement;

NOW, THEREFORE, in consideration of the premises and further valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Consents.

(a) Subject to the terms and conditions set forth herein, the Administrative Agent and the Lenders signatory hereto hereby consent to the Reorganization; provided that (i) with respect to any Subsidiary created, acquired, converted or merged in connection with such Reorganization, the Company shall (x) deliver or cause to be delivered to the Administrative Agent all documents required to be delivered by Section 6.14 in the timeframes set forth therein, and (y) execute, deliver or file such other documents, and take such other action, as may be required by law or reasonably requested by the Administrative Agent to ensure the continued perfection and priority of the Administrative Agent’s security interest in any Collateral and the continued obligations of any surviving Subsidiary under the Loan Documents (and in addition, with respect to any Subsidiary listed on Schedule 1 which is in existence prior to the

Reorganization and which is not a Loan Party, on or before the consummation of the Reorganization, the Company shall (A) deliver or cause to be delivered to the Administrative Agent all documents required with respect to Subsidiaries under Section 6.14, and (B) execute, deliver or file such other documents, and take such other action, as may be required by law or reasonably requested by the Administrative Agent to ensure the continued perfection and priority of the Administrative Agent’s security interest in any Collateral), (ii) the trade names for all operating Subsidiaries effected by such Reorganization are maintained, and (iii) the Company provides all necessary notices to manufacturers affected by the Reorganization.

(b) Subject to the terms and conditions set forth herein, the Administrative Agent and the Lenders signatory hereto hereby (i) consent to the Cornerstone Acceptance Joint Venture Transaction, (ii) authorize the Administrative Agent to (x) release the Liens granted to it by Cornerstone Acceptance Corporation, (y) release Cornerstone Acceptance Corporation from its obligations under the Subsidiary Guaranty and the other Loan Documents, and (z) release the pledge by the Company of the Equity Interest in Cornerstone Acceptance Corporation and (iii) agree that any Investment held by the Loan Parties in Cornerstone Acceptance Corporation on and after the Cornerstone Acceptance Joint Venture Transaction shall not be subject to, or be counted against, the $5,000,000 limitation set forth in Section 7.02(i); provided that, on and after the date of effectiveness of the Cornerstone Acceptance Joint Venture Transaction, in no event shall all or any portion of the Finance Receivables Portfolio of Cornerstone Acceptance Corporation be included in the calculation of the Revolving Borrowing Base.

The consents set forth in this Section 1 are limited to the extent specifically set forth above and no other terms, covenants or provisions of the Credit Agreement or any other Loan Document are intended to be effected hereby.

2. Amendments to Credit Agreement. Subject to the terms and conditions set forth herein, the Credit Agreement is hereby amended as follows:

(a) The following definition of “Buyer Notes” is added to Section 1.01 of the Credit Agreement:

“Buyer Notes” means those promissory notes received by the Company or any Subsidiary as partial or full payment consideration for Dispositions of vehicle dealerships or Subsidiaries by the Company or such Subsidiary to the obligors of such promissory notes.”

(b) The definition of “Consolidated EBITDA” in Section 1.01 of the Credit Agreement is amended so that, as amended, the definition shall read as follows:

“Consolidated EBITDA” means for any period, on a consolidated basis for the Company and its Subsidiaries, the sum of the amounts for such period, without duplication, of (a) Consolidated Net Income from Continuing Operations, plus (b) to the extent deducted in computing Consolidated Net Income from Continuing Operations for such period: (i) Consolidated Interest Expense with respect to non-floorplan Indebtedness, excluding any Consolidated Real Property Interest Expense, (ii) Consolidated Interest Expense with respect to Used Vehicle

floorplan Indebtedness, (iii) charges against income for foreign, Federal, state and local income taxes, (iv) depreciation expense, (v) amortization expense, including, without limitation, amortization of other intangible assets and transaction costs, (vi) non-cash charges, and (vii) all extraordinary losses, minus (c) to the extent included in computing Consolidated Net Income from Continuing Operations for such period, extraordinary gains.

(c) The definition of “Consolidated Liquidity Ratio” in Section 1.01 of the Credit Agreement is amended so that, as amended, the definition shall read as follows:

“Consolidated Liquidity Ratio” means, as of any date of determination, the ratio of (a) the sum of Consolidated Current Assets plus the Revolving Facility Liquidity Amount to (b) the sum of (i) Consolidated Current Liabilities plus (ii) Indebtedness (whether or not reflected as Indebtedness under GAAP) under all floorplan financing arrangements (but excluding (x) Total Revolving Outstandings and (y) liabilities arising under the 5.25% Convertible Senior Subordinated Notes due May 7, 2009 issued by the Company in an initial aggregate principal amount of $149,500,000, other than such Total Revolving Outstandings and such liabilities under the 5.25% Convertible Senior Subordinated Notes which are scheduled to be due within the two (2) fiscal quarters following such date of determination).

