<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 March 31, 1999
( ) 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
---------
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 May 10, 1999
was 21,607,415.
<PAGE>
CAPITAL AUTOMOTIVE REIT
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
-------
<S> <C>
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets - March 31, 1999 (unaudited) and
December 31, 1998. 3
Consolidated Statements of Operations (unaudited) - three months
ended March 31, 1999 and March 31, 1998. 4
Consolidated Statements of Cash Flows (unaudited) - three months
ended March 31, 1999 and March 31, 1998. 5
Notes to Consolidated Financial Statements (unaudited) 6 - 10
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 11 - 16
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 16
Part II - Other Information
Item 1 - Legal Proceedings 17
Item 2 - Changes in Securities 17
Item 3 - Defaults Upon Senior Securities 18
Item 4 - Submission of Matters to Vote of Security Holders 18
Item 5 - Other Information 18
Item 6 - Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CAPITAL AUTOMOTIVE REIT
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
-------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land $ 275,549 $ 238,970
Building and improvements 323,598 272,162
Accumulated depreciation (9,951) (6,145)
-------------- --------------
589,196 504,987
Cash and cash equivalents 5,939 72,106
Other assets, net 6,622 6,118
-------------- --------------
TOTAL ASSETS $ 601,757 $ 583,211
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Mortgage loans $ 161,929 $ 161,997
Borrowings under credit facilities 20,000 -
Accounts payable and accrued expenses 2,872 14,752
Security deposits payable 4,346 3,907
-------------- --------------
TOTAL LIABILITIES 189,147 180,656
-------------- --------------
Minority Interest 99,373 93,898
SHAREHOLDERS' EQUITY
Preferred shares, $.01 par value; 20,000,000
shares authorized; none outstanding - -
Common shares, $.01 par value; 100,000,000 shares
authorized; 24,792,115 shares issued 248 248
Additional paid-in-capital 346,096 345,905
Retained earnings (accumulated deficit) 364 (4,025)
Less treasury shares at cost, 3,184,700 common shares (33,471) (33,471)
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 313,237 308,657
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 601,757 $ 583,211
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
3
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CAPITAL AUTOMOTIVE REIT
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
------------ -----------
<S> <C> <C>
Revenue:
Rental $ 14,572 $ 1,731
Interest and other 216 1,590
------------ -----------
Total revenue 14,788 3,321
------------ -----------
Expenses:
Depreciation and amortization 3,845 344
General and administrative 1,894 892
Interest 3,275 41
------------ -----------
Total expenses 9,014 1,277
------------ -----------
Net income before minority interest 5,774 2,044
Minority interest (1,385) (341)
------------ -----------
Net income $ 4,389 $ 1,703
============ ===========
Shares of common stock outstanding used to
compute basic earnings per share 21,607 12,147
============ ===========
Basic earnings per share $ 0.20 $ 0.14
============ ===========
Shares of common stock outstanding used to
compute diluted earnings per share 21,607 12,267
============ ===========
Diluted earnings per share $ 0.20 $ 0.14
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CAPITAL AUTOMOTIVE REIT
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,389 $ 1,703
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,845 344
Income applicable to minority interest 1,385 341
Increase in other assets (76) (1,135)
Increase/(decrease) in accounts payable and accrued expenses (2,932) 817
Increase in security deposits payable 439 1,140
-------- --------
Net cash provided by operating activities 7,050 3,210
-------- --------
Cash flows from investing activities:
Purchase of furniture and equipment (21) (172)
Real estate acquisitions (83,655) (79,184)
-------- --------
Net cash used in investing activities (83,676) (79,356)
-------- --------
Cash flows from financing activities:
Proceeds from bank borrowings 20,000 5,100
Repayment of bank and other borrowings -- (1,000)
Mortgage principal payments (68) --
Payment of loan costs (430) --
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 (6,914) --
Payment of partner distribution (2,059) --
Other fees (70) --
-------- --------
Net cash provided by financing activities 10,459 346,385
-------- --------
Net increase (decrease) in cash and cash equivalents (66,167) 270,239
Cash and cash equivalents at beginning of period 72,106 25
-------- --------
Cash and cash equivalents at end of period $ 5,939 $270,264
======== ========
Supplemental Data:
Real estate acquisitions in exchange for equity issuance $ 4,360 $ 74,421
======== ========
Interest paid during the period $ 2,110 $ 41
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CAPITAL AUTOMOTIVE REIT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Capital Automotive REIT (the "Company") is a Maryland real estate investment
trust formed in October 1997. The Company owns its property interests through
Capital Automotive L.P. (the "Operating Partnership") and its subsidiaries.
