<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1998
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________.
COMMISSION FILE NUMBER 000-23733
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CAPITAL AUTOMOTIVE REIT
(Exact name of registrant as specified in its charter)
Maryland 54-1870224
(State of organization) (I.R.S. Employer
Identification Number)
1420 Spring Hill Road, Suite 525, McLean, Virginia 22102
(Address of principal executive offices and zip code)
(703) 288-3075
(Registrant's telephone Number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of Common Shares of Beneficial Interest outstanding as of November 10,
1998 was 21,707,415.
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CAPITAL AUTOMOTIVE REIT
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I -- Financial Information
Item 1 -- Financial Statements
Consolidated Balance Sheets -- September 30, 1998 (unaudited)
and December 31, 1997 3
Consolidated Statements of Operations (unaudited) -- three
months and nine months ended September 30, 1998 4
Consolidated Statements of Changes in Shareholders' Equity
(Deficit) -- nine months ended September 30, 1998
(unaudited) and period from October 20, 1997 (date of
organization) through December 31, 1997 5
Consolidated Statement of Cash Flows (unaudited) -- nine months
ended September 30, 1998 6
Notes to Consolidated Financial Statements (unaudited) 7 - 14
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 15 - 21
Item 3 -- Quantitative and Qualitative Disclosures About Market Risk 21
Part II -- Other Information
Item I -- Legal Proceedings 22
Item 2 -- Changes in Securities and Use of Proceeds 22 - 24
Item 3 -- Defaults Upon Senior Securities 24
Item 4 -- Submission of Matters to Vote of Security Holders 24
Item 5 -- Other Information 24
Item 6 -- Exhibits and Reports on Form 8-K 24
Signatures 25
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CAPITAL AUTOMOTIVE REIT
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
ASSETS
<S> <C> <C>
Real estate:
Land $ 208,099 $ -
Building and improvements 205,174 -
Accumulated depreciation (3,234) -
------------- ------------
410,039 -
Furniture, fixtures and equipment, net
of accumulated depreciation 250 29
Cash and cash equivalents 40,138 25
Other assets, net 5,641 957
------------- ------------
TOTAL ASSETS $ 456,068 $ 1,011
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT):
LIABILITIES:
Borrowings under line of credit $ 13,000 $ 1,000
Accounts payable and accrued expenses 7,547 661
Security deposits payable 3,702 -
------------- ------------
TOTAL LIABILITIES 24,249 1,661
------------- ------------
Minority Interest 90,335 -
SHAREHOLDERS' EQUITY/(DEFICIT):
Preferred shares, $.01 par value; 20,000,000
shares authorized; none outstanding - -
Common shares, $.01 par value; authorized
100,000,000 shares; issued 24,792,115 and
10 shares 248 -
Additional paid-in-capital 348,264 -
Retained earnings (accumulated deficit) 3,929 (650)
Less treasury shares at cost, 943,000 common
shares (10,957) -
------------- ------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 341,484 (650)
------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY/(DEFICIT) $ 456,068 $ 1,011
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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CAPITAL AUTOMOTIVE REIT
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
Sept. 30, 1998 Sept. 30, 1998
-------------- --------------
<S> <C> <C>
Revenue:
Rental income $ 8,425 $ 15,254
Interest income 1,938 6,975
------------ ------------
Total revenue 10,363 22,229
------------ ------------
Expenses:
Depreciation and amortization 1,972 3,311
General and administrative 1,630 3,992
Interest 159 328
------------ ------------
Total expenses 3,761 7,631
------------ ------------
Net income before minority interest 6,602 14,598
Minority interest (1,381) (2,928)
------------ ------------
Net income applicable to common
shareholders $ 5,221 $ 11,670
============ ============
Shares of common stock outstanding
used to compute basic earnings
per share 24,713 20,597
============ ============
Basic earnings per share $ 0.21 $ 0.57
============ ============
Shares of common stock outstanding
used to compute diluted earnings
per share 24,713 20,665
============ ============
Diluted earnings per share $ 0.21 $ 0.56
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CAPITAL AUTOMOTIVE REIT
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/(DEFICIT)
(in thousands, except share data)
<TABLE>
<CAPTION>
Retained
Common Shares Additional Earnings/
----------------------- Paid-in (Accumulated Treasury
Shares Amount Capital Deficit) Shares Total
---------- --------- ---------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 20, 1997 - $ - $ - $ - $ - $ -
Net loss - - - (650) - (650)
Capital contribution 10 - - - - -
---------- --------- ---------- ------------ --------- --------
BALANCE AT DECEMBER 31, 1997 10 - - (650) - (650)
Repurchase of initial shares (10) - - - - -
Proceeds from initial public offering 20,000,000 200 299,800 - - 300,000
Proceeds from exercise of underwriters'
over-allotment option 3,000,000 30 44,970 - - 45,000
Proceeds from private placement 1,792,115 18 24,982 - - 25,000
Payment of underwriting discounts,
commissions and other offering expenses - - (27,715) - - (27,715)
Adjustment to reflect minority interest
ownership in Operating Partnership - - 6,227 - - 6,227
Purchase of treasury shares (943,000) - - - (10,957) (10,957)
Dividend payment - - - (7,091) - (7,091)
Net income - - - 11,670 - 11,670
---------- --------- ---------- ------------ -------- --------
BALANCE AT SEPTEMBER 30, 1998 (UNAUDITED) 23,849,115 $ 248 $ 348,264 $ 3,929 $(10,957) $341,484
========== ========= ========== ============ ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CAPITAL AUTOMOTIVE REIT
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(in thousands)
(unaudited)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 11,670
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,311
Income applicable to minority interest 2,928
Increase in other assets (4,717)
Increase in accounts payable and accrued expenses 6,886
Increase in security deposits payable 3,702
------------
Net cash provided by operating activities 23,780
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (263)
Real estate acquisitions (317,987)
------------
Net cash used in investing activities (318,250)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 13,000
Repayment of short-term revolving line of credit (1,000)
Proceeds from issuance of initial public offering of
common shares and underwriters' over-allotment
option, net of issuance costs 317,285
Proceeds from issuance of private placement,
net of issuance costs 25,000
Payment of cash dividend (7,091)
Payment of partner distribution (1,654)
Purchase of treasury shares (10,957)
------------
Net cash provided by financing activities 334,583
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 40,113
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 25
------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 40,138
============
SUPPLEMENTAL DATA:
Real estate acquisitions in exchange for
partnership units $ 95,286
============
Interest paid during the period $ 305
============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
CAPITAL AUTOMOTIVE REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Capital Automotive REIT (the "Company") was formed as a Maryland real estate
investment trust on October 20, 1997 and was initially capitalized on such date
through the sale of ten common shares of beneficial interest, par value $.01 per
share. The Company's mission is to invest in the real property and improvements
used by multi-site, multi-franchised dealerships and related businesses located
in major metropolitan areas throughout the United States, through its ownership
interest in Capital Automotive L.P. (the "Operating Partnership").
In February 1998, the Company completed an Initial Public Offering ("IPO") of
its common shares of beneficial interest, par value $.01 per share (the "Common
Shares"), whereby 20.0 million Common Shares were issued at $15 per Common
Share, resulting in net proceeds of approximately $275.4 million, after
underwriting discounts and commissions and other expenses of the IPO. In
addition, FBR Asset Investment Corporation, an affiliate of Friedman, Billings,
Ramsey & Co., Inc. ("FBR"), the representative of the underwriters in the IPO,
purchased 1,792,115 Common Shares of the Company at the IPO price in a private
placement offering, resulting in net proceeds of $25 million, net of
underwriting discounts (the "FBR Offering"). In March 1998, 3.0 million Common
Shares subject to the underwriters' over-allotment option were issued at $15 per
Common Share, resulting in net proceeds of approximately $41.9 million, after
underwriting discounts and commissions. The Company contributed the net
proceeds of the IPO, over-allotment option and the FBR Offering to the Operating
Partnership in exchange for 24,792,115 units of limited partnership interest
("Units") in the Operating Partnership.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
by the Company's management in accordance with generally accepted accounting
principles for interim financial information and in conformity with the rules
and regulations of the Securities and Exchange Commission. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. The results of
operations for the nine months ended September 30, 1998, are not necessarily
indicative of the results that may be expected for the full year. These
financial statements should be read in conjunction with the Company's audited
consolidated financial statements and footnotes thereto, included in the
Company's Annual Report on Form 10-K/A for the period from October 20, 1997
(date of organization) through December 31, 1997.
7
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include all accounts of the
Company and the Operating Partnership. All intercompany amounts have been
eliminated in the consolidation.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid instruments purchased
with original maturities of three months or less.
Real Estate
Real estate is recorded at cost. External acquisition costs directly related to
each property are capitalized as a cost of the respective property. The cost of
real estate properties acquired is allocated between land and buildings based
upon estimated market values at the time of acquisition. Depreciation is
computed using the straight-line method over an estimated useful life of 20
years for the buildings and improvements.
Leases and Rental Income
The leases are triple net leases, and require the lessees to pay substantially
all expenses associated with operations, including taxes, utilities, insurance,
repairs, maintenance and other expenses. Current leases have initial terms
generally ranging from ten to 20 years, and generally include multiple options
to renew upon the same terms and conditions, at the option of the lessees.
Under current leases, annual base rent will be adjusted upward periodically
based on a factor of the consumer price index. Generally, the lease terms
establish minimum and maximum periodic adjustments. All leases are accounted
for as operating leases.
Income Taxes
The Company is qualified as a real estate investment trust under the provisions
of the Internal Revenue Code of 1986, as amended. As a real estate investment
trust, the Company is required to distribute at least 95% of its taxable income
to shareholders and meet certain other requirements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. ACQUISITION OF PROPERTIES
As of September 30, 1998, the Company owned 96 properties used by 23 dealer
groups. These properties are located in 16 states, operated by 137 automotive
franchises, represent 35 brands and total 3.4 million square feet of building
space on 521 acres of land.
8
<PAGE>
At the time of the IPO, the Company, through the Operating Partnership, had
entered into agreements to acquire 36 parcels of real property and improvements
(the "Initial Properties") from the affiliates of seven motor vehicle dealer
groups on which 49 automotive franchisees are located. Concurrent with the IPO,
the Operating Partnership acquired 21 of the Initial Properties that are located
primarily in suburban communities of the Washington, D.C. Metropolitan Area and
Pennsylvania. These Initial Properties were purchased for approximately $117.2
million, consisting of $41.3 million in the assumption and repayment of mortgage
debt, approximately 5.0 million Units (valued at $74.4 million) and $1.5 million
in closing costs. Subsequent to the IPO, the Company acquired 15 of the Initial
Properties located on the Eastern Shore of Maryland, Texas, southern Virginia,
Colorado and Nevada for approximately $50.8 million in cash.
During the second quarter, the Company, through the Operating Partnership,
signed definitive agreements to acquire 37 properties from the affiliates of ten
dealer groups for approximately $132.3 million (including estimated closing
costs through September 30, 1998). These properties are used by 53 automotive
franchises, located in Indiana, Georgia, Louisiana, Idaho, Arizona, Maryland,
Missouri, Connecticut, California and Ohio. Of these agreements, the Company
closed on 28 properties during the second quarter totaling approximately $96.4
million, consisting of $29.5 million in cash (including estimated closing costs
through September 30, 1998), $46.2 million in the assumption and repayment of
mortgage debt and approximately 1.3 million Units (valued at $20.7 million).
Subsequent to June 30, 1998, the Company closed on six properties totaling
approximately $29.6 million, consisting of $11.3 million in cash (including
estimated closing costs through September 30, 1998), $18.2 million in the
assumption and repayment of mortgage debt and Units valued at $100,000. The
acquisition of three properties, totaling approximately $6.3 million, is pending
completion of the Company's due diligence process.
During the third quarter, the Company, through the Operating Partnership, signed
definitive agreements to acquire 36 properties for approximately $161.7 million
(including estimated closing costs through September 30, 1998). Of these
agreements, the Company closed on 26 properties during the third quarter
totaling approximately $119.3 million. Subsequent to September 30, 1998, the
Company closed on eight properties totaling approximately $26.5 million. The
acquisition of two properties, totaling approximately $15.9 million, is pending
completion of the Company's due diligence process. Significant transactions
include the following:
. The closing of the acquisition of five properties from the Gunn Automotive
Group, totaling 30.9 acres, located in San Antonio, Texas for approximately
$22.4 million. The purchase price consists of approximately $4.9 million in
cash (including estimated closing costs through September 30, 1998) and $17.5
million in the assumption and repayment of mortgage debt. These properties
are used by six automotive franchises representing six brands, including
Chevrolet, Dodge and Nissan. The lease terms are 15 years with two 10-year
renewal options by the tenant.
. The closing of the acquisition of four properties from Warren Henry
Automobiles, totaling 10.9 acres, located in Miami, Florida for approximately
$12.7 million. The purchase price consists of approximately $6.7 million in
cash (including estimated closing costs through September 30, 1998) and $6.0
million in the assumption and repayment of mortgage debt. These properties are
used by four automotive franchises representing four brands, including
Infiniti, Jaguar, Volvo and Land Rover. The lease terms are 12 years with two
10-year renewal options by the tenant.
. The closing of the acquisition of four properties from Orr Automotive,
totaling 9.0 acres, located in Texarkana, Texas and Shreveport, Louisiana for
approximately $5.5 million. The purchase
9
<PAGE>
price consists of approximately $3.4 million in cash (including estimated
closing costs through September 30, 1998) and $2.1 million in the assumption
and repayment of mortgage debt. These properties are used by five automotive
franchises, including BMW, Acura, Infiniti, Honda and Mitsubishi. The lease
terms are 15 years with four 5-year renewal options by the tenant.
. The closing of the acquisition of three properties from the Momentum
Automotive Group, totaling 19.9 acres, located in Houston, Texas for
approximately $25.3 million. The purchase price consists of approximately
$14.2 million in cash (including estimated closing costs through September 30,
1998) and $11.1 million in the assumption and repayment of mortgage debt.
These properties are used by four automotive franchises, including Jaguar,
Porsche, Volvo and Saab. The lease terms are 15 years with two 10-year renewal
options by the tenant. These properties were acquired in conjunction with the
Automotive Realty Trust of America ("ARTA") agreement. See reference to the
ARTA agreement in the Management's Discussion and Analysis of Financial
Condition and Results of Operations section.
. The closing of the acquisition of four properties from the Lynn Alexander
Automotive Group, totaling 19.4 acres, located in San Angelo and Big Spring,
Texas for approximately $9.4 million. The purchase price consists of
approximately $5.9 million in cash (including estimated closing costs through
September 30, 1998) and $3.5 million in the assumption and repayment of
mortgage debt. These properties are used by 13 automotive franchises
representing seven brands, including Chrysler, Plymouth, Dodge, Jeep, Lincoln
Mercury and Nissan. The lease terms are 15 years with two 10-year renewal
options by the tenant. These properties were acquired in conjunction with the
ARTA agreement. See reference to the ARTA agreement in the Management's
Discussion and Analysis of Financial Condition and Results of Operations
section.
. The closing of the acquisition of three properties from Park Place Motor Cars,
totaling 20.5 acres, located in Houston, Dallas and Plano, Texas, for
approximately $33.1 million. The purchase price consists of approximately
$19.0 million in cash (including estimated closing costs through September 30,
1998), $14.1 million in the assumption and repayment of mortgage debt and
Units valued at $51,000. These properties are used by two automotive
franchises, including Mercedes-Benz and Lexus. The lease terms are 15 years
with two 10-year renewal options by the tenant. These properties were
acquired in conjunction with the ARTA agreement. See reference to the ARTA
agreement in the Management's Discussion and Analysis of Financial Condition
and Results of Operations section.
. The closing of the acquisition of two properties from Scott Fink, totaling
10.9 acres, located in Clearwater, Florida and operated by Sonic Automotive,
Inc., for approximately $8.7 million. The purchase price consists of
approximately $4.7 million in cash (including estimated closing costs through
September 30, 1998) and $4.0 million in the assumption and repayment of
mortgage debt. These properties are used by two automotive franchises,
including Toyota and Mitsubishi. The lease term is 9.25 years with two 5-year
renewal options by the tenant.
. The execution of definitive agreements to acquire five properties from the
Jackson Automotive Group, totaling 28.9 acres, located in Greenville, Sulphur
Springs and Commerce, Texas for approximately $4.5 million in cash. These
properties are used by 15 automotive franchises representing 11 brands,
including Pontiac, Cadillac, Oldsmobile, Mazda, Chrysler, Plymouth, Dodge,
Jeep, Nissan, Ford and Mercury. The lease terms are 15 years with four 5-year
renewal options by the tenant. The Company closed on the acquisition of these
properties from the Jackson Automotive Group in October 1998.
10
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. The execution of definitive agreements to acquire three properties from the
Gurley-Leep Automotive Group, totaling 29.4 acres, located in South Bend,
Indiana for approximately $22.0 million. The purchase price consists of
approximately $10.0 million in cash and $12.0 million in the assumption of
mortgage debt. These properties are used by 12 automotive franchises
including, Mercedes-Benz, Porsche, Audi, Honda, GMC Truck, Chrysler, VW and
Cadillac. The lease terms are 15 years with four 5-year renewal options by
the tenant. The Company closed on the acquisition of these properties from
the Gurley-Leep Automotive Group in November 1998.
. The execution of definitive agreements to acquire two properties from Moritz
Interests LTD, totaling 60.7 acres, located in Oklahoma City and Tulsa,
Oklahoma for approximately $15.9 million in cash. These properties are used
by three automotive franchises, including BMW, Buick and Jeep and one auto
auction. The lease terms are ten years with two 5-year renewal options by the
tenant.
4. EARNINGS PER SHARE
A reconciliation of net income and weighted average shares used to calculate
basic and diluted earnings per share for the three months and nine months ended
September 30, 1998 is as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Net Weighted Earnings
Income Average Shares Per Share
------- -------------- ---------
<S> <C> <C> <C>
Three Months Ended September 30, 1998:
Earnings per share -- basic $ 5,221 24,713 $ 0.21
Effect of dilutive securities:
Options (1) - - n/a
------- ------ ---------
Earnings per share -- diluted $ 5,221 24,713 $ 0.21
======= ====== =========
Nine Months Ended September 30, 1998:
Earnings per share -- basic $11,670 20,597 $ 0.57
Effect of dilutive securities:
Options (1) (39) 68 (0.01)
------- ------ ---------
Earnings per share -- diluted $11,631 20,665 $ 0.56
======= ====== ========
</TABLE>
(1) Adjustment to net income reflects change in Minority Interest share of
income based on ownership calculation including common share equivalents.
Adjustment to weighted average shares reflects exercise of dilutive options
for shares assuming treasury stock method.
11
<PAGE>
5. BORROWINGS UNDER LINE OF CREDIT
In October 1997, and amended as of January 30, 1998, Friedman, Billings, Ramsey
Group, Inc., an affiliate of FBR, issued to the Company a short-term revolving
line of credit in the amount of approximately $2.5 million. Draws on the line
of credit were used by the Company for organizational costs and offering costs,
and were repaid with the proceeds of the IPO.
In February 1998, the Company, through the Operating Partnership, entered into a
secured revolving line of credit from NationsBank, N.A. providing for a
borrowing capacity of $10.0 million. Borrowings bear interest at a fluctuating
rate equal to the LIBOR plus 1.50 percent (7.13 percent as of September 30,
1998). On August 14, 1998, the Company amended and restated the line of credit
to increase the borrowing capacity to $13.5 million and extend the expiration
date to November 19, 1998. On September 8, 1998, the Company amended and
restated the line of credit to increase the borrowing capacity to $19.1 million.
The total amount drawn down as of September 30, 1998 was $13.0 million, which is
guaranteed by the Company and affiliates of certain dealer groups. The line of
credit is secured by a blanket mortgage or mortgages on certain Initial
Properties acquired from certain affiliates. At maturity, the principal payment
in the aggregate amount of the then outstanding borrowings plus any accrued and
unpaid interest will be due and payable, unless the line of credit is renewed or
is refinanced as is currently contemplated by the Company. The line of credit
may be paid in full at any time without prepayment penalty or premium.
6. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive income in the Company's financial statements. This statement is
effective for fiscal years beginning after December 15, 1997. The adoption of
SFAS No. 130 has no significant impact on the Company's consolidated financial
position, results of operations or cash flows.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which requires financial and descriptive
information about reportable operating segments and related products, services,
geographic areas and major customers. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997. The Company believes that the adoption
of SFAS No. 131 will not have an impact on the Company's consolidated financial
position, results of operations or cash flows. The Company intends to implement
SFAS No. 131 at December 31, 1998.
12
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7. MINORITY INTEREST
Minority interest is calculated at approximately 20.9 percent of the Operating
Partnership's partners' capital and net income. The ownership of the Operating
Partnership as of September 30, 1998 is as follows (Units in thousands):
Units Percent
------- -------
Partners' capital:
Limited Partners 6,309 20.9%
The Company 23,849 79.1%
------- -------
Total 30,158 100.0%
======= ======
8. 401(K) PLAN
Effective April 1, 1998, the Company adopted the Capital Automotive L.P.
Employee 401 (k) Plan available to all employees hired prior to April 1, 1998
who are at least 21 years of age. Employees hired subsequent to April 1, 1998
are eligible to participate in the plan after three months of service.
Participants may contribute up to 20% of their earnings, on a pre-tax basis,
subject to annual limitations imposed by the Internal Revenue Code. The Company
may make matching or discretionary contributions to the plan at the discretion
of management. Employer contributions generally vest over five years. No
matching or discretionary contributions have been paid or declared for the three
months and nine months ended September 30, 1998.
9. COMMON SHARE REPURCHASE PROGRAM
On September 8, 1998, the Company announced that its Board of Trustees
authorized the repurchase of up to 3.0 million Common Shares. On October 21,
1998, the Company announced that its Board of Trustees authorized the repurchase
of up to 3.0 million additional Common Shares, bringing the total Common Share
repurchase program to 6.0 million. Purchases will be made from time to time in
open market transactions at prevailing prices or in negotiated private
transactions at management's discretion. The Company repurchased 943,000 Common
Shares at prices ranging from $11 3/8 to $11 7/8 per Common Share, during the
three-month period ended September 30, 1998. The Company repurchased an
additional 2,141,700 Common Shares at prices ranging from $9 1/8 to $14 per
Common Share through November 10, 1998. During the same time period, the
Operating Partnership redeemed an equivalent number of Units from the Company
for an equivalent purchase price.
10. COMMITMENTS
On September 23, 1998, the Company, through the Operating Partnership, entered
into a commitment with Global Alliance Finance Company, L.L.C. ("Lender") for a
$150.0 million permanent loan, which commitment expires November 22, 1998 unless
extended ("Permanent Loan"). The Permanent Loan will require consecutive
monthly installment payments of interest only for two years. Thereafter, equal
payments of principal and interest will be required in an amount sufficient to
amortize the Permanent Loan over a twenty-five year term. The term of the
Permanent Loan is ten years. The Permanent Loan will be secured by a first
mortgage on the properties financed. The proceeds of the Permanent Loan will be
used to refinance existing debt and working capital requirements.
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<PAGE>
On September 23, 1998, the Company, through the Operating Partnership, entered
into a forward rate lock agreement with the Lender, to effectively lock in
advance the fixed per annum interest rate ("Rate Lock") on the Permanent Loan.
On the date thereof, the Company paid to Lender a hedge deposit totaling $3.0
million ("Hedge Deposit") to lock the interest rate at 7.67% for a period of
sixty days from such date ("Fixed Rate Period").
In order to effect a Rate Lock, the Lender intends to enter into certain hedging
arrangements in its sole and absolute discretion (the "Hedging Arrangements").
After Hedging Arrangements have been put in place, if the fair market value of
such Hedging Arrangements declines by an amount equal to or greater than 1% of
the anticipated loan amount, the Company will, within one business day of notice
from Lender, deposit an additional amount to the Hedge Deposit equal to the
amount of such decline from time to time. No additional deposits have been paid
to Lender.
In the event, except default by the Lender, the Permanent Loan does not close
prior to expiration of the Fixed Rate Period, the actual term of the Permanent
Loan differs from the original 10 year term, or the final loan amount differs
from the original loan amount, the Company agreed to pay Lender's damages,
losses, liabilities, costs, fees and expenses (including breakage, unwind and
similar costs, fees and expenses (collectively, the "Breakage Costs"). The
Company will be fully responsible for all Breakage Costs, which are required to
be paid upon demand. Lender may apply all or a portion of the Hedge Deposit in
payment of Breakage Costs. Upon closing of the Permanent Loan, the Hedge
Deposit will be refunded to the Company.
11. SUBSEQUENT EVENTS
Declaration of Dividend
- -----------------------
On October 26, 1998, the Company declared a dividend of $0.27 per share which
will be paid on November 20, 1998 to shareholders of record as of November 9,
1998.
Short-term Debt
- ---------------
On October 16, 1998, the Company, through the Operating Partnership, entered
into a $50.0 million bridge loan with the Lender to be used to finance
acquisitions, working capital and for other corporate purposes ("Bridge Loan").
The Bridge Loan requires monthly payments of interest only and will mature on
the earlier of January 13, 1999 or the closing date of the Permanent Loan,
unless otherwise extended. The Bridge Loan bears interest at the one month
LIBOR plus 200 basis points.
