<PAGE> 1
PURSUANT TO RULE 424(B)(3)
REGISTRATION NO.: 333-09371
SUPPLEMENT NO. 4
DATED AUGUST 26, 1997
TO THE PROSPECTUS OF
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
DATED DECEMBER 23, 1996
This Supplement No. 4 is provided for the purpose of supplementing the
prospectus of Captec Franchise Capital Partners L.P. IV, a Delaware limited
partnership (the "Partnership"), dated December 23, 1996 (the "Prospectus").
This Supplement No. 4 expands upon, supplements, modifies and supersedes
certain information contained in the Prospectus and consolidates and/or
supersedes information in Supplement No. 3 dated August 1, 1997. This
Supplement No. 4 must be read in conjunction with the Prospectus. Unless
otherwise defined, capitalized terms used herein shall have the same meanings
accorded such terms in the Prospectus.
As of August 26, 1997, the Partnership had raised $9,165,593 through the
sale of 9,165.593 Units. The following material sets forth certain information
regarding (i) the Partnership's purchase of Properties and Equipment Packages,
(ii) revisions to the Partnership Agreement in response to comments made by
certain securities administrators in states in which the Partnership intends to
sell Units, and (iii) events that happened after the date of the Prospectus.
PROPERTY ACQUISITIONS
REAL ESTATE
<TABLE>
<CAPTION>
PURCHASE
DATE CONCEPT/LOCATION PRICE LESSEE
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<S> <C> <C> <C>
3/10/97 Boston Market $964,000 Finest Foodservice L.L.C.
Rochester, Minnesota
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7/25/97 Carino's Italian Kitchen $1,600,000 Kona Restaurant Group, Inc.
El Paso, Texas
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7/25/97 Golden Corral Restaurant $550,000 Corral South Store 3, Inc.
Lakeland, Florida
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8/8/97 Blockbuster Video $1,114,286 Blockbuster Videos, Inc.
Riverdale, Georgia
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</TABLE>
EQUIPMENT
<TABLE>
PURCHASE
DATE CONCEPT/LOCATION PRICE LESSEE
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<S> <C> <C> <C>
3/31/97 Applebee's Neighborhood $402,000 J.M.C. Limited Partnership
Grill & Bar
Midvale, Utah
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4/3/97 Black-Eyed Pea $350,000 DenAmerica Corporation
Plano, Texas
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5/27/97 Shells Seafood Restaurant $118,658 Shells Seafood Restaurants, Inc.
Jacksonville, Florida
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5/27/97 Shells Seafood Restaurant $93,460 Shells Seafood Restaurants, Inc.
Winter Haven, Florida
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6/4/97 Golden Corral Restaurant $506,198 Corral South Store 4, Inc.
Temple Terrace, Florida
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6/25/97 Arby's $159,471 Girardi-Riva Enterprises, Inc.
Pasco, Washington
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7/9/97 Breckenridge Brewery & Pub $791,000 BBI Acquisition Co.
Breckenridge, Colorado
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7/25/97 Burger King $30,600 Virginia QSC, L.L.C.
Colonia Heights, Virginia
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</TABLE>
Boston Market Restaurant (Rochester, Minnesota)
On March 10, 1997 the Partnership acquired the land and 3,035 square foot
building comprising a Boston Market restaurant located at 1201 S. Broadway,
Rochester, Minnesota (the "Minnesota Property"). The Minnesota Property was
constructed for its present use in November of 1995 and was fully operational
at the time of the purchase. The Minnesota Property was purchased from, and
leased back to Finest Foodservice L.L.C., a Delaware limited liability company
("Finest Foodservice"). Finest Foodservice operates casual dining restaurants
under the primary trade name of Boston Market. The Partnership purchased the
Minnesota Property for a purchase price of $964,000.
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Finest Foodservice and the Partnership have entered into a lease (the
"Finest Foodservice Lease"), which is an absolute net lease, whereby Finest
Foodservice is responsible for all expenses related to the Minnesota Property,
including real estate taxes, insurance, maintenance and repair costs. The
Finest Foodservice Lease term expires on April 1, 2012 with five renewal
options of five years each. Annual rental (the "Annual Rental") is payable
according to the following schedule:
<TABLE>
<CAPTION>
PERIOD ANNUAL RENTAL
<S> <C>
Lease Years 1-5 $101,220
Lease Years 6-10 $111,342
Lease Years 11-15 $122,525
Lease Years 16-20 $134,777
Lease Years 21-25 $148,255
Lease Years 26-30 $163,081
Lease Years 31-40 Fair market value determined for each
subsequent five-year period at
the beginning of the 31st and 36th
Lease Years
</TABLE>
Beginning in the sixth lease year, and in addition to the Annual Rental
provided above, Finest Foodservice will pay percentage rent on an annual basis
equal to the difference between five percent of "gross sales" (as defined in
the Finest Foodservice Lease) during such lease year less the Annual Rental
payable for such lease year.
Boston Chicken, Inc., a Delaware corporation (the "Option Holder"), has an
option to purchase and first right of refusal to purchase the Minnesota
Property. The Option Holder has the right to purchase the Minnesota Property
on the same terms and conditions as set forth in the offer or the Option Holder
may elect an alternate purchase price as follows: (a) during the first and
second lease years, an alternate purchase price equal to the total Annual
Rental payable for the lease year subsequent to the lease year in which the
option is exercised divided by 9.462%; (b) during the third lease year, an
alternate purchase price equal to the total Annual Rental for the third ease
year divided by 9.978%; (c) during the fourth lease year, an alternative
purchase price equal to the Annual Rental for the fourth lease year divided by
9.785%; and (d) during the fifth lease year, an alternative purchase price
equal to the Annual Rental for the fifth lease divided by 9.580%.
