Document:

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                                                                     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. BRUTON SMITH (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
            ---------------------
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

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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
            ----------------------
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,
sue 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
            ------------------
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
            ------------------
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
            --------------------------
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
            --------------------------------------------------
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,
            ------------------------
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
            -----------------------------------------
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, sue 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
            ----------------------------------------
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
             -----------------
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
             -------------------------------------------------------------------
on Assignment of Claims. Except as permitted in Section 3 hereof, the Junior
-----------------------
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
             ----------------------------------
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
             ------------------------------------------------------------
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
             -------------------------
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
             --------------------
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
             -----------------
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
             -------------------------
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
             ----------------------------------------------------
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

<PAGE>

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
         180 East Fifth Street
         St. Paul, Minnesota 55101

         (ii) If to the Junior Creditor at:

         O. Bruton Smith
         5401 East Independence Boulevard
         P.O. Box 18747
         Charlotte, North Carolina  78218

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

<PAGE>

         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

<PAGE>

         IN WITNESS WHEREOF, this Subordination Agreement has been signed as of
this 7th day of May, 2002.

                                        ----------------------------------------
                                                    O. BRUTON SMITH

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:
       ----------------------------------------------

                                       11EXHIBIT 4.1

                             TEMPLE-INLAND INC.

                           Officers' Certificate
                           ---------------------

         Each of the undersigned officers of Temple-Inland Inc., a Delaware
corporation (the "Company"), does hereby certify as follows:

                  1. Each of the undersigned has read Sections 201, 301 and
         303 of the Indenture, dated as of September 1, 1986 (the
         "Indenture"), between the Company and JPMorgan Chase Bank
         (formerly known as The Chase Manhattan Bank and Chemical Bank), as
         Trustee (the "Trustee"), as amended by the first supplemental
         indenture, dated as of April 15, 1988, the second supplemental
         indenture, dated as of December 27, 1990, and the third
         supplemental indenture, dated as of May 9, 1991, and the
         definitions in such Indenture relating thereto and has reviewed
         such other corporate documents and records relating to the matters
         referred to herein, and, in the opinion of the undersigned, has
         made such examination or investigation as is necessary to enable
         him to express an informed opinion on the matters set forth below.

                  2. The terms of the series of Securities of the Company
         entitled the "7.875% Senior Notes due 2012" (the "Notes") to be
         issued under the Indenture are hereby established pursuant to
         resolutions duly adopted by a Special Committee of the Board of
         Directors of the Company on May 1, 2002 and are set forth in Annex
         A and in Exhibit A hereto.

                  3. All conditions precedent provided for in the Indenture
         relating to the establishment and original issuance,
         authentication and delivery of the Notes have been complied with.

                  4. In the opinion of the undersigned, Section 301 of the
         Indenture has been complied with in the establishment of the terms
         of the Notes.

                          [Signature page follows]

         IN WITNESS WHEREOF, each of the undersigned has executed this
Officers' Certificate as of May 6, 2002.

                                   By:________________________________________
                                   Name:
                                   Title:

                                   By:________________________________________
                                   Name:
                                   Title:

                                  ANNEX A

                                     To

                           Officers' Certificate

         Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Indenture.

         The series of Securities authorized hereby shall be the "7.875%
Senior Notes due 2012" of the Company (the "Notes").

         The aggregate principal amount of Notes that may be authenticated
and delivered under the Indenture in accordance with this Officers'
Certificate is initially limited to $500,000,000, except for Notes
authenticated and delivered upon registration of, transfer of, or in
exchange for, other Notes pursuant to Sections 304, 305, 906 or 1107 of the
Indenture; provided, however, that the Company may, without the consent of
Holders of the Notes, create and issue additional Notes ranking equally
with the Notes and otherwise similar in all respects so that such further
Notes would be consolidated and form a single series of the Notes.

         Subject to the terms and conditions set forth in the form of Note
(attached as Exhibit A hereto), the Notes will mature on May 1, 2012. The
Notes will pay interest at the annual rate of 7.875% on May 1 and November
1 of each year, commencing on November 1, 2002.

