EXHIBIT 10.5
SECURITY AGREEMENT
SECURITY AGREEMENT (the "Agreement") dated as of August 10, 2000 made
by SONIC AUTOMOTIVE, INC., a Delaware company (the "Borrower"), to FORD MOTOR
CREDIT COMPANY, a Delaware corporation, as agent (the "Agent") for the lenders
(the "Lenders") under the Credit Agreement defined below. Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings given
to such terms in the Credit Agreement defined below.
PRELIMINARY STATEMENTS:
WHEREAS, the Borrower and the Lenders have entered into a
certain Credit Agreement of even date herewith (as amended, restated,
supplemented, refinanced or otherwise modified from time to time, the "Credit
Agreement"), pursuant to which the Lenders have agreed, subject to certain
conditions precedent, to make loans and other financial accommodations to the
Borrower from time to time (the "Credit Facilities");
WHEREAS, the Lenders have required, as a condition to entering
into the Credit Agreement, that the Borrower execute and deliver this Agreement;
NOW, THEREFORE, for and in consideration of the foregoing and
of any financial accommodations or extensions of credit (including, without
limitation, any loan or advance by renewal, refinancing or extension of the
agreements described hereinabove or otherwise) heretofore, now or hereafter made
to or for the benefit of the Borrower pursuant to the Credit Agreement any other
agreement, instrument or document executed pursuant to or in connection
therewith, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Agent hereby
agree, for the benefit of the Lenders, as follows:
SECTION 1. Grant of Security. The Borrower hereby assigns and
pledges to Agent, for the benefit of the Lenders, and hereby grants to Agent,
for the benefit of the Lenders, a security interest in, all of its respective
right, title and interest in and to the following, whether now owned or
hereafter acquired (the "Collateral"):
(a) all furniture, machinery, service vehicles, supplies and
other equipment (the "Equipment");
(b) motor vehicles, tractors, trailers, service parts and
accessories and other inventory ("Inventory");
(c) all accounts, contract rights, chattel paper, instruments,
notes, letters of credit, documents, documents of title, investment
property, deposit accounts, other bank accounts, general intangibles,
tax refunds and other obligations of third persons of any kind, now or
hereafter existing, whether arising out of or in connection with the
sale or lease of goods, the rendering of services or otherwise, and all
rights now or hereafter
existing in and to all security agreements, leases, and other contracts
securing or otherwise relating to any such accounts, contract rights,
chattel paper, instruments, notes, letters of credit, documents,
documents of title, investment property, deposit accounts, other bank
accounts, general intangibles, tax refunds or obligations of third
persons (any and all such accounts, contract rights, chattel paper,
instruments, notes, letters of credit, documents, documents of title,
investment property, deposit accounts, other bank accounts, general
intangibles, tax refunds and obligations of third Persons being the
"Receivables", and any and all such leases, security agreements and
other contracts being the "Related Contracts");
(d) all of the Debtor's governmental approvals and
authorizations to the maximum extent permitted by applicable law;
(e) all property and interests in property of the Debtor now
or hereafter coming into the actual possession, custody or control of
Lender in any way or for any purpose (whether for safekeeping, deposit,
custody, pledge, transmission, collection or otherwise);
(f) leasehold interests in and fixtures located on any real
property from which the Debtor conducts business;
(g) records and other books and records relating to the
foregoing; and
(h) all accessions and additions to, substitutions for, and
replacements, products and proceeds of any of the foregoing (including,
without limitation, proceeds which constitute property of the types
described in clauses (a) through (g) of this Section 1 and, to the
extent not otherwise included, all (i) payments under insurance
(whether or not the Agent or the Lenders are the loss payee thereof),
or any indemnity, warranty or guaranty, payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral
and (ii) cash.