The Option Holder has the option to purchase the Minnesota Property at the
following times and option prices:
PERIOD OPTION PRICE
Lease Years 6-8 Annual Rent payable for the Lease Year
subsequent to the Lease Year in which
the option is exercised divided
by ten percent (10%)
Last ninety (90) Annual Rent payable for the 16th Lease
days of the 15th Year divided by ten percent (10%)
Lease Year
Last ninety (90) The lesser of (i) fair market value
days of the 30th or (ii) one hundred ten percent (110%)
Lease Year of the Annual Rent payable for the
31st Lease Year divided by ten
percent (10%)
Last ninety (90) The lesser of (i) fair market value or (ii) one hundred
days of the 40th ten percent (110%) of the Annual Rent payable for the
Lease Year 40th Lease Year divided by ten
percent (10%)
The current annual rent per square foot for the Minnesota Property is
$33.35 per square foot. The depreciable basis of the Minnesota Property for
federal tax purposes if $614,000 and it will be depreciated using the straight
line method over 39 years, a rate of $15,744 per year.
An Affiliate of the Managing General Partner has received an Acquisition
Fee from the Partnership in an amount equal to $38,560 and expects to receive
an additional fee of $9,640 from the Partnership after leveraging the Property,
as provided for in the Prospectus. As provided in the Partnership Agreement,
these fees are being paid for services rendered in connection with the
selection, evaluation and acquisition of the Minnesota Property. In addition,
Finest Foodservice has paid to the same affiliate a closing fee equal to $4,820
as provided for in the Partnership Agreement. Finest Foodservice also paid all
of the expenses incident to the closing of the transaction contemplated by this
commitment including, without limitation, title insurance premiums, recording
fees and expenses and transfer taxes.
The Finest Foodservice Lease contains a substitution option that provides
in the event that Finest Foodservice determines the Minnesota Property is
inadequate or unprofitable or is rendered unsuitable by condemnation or
casualty, Finest Foodservice, subject to the Partnership's approval, may
substitute another property of equal or greater current value having a Boston
Market restaurant located thereon. All obligations under the Finest
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Foodservice Lease, including Annual Rental, percentage rent and taxes
attributable to rent and the Minnesota property, are unconditionally guaranteed
by Boston Chicken, Inc., a Delaware corporation.
The Finest Foodservice Lease contains material default provisions that
include, but are not limited to: (i) the vacating or abandonment of the
Minnesota Property by Finest Foodservice; (ii) the failure by Finest
Foodservice to make any payment due under the Finest Foodservice Lease; (iii)
the failure by Finest Foodservice to observe or perform any of the covenants,
conditions, or provisions of the Finest Foodservice Lease; and (iv) Finest
Foodservice making any general arrangement or general assignment for the
benefit of creditors. In the event of a material default by Finest
Foodservice, the Finest Foodservice Lease contains remedy provisions which are
summarized as follows: (i) the Partnership may terminate the Finest
Foodservice Lease and take possession of the Minnesota Property, in which case
the Partnership would be entitled to damages incurred by reason of the material
default; (ii) the Partnership may permit Finest Foodservice to remain in
possession of the Minnesota Property, in which case the Finest Foodservice
Lease would continue to be in effect; or (iii) the Partnership may pursue any
other legal remedy available.
Carino's Italian Kitchen Lease (El Paso, Texas)
On July 25, 1997 the Partnership acquired the land and 6,257 square foot
building comprising a Carino's Italian Kitchen restaurant located at 675
Sunland Park Drive, El Paso, Texas (the "Carino's Property"). The Carino's
Property was constructed for its present use in 1995 and was fully operational
at the time of the purchase. The Carino's Property was purchased from and
leased back to Kona Restaurant Group, Inc., a Delaware corporation ("Kona
Group"). Kona Group operates casual dining restaurants under the primary trade
names of Carino's Italian Kitchen and Kona Ranch Steak House. The Partnership
purchased a fee simple interest in the Carino's Property for a purchase price
of $1,600,000.
Kona Group and the Partnership have entered into a lease (the "Carino's
Lease"), which is an absolute net lease, whereby Kona Group is responsible for
all expenses related to the Carino's Property including real estate taxes,
insurance, maintenance and repair costs. The Carino's Lease term expires on
July 31, 2014 with one renewal option of six years and one renewal option of
seven years. The initial annual rent is equal to eleven percent (11%) of the
purchase price and will be payable in monthly installments on the first day of
each month. Thus, based on the purchase price of $1,600,000 the rent in the
first year of the Carino's Lease is $176,000 per year, or $14,667 per month.
The annual rent will increase by five percent (5%) on the August 1, 2000 and
every three years thereafter.
Kona Group has an option to purchase the Carino's Property during the
sixty-first (61st) full month of the Carino's Lease. In the event that Kona
Group elects to exercise the option to purchase in the sixty-first full month
of the Carino's Lease, the option price is $1,940,400.
The current annual rent per square foot for the Carino's Property is
$28.13 per square foot. The depreciable basis of the Carino's Property for
federal tax purposes is $500,000 and it will be depreciated using the straight
line method over 39 years, a rate of $12,821 per year.
An affiliate of the Managing General Partner has received an Acquisition
Fee from the Partnership in an amount equal to $64,000 and expects to receive
an additional fee of $16,000 from the Partnership after leveraging the
Property, as provided for in the Prospectus. These fees are being paid for
services rendered in connection with the selection, evaluation and acquisition
of the Carino's Property, as provided for in the Partnership Agreement. In
addition, Kona Group has paid to the same affiliate a commitment fee equal to
$16,000 as provided for in the Partnership Agreement. The Tenant also paid all
of the expenses incident to the closing of the transaction contemplated by this
commitment including, without limitation, title insurance premiums, recording
fees and expenses, and transfer taxes.