         The amount of interest payable for any period will be computed (1)
for any full semi-annual period, on the basis of a 360-day year of twelve
30-day months, (2) for any period shorter than a full semi-annual period,
on the basis of a 30-day month and (3) for periods of less than a month, on
the basis of the actual number of days elapsed per 30-day month. In the
event that any date on which interest is payable on the Notes is not a
Business Day, the payment of the interest payable on that date will be made
on the next succeeding day that is a Business Day, without any interest or
other payment in respect of the delay, except that, if the next succeeding
Business Day is in the next succeeding calendar year, then the payment will
be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on the scheduled payment date.

         In case an Event of Default with respect to the Notes shall have
occurred and be continuing, the principal thereof and any interest accrued
thereon may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.

         The Notes will be redeemable, in whole or in part, at the option
of the Issuer, at any time or from time to time, on any date prior to its
maturity (a "Redemption Date") at a redemption price (the "Redemption
Price") equal to the sum of:

         (i)      100% of the principal amount of the Notes to be redeemed;

         (ii)     accrued and unpaid interest on the Notes being redeemed
                  to, but excluding, the Redemption Date; and

         (iii)    the Make-Whole Premium (as defined below) for the Notes
                  subject to redemption.

In no event will the Redemption Price of the Notes ever be less than the
sum of 100% of the principal amount of the Notes being redeemed and accrued
and unpaid interest thereon.

         The "Make-Whole Premium" for any Note subject to redemption means
an amount equal to the Discounted Present Value calculated for such Note
less the unpaid principal amount of such Note; provided, however, that no
Make-Whole Premium shall be less than zero.

         The "Discounted Present Value" of any Note subject to redemption
shall be equal to the discounted present value of all principal and
interest payments scheduled to become due in respect of such Note after the
Redemption Date, calculated using a discount rate equal to the sum of: (i)
the yield to maturity on the United States treasury security having a
maturity date equal to the maturity date of such Note and trading in the
secondary market at the price closest to par; and (ii) 50 basis points;
provided, however, that if there is no United States treasury security
having a maturity date equal to the maturity date of such Note, such
discount rate shall be calculated using a yield to maturity interpolated or
extrapolated on a straight-line basis (rounding to the nearest month, if
necessary) from the yields to maturity for the two United States treasury
securities having maturity dates most closely corresponding to the maturity
date of such Note and trading in the secondary market at the price closest
to par. The Discounted Present Value shall be calculated on the third
Business Day prior to the Redemption Date.

         Notice of any redemption must be given at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at its registered address. Notwithstanding the provisions of
Section 1104 of the Indenture, notice of such redemption need not set forth
the Redemption Price but only the manner of calculation thereof. The Issuer
will notify the Trustee of the Redemption Price promptly after the
calculation thereof. The Trustee shall have no responsibility for such
calculation.

         If money sufficient to pay the Redemption Price of the Notes to be
redeemed on the Redemption Date is deposited on or before the Redemption
Date and the other conditions set forth in the Indenture are satisfied,
then on and after such date, interest will cease to accrue on the Notes
called for redemption. In the event any Notes are called for redemption,
neither the Company nor the Trustee will be required to register the
transfer of or exchange the Notes to be redeemed.

         The Notes will be issued in the form of one global certificate,
referred to as a "Global Security," registered in the name of the
Depositary or its nominee. Except as provided below, owners of beneficial
interests in such a Global Security will not be entitled to receive
physical delivery of Notes in certificated form and will not be considered
the Holders (as defined in the Indenture) thereof for any purpose under the
Indenture, and no Global Security representing Notes shall be exchangeable,
except for another Global Security of like denomination and tenor to be
registered in the name of the Depositary or its nominee or a successor
Depositary or its nominee. Accordingly, each beneficial owner must rely on
the procedures of the Depositary or if such person is not a participant, on
the procedures of the participant through which such person owns its
interest to exercise any rights of a Holder under the Indenture. The
Depository Trust Company shall be the initial Depositary.

         In the event that: (1) the Depositary notifies the Company that it
is unwilling or unable to continue as a Depositary for the Global Security
certificate and no successor Depositary has been appointed within 90 days
after this notice, (2) the Depositary at any time ceases to be a Depositary
registered under the Securities Exchange Act at which time the Depositary
is required to be so registered to act as the Depositary and no successor
Depositary has been appointed within 90 days after the Company learns that
the Depositary has ceased to be so registered, (3) the Company determines
in its sole discretion that it will no longer have the Notes represented by
Global Securities or permit any the Global Security certificate to be so
exchangeable or (4) an Event of Default under the Indenture has occurred
and is continuing, the Company will execute, and subject to Article 3 of
the Indenture, the Trustee, upon written notice from the Company, will
authenticate and deliver the Notes in definitive registered form without
coupons, in authorized denominations and in an aggregate principal amount
of the Global Security in exchange for such Global Security.