SECTION 2. Security for Obligations. This Agreement secures
the payment of (i) all obligations of the Borrower now or hereafter existing
under the Credit Agreement and (ii) all obligations of the Borrower hereafter
existing under this Agreement (all such obligations of the Borrower being the
"Obligations"). Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts which constitute part of the Obligations and
would be owed by Borrower to the Agent or any Lender under the Credit Facilities
but for the fact that they are unenforceable or not allowable due to the
existence of a bankruptcy, reorganization or similar proceeding involving the
Borrower.
SECTION 3. Borrower Remains Liable. Anything herein to the
contrary notwithstanding, (a) the Borrower shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its respective duties and obligations thereunder to
the same extent as if this Agreement had not been executed, (b) the exercise by
the Agent of any of the rights hereunder shall not release the Borrower from any
of its respective duties or obligations under the contracts and agreements
included in the Collateral, and (c) neither the Agent nor the Lenders shall have
any obligation or liability under the contracts and agreements included in the
Collateral by reason of this Agreement, nor shall Agent or the Lenders be
obligated to perform any of the obligations or duties of the Borrower
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 4. Representations and Warranties. The Borrower
represents and warrants as follows:
(a) All of its Equipment and Inventory is located at the
places specified on Exhibit A hereto. The chief place of business and chief
executive office of the Borrower and the office where the Borrower keeps its
records concerning the Receivables, and the originals of all chattel paper that
evidence Receivables, are located at its address specified in Section 16. None
of the Receivables is evidenced by a promissory note or other instrument.
(b) The Borrower is the legal and beneficial owner of the
Collateral free and clear of any lien, security interest, option or other charge
or encumbrance except for (i) the security interest created by this Agreement,
and (ii) any security interests consented to by the Required Lenders (as defined
in the Credit Agreement) (collectively, the "Permitted Liens"). Except for
financing statements with respect to Permitted Liens, no effective financing
statement or other document similar in effect covering all or any part of the
Collateral is on file in any recording office, except such as may have been
filed in favor of the Lender relating to this Agreement. The Borrower does not
have a trade name.
(c) The Borrower has exclusive possession and control of its
Equipment and Inventory.
(d) Subject to the Permitted Liens, this Agreement creates a
valid and perfected first priority security interest in the Collateral, securing
the payment of the Obligations, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been duly taken.
(e) No consent of any other person or entity and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required (i) for the grant by the
Borrower of the security interest granted hereby or for the execution, delivery
or performance of this Agreement by the Borrower, (ii) for the perfection or
maintenance of the security interest created hereby (including the first
priority nature of such security interest) or (iii) for the exercise by Agent
(for the benefit of the Lenders) of its rights and remedies hereunder.
(f) There are no conditions precedent to the effectiveness of
this Agreement that have not been satisfied or waived.
(g) The Borrower has, independently and without reliance upon
any Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.
SECTION 5. Further Assurances. (a) The Borrower agrees that
from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that the Agent may reasonably request, in order to
perfect and protect any security interest granted or purported to be granted
hereby or to enable the Agent (acting for the benefit of the Lenders) to
exercise and
enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, the Borrower will upon such
request: (i) mark conspicuously each chattel paper included in the Receivables
and each Related Contract and, at the request of the Agent, each of its records
pertaining to the Collateral with a legend, in form and substance satisfactory
to the Agent, indicating that such document, chattel paper, Related Contract or
Collateral is subject to the security interest granted hereby; (ii) if any
Receivable shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to the Agent (for the benefit of the Lenders)
hereunder such note or instrument or chattel paper duly indorsed and accompanied
by duly executed instruments of transfer or assignment, all in form and
substance satisfactory to the Agent; and (iii) execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or
notices, as may be necessary or desirable, or as the Agent may request, in order
to perfect and preserve the security interest granted or purported to be granted
hereby.
(b) The Borrower hereby authorizes the Agent to file one or
more financing or continuation statements, and amendments thereto, relating to
all or any part of the Collateral without its signature where permitted by law.
A photocopy or other reproduction of this Agreement or any financing statement
covering the Collateral or any part thereof shall be sufficient as a financing
statement where permitted by law.