The Carino's Lease contains material default provisions that include, but
are not limited to: (i) the vacating or abandonment of the Carino's Property by
Kona Group; (ii) the failure by Kona Group to make any payment due under the
Carino's Lease; (iii) the failure by Kona Group to observe or perform any of
the covenants, conditions, or provisions of the Carino's Lease; and (iv) the
making by Kona Group of any general arrangement or general assignment for the
benefit of creditors. In the event of a material default by Kona Group, the
Carino's Lease contains remedy provisions which are summarized as follows: (i)
the Partnership may terminate the Carino's Lease and take possession of the
Carino's Property, in which case the Partnership would be entitled to damages
incurred by reason of the material default; (ii) the Partnership may permit
Kona Group to remain in possession of the Carino's Property, in which case the
Carino's Lease would continue to be in effect; or (iii) the Partnership may
pursue any other legal remedy available.
Golden Corral Restaurant Lease (Lakeland, Florida)
On July 25, 1997, the Partnership acquired an undivided 34.375% interest
as a tenant in common with Captec Franchise Capital Partners L.P. III, a
Delaware limited partnership and affiliate of the Managing General Partner
("Captec III"), in the land and 8,825 square foot building located at 4532
South Florida Avenue, Lakeland, Florida (the "Lakeland Property"). The
Lakeland Property was constructed for its present use in May of 1997 and
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leased to Corral South Store 3, Inc., a Florida corporation ("Corral South 3").
Corral South 3 operates casual dining restaurants under the primary trade name
of Golden Corral Restaurants. Captec 3 purchased the Lakeland Property for a
total purchase price of $1,600,000 and sold the 34.375% interest to the
Partnership for $550,000.
Corral South 3 and the Partnership have entered into a lease (the "Corral
South 3 Lease"), which is an absolute net lease, whereby Corral South 3 is
responsible for all expenses related to the Lakeland Property including real
estate taxes, insurance, maintenance and repair costs. The Corral South 3
Lease term commenced on June 1, 1997 and expires fifteen years thereafter. The
Corral South 3 Lease has two renewal options of five years each. The initial
annual rent is $174,400, or $14,533 per month, and increases by 8% on the
five-year anniversary of the Corral South 3 Lease and every five years
thereafter (including any renewal options). The Partnership's pro-rata share
of the initial annual rent will be $59,950 or $4,996 per month. The initial
annual rent per square foot on the Lakeland Property is $19.76. The
depreciable basis of the Lakeland Property for federal tax purposes is
$1,080,000 and it will be depreciated using the straight line method over 39
years, a rate of $27,692 per year.
The obligations under the Corral South 3 Lease are guaranteed for the
benefit of the Partnership by David C. Brown, an individual. David C. Brown is
the sole stockholder of Corral South 3. Corral South 3 has an option to
purchase the Lakeland Property commencing on the sixty-first month of the
Corral South 3 Lease. In the event that Corral South 3 elects to exercise the
option to purchase, the option price shall be $1,833,520.
An affiliate of the Managing General Partner has received an acquisition
fee from the Partnership in an amount equal to $22,000 and expects to receive
an additional fee of $5,500 from the Partnership after leveraging the Lakeland
Property as provided for in the Prospectus. These fees are being paid for
services rendered in connection with the selection, evaluation and acquisition
of the Lakeland Property, as provided for in the Partnership Agreement. In
addition, Corral South 3 has paid to the same affiliate a commitment fee equal
to $5,500, as provided for in the Partnership Agreement. Corral South 3 has
paid all of the expenses incident to the closing of the transaction
contemplated by this commitment including, without limitation, the
Partnership's attorney's fees, title insurance premiums, recording fees and
expenses and transfer taxes.
The Corral South 3 Lease contains material default provisions that
include, but are not limited to: (i) the vacating or abandonment of the
Lakeland Property by Corral South 3; (ii) the failure by Corral South 3 to make
any payment due under the Corral South 3 Lease; (iii) the failure by Corral
South 3 to observe or perform any of the covenants, conditions, or provisions
of the Corral South 3 Lease; and (iv) the making by Corral South 3 of any
general arrangement or general assignment for the benefit of creditors. In the
event of a material default by Corral South 3, the Corral South 3 Lease
contains remedy provisions which are summarized as follows: (i) the Partnership
may terminate the Corral South 3 Lease and take possession of the Lakeland
Property, in which case the Partnership would be entitled to damages incurred
by reason of the material default; (ii) the Partnership may permit Corral South
3 to remain in possession of the Lakeland Property, in which case the Corral
South 3 Lease would continue to be in effect; or (iii) the Partnership may
pursue any other legal remedy available.
Blockbuster Video (Riverdale, Georgia)
On August 8, 1997 the Partnership acquired the land and 6,500 square foot
building comprising a Blockbuster Video located at 8529 Georgia Highway 85,
Riverdale, Georgia (the "Blockbuster Property"). The Blockbuster Property was
constructed for its present use in 1995 and was fully operational at the time
of the purchase. The Blockbuster Property was purchased from Atlantis
Properties, L.L.C., a Georgia limited liability company ("Atlantis
Properties"), for a purchase price of $1,114,286.