(d) The following definition of “Consolidated Real Property Interest Expense” is added to Section 1.01 of the Credit Agreement:

“Consolidated Real Property Interest Expense” means, for any period, for the Company and its Subsidiaries on a consolidated basis, the sum of all interest (before factory assistance or subsidy), premium payments, debt discount, fees, charges and related expenses of the Company and its Subsidiaries in connection with Permitted Real Estate Indebtedness.

(e) The definition of “Consolidated Total Outstanding Senior Secured Indebtedness” in Section 1.01 of the Credit Agreement is amended, so that, as amended, the definition shall read as follows:

“Consolidated Total Outstanding Senior Secured Indebtedness” means, for any period, for the Company and its Subsidiaries on a consolidated basis, the aggregate outstanding principal amount of Consolidated Funded Indebtedness of the Company and its Subsidiaries other than (i) Subordinated Indenture Indebtedness, (ii) Subordinated Indebtedness permitted by Section 7.03(j) and (iii) any Permitted Real Estate Indebtedness permitted by Section 7.03(l)).

(f) The definition of “Equipment” is amended by adding “trade” before “fixtures” in the second line thereof.

(g) Clause (b) of the definition of “Eligible Equipment” is amended so that, as amended, clause (b) shall read as follows:

(b) that is not subject to the Administrative Agent’s Liens, which are perfected as to such Equipment, or that are subject to any other Lien whatsoever (other than the Equipment described on Schedule 1.01C), and (without limiting the generality of the foregoing) in no event shall “Eligible Equipment” include any Permitted Real Estate Indebtedness Collateral;

(h) Clause (b) of the definition of “Eligible Inventory” is amended so that, as amended, clause (b) shall read as follows:

(b) that is not subject to the Administrative Agent’s Liens, which are perfected as to such Inventory, or that are subject to any other Lien whatsoever, and (without limiting the generality of the foregoing) in no event shall “Eligible Inventory” include any Permitted Real Estate Indebtedness Collateral;

(i) The definition of “New Vehicle” in Section 1.01 of the Credit Agreement is amended, so that, as amended, the definition shall read as follows:

“New Vehicle” means a Vehicle which has never been owned except by a manufacturer, distributor or dealer and has never been registered, and (notwithstanding clause (c) of the definition of “Vehicle”) includes Rental Vehicles and Demonstrators whether or not held for sale.

(j) The following definition of “Permitted Service Loaner Indebtedness” is hereby added to Section 1.01 of the Credit Agreement:

“Permitted Service Loaner Indebtedness” means Indebtedness incurred from time to time by the Company or any current or (so long as no Default shall have occurred and be continuing) future Subsidiary consisting of financing for New Vehicles which are used exclusively by the Company or such Subsidiary as service loaner vehicles for customers of the Company or such Subsidiary that are having their vehicles serviced by the Company or such Subsidiary (collectively, “Service Loaner Vehicles”), which financing is provided by the respective manufacturers or manufacturer-affiliated finance companies to the Company or such Subsidiary, provided that (i) no Subsidiary may initially incur any such Indebtedness at any time that a Default shall have occurred or be continuing; (ii) such financing applies only to Service Loaner Vehicles sold to the Company or such Subsidiary by the respective manufacturer affiliated with said finance company, and that (to the extent that an intercreditor agreement is required to be in effect pursuant to clause (iv) below) the required intercreditor agreement provides that such Service Loaner Vehicles are not subject to a first priority security interest in favor of the Administrative Agent, (iii) such Indebtedness is secured solely by a Lien on said Service Loaner Vehicles sold and so financed and the proceeds thereof, and (iv) unless the Administrative Agent waives such requirement in its sole discretion, the Administrative Agent shall have executed with said affiliate finance company an intercreditor agreement, reasonably satisfactory to the Administrative Agent, setting forth the respective rights of each party in the assets of the Company and such dealerships, (A) in the case of

such Indebtedness existing on the Second Amendment Effectiveness Date, within 90 days of the Second Amendment Effective Date, and (B) in all other cases, on or before the incurrence of such Indebtedness.