         Upon exchange of the Global Security for such Notes in definitive
registered form without coupons, in authorized denominations, the Global
Security shall be cancelled by the Trustee. Such Notes in definitive
registered form issued in exchange for the Global Security shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee. The Trustee shall
deliver such Notes to the Depositary for delivery to the persons in whose
names such Notes are so registered.

         The principal of and interest on the Notes shall be payable at the
Corporate Trust Office of the Trustee; provided, however, that at the
option of the Company, payment of interest may be made by check mailed to
the address of the Person entitled thereto as it shall appear in the
Security Register or by wire transfer to an account in the United States
designated to the Trustee by a prior written notice by such Person
delivered at least five Business Days prior to the applicable Interest
Payment Date.

         The Notes will be issued in denominations of $1,000 and any
integral multiple thereof.

         The Notes shall not have the benefit of a sinking fund and shall
not be exchangeable into shares of the Company's Common Stock.

         The provisions of Section 403 of the Indenture shall apply to the
Notes.

                                                                     EXHIBIT A
                                                                  FORM OF NOTE

                               [Form of Note]

[For inclusion in Global Securities only - Unless this certificate is
presented by an authorized representative of The Depository Trust Company,
a New York corporation ("DTC"), to the Issuer (as defined below) or its
agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other
name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.

         THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE TRANSFERRED TO,
OR REGISTERED OR EXCHANGED IN WHOLE OR IN PART FOR, A SECURITY REGISTERED
IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF,
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]

                             TEMPLE-INLAND INC.
                        7.875% Senior Note due 2012

Number: __                                             CUSIP NO.: 879868AH0

         Temple-Inland Inc., a Delaware corporation (the "Issuer", which
term includes any successor corporation under the Indenture hereafter
referred to), for value received, hereby promises to pay to [For inclusion
in Global Securities only - Cede & Co.] or registered assigns, the
principal sum of ____________ on May 1, 2012, and to pay interest thereon
at 7.875% per annum (the "Interest Rate"), from May 6, 2002, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, semi-annually in arrears on May 1 and November 1 of each
year, commencing November 1, 2002 (each, an "Interest Payment Date"). The
amount of interest payable for any period will be computed (1) for any full
semi-annual period on the basis of a 360-day year of twelve 30-day months
and (2) for any period shorter than a full semi-annual period, on the basis
of a 30-day month and (3) for periods of less than a month, on the basis of
the actual number of days elapsed per 30-day month. In the event that any
date on which interest is payable on this Note is not a Business Day, then
payment of interest payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that, if the next succeeding
Business Day is in the next succeeding calendar year, then the payment will
be made on the immediately preceding Business Day, in each case with the
same force and effect as if made on such Interest Payment Date. The
interest installment so payable, and punctually paid or duly provided for,
on any Interest Payment Date will be paid to the person in whose name this
Note (or one or more Predecessor Securities, as defined in said Indenture)
is registered at the close of business on the April 15 and October 15 of
each year (each, a "Regular Record Date") next preceding such Interest
Payment Date. Any such interest installment not punctually paid or duly
provided for on any Interest Payment Date shall forthwith cease to be
payable to the registered Holders on the corresponding Regular Record Date
and may be paid to the Person in whose name this Note (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date to be fixed by the Trustee for the payment of such Defaulted
Interest, notice whereof shall be given to the registered Holders of this
series of Notes not less than 10 days prior to such Special Record Date, or
may be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange, if any, on which the Notes may
be listed, and upon such notice as may be required by such exchange all as
more fully provided in the Indenture. The principal of (and premium, if
any) and the interest on this Note shall be payable at the office or agency
of the Issuer maintained for that purpose in the Borough of Manhattan, the
City of New York, in any coin or currency of the United States of America
that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at
the option of the Issuer by check mailed to the Person entitled thereto at
such address as shall appear in the Security Register or by wire transfer
to an account in the United States designated to the Trustee by a prior
written notice by such Person delivered at least five Business Days prior
to the applicable Interest Payment Date.