The Partnership purchased the Blockbuster Property subject to a lease
dated April 4, 1997 (the "Blockbuster Lease") between Atlantis Properties and
Blockbuster Videos, Inc., a Texas corporation ("Blockbuster"), which is a net
lease, whereby Blockbuster is responsible for most expenses related to the
Blockbuster Property including real estate taxes, insurance, maintenance and
repair costs, except that the Partnership will be responsible for the repair
and maintenance of the structural systems including the roof, load-bearing
walls and floor slabs and exterior masonry walls and foundations. The
Blockbuster Lease term expires on June 30, 2007 with three renewal options of
five years each. Annual rental is payable according to the following schedule:
<TABLE>
<CAPTION>
PERIOD ANNUAL RENTAL
<S> <C>
Lease Years 1-5 $117,975
Lease Years 6-10 $132,145
Lease Years 11-15 $145,360
Lease Years 16-20 $159,900
Lease Years 21-25 $175,890
</TABLE>
The rent is payable in monthly installments on the first day of each month.
Thus, the monthly rent in the first five years of the Blockbuster Lease is
$9,831. Viacom International, Inc., a Delaware corporation, unconditionally
and irrevocably guaranteed the full and complete performance of the Blockbuster
Lease.
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The current annual rent per square foot for the Blockbuster Property is
$18.15 per square foot. The depreciable basis of the Blockbuster Property for
federal tax purposes is $754,286 and it will be depreciated using the straight
line method over 39 years, a rate of $19,341 per year.
An affiliate of the Managing General Partner has received an Acquisition
Fee from the Partnership in an amount equal to $44,571 and expects to receive
an additional fee of $11,143 from the Partnership after leveraging the
Property, as provided for in the Prospectus. These fees are being paid for
services rendered in connection with the selection, evaluation and acquisition
of the Blockbuster Property, as provided for in the Partnership Agreement. In
addition, Blockbuster has paid to the same affiliate a commitment fee equal to
$11,143 as provided for in the Partnership Agreement. The Tenant also paid all
of the expenses incident to the closing of the transaction contemplated by this
commitment including, without limitation, title insurance premiums, recording
fees and expenses and transfer taxes.
The Blockbuster Lease contains material default provisions that include,
but are not limited to: (i) the failure by Blockbuster to make any payment due
under the Blockbuster Lease; (ii) the failure by Blockbuster to observe or
perform any of the covenants, conditions, or provisions of the Blockbuster
Lease; and (iii) the making by Blockbuster of any general arrangement or
general assignment for the benefit of creditors. In the event of a material
default by Blockbuster, the Blockbuster Lease contains remedy provisions which
are summarized as follows: (i) the Partnership may terminate the Blockbuster
Lease and take possession of the Blockbuster Property, in which case the
Partnership would be entitled to damages incurred by reason of the material
default; (ii) the Partnership may permit Blockbuster to remain in possession of
the Blockbuster Property, in which case the Blockbuster Lease would continue to
be in effect; or (iii) the Partnership may pursue any other legal remedy
available; provided, however, that the Partnership may not accelerate rent and
is required to mitigate damages.
Applebee's Neighborhood Grill & Bar Equipment Lease (Midvale, Utah)
On March 31, 1997, the Partnership acquired, effective as of February 20,
1997, restaurant equipment (the "Applebee's Equipment") to be used in the
operation of an Applebee's Neighborhood Grill & Bar, located at 7045 South 1300
East, Midvale, Utah for $402,000.00. The Applebee's Equipment was acquired
from Captec Financial Group, Inc. ("Captec"), an affiliate of the General
Partners, which purchased the Applebee's Equipment from various vendors for a
total cost of $402,000 and leased it to J.M.C. Limited Partnership, a Utah
limited partnership, DBA Applebees ( "JMC"), by entering into a lease dated
March 1, 1997 (the "JMC Lease") with JMC on the Partnership's standard form of
equipment lease. JMC owns and operates the Applebee's Neighborhood Grill & Bar
restaurant under a franchise agreement.
On March 31, 1997, Captec assigned the JMC Lease to the Partnership,
effective as of February 20, 1997. Under the terms of the JMC Lease, JMC is
responsible for all expenses related to the Applebee's Equipment including
taxes, insurance, maintenance and repair costs. The lease term is 84 months
and the minimum annual rent is $82,056 payable in monthly installments of
$6,838 on the 1st day of each month. The annual rent remains fixed for the
entire JMC Lease term. The JMC Lease is guaranteed by the following: John B.
Prince, an individual; and William Tell, Inc., a Utah corporation. At the end
of the JMC Lease term, upon at least 90 days prior irrevocable notice to the
Partnership, JMC may purchase all of the Equipment for the lesser of fair
market value or Forty Thousand Two Hundred Dollars ($40,200).
JMC paid the first and last month's rent of $13,676 and interim rent in
the amount of $2,051 to the Partnership. An affiliate of the Managing General
Partner received an Acquisition Fee from the Partnership in an amount equal to
$16,080, and expects to receive an additional fee of $4,020 from the
Partnership after leveraging the Applebee's Equipment, as provided for in the
Partnership Agreement. In addition, JMC paid a commitment fee equal to $4,020
to the same affiliate as provided for in the Partnership Agreement.
Black-Eyed Pea Equipment Lease (Plano, Texas)
On April 3, 1997, the Partnership acquired restaurant equipment (the
"Black-Eyed Pea Equipment") to be used in the operation of a Black-Eyed Pea
restaurant located at 1905 Preston Road, Plano, Texas for $350,000. The
Black-Eyed Pea Equipment was acquired from DenAmerica Corp., which purchased
the Black-Eyed Pea Equipment from various vendors for a total cost of $350,000.