Acquisitions
- ------------
During October 1998, the Company signed a definitive agreement and closed on the
acquisition of three properties from Motorcars Group, totaling 8.3 acres,
located in North Olmsted and Cleveland Heights, Ohio for approximately $12.7
million. The purchase price consists of approximately $9.7 million in cash and
$3.0 million in the assumption and repayment of debt. These properties are used
by six automotive franchises, including Oldsmobile, Pontiac, Honda, Volvo,
Mercedes-Benz and Infiniti. The lease terms are 12.5 years with two 10-year
renewal options by the tenant. These properties were acquired in conjunction
with the Automotive Realty Trust of America ("ARTA") agreement. See reference
to the ARTA agreement in the Management's Discussion and Analysis of Financial
Condition and Results of Operations section.
14
<PAGE>
CAPITAL AUTOMOTIVE REIT
ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998
The following discussion should be read in conjunction with the accompanying
unaudited consolidated financial statements and notes thereto.
OVERVIEW
Capital Automotive REIT was formed as a Maryland real estate investment trust on
October 20, 1997 and was initially capitalized on such date through the sale of
ten common shares of beneficial interest, par value $.01 per share. The
Company's mission is to invest in the real property and improvements used by
multi-site, multi-franchised dealerships and related businesses located in major
metropolitan areas throughout the United States, through its ownership interest
in Capital Automotive L.P. The Company is the first publicly-traded real estate
investment trust formed primarily to acquire and lease back the real estate used
by automotive dealers and automotive-related businesses.
In February 1998, the Company completed an IPO of its Common Shares whereby 20.0
million Common Shares were issued at $15 per Common Share, resulting in net
proceeds of approximately $275.4 million, after underwriting discounts and
commissions and other expenses of the IPO. In addition, FBR Asset Investment
Corporation, an affiliate of FBR, purchased 1,792,115 Common Shares of the
Company at the IPO price in a private placement offering, resulting in net
proceeds of $25 million, net of underwriting discounts. In March 1998, 3.0
million Common Shares subject to the underwriters' over-allotment option were
issued at $15 per Common Share, resulting in net proceeds of approximately $41.9
million, after underwriting discounts and commissions. The Company contributed
the net proceeds of the IPO, over-allotment option and the FBR Offering to the
Operating Partnership in exchange for 24,792,115 Units.
Substantially all of the Company's revenues are derived from (i) rents received
under triple net leases; and (ii) interest earned from the temporary investment
of funds in short-term investments.
The Company incurs operating and administrative expenses including principally,
compensation expense for its executive officers and other employees,
professional fees and various expenses incurred in the process of acquiring
additional properties. The Company is self-administered and managed by its
executive officers and staff, and does not engage a separate advisor or pay an
advisory fee for services, although the Company will engage legal, accounting,
tax and financial advisors from time to time. The primary non-cash expense of
the Company is the depreciation of its properties. The Company depreciates
buildings and improvements on the properties currently owned by it over a 40-
year and 20-year period for tax and financial reporting purposes, respectively.
The Company does not own or lease any significant personal property, furniture
or equipment at any property currently owned by it.
ACQUISITIONS
As of September 30, 1998, the Company owned 96 properties used by 23 dealer
groups. These properties are located in 16 states, operated by 137 automotive
franchises, represent 35 brands and total 3.4 million square feet of building
space on 521 acres of land. The Company's portfolio weighted average initial
cap rate was 10.7% as of the end of the third quarter 1998.
15
<PAGE>
At the time of the IPO, the Company, through the Operating Partnership, had
entered into agreements to acquire 36 Initial Properties from the affiliates of
seven motor vehicle dealer groups on which 49 automotive franchisees are
located. Concurrent with the IPO, the Operating Partnership acquired 21 of the
Initial Properties that are located primarily in suburban communities of the
Washington, D.C. Metropolitan Area and Pennsylvania. These Initial Properties
were purchased for approximately $117.2 million, consisting of $41.3 million in
the assumption and repayment of mortgage debt, approximately 5.0 million Units
(valued at $74.4 million) and $1.5 million in closing costs. Subsequent to the
IPO, the Company acquired 15 of the Initial Properties located on the Eastern
Shore of Maryland, Texas, southern Virginia, Colorado and Nevada for
approximately $50.8 million in cash.
During the second quarter, the Company, through the Operating Partnership,
signed definitive agreements to acquire 37 properties from the affiliates of ten
dealer groups for approximately $132.3 million (including estimated closing
costs through September 30, 1998). These properties are used by 53 automotive
franchises, located in Indiana, Georgia, Louisiana, Idaho, Arizona, Maryland,
Missouri, Connecticut, California and Ohio. Of these agreements, the Company
closed on 28 properties during the second quarter totaling approximately $96.4
million, consisting of $29.5 million in cash (including estimated closing costs
through September 30, 1998), $46.2 million in the assumption and repayment of
mortgage debt and approximately 1.3 million Units (valued at $20.7 million).
Subsequent to June 30, 1998, the Company closed on six properties totaling
approximately $29.6 million, consisting of $11.3 million in cash (including
estimated closing costs through September 30, 1998), $18.2 million in the
assumption and repayment of mortgage debt and Units valued at $100,000. The
acquisition of three properties, totaling approximately $6.3 million, is pending
completion of the Company's due diligence process.
During the third quarter, the Company, through the Operating Partnership, signed
definitive agreements to acquire 36 properties from the affiliates of 11 dealer
groups for approximately $161.7 million (including estimated closing costs
through September 30, 1998). These properties are used by 66 automotive
franchises, located in Texas, Florida, Oklahoma, Louisiana and Indiana. Of
these agreements, the Company closed on 26 properties during the third quarter
for approximately $119.3 million, consisting of $61.0 million in cash (including
estimated closing costs through September 30, 1998), $58.3 million in the
assumption and repayment of mortgage debt and Units valued at $51,000.
Subsequent to September 30, 1998, the Company closed on eight properties
totaling approximately $26.5 million, of which $14.5 million was cash and
$12.0 million was the assumption of mortgage debt. The acquisition of two
properties, totaling $15.9 million, is pending completion of the Company's due
diligence process.
Subsequent to September 30, 1998, the Company signed a definitive agreement and
closed on the acquisition of three properties from one dealer group for
approximately $12.7 million, which consists of $9.7 million in cash and $3.0
million in the assumption and repayment of debt. These properties are used by
six automotive franchises, located in Olmsted and Cleveland Heights, Ohio.
Automotive Realty Trust of America ("ARTA")
- -------------------------------------------
On July 23, 1998, the Company announced the execution of a definitive agreement
that would permit Capital Automotive REIT to purchase certain properties then
under contract with ARTA. ARTA had contracted with 17 automotive dealer groups
to acquire 67 properties having a value of $334.5 million. Under the terms of
the agreement, ARTA agreed to assign its purchase contracts to the Company,
subject to the approval of the respective dealer groups. Closings on individual
16
<PAGE>
properties were subject to the revision of certain purchase and lease terms and
the satisfactory completion by the Company of property level and financial due
diligence. The Company agreed to compensate ARTA on a pro rata basis upon the
delivery of the assets, as well as upon the acquisition of ARTA's existing
marketing network and its acquisition pipeline. ARTA had filed a registration
statement on April 20, 1998 with the Securities and Exchange Commission to
pursue an initial public offering as a self-administered, self-managed real
estate investment trust.
During the third quarter of 1998, the Company completed acquisitions for
approximately $67.8 million (including estimated closing costs through September
30, 1998) in conjunction with the ARTA agreement. Consideration for the
acquisitions was substantially all cash. The acquisitions included 10
dealership properties from three dealer groups (Momentum Automotive Group, Lynn
Alexander Automotive Group and Park Place Motor Cars) used by 19 automotive
franchises, and totaling 59.8 acres. See Note 3 to Notes to Consolidated
Financial Statements for discussion of the acquisitions. Subsequent to the
third quarter, the Company completed the acquisition of three properties from
Motorcars Group for approximately $12.7 million in cash, used by six automotive
franchises, and totaling 8.3 acres. See Note 11 to Notes to Consolidated
Financial Statements for discussion of the acquisition.
These transactions represent the first acquisitions completed in conjunction
with the Company's agreement permitting the Company to purchase properties under
contract with ARTA. Of ARTA's $334.5 million portfolio, Capital Automotive
declined to proceed on approximately $110 million of the properties because
either the properties or the terms did not satisfy the Company's acquisition
requirements. Approximately $49 million of the properties have been withdrawn
by the dealers not willing to accept the Company's amended lease terms. The
Company continues to pursue the remaining portfolio balance although there is no
assurance that the Company will acquire additional ARTA properties.
RESULTS OF OPERATIONS
The Company had no operations prior to October 20, 1997 (the date of
organization). Although the Company was formed prior to January 1, 1998, it did
not complete its IPO until February 19, 1998, at which time it began generating
rental income.
Rental revenue was $8.4 million and $15.3 million for the three months and nine
months ended September 30, 1998, respectively. The rental revenue was generated
from the immediate leaseback of 96 properties purchased during the nine months
ended September 30, 1998. Of the 96 properties, 35 of the properties closed
during the first quarter of 1998, 29 properties closed during the second quarter
of 1998 and 32 properties closed during the third quarter of 1998.
Interest income was $1.9 million and $7.0 million for the three months and nine
months ended September 30, 1998, respectively. Interest income was generated
from the investment of the net proceeds of the IPO, the FBR Offering and
exercise of the underwriters' over-allotment option.
Depreciation and amortization was $2.0 million and $3.3 million for the three
months and nine months ended September 30, 1998, respectively and consisted
primarily of depreciation on the properties purchased during those periods.
General and administrative expenses were $1.6 million and $4.0 million for the
three months and nine months ended September 30, 1998, respectively and
consisted primarily of payroll and related benefits, professional services and
other administrative costs.
17
<PAGE>
Interest expense was $159,000 and $328,000 for the three months and nine months
ended September 30, 1998, respectively and consisted of interest charged on the
amount drawn down on the Company's line of credit.
LIQUIDITY AND CAPITAL RESOURCES
Upon the completion of the IPO, the FBR Offering and the underwriters' over-
allotment option, the Company received net proceeds of approximately $342.3
million, after underwriting discounts and commissions and other expenses of the
IPO.
For the nine months ended September 30, 1998, the Company acquired 96 properties
used by 23 dealer groups for approximately $413.3 million, consisting of $154.1
million in cash (including estimated closing costs through September 30, 1998),
$163.9 million in the assumption and repayment of mortgage debt and
approximately 6.3 million in Units (valued at $95.3 million).
On September 8, 1998, the Company announced that its Board of Trustees
authorized the repurchase of up to 3.0 million Common Shares. On October 21,
1998, the Company announced that its Board of Trustees authorized the repurchase
of up to 3.0 million additional Common Shares, bringing the total Common Share
repurchase program to 6.0 million. Purchases will be made from time to time in
open market transactions at prevailing prices or in negotiated private
transactions at management's discretion. The Company repurchased 943,000 Common
Shares at prices ranging from $11 3/8 to $11 7/8 per Common Share, during the
three-month period ended September 30, 1998. The Company repurchased an
additional 2,141,700 Common Shares at prices ranging from $9 1/8 to $14 per
Common Share through November 10, 1998. During the same time period, the
Operating Partnership redeemed an equivalent number of Units from the Company
for an equivalent purchase price.
In February 1998, the Company, through the Operating Partnership, entered into a
secured revolving line of credit from NationsBank, N.A. providing for a
borrowing capacity of $10.0 million. Borrowings bear interest at a fluctuating
rate equal to the LIBOR plus 1.50 percent (7.13 percent as of September 30,
1998). On August 14, 1998, the Company amended and restated the line of credit
to increase the borrowing capacity to $13.5 million and extend the expiration
date to November 19, 1998. On September 8, 1998, the Company amended and
restated the line of credit to increase the borrowing capacity to $19.1 million.
The total amount drawn down as of September 30, 1998 was $13.0 million, which is
guaranteed by the Company and affiliates of certain dealer groups. The line of
credit is secured by a blanket mortgage or mortgages on certain Initial
Properties acquired from certain affiliates. At maturity, the principal payment
in the aggregate amount of the then outstanding borrowings plus any accrued and
unpaid interest will be due and payable, unless the line of credit is renewed or
is refinanced as is currently contemplated by the Company. The line of credit
may be paid in full at any time without prepayment penalty or premium.
On September 23, 1998, the Company, through the Operating Partnership, entered
into a commitment with Global Alliance Finance Company, L.L.C. ("Lender") for a
$150.0 million permanent loan, which commitment expires November 22, 1998 unless
extended ("Permanent Loan"). The Permanent Loan will require consecutive
monthly installment payments of interest only for two years. Thereafter, equal
payments of principal and interest will be required in an amount sufficient to
amortize the Permanent Loan over a twenty-five year term. The term of the
Permanent Loan is ten years. The Permanent Loan will be secured by a first
mortgage on the properties financed. The proceeds of the Permanent Loan will be
used to refinance existing debt and working capital requirements.
18
<PAGE>
On September 23, 1998, the Company, through the Operating Partnership, entered
into a forward rate lock agreement with the Lender, to effectively lock in
advance the fixed per annum interest rate ("Rate Lock") on the Permanent Loan.
On the date thereof, the Company paid to Lender a hedge deposit totaling
$3 million ("Hedge Deposit") to lock the interest rate at 7.67% for a period of
sixty days from such date ("Fixed Rate Period").
In order to effect a Rate Lock, the Lender intends to enter into certain Hedging
Arrangements in its sole and absolute discretion. After Hedging Arrangements
have been put in place, if the fair market value of such Hedging Arrangements
declines by an amount equal to or greater than 1% of the anticipated loan
amount, the Company will, within one business day of notice from Lender, deposit
an additional amount to the Hedge Deposit equal to the amount of such decline
from time to time. No additional deposits have been paid to Lender.
In the event, except default by the Lender, the Permanent Loan does not close
prior to expiration of the Fixed Rate Period, the actual term of the Loan
differs from the original 10 year term, or the final loan amount differs from
the original loan amount, the Company agreed to pay Lender's damages, losses,
liabilities, costs, fees and expenses (including breakage, unwind and similar
costs, fees and expenses (collectively, the "Breakage Costs"). The Company will
be fully responsible for all Breakage Costs, which are required to be paid upon
demand. Lender may apply all or a portion of the Hedge Deposit in payment of
Breakage Costs. Upon closing of the Permanent Loan, the Hedge Deposit will be
refunded to the Company.
On October 16, 1998, the Company, through the Operating Partnership, entered
into a $50.0 million bridge loan with the Lender to be used to finance
acquisitions, working capital and for other corporate purposes ("Bridge Loan").
The Bridge Loan requires monthly payments of interest only and will mature on
the earlier of January 13, 1999 or the closing date of the Permanent Loan,
unless otherwise extended. The Bridge Loan bears interest at the one month
LIBOR plus 200 basis points.
The Company anticipates that the proceeds of the FBR Offering, together with its
cash from operations, short-term and long-term debt and any bank credit facility
anticipated to be available to the Company, will provide adequate liquidity to
acquire additional properties, conduct its operations, fund administrative and
operating costs and interest payments, and allow distributions to shareholders
in accordance with the Code's requirements for qualification as a real estate
investment trust and to avoid any corporate level federal income or excise tax
for at least the next 12 months.
In order to qualify as a real estate investment trust for federal income tax
purposes, the Company will be required to make substantial distributions to its
shareholders. The following factors, among others, will influence the decisions
of the Board of Trustees regarding distributions: (i) annual base rent under the
leases; and (ii) returns from short-term investments. Although the Company will
receive most of its rental payments on a monthly basis, it intends to make
distributions quarterly. Amounts accumulated for distribution are expected to
be invested by the Company in short-term investments.
The Company also intends to obtain an additional bank credit facility for
acquisition of properties and may borrow additional amounts in connection with
the acquisition of additional properties, the renovation or expansion of
properties, or, as necessary, to meet certain distribution requirements imposed
on a real estate investment fund under the Code. The Company may raise
additional long-term capital by issuing, in public or private transactions, debt
or other equity securities, but the availability and terms of any such issuance
will depend upon the market and other conditions.
19
<PAGE>
On October 20, 1998, the Board of Trustees approved a resolution providing that
the policy of the Company shall be to operate with a debt to asset ratio of not
more than approximately 50%. Prior to that date, the Company's policy on the
use of leverage was not more than 50% of total market capitalization.
Management believes that the revised policy is more in line with the Company's
overall business strategy.
The Company anticipates that as a result of its initially low ratio of debt to
assets and its policy to maintain such ratio at no more than approximately 50%
of debt to assets, it will be able to obtain additional financing for its long-
term capital needs. However, there can be no assurance that additional
financing or capital will be available, or that the terms will be acceptable or
advantageous to the Company.
Acquisitions will be made subject to the investment objectives and policies of
the Company to maximize both current income and long-term growth in income. The
Company's liquidity requirements with respect to future acquisitions may be
reduced to the extent the Company uses Common Shares or Units as consideration
for such purchases.
YEAR 2000 COMPLIANCE
While the Company has completed an assessment of its computer systems and
software applications and believes that both are "Year 2000" compliant, there
can be no assurance that coding errors or other defects will not be discovered
in the future. In addition, there are significant third parties on which the
Company's operations are dependent, which provide the Company with information,
including lessees of the Company's properties. There can be no assurance the
systems of other companies, including lessees of the Company's properties on
which the Company relies will be year 2000 compliant and thus no assurance that
such companies' systems would not have an adverse effect on the Company's
business or operations, including rental collections.
FUNDS FROM OPERATIONS
Funds From Operations ("FFO") is defined under the revised definition adopted by
the National Association of Real Estate Investment Trusts (NAREIT) as net income
(loss) (computed in accordance with generally accepted accounting principles)
excluding gains (or losses) from debt restructuring plus
depreciation/amortization of assets unique to the real estate industry.
Depreciation/amortization of assets not unique to the industry, such as
amortization of deferred financing costs and non-real estate assets, is not
added back. FFO does not represent cash flows from operating activities in
accordance with generally accepted accounting principles (which, unlike FFO,
generally reflects all cash effects of transactions and other events in the
determination of net income) and should not be considered an alternative to net
income as an indication of the Company's performance or to cash flow as a
measure of liquidity or ability to make distributions. The Company considers
FFO a meaningful, additional measure of operating performance because it
primarily excludes the assumption that the value of the real estate assets
diminishes predictably over time, and because industry analysts have accepted it
as a performance measure. Comparison of the Company's presentation of FFO,
using the NAREIT definition, to similarly titled measures for other REITs may
not necessarily be meaningful due to possible differences in the application of
the NAREIT definition used by such REITs.
20
<PAGE>
Funds From Operations for the three months and nine months ended September 30,
1998 is computed as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
Sept. 30, 1998 Sept. 30, 1998
-------------- --------------
<S> <C> <C>
Net Income before Minority Interest $ 6,602 $ 14,598
Real Estate Depreciation and Amortization 1,947 3,241
--------- ---------
Funds From Operations $ 8,549 $ 17,839
========= =========
</TABLE>
FORWARD LOOKING STATEMENTS
Certain statements in this Form 10-Q are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward looking statements
involve a number of risks and uncertainties. The Company's actual operations
may differ significantly from the results discussed in the forward looking
statements. Such statements can be identified by the use of forward-looking
terminology such as "may," "will," "could," "should," "expect," "intends,"
"anticipate," "estimate," or "continue" or the negative thereof or other
variations thereon or comparable terminology. Factors which may cause the
actual results of operations in future periods to differ materially from
forecast or anticipated results include, but are not limited to (i) the failure
of any lessee of real property owned by Capital Automotive REIT to perform the
terms of its lease in any material respects, (ii) the inability of the Company
to acquire suitable real properties that conform to its business strategy, (iii)
the termination or abandonment of the dealerships or other motor vehicle related
businesses that occupy any real property owned by the Company, (iv) the
inability of the Company to release any real property, (v) general economic and
business conditions, both nationally and in the regions in which the Company
owns real property, including, but not limited to, those conditions affecting
real estate generally or the motor vehicle retail and related businesses
specifically, (vi) zoning changes in locations in which any such real property
is located, (vii) existing governmental regulations and changes in, or the
failure to comply with government regulations, (viii) changes to laws, rules and
regulations affecting the Company, including the tax laws affecting real estate
investment trusts, (ix) competition, (x) changes in business strategy, (xi)
divestiture of real property, (xii) retention of the Company's executive
officers, (xiii) the ability of the Company to attract and retain key personnel,
(xiv) the availability and terms of additional capital to fund the acquisition
of additional properties and for working capital purposes, (xv) the impact on
the Company of computer and related problems that may arise from year 2000,
(xvi) the ability of the Company to obtain additional financing and (xvii) other
risks described from time to time in the registrant's filings with the
Securities and Exchange Commission. Given these uncertainties, readers are
cautioned not to place undue reliance on such statements. The registrant
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------
Not applicable.
21
<PAGE>
CAPITAL AUTOMOTIVE REIT
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Use of Proceeds
Changes in Securities
- ---------------------
The Company has not sold any common shares of beneficial interest, par value
$.01 per share ("Common Shares"), during the three-month period ended
September 30, 1998.
The Company repurchased 943,000 Common Shares, at prices ranging from $11 3/8 to
$11 7/8 per Common Share, during the three-month period ended September 30,
1998. The Operating Partnership redeemed 943,000 Units from the Company, at
equivalent prices, during the three-month period ended September 30, 1998.
On July 23, 1998, the Operating Partnership issued 6,739 Units to TMB, LLC as
partial consideration for the acquisition of one parcel of real property and
improvements located thereon in Dothan, Alabama. The Units are redeemable
beginning on July 23, 1999 for cash, or at the option of the Company, Common
Shares on a one for one basis. The issuance of such Units was effected in
reliance on an exemption from registration under Section 4(2) of the Securities
Act.
On September 28, 1998, the Operating Partnership issued 3,400 Units to PPM
Greenway Land Company, LTD, as partial consideration for the acquisition of one
parcel of real property and improvements located thereon in Houston, Texas. 50%
of the Units are redeemable beginning on January 1, 2000 and 50% are redeemable
beginning on September 28, 2000 for cash, or at the option of the Company,
Common Shares on a one for one basis. The issuance of such Units was effected
in reliance on an exemption from registration under Section 4(2) of the
Securities Act.
USE OF PROCEEDS OF INITIAL PUBLIC OFFERING
- ------------------------------------------
On February 19, 1998, the Company closed its IPO of its Common Shares, whereby
20.0 million Common Shares were issued at $15 per share, representing gross
proceeds of $300.0 million to the Company. On March 12, 1998, the Company
closed the sale of an additional 3.0 million Common Shares pursuant to exercise
of the underwriters' over-allotment option, representing gross proceeds of $45.0
million to the Company. Total underwriting discounts and commissions paid by
the Company were approximately $24.2 million. Total expenses paid by the
Company, including expenses incurred in connection with the offering, the
initial organization and operation of the Company and the Operating Partnership
and the formation transactions described in the Company's Registration Statement
on Form S-11 (File No. 333-41183), were approximately $6.1 million, of which
approximately $2.5 million was used to repay indebtedness to an affiliate of
FBR.
The Company contributed the net proceeds of the IPO of approximately $320.9
million (net of underwriting discounts and commissions) to the Operating
Partnership in exchange for 23.0 million Units. As of June 30, 1998, the
Company had unused net proceeds, totaling approximately $146.0 million, invested
in short-term investments. During the three-month period ended September 30,
1998, all unused net proceeds of the IPO were used to acquire real properties
and improvements ("properties") as follows:
22
<PAGE>
On July 22, 1998, the Operating Partnership acquired two properties from Russell
E. Hand for approximately $2.2 million in cash, including estimated closing
costs through September 30, 1998, and for which approximately $8.5 million in
cash was used to repay debt assumed in connection with such acquisition.
On July 23, 1998, the Operating Partnership acquired three properties from
affiliates of Kelley Automotive Group for approximately $8.1 million in cash,
including estimated closing costs through September 30, 1998, and for which
approximately $8.1 million in cash was used to repay debt assumed in connection
with such acquisitions.
On July 23, 1998, the Operating Partnership acquired one property from
affiliates of TMB, LLC for approximately 900,000 in cash, including estimated
closing costs through September 30, 1998, and for which approximately $1.7
million in cash was used to repay debt assumed in connection with such
acquisitions.
On August 24, 1998, the Operating Partnership acquired five properties from
affiliates of Gunn Automotive Group for approximately $4.9 million in cash,
including estimated closing costs through September 30, 1998, and for which
approximately $17.5 million in cash was used to repay debt assumed in connection
with such acquisitions.
On August 27, 1998, the Operating Partnership acquired two properties from
affiliates of Orr Automotive for approximately $1.3 million in cash, including
estimated closing costs through September 30, 1998, and for which approximately
$1.8 million in cash was used to repay debt assumed in connection with such
acquisitions.
On August 28, 1998, the Operating Partnership acquired one additional property
from affiliates of Orr Automotive for approximately $72,000 in cash, including
estimated closing costs through September 30, 1998, and for which approximately
$237,000 in cash was used to repay debt assumed in connection with such
acquisitions.
On August 28, 1998, the Operating Partnership acquired four properties from
affiliates of Warren Henry Automobiles for approximately $6.7 million in cash,
including estimated closing costs through September 30, 1998, and for which
approximately $6.0 million in cash was used to repay debt assumed in connection
with such acquisitions.
On September 1, 1998, the Operating Partnership acquired one property from
affiliates of Roundtree Automotive Group for approximately $2.2 million in cash,
including estimated closing costs through September 30, 1998.
On September 1, 1998, the Operating Partnership acquired three properties from
affiliates of Momentum Automotive Group for approximately $14.2 million in cash,
including estimated closing costs through September 30, 1998, and for which
approximately $11.1 million in cash was used to repay debt assumed in connection
with such acquisitions.
On September 11, 1998, the Operating Partnership acquired four properties from
affiliates of Lynn Alexander Automotive Group for approximately $5.9 million in
cash, including estimated closing costs through September 30, 1998, and for
which approximately $3.5 million in cash was used to repay debt assumed in
connection with such acquisitions.