         Reference is made to the further provisions of this Note set forth
on the reverse hereof. Such further provisions shall for all purposes have
the same effect as though fully set forth at this place.

         This Note shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been executed by
the Trustee under the Indenture referred to on the reverse hereof by manual
signature.

                          [Signature page follows]

         IN WITNESS WHEREOF, Temple-Inland Inc. has caused this instrument
to be signed by one of its duly authorized officers and has caused a
facsimile of its corporate seal to be affixed hereunto or imprinted hereon.

                                           TEMPLE-INLAND INC.

                                           By:________________________________
                                           Name:______________________________
                                           Title:_____________________________

ATTEST:

______________________________
Name: ________________________
Its. _________________________

                       CERTIFICATE OF AUTHENTICATION

                  This is one of the Securities of the series designated
herein referred to in the within-mentioned Indenture.

Dated:

JPMORGAN CHASE BANK, as Trustee

By:_________________________________
       Authorized Officer

                             [REVERSE OF NOTE]

                             TEMPLE-INLAND INC.

                        7.875% Senior Note due 2012

         This Note is one of a duly authorized issue of debentures, notes,
bonds or other evidences of indebtedness of the Issuer (hereinafter called
the "Securities") of the series hereinafter specified, all issued or to be
issued under and pursuant to an Indenture dated as of September 1, 1986
(herein called the "Indenture"), between the Issuer and JPMorgan Chase Bank
(formerly known as The Chase Manhattan Bank and Chemical Bank), as Trustee
(herein called the "Trustee"), as amended by the first supplemental
indenture, dated as of April 15, 1988, the second supplemental indenture,
dated as of December 27, 1990, and the third supplemental indenture, dated
as of May 9, 1991, to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Issuer and the Holders of the Securities. The Securities may
be issued in one or more series, which different series may be issued in
various aggregate principal amounts, may mature at different times, may
bear interest (if any) at different rates, may be subject to different
redemption provisions (if any) and may otherwise vary as provided in the
Indenture.

         This Note is one of a series designated as the 7.875% Senior Notes
due 2012 (the "Notes") of the Issuer. The Notes are initially limited in
aggregate principal amount of $500,000,000; provided, however, that the
Issuer may, without the consent of the Holders of the Notes, create and
issue additional notes ranking equally with the Notes and otherwise similar
in all respects so that such further notes would be consolidated and form a
single series of the Notes.

         [For inclusion in Global Securities only - Except as otherwise
provided in the Indenture, this Note will be issued in global form only
registered in the name of The Depository Trust Company ("DTC") or its
nominee. This Note will not be issued in definitive form, except as
otherwise provided in the Indenture, and ownership of this Note shall be
maintained in book-entry form by DTC for the accounts of participating
organizations of DTC.]

         In case an Event of Default with respect to the Notes shall have
occurred and be continuing, the principal hereof and accrued interest
hereon may be declared, and upon such declaration shall become, due and
payable, in the manner, with the effect and subject to the conditions
provided in the Indenture.

         The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Issuer and the rights of the Holders of the Securities
of each series to be affected under the Indenture at any time by the Issuer
and the Trustee with the consent of the Holders of a majority in principal
amount of the Securities at the time Outstanding of each series to be
affected. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series
at the time Outstanding, on behalf of the Holders of all Securities of such
series, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security
shall be conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.

         As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a
receiver or trustee or for any other remedy thereunder, unless such Holder
shall have previously given the Trustee written notice of a continuing
Event of Default with respect to the Securities of this series, the Holders
of not less than 25% in principal amount of the Securities of this series
at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and
offered the Trustee reasonable indemnity, and the Trustee shall not have
received from the Holders of a majority in principal amount of Securities
of this series at the time Outstanding a direction inconsistent with such
request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The
foregoing shall not apply to any suit instituted by the Holder of this
Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.

         No reference herein to the Indenture and no provision of this Note
or of the Indenture shall alter or impair the obligation of the Issuer,
which is absolute and unconditional, to pay the principal of and interest
on this Note in the manner, at the respective times, at the rate and in the
coin or currency herein prescribed.

         The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. At the office or
agency of the Issuer in the Borough of Manhattan, The City of New York, or
at such other locations as the Issuer may from time to time designate, and
in the manner and subject to the limitations provided in the Indenture, but
without the payment of any service charge, Notes may be exchanged for a
like aggregate principal amount of Notes of other authorized denominations.