The Partnership leased the Black-Eyed Pea Equipment to DenAmerica Corporation,
a Georgia corporation d/b/a Black-Eyed Pea ("DenAmerica"), by entering into a
lease dated as of April 15, 1997 (the "DenAmerica Lease") with DenAmerica on
the Partnership's standard form of equipment lease. DenAmerica operates and
franchises restaurants under the primary trade names of Denny's and Black-Eyed
Pea.
Under the terms of the DenAmerica Lease, DenAmerica is responsible for all
expenses related to the Black-Eyed Pea Equipment including taxes, insurance,
maintenance and repair costs. The lease term is 84 months and the minimum
annual rent is $70,392 payable in monthly installments of $5,866 on the 15th
day of each month. The annual rent remains fixed for the entire DenAmerica
Lease term. At the end of the DenAmerica Lease term, upon at least 90 days
prior irrevocable notice to the Partnership, DenAmerica may purchase all of the
Black-Eyed Equipment for its fair market value at the date of the exercise of
the option.
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The Partnership consented to a sublease between DenAmerica and Texas BEP.,
LP., a Texas limited partnership, on the same terms and conditions as the
DenAmerica Lease. DenAmerica remains the obligor under the DenAmerica Lease.
DenAmerica paid the first and last month's rent of $11,732 and interim
rent in the amount of $2,346 to the Partnership. An affiliate of the Managing
General Partner received an Acquisition Fee from the Partnership in an amount
equal to $14,000 and expects to receive an additional fee of $3,500 from the
Partnership after leveraging the Black-Eyed Pea Equipment, as provided for in
the Partnership Agreement. In addition, DenAmerica paid a commitment fee equal
to $3,500 to the same affiliate as provided for in the Partnership Agreement.
Jacksonville Shells Seafood Equipment Lease (Jacksonville, Florida)
On May 27,1997, the Partnership acquired restaurant equipment to be used
in the operation of a Shells Seafood Restaurant, located at 9965 San Jose
Blvd., Jacksonville, Florida (the "Jacksonville Shells Equipment"). The
Jacksonville Shells Equipment was purchased from various vendors for a total
cost of $118,658.30 and leased to Shells Seafood Restaurants, Inc., a Delaware
corporation ("Shells Seafood"). Shells Seafood owns and operates Shells
Seafood Restaurants.
The Partnership and Shells Seafood entered into the Partnership's standard
form of equipment lease commencing on June 1, 1997 (the "Jacksonville Shells
Seafood Lease"). Under the terms of the Jacksonville Shells Seafood Lease,
Shells Seafood is responsible for all expenses related to the Jacksonville
Shells Equipment including taxes, insurance, maintenance and repair costs. The
lease term is 60 months and the minimum annual rent is $31,781 payable in
monthly installments of $2,648 on the 1st day of each month. The annual rent
remains fixed for the entire Jacksonville Shells Lease term. At the end of the
Jacksonville Shells Seafood Lease term, upon at least 90 days prior irrevocable
notice to the Partnership, Shells Seafood may purchase all of the Jacksonville
Shells Equipment for $11,866.
Shells Seafood paid the first and last month's rent of $5,297 and interim
rent in the amount of $441 to the Partnership. An affiliate of the Managing
General Partner received an Acquisition Fee from the Partnership in an amount
equal to $4,746, and expects to receive an additional fee of $1,187 from the
Partnership after leveraging the Jacksonville Shells Equipment, as provided for
in the Partnership Agreement. In addition, Shells Seafood paid a commitment
fee equal to $1,187 to the same affiliate as provided for in the Partnership
Agreement.
Winter Haven Shells Seafood Equipment Lease (Winter Haven, Florida)
On May 27,1997, the Partnership acquired restaurant equipment to be used
in the operation of a Shells Seafood Restaurant, located at 1551 3rd Street,
SW, Winter Haven, Florida (the "Winter Haven Shells Equipment"). The Winter
Haven Shells Equipment was purchased from various vendors for a total cost of
$93,460 and leased to Shells Seafood.
The Partnership and Shells Seafood entered into the Partnership's standard
form of equipment lease commencing on June 1, 1997 (the "Winter Haven Shells
Seafood Lease"). Under the terms of the Winter Haven Shells Seafood Lease,
Shells Seafood is responsible for all expenses related to the Winter Haven
Shells Equipment including taxes, insurance, maintenance and repair costs. The
lease term is 60 months and the minimum annual rent is $25,032 payable in
monthly installments of $2,086 on the 1st day of each month. The annual rent
remains fixed for the entire Winter Haven Shells Lease term. At the end of the
Winter Haven Shells Seafood Lease term, upon at least 90 days prior irrevocable
notice to the Partnership, Shells Seafood may purchase all of the Winter Haven
Shells Equipment for $9,346.
Shells Seafood paid the first and last month's rent of $4,172 and interim
rent in the amount of $348 to the Partnership. An affiliate of the Managing
General Partner received an Acquisition Fee from the Partnership in an amount
equal to $3,738, and expect to receive an additional fee of $935 from the
Partnership after leveraging the Winter Haven Shells Equipment, as provided for
in the Partnership Agreement. In addition, Shells Seafood paid a commitment
fee equal to $935 to the same affiliate as provided for in the Partnership
Agreement.
Golden Corral Equipment Lease (Temple Terrace, Florida)
On June 4,1997, the Partnership acquired restaurant equipment to be used
in the operation of a Golden Corral Restaurant located at 11801 56th Street
North, Temple Terrace, Florida (the "Golden Corral Equipment"). The Golden
Corral Equipment was purchased from various vendors for a total cost of
$506,198 and leased to Corral South Store 4, Inc. a Florida corporation dba
Golden Corral Restaurant ("Corral South 4"). Corral South 4 owns and operates
the Golden Corral Restaurant under a franchise agreement.