On September 16, 1998, the Operating Partnership acquired one additional
property from affiliates of Orr Automotive for approximately $2.1 million in
cash, including estimated closing costs through September 30, 1998.
23
<PAGE>
On September 18, 1998, the Operating Partnership acquired two properties from
Scott Fink for approximately $4.7 million in cash, including estimated closing
costs through September 30, 1998, and for which approximately $4.0 million in
cash was used to repay debt assumed in connection with such acquisitions.
On September 28, 1998, the Operating Partnership acquired three properties from
affiliates of Park Place Motor Cars for approximately $19.0 million in cash,
including estimated closing costs through September 30, 1998, and for which
approximately $14.1 million in cash was used to repay debt assumed in connection
with such acquisitions.
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS:
--------
10.40 First Amended and Restated Credit Agreement dated as of August 14, 1998
to Credit Agreement dated February 19, 1998 between Capital Automotive
L.P. and NationsBank, N.A.
10.41 Second Amended and Restated Credit Agreement dated as of September 8,
1998 to Credit Agreement dated February 19, 1998 between Capital
Automotive L.P. and NationsBank, N.A.
10.42 Employment Agreement by and between Capital Automotive L.P. and John M.
Weaver
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
-------------------
(1) A current report on Form 8-K dated July 23, 1998 was filed with the
Securities and Exchange Commission on August 7, 1998. It disclosed the
Real Property Contribution and Purchase Agreement by and among Capital
Automotive L.P., Capital Automotive REIT, Thomas W. Kelley, James E.
Kelley and Midwest Auto Realty Co. L.P.
24
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAPITAL AUTOMOTIVE REIT
(Registrant)
BY: /s/ Thomas D. Eckert
-----------------------
Thomas D. Eckert
Chief Executive Officer
and President
BY: /s/ David S. Kay
------------------------
David S. Kay
Vice President and Chief
Financial and Accounting
Officer
Dated: November 10, 1998
-----------------
25
<PAGE>
EXHIBIT 10.40
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDED AND RESTATED CREDIT AGREEMENT is dated as of August 14,
1998, between CAPITAL AUTOMOTIVE L.P., a Delaware limited partnership (the
"COMPANY"), and NATIONSBANK, N.A. (the "BANK").
RECITALS:
A. The Company and the Bank are parties to that certain Credit Agreement
dated as of February 19, 1998 as amended by that certain First Amendment to
Credit Agreement dated as of May 6, 1998 (the "Credit Agreement").
B. The Company and the Bank have agreed to increase the Loan from
$10,000,000 to $13,500,000 and to modify and amend the Credit Agreement pursuant
to the terms and conditions hereof. Capitalized terms used herein and not
otherwise defined herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledge, the Bank and the Company hereby amend and restate
the Credit Agreement as follows:
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDED AND RESTATED CREDIT AGREEMENT is dated as of February
19, 1998, between CAPITAL AUTOMOTIVE L.P., a Delaware limited partnership (the
"COMPANY"), and NATIONSBANK, N.A. (the "BANK").
The parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS
-----------
Section 1.1 Defined Terms. As used in this Agreement, the following
-------------
terms have the following meanings:
"Agreement": this Credit Agreement, as amended, supplemented or otherwise
---------
modified from time to time.
"Appraised Value": the fair market value of all or such portion of the Real
---------------
Property as has been determined by an appraiser engaged by the Bank, at the
Company's expense based upon a written appraisal that has been accepted by the
Bank in accordance with FIRREA, other applicable laws and regulations and
policies of the Bank.
1
<PAGE>
"Business Day": any day except a Saturday, Sunday or other day on which
------------
commercial banks in Virginia or New York are authorized by law to close.
"CAR": Capital Automotive REIT, a Maryland real estate investment trust.
---
"Code": the Internal Revenue Code of 1986, as amended from time to time.
----
"Commonly Controlled Entity": an entity, whether or not incorporated, which
--------------------------
is under common control with the Company within the meaning of Section 414(b),
(c), (m) or (n) of the Code.
"Contingent Obligation": as to any Person, any obligation of such Person
---------------------
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof; provided, however, that the term
-------- -------
Contingent Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business.
"Contractual Obligation": as to any Person, any provision of any security
----------------------
issued by such Person or of any agreement, instrument or undertaking to which
such Person is a party or by which it or any of its property is bound.
"Debt Service Coverage Ratio": the consolidated ratio for the Company and
---------------------------
CAR, calculated at the end of any fiscal quarter as an average of that quarter
and the immediately preceding three quarters, by dividing (A) the sum of (i) net
profit, (ii) depreciation, (iii) amortization and (iv) interest expense, minus
the sum of (i) distributions, (ii) non-recurring gains and (iii) charges to
equity, by (B) the sum of (i) interest expense, (ii) prior year current
maturities of long term debt and (iii) prior year current maturities of capital
leases.
"Default": any of the events specified in Article VII, whether or not any
-------
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Environmental Indemnity Agreement": the Environmental Indemnity Agreement
---------------------------------
dated as of February 19, 1998 from the Company to the Bank, as it may be
amended, supplemented or otherwise modified from time to time.
2
<PAGE>
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
-----
from time to time.
"Event of Default": any of the events specified in Article VII, provided
----------------
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"FIRREA" the Financial Institution Reform, Recovery and Enforcement Act, 12
------
U.S.C. (S) 1811, et seq.
-- ----
"GAAP": Generally Accepted Accounting Principles in the United States of
----
America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
----------------------
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by any of the foregoing.
"Guarantee": the collective reference to (i) the guarantees of the Loan
---------
dated as of February 19, 1998, from the Guarantors to the Bank in the form
attached hereto as Exhibit B-1 for CAR, as Exhibit B-2 as to the Sheehy
Guarantors and Exhibit B-3 as to the Rosenthal Guarantors, as such Guarantee may
be amended, supplemented or otherwise modified from time to time, and (ii) the
guarantees of the Loan delivered to the Bank by the Other Guarantors, in form
and substance satisfactory to the Bank in order to satisfy the conditions of
Section 4.2(d)(i) hereof.
"Guarantors": CAR, the Sheehy Guarantors and the Rosenthal Guarantors and
----------
the Other Guarantors.
"Indebtedness": as to any Person, at a particular time, (a) all
------------
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which such
Person otherwise assures a creditor against loss, including, without limitation,
accounts payable, accrued expenses and other current liabilities, and inter-
company accounts, (b) all liabilities secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof, and (c) capitalized lease obligations of such
Person.
"Libor Rate": for any day, the fluctuating interest rate per annum obtained
----------
by dividing the three month London Interbank Offered Rate quoted in the "Money
Rates" section of "The Wall Street Journal" by (ii) an amount equal to 1 minus
the "Floating Libor Reserve Requirement" for such day. "Floating Libor Reserve
Requirement" means the rate at which reserves (including, without limitation,
any marginal, supplemental or emergency reserves) are required to be
3
<PAGE>
maintained by the Bank by any applicable Governmental Authority, on the date for
which interest is being calculated, against U. S. dollar non-personal time
deposits in the United States with a term equal to one month, expressed as a
decimal.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction).
"Loan": the loan to be made to the Company by the Bank pursuant to Section
----
2.1, evidenced by the Note.
"Loan Documents": the collective reference to this Agreement, the Note, the
--------------
Guarantee, the Security Documents and all other documents which have been
executed and delivered by the Company in connection with the Loans;
individually, a "Loan Document".
"Multiemployer Plan": a Plan which is a multiemployer plan as defined in
------------------
Section 4001(a)(3) of ERISA.
"Note": as defined in Section 2.1.
----
"Other Guarantors": the collective reference to any Person that has
----------------
executed and delivered a Guarantee to the Bank in order to satisfy the
conditions of Section 4.2(d)(i) hereof.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
----
Subtitle A of Title IV of ERISA or any entity succeeding to any or all of its
functions under ERISA.
"Person": an individual, a partnership, a corporation, a real estate
------
investment trust, a limited liability company, a business trust, a joint stock
company, a trust, an unincorporated association, a joint venture, a Governmental
Authority or any other entity of whatever nature.
"Plan": at any time an employee pension benefit plan which is covered by
----
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (i) maintained by a member of the Commonly Controlled
Entity for employees of a member or members of the Commonly Controlled Entity,
or (ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Commonly Controlled Entity is then making or accruing an
obligation to make contributions or has within the preceding five years made
contributions.
4
<PAGE>
"Real Property": at any time, the parcels of real property owned by the
-------------
Company securing the Loan from time to time and conveyed by the $10,000,000 Deed
of Trust, as more particularly described therein.
"Reportable Event": any of the events set forth in Section 4043(b) of ERISA
----------------
or the regulations thereunder.
"Requirement of Law": as to any Person, the partnership agreement, the
------------------
Certificate or Articles of Incorporation and Bylaws, or Articles of
Organization, or Declaration of Trust, or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its properties or
to which such Person or any of its property is subject.
"Responsible Officer": the Vice President-Chief Financial Officer of the
-------------------
Company, or the Vice President-Chief Financial Officer of CAR or, with respect
to financial matters, the chief financial officer of a Person or the chief
accounting officer of a Person.
"Rosenthal Guarantors": Robert M. Rosenthal, Marion Rosenthal, Brooke
--------------------
Peterson, Jane Cafritz and Nancy Rosenthal.
"Security Documents": the $10,000,000 Deed of Trust, the $3,500,000 Deed of
------------------
Trust and any other instruments or documents executed by the Company or others
as security for the Note, as they may be amended, supplemented or otherwise
modified from time to time.
"Sheehy Guarantors": Vincent A. Sheehy and Helen M. Sheehy.
-----------------
"Subsidiary": as to any Person, a corporation of which shares of stock
----------
having ordinary voting power (other than stock having such power only by reason
of the happening of a contingency) to elect a majority of the board of directors
or other managers of such corporation are at the time owned, or the management
of which is otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person.
"Tangible Net Worth": at a particular date, all amounts which would, in
------------------
conformity with GAAP, be included under shareholders' equity on a balance sheet
of a Person at such date; provided, however, such amounts are to be net of
-------- -------
amounts carried on the books of such Person for (a) any write-up in the book
value of any assets of such Person resulting from a revaluation thereof, (b)
treasury stock, (c) unamortized debt discount and expense, (d) any cost of
investments in excess of net assets acquired at any time of acquisition by such
Person, (e) patents, patent applications, copyrights, trademarks, trade names,
and other like intangibles and (f) goodwill, experimental or organizational
expenses and other like intangibles.
5
<PAGE>
"$10,000,000 Deed of Trust ": the collective reference to the Deeds of
--------------------------
Trust and/or Mortgages securing the $10,000,000 Note dated as of the date hereof
or after to be executed and delivered by the Company, conveying the Real
Property to certain trustees for the benefit of the Bank, which are to be
recorded in the jurisdictions in which the Real Property is located, as any of
them may be amended, supplemented or otherwise modified from time to time.
"$10,000,000 Note": as defined in Section 2.1.
----------------
"Termination Date": November 19, 1998.
----------------
"$3,500,000 Deed of Trust ": the collective reference to the Deeds of Trust
-------------------------
and/or Mortgages securing the $3,500,000 Note dated as of the date hereof or
after to be executed and delivered by the Company, conveying the Real Property
to certain trustees for the benefit of the Bank, which are to be recorded in the
jurisdictions in which the Virginia Real Property is located, as any of them may
be amended, supplemented or otherwise modified from time to time.
"$3,500,000 Note": as defined in Section 2.1.
---------------
"Total Liabilities": at a particular date, the total liabilities of a
-----------------
Person, determined in accordance with GAAP.
"Unfunded Vested Liabilities": with respect to any Plan at any time, the
---------------------------
amount (if any) by which (i) the present value of all vested nonforfeitable
benefits under the Plan exceeds (ii) the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Commonly Controlled Entity to the PBGC or
the Plan under Title IV of ERISA.
"Virginia Real Property": at any time, the parcels of real property located
----------------------
in the Commonwealth of Virginia owned by the Company securing the Loan from time
to time and conveyed by the $10,000,000 Deed of Trust, as more particularly
described therein.
"Withdrawal Liability": at a particular date, the aggregate liability of
--------------------
the Company or any Commonly Controlled Entity (regardless of the date of
payment) to any Multiemployer Plans pursuant to (S) 4201 of ERISA if, on such
date, the Company or any Commonly Controlled Entity were to withdraw (partially
or completely) from such Plans.
Section 1.2 Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined
meanings when used in the Note, the other Loan Documents, and in any certificate
or other document made or delivered pursuant hereto or thereto, unless otherwise
defined therein.
6
<PAGE>
(b) As used herein and in the Note, and any certificate or other
document made or delivered pursuant hereto, accounting terms not defined in
Section 1.1, and accounting terms partly defined in Section 1.1 to the extent
not defined, shall have the respective meanings given to them under GAAP.
ARTICLE 2.
AMOUNT AND TERMS OF LOAN
------------------------
Section 2.1 The Loan. Subject to the terms and conditions hereof, and
--------
until the Termination Date, the Bank agrees to make revolving loans to the
Company in an amount up to $13,500,000 (the "Loan"). The Loan shall be evidenced
by two (2) revolving notes of the Company (collectively, the "Note") and payable
to the order of the Bank, one dated as of February 19, 1998, in the maximum
original principal amount of $10,000,000 (the "$10,000,000 Note") and the other,
of even date herewith, in the amount of $3,500,000 (the "$3,500,000 Note"). The
Note shall bear interest from the date thereof on the unpaid principal amount
thereof at a rate per annum equal to the Libor Rate plus 1.5%. Interest only on
the Note shall be payable monthly in arrears, on the first day of each month,
beginning on the first such date to occur after the date hereof. The Note shall
mature on the Termination Date. The Note shall be in the form attached hereto
as Exhibit A. The Bank is authorized to endorse the date and amount of each
Loan of the Bank and each payment of principal with respect thereto on the
schedule annexed to and constituting a part of the Note, which endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
----- -----
Subject to the terms and conditions hereof, the Company may borrow, repay and
reborrow the Loan. The Note shall be secured by the Security Documents.
Section 2.2 Default Interest; Late Charges. After any amount on the
------------------------------
Note becomes due and payable, (whether at the stated maturity, by acceleration
or otherwise) the Note shall bear interest at a rate per annum equal to three
percent (3%) above the rate otherwise applicable until paid in full (both before
and after judgment). In the event the Company fails to pay any installment of
principal and/or interest or otherwise fails to repay the Note within fifteen
(15) days of its due date, the Company will pay the Bank on demand a late charge
of 5% of the overdue payment.
Section 2.3 Prepayments. The Company may, at its option, from time to
-----------
time, prepay the Loans in whole or in part without premium or penalty at any
time or times. All prepayments shall be applied against the balance outstanding
on the $3,500,000 Note until the balance on such note shall be reduced to $0 and
then to the $10,000,000 Note.
Section 2.4 Computation of Interest and Fees. Interest and fees shall
--------------------------------
be calculated on the basis of a 360-day year for the actual days elapsed.
Section 2.5 Notice of Borrowing; Disbursements and Payments. The
-----------------------------------------------
Company shall give the Bank notice of a requested advance under the Loan before
1:00 p.m., on the day prior to
7
<PAGE>
the requested Borrowing Date, specifying a Business Day on which the Loan is to
be made and the amount of such Loan. All proceeds of the Loans shall be
disbursed by the Bank to the Company first under the $10,000,000 Note until
fully funded and then under the $3,500,000 Note. Each payment by the Company on
account of principal, interest and fees with respect to the Loans shall be made
to the Bank. All payments (including prepayments) by the Company on account of
principal, interest and fees shall be made without set-off or counterclaim to
the Bank at the office of the Bank in lawful money of the United States of
America and in immediately available funds. If any payment hereunder or on the
Note becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day, and, with respect
to payments of principal or interest thereon shall be payable at the then
applicable rate during such extension.
Section 2.6 Use of Proceeds. The proceeds of the Loan shall be used by
---------------
the Company for working capital.
Section 2.7 Fee. On the date hereof, the Company shall pay to the Bank
---
a fee of $7,500.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Bank to enter into this Agreement and to make the
loans herein provided for, the Company hereby represents and warrants to the
Bank that as of February 19, 1998:
Section 3.1 Financial Condition. The pro-forma consolidated financial
------------------- --- -----
statements of the Company and CAR provided to the Bank by the Company, fairly
present the financial position of the Company and CAR purported to be shown
thereon at the dates stated therein (management believes that the assumptions
underlying the pro-forma adjustments are reasonable and such pro-forma
--- ----- --- -----
adjustment have been properly applied to the historical amounts in the
compilation of the information) and the consolidated financial statements of the
Company and CAR delivered, from time to time, to the Bank pursuant to Section
5.1 of this Agreement accurately reflect the financial condition of the Company
and CAR on the dates stated therein.
Section 3.2 No Change. Since the date of the most recent consolidated
---------
financial statements of the Company and CAR provided to the Bank, there has been
no material adverse change in the business, operations, assets or financial or
other condition of the Company and/or CAR.
Section 3.3 Loan to Value Ratio. The Appraised Value of the Real
-------------------
Property is at least 133% of the aggregate amount of the Loans outstanding
hereunder at a particular time.
8
<PAGE>
Section 3.4 Partnership Existence; Compliance with Law. The Company (a)
------------------------------------------
is duly organized, validly existing and in good standing as a limited
partnership under the laws of Delaware, (b) has the partnership power and
authority to own and operate its property, to lease the property it leases and
to conduct the business in which it is currently engaged, (c) is duly qualified
as a limited partnership and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business required such qualification, and (d) is in compliance with all
Requirements of Law, except to the extent that the failure to comply therewith
could not, in the aggregate, have a material adverse effect on the business,
operations, property or financial or other condition of the Company and could
not materially adversely affect the ability of the Company to perform its
obligations under this Agreement, the Note, and the Security Documents and to
effectuate the transactions contemplated hereby and thereby.
Section 3.5 Partnership Power; Authorization; Enforceable Obligations.
--------------------------------------------- -----------
The Company has the partnership power and authority to make, deliver and perform
the Loan Documents to which it is a party, to borrow hereunder and to effectuate
the transactions contemplated hereby and has taken all necessary action to
authorize the borrowings on the terms and conditions of this Agreement and the
Note, to grant the mortgage liens and security interests pursuant to the
Security Documents and to authorize the execution, delivery and performance of
the Loan Documents to which it is a party. No consent or authorization of,
filing with, or other act by or in respect of any Person or any Governmental
Authority, is required or advisable in connection with the borrowings hereunder
or with the execution, delivery, performance, validity or enforceability of the
Loan Documents to which it is a party. The Loan Documents to which the Company
is a party have been duly executed and delivered on behalf of the Company and
constitute the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general principles of equity regardless of whether applied in a proceeding in
equity or at law, the discretion of the court before which any action or
proceeding may be brought and other applicable laws which may limit the
enforceability of certain of the remedial or procedural provisions contained in
the Loan Documents.
Section 3.6 No Legal Bar. The execution, delivery and performance of
------------
the Loan Documents and the borrowings hereunder, the use of the proceeds thereof
and the granting of the security interests pursuant to the Security Documents
will not violate any Requirement of Law applicable to the Company or any
Contractual Obligation of the Company, and will not result in, or require, the
creation or imposition of any Lien on any of its properties or revenues pursuant
to any Requirement of Law or Contractual Obligation except as permitted in
Section 5.2 hereof.
Section 3.7 No Material Litigation. No litigation, investigation or
----------------------
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Company, threatened by or against the Company, any of
its employee benefit programs, policies or Plans or against any of its
properties or revenues (a) with respect to the Loan Documents or
9
<PAGE>
any of the transactions contemplated thereby, or (b) which would have a material
adverse effect on the business, operations, property or financial or other
condition of the Company.
Section 3.8 No Default. The Company is not in default under or with
----------
respect to any material Contractual Obligation in any respect which would be
materially adverse to the business, operations, property or financial or other
condition of the Company, or which could materially adversely affect the ability
of the Company to perform its obligations under the Loan Documents. No Default
or Event of Default has occurred and is continuing.
Section 3.9 Ownership of Property; Liens. The Company has good record
----------------------------
and marketable title in fee simple to all its real property owned by it, and
good title to all other property owned by it, and none of such property is
subject to any Lien, except as permitted in Section 5.2 hereof.
Section 3.10 No Burdensome Restrictions. To the knowledge of the
--------------------------
Company, no Contractual Obligation of the Company and no Requirement of Law
materially adversely affects, or insofar as the Company may reasonably foresee
may so affect, the business, operations, property or financial or other
condition of the Company.
Section 3.11 Taxes. The Company has filed or caused to be filed all tax
-----
returns which to the knowledge of the Company are required to be filed, and has
paid all taxes shown to be due and payable on said returns or on any assessments
made against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority; and
no tax liens have been filed and, to the knowledge of the Company, no claims are
being asserted with respect to any such taxes, fees or other charges, unless and
to the extent that such taxes, assessments, fees or other changes are contested
in good faith and by appropriate procedure, such taxes, assessments, fees or
charges are not subject to any liens other than Permitted Liens, and adequate
reserves therefor have been established as required by GAAP.
Section 3.12 Federal Regulations. The Company is not engaged and will
-------------------
not engage, principally or as one of its important activities, in the business
of extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any loans
hereunder will be used for "purchasing" or "carrying" "margin stock" as so
defined or for any purpose which violates, or which would be inconsistent with,
the provisions of the Regulations of such Board of Governors.
Section 3.13 Compliance with ERISA; Prohibited Transactions. Each member
----------------------------------------------
of the Commonly Controlled Entity has fulfilled its obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan and is
in compliance in all material respects with provisions of ERISA and the Code and
published regulations presently applicable to each Plan. No member of the
Commonly Controlled Entity has incurred any liability, or has entered
10
<PAGE>
into any transaction that is likely to cause any liability to be incurred to the
PBGC or any Plan under Title IV of ERISA. No Lien has been attached and no
Person has threatened to attach a Lien on any property of the Company as a
result of the Company's failure to comply with ERISA. None of the Plans is a
Multiemployer Plan. With respect to each Plan, the Plan has not at any time:
(a) engaged in any "prohibited transaction," as such term is defined
in Section 4975 of the Code or in Section 406 of ERISA;
(b) incurred any "accumulated funding deficiency," as such term is
defined in Sections 302(a)(2) and 4243 of ERISA, whether or not waived; or
(c) been terminated in a manner which could result in the imposition
of a Lien on the property of the Company pursuant to Section 4068 of ERISA.
Section 3.14 Investment Company Act. The Company is not an "investment
----------------------
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
Section 3.15 Subsidiaries. There are no Subsidiaries of the Company.
------------
Section 3.16 Operations and Business. The Company has engaged in no
-----------------------
business other than the business currently being conducted by the Company.
Section 3.17 Patents, Copyrights, Permits, Licenses, Trademarks and
------------------------------------------------------
Leases. The Company owns all of the patents, trademarks, permits, service
- ------
marks, trade names, copyrights and licenses, or rights necessary for the
operation of its business and has obtained, or shall have obtained, all
assignments of all leases and other rights of whatever nature, necessary for the
present and planned future conduct of its business, without any known conflict
with the rights of others which would result in a material adverse effect on the
business, operations, property or financial or other condition of the Company.
Section 3.18 The Security Documents. Upon the due execution and delivery
----------------------
thereof pursuant to this Agreement and upon the recording thereof of the
appropriate jurisdiction where Real Property is located, the provisions of the
Security Documents will be effective to create in favor of the Bank, a legal,
valid and enforceable security interest in all right, title and interest of the
Company in the collateral described therein. When Uniform Commercial Code
financing statements have been filed in the offices in the jurisdictions listed
in Schedule 1, the Security Documents shall constitute fully perfected security
interests in all right, title and interest of the Company in such collateral
superior in right to any Liens, existing or future, which the Company or any
third Person may have against such collateral or interests therein, except as
permitted by Section 5.2 below or specifically consented to by the Bank.
11
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
Section 4.1 Conditions to First Loan. The obligation of the Bank to
------------------------
make its first Loan hereunder is subject to the satisfaction of the following
conditions precedent:
(a) Note. The Bank shall have received the $10,000,000 Note
----
conforming to the requirements hereof, duly executed and delivered by a duly
authorized officer of the Company.
(b) Legal Opinion of Counsel. The Bank shall have received the
------------------------
executed legal opinion of (i) Wilmer, Cutler & Pickering as counsel for Company
and CAR, and (ii) Charapp, Deese & Weiss, LLP, as counsel to the Rosenthal
Guarantors, and (iii) Surovell, Jackson, Colten & Dugan, P.C., as counsel to the
Sheehy Guarantors, each dated the date of the making of the initial Loan
hereunder and addressed to the Bank, covering such matters incidental to the
transactions contemplated hereby as the Bank may reasonably require and
satisfactory in form and substance to the Bank.
(c) Partnership Proceedings. The Bank shall have received a copy of
-----------------------
the resolutions (in form and substance satisfactory to the Bank) of the Company
authorizing (i) the execution, delivery and performance of the Loan Documents to
which it is a party, (ii) the consummation of the transactions contemplated
thereby and (iii) the borrowings herein provided for and the granting of the
mortgage liens and security interests pursuant to the Security Documents,
certified by the general partner of the Company on the date of the making of the
initial Loan hereunder. Such certificate shall state that the resolutions set
forth therein have not been amended, modified, revoked or rescinded as of the
date of such certificate.
(d) Incumbency Certificate of Company. The Bank shall have received a
---------------------------------
certificate of the Company, dated the date of the making of the initial Loan
hereunder, as to the incumbency and signature of the representatives of the
general partner of the Company executing the Loan Documents and any certificate
or other document to be delivered pursuant hereto or thereto.