         The Notes will be redeemable, in whole or in part, at the option
of the Issuer, at any time or from time to time, on any date prior to its
maturity (a "Redemption Date") at a redemption price (the "Redemption
Price") equal to the sum of:

         (i)      100% of the principal amount of the Notes to be redeemed;

         (ii)     accrued and unpaid interest on the Notes being redeemed
                  to, but excluding, the Redemption Date; and

         (iii)    the Make-Whole Premium (as defined below) for the Notes
                  subject to redemption.

In no event will the Redemption Price of the Notes ever be less than the
sum of 100% of the principal amount of the Notes being redeemed and accrued
and unpaid interest thereon.

         The "Make-Whole Premium" for any Note subject to redemption means
an amount equal to the Discounted Present Value calculated for such Note
less the unpaid principal amount of such Note; provided, however, that no
Make-Whole Premium shall be less than zero.

         The "Discounted Present Value" of any Note subject to redemption
shall be equal to the discounted present value of all principal and
interest payments scheduled to become due in respect of such Note after the
Redemption Date, calculated using a discount rate equal to the sum of: (i)
the yield to maturity on the United States treasury security having a
maturity date equal to the maturity date of such Note and trading in the
secondary market at the price closest to par; and (ii) 50 basis points;
provided, however, that if there is no United States treasury security
having a maturity date equal to the maturity date of such Note, such
discount rate shall be calculated using a yield to maturity interpolated or
extrapolated on a straight-line basis (rounding to the nearest month, if
necessary) from the yields to maturity for the two United States treasury
securities having maturity dates most closely corresponding to the maturity
date of such Note and trading in the secondary market at the price closest
to par. The Discounted Present Value shall be calculated on the third
Business Day prior to the Redemption Date.

         Notice of any redemption must be given at least 30 days but not
more than 60 days before the Redemption Date to each Holder of Notes to be
redeemed at its registered address. Notwithstanding the provisions of
Section 1104 of the Indenture, notice of such redemption need not set forth
the Redemption Price but only the manner of calculation thereof. The Issuer
will notify the Trustee of the Redemption Price promptly after the
calculation thereof. The Trustee shall have no responsibility for such
calculation.

         If money sufficient to pay the Redemption Price of the Notes to be
redeemed on the Redemption Date is deposited on or before the Redemption
Date and the other conditions set forth in the Indenture are satisfied,
then on and after such date, interest will cease to accrue on the Notes
called for redemption.

         The Notes are not entitled to any sinking fund.

         Upon due presentment for registration of transfer of this Note at
the office or agency of the Issuer in the Borough of Manhattan, The City of
New York, or at such other locations as the Issuer may from time to time
designate, a new Note or Notes of authorized denominations for an equal
aggregate principal amount will be issued to the transferee in exchange
therefor, subject to the limitations provided in the Indenture, without
charge except for any tax or other governmental charge imposed in
connection therewith. In the event any Notes are called for redemption,
neither the Issuer nor the Trustee will be required to register the
transfer of or exchange the Notes to be redeemed.

         Prior to due presentment of this Note for registration of
transfer, the Issuer, the Trustee and any agent of the Issuer or the
Trustee may treat the Person in whose name this Note is registered as the
owner hereof for all purposes (subject to certain provisions relating to
Defaulted Interest), whether or not this Note be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.

         No recourse under or upon any obligation, covenant or agreement of
the Issuer in the Indenture or any indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer or director, as
such, of the Issuer or of any successor corporation, either directly or
through the Issuer or any successor corporation, under any rule of law,
statute or constitutional provision or by the enforcement of any assessment
or by any legal or equitable proceeding or otherwise, all such liability
being expressly waived and released by the acceptance hereof and as part of
the consideration of the issue hereof.

         This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.

         Terms used but not defined herein shall have the respective
meanings assigned thereto in the Indenture.

                                 ASSIGNMENT

         FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto:

         _____________________________________________________________________
(Please insert social security or other identifying number of assignee)

         _____________________________________________________________________
(Please insert name and address, including ZIP code, of assignee)

the within Note and all rights thereunder, hereby irrevocably constituting
and appointing such person attorney to transfer such Note on the books of
the Issuer, with full power of substitution in the premises.

Dated:  ________________   Signed:  __________________________________

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within Note in every particular without
alteration or enlargement or any change whatsoever.

Signature Guarantee

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