The Partnership and Corral South 4 entered into the Partnership's standard
form of equipment lease commencing on June 15, 1997 (the "Corral South 4
Lease"). Under the terms of the Corral South 4 Lease, Corral South 4 is
responsible for all expenses related to the Golden Corral Equipment including
taxes, insurance,
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maintenance and repair costs. The lease term is 60 months and the annual rent
is $131,207 payable in monthly installments of $10,934 on the 15th day of each
month. The annual rent remains fixed for the entire Golden Corral Lease
term. All obligations under the Corral South 4 Lease are guaranteed by David
C. Brown, an individual. At the end of the Corral South 4 Lease term, upon at
least 90 days prior irrevocable notice to the Partnership, Corral South 4 may
purchase all of the Golden Corral Equipment for $1.00.
At closing Corral South 4 paid the first and last month's rent of $21,868
and interim rent in the amount of $4,374 to the Partnership. An affiliate of
the Managing General Partner received an Acquisition Fee from the Partnership
in an amount equal to $20,248, and expects to receive an additional fee of
$5,062 from the Partnership after leveraging the Golden Corral Equipment, as
provided for in the Partnership Agreement. In addition, Corral South 4 paid a
commitment fee equal to $5,500 to the same affiliate as provided for in the
Partnership Agreement.
Arby's Equipment Lease (Pasco, Texas)
On June 25,1997, the Partnership acquired restaurant equipment to be used
in the operation of an Arby's restaurant, located at 2411 West Court, Pasco,
Washington (the "Arby's Equipment"). The Arby's Equipment was acquired from
various vendors for a total cost of $159,470.62 and leased to Girardi-Riva
Enterprises, Inc., an Arizona corporation dba Arby's Restaurant
("Girardi-Riva"). Girardi-Riva owns and operates the Arby's restaurant under a
franchise agreement.
The Partnership and Girardi-Riva entered into the Partnership's standard
form of equipment lease (the "Girardi-Riva Lease") commencing July 1, 1997.
Under the terms of the Girardi-Riva Lease, Girardi-Riva is responsible for all
expenses related to the Arby's Equipment including taxes, insurance,
maintenance and repair costs. The lease term is 84 months and the minimum
annual rent is $32,724 payable in monthly installments of $2,727 on the 1st day
of each month. The annual rent remains fixed for the entire Girardi-Riva Lease
term. All obligations under the Girardi-Riva Lease are jointly and severally
guaranteed by the following individuals: Richard Riva, Sharri Riva, Thomas
Girardi and Kathy Girardi. At the end of the Girardi-Riva Lease term, upon at
least 90 days prior irrevocable notice to the Partnership, Girardi-Riva may
purchase all of the Arby's Equipment for $1.00.
Girardi-Riva paid the first and last month's rent of $5,454 and interim
rent in the amount of $545 to the Partnership. An affiliate of the Managing
General Partner received an acquisition fee from the Partnership in an amount
equal to $6,379, and expects to receive an additional fee of $1,595 from the
Partnership after leveraging the Arby's Equipment, as provided for in the
Partnership Agreement. In addition, Girardi-Riva paid a commitment fee equal
to $1,595 to the same affiliate as provided for in the Partnership Agreement.
Breckenridge Brewery & Pub Equipment Lease (Breckinridge, Colorado)
On July 9, 1997, the Partnership purchased restaurant equipment to be used
in the operation of an Breckenridge Brewery & Pub, located at 600 South Main,
Breckenridge, Colorado (the "Breckenridge Equipment") for $791,000. The
Breckenridge Equipment was acquired from, and leased back to BBI Acquisition
Co., a Colorado corporation dba Breckenridge Brewery & Pub ("BBI").
The Partnership and BBI entered into the Partnership's standard form of
equipment lease ("BBI Lease") commencing August 1, 1997. Under the terms of
the BBI Lease, BBI is responsible for all expenses related to the Breckenridge
Equipment including taxes, insurance, maintenance and repair costs. The lease
term is 84 months and the minimum annual rent is $163,262 payable in monthly
installments of $13,605.20 on the 1st day of each month. The annual rent
remains fixed for the entire BBI Lease term. All obligations under the BBI
Lease are unconditionally guaranteed by Breckenridge Holding Company, a
Colorado corporation. At the end of the BBI Lease term, upon at least 90 days
prior irrevocable notice to the Partnership, BBI may purchase all of the
Breckenridge Equipment for $1.00.
BBI paid the first and last month's rent of $27,210 and interim rent in
the amount of $10,094 to the Partnership. An affiliate of the Managing General
Partner received an acquisition fee from the Partnership in an amount equal to
$31,640, and expects to receive an additional fee of $7,910 from the
Partnership after leveraging the Breckenridge Equipment, as provided for in the
Partnership Agreement. In addition, BBI paid a commitment fee equal to $7,910
to the same affiliate as provided for in the Partnership Agreement.
Burger King Equipment Lease (Colonial Heights, Virginia)
On July 25,1997, the Partnership made an initial disbursement of $30,600
for restaurant equipment to be used in the operation of a Burger King
restaurant, located at 401 Southpark Blvd., Colonial Heights, Virginia ("Burger
King Equipment"). The Burger King Equipment will be acquired from various
vendors for a total cost of up to $310,000 and leased to Virginia QSC, LLC, a
Delaware limited liability company dba Burger King ("Virginia QSC"). Virginia
QSC owns and operates the Burger King restaurant under a franchise agreement.
The Partnership and Virginia QSC have entered into a Progress Payment
Agreement dated July 15, 1997, ("Agreement") whereby the Partnership shall
provide disbursements of down payments and interim payments to pay
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approved costs associated with the purchase of the Burger King Equipment.