(k) The following definitions of “Permitted Real Estate Indebtedness” and “Permitted Real Estate Indebtedness Collateral” are hereby added to Section 1.01 of the Credit Agreement:

“Permitted Real Estate Indebtedness” means Indebtedness of the Company or a Subsidiary (including any bankruptcy remote, special purpose Subsidiary described in the proviso immediately following clause (vi) of Section 6.14) owing to non-Affiliated Persons secured solely by Liens on Permitted Real Estate Indebtedness Collateral so long as the amount of such Indebtedness (as measured for any specified real property parcel and improvements (if any) financed thereby) is no greater than eighty-five percent (85%) of the value of such parcel and improvements set forth in an appraisal thereof prepared by a member of the Appraisal Institute and an independent appraisal firm satisfactory to Agent and commissioned in connection with such financing, a copy of which such appraisal has been provided to the Administrative Agent upon its request.

“Permitted Real Estate Indebtedness Collateral” means, with respect to any particular Permitted Real Estate Indebtedness, the applicable real property used (at the time of the incurrence of such Permitted Real Estate Indebtedness) by a Subsidiary of the Company for the operation of a vehicle dealership or a business ancillary thereto, together with related real property rights, improvements, fixtures (other than trade fixtures), insurance payments, leases and rents related thereto and proceeds thereof.

(l) The definition of “Revolving Borrowing Base” is hereby amended by:

(i) inserting the following at the end of clause (A)(ii):

“provided that in no event shall Buyer Notes or the rights or obligations thereunder be considered finance receivables or otherwise be included in the calculation of the Revolving Borrowing Base,” and

(ii) inserting the following at the end of clause (A)(vi):

“, provided that in no event shall all or any portion of the Finance Receivables Portfolio of Cornerstone Acceptance Corporation be included in the calculation of the Revolving Borrowing Base after the effectiveness of the Cornerstone Acceptance Joint Venture Transaction (as defined in the Second Amendment).”

(m) The following definition of “Second Amendment” is hereby added to Section 1.01 of the Credit Agreement:

“Second Amendment” means that certain Amendment No. 2 to Credit Agreement and Security Agreement and Consent dated as of April 24, 2007 among the Company, the New Vehicle Borrowers, Bank of America, as Administrative Agent, Revolving Swing Line Lender, New Vehicle Swing Line Lender, Used Vehicle Swing Line Lender and L/C Issuer, the Lenders party thereto and the Guarantors.

(n) Section 6.14 of the Credit Agreement is hereby amended by:

(i) adding “(or the date a Subsidiary otherwise qualifies as a Restricted Subsidiary)” after “Restricted Subsidiary” in the second line thereof; and

(ii) deleting the period at the end of clause (vi) and inserting the following after such clause:

“; provided that any bankruptcy remote, special purpose Subsidiary formed for the sole purpose of, and engaged solely in the business of, owning real estate and leases thereof, and issuing non-recourse securities in connection with securitizations of such real estate and leases, shall be excluded from the requirements contained in this Section 6.14.”

(o) Section 7.01(l) of the Credit Agreement is amended by deleting the word “and” at the end of such section, renumbering Section 7.01(m) to be Section 7.01(o) and inserting the following new Sections 7.01(m) and (n) so that, as amended, such Sections 7.01(m) and (n) shall read as follows:

“(m) Liens on Permitted Real Estate Indebtedness Collateral securing either Permitted Real Estate Indebtedness permitted by Section 7.03(l) or permitted Guarantees thereof;

(n) Liens securing Permitted Service Loaner Indebtedness, provided that such Liens do not at any time encumber any property other than the New Vehicles financed by such Permitted Service Loaner Indebtedness, and proceeds of such Vehicles; and”

(p) Section 7.02(h) of the Credit Agreement is amended by deleting “and” at the end of such section, Section 7.02(i) of the Credit Agreement is re-numbered as Section 7.04(j) and a new Section 7.04(i) is added, so that, as amended, such Section 7.04(i) shall read as follows:

“(i) Buyer Notes obtained by the Company or a Subsidiary in connection with a Disposition permitted by Section 7.05(i), provided, however, that the aggregate amount of all such Investments at any one time shall not exceed $15,000,000; and”

(q) Section 7.03(k) of the Credit Agreement is hereby amended by deleting the period at the end of such Section, and inserting “;” in lieu thereof, and new Sections 7.03(l) and (m) are added so that, as amended, such Sections 7.03(l) and (m) shall read as follows:

“(l) Permitted Real Estate Indebtedness, provided, however, that the aggregate amount of all such Permitted Real Estate Indebtedness at any one time outstanding shall not exceed $200,000,000; and

“(m) Permitted Service Loaner Indebtedness.”