(c) The Borrower will furnish to the Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Agent may reasonably
request, all in reasonable detail.
SECTION 6. As to Equipment and Inventory. (a) The Borrower
shall keep its Equipment and Inventory at the location referred to in Section
4(a) or, upon 30 days' prior written notice to the Agent, at such other places
in jurisdictions where all action required by Section 5 shall have been taken
with respect to its Equipment and Inventory.
(b) The Borrower shall cause the Equipment owned by it to be
maintained and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted, and in accordance with any manufacturer's
manual, and shall forthwith, or in the case of any loss or damage to any of the
Equipment as quickly as practicable after the occurrence thereof, make or cause
to be made all repairs, replacements, and other improvements in connection
therewith which are necessary or desirable to such end. The Borrower shall
promptly furnish to the Agent a statement respecting any material loss or damage
to any of its Equipment or Inventory.
(c) The Borrower shall pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims against, its Equipment or Inventory.
SECTION 7. Insurance. The Borrower shall, at its own expense,
maintain insurance with respect to its Equipment and Inventory in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to the Agent from time to time. Each policy for liability insurance
shall provide for all losses to be paid on behalf of the Agent (for the benefit
of the Lenders) and the Borrower as their respective interests may appear and
each policy for property damage insurance shall provide for all losses to be
paid directly to the Agent (for the benefit of the Lenders). Each such policy
shall in addition (i) name the Borrower and
the Agent (for the benefit of the Lenders) as insured parties thereunder
(without any representation or warranty by or obligation upon the Agent) as
their interests may appear, (ii) contain the agreement by the insurer that any
loss thereunder shall be payable to the Agent (for the benefit of the Lenders)
notwithstanding any action, inaction or breach of representation or warranty by
the Borrower, (iii) provide that there shall be no recourse against Agent or the
Lenders for payment of premiums or other amounts with respect thereto and (iv)
provide that at least ten days' prior written notice of cancellation or of lapse
shall be given to the Agent by the insurer. The Borrower shall, if so requested
by the Agent, deliver to the agent original or duplicate policies of such
insurance and, as often as the Agent may reasonably request, a report of a
reputable insurance broker with respect to such insurance. Further the Borrower
shall, at the request of the Agent, duly execute and deliver instruments of
assignment of such insurance policies to comply with the requirements of Section
5 and cause the insurers to acknowledge notice of such assignment.
(b) Upon the occurrence and during the continuance of an Event
of Default, all insurance payments in respect of such Equipment or Inventory
shall be paid to and applied by the Agent as specified in Section 13(b).
SECTION 8. As to Receivables. The Borrower shall keep its
chief place of business and chief executive office and the office where it keeps
its records concerning the Receivables, and the originals of all chattel paper
that evidence Receivables, if any, at the location therefor referred to in
Section 4(a) or, upon 30 days' prior written notice to the Lender, at any other
locations in a jurisdiction where all action required by Section 5 shall have
been taken with respect to the Receivables. The Borrower will hold and preserve
such records and chattel paper and will permit representatives of the Agent or a
Lender at any time during normal business hours to inspect and make abstracts
from such records and chattel paper. The Borrower shall not change its name,
identity or corporate structure to such an extent that any financing statement
filed in connection with this Agreement would become seriously misleading,
unless the Borrower shall have given the Agent at least 30 days prior written
notice thereof and prior to effecting any such change, taken such steps as the
Agent may deem necessary or desirable to continue the perfecting and priority of
the liens in favor of the Lender granted in connection herewith.
SECTION 9. Transfers and Other Liens. The Borrower shall not
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, or (ii) create or
permit to exist any lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Collateral, except for the
security interest under this Agreement.