(e) Proceedings of CAR. The Bank shall have received a copy (in form
------------------
and substance satisfactory to the Bank) of the resolutions of CAR, certified by
a Responsible Officer of CAR on the date of the making of the initial advance
hereunder, authorizing CAR's execution, delivery and performance of the Loan
Documents to which it is a party. Such certificate shall state that the
resolutions set forth therein have not been amended, modified, revoked or
rescinded as of the date of such certificate.
(f) Incumbency Certificate of CAR. The Bank shall have received a
-----------------------------
certificate of CAR, dated the date of the making of the initial advance
hereunder, as to the
12
<PAGE>
incumbency and signature of the Responsible Officer authorized to sign the Loan
Documents to which it is a party and any other certificate or other document to
be delivered pursuant thereto.
(g) Guarantees. The Bank shall have received the Guarantees other
----------
than those of the Other Guarantors, duly executed and delivered by such
Guarantors and dated the date hereof.
(h) Security Documents. The Bank shall have received the $10,000,000
------------------
Deed of Trust, each duly executed and delivered by a duly authorized Responsible
Officer of the Company.
(i) Filings, Registrations and Recordings. Any documents (including,
-------------------------------------
without limitation, the Deed of Trust and Uniform Commercial Code financing
statements) required to be filed, registered or recorded in order to create, in
favor of the Bank, a perfected Lien on the collateral described in the Security
Documents shall have been properly filed, registered or recorded in each office
in each jurisdiction in which such filings, registrations and recordations are
required; the Bank shall have received acknowledgment copies of all such
filings, registrations and recordations stamped by the appropriate filing,
registration or recording officer (or, in lieu thereof, other evidence
satisfactory to the Bank that all such filings, registrations and recordations
have been made); and the Bank shall have received evidence that all necessary
filing, subscription and inscription fees and all recording and other similar
fees, and all taxes and other expenses related to such filings, registrations
and recordings have been paid in full by or on behalf of the Company.
(j) No Proceedings or Litigation. To the knowledge of the Company, no
----------------------------
action, suit or proceeding before any arbitrator or any Governmental Authority
shall have been commenced, no investigation by any Governmental Authority shall
have been threatened, against the Company or any Guarantor or any of the
officers or representatives of the Company or any Guarantor, seeking to
restrain, prevent or change the transactions contemplated by the Loan Documents,
in whole or in part, or questioning the validity or legality of the transactions
contemplated by the Loan Documents or seeking damages in connection with such
transactions.
(k) Insurance. The Bank shall have received evidence satisfactory to
---------
it that the Company or other appropriate party has obtained the policies of
insurance required by the Security Documents and Section 5.5 of this Agreement.
(l) Consents, Licenses, Approvals, etc. The Bank shall have received
----------------------------------
certified true copies of all consents, licenses and approvals required or
advisable in connection with the execution, delivery, performance, validity and
enforceability of the Loan Documents, and such consents, licenses and approvals
shall be in full force and effect and be satisfactory in form and substance to
the Bank.
13
<PAGE>
(m) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing hereunder or after giving effect to the
making of the Loans hereunder.
(n) Initial Public Offering. CAR shall have completed an initial
-----------------------
public offering in which at least $225,000,000 of equity capitalization was
raised from the public and contributed it to the equity of the Company.
(o) Appraised Value. The Appraised Value of the Real Property is no
---------------
less than $18,000,000.
(p) Additional Information. The Bank shall have received such
----------------------
additional information as it shall have reasonably requested, including, without
limitation, copies of any debt agreements, security agreements and other
material contracts.
(q) Additional Matters. All corporate and other proceedings and all
------------------
other documents and legal matters in connection with the transactions
contemplated by the Loan Documents shall be satisfactory in form and substance
to the Bank and its counsel.
Section 4.2 Conditions to All Loans. The obligation of the Bank to make
-----------------------
any Loan hereunder on any date is subject to the satisfaction of the following
conditions precedent:
(a) Representations and Warranties. The representations and
------------------------------
warranties made by the Company or any Guarantor in the Loan Documents to which
any of them is a party, or which are contained in any certificate, document or
financial or other statement furnished at any time under or in connection
herewith or therewith, shall be correct in all material respects on and as of
the date of such Loan as if made on and as of such date.
(b) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred on or before such date and/or after giving effect to the
Loan to be made on such date.
(c) Real Property. With respect to the Real Property:
--------------
(i) The Bank shall have received the Deed of Trust, or an
amendment or supplement thereto, conveying the Real Property to secure the Loan,
in form and substance satisfactory to the Bank and such document shall have been
duly recorded in all jurisdictions where the Real Property is located.
(ii) The Bank shall have received an ALTA lender's policy of title
insurance, containing no exceptions (including exceptions as to unfiled
mechanics' and materialmen's liens and matters of survey) unacceptable to the
Bank, insuring the Bank that the Deed of Trust is a valid and first lien on the
Real Property and containing such endorsements as the Bank may reasonably
require.
14
<PAGE>
(iii) The Bank shall have received a Phase 1 environmental
assessment report from a qualified environmental consultant acceptable to the
Bank with respect to the Real Property and any existing improvements, which
report shall be satisfactory in form and substance to the Bank, and shall
include, without limitation, historical research into prior ownership and use,
review of governmental records, review of available aerial photographs and
topographical maps, on-site visual inspection and review of surrounding land
use.
(iv) The Bank shall have received a certificate from an
engineering firm qualified in such matters and approved by the Bank to the
effect that the existing improvements on the Real Property have been inspected
for asbestos and other hazardous or toxic building materials and either (i) no
asbestos or other hazardous or toxic building materials were detected or (ii)
asbestos or other hazardous or toxic building materials were detected and any
potential risk to human health arising therefrom was abated.
(v) The Bank shall have received evidence acceptable to the
Bank that the Real Property and the improvements thereon comply with all
applicable local, state and federal laws, rules, regulations and/or
requirements.
(vi) The Bank shall have received written evidence that the Real
Property is not located in a flood plain, as shown upon the appropriate Flood
Area Map prepared by the Federal Insurance Administration of the United States
Department of Housing and Urban Development or, if the Real Property is located
in a flood plain, flood insurance satisfactory in all respects to the Bank.
(vii) The Bank shall have received current plats of survey of the
Real Property prepared and certified by a surveyor qualified in such matters and
approved by the Bank, certified to the Bank and the title insurance company,
showing (A) the dimensions of the Real Property, (B) the dimensions and location
of the buildings and improvements constructed thereon, (c) the dimensions of the
parking areas as well as the total number of on-site parking spaces, (D) all
recorded easements encumbering the Real Property and identifying the same by
book and page number, (E) any recorded building restrictions and building
setback lines applicable to the Real Property, and (F) the means of ingress and
egress to the Real Property, together with a certificate from the surveyor to
the Bank relating to such matters as the Bank may require.
(d) Advances Outstanding Exceeding $10,000,000. With respect to
------------------------------------------
advances outstanding exceeding $10,000,000, the Bank shall have received (A)
the duly executed $3,500,000 Note, and (B) an amendment to the Guarantee
executed by CAR increasing the amount guarantied to $13,500,000 in form and
substance satisfactory to the Bank.
15
<PAGE>
(e) Guarantees from Other Guarantors. The Bank shall have received
--------------------------------
the following:
(i) sufficient Guarantees from Other Guarantors such that the
aggregate amount of the Loan outstanding hereunder at such date, after giving
effect to such Loan, shall not exceed the sum of (A) $5,100,000 plus (B) the
aggregate face amount of each Guarantee held by the Bank (remaining outstanding,
and not withdrawn) that has been delivered to the Bank by the Other Guarantors
as at such date;
(ii) an executed legal opinion of counsel to each of the Other
Guarantors whose Guarantee is included in the determination made at such date in
the preceding subsection, each of which counsel shall be reasonably acceptable
to the Bank, each of which opinion shall be dated the date of delivery to the
Bank of such Guarantee and addressed to the Bank, and shall cover such matters
incidental to the transactions contemplated hereby as the Bank may reasonably
require and satisfactory in form and substance to the Bank;
(iii) in the case of each Other Guarantor that is not an
individual and whose Guarantee is included in the determination made at such
date in subsection (a) above, a copy of the resolutions or other document of
consent, in form and substance satisfactory to the Bank (whether such guarantor
be a corporation, partnership, limited liability company or other entity)
authorizing the execution, delivery and performance of each such Other
Guarantor's Guarantee.
(f) Satisfaction of Conditions. Each borrowing by the Company under
--------------------------
this Agreement shall constitute a representation and warranty by the Company as
of the date of each such borrowing that the conditions contained in the
foregoing paragraphs (a) through (e) of this Section 4.2 have been satisfied.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
The Company hereby agrees that, so long as the Note remains
outstanding and unpaid or any other amount is owing to the Bank hereunder, the
Company shall:
Section 5.1 Financial Statements. Furnish to the Bank:
--------------------
(a) as soon as available, but in any event within ninety (90) days
after the end of each fiscal year of the Company, a copy of the audited
financial statements of the Company prepared on a consolidated and consolidating
basis with CAR in accordance with GAAP as at the end of such year, including a
balance sheet and statements of income and retained earnings and paid-in capital
and changes in financial position, setting forth in each case in comparative
form the figures for the previous year, certified without a "going concern" or
like qualification or exception, or qualification arising out of the scope of
the audit, by independent certified public
16
<PAGE>
accountants of nationally recognized standing acceptable to the Bank, and
certified by a Responsible Officer of the Company as being true and correct in
all material respects;
(b) as soon as available, but in any event not later than forty-five
(45) days after the end of each accounting quarter of the Company internally
prepared financial statements of the Company prepared on a consolidated and
consolidating basis with CAR in accordance with GAAP as at the end of such
quarter, including a balance sheet and statements of income and retained
earnings and paid-in capital and changes in financial position, certified by a
Responsible Officer;
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except in the case of interim statements, excluding notes thereto and
normal year-end adjustments).
Section 5.2 Certificates; Other Information. Furnish to the Bank:
-------------------------------
(a) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a) and (b) above, a certificate of a Responsible
Officer of the Company (i) stating that, to the best of such officer's
knowledge, the Company during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in the
Loan Documents to be observed, performed or satisfied by them, and that such
officers have obtained no knowledge of any Default or Event of Default except as
specified in such certificate, and (ii) showing in detail in form and substance
satisfactory to the Bank, the calculations supporting such statement in respect
of Section 5.9 hereof;
(b) within five days after the same are sent, copies of all financial
statements and reports which the Company sends to partners, and within five days
after the same are filed, copies of all financial statements and reports, which
the Company or CAR may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority;
(c) furnish to the Bank by January 31 of each year an estimate of the
Withdrawal Liability as of the end of the Plan year occurring in the preceding
year for each Plan that is a Multiemployer Plan; and
(d) promptly, such additional financial and other information as the
Bank may from time to time reasonably request.
Section 5.3 Payment of Obligations. Pay, discharge or otherwise satisfy
----------------------
at or before maturity or before they become delinquent, as the case may be, all
its Indebtedness and other obligations of whatever nature, except, in the case
of such other obligations, when the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and
17
<PAGE>
reserves in conformity with GAAP with respect thereto have been provided on the
books of the Company.
Section 5.4 Conduct of Business and Maintenance of Existence. Engage in
------------------------------------------------
business of the same general type as now conducted by the Company, and preserve,
renew and keep in full force and effect its partnership existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business; comply with all Contractual
Obligations and Requirements of Law except to the extent that the failure to
comply therewith would not, in the aggregate, have a material adverse effect on
the business, operations, property or financial or other condition of the
Company.
Section 5.5 Maintenance of Property, Insurance. Keep all property
----------------------------------
useful and necessary in its business in good working order and condition, normal
wear and tear excepted; maintain or cause to be maintained by the lease of any
property, with financially sound and reputable insurance companies insurance on
all its property, including the Real Property, in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business, designating the
Bank as loss payee, provided that, in any event, the Company shall maintain or
-------- ---- -- --- -----
cause to be maintained by the lease of any property, insurance at all times on
its tangible personal property and real property in an amount equal to the
replacement cost of such property at such time and shall maintain extended
coverage for vandalism and malicious mischief; and furnish to the Bank, upon
written request, full information as to the insurance carried.
Section 5.6 Inspection of Property; Books and Records; Discussions.
----------------------------------------- -----------
Keep proper books of record as reasonably required in the ordinary course of
business and account in which full, true and correct entries in conformity with
GAAP and all Requirements of Law shall be made of all material dealings and
transactions in relation to its business and activities as reasonably required
in the ordinary course of business; and permit representatives of the Bank to
visit and inspect any of its properties and examine and make abstracts from any
of its books and records at any reasonable time and as often as may reasonably
be desired, and to discuss the business, operations, properties and financial
and other condition of the Company with officers and employees of the Company
and with its independent certified public accountants.
Section 5.7 Notices. Promptly give notice to the Bank:
-------
(a) of the occurrence of any Default or Event of Default of which the
Company has knowledge;
(b) of any (i) default or event of default under any Contractual
Obligation of the Company or (ii) litigation, investigation or proceeding which
may exist at any time between the Company and any Governmental Authority, which
in either case would have a material adverse effect on the business, operations,
property or financial or other condition of the Company;
18
<PAGE>
(c) of any litigation or proceeding affecting the Company, or any of
its employee benefit programs, policies or plans in which the amount sued for is
$500,000 or more and not fully covered by insurance or in which injunctive or
similar relief is sought and of any material adverse development in such
litigation or proceeding;
(d) of the following events, as soon as possible, and in any event no
later than the date the Company gives or is required to give notice to the PBGC
of (i) the occurrence of any Reportable Event with respect to any Plan which
might constitute grounds for a termination of such Plan under Title IV of ERISA,
or knows the Plan Administrator of any Plan has given or is required to give
notice of any such Reportable Event given or required to be given to the PBGC,
or (ii) the institution of proceedings or the taking or expected taking of any
other action by PBGC or the Company to terminate any Plan, and in addition to
such notice, deliver to the Bank whichever of the following may be applicable
(A) a certificate of the chief financial officer of the Company setting forth
details as to such Reportable Event and the action that the Company or Commonly
Controlled Entity proposes to take with respect thereto, together with a copy of
any notice of such Reportable Event that may be required to be filed with PBGC,
or (B) any notice delivered by PBGC evidencing its intent to institute such
proceedings to terminate the Plan or to appoint a trustee to administer the Plan
or any notice to PBGC that such Plan is to be terminated, as the case may be, or
(iii) any member of the Commonly Controlled Entity receives notice of complete
or partial withdrawal liability under Title IV of ERISA; and
(e) of a material adverse change in the business, operations, property
or financial or other condition of the Company.
Each notice pursuant to this Section shall be accompanied by a statement of
the chief executive officer or chief financial officer of the Company setting
forth details of the occurrence referred to therein and stating what action the
Company proposes to take with respect thereto. For all purposes of clause (d) of
this Section 5.7, the Company shall be deemed to have all knowledge of all facts
attributable to the administrator of such Plan.
Section 5.8 Further Assurances. Execute and file all such further
------------------
instruments, and perform such other acts, as the Bank may determine are
necessary or advisable.
Section 5.9 Financial Covenants. Maintain, on a consolidated basis with
-------------------
CAR:
(a) a Debt Service Coverage Ratio of no less than 2.50 to 1.0;
(b) a ratio of Total Liabilities to Tangible Net Worth of not more
than .35 to 1.0, measured at the end of each fiscal quarter of the Company; and
(c) a minimum Tangible Net Worth of $200,000,000, plus 80% of the net
cash proceeds from any future equity offerings.
19
<PAGE>
ARTICLE VI
NEGATIVE COVENANTS
------------------
The Company hereby agrees that, so long as the Note remains outstanding and
unpaid or any other amount is owing to the Bank hereunder, the Company shall
not, directly or indirectly, without the Bank's consent:
Section 6.1 Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness (other than current trade and other current accounts payable in the
ordinary course of business in accordance with customary trade terms), except:
(a) Indebtedness in respect of the Note;
(b) Indebtedness to the Bank;
(c) Indebtedness expressly consented to by the Bank in writing; and
(d) Other Indebtedness so long as such Indebtedness is not secured by
Liens upon the Real Property or the leases or rents therefrom.
Section 6.2 Limitation on Liens. Create, incur, assume or suffer to
-------------------
exist, any Lien upon any of the Real Property or the leases or rents therefrom.
Section 6.3 Limitation on Contingent Obligations. Agree to, or assume,
------------------------------------
guarantee, endorse or otherwise in any way, be or become responsible or liable
for, directly or indirectly, any Contingent Obligation other than Indebtedness
permitted under Section 6.1 hereof.
Section 6.4 Prohibition of Fundamental Changes. Enter into any
----------------------------------
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), convey, sell, lease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of its business or assets, whether now
owned or hereafter acquired (including, without limitation, receivables and
leasehold interests but excluding obsolete or worn out property, or Inventory
disposed of in the ordinary course of business), or acquire by purchase or
otherwise all or substantially all the business or assets of, or stock or other
evidence of beneficial ownership of, any Person, or make any material change in
its present method of conducting business.
Section 6.5 INTENTIONALLY DELETED.
---------------------
Section 6.6 Investments. Except as otherwise specifically permitted
-----------
hereunder, make or commit to make, any advance, loan, extension of credit or
capital contribution to, or purchase of any stock, bonds, note, debentures or
other securities of, or make any other investment in, any Person (all such
transactions being herein called "investments") except:
20
<PAGE>
(a) investments in accounts, contract rights and chattel paper (as
defined in the Uniform Commercial Code), arising or acquired in the ordinary
course of business;
(b) investments in bank certificates of deposit, open market
commercial paper maturing within one year having the highest rating of either
Standard & Poor's Corporation or Moody's Investors Service, Inc., U.S. Treasury
Bills and other short term obligations issued or guaranteed by the U.S.
Government or any agency thereof;
(c) to CAR in accordance with Section 6.7;
(d) to Persons in connection with the acquisition of real property in
the ordinary course of business of the Company;
(e) to Persons in connection with the construction, renovation,
expansion or improvement of real property acquired or to be acquired by the
Company in the ordinary course of business;
(f) pursuant to redemption granted to holders of Units of Partnership
Interest of the Company ("Units");
(g) pursuant to the grant of exercise of options or warrants for Units
of the Company; and
(h) subsidiaries of the Company in accordance with Section 6.7.
Section 6.7 Transactions with Affiliates and Officers. (i) Enter into
-----------------------------------------
any transactions, including, without limitation, the purchase, sale or exchange
of property or the rendering of any services, with any Affiliate, or enter into,
assume or suffer to exist any employment or consulting contract with any
Affiliate or any officer thereof, except a transaction or contract which is in
the ordinary course of the Company's business and which is upon fair and
reasonable terms no less favorable to the Company than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate or (ii) make
any advance or loan in excess of $500,000, in the aggregate, to any Affiliate of
the Company other than CAR or to any officer or employee thereof or of the
Company or to any trust of which any of the foregoing is a beneficiary, or to
any Person on the guarantee of any of the foregoing except for loans
specifically permitted by this Agreement, or (iii) pay any fees, costs or
expenses to, or reimburse or assume any obligation for the reimbursement of any
expenses, fees or costs incurred by any Affiliate except in the ordinary course
of business.
Section 6.8 Compliance with ERISA. (a) Terminate any Plan so as to
---------------------
result in any material liability to PBGC or any material Withdrawal Liability,
(b) engage in or permit any Person to engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan
which would subject the Company to any material
21
<PAGE>
tax, penalty or other liability, (c) incur or suffer to exist any material
"accumulated funding deficiency" (as defined in Sections 302(a)(2) and 4243 of
ERISA), whether or not waived, involving any Plan, except for contingent
Withdrawal Liability not in excess of $500,000, or (d) allow or permit to exist
any event or condition which presents a material risk of incurring a material
liability to PBGC.
Section 6.9 No Subsidiaries. Directly or indirectly form or hold any
---------------
Subsidiaries, other than subsidiaries organized to own real property of the
Company in the ordinary course of business.
Section 6.10 Exception to Negative Covenants. Notwithstanding anything
-------------------------------
in this Article VI of this Agreement, the Company and CAR may take such actions
(including without limitation, the making of distributions) that are necessary
to assure that CAR continues to qualify as a real estate investment trust under
the Code and that the Company is treated as a partnership for tax purposes under
the Code so long as such actions do not further encumber the Real Property or
have a material adverse effect on the value of the Real Property, the leases
thereof or the rental income therefrom.
ARTICLE VII
EVENTS OF DEFAULT
-----------------
Upon the occurrence of any of the following events:
(a) The Company shall fail to pay any principal or interest on the
Note when due, and such failure shall continue for ten (10) days or the Company
shall fail to pay any other amount payable hereunder in accordance with the
terms hereof, or
(b) Any representation or warranty made or deemed made by the Company
herein or in any other Loan Document, or by any Guarantor in any Loan Document
to which it is a party or in any certificate, document or financial or other
statement furnished at any time under or in connection with any Loan Document
shall prove to have been incorrect in any material respect on or as of the date
made or deemed made; or
(c) The Company shall default in the observance or performance of any
agreement contained in Section 5.5 or Article VI hereof and such default shall
not have been cured within a period of 30 days; or
(d) Any of the Guarantors shall default under or breach the terms of
the Guarantee and such default shall not have been cured within a period of 30
days; or
(e) The Company or any Guarantor shall default in the observance or
performance of any other covenant or agreement contained herein for a period of
thirty (30) days after written notice shall have been given by the Bank to the
Company; or the Company or any
22
<PAGE>
Guarantor shall default in the observance or performance of any other covenant
or agreement contained in any other Loan Document and such default is not
remedied within the applicable period of grace (if any) provided in such Loan
Document; or
(f) Any Loan Document shall cease, for any reason, to be in full force
and effect in accordance with its terms or any party thereto shall so assert in
writing; or any Security Document shall cease, for any reason, to grant to the
Bank a legal, valid and enforceable Lien on any of the collateral described
therein or shall cease, for any reason, to have the priority purport ed to be
created thereby at the time of the execution thereof; or any party to any Loan
Document shall default in the observance or performance of any of the covenants
or agreements contained therein and such default shall not have been cured
within a period of 30 days; or
(g) Any default or event of default shall occur and remain uncured
beyond any applicable grace period under any note, security documents,
guarantees, agreements, documents or other instruments (other than the Loan
Documents) between the Bank and (i) CAR, (ii) the Company or (iii) any Affiliate
of CAR or the Company; or
(h) The Company, shall (i) default in any payment of principal of or
interest on any Indebtedness or in the payment of any Contingent Obligation,
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness or Contingent Obligation was created; or (ii)
default in the observance or performance of any other agreement or condition
relating to any such Indebtedness or Contingent Obligation or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur, the effect of which default or other event is (A) to cause
such Indebtedness to become due prior to its stated maturity or such Contingent
Obligation to become payable, or (B) to allow the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Contingent Obligation (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries), to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such Contingent
Obligation to become payable; or
(i) (i) The Company shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it, or for all or any
substantial part of its assets, or the Company shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced against the
Company any case, proceeding or other action of a nature referred to in clause
(i) above which is not dismissed within sixty (60) days or which results in the
entry of an order for relief or any such adjudication or appointment which shall
not have been vacated, discharged or stayed or bonded pending appeal within
sixty (60) days from the entry thereof; or (iii) there shall be commenced
against the Company any case, proceeding or other action seeking issuance of a
23
<PAGE>
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets, which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 days from the entry thereof; or (iv) the
Company, shall take any action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the acts set forth in clause (i), (ii)
or (iii) above; or (v) the Company shall generally not, or shall be unable to,
or shall admit in writing its inability to, pay its debts as they become due; or
(j) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Sections 302(a)(2) and
4243 of ERISA), whether or not waived, shall exist with respect to any Plan,
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Plan, which Reportable Event or institution of
proceedings is, in the reasonable opinion of the Bank, likely to result in the
termination of such Plan for purposes of Title IV of ERISA and, in the case of a
Reportable Event, the continuance of such Reportable Event unremedied for ten
days after the earlier of the date when the Company obtains actual knowledge of
the Reportable Event or the date when notice of such Reportable Event pursuant
to Section 4043(a), (c) or (d) of ERISA is given or the continuance of such
proceedings for ten days after commencement thereof, as the case may be, (iv)
any Plan shall terminate for purposes of Title IV of ERISA, (v) if on any date,
the Withdrawal Liability exceeds $100,000, or (vi) any other event or condition
shall occur or exist and in each case in clauses (i) through (vi) above, such
event or condition, together with all other such events or conditions, if any,
could subject the Company to any tax, penalty or other liabilities which in the
aggregate would result in a material adverse change to the business, operations,
property or financial or other condition of the Company; or
(k) One or more final judgments or decrees shall be entered against
the Company which are not insured and which involve more than $500,000 and such
judgments or decrees shall not have been vacated, discharged, or stayed within
60 days from the entry thereof;
Then, and in any such event, (a) if such event is an Event of Default
specified in paragraph (i) above and such Event of Default shall be continuing,
automatically the obligation of the Bank to make Loans hereunder shall
immediately terminate and the Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement and the Note shall immediately
become due and payable, and (b) if such event is any other Event of Default and
such Event of Default shall be continuing and has not been cured within any
applicable grace period, (i) the Bank may, by notice to the Company, terminate
its obligation to make Loans hereunder, whereupon it shall immediately
terminate; and/or (ii) the Bank may, by notice of default to the Company,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the Note to be due and payable forthwith,
whereupon the same shall immediately become due and payable. Except as
expressly provided above in this
24
<PAGE>
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1 Amendments and Waivers. No provision of any Loan Document may
----------------------
be amended or modified in any way, nor may non-compliance therewith be waived,
except pursuant to a written instrument executed by the Bank and the Company.