(r) Section 7.04(d) of the Credit Agreement is amended, so that, as amended, such section shall read as follows:

“(d) any Subsidiary which has Disposed of all or substantially all of its assets in accordance with the terms of this Agreement (i) may be dissolved or have its entity status terminated or (ii) so long as such Subsidiary does not qualify as a Restricted Subsidiary after giving effect to such Disposition, shall promptly at the request of the Company be released by the Administrative Agent from its obligations under the Subsidiary Guaranty and the other Loan Documents, provided that, at any time such Subsidiary thereafter qualifies as an Restricted Subsidiary, the Company shall cause to be delivered to the Administrative Agent all documents required to be delivered by Section 6.14 with respect to such Subsidiary in the timeframes set forth therein.

(s) Section 7.05(g) of the Credit Agreement is amended to correct a typographical error by deleting “Receivables Portfolio” in the second line and inserting “Acceptance Corporation” in lieu thereof.

(t) Clause (b) of Section 9.10 of the Credit Agreement is amended so that, as amended, such clause shall read as follows:

(b) (i) to subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.01(i) or to the interests of any lessor or purchaser of accounts receivable in assets that are owned by such Person and not by any Loan Party and (ii) to enter into intercreditor arrangements with holders of Permitted Real Estate Indebtedness for the purpose of releasing or subordinating any Lien of the Administrative Agent on property that constitutes Permitted Real Estate Indebtedness Collateral.

(u) Exhibit H (Form of Compliance Certificate) is hereby amended so that, as amended, such exhibits shall be Exhibit H as attached to this Agreement

(v) Exhibits L-1 (Form of Revolving Borrowing Base Certificate) and L-2 (Form of Used Vehicle Borrowing Base Certificate) to the Credit Agreement are hereby amended so that, as amended, such exhibits shall be Exhibit L-1 and Exhibit L-2, respectively, as attached to this Agreement.

3. Amendments to Security Agreement. Subject to the terms and conditions set forth herein, the Security Agreement is hereby amended as follows:

(a) The second recital of the Security Agreement is amended, so that, as amended, the recital shall read as follows:

“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 and each other Grantor (other than the Silo Subsidiaries) 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”

(b) The fourth, fifth and sixth recitals of the Security Agreement are amended so that, as amended, the recitals shall read as follows, respectively:

“WHEREAS, each Grantor will materially benefit from the Loans to be made, and the Letters of Credit to be issued, under the Credit Agreement; and”

“WHEREAS, each Borrower and each other Grantor (other than the Silo Subsidiaries) is a party (as signatory or by joinder) to a Guaranty pursuant to which such Borrower or such Grantor guarantees the Obligations of the other Loan Parties; and”

“WHEREAS, each Silo Subsidiary is a party (as signatory or by joinder) to a Guaranty pursuant to which such Silo Subsidiary guarantees the Obligations (other than Obligations in respect of the New Vehicle Facility) of the other Loan Parties; and”

(c) The introduction of Section 2 of the Security Agreement is amended, so that, as amended, the introduction shall read as follows:

“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 other Grantor 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 other Grantors 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 personal property and trade fixtures 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:”

(d) Section 2(d) of the Security Agreement is amended by inserting “trade” before “fixtures” in the third line thereof.

4. Effectiveness; Conditions Precedent. This Agreement and the amendments to the Credit Agreement and Security Agreement herein provided shall become effective upon satisfaction of the following conditions precedent:

(a) the Administrative Agent shall have received counterparts of this Agreement, duly executed by each Borrower, Bank of America, as Administrative Agent, Revolving Swing Line Lender, New Vehicle Swing Line Lender, Used Vehicle Swing Line Lender and L/C Issuer, each Guarantor and the Required Lenders; and

(b) all fees and expenses payable to the Administrative Agent and the Lenders (including the fees and expenses of counsel to the Administrative Agent) to the extent invoiced on or prior to the Agreement Date shall have been paid in full (without prejudice to final settling of accounts for such fees and expenses).

5. Consent of the Guarantors. Each Guarantor hereby consents, acknowledges and agrees to the amendments set forth herein and hereby confirms and ratifies in all respects the Guaranty to which such Guarantor is a party (including without limitation the continuation of such Guarantor’s payment and performance obligations thereunder upon and after the effectiveness of this Agreement and the amendments contemplated hereby) and the enforceability of such Guaranty against such Guarantor in accordance with its terms.