SECTION 10. Lender Appointed Attorney-in-Fact. The Borrower
hereby irrevocably appoints the Agent such Borrower's attorney-in-fact, with
full authority in the place and stead of the Borrower and in the name of the
Borrower, the Lenders or otherwise, from time to time in the Lender's
discretion, to take any action and to execute any instrument which the Agent may
deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation:
(a) to obtain and adjust insurance required to be paid to the
Agent pursuant to Section 7,
(b) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in connection with the Collateral,
(c) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper, in connection therewith, and
(d) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of the Agent or the Lenders with respect to any of the Collateral.
SECTION 11. Agent May Perform. If the Borrower fails to
perform any agreement contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the expenses of the Agent or the Lenders
incurred in connection therewith shall be payable by the Borrower under Section
14(b).
SECTION 12. Agent's Duties. The powers conferred on the Agent
hereunder are solely to protect its interest (in its capacity as agent on behalf
of the Lenders) in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Agent shall have no duty as to any Collateral or as to the taking of any
necessary steps to preserve rights against prior parties or any other rights
pertaining to any Collateral. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which the Agent accords its own property.
SECTION 13. Remedies. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of
North Carolina at that time (the "Code") (whether or not the Code
applies to the affected Collateral), and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense
and upon request of the Agent forthwith, assemble all or part of the
Collateral as directed by the Agent and make it available to the Agent
at a place to be designated by the Agent which is reasonably convenient
to both parties and (ii) without notice except as specified below, sell
the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Agent's or the Initial Lender's offices or
elsewhere, for cash, on credit or for future delivery, and upon such
other terms as the Agent may deem commercially reasonable. The Borrower
agrees that, to the extent notice of sale shall be required by law, at
least ten days' notice to the Borrower of the time and place of any
public sale or the time after which any private sale is to be made
shall constitute reasonable notification. The Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
(b) Any cash held by the Lender as Collateral and all cash
proceeds received by the Lender in respect of any sale of, collection
from, or other realization upon all or any part of the Collateral may,
in the discretion of the Lender, be held by the Lender as collateral
for, and/or then or at any time thereafter be applied (after payment of
any amounts payable to the Lender pursuant to Section 14) in whole or
in part by the Lender against, all or any part of the Obligations in
such order as the Lender shall elect. Any surplus of such cash or cash
proceeds held by the Lender and remaining after payment in full in cash
of all the Obligations shall be paid over to the Borrower or to
whomsoever may be lawfully entitled to receive such surplus.
SECTION 14. Indemnity and Expenses. (a) The Borrower agrees to
indemnify the Agent and the Lenders from and against any and all claims, losses
and liabilities (including reasonable attorneys' fees) growing out of or
resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities resulting from the
Lender's gross negligence or willful misconduct.
(b) The Borrower shall be liable to the Lender for the amount
of any and all reasonable expenses, including the reasonable fees and expenses
of its in-house and external counsel and of any experts and agents, which the
Agent or the Lenders may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (iii) the
exercise or enforcement of any of the rights of the Agent or the Lenders
hereunder or (iv) the failure by the Borrower to perform or observe any of the
provisions hereof.
(c) Notwithstanding anything else in this Agreement to the
contrary, no party shall have any obligation to reimburse any person for
attorneys' fees and expenses unless such fees and expenses are (i) reasonable in
amount, (ii) determined without reference to any statutory presumption and (iii)
calculated using the actual time expended and the standard hourly rate for the
attorneys and paralegals performing the tasks in question and the actual
out-of-pocket expenses incurred.
SECTION 15. Amendments, Etc. except as otherwise provided in
Section 7.1 (b) of the Credit Agreement, no amendment or waiver of any provision
of this Agreement, and no consent to any departure by the Borrower herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Required Lenders, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 16. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered, if to the Borrower, at its address at 6415
Idlewild Road, Suite 109, Charlotte, North Carolina 28212, if to the Agent, at
its address specified in the Credit Agreement; or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other party. All such notices and communications shall be effective, upon
receipt, or in the case of (i) notice by mail, five days after being deposited
in the United States mails, first class postage prepaid, (ii) notice by
overnight courier, one business day after being deposited with a national
overnight courier
service, (iii) notice by telex, when telexed against receipt of answer back or
(iv) notice by facsimile copy, when transmitted against mechanical confirmation
of successful transmission.