In the case of any waiver, the Company and the Bank shall be restored to their
former position and rights hereunder and under the outstanding Note, the
Guarantee and the Security Documents, and any Default or Event of Default waived
shall be deemed to be cured and not continuing; but no such waiver shall extend
to any subsequent or other Default or Event of Default, or impair any right
consequent thereon.
Section 8.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing or by telefax and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or when deposited in the mail, postage
prepaid, or, in the case of telefaxed notice, when sent, or in the case of
private courier, when delivered to such courier, addressed as follows or to such
address as may be hereafter notified by the respective parties hereto and any
future holders of the Note:
The Company: Capital Automotive L.P.
Attn: Thomas D. Eckert
1420 Spring Hill Road
Suite 525
McLean, Virginia 22102
The Bank: NationsBank, N.A.
Dealer Financial Services
Attn: Michael R. Burkitt, Vice President
6830 Old Dominion Drive, Suite 200
McLean, Virginia 22101
provided that any notice, request or demand to or upon the Bank shall not be
effective until received.
Section 8.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Bank, any right, remedy, power or
privilege hereunder or under any Loan Document, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies,
25
<PAGE>
powers and privileges herein or therein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
Section 8.4 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made under any Loan Document and in any document,
certificate or statement delivered pursuant thereto or in connection therewith
shall survive the execution and delivery of such Loan Document.
Section 8.5 Payment of Expenses and Taxes. The Company agrees (a) to pay
-----------------------------
or reimburse the Bank for all of its reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to the Loan Documents and any other
documents prepared in connection therewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Bank, (b) to pay or
reimburse the Bank for all its reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under the Loan
Documents and any such other documents, including, without limitation,
reasonable fees and disbursements of counsel to the Bank, (c) to pay, indemnify,
and to hold the Bank harmless from, any engineering fees, any and all recording
and filing fees and taxes and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery and recordation of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of the Loan Documents, and any such other
documents, and (d) to pay, indemnify, and hold the Bank harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of the Loan Documents or any transaction financed
in whole or in part directly or indirectly with the proceeds of any loans made
under this Agreement (all the foregoing, collectively, the "indemnified
liabilities"), provided, that the Company shall have no obligation hereunder
--------
with respect to indemnified liabilities arising from (i) the gross negligence or
willful misconduct of the Bank or (ii) legal proceedings commenced against the
Bank by any security holder or creditor thereof arising out of and based upon
rights afforded any such security holder or creditor solely in its capacity as
such or (iii) a breach of this Agreement by the Bank. The agreements in this
Section shall survive repayment of the Note and all other amounts payable
hereunder.
Section 8.6 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the Company and the Bank, all future holders of the
Note and their respective successors and assigns, except that the Company may
not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the Bank.
26
<PAGE>
Section 8.7 Setoff.
------
(a) The Company agrees that the Bank shall have the right to set off
and apply against all amounts owing to the Bank by the Company under the Note or
any other Loan Document any amount owing to the Company from the Bank.
(b) In addition to any rights and remedies of the Bank provided by
law, the Bank shall have the right, without prior notice to the Company, any
such notice being expressly waived by the Company to the extent permitted by
applicable law, upon the filing of a petition under any of the provisions of the
federal bankruptcy act or amendments thereto, by or against; the making of an
assignment for the benefit of creditors by; the application for the appointment,
or the appointment of any receiver of, or of any of the property of; the
issuance of any execution against any of the property of; the issuance of a
subpoena or order, in supplementary proceedings, against or with respect to any
of the property of; or the issuance of a warrant of attachment against any of
the property of; the Company, to set off and apply against all amounts owing to
the Bank by the Company under the Note or any other Loan Documents, and against
any other Indebtedness, whether matured or unmatured, of the Company to the
Bank, any amount owing from the Bank to the Company, at or at any time after the
happening of any of the above-mentioned events, and the aforesaid right of set
off may be exercised by the Bank against the Company or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver, or execution, judgment or attachment creditor of the Company, or any
of them, or against anyone else claiming through or against the Company or such
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set off shall not have been
exercised by the Bank prior to the making, filing or issuance, or service upon
the Bank of, or of notice of, any such petition; assignment for the benefit of
creditors; appointment or application for the appointment of a receiver; or
issuance of execution, subpoena or order or warrant.
Section 8.8 Counterparts. This Agreement may be executed by one or more
------------
of the parties to this Agreement on any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Company and the Bank.
Section 8.9 Governing Law. The Loan Documents and the rights and
-------------
obligations of the parties thereunder shall be governed by, and construed and
interpreted in accordance with, the law of the Commonwealth of Virginia, except
to the extent that the law of other states governs creation and perfection of
security interests in collateral located in such states.
Section 8.10 Arbitration. Any controversy or claim between or among the
-----------
parties hereto including but not limited to those arising out of or relating to
the Note, this Agreement or any related agreements or instruments, including any
claim based on or arising from an alleged tort, shall be determined by binding
arbitration in accordance with the Federal Arbitration Act (or
27
<PAGE>
if not applicable, the applicable state law), the Rules of Practice and
Procedure for the Arbitration of Commercial Disputes of Judicial Arbitration and
Mediation Services, Inc. (J.A.M.S.), and the "Special Rules" set forth below.
In the event of any inconsistency, the Special Rules shall control. Judgment
upon any arbitration award may be entered in any court having jurisdiction. Any
party to this Agreement may bring an action, including a summary or expedited
proceeding, to compel arbitration of any controversy or claim to which this
Agreement applies in any court having jurisdiction over such action.
(a) Special Rules The arbitration shall be conducted in the city of
-------------
the Company's domicile at time of this Agreement's execution and administered by
J.A.M.S.; if J.A.M.S. is unable or legally precluded from administering the
arbitration, then the American Arbitration Association shall administer such
arbitration. All arbitration hearings will be commenced within 90 days of
demand for arbitration; further, the arbitrator shall only, upon a showing of
cause, be permitted to extend the commencement of such hearing for an additional
60 days.
(b) Reservation of Rights Nothing in this Agreement shall be deemed
---------------------
to (A) limit the applicability of any otherwise applicable statutes of
limitation or repose and any waivers contained in this Agreement; or (B) be a
waiver by the Bank of the protection afforded to it by 12 U.S.C. (S) 91 or any
substantially equivalent state law; or (c) limit the right of any party hereto
to exercise self-help remedies such as (but not limited to) setoff, or to
foreclose against any real or personal property collateral, or to obtain from a
court provisional or ancillary remedies such as (but not limited to) injunctive
relief or the appointment of a receiver. Any party may exercise such self-help
rights, foreclose upon such property, or obtain such provisional or ancillary
remedies before, during or after the pendency of any arbitration proceeding
brought pursuant to this Agreement. At the Bank's option, foreclosure under a
deed of trust or mortgage may be accomplished by either the exercise of power of
sale under the deed of trust or mortgage, or by judicial sale under the deed of
trust or mortgage, or by judicial foreclosure. Neither exercise of self-help
remedies nor the institution or maintenance of an action for foreclosure or
provisional or ancillary remedies shall constitute a waiver of the right of any
party, including the claimant in any such action, to arbitrate the merits of the
controversy or claim occasioning resort to such remedies.
Section 8.11 Waiver of Jury Trial. THE COMPANY AND THE BANK EACH WAIVE
--------------------
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT
BY EITHER PARTY AGAINST THE OTHER ON ANY MATTER ARISING OUT OF THIS AGREEMENT,
THE NOTE, THE SECURITY DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY.
Section 8.12 Rights of Company. In addition to any other rights of the
-----------------
Company contained herein and notwithstanding anything to the contrary contained
herein and as of February 19, 1998, the Company shall have the following rights
hereunder:
28
<PAGE>
(a) The Company may sell, lease, convey, assign, pledge, encumber, or
transfer all or any part of the assets of the Company other than the Real
Property without the consent of the Bank; provided however that, the result of
any such transaction may not cause the Company on a consolidated basis with CAR
to violate any of the financial covenants contained in Section 5.9 hereto.
(b) The Company may voluntarily sell, pledge, encumber, assign or
transfer, by operation of law or otherwise, any interest in the Company without
the consent of the Bank; except for the withdrawal or admission to the Company
of any general partner, which withdrawal or admission shall require to prior
written consent of the Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly signed, sealed and delivered by their properly and duly authorized officers
as of the day and year first above-written.
CAPITAL AUTOMOTIVE L.P.
By: CAPITAL AUTOMOTIVE REIT,
General Partner
By: /s/ David S. Kay
-------------------------------[Seal]
Title: V.P., C.F.O. & Secretary
----------------------------
NATIONSBANK, N.A.
By: /s/ Michael R. Burkitt
-----------------------------------[Seal]
Title: V.P.
--------------------------------
29
<PAGE>
EXHIBIT 10.41
UPDATED TO REFLECT MODIFICATIONS FOR
SCHNITZER/PARK PLACE CLOSING ON SEPTEMBER 28, 1998
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of September
8, 1998, between CAPITAL AUTOMOTIVE L.P., a Delaware limited partnership (the
"COMPANY"), and NATIONSBANK, N.A. (the "BANK").
RECITALS:
A. By agreement dated August 14, 1998, the Company and the Bank are
parties to that certain Amended and Restated Credit Agreement dated as of
February 19, 1998 (the "Credit Agreement").
B. The Company and the Bank have agreed to increase the Loan from
$13,500,000 to $19,100,000 and to modify and amend the Credit Agreement pursuant
to the terms and conditions hereof. Capitalized terms used herein and not
otherwise defined herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledge, the Bank and the Company hereby amend and restate
the Credit Agreement as follows:
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of February
19, 1998, between CAPITAL AUTOMOTIVE L.P., a Delaware limited partnership (the
"COMPANY"), and NATIONSBANK, N.A. (the "BANK").
The parties hereto hereby agree as follows:
ARTICLE 1.
DEFINITIONS
-----------
Section 1.1 Defined Terms. As used in this Agreement, the following
-------------
terms have the following meanings:
"Additional Real Property" The parcels of real property located in
------------------------
Arlington County, Virginia owned by the Company more particularly described in
the $5,600,000 Deed of Trust.
1
<PAGE>
"Agreement": this Credit Agreement, as amended, supplemented or otherwise
---------
modified from time to time.
"Appraised Value": the fair market value of all or such portion of the Real
---------------
Property as has been determined by an appraiser engaged by the Bank, at the
Company's expense based upon a written appraisal that has been accepted by the
Bank in accordance with FIRREA, other applicable laws and regulations and
policies of the Bank.
"Business Day": any day except a Saturday, Sunday or other day on which
------------
commercial banks in Virginia or New York are authorized by law to close.
"CAR": Capital Automotive REIT, a Maryland real estate investment trust.
---
"CAR Guaranty": the guarantees of the Loan dated as of February 19, 1998,
------------
from CAR to the Bank in the form attached hereto as Exhibit B-1 as such
Guarantee may be amended, supplemented or otherwise modified from time to time.
"Code": the Internal Revenue Code of 1986, as amended from time to time.
----
"Commonly Controlled Entity": an entity, whether or not incorporated, which
--------------------------
is under common control with the Company within the meaning of Section 414(b),
(c), (m) or (n) of the Code.
"Contingent Obligation": as to any Person, any obligation of such Person
---------------------
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (c) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (d) otherwise to assure or hold harmless the owner of such primary
obligation against loss in respect thereof; provided, however, that the term
-------- -------
Contingent Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business.
"Contractual Obligation": as to any Person, any provision of any security
----------------------
issued by such Person or of any agreement, instrument or undertaking to which
such Person is a party or by which it or any of its property is bound.
"Debt Service Coverage Ratio": the consolidated ratio for the Company and
---------------------------
CAR, calculated at the end of any fiscal quarter as an average of that quarter
and the immediately
2
<PAGE>
preceding three quarters, by dividing (A) the sum of (i) net profit, (ii)
depreciation, (iii) amortization and (iv) interest expense, minus the sum of (i)
distributions, (ii) non-recurring gains and (iii) charges to equity, by (B) the
sum of (i) interest expense, (ii) prior year current maturities of long term
debt and (iii) prior year current maturities of capital leases.
"Default": any of the events specified in Article VII, whether or not any
-------
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Environmental Indemnity Agreement": the Environmental Indemnity Agreement
---------------------------------
dated as of February 19, 1998 from the Company to the Bank, as it may be
amended, supplemented or otherwise modified from time to time.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
-----
from time to time.
"Event of Default": any of the events specified in Article VII, provided
----------------
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"FIRREA" the Financial Institution Reform, Recovery and Enforcement Act, 12
------
U.S.C. (S) 1811, et seq.
-- ----
"$5,600,000 Deed of Trust ": the Deed of Trust securing the $5,600,000 Note
-------------------------
to be executed and delivered by the Company, conveying the Additional Property
and the Initial Property to certain trustees for the benefit of the Bank, as it
may be amended, supplemented or otherwise modified from time to time.
"$5,600,000 Note": as defined in Section 2.1.
---------------
"$5,600,000 Subordination Agreement": the agreement subordinating the lien
----------------------------------
of the $10,000,000 Deed of Trust on the Virginia Property to the lien of the
$5,600,000 Deed of Trust with respect thereto.
"GAAP": Generally Accepted Accounting Principles in the United States of
----
America in effect from time to time.
"Governmental Authority": any nation or government, any state or other
----------------------
political subdivision thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled (through stock or
capital ownership or otherwise) by any of the foregoing.
"Guarantee": the collective reference to (i) the CAR Guaranty and the
---------
guarantees of the Loan dated as of February 19, 1998, from the Guarantors to the
Bank in the form attached hereto
3
<PAGE>
as Exhibit B-2 as to the Sheehy Guarantors and Exhibit B-3 as to the Rosenthal
Guarantors, as such Guarantee may be amended, supplemented or otherwise modified
from time to time, and (ii) the guarantees of the Loan delivered to the Bank by
the Other Guarantors, in form and substance satisfactory to the Bank in order to
satisfy the conditions of Section 4.2(d)(i) hereof.
"Guarantors": CAR, the Sheehy Guarantors and the Rosenthal Guarantors and
----------
the Other Guarantors.
"Indebtedness": as to any Person, at a particular time, (a) all
------------
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which such
Person otherwise assures a creditor against loss, including, without limitation,
accounts payable, accrued expenses and other current liabilities, and inter-
company accounts, (b) all liabilities secured by any Lien on any property owned
by such Person even though such Person has not assumed or otherwise become
liable for the payment thereof, and (c) capitalized lease obligations of such
Person.
"Initial Real Property": at any time, the parcels of real property owned by
---------------------
the Company securing the Loan located in the State of Maryland and in Fairfax
and Spottsylvania Counties, Virginia more particularly described in the
$10,000,000 Deed of Trust.
"Libor Rate": for any day, the fluctuating interest rate per annum obtained
----------
by dividing the three month London Interbank Offered Rate quoted in the "Money
Rates" section of "The Wall Street Journal" by (ii) an amount equal to 1 minus
the "Floating Libor Reserve Requirement" for such day. "Floating Libor Reserve
Requirement" means the rate at which reserves (including, without limitation,
any marginal, supplemental or emergency reserves) are required to be maintained
by the Bank by any applicable Governmental Authority, on the date for which
interest is being calculated, against U. S. dollar non-personal time deposits in
the United States with a term equal to one month, expressed as a decimal.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction).
"Loan": the loan to be made to the Company by the Bank pursuant to Section
----
2.1, evidenced by the Note.
"Loan Documents": the collective reference to this Agreement, the Note, the
--------------
Guarantee, the Security Documents and all other documents which have been
executed and delivered by the Company in connection with the Loans;
individually, a "Loan Document".
4
<PAGE>
"Multiemployer Plan": a Plan which is a multiemployer plan as defined in
------------------
Section 4001(a)(3) of ERISA.
"Note": as defined in Section 2.1.
----
"Other Guarantors": the collective reference to any Person that has
----------------
executed and delivered a Guarantee to the Bank in order to satisfy the
conditions of Section 4.2(d)(i) hereof.
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
----
Subtitle A of Title IV of ERISA or any entity succeeding to any or all of its
functions under ERISA.
"Person": an individual, a partnership, a corporation, a real estate
------
investment trust, a limited liability company, a business trust, a joint stock
company, a trust, an unincorporated association, a joint venture, a Governmental
Authority or any other entity of whatever nature.
"Plan": at any time an employee pension benefit plan which is covered by
----
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (i) maintained by a member of the Commonly Controlled
Entity for employees of a member or members of the Commonly Controlled Entity,
or (ii) maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Commonly Controlled Entity is then making or accruing an
obligation to make contributions or has within the preceding five years made
contributions.
"Real Property": at any time, the parcels of real property owned by the
-------------
Company securing the $10,000,000 Note, the $3,500,000 Note and the $5,600,000
Note, or any of them as more particularly described in the $10,000,000 Deed of
Trust, the $3,500,000 Deed of Trust and the $5,600,000 Deed of Trust and, with
respect to each such parcel, for which each of the requirements of Section 4.4
(c) have either been satisfied or waived by the Bank in writing.
"Reportable Event": any of the events set forth in Section 4043(b) of ERISA
----------------
or the regulations thereunder.
"Requirement of Law": as to any Person, the partnership agreement, the
------------------
Certificate or Articles of Incorporation and Bylaws, or Articles of
Organization, or Declaration of Trust, or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its properties or
to which such Person or any of its property is subject.
"Responsible Officer": the Vice President-Chief Financial Officer of the
-------------------
Company, or the Vice President-Chief Financial Officer of CAR or, with respect
to financial matters, the chief financial officer of a Person or the chief
accounting officer of a Person.
5
<PAGE>
"Rosenthal Guarantors": Robert M. Rosenthal, Marion Rosenthal, Brooke
--------------------
Peterson, Jane Cafritz and Nancy Rosenthal.
"Security Documents": the $10,000,000 Deed of Trust, the $3,500,000 Deed of
------------------
Trust, the $5,600,000 Deed of Trust and any other instruments or documents
executed by the Company or others as security for the Note, as they may be
amended, supplemented or otherwise modified from time to time.
"Sheehy Guarantors": Vincent A. Sheehy and Helen M. Sheehy.
-----------------
"Subsidiary": as to any Person, a corporation of which shares of stock
----------
having ordinary voting power (other than stock having such power only by reason
of the happening of a contingency) to elect a majority of the board of directors
or other managers of such corporation are at the time owned, or the management
of which is otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person.
"Supplemental Trusts" supplemental deeds of trusts, in form and substance
-------------------
satisfactory to the Bank, supplementing the $10,000,000 Deed of Trust and the
$3,500,000 Deed of Trust with Liens on the Additional Real Property, subject to
the Lien of the $5,600,000 Deed of Trust.
"Tangible Net Worth": at a particular date, all amounts which would, in
------------------
conformity with GAAP, be included under shareholders' equity on a balance sheet
of a Person at such date; provided, however, such amounts are to be net of
amounts carried on the books of such Person for (a) any write-up in the book
value of any assets of such Person resulting from a revaluation thereof, (b)
treasury stock, (c) unamortized debt discount and expense, (d) any cost of
investments in excess of net assets acquired at any time of acquisition by such
Person, (e) patents, patent applications, copyrights, trademarks, trade names,
and other like intangibles and (f) goodwill, experimental or organizational
expenses and other like intangibles.
"$10,000,000 Deed of Trust ": the collective reference to one or more Deeds
--------------------------
of Trust securing the $10,000,000 Note executed and delivered by the Company at
the time of the first advance on the Loan conveying the Initial Real Property to
certain trustees for the benefit of the Bank, as any of them may be amended,
supplemented or otherwise modified from time to time.
"$10,000,000 Note": as defined in Section 2.1.
----------------
"Termination Date": November 19, 1998.
----------------
"$3,500,000 Deed of Trust ": the Deed of Trust securing the $3,500,000 Note
-------------------------
dated August 14, 1998 executed and delivered by the Company, conveying the
Virginia Real Property to certain trustees for the benefit of the Bank, which
are to be recorded in Virginia in the jurisdictions in which the Virginia Real
Property is located, as any of them may be amended, supplemented or otherwise
modified from time to time.
6
<PAGE>
"$3,500,000 Note": as defined in Section 2.1.
---------------
"$3,500,000 Subordination Agreement": the agreement subordinating the lien
---------------------------------
of the $10,000,000 Deed of Trust on the Virginia Property to the lien of the
$3,500,000 Deed of Trust with respect thereto.
"Total Liabilities": at a particular date, the total liabilities of a
-----------------
Person, determined in accordance with GAAP.
"Unfunded Vested Liabilities": with respect to any Plan at any time, the
---------------------------
amount (if any) by which (i) the present value of all vested nonforfeitable
benefits under the Plan exceeds (ii) the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess represents a
potential liability of a member of the Commonly Controlled Entity to the PBGC or
the Plan under Title IV of ERISA.
"Virginia Real Property": at any time, the portion of the Initial Real
----------------------
Property located in the Commonwealth of Virginia.
"Withdrawal Liability": at a particular date, the aggregate liability of
--------------------
the Company or any Commonly Controlled Entity (regardless of the date of
payment) to any Multiemployer Plans pursuant to (S) 4201 of ERISA if, on such
date, the Company or any Commonly Controlled Entity were to withdraw (partially
or completely) from such Plans.
Section 1.2 Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined
meanings when used in the Note, the other Loan Documents, and in any certificate
or other document made or delivered pursuant hereto or thereto, unless otherwise
defined therein.
(b) As used herein and in the Note, and any certificate or other
document made or delivered pursuant hereto, accounting terms not defined in
Section 1.1, and accounting terms partly defined in Section 1.1 to the extent
not defined, shall have the respective meanings given to them under GAAP.
ARTICLE 2.
AMOUNT AND TERMS OF LOAN
------------------------
Section 2.1 The Loan. Subject to the terms and conditions hereof, and
--------
until the Termination Date, the Bank agrees to make revolving loans to the
Company in an amount up to $18,500,000 (the "Loan"). The Loan shall be evidenced
by three (3) revolving notes of the Company (collectively, the "Note") and
payable to the order of the Bank, the first dated as of February 19, 1998, in
the maximum original principal amount of $10,000,000 (the "$10,000,000
7
<PAGE>
Note"), the second dated August 14, 1998 in the original principal amount of
$3,500,000 (the "$3,500,000 Note") and the third, dated September 8, 1998, in
the original principal amount of $5,600,000 (the "$5,600,000 Note"). The Note
shall bear interest from the date thereof on the unpaid principal amount thereof
at a rate per annum equal to the Libor Rate plus 1.5%. Interest only on the
Note shall be payable monthly in arrears, on the first day of each month,
beginning on the first such date to occur after the date hereof. The Note shall
mature on the Termination Date. The Note shall be in the form attached hereto
as Exhibit A. The Bank is authorized to endorse the date and amount of each
Loan of the Bank and each payment of principal with respect thereto on the
schedule annexed to and constituting a part of the Note, which endorsement shall
constitute prima facie evidence of the accuracy of the information endorsed.
----- -----
Subject to the terms and conditions hereof, the Company may borrow, repay and
reborrow the Loan. Each Note shall be secured by the applicable Security
Documents.
Section 2.2 Default Interest; Late Charges. After any amount on the
------------------------------
Note becomes due and payable, (whether at the stated maturity, by acceleration
or otherwise) the Note shall bear interest at a rate per annum equal to three
percent (3%) above the rate otherwise applicable until paid in full (both before
and after judgment). In the event the Company fails to pay any installment of
principal and/or interest or otherwise fails to repay the Note within fifteen
(15) days of its due date, the Company will pay the Bank on demand a late charge
of 5% of the overdue payment.
Section 2.3 Prepayments. The Company may, at its option, from time to
-----------
time, prepay the Loans in whole or in part without premium or penalty at any
time or times. All prepayments shall be applied against the balance outstanding
on the $5,600,000 Note until the balance on such note shall be reduced to $0,
then to the balance outstanding on the $3,500,000 Note until the balance on such
note shall be reduced to $0 and then to the $10,000,000 Note until the balance
on such note shall be reduced to $0.
Section 2.4 Computation of Interest and Fees. Interest and fees shall
--------------------------------
be calculated on the basis of a 360-day year for the actual days elapsed.
Section 2.5 Notice of Borrowing; Disbursements and Payments. The
-----------------------------------------------
Company shall give the Bank notice of a requested advance under the Loan before
1:00 p.m., on the day prior to the requested Borrowing Date, specifying a
Business Day on which the Loan is to be made and the amount of such Loan. All
proceeds of the Loans shall be disbursed by the Bank to the Company first under
the $10,000,000 Note until fully funded, then under the $3,500,000 Note until
fully funded and then under the $5,600,000 Note. Each payment by the Company on
account of principal, interest and fees with respect to the Loans shall be made
to the Bank. All payments (including prepayments) by the Company on account of
principal, interest and fees shall be made without set-off or counterclaim to
the Bank at the office of the Bank in lawful money of the United States of
America and in immediately available funds. If any payment hereunder or on the
Note becomes due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day, and, with respect
to
8
<PAGE>
payments of principal or interest thereon shall be payable at the then
applicable rate during such extension.
Section 2.6 Use of Proceeds. The proceeds of the Loan shall be used by
---------------
the Company for working capital.