Under the terms of the Agreement, it is estimated that all of the Burger King
Equipment will be delivered and installed and all disbursements made on or
before October 31, 1997. Virginia QSC shall pay to the Partnership a daily
progress rental payment for each day that any down payment and/or interim
payment remains outstanding. The daily progress payment shall be equal to
.00031944 times the total amount outstanding to the date upon which the last of
the following events shall have occurred: (a) Virginia QSC shall have paid the
first regularly monthly scheduled installment of rent; or (b) all of the Burger
King Equipment had been delivered, installed and accepted by Virginia QSC.
The Partnership and Virginia QSC entered into the Partnership's standard
form of equipment lease (the "Virginia QSC Lease") dated July 15, 1997. Under
the terms of the Virginia QSC Lease, Virginia QSC is responsible for all
expenses related to the Burger King Equipment including taxes, insurance,
maintenance and repair costs. The base lease term is 84 months and will
commence on the first or fifteenth of the month following the final funding
under the Agreement. Under the terms of the Virginia QSC Lease, the minimum
annual rent is $64,058 and is payable in monthly installments of $5,338. The
annual rent remains fixed for the entire Virginia QSC Lease term. All
obligations under the Virginia QSC Lease are jointly and severally
unconditionally guaranteed by the following individuals: Justin Hathaway,
Steven Porath and Alan Buford, each of whom is a member of Virginia QSC. At
the end of the Virginia QSC Lease term, upon at least 90 days prior irrevocable
notice to the Partnership, Virginia QSC may purchase all of the Burger King
Equipment for $1.00.
Virginia QSC will pay the first and last month's rent of $5,338 and
interim rent to the Partnership at final funding. An affiliate of the Managing
General Partner received an acquisition fee from the Partnership in an amount
equal to $1,224, and expects to receive an additional acquisition fees of
$11,176 at final funding of the additional $279,400. In addition, an affiliate
of the Managing General Partner will receive $3,100 from the Partnership after
leveraging the Burger King Equipment, as provided for in the Partnership
Agreement. Virginia QSC paid a commitment fee equal to $3,100 to the same
affiliate, as provided for in the Partnership Agreement.
Property and Equipment Acquisitions-General
With respect to each of the Properties, an affiliate of the Managing
General Partner (i) considered factors such as the potential value of the site,
the financial condition and business and operating history of the tenant, and
demographic data for the area in which the Property is located, (ii) analyzed
demographic, geographic and market diversification data for the area in which
each Property is located and reviewed an independent MAI appraisal of each
Property and the analysis regarding comparable properties contained therein,
and (iii) negotiated the purchase price.
The Partnership purchased each Property and Equipment package with cash
from Offering proceeds. It is anticipated that each such Property and
Equipment package will be leveraged as provided for in the Prospectus.
However, the Partnership presently does not have a financing commitment. With
respect to each of the Properties and the Equipment packages, the General
Partners believe that the amount of insurance carried by each tenant is
adequate.
RISK FACTORS
The following paragraph is added to the end of the section of the
Prospectus entitled "Risk Factors - Litigation against General Partner and
Possible Adverse Effect on Net Worth":
On January 31, 1997, the Court's decision was reversed on
appeal by the Michigan Court of Appeals and the case will either
be dismissed or subject to further proceedings if the plaintiffs
appeal the Court of Appeals decision.
PRIOR OFFERINGS
The following text has been added to the first paragraph of this Section
of the Prospectus:
On January 29, 1997, effective as of January 1, 1997, Captec L.P.
II sold all of its equipment packages and real estate properties
to an Affiliate of the Managing General Partner for $2,760,000 in
a transaction that was consented to by a majority in interest of
the limited partners. Simultaneously with such sale, Captec L.P.
II paid all of its expenses and distributed its remaining
$2,000,569 to its limited partners.
PLAN OF DISTRIBUTION
The subsections of this section of the Prospectus titled "General",
"Compensation", and "Indemnification" are amended, effective as of the date of
this Prospectus Supplement, to read in their entirety as follows:
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GENERAL
The Offering is being made on a "best efforts, part or none" basis through
broker-dealers who are members of the National Association of Securities
Dealers, Inc. (the "Participating Dealers") and Captec Securities Corporation,
which will act as Dealer-Manager. The individual General Partner and the
corporate General Partner are each an Affiliate of the Dealer-Manager. The
Offering is conditioned upon sale of the Minimum Number of Units prior to the
close of business one year after the effective date of this Prospectus (the
"Termination Date"). Since the Minimum Number of Units was sold on March 5,
1997, prior to the Termination Date, the General Partners may extend the
Offering to a date not later than the earlier to occur: (i) sale of all Units
offered hereby; or (ii) two years after the effective date of this Prospectus
(the "Extended Termination Date"). After the Minimum Number of Units was sold,
the Partnership has and will schedule interim closings at which subscribers
will be admitted as Limited Partners on at least a monthly basis.
The Offering is made pursuant to agreements among the General Partners,
the Partnership, the Dealer-Manager and the Participating Dealers pursuant to
which the Participating Dealers are acting as agents of the Partnership for the
purpose of offering and selling Units. The Units are being offered on a "best
efforts, part or none" basis, which means that Participating Dealers are not
obligated to purchase any Units but are required only to use their best efforts
to sell Units to investors.