6. Representations and Warranties. In order to induce the Administrative Agent and the Lenders to enter into this Agreement, each Loan Party represents and warrants to the Administrative Agent and the Lenders as follows:

(a) The representations and warranties made by each Loan Party in Article V of the Credit Agreement and in each of the other Loan Documents to which such Loan Party is a party are true and correct on and as of the date hereof, except to the extent that such representations and warranties expressly relate to an earlier date;

(b) The Persons appearing as Guarantors on the signature pages to this Agreement constitute all Persons who are required to be Guarantors pursuant to the terms of the Credit Agreement and the other Loan Documents, including without limitation all Persons who became Subsidiaries or were otherwise required to become Guarantors after the Closing Date, and each of such Persons has become and remains a party to a Guaranty as a Guarantor;

(c) This Agreement has been duly authorized, executed and delivered by the Borrowers and Guarantors party hereto and constitutes a legal, valid and binding obligation of such parties, except as may be limited by general principles of equity or by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally;

(d) No Default or Event of Default has occurred and is continuing;

(e) The Collateral, either individually or collectively, consented to be released by this Agreement does not comprise all or substantially all of the Collateral; and

(f) The value of the Subsidiary Guaranty attributable to the Subsidiaries consented to be released from the Loan Documents by this Agreement, either individually or collectively, does not comprise all or substantially all of the value of the Subsidiary Guaranty.

7. Entire Agreement. This Agreement, together with all the Loan Documents (collectively, the “Relevant Documents”), sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relating to such subject matter. No promise, condition, representation or warranty, express or implied, not set forth in the Relevant Documents shall bind any party hereto, and no such party has relied on any such promise, condition, representation or warranty. Each of the parties hereto acknowledges that, except as otherwise expressly stated in the Relevant Documents, no representations, warranties or commitments, express or implied, have been made by any party to the other in relation to the subject matter hereof or thereof. None of the terms or conditions of this Agreement may be changed, modified, waived or canceled orally or otherwise, except in writing and in accordance with Section 10.01 of the Credit Agreement.

8. Full Force and Effect of Agreement. Except as hereby specifically amended, modified or supplemented, the Credit Agreement, the Security Agreement and all other Loan Documents are hereby confirmed and ratified in all respects and shall be and remain in full force and effect according to their respective terms.

9. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or electronic delivery (including by .pdf) shall be effective as delivery of a manually executed counterpart of this Agreement.

10. Governing Law. This Agreement shall in all respects be governed by, and construed in accordance with, the laws of the State of North Carolina applicable to contracts executed and to be performed entirely within such State, and shall be further subject to the provisions of Section 10.14 of the Credit Agreement.

11. Enforceability. Should any one or more of the provisions of this Agreement be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto.

12. References. All references in any of the Loan Documents to the “Credit Agreement” shall mean the Credit Agreement, as amended hereby and as further amended, supplemented or otherwise modified from time to time. All references in any of the Loan Documents to the “Security Agreement” shall mean the Security Agreement, as amended hereby and as further amended, supplemented or otherwise modified from time to time.

13. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Borrowers, the Administrative Agent, each of the Guarantors and Lenders, and their respective successors, legal representatives, and assignees to the extent such assignees are permitted assignees as provided in Section 10.06 of the Credit Agreement.

[Signature pages follow.]

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be made, executed and delivered by their duly authorized officers as of the day and year first above written.


COMPANY:

SONIC AUTOMOTIVE, INC., as a Borrower and as a Guarantor

By:		/s/ Michael C. Dickerson
Name:		Michael C. Dickerson
Title:		Treasurer

NEW VEHICLE BORROWERS:

AVALON FORD, INC.
CAPITOL CHEVROLET AND IMPORTS, INC.
FAA AUTO FACTORY, INC.
FAA BEVERLY HILLS, INC.
FAA CAPITOL N, INC.
FAA CONCORD H, INC.
FAA CONCORD T, INC.
FAA DUBLIN N, INC.
FAA DUBLIN VWD, INC.
FAA LAS VEGAS H, INC.
FAA POWAY T, INC.
FAA SAN BRUNO, INC.
FAA SANTA MONICA V, INC.
FAA SERRAMONTE H, INC.
FAA SERRAMONTE L, INC.
FAA SERRAMONTE, INC.
FAA STEVENS CREEK, INC.
FORT MYERS COLLISION CENTER, LLC
FRANCISCAN MOTORS, INC.
KRAMER MOTORS INCORPORATED
MARCUS DAVID CORPORATION
MOUNTAIN STATES MOTORS CO., INC.
ONTARIO L, LLC
PHILPOTT MOTORS, LTD., in each case as a New Vehicle Borrower and as a Guarantor


By:		/s/ David P. Cosper
Name:		David P. Cosper
Title:		Vice President/Treasurer