Section 2.7 Fee. On the date of this Second Amended and Restated
---
Agreement, the Company shall pay to the Bank a fee of $10,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Bank to enter into this Agreement and to make the
loans herein provided for, the Company hereby represents and warrants to the
Bank that as of February 19, 1998:
Section 3.1 Financial Condition. The pro-forma consolidated financial
------------------- --- -----
statements of the Company and CAR provided to the Bank by the Company, fairly
present the financial position of the Company and CAR purported to be shown
thereon at the dates stated therein (management believes that the assumptions
underlying the pro-forma adjustments are reasonable and such pro-forma
--- ----- --- -----
adjustment have been properly applied to the historical amounts in the
compilation of the information) and the consolidated financial statements of the
Company and CAR delivered, from time to time, to the Bank pursuant to Section
5.1 of this Agreement accurately reflect the financial condition of the Company
and CAR on the dates stated therein.
Section 3.2 No Change. Since the date of the most recent consolidated
---------
financial statements of the Company and CAR provided to the Bank, there has been
no material adverse change in the business, operations, assets or financial or
other condition of the Company and/or CAR.
Section 3.3 Loan to Value Ratio. The Appraised Value of the Real
-------------------
Property is at least 133% of the aggregate amount of the Loans outstanding
hereunder at a particular time.
Section 3.4 Partnership Existence; Compliance with Law. The Company (a)
------------------------------------------
is duly organized, validly existing and in good standing as a limited
partnership under the laws of Delaware, (b) has the partnership power and
authority to own and operate its property, to lease the property it leases and
to conduct the business in which it is currently engaged, (c) is duly qualified
as a limited partnership and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or the conduct
of its business required such qualification, and (d) is in compliance with all
Requirements of Law, except to the extent that the failure to comply therewith
could not, in the aggregate, have a material adverse effect on the business,
operations, property or financial or other condition of the Company and could
not materially adversely affect the ability of the Company to perform its
obligations under this
9
<PAGE>
Agreement, the Note, and the Security Documents and to effectuate the
transactions contemplated hereby and thereby.
Section 3.5 Partnership Power; Authorization; Enforceable Obligations.
--------------------------------------------- -----------
The Company has the partnership power and authority to make, deliver and perform
the Loan Documents to which it is a party, to borrow hereunder and to effectuate
the transactions contemplated hereby and has taken all necessary action to
authorize the borrowings on the terms and conditions of this Agreement and the
Note, to grant the mortgage liens and security interests pursuant to the
Security Documents and to authorize the execution, delivery and performance of
the Loan Documents to which it is a party. No consent or authorization of,
filing with, or other act by or in respect of any Person or any Governmental
Authority, is required or advisable in connection with the borrowings hereunder
or with the execution, delivery, performance, validity or enforceability of the
Loan Documents to which it is a party. The Loan Documents to which the Company
is a party have been duly executed and delivered on behalf of the Company and
constitute the legal, valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
general principles of equity regardless of whether applied in a proceeding in
equity or at law, the discretion of the court before which any action or
proceeding may be brought and other applicable laws which may limit the
enforceability of certain of the remedial or procedural provisions contained in
the Loan Documents.
Section 3.6 No Legal Bar. The execution, delivery and performance of
------------
the Loan Documents and the borrowings hereunder, the use of the proceeds thereof
and the granting of the security interests pursuant to the Security Documents
will not violate any Requirement of Law applicable to the Company or any
Contractual Obligation of the Company, and will not result in, or require, the
creation or imposition of any Lien on any of its properties or revenues pursuant
to any Requirement of Law or Contractual Obligation except as permitted in
Section 5.2 hereof.
Section 3.7 No Material Litigation. No litigation, investigation or
----------------------
proceeding of or before any arbitrator or Governmental Authority is pending or,
to the knowledge of the Company, threatened by or against the Company, any of
its employee benefit programs, policies or Plans or against any of its
properties or revenues (a) with respect to the Loan Documents or any of the
transactions contemplated thereby, or (b) which would have a material adverse
effect on the business, operations, property or financial or other condition of
the Company.
Section 3.8 No Default. The Company is not in default under or with
----------
respect to any material Contractual Obligation in any respect which would be
materially adverse to the business, operations, property or financial or other
condition of the Company, or which could materially adversely affect the ability
of the Company to perform its obligations under the Loan Documents. No Default
or Event of Default has occurred and is continuing.
10
<PAGE>
Section 3.9 Ownership of Property; Liens. The Company has good record
----------------------------
and marketable title in fee simple to all its real property owned by it, and
good title to all other property owned by it, and none of such property is
subject to any Lien, except as permitted in Section 5.2 hereof.
Section 3.10 No Burdensome Restrictions. To the knowledge of the
--------------------------
Company, no Contractual Obligation of the Company and no Requirement of Law
materially adversely affects, or insofar as the Company may reasonably foresee
may so affect, the business, operations, property or financial or other
condition of the Company.
Section 3.11 Taxes. The Company has filed or caused to be filed all tax
-----
returns which to the knowledge of the Company are required to be filed, and has
paid all taxes shown to be due and payable on said returns or on any assessments
made against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority; and
no tax liens have been filed and, to the knowledge of the Company, no claims are
being asserted with respect to any such taxes, fees or other charges, unless and
to the extent that such taxes, assessments, fees or other changes are contested
in good faith and by appropriate procedure, such taxes, assessments, fees or
charges are not subject to any liens other than Permitted Liens, and adequate
reserves therefor have been established as required by GAAP.
Section 3.12 Federal Regulations. The Company is not engaged and will
-------------------
not engage, principally or as one of its important activities, in the business
of extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any loans
hereunder will be used for "purchasing" or "carrying" "margin stock" as so
defined or for any purpose which violates, or which would be inconsistent with,
the provisions of the Regulations of such Board of Governors.
Section 3.13 Compliance with ERISA; Prohibited Transactions. Each member
----------------------------------------------
of the Commonly Controlled Entity has fulfilled its obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan and is
in compliance in all material respects with provisions of ERISA and the Code and
published regulations presently applicable to each Plan. No member of the
Commonly Controlled Entity has incurred any liability, or has entered into any
transaction that is likely to cause any liability to be incurred to the PBGC or
any Plan under Title IV of ERISA. No Lien has been attached and no Person has
threatened to attach a Lien on any property of the Company as a result of the
Company's failure to comply with ERISA. None of the Plans is a Multiemployer
Plan. With respect to each Plan, the Plan has not at any time:
(a) engaged in any "prohibited transaction," as such term is defined
in Section 4975 of the Code or in Section 406 of ERISA;
11
<PAGE>
(b) incurred any "accumulated funding deficiency," as such term is
defined in Sections 302(a)(2) and 4243 of ERISA, whether or not waived; or
(c) been terminated in a manner which could result in the imposition
of a Lien on the property of the Company pursuant to Section 4068 of ERISA.
Section 3.14 Investment Company Act. The Company is not an "investment
----------------------
company" or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
Section 3.15 Subsidiaries. There are no Subsidiaries of the Company.
------------
Section 3.16 Operations and Business. The Company has engaged in no
-----------------------
business other than the business currently being conducted by the Company.
Section 3.17 Patents, Copyrights, Permits, Licenses, Trademarks and
------------------------------------------------------
Leases. The Company owns all of the patents, trademarks, permits, service
- ------
marks, trade names, copyrights and licenses, or rights necessary for the
operation of its business and has obtained, or shall have obtained, all
assignments of all leases and other rights of whatever nature, necessary for the
present and planned future conduct of its business, without any known conflict
with the rights of others which would result in a material adverse effect on the
business, operations, property or financial or other condition of the Company.
Section 3.18 The Security Documents. Upon the due execution and delivery
----------------------
thereof pursuant to this Agreement and upon the recording thereof of the
appropriate jurisdiction where Real Property is located, the provisions of the
Security Documents will be effective to create in favor of the Bank, a legal,
valid and enforceable security interest in all right, title and interest of the
Company in the collateral described therein. When Uniform Commercial Code
financing statements have been filed in the offices in the jurisdictions listed
in Schedule 1, the Security Documents shall constitute fully perfected security
interests in all right, title and interest of the Company in such collateral
superior in right to any Liens, existing or future, which the Company or any
third Person may have against such collateral or interests therein, except as
permitted by Section 5.2 below or specifically consented to by the Bank.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
Section 4.1 Conditions to First Loan. The obligation of the Bank to
------------------------
make its first advance on the Loan under the $10,000,000 Note is subject to the
satisfaction of the following conditions precedent:
12
<PAGE>
(a) Note. The Bank shall have received the $10,000,000 Note
----
conforming to the requirements hereof, duly executed and delivered by a duly
authorized officer of the Company.
(b) Legal Opinion of Counsel. The Bank shall have received the
------------------------
executed legal opinion of (i) Wilmer, Cutler & Pickering as counsel for Company
and CAR, and (ii) Charapp, Deese & Weiss, LLP, as counsel to the Rosenthal
Guarantors, and (iii) Surovell, Jackson, Colten & Dugan, P.C., as counsel to the
Sheehy Guarantors, each dated the date of the making of the initial Loan
hereunder and addressed to the Bank, covering such matters incidental to the
transactions contemplated hereby as the Bank may reasonably require and
satisfactory in form and substance to the Bank.
(c) Partnership Proceedings. The Bank shall have received a copy of
-----------------------
the resolutions (in form and substance satisfactory to the Bank) of the Company
authorizing (i) the execution, delivery and performance of this Agreement , the
$10,000,000 Note and the $10,000,000 Deed of Trust (ii) the consummation of the
transactions contemplated thereby and (iii) the borrowings herein provided for
and the granting of the mortgage liens and security interests pursuant to the
Security Documents, certified by the general partner of the Company on the date
of such advance. Such certificate shall state that the resolutions set forth
therein have not been amended, modified, revoked or rescinded as of the date of
such certificate.
(d) Incumbency Certificate of Company. The Bank shall have received a
---------------------------------
certificate of the Company, dated the date of the making of the initial Loan
hereunder, as to the incumbency and signature of the representatives of the
general partner of the Company executing the Loan Documents and any certificate
or other document to be delivered pursuant hereto or thereto.
(e) Proceedings of CAR. The Bank shall have received a copy (in form
------------------
and substance satisfactory to the Bank) of the resolutions of CAR, certified by
a Responsible Officer of CAR on the date of such advance, authorizing CAR's
execution, delivery and performance of the Loan Documents to which it is a
party. Such certificate shall state that the resolutions set forth therein have
not been amended, modified, revoked or rescinded as of the date of such
certificate.
(f) Incumbency Certificate of CAR. The Bank shall have received a
-----------------------------
certificate of CAR, dated the date of the making of the initial advance
hereunder, as to the incumbency and signature of the Responsible Officer
authorized to sign the Loan Documents to which it is a party and any other
certificate or other document to be delivered pursuant thereto.
(g) Guarantees. The Bank shall have received the Guarantees other
----------
than those of the Other Guarantors, duly executed and delivered by such
Guarantors and dated the date hereof.
13
<PAGE>
(h) Security Documents. The Bank shall have received the
------------------
$10,000,000 Deed of Trust, duly executed and delivered by a duly authorized
Responsible Officer of the Company.
(i) Filings, Registrations and Recordings. Any documents
-------------------------------------
(including, without limitation, the $10,000,000 Deed of Trust and Uniform
Commercial Code financing statements) required to be filed, registered or
recorded in order to create, in favor of the Bank, a perfected Lien on the
collateral described in the $10,000,000 Deed of Trust shall have been properly
filed, registered or recorded in each office in each jurisdiction in which such
filings, registrations and recordations are required; the Bank shall have
received acknowledgment copies of all such filings, registrations and
recordations stamped by the appropriate filing, registration or recording
officer (or, in lieu thereof, other evidence satisfactory to the Bank that all
such filings, registrations and recordations have been made); and the Bank shall
have received evidence that all necessary filing, subscription and inscription
fees and all recording and other similar fees, and all taxes and other expenses
related to such filings, registrations and recordings have been paid in full by
or on behalf of the Company.
(n) Initial Public Offering. CAR shall have completed an initial
-----------------------
public offering in which at least $225,000,000 of equity capitalization was
raised from the public and contributed it to the equity of the
Company.
(o) Appraised Value. The Appraised Value of the Real Property is
---------------
no less than $18,000,000.
Section 4.2 Conditions to First Advance on $3,500,000 Note. The
----------------------------------------------
obligation of the Bank to make its first advance on the Loan under the
$3,500,000 Note is subject to the satisfaction of the following conditions
precedent:
(a) Note. The Bank shall have received the $3.500,000 Note
----
conforming to the requirements hereof, duly executed and delivered by a duly
authorized officer of the Company.
(b) Amendment to CAR Guaranty. The Bank shall have received the
-------------------------
amendment to the CAR Guaranty, in form and substance satisfactory to the Bank,
duly executed and delivered by a duly authorized officer of CAR.
(b) Legal Opinion of Counsel. The Bank shall have received the
------------------------
executed legal opinion of (i) Wilmer, Cutler & Pickering, as counsel for Company
and CAR, dated as of the date of the making of the $3,500,000 Note and addressed
to the Bank, covering such matters incidental to the transactions contemplated
hereby as the Bank may reasonably require and satisfactory in form and substance
to the Bank.
14
<PAGE>
(c) Partnership Proceedings. The Bank shall have received a copy of
-----------------------
the resolutions (in form and substance satisfactory to the Bank) of the Company
authorizing (i) the execution, delivery and performance of the $3,500,000 Note
and the $3,500,000 Deed of Trust, (ii) the consummation of the transactions
contemplated thereby and (iii) the borrowings herein provided for and the
granting of the liens and security interests pursuant to the $3,500,000 Deed of
Trust, certified by the general partner of the Company on the date of such
advance. Such certificate shall state that the resolutions set forth therein
have not been amended, modified, revoked or rescinded as of the date of such
certificate.
(d) Incumbency Certificate of Company. The Bank shall have received a
---------------------------------
certificate of the Company, dated the date of such advance, as to the incumbency
and signature of the representatives of the general partner of the Company
executing the Loan Documents and any certificate or other document to be
delivered pursuant hereto or thereto.
(e) Proceedings of CAR. The Bank shall have received a copy (in form
------------------
and substance satisfactory to the Bank) of the resolutions of CAR, certified by
a Responsible Officer of CAR on the date of the making of such advance,
authorizing CAR's execution, delivery and performance of the amendment to the
CAR Guaranty referenced above. Such certificate shall state that the
resolutions set forth therein have not been amended, modified, revoked or
rescinded as of the date of such certificate.
(f) Incumbency Certificate of CAR. The Bank shall have received a
-----------------------------
certificate of CAR, as to the incumbency and signature of the Responsible
Officer authorized to sign the amendment to the CAR Guaranty referred to above
and any other certificate or other document to be delivered pursuant thereto.
(g) Security Documents. The Bank shall have received the $3,500,000
------------------
Deed of Trust and the $3,500,000 Subordination Agreement, each duly executed and
delivered by a duly authorized Responsible Officer of the Company.
(h) Filings, Registrations and Recordings. Any documents (including,
-------------------------------------
without limitation, the $3,500,000 Deed of Trust and Uniform Commercial Code
financing statements) required to be filed, registered or recorded in order to
create, in favor of the Bank, a perfected Lien on the collateral described in
the $3,500,000 Deed of Trust shall have been properly filed, registered or
recorded in each office in each jurisdiction in which such filings,
registrations and recordations are required; the Bank shall have received
acknowledgment copies of all such filings, registrations and recordations
stamped by the appropriate filing, registration or recording officer (or, in
lieu thereof, other evidence satisfactory to the Bank that all such filings,
registrations and recordations have been made); and the Bank shall have received
evidence that all necessary filing, subscription and inscription fees and all
recording and other similar fees, and all taxes and other expenses related to
such filings, registrations and recordings have been paid in full by or on
behalf of the Company.
15
<PAGE>
(i) Fee. The Bank shall have received a fee in the amount of
---
$7,500.
Section 4.3 Conditions to First Advance on $5,600,000 Note. The
----------------------------------------------
obligation of the Bank to make its first advance on the Loan under the
$5,600,000 Note is subject to the satisfaction of the following conditions
precedent:
(a) Note. The Bank shall have received the $5,600,000 Note
----
conforming to the requirements hereof, duly executed and delivered by a duly
authorized officer of the Company.
(b) Amendment to CAR Guaranty. The Bank shall have received the
-------------------------
amendment to the CAR Guaranty, in form and substance satisfactory to the Bank,
duly executed and delivered by a duly authorized officer of CAR.
(c) Legal Opinion of Counsel. The Bank shall have received the
------------------------
executed legal opinion of (i) Wilmer, Cutler & Pickering, as counsel for Company
and CAR, dated the date of the making of the $5,600,000 Note and addressed to
the Bank, covering such matters incidental to the transactions contemplated
hereby as the Bank may reasonably require and satisfactory in form and substance
to the Bank.
(d) Partnership Proceedings. The Bank shall have received a
-----------------------
copy of the resolutions (in form and substance satisfactory to the Bank) of the
Company authorizing (i) the execution, delivery and performance of the
$5,600,000 Note and the $5,600,000 Deed of Trust, (ii) the consummation of the
transactions contemplated thereby and (iii) the borrowings herein provided for
and the granting of the mortgage liens and security interests pursuant to the
$5,600,000 Deed of Trust, certified by the general partner of the Company on the
date of the such advance. Such certificate shall state that the resolutions set
forth therein have not been amended, modified, revoked or rescinded as of the
date of such certificate.
(e) Incumbency Certificate of Company. The Bank shall have
---------------------------------
received a certificate of the Company, dated the date of such advance, as to the
incumbency and signature of the representatives of the general partner of the
Company executing the Loan Documents and any certificate or other document to be
delivered pursuant hereto or thereto.
(f) Proceedings of CAR. The Bank shall have received a copy
------------------
(in form and substance satisfactory to the Bank) of the resolutions of CAR,
certified by a Responsible Officer of CAR on the date of the making of such
advance, authorizing CAR's execution, delivery and performance of the amendment
to the CAR Guaranty referred to above. Such certificate shall state that the
resolutions set forth therein have not been amended, modified, revoked or
rescinded as of the date of such certificate.
(g) Incumbency Certificate of CAR. The Bank shall have
-----------------------------
received a certificate of CAR, as to the incumbency and signature of the
Responsible Officer authorized to
16
<PAGE>
sign the amendment to the CAR Guaranty referred to above and any other
certificate or other document to be delivered pursuant thereto.
(h) Security Documents. The Bank shall have received the Supplemental
------------------
Trusts, $5,600,000 Deed of Trust and the $5,600,000 Subordination Agreement,
each duly executed and delivered by a duly authorized Responsible Officer of the
Company.
(i) Filings, Registrations and Recordings. Any documents (including,
-------------------------------------
without limitation, the $5,600,000 Deed of Trust and Uniform Commercial Code
financing statements) required to be filed, registered or recorded in order to
create, in favor of the Bank, a perfected Lien on the collateral described in
the Security Documents shall have been properly filed, registered or recorded in
each office in each jurisdiction in which such filings, registrations and
recordations are required; the Bank shall have received acknowledgment copies of
all such filings, registrations and recordations stamped by the appropriate
filing, registration or recording officer (or, in lieu thereof, other evidence
satisfactory to the Bank that all such filings, registrations and recordations
have been made); and the Bank shall have received evidence that all necessary
filing, subscription and inscription fees and all recording and other similar
fees, and all taxes and other expenses related to such filings, registrations
and recordings have been paid in full by or on behalf of the Company.
(j) Appraised Value. The Appraised Value of the Real Property is no
---------------
less than $28,000,000.
(k) Fee. The Bank shall have received a fee in the amount of $10,000.
---
Section 4.4 Conditions to All Loans. The obligation of the Bank to make
-----------------------
any Loan hereunder on any date is subject to the satisfaction of the following
conditions precedent:
(a) Representations and Warranties. The representations and
------------------------------
warranties made by the Company or any Guarantor in the Loan Documents to which
any of them is a party, or which are contained in any certificate, document or
financial or other statement furnished at any time under or in connection
herewith or therewith, shall be correct in all material respects on and as of
the date of such Loan as if made on and as of such date.
(b) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred on or before such date and/or after giving effect to the
Loan to be made on such date.
(c) Real Property. With respect to each parcel of the Real Property:
--------------
(i) The Bank shall have received the Deed of Trust, or an
amendment or supplement thereto, conveying the Real Property to secure the Loan,
in form and substance satisfactory to the Bank and such document shall have been
duly recorded in all jurisdictions where the Real Property is located.
17
<PAGE>
(ii) The Bank shall have received an ALTA lender's policy of
title insurance, containing no exceptions (including exceptions as to unfiled
mechanics' and materialmen's liens and matters of survey) unacceptable to the
Bank, insuring the Bank that the Deed of Trust is a valid and first lien on the
Real Property and containing such endorsements as the Bank may reasonably
require.
(iii) The Bank shall have received a Phase 1 environmental
assessment report from a qualified environmental consultant acceptable to the
Bank with respect to the Real Property and any existing improvements, which
report shall be satisfactory in form and substance to the Bank, and shall
include, without limitation, historical research into prior ownership and use,
review of governmental records, review of available aerial photographs and
topographical maps, on-site visual inspection and review of surrounding land
use.
(iv) The Bank shall have received a certificate from an
engineering firm qualified in such matters and approved by the Bank to the
effect that the existing improvements on the Real Property have been inspected
for asbestos and other hazardous or toxic building materials and either (i) no
asbestos or other hazardous or toxic building materials were detected or (ii)
asbestos or other hazardous or toxic building materials were detected and any
potential risk to human health arising therefrom was abated.
(v) The Bank shall have received evidence acceptable to the
Bank that the Real Property and the improvements thereon comply with all
applicable local, state and federal laws, rules, regulations and/or
requirements.
(vi) The Bank shall have received written evidence that the
Real Property is not located in a flood plain, as shown upon the appropriate
Flood Area Map prepared by the Federal Insurance Administration of the United
States Department of Housing and Urban Development or, if the Real Property is
located in a flood plain, flood insurance satisfactory in all respects to the
Bank.
(vii) The Bank shall have received current plats of survey of
the Real Property prepared and certified by a surveyor qualified in such matters
and approved by the Bank, certified to the Bank and the title insurance company,
showing (A) the dimensions of the Real Property, (B) the dimensions and location
of the buildings and improvements constructed thereon, (c) the dimensions of the
parking areas as well as the total number of on-site parking spaces, (D) all
recorded easements encumbering the Real Property and identifying the same by
book and page number, (E) any recorded building restrictions and building
setback lines applicable to the Real Property, and (F) the means of ingress and
egress to the Real Property, together with a certificate from the surveyor to
the Bank relating to such matters as the Bank may require.
18
<PAGE>
(e) Guarantees from Other Guarantors. The Bank shall have received the
--------------------------------
following:
(i) sufficient Guarantees from Other Guarantors such that the
aggregate amount of the Loan outstanding hereunder at such date, after giving
effect to such Loan, shall not exceed the sum of (A) $5,100,000 plus (B) the
aggregate amounts of the Loan guaranteed by each Guarantee held by the Bank
(remaining outstanding, and not withdrawn) made by the Other Guarantors as at
such date, less the amount by which each such amount is otherwise limited
pursuant to the terms of each of the Guarantees.
(ii) an executed legal opinion of counsel to each of the Other
Guarantors whose Guarantee is included in the determination made at such date in
the preceding subsection, each of which counsel shall be reasonably acceptable
to the Bank, each of which opinion shall be dated the date of delivery to the
Bank of such Guarantee and addressed to the Bank, and shall cover such matters
incidental to the transactions contemplated hereby as the Bank may reasonably
require and satisfactory in form and substance to the Bank;
(iii) in the case of each Other Guarantor that is not an
individual and whose Guarantee is included in the determination made at such
date in subsection (a) above, a copy of the resolutions or other document of
consent, in form and substance satisfactory to the Bank (whether such guarantor
be a corporation, partnership, limited liability company or other entity)
authorizing the execution, delivery and performance of each such Other
Guarantor's Guarantee.
(j) No Proceedings or Litigation. To the knowledge of the Company, no
----------------------------
action, suit or proceeding before any arbitrator or any Governmental Authority
shall have been commenced, no investigation by any Governmental Authority shall
have been threatened, against the Company or any Guarantor or any of the
officers or representatives of the Company or any Guarantor, seeking to
restrain, prevent or change the transactions contemplated by the Loan Documents,
in whole or in part, or questioning the validity or legality of the transactions
contemplated by the Loan Documents or seeking damages in connection with such
transactions.
(k) Insurance. The Bank shall have received evidence satisfactory to
---------
it that the Company or other appropriate party has obtained the policies of
insurance required by the Security Documents and Section 5.5 of this Agreement.
(l) Consents, Licenses, Approvals, etc. The Bank shall have received
----------------------------------
certified true copies of all consents, licenses and approvals required or
advisable in connection with the execution, delivery, performance, validity and
enforceability of the Loan Documents, and such consents, licenses and approvals
shall be in full force and effect and be satisfactory in form and substance to
the Bank.
19
<PAGE>
(m) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing hereunder or after giving effect to the
making of the Loans hereunder.
(n) Additional Information. The Bank shall have received such
----------------------
additional information as it shall have reasonably requested, including, without
limitation, copies of any debt agreements, security agreements and other
material contracts.
(o) Additional Matters. All corporate and other proceedings and all
------------------
other documents and legal matters in connection with the transactions
contemplated by the Loan Documents shall be satisfactory in form and substance
to the Bank and its counsel.