COMPENSATION
Subject to the provisions for reduced selling commissions, the Partnership
will pay selling commissions equal to 8.0% of Gross Proceeds to the
Dealer-Manager for Units sold by it. The Dealer-Manager may reallow fees of
up to 8% to the Participating Dealers with respect to Units sold by them. The
General Partners also paid an additional selling commission equal to 1% of
Gross Proceeds to Participating Dealers from Units sold until the Minimum
Number of Units was sold. The Dealer-Manager may also receive up to 0.5% of
Gross Proceeds as reimbursement for bona fide due diligence expenses. The
Dealer-Manager may reallow to any Participating Dealer or its registered
representatives all or any portion of this fee based upon the bona fide due
diligence expenses incurred. The General Partners will receive a
Non-Accountable Expense Allowance in an amount equal to 2% of Gross Proceeds to
cover certain expenses relating to the offer and sale of Units (including the
additional 1% selling commission payable until the Minimum Number of Units is
sold). In no event will sales commissions, the Non-Accountable Expense
Allowance, Organization and Offering Expenses, wholesaling salaries and
expenses and expenses of sales seminars, exceed in the aggregate, 13% of Gross
Proceeds.
The General Partners, their Affiliates and Participating Dealers may
purchase up to 10% of the Units, net of any selling commissions but otherwise
on the same terms as purchasers who are not Affiliates. Purchase of Units by
the General Partners and their Affiliates will not be counted for purposes of
reaching the Minimum Number of Units. Any purchases by the General Partners
will be for investment purposes only and not with a view toward resale.
Investors will not have a right to withdraw and receive a return of their
contributions. Neither the General Partners nor any of their Affiliates will
directly or indirectly pay or award any compensation to a third party engaged
as an investment adviser as inducement to advise favorably toward investment in
the Partnership. In addition, the selling commissions to the Dealer-Manager and
Participating Dealers will be reduced on sales of 501 or more Units in
accordance with the following Schedule:
<TABLE>
<CAPTION>
Investor's Selling Commission Per Unit
Purchase Price --------------------------------
Dollar Amount Purchased Per Unit Percent Dollar Amount
- ----------------------- -------------------- -------------- ----------------
<S> <C> <C> <C>
$1,000 - $500,000 $1,000 8.0% $80.00
$501,000 - $750,000 $980 6.0% $60.00
$751,000 - $1,000,000 $970 5.0% $50.00
$1,001,000 - $1,500,000 $960 4.0% $40.00
$1,501,000 - $2,000,000 $950 3.0% $30.00
$2,001,000 and above $940 2.0% $20.00
</TABLE>
The purchaser of such Units will be credited with such reduced commission
and the net proceeds to the Partnership will not be affected by the discount.
Subscriptions may be combined for purposes of determining the volume discounts
applicable to subscriptions from a purchaser.
INDEMNIFICATION
The Partnership, General Partners, and Dealer-Manager have agreed to
indemnify the Participating Dealers and the Participating Dealers have agreed
to indemnify the General Partners, Dealer-Manager, and the Partnership against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Act"). In the opinion of the Securities and Exchange Commission,
indemnification for liabilities under the Act is against public
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policy and therefore unenforceable. The Participating Dealers may be deemed to
be underwriters as that term is defined in the Act.
AMENDMENT TO THE AGREEMENT OF LIMITED
PARTNERSHIP OF CAPTEC FRANCHISE
CAPITAL PARTNERS IV
Sections 12, 14, and 15 of the Partnership's Agreement of Limited
Partnership included as Exhibit B to the Prospectus (the "Partnership
Agreement"), have been corrected and amended, consistent with the disclosures
in the Prospectus as set forth below:
12. TRANSFERABILITY OF UNITS
Section 12.1.4 of the Partnership Agreement has been amended so as to read in
its entirety as follows:
12.1.4 if the Managing General Partner determines in its sole
discretion that such assignment would prevent the Partnership from
being able to satisfy either the 2% or 5% "safe harbors" contained
in Service Advance Notice 88-75 or in corresponding regulations or
the Partnership has received an opinion of counsel or a favorable
service ruling that such transfer would result in the Partnership
being classified as a "publicly-traded partnership" for federal
income tax purposes.
14. RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND DUTIES OF THE MANAGING
GENERAL PARTNER
The first sentence of Section 14.4.5 has been amended so as to permit the
Partnership to only enter into co-tenancy arrangements, joint ventures or
general partnerships with non-affiliates that own one or more Assets, and
Section 14.4.5 now reads in its entirety as follows:
cause the Partnership to invest in any Asset with unaffiliated
parties that own one or more Assets through co-tenancy
arrangements, joint ventures or general partnerships except on
substantially the same terms and conditions (although not
necessarily the same percentage interest) as such unaffiliated
parties; provided, however, that no such investment shall be
entered into by the Partnership (i) if it involves the payment of
duplicative property management or other fees which would have the
effect of circumventing any of the restrictions on and prohibited
transactions involving conflicts of interest contained in this
Partnership Agreement, and (ii) unless the Partnership acquires a
controlling interest in such joint venture or partnership.
15. RIGHTS AND POWERS OF THE LIMITED PARTNERS
The last sentence of Section 15.3 has been revised so as to remove the
General Partners' right to vote the Units of those Limited Partners that do not
submit a vote within a certain time period, and Section 15.3 reads in its
entirety as follows:
15.3 Consent Without a Meeting. The Managing General Partner may
and, upon receipt of a request in writing signed by ten percent
(10%) or more in interest of the Limited Partners, the Managing
General Partner shall, submit any matter upon which the Limited
Partners are entitled to act, to the Limited Partners for a vote
by written consent without a meeting. For purposes of obtaining a
written vote under this Partnership Agreement, the Managing
General Partner may require a written response within a specified
time, but not less than fifteen (15) days and no more than sixty
(60) days from receipt of said request.
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