SECTION 17. Continuing Security Interest; Assignments under
Credit Agreement. This Agreement shall create a continuing assignment of and
security interest in the Collateral and shall (i) remain in full force and
effect until the payment in full in cash of the Obligations and all other
amounts payable under this Agreement (such date, the "Security Termination
Date"), (ii) be binding upon the Borrower, and such Borrower's successors and
assigns and (iii) inure to the benefit of, and be enforceable by, the Agent, the
Lenders and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii), any Lender may assign or
otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement to any other person or entity, and such other person or entity
shall thereupon become vested with all the benefits in respect thereof granted
to such Lender herein or otherwise subject, however to the provisions of Article
VII of the Credit Agreement. On the Security Termination Date, the security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the Borrower. Upon any such termination, the Agent will, at the
Borrower's expense, execute and deliver to the Borrower such documents as it
shall reasonably request to evidence such termination.
SECTION 18. Governing Law; Terms. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF NORTH CAROLINA.
Unless otherwise defined herein or in the Credit Agreement, terms used in
Article 9 of the Code are used herein as therein defined.
SECTION 19. Waiver of Jury Trial. To the maximum extent of
applicable law, each of the Borrower, the Agent and the Lenders waives any right
to trial by jury in any dispute, whether sounding in contract, tort, or
otherwise, between the Agent, the Lenders and the Borrower arising out of or
related to the transactions contemplated by this Agreement or any other
instrument, document or agreement executed or delivered in connection herewith.
Either the Borrower, the Agent or the Lenders may file an original counterpart
or a copy of this Agreement with any court as written evidence of the consent of
the parties hereto to the waiver of their right to trial by jury.
SECTION 20. Consent to Jurisdiction; Counterclaims; Forum Non
Conveniens. (a) Exclusive Jurisdiction. Except as provided in subsection (b) of
this Section 20, the Lender and the Borrower agree that all disputes between
them arising out of or related to the relationship established between them in
connection with this Agreement, whether arising in contract, tort, equity, or
otherwise, shall be resolved only by state or federal courts located in North
Carolina, but the parties acknowledge that any appeals from those courts may
have to be heard by a court located outside of North Carolina.
(b) Other Jurisdictions. Each of the Agent and the Lenders
shall have the right to proceed against the Borrower or its real or personal
property in a court in any location to enable the Agent or the Lenders to obtain
personal jurisdiction over the Borrower, to realize on the Collateral or any
other security for the Obligations or to enforce a judgment or other court order
entered in favor of the Agent or the Lenders. The Borrower shall not assert any
permissive counterclaims in any proceeding brought by the Agent or the Lenders
under this Section 17(b).
(c) Venue; Forum Non Conveniens. Each of the Agent, Borrower
and each Lender waives any objection that it may have (including, without
limitation, any objection to the laying of venue or based on forum non
conveniens) to the location of the court in which any proceeding is commenced in
accordance with this Section 20.
21. Service of Process. The Borrower waives personal service
of any process upon it and, as security for the Obligations, irrevocably
appoints Theodore M. Wright as its registered agent for the purpose of accepting
service of process issued by any court in connection with any dispute between
the Borrower, the Agent and the Lender arising out of or related to the
relationship established between them in connection with this Agreement or any
other document to which the Borrower is a party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES TO FOLLOW]
IN WITNESS WHEREOF, the Borrower has caused this Agreement to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
SONIC AUTOMOTIVE, INC.
By: /s/ Theodore M. Wright
--------------------------
Name: Theodore M. Wright
Title: Vice President
Agreed and Accepted
this 10th day of August, 2000
FORD MOTOR CREDIT COMPANY,
a Delaware corporation, as Agent
By: /s/ W. J. Beck IV
------------------------
Name: W. J. Beck, IV
Title: National Account Manager