(p) Satisfaction of Conditions. Each borrowing by the Company under
--------------------------
this Agreement shall constitute a representation and warranty by the Company as
of the date of each such borrowing that the conditions contained in the
foregoing paragraphs (a) through (e) of this Section 4.2 have been satisfied.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
The Company hereby agrees that, so long as the Note remains outstanding and
unpaid or any other amount is owing to the Bank hereunder, the Company shall:
Section 5.1 Financial Statements. Furnish to the Bank:
--------------------
(a) as soon as available, but in any event within ninety (90) days
after the end of each fiscal year of the Company, a copy of the audited
financial statements of the Company prepared on a consolidated and consolidating
basis with CAR in accordance with GAAP as at the end of such year, including a
balance sheet and statements of income and retained earnings and paid-in capital
and changes in financial position, setting forth in each case in comparative
form the figures for the previous year, certified without a "going concern" or
like qualification or exception, or qualification arising out of the scope of
the audit, by independent certified public accountants of nationally recognized
standing acceptable to the Bank, and certified by a Responsible Officer of the
Company as being true and correct in all material respects;
(b) as soon as available, but in any event not later than forty-five
(45) days after the end of each accounting quarter of the Company internally
prepared financial statements of the Company prepared on a consolidated and
consolidating basis with CAR in accordance with GAAP as at the end of such
quarter, including a balance sheet and statements of income and retained
earnings and paid-in capital and changes in financial position, certified by a
Responsible Officer;
20
<PAGE>
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except in the case of interim statements, excluding notes thereto and
normal year-end adjustments).
Section 5.2 Certificates; Other Information. Furnish to the Bank:
-------------------------------
(a) concurrently with the delivery of the financial statements
referred to in Sections 5.1(a) and (b) above, a certificate of a Responsible
Officer of the Company (i) stating that, to the best of such officer's
knowledge, the Company during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained in the
Loan Documents to be observed, performed or satisfied by them, and that such
officers have obtained no knowledge of any Default or Event of Default except as
specified in such certificate, and (ii) showing in detail in form and substance
satisfactory to the Bank, the calculations supporting such statement in respect
of Section 5.9 hereof;
(b) within five days after the same are sent, copies of all financial
statements and reports which the Company sends to partners, and within five days
after the same are filed, copies of all financial statements and reports, which
the Company or CAR may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority;
(c) furnish to the Bank by January 31 of each year an estimate of the
Withdrawal Liability as of the end of the Plan year occurring in the preceding
year for each Plan that is a Multiemployer Plan; and
(d) promptly, such additional financial and other information as the
Bank may from time to time reasonably request.
Section 5.3 Payment of Obligations. Pay, discharge or otherwise satisfy
----------------------
at or before maturity or before they become delinquent, as the case may be, all
its Indebtedness and other obligations of whatever nature, except, in the case
of such other obligations, when the amount or validity thereof is currently
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP with respect thereto have been provided on the books of the
Company.
Section 5.4 Conduct of Business and Maintenance of Existence. Engage in
------------------------------------------------
business of the same general type as now conducted by the Company, and preserve,
renew and keep in full force and effect its partnership existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its business; comply with all Contractual
Obligations and Requirements of Law except to the extent that the failure to
comply therewith would not, in the aggregate, have a material adverse effect on
the business, operations, property or financial or other condition of the
Company.
21
<PAGE>
Section 5.5 Maintenance of Property, Insurance. Keep all property useful
----------------------------------
and necessary in its business in good working order and condition, normal wear
and tear excepted; maintain or cause to be maintained by the lease of any
property, with financially sound and reputable insurance companies insurance on
all its property, including the Real Property, in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business, designating the
Bank as loss payee, provided that, in any event, the Company shall maintain or
-------- ---- -- --- -----
cause to be maintained by the lease of any property, insurance at all times on
its tangible personal property and real property in an amount equal to the
replacement cost of such property at such time and shall maintain extended
coverage for vandalism and malicious mischief; and furnish to the Bank, upon
written request, full information as to the insurance carried.
Section 5.6 Inspection of Property; Books and Records; Discussions.
----------------------------------------- -----------
Keep proper books of record as reasonably required in the ordinary course of
business and account in which full, true and correct entries in conformity with
GAAP and all Requirements of Law shall be made of all material dealings and
transactions in relation to its business and activities as reasonably required
in the ordinary course of business; and permit representatives of the Bank to
visit and inspect any of its properties and examine and make abstracts from any
of its books and records at any reasonable time and as often as may reasonably
be desired, and to discuss the business, operations, properties and financial
and other condition of the Company with officers and employees of the Company
and with its independent certified public accountants.
Section 5.7 Notices. Promptly give notice to the Bank:
-------
(a) of the occurrence of any Default or Event of Default of which the
Company has knowledge;
(b) of any (i) default or event of default under any Contractual
Obligation of the Company or (ii) litigation, investigation or proceeding which
may exist at any time between the Company and any Governmental Authority, which
in either case would have a material adverse effect on the business, operations,
property or financial or other condition of the Company;
(c) of any litigation or proceeding affecting the Company, or any of
its employee benefit programs, policies or plans in which the amount sued for is
$500,000 or more and not fully covered by insurance or in which injunctive or
similar relief is sought and of any material adverse development in such
litigation or proceeding;
(d) of the following events, as soon as possible, and in any event no
later than the date the Company gives or is required to give notice to the PBGC
of (i) the occurrence of any Reportable Event with respect to any Plan which
might constitute grounds for a termination of such Plan under Title IV of ERISA,
or knows the Plan Administrator of any Plan has given or is required to give
notice of any such Reportable Event given or required to be given to the PBGC,
22
<PAGE>
or (ii) the institution of proceedings or the taking or expected taking of any
other action by PBGC or the Company to terminate any Plan, and in addition to
such notice, deliver to the Bank whichever of the following may be applicable
(A) a certificate of the chief financial officer of the Company setting forth
details as to such Reportable Event and the action that the Company or Commonly
Controlled Entity proposes to take with respect thereto, together with a copy of
any notice of such Reportable Event that may be required to be filed with PBGC,
or (B) any notice delivered by PBGC evidencing its intent to institute such
proceedings to terminate the Plan or to appoint a trustee to administer the Plan
or any notice to PBGC that such Plan is to be terminated, as the case may be, or
(iii) any member of the Commonly Controlled Entity receives notice of complete
or partial withdrawal liability under Title IV of ERISA; and
(e) of a material adverse change in the business, operations, property
or financial or other condition of the Company.
Each notice pursuant to this Section shall be accompanied by a statement of
the chief executive officer or chief financial officer of the Company setting
forth details of the occurrence referred to therein and stating what action the
Company proposes to take with respect thereto. For all purposes of clause (d) of
this Section 5.7, the Company shall be deemed to have all knowledge of all facts
attributable to the administrator of such Plan.
Section 5.8 Further Assurances. Execute and file all such further
------------------
instruments, and perform such other acts, as the Bank may determine are
necessary or advisable.
Section 5.9 Financial Covenants. Maintain, on a consolidated basis with
-------------------
CAR:
(a) a Debt Service Coverage Ratio of no less than 2.50 to 1.0;
(b) a ratio of Total Liabilities to Tangible Net Worth of not more
than .35 to 1.0, measured at the end of each fiscal quarter of the Company; and
(c) a minimum Tangible Net Worth of $200,000,000, plus 80% of the net
cash proceeds from any future equity offerings.
ARTICLE VI
NEGATIVE COVENANTS
------------------
The Company hereby agrees that, so long as the Note remains outstanding and
unpaid or any other amount is owing to the Bank hereunder, the Company shall
not, directly or indirectly, without the Bank's consent:
23
<PAGE>
Section 6.1 Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness (other than current trade and other current accounts payable in the
ordinary course of business in accordance with customary trade terms), except:
(a) Indebtedness in respect of the Note;
(b) Indebtedness to the Bank;
(c) Indebtedness expressly consented to by the Bank in writing; and
(d) Other Indebtedness so long as such Indebtedness is not secured by
Liens upon the Real Property or the leases or rents therefrom.
Section 6.2 Limitation on Liens. Create, incur, assume or suffer to
-------------------
exist, any Lien upon any of the Real Property or the leases or rents therefrom.
Section 6.3 Limitation on Contingent Obligations. Agree to, or assume,
------------------------------------
guarantee, endorse or otherwise in any way, be or become responsible or liable
for, directly or indirectly, any Contingent Obligation other than Indebtedness
permitted under Section 6.1 hereof.
Section 6.4 Prohibition of Fundamental Changes. Enter into any
----------------------------------
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), convey, sell, lease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of its business or assets, whether now
owned or hereafter acquired (including, without limitation, receivables and
leasehold interests but excluding obsolete or worn out property, or Inventory
disposed of in the ordinary course of business), or acquire by purchase or
otherwise all or substantially all the business or assets of, or stock or other
evidence of beneficial ownership of, any Person, except as permitted under
Section 6.6 hereof, or make any material change in its present method of
conducting business.
Section 6.5 INTENTIONALLY DELETED.
---------------------
Section 6.6 Investments. Except as otherwise specifically permitted
-----------
hereunder, make or commit to make, any advance, loan, extension of credit or
capital contribution to, or purchase of any stock, bonds, note, debentures or
other securities of, or make any other investment in, any Person (all such
transactions being herein called "investments") except:
(a) investments in accounts, contract rights and chattel paper (as
defined in the Uniform Commercial Code), arising or acquired in the ordinary
course of business;
(b) investments in bank certificates of deposit, open market
commercial paper maturing within one year having the highest rating of either
Standard & Poor's Corporation or
24
<PAGE>
Moody's Investors Service, Inc., U.S. Treasury Bills and other short term
obligations issued or guaranteed by the U.S. Government or any agency thereof;
(c) to CAR in accordance with Section 6.7;
(d) to Persons in connection with the acquisition of real property in
the ordinary course of business of the Company;
(e) to Persons in connection with the construction, renovation,
expansion or improvement of real property acquired or to be acquired by the
Company in the ordinary course of business;
(f) pursuant to redemption rights granted to holders of Units of
Partnership Interest of the Company ("Units");
(g) pursuant to the grant or exercise of options or warrants for Units
of the Company;
(h) pursuant to call rights of the Company; and
(i) subsidiaries of the Company in accordance with Section 6.7.
Section 6.7 Transactions with Affiliates and Officers. (i) Enter into
-----------------------------------------
any transactions, including, without limitation, the purchase, sale or exchange
of property or the rendering of any services, with any Affiliate, or enter into,
assume or suffer to exist any employment or consulting contract with any
Affiliate or any officer thereof, except a transaction or contract which is in
the ordinary course of the Company's business and which is upon fair and
reasonable terms no less favorable to the Company than it would obtain in a
comparable arm's length transaction with a Person not an Affiliate or (ii) make
any advance or loan in excess of $500,000, in the aggregate, to any Affiliate of
the Company other than CAR or to any officer or employee thereof or of the
Company or to any trust of which any of the foregoing is a beneficiary, or to
any Person on the guarantee of any of the foregoing except for loans
specifically permitted by this Agreement, or (iii) pay any fees, costs or
expenses to, or reimburse or assume any obligation for the reimbursement of any
expenses, fees or costs incurred by any Affiliate except in the ordinary course
of business.
Section 6.8 Compliance with ERISA. (a) Terminate any Plan so as to
---------------------
result in any material liability to PBGC or any material Withdrawal Liability,
(b) engage in or permit any Person to engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan
which would subject the Company to any material tax, penalty or other liability,
(c) incur or suffer to exist any material "accumulated funding deficiency" (as
defined in Sections 302(a)(2) and 4243 of ERISA), whether or not waived,
involving any Plan, except for contingent Withdrawal Liability not in excess of
$500,000, or
25
<PAGE>
(d) allow or permit to exist any event or condition which presents a material
risk of incurring a material liability to PBGC.
Section 6.9 No Subsidiaries. Directly or indirectly form or hold any
---------------
Subsidiaries, other than subsidiaries organized to own real property of the
Company in the ordinary course of business.
Section 6.10 Exception to Negative Covenants. Notwithstanding anything
-------------------------------
in this Article VI of this Agreement, the Company and CAR may take such actions
(including without limitation, the making of distributions) that are necessary
to assure that CAR continues to qualify as a real estate investment trust under
the Code and that the Company is treated as a partnership for tax purposes under
the Code so long as such actions do not further encumber the Real Property or
have a material adverse effect on the value of the Real Property, the leases
thereof or the rental income therefrom.
ARTICLE VII
EVENTS OF DEFAULT
-----------------
Upon the occurrence of any of the following events:
(a) The Company shall fail to pay any principal or interest on the
Note when due, and such failure shall continue for ten (10) days or the Company
shall fail to pay any other amount payable hereunder in accordance with the
terms hereof, or
(b) Any representation or warranty made or deemed made by the Company
herein or in any other Loan Document, or by any Guarantor in any Loan Document
to which it is a party or in any certificate, document or financial or other
statement furnished at any time under or in connection with any Loan Document
shall prove to have been incorrect in any material respect on or as of the date
made or deemed made; or
(c) The Company shall default in the observance or performance of any
agreement contained in Section 5.5 or Article VI hereof and such default shall
not have been cured within a period of 30 days; or
(d) (i) The aggregate liability of Other Guarantors under their
respective Guarantees at any time (as such guarantees are limited in amount and
subject to further reductions in, limitations to, or termination of, such
liability) shall be less than the outstanding principal balance of the Note at
such time, and such circumstance is not cured within thirty (30) days after
notice, or (ii) any of the Guarantors shall default under or breach the terms
of the Guarantee and such default shall not have been cured within a period of
30 days; or
(e) The Company or any Guarantor shall default in the observance or
performance of any other covenant or agreement contained herein for a period of
thirty (30) days
26
<PAGE>
after written notice shall have been given by the Bank to the Company; or the
Company or any Guarantor shall default in the observance or performance of any
other covenant or agreement contained in any other Loan Document and such
default is not remedied within the applicable period of grace (if any) provided
in such Loan Document; or
(f) Any Loan Document shall cease, for any reason, to be in full force
and effect in accordance with its terms or any party thereto shall so assert in
writing; or any Security Document shall cease, for any reason, to grant to the
Bank a legal, valid and enforceable Lien on any of the collateral described
therein or shall cease, for any reason, to have the priority purport ed to be
created thereby at the time of the execution thereof; or any party to any Loan
Document shall default in the observance or performance of any of the covenants
or agreements contained therein and such default shall not have been cured
within a period of 30 days; or
(g) Any default or event of default shall occur and remain uncured
beyond any applicable grace period under any note, security documents,
guarantees, agreements, documents or other instruments (other than the Loan
Documents) between the Bank and (i) CAR, (ii) the Company or (iii) any Affiliate
of CAR or the Company; or
(h) The Company, shall (i) default in any payment of principal of or
interest on any Indebtedness or in the payment of any Contingent Obligation,
beyond the period of grace, if any, provided in the instrument or agreement
under which such Indebtedness or Contingent Obligation was created; or (ii)
default in the observance or performance of any other agreement or condition
relating to any such Indebtedness or Contingent Obligation or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur, the effect of which default or other event is (A) to cause
such Indebtedness to become due prior to its stated maturity or such Contingent
Obligation to become payable, or (B) to allow the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Contingent Obligation (or a
trustee or agent on behalf of such holder or holders or beneficiary or
beneficiaries), to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such Contingent
Obligation to become payable; or
(i) (i) The Company shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for it, or for all or any
substantial part of its assets, or the Company shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced against the
Company any case, proceeding or other action of a nature referred to in clause
(i) above which is not dismissed within sixty (60) days or which results in the
entry of an order for relief or any such adjudication or appointment which shall
not have been vacated, discharged or stayed or bonded pending appeal within
sixty (60) days from the entry thereof; or (iii) there shall be
27
<PAGE>
commenced against the Company any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets, which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or (iv)
the Company, shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i),
(ii) or (iii) above; or (v) the Company shall generally not, or shall be unable
to, or shall admit in writing its inability to, pay its debts as they become
due; or
(j) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(ii) any "accumulated funding deficiency" (as defined in Sections 302(a)(2) and
4243 of ERISA), whether or not waived, shall exist with respect to any Plan,
(iii) a Reportable Event shall occur with respect to, or proceedings shall
commence to have a trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Plan, which Reportable Event or institution of
proceedings is, in the reasonable opinion of the Bank, likely to result in the
termination of such Plan for purposes of Title IV of ERISA and, in the case of a
Reportable Event, the continuance of such Reportable Event unremedied for ten
days after the earlier of the date when the Company obtains actual knowledge of
the Reportable Event or the date when notice of such Reportable Event pursuant
to Section 4043(a), (c) or (d) of ERISA is given or the continuance of such
proceedings for ten days after commencement thereof, as the case may be, (iv)
any Plan shall terminate for purposes of Title IV of ERISA, (v) if on any date,
the Withdrawal Liability exceeds $100,000, or (vi) any other event or condition
shall occur or exist and in each case in clauses (i) through (vi) above, such
event or condition, together with all other such events or conditions, if any,
could subject the Company to any tax, penalty or other liabilities which in the
aggregate would result in a material adverse change to the business, operations,
property or financial or other condition of the Company; or
(k) One or more final judgments or decrees shall be entered against
the Company which are not insured and which involve more than $500,000 and such
judgments or decrees shall not have been vacated, discharged, or stayed within
60 days from the entry thereof;
Then, and in any such event, (a) if such event is an Event of Default
specified in paragraph (i) above and such Event of Default shall be continuing,
automatically the obligation of the Bank to make Loans hereunder shall
immediately terminate and the Loans hereunder (with accrued interest thereon)
and all other amounts owing under this Agreement and the Note shall immediately
become due and payable, and (b) if such event is any other Event of Default and
such Event of Default shall be continuing and has not been cured within any
applicable grace period, (i) the Bank may, by notice to the Company, terminate
its obligation to make Loans hereunder, whereupon it shall immediately
terminate; and/or (ii) the Bank may, by notice of default to the Company,
declare the Loans hereunder (with accrued interest thereon) and all other
amounts owing under this Agreement and the Note to be due and payable forthwith,
whereupon the same shall immediately become due and payable. Except as
expressly provided above in this
28
<PAGE>
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived.
ARTICLE VIII
MISCELLANEOUS
-------------
Section 8.1 Amendments and Waivers. No provision of any Loan Document may
----------------------
be amended or modified in any way, nor may non-compliance therewith be waived,
except pursuant to a written instrument executed by the Bank and the Company.
In the case of any waiver, the Company and the Bank shall be restored to their
former position and rights hereunder and under the outstanding Note, the
Guarantee and the Security Documents, and any Default or Event of Default waived
shall be deemed to be cured and not continuing; but no such waiver shall extend
to any subsequent or other Default or Event of Default, or impair any right
consequent thereon.
Section 8.2 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing or by telefax and,
unless otherwise expressly provided herein, shall be deemed to have been duly
given or made when delivered by hand, or when deposited in the mail, postage
prepaid, or, in the case of telefaxed notice, when sent, or in the case of
private courier, when delivered to such courier, addressed as follows or to such
address as may be hereafter notified by the respective parties hereto and any
future holders of the Note:
The Company: Capital Automotive L.P.
Attn: Thomas D. Eckert
1420 Spring Hill Road
Suite 525
McLean, Virginia 22102
The Bank: NationsBank, N.A.
Dealer Financial Services
Attn: Michael R. Burkitt, Vice President
6830 Old Dominion Drive, Suite 200
McLean, Virginia 22101
provided that any notice, request or demand to or upon the Bank shall not be
effective until received.
Section 8.3 No Waiver; Cumulative Remedies. No failure to exercise and no
------------------------------
delay in exercising, on the part of the Bank, any right, remedy, power or
privilege hereunder or under any Loan Document, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies,
29
<PAGE>
powers and privileges herein or therein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
Section 8.4 Survival of Representations and Warranties. All
------------------------------------------
representations and warranties made under any Loan Document and in any document,
certificate or statement delivered pursuant thereto or in connection therewith
shall survive the execution and delivery of such Loan Document.
Section 8.5 Payment of Expenses and Taxes. The Company agrees (a) to pay
-----------------------------
or reimburse the Bank for all of its reasonable out-of-pocket costs and expenses
incurred in connection with the development, preparation and execution of, and
any amendment, supplement or modification to the Loan Documents and any other
documents prepared in connection therewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the Bank, (b) to pay or
reimburse the Bank for all its reasonable costs and expenses incurred in
connection with the enforcement or preservation of any rights under the Loan
Documents and any such other documents, including, without limitation,
reasonable fees and disbursements of counsel to the Bank, (c) to pay, indemnify,
and to hold the Bank harmless from, any engineering fees, any and all recording
and filing fees and taxes and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other taxes, if any, which
may be payable or determined to be payable in connection with the execution and
delivery and recordation of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of the Loan Documents, and any such other
documents, and (d) to pay, indemnify, and hold the Bank harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of the Loan Documents or any transaction financed
in whole or in part directly or indirectly with the proceeds of any loans made
under this Agreement (all the foregoing, collectively, the "indemnified
liabilities"), provided, that the Company shall have no obligation hereunder
--------
with respect to indemnified liabilities arising from (i) the gross negligence or
willful misconduct of the Bank or (ii) legal proceedings commenced against the
Bank by any security holder or creditor thereof arising out of and based upon
rights afforded any such security holder or creditor solely in its capacity as
such or (iii) a breach of this Agreement by the Bank. The agreements in this
Section shall survive repayment of the Note and all other amounts payable
hereunder.
Section 8.6 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the Company and the Bank, all future holders of the
Note and their respective successors and assigns, except that the Company may
not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the Bank.
30
<PAGE>
Section 8.7 Setoff.
------
(a) The Company agrees that the Bank shall have the right to set off
and apply against all amounts owing to the Bank by the Company under the Note or
any other Loan Document any amount owing to the Company from the Bank.
(b) In addition to any rights and remedies of the Bank provided by
law, the Bank shall have the right, without prior notice to the Company, any
such notice being expressly waived by the Company to the extent permitted by
applicable law, upon the filing of a petition under any of the provisions of the
federal bankruptcy act or amendments thereto, by or against; the making of an
assignment for the benefit of creditors by; the application for the appointment,
or the appointment of any receiver of, or of any of the property of; the
issuance of any execution against any of the property of; the issuance of a
subpoena or order, in supplementary proceedings, against or with respect to any
of the property of; or the issuance of a warrant of attachment against any of
the property of; the Company, to set off and apply against all amounts owing to
the Bank by the Company under the Note or any other Loan Documents, and against
any other Indebtedness, whether matured or unmatured, of the Company to the
Bank, any amount owing from the Bank to the Company, at or at any time after the
happening of any of the above-mentioned events, and the aforesaid right of set
off may be exercised by the Bank against the Company or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver, or execution, judgment or attachment creditor of the Company, or any
of them, or against anyone else claiming through or against the Company or such
trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set off shall not have been
exercised by the Bank prior to the making, filing or issuance, or service upon
the Bank of, or of notice of, any such petition; assignment for the benefit of
creditors; appointment or application for the appointment of a receiver; or
issuance of execution, subpoena or order or warrant.
Section 8.8 Counterparts. This Agreement may be executed by one or more
------------
of the parties to this Agreement on any number of separate counterparts and all
of said counterparts taken together shall be deemed to constitute one and the
same instrument. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Company and the Bank.
Section 8.9 Governing Law. The Loan Documents and the rights and
-------------
obligations of the parties thereunder shall be governed by, and construed and
interpreted in accordance with, the law of the Commonwealth of Virginia, except
to the extent that the law of other states governs creation and perfection of
security interests in collateral located in such states.
Section 8.10 Arbitration. Any controversy or claim between or among the
-----------
parties hereto including but not limited to those arising out of or relating to
the Note, this Agreement or any related agreements or instruments, including any
claim based on or arising from an alleged tort, shall be determined by binding
arbitration in accordance with the Federal Arbitration Act (or
31
<PAGE>
if not applicable, the applicable state law), the Rules of Practice and
Procedure for the Arbitration of Commercial Disputes of Judicial Arbitration and
Mediation Services, Inc. (J.A.M.S.), and the "Special Rules" set forth below.
In the event of any inconsistency, the Special Rules shall control. Judgment
upon any arbitration award may be entered in any court having jurisdiction. Any
party to this Agreement may bring an action, including a summary or expedited
proceeding, to compel arbitration of any controversy or claim to which this
Agreement applies in any court having jurisdiction over such action.
(a) Special Rules The arbitration shall be conducted in the city of
-------------
the Company's domicile at time of this Agreement's execution and administered by
J.A.M.S.; if J.A.M.S. is unable or legally precluded from administering the
arbitration, then the American Arbitration Association shall administer such
arbitration. All arbitration hearings will be commenced within 90 days of
demand for arbitration; further, the arbitrator shall only, upon a showing of
cause, be permitted to extend the commencement of such hearing for an additional
60 days.
(b) Reservation of Rights Nothing in this Agreement shall be deemed
---------------------
to (A) limit the applicability of any otherwise applicable statutes of
limitation or repose and any waivers contained in this Agreement; or (B) be a
waiver by the Bank of the protection afforded to it by 12 U.S.C. (S) 91 or any
substantially equivalent state law; or (c) limit the right of any party hereto
to exercise self-help remedies such as (but not limited to) setoff, or to
foreclose against any real or personal property collateral, or to obtain from a
court provisional or ancillary remedies such as (but not limited to) injunctive
relief or the appointment of a receiver. Any party may exercise such self-help
rights, foreclose upon such property, or obtain such provisional or ancillary
remedies before, during or after the pendency of any arbitration proceeding
brought pursuant to this Agreement. At the Bank's option, foreclosure under a
deed of trust or mortgage may be accomplished by either the exercise of power of
sale under the deed of trust or mortgage, or by judicial sale under the deed of
trust or mortgage, or by judicial foreclosure. Neither exercise of self-help
remedies nor the institution or maintenance of an action for foreclosure or
provisional or ancillary remedies shall constitute a waiver of the right of any
party, including the claimant in any such action, to arbitrate the merits of the
controversy or claim occasioning resort to such remedies.
Section 8.11 Waiver of Jury Trial. THE COMPANY AND THE BANK EACH WAIVE
--------------------
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT
BY EITHER PARTY AGAINST THE OTHER ON ANY MATTER ARISING OUT OF THIS AGREEMENT,
THE NOTE, THE SECURITY DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY.
Section 8.12 Rights of Company. In addition to any other rights of the
-----------------
Company contained herein and notwithstanding anything to the contrary contained
herein and as of February 19, 1998, the Company shall have the following rights
hereunder:
32
<PAGE>
(a) The Company may sell, lease, convey, assign, pledge, encumber, or
transfer all or any part of the assets of the Company other than the Real
Property without the consent of the Bank; provided however that, the result of
any such transaction may not cause the Company on a consolidated basis with CAR
to violate any of the financial covenants contained in Section 5.9 hereto.
(b) The Company may voluntarily sell, pledge, encumber, assign or
transfer, by operation of law or otherwise, any interest in the Company without
the consent of the Bank; except for the withdrawal or admission to the Company
of any general partner, which withdrawal or admission shall require to prior
written consent of the Bank.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly signed, sealed and delivered by their properly and duly authorized officers
as of the day and year first above-written.
CAPITAL AUTOMOTIVE L.P.
By: CAPITAL AUTOMOTIVE REIT,
General Partner
By: /s/ David S. Kay
---------------------------------[Seal]
Title: V.P., C.F.O., Secretary
------------------------------
NATIONSBANK, N.A.
By: /s/ Michael R. Burkitt
---------------------------------[Seal]
Title: V.P.
------------------------------
33
<PAGE>
EXHIBIT 10.42
|__| Employee's Copy
|__| Partnership's Copy
CAPITAL AUTOMOTIVE L.P.
EMPLOYMENT AGREEMENT
To JOHN M. WEAVER:
This Agreement establishes the terms of your employment with Capital
Automotive L.P., a Maryland limited partnership (the "Partnership").
EMPLOYMENT AND DUTIES You and the Partnership agree to your employment as
Vice President and General Counsel on the terms
contained herein. In such position, you will report
directly to the Chief Executive Officer (the "CEO") of
Capital Automotive REIT, a Maryland real estate
investment trust (the "Company") and to the General
Partner of the Partnership. You agree to perform
whatever duties the Partnership may assign you from
time to time, consistent with your position as a senior
executive. During your employment, you agree to devote
your full business time, attention, and energies to
performing those duties (except as the CEO otherwise
agrees from time to time). You agree to faithfully
serve the Partnership, to conform to and comply with
the lawful and good faith directions and instructions
given you by the Partnership, and to use your best
efforts to promote and serve the interests of the
Partnership. You agree to comply with the
noncompetition, secrecy, and other provisions of
Exhibit A to this Agreement.
TERM OF EMPLOYMENT Your employment under this Agreement begins as of July
20, 1998 (the "Effective Date"). Unless sooner
terminated under this Agreement, your employment ends
at 6:00 p.m. Eastern Time on October 19, 2001. The
period running from the Effective Date to the
applicable date in the preceding sentence is the
"Term."
Termination or expiration of this Agreement ends your
employment but does not end your obligation to comply
with Exhibit A.
<PAGE>
COMPENSATION
Salary The Partnership (or, in its discretion, the
Company) will pay you an annual salary (the
"Salary") from the Effective Date at the rate of
not less than $150,000 in accordance with its
payroll practices. The Partnership or the
Compensation Committee of the General Partner
("Compensation Committee") will review your Salary
annually and consider you for increases.
Bonus The Partnership or the Compensation Committee will
establish annual bonus targets under which you
will be eligible for an annual bonus equal to up
to 100% of your Salary.
Employee Benefits While you are employed under this Agreement, the
Partnership will provide you with the same
benefits, including medical insurance coverage, as
the Partnership makes generally available from
time to time to the Partnership's employees, as
those benefits are amended or terminated from time
to time, and such other benefits as are
commensurate with your position as a senior
executive of a public company. Your participation
in the Partnership's benefit plans will be subject
to the terms of the applicable plan documents and
the Partnership's generally applied policies, and
the Partnership in its sole discretion may from
time to time adopt, modify, interpret, or
discontinue such plans or policies.
PLACE OF EMPLOYMENT Your principal place of employment will be at the
Partnership's headquarters in the Washington
metropolitan area (or such other offices as the
Partnership may establish from time to time and to
which it assigns you in its sole discretion). You
understand and agree that you must travel from
time to time for business reasons.
INDEMNIFICATION The Partnership will indemnify you to the fullest
extent authorized by law if you are made a party
to any action, suit, or proceeding, whether
criminal, civil, administrative, or investigative,
because you are or were a manager, officer, or
employee of the Partnership or serve or served any
other entity as a director, officer, or employee
at the Partnership's request; provided, however,
-------- -------
that you must repay the Partnership for any
indemnification if the final determination of an
arbitrator or a court of competent jurisdiction
declares, after the expiration of the time within
which judicial review (if permitted) of such
determination may be perfected, that
Page 2 of 15
<PAGE>
indemnification by the Partnership is not
permissible under applicable law.
EXPENSES The Partnership will reimburse you for reasonable
and necessary travel and other business-related
expenses you incur for the Partnership in
performing your duties under this Agreement. You
must itemize and substantiate all requests for
reimbursements. You must submit requests for
reimbursement in accordance with the policies and
practices of the Partnership and within 60 days
after incurring the expense.
NO OTHER EMPLOYMENT For so long as you are employed by the
Partnership, you agree that you will not, directly
or indirectly, provide services to any person or
organization for which you receive compensation or
otherwise engage in activities that would conflict
or interfere significantly with the faithful
performance of your duties to the Partnership
without the Partnership's prior written consent.
(This prohibition excludes any work performed at
the Partnership's direction including any work for
the Partnership.) You may manage your personal
investments, as long as the management takes only
minimal amounts of time and is consistent with the
provisions of the No Competition Section in
Exhibit A and is otherwise consistent with the
policies and practices of the Partnership.
You represent to the Partnership that you are not
subject to any agreement, commitment, or policy of
any third party that would prevent you from
entering into or performing your duties under this
Agreement, and you agree that you will not enter
into any agreement or commitment or agree to any
policy that would prevent or hinder your
performance of duties and obligations under this
Agreement, including Exhibit A.
NO CONFLICTS OF INTEREST You confirm that you have fully disclosed to the
Partnership and the Company, to the best of your
knowledge, all circumstances under which you, your
spouse, and your relatives (including their
spouses, children, and relatives) have or may have
a conflict of interest with the Partnership or the
Company. You further agree to fully disclose to
the Partnership any such circumstances that might
arise during the Term. You agree to fully comply
with the Partnership's policy and practices
relating to conflicts of interest.
Page 3 of 15
<PAGE>
NO PAYMENTS TO You will neither pay nor permit payment of any
GOVERNMENTAL OFFICIALS remuneration to or on behalf of any governmental
official other than payments required or permitted
by applicable law.
TERMINATION Subject to the provisions of this section, the
Partnership may terminate your employment, or you
may resign, except that, if you voluntarily
resign, you must provide the Partnership with 90
days' prior written notice (unless the Partnership
has previously waived such notice in writing or
authorized a shorter notice period).
For Cause The Partnership may terminate your employment for
"Cause" if you:
(i) engage in dishonesty that relates
materially to the performance of services or
any obligations under this Agreement,
including Exhibit A;
(ii) are convicted of any misdemeanor (other
than for minor infractions) involving fraud,
breach of trust, misappropriation, or other
similar activity or any felony;
(iii) perform your duties under this
Agreement in a grossly negligent manner; or
(iv) willfully breach this Agreement,
including Exhibit A, in a manner materially
injurious to the Partnership. An act or
omission is only "willful" if you acted in
bad faith or without any reasonable belief
that the action or omission was in the
interests of the Partnership and consistent
with your duties and obligations under this
Agreement.
Your termination for Cause under (i) and will be
effective immediately upon the Partnership's
mailing or transmission of such notice. Before
terminating your employment for Cause under (iii)
or (iv), the Partnership will specify in writing
to you the nature of the act, omission, refusal,
or failure that it deems to constitute Cause. The
Partnership will give you the opportunity to
correct the situation (and thus avoid termination
for Cause under (iii) or (iv)). You must complete
the correction within a reasonable period of time
after the written notice to you, and the
Partnership agrees to provide you no less than 15
days for such correction.
Page 4 of 15
<PAGE>
Without Cause Subject to the provisions below under Payments on
Termination, the Partnership may terminate your
employment under this Agreement before the end of
the Term without Cause.
Good Reason You may resign for Good Reason with 45 days'
advance written notice as provided below. "Good
Reason" means the occurrence, without your written
consent, of any of the following circumstances:
the Partnership's failure to perform or
observe any of the material terms or
provisions of this Agreement,
the assignment to you of any duties
inconsistent with, or any substantial
diminution in, your employment status or
responsibilities as in effect on the date of
this Agreement,
the Partnership's relocation of its corporate
headquarters to a location that would
increase your commuting distance by more than
50 miles, based on your residence when this
Agreement is executed, or
a Change of Control, consisting of any one or
more of the following events:
a person, entity, or group (other than
the Company, the Partnership, any
subsidiary of either, any Company Group
benefit plan, or any underwriter
temporarily holding securities for an
offering of such securities) acquires
ownership of more than 40% of the
undiluted total voting power of the
Company's then-outstanding securities
eligible to vote to elect members of the
Board ("Company Voting Securities");
consummation of a merger or
consolidation of the Company into any
other entity -- unless the holders of
the Company Voting Securities
outstanding immediately before such
consummation, together with any trustee
or other fiduciary holding securities
under a Company Group benefit plan, hold
securities that represent immediately
after such merger or consolidation more
than 60% of the
Page 5 of 15
<PAGE>
combined voting power of the then
outstanding voting securities of either
the Company or the other surviving
entity or its parent; or the
stockholders of the Company approve (i)
a plan of complete liquidation or
dissolution of the Company or (ii) an
agreement for the Company's sale or
disposition of all or substantially all
the Company's assets, and such
liquidation, dissolution, sale, or
disposition is consummated.
Even if other tests are met, a Change of Control
has not occurred under any circumstance in which
the Company files for bankruptcy protection or is
reorganized following a bankruptcy filing.
You must give notice to the Partnership of your
intention to resign for Good Reason within 30 days
after the occurrence of the event that you assert
entitles you to resign for Good Reason. In that
notice, you must specify the condition that you
consider provides you with Good Reason and must
give the Partnership an opportunity to cure the
condition within 30 days after your notice. If the
Partnership fails to cure the condition, your
resignation will be effective on the 45th day
after your notice (unless the Partnership has
previously waived such notice period in writing or
agreed to a shorter notice period).
You will not be treated as resigning for Good
Reason if the Partnership had Cause to terminate
your employment as of the date of your notice of
resignation.
Disability If you become "disabled" (as defined below), the
Partnership may terminate your employment. You are
"disabled" if you are unable, despite whatever
reasonable accommodations the law requires, to
render services to the Partnership for more than
90 consecutive days because of physical or mental
disability, incapacity, or illness. You are also
disabled if you are deemed to be disabled within
the meaning of the Partnership's long-term
disability policy as then in effect.
Death If you die during the Term, the Term will end as
of the date of your death.
Page 6 of 15
<PAGE>
Payments on If the Partnership terminates your employment
Termination for or without Cause or because of disability or
death or you resign, the Partnership will pay you
any unpaid portion of your Salary prorated through
the date of actual termination and any annual
bonuses already determined by such date but not
yet paid, reimburse any substantiated but
unreimbursed business expenses, pay any accrued
and unused vacation time (to the extent consistent
with the Partnership's policies), and provide such
other benefits as applicable laws or the terms of
the benefits require. Except to the extent the law
requires otherwise or as provided in the Severance
paragraph, neither you nor your beneficiary or
estate will have any rights or claims under this
Agreement or otherwise to receive severance or any
other compensation, or to participate in any other
plan, arrangement, or benefit, after such
termination.
Severance In addition to the foregoing payments, if the
Partnership terminates your employment
without Cause or you resign for Good Reason
before the end of the Term, the Partnership
will
pay you severance equal to your Salary,
as then in effect, for 12 months in a
single lump sum as soon as practicable
but in any event no more than 90 days
after termination;
pay the premium cost for you to receive
any group health coverage the
Partnership must offer you under Section
4980B of the Internal Revenue Code of
1986 ("COBRA Coverage") for the period
of such coverage;
pay you, at the time the Partnership
would otherwise pay your annual bonus,
your pro rata share of the bonus for the
year of your termination, where the pro
rata factor is based on days elapsed in
your year of termination till date of
termination over 365, less any portion
of the bonus for the year of your
termination already paid; and
cause any otherwise unexercisable
options to purchase units in the
Partnership or stock in the
Page 7 of 15
<PAGE>
Company to become exercisable, subject
to expiration at the end of their
regular term.
You are not required to mitigate amounts
payable under the Severance paragraph by
seeking other employment or otherwise;
however, you agree to return any payments
under this Severance paragraph if you fail to
comply with Exhibit A. Expiration of this
Agreement, whether because of notice of non-
renewal or otherwise, does not constitute
termination without Cause nor is it grounds
for resignation with Good Reason.
ASSIGNMENT The Partnership may assign or otherwise transfer
this Agreement and any and all of its rights,
duties, obligations, or interests under it to
the Company or any of the affiliates or
subsidiaries of the Company or the
Partnership or
to any business entity that at any time by
merger, consolidation, or otherwise acquires
all or substantially all of the Company's
stock or assets or the partnership units or
assets of the Partnership or to which the
Company or the Partnership transfers all or
substantially all of its assets.
Upon such assignment or transfer, any such
business entity will be deemed to be substituted
for the Partnership for all purposes. Assignment
or transfer does not constitute termination
without Cause nor is it grounds for resignation
with Good Reason absent the occurrence of a Change
of Control. This Agreement binds the Partnership,
its successors or assigns, and your heirs and the
personal representatives of your estate. Without
the Partnership's prior written consent, you may
not assign or delegate this Agreement or any or
all rights, duties, obligations, or interests
under it.
SEVERABILITY If the final determination of an arbitrator or a
court of competent jurisdiction declares, after
the expiration of the time within which judicial
review (if permitted) of such determination may be
perfected, that any term or provision of this
Agreement, including any provision of Exhibit A,
is invalid or unenforceable, the remaining terms
and provisions will be unimpaired, and the invalid
Page 8 of 15
<PAGE>
or unenforceable term or provision will be deemed
replaced by a term or provision that is valid and
enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term
or provision.
AMENDMENT; WAIVER Neither you nor the Partnership may modify, amend,
or waive the terms of this Agreement other than by
a written instrument signed by you and a duly
authorized representative of the General Partner.
Either party's waiver of the other party's
compliance with any provision of this Agreement is
not a waiver of any other provision of this
Agreement or of any subsequent breach by such
party of a provision of this Agreement.
WITHHOLDING The Partnership will reduce its compensatory
payments to you for withholding and FICA taxes and
any other withholdings and contributions required
by law.
THIRD PARTY BENEFICIARY You understand and agree that the Company is a
third party beneficiary of this Agreement.
GOVERNING Law The laws of the Commonwealth of Virginia
(other than its conflict of laws provisions)
govern this Agreement.
NOTICES Notices must be given in writing by personal
delivery, by certified mail, return receipt
requested, by telecopy, or by overnight delivery.
You should send or deliver your notices to the
Partnership's headquarters. The Partnership will
send or deliver any notice given to you at your
address as reflected on the Partnership's
personnel records. You and the Partnership may
change the address for notice by like notice to
the others. You and the Partnership agree that
notice is received on the date it is personally
delivered, the date it is received by certified
mail, the date of guaranteed delivery by the
overnight service, or the date the fax machine
confirms receipt.
LEGAL FEES If a claim is asserted for breach of any provision
of this Agreement, you will be entitled to recover
your reasonable attorney's fees and expenses if
you prevail.
SUPERSEDING EFFECT This Agreement supersedes any prior oral or
written employment, severance, or fringe benefit
agreements between you and the Company or the
Partnership. This Agreement supersedes all prior
Page 9 of 15
<PAGE>
or contemporaneous negotiations, commitments,
agreements, and writings with respect to the
subject matter of this Agreement. All such other
negotiations, commitments, agreements, and
writings will have no further force or effect; and
the parties to any such other negotiation,
commitment, agreement, or writing will have no
further rights or obligations thereunder.
If you accept the terms of this Agreement, please sign in the space indicated
below. We encourage you to consult with any advisors of your choosing.
CAPITAL AUTOMOTIVE L.P.
General Partner:
CAPITAL AUTOMOTIVE REIT, a Maryland real
estate investment trust
By: /s/ THOMAS D. ECKERT
---------------------------------------
Its: President and Chief Executive Officer
--------------------------------------
I accept and agree to the terms of employment
set forth in this Agreement:
/s/ JOHN M. WEAVER
- --------------------------------
John M. Weaver
Dated: June 22, 1998
---------------------
Page 10 of 15
<PAGE>
Exhibit A
---------
NO COMPETITION In consideration of your employment by the
Partnership and salary and benefits under this
Agreement, during the term of your employment, and
until the date one year after your employment with
the Company, the Partnership, or their successors,
assigns, affiliates, or subsidiaries (collectively,
the "Company Group") ends for any reason (the
"Restricted Period"), you agree as follows:
The Company is a real estate investment trust formed
to acquire real properties owned by automobile
dealerships and other automotive-related businesses
and lease the properties to such businesses. Except
as provided below under Excluded Category, you will
not, directly or indirectly, promote, be employed by,
lend money to, invest in, or engage in any Competing
Business within the Market Area. That prohibition
includes, but is not limited to, acting, either
singly or jointly or as agent for, or as an employee
of or consultant to, any one or more persons, firms,
entities, or corporations directly or indirectly (as
a director, independent contractor, representative,
consultant, member, or otherwise) that constitutes
such a Competing Business. You may own up to 3% of
the outstanding capital stock of any corporation that
is actively publicly traded without violating this No
Competition covenant. This covenant does not preclude
you from being employed by any automobile dealership
or dealership group or other automotive- related
business that is a lessee or prospective lessee of
properties the Company or the Partnership holds or is
actively considering acquiring.
If, during the Restricted Period, you are offered and
want to accept employment with a business that
engages in activities similar to the Company's or the
Partnership's, you will inform the Partnership in
writing of the identity of the business, your
proposed duties with that business, and the proposed
starting date of that employment. You will also
inform that business of the terms of this Exhibit A.
The Partnership will analyze the proposed employment
and make a good faith determination as to whether it
would threaten the Partnership's legitimate
competitive interests. If the Partnership determines
that the proposed employment would not pose an
unacceptable threat to its interests, the Partnership
will notify you that it does not object to the
employment.
Page 11 of 15
<PAGE>
You acknowledge that, during the portion of the
Restricted Period that follows your employment,
you may engage in any business activity or gainful
employment of any type and in any place except as
described above. You acknowledge that you will be
reasonably able to earn a livelihood without
violating the terms of this Agreement.
You understand and agree that the rights and
obligations set forth in this No Competition
section will continue for one year from the date
of termination of this Agreement and your
employment with the Partnership or the Company
Group.
Excluded This No Competition section is not intended to
Category prevent you from practising solely as an attorney
after the termination of your employment, whether
you are directly employed by a Competing Business
or serving as outside counsel to such business.
You acknowledge and agree that, as counsel to the
Partnership, you have an ethical duty to preserve
attorney work product and matters subject to the
attorney-client privilege and to comply with
conflict of interest rules if advising new clients
on matters (i) where their interests are adverse
to the Partnership or the Company Group or (ii)
that relate to matters on which you gave advice to
the Partnership or the Company Group.
Definitions
Competing Competing Business means any service or financial
Business product of any person or organization other than
the Company Group, in existence or then under
development, that competes or could potentially
compete, directly or indirectly, with any service
or financial product of the Company Group upon
which or with which you have worked for the
Partnership or the Company Group or about which
you acquire knowledge while working for the
Partnership or the Company Group. Competing
Business includes any enterprise engaged in the
formation or operation of real estate investment
trusts or other entities that invest primarily in
automobile dealership or automotive-related
properties or provide real estate financing to
automobile dealerships or automotive-related
businesses. Competing Business excludes real
estate investment trusts and similar entities that
do not engage in activities related to automotive
dealerships or automotive-related businesses.
Page 12 of 15
<PAGE>
Market Area The Market Area consists of the United States.
NO INTERFERENCE; During the Restricted Period, you agree that
NO SOLICITATION you will not, directly or indirectly, whether
for yourself or for any other individual or
entity (other than the Partnership or its
affiliates or subsidiaries), intentionally
solicit or endeavor to entice away from the
Company Group:
any person whom the Company Group
employs (other than as your personal
secretary) or otherwise engages to
perform services as a consultant or
sales representatives; or
any person or entity who is, or was,
within the Restricted Period, a
contractor or subcontractor of the
Company Group known to you or a
lessee or prospective lessee of
properties the Company Group holds
or is actively considering
acquiring.
SECRECY
Preserving Your employment with the Partnership under
Partnership and, if applicable, before this Agreement has
Confidences given and will give you Confidential
Information (as defined below). You acknowledge
and agree that using, disclosing, or publishing
any Confidential Information in an unauthorized
or improper manner could cause the Partnership
or Company Group substantial loss and damages
that could not be readily calculated and for
which no remedy at law would be adequate.
Accordingly, you agree with the Partnership
that you will not at any time, except in
performing your employment duties to the
Partnership or the Company Group under this
Agreement (or with the Partnership's prior
written consent), directly or indirectly, use,
disclose, or publish, or permit others not so
authorized to use, disclose, or publish any
Confidential Information that you may learn or
become aware of, or may have learned or become
aware of, because of your prior or continuing
employment, ownership, or association with the
Partnership or the Company Group or any of
their predecessors, or use any such information
in a manner detrimental to the interests of the
Partnership or the Company Group.
Preserving You agree not to use in working for the
Others' Company Group and not to disclose to the
Confidences Company Group any trade secrets or
other
Page 13 of 15
<PAGE>
Confidences information you do not have the right to use or
disclose and that the Company Group is not free
to use without liability of any kind. You agree
to promptly inform the Partnership in writing
of any patents, copyrights, trademarks, or
other proprietary rights known to you that the
Partnership or the Company Group might violate
because of information you provide.
Confidential "Confidential Information" includes, without
Information limitation, information the Partnership or the
Company Group has not previously disclosed to
the public or to the trade with respect to the
Partnership's or the Company Group's present or
future business, operations, services,
products, research, inventions, discoveries,
drawings, designs, plans, processes, models,
technical information, facilities, methods,
trade secrets, copyrights, software, source
code, systems, patents, procedures, manuals,
specifications, any other intellectual
property, confidential reports, price lists,
pricing formulas, customer lists, financial
information (including the revenues, costs, or
profits associated with any of the
Partnership's or the Company Group's products
or services), business plans, lease structure,
projections, opportunities or strategies,
acquisitions or mergers, advertising or
promotions, personnel matters, legal matters,
any other confidential and proprietary
information, and any other information not
generally known outside the Partnership or the
Company Group that may be of value to the
Partnership or the Company Group but excludes
any information already properly in the public
domain. "Confidential Information" also
includes confidential and proprietary
information and trade secrets that third
parties entrust to the Partnership or the
Company Group in confidence.
You understand and agree that the rights and
obligations set forth in this Secrecy Section
will continue indefinitely and will survive
termination of this Agreement and your
employment with the Partnership or the Company
Group.
EXCLUSIVE PROPERTY You confirm that all Confidential Information
is and must remain the exclusive property of
the Partnership or the relevant member of the
Company Group. All business records, business
papers, and business documents you keep or make
in the course of your employment by the
Partnership relating to the Partnership or any
member of the Company Group must be and remain
the property of the Partnership or the relevant
member of the Company Group.
Page 14 of 15
<PAGE>
Upon the termination of this Agreement with the
Partnership or upon the Partnership's request
at any time, you must promptly deliver to the
Partnership or to the relevant member of the
Company Group any Confidential Information or
other materials (written or otherwise) not
available to the public or made available to
the public in a manner you know or reasonably
should recognize the Partnership did not
authorize, and any copies, excerpts, summaries,
compilations, records and documents you made or
that came into your possession during your
employment. You agree that you will not,
without the Partnership's consent, retain
copies, excerpts, summaries or compilations of
the foregoing information and materials. You
understand and agree that the rights and
obligations set forth in this Exclusive
Property Section will continue indefinitely and
will survive termination of this Agreement and
your employment with the Company Group.
MAXIMUM LIMITS If any of the provisions of Exhibit A are ever
deemed to exceed the time, geographic area, or
activity limitations the law permits, you and
the Partnership agree to reduce the limitations
to the maximum permissible limitation, and you
and the Partnership authorize a court or
arbitrator having jurisdiction to reform the
provisions to the maximum time, geographic
area, and activity limitations the law permits.
INJUNCTIVE RELIEF Without limiting the remedies available to the
Partnership, you acknowledge
that a breach of any of the covenants in
this Exhibit A may result in material
irreparable injury to the Partnership and
Company Group for which there is no
adequate remedy at law, and
that it will not be possible to measure
damages for such injuries precisely.
You agree that, if there is a breach or
threatened breach, the Partnership or any
member of the Company Group will be entitled to
obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining
you from engaging in activities prohibited by
any provisions of this Exhibit A or such other
relief as may be required to specifically
enforce any of the covenants in this Exhibit A.
Page 15 of 15
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<PAGE>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
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0
0
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