The Company is the sole general partner of the Operating Partnership. The
Company completed its initial public offering of common shares and began
generating rental income in February 1998. The term "Capital Automotive
Group" refers to the Company and the Operating Partnership and their
subsidiaries. In this Quarterly Report on Form 10-Q, the term "subsidiary" of
the Company or the Operating Partnership means a corporation, partnership,
limited liability company or similar entity if the Company or the Operating
Partnership, alone or together, directly or indirectly, own at least a majority
of the equity interests of the entity. Typically the Operating Partnership
forms a subsidiary limited liability company or limited partnership to own
properties acquired from a given dealership group. This structure is intended
to facilitate financing and transfers involving such properties.
Capital Automotive Group's primary business purpose is to own and lease real
estate properties (land, buildings and other improvements) to operators of
franchised automobile dealerships, motor vehicle service, repair or parts
businesses and related businesses. In this Quarterly Report on Form 10-Q,
Capital Automotive Group uses the term "dealerships" to refer to these types
of businesses that are operated on its properties.
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
by the Company's management in accordance with generally accepted accounting
principles ("GAAP") 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 GAAP 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 three months
ended March 31, 1999, 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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements have been prepared in
accordance with GAAP and include the accounts of Capital Automotive Group. All
intercompany balances and transactions have been eliminated in consolidation.
6
<PAGE>
Real Estate and Depreciation
Real estate assets are 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.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid instruments purchased
with original maturities of three months or less.
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 generally not subject to federal income tax to the extent
that it distributes annually at least 95% of its taxable income to its
shareholders and complies with certain other requirements.
Rental Revenue Recognition
The Company leases its real estate under long-term triple-net leases which
require the lessees to pay substantially all expenses associated with the
operations, including taxes, utilities, insurance, repairs, maintenance and
other expenses. All leases are accounted for as operating leases.
Use of Estimates
The preparation of financial statements in conformity with GAAP 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
During the three months ended March 31, 1999, Capital Automotive Group closed on
the acquisition of 22 dealership properties, representing 19 automotive
franchises, for an aggregate purchase price of $88 million. Consideration for
the properties consisted of approximately $64.3 million in cash, $19.3 million
in the assumption and repayment of debt and $4.4 million in equity issuance
(approximately $3.8 million in Operating Partnership units ("Units") and
approximately $600,000 allocated to warrants exercisable for common shares of
the Company). The properties were acquired from various dealer groups,
including affiliates of Asbury Automotive Group, Craig Zinn Automotive Group,
FirstAmerica Automotive, Inc., Group 1 Automotive Inc. and its affiliates,
McCluskey Chevrolet, Mulkin Automotive Group, and Park Place Motorcars. The
properties total approximately 700,000 square feet of buildings and improvements
on 81.9 acres of land and are located in five states, including California,
Florida, New York, Ohio and Texas. These properties have initial lease terms
ranging from ten to 20 years, with an average initial term of 14.7 years, and
have multiple renewal options by the tenant.
7
<PAGE>
As of March 31, 1999, Capital Automotive Group had invested approximately $600
million in properties. Capital Automotive Group's portfolio included 142
properties, representing 215 automotive franchises in 19 states. These
properties total approximately 5.0 million square feet of buildings and
improvements on 793 acres of land. The properties are leased on long-term,
triple-net leases with an average initial lease term of 13.2 years.
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 ended March 31, 1999
and March 31, 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 March 31, 1999:
Earnings per share - basic $4,389 21,607 $0.20
Adjustments (1) - - -
------ ------ -----
Earnings per share - diluted $4,389 21,607 $0.20
====== ====== =====
Three Months Ended March 31, 1998:
Earnings per share - basic $1,703 12,147 $0.14
Adjustments (1) (16) 120 -
------ ------ -----
Earnings per share - diluted $1,687 12,267 $0.14
====== ====== =====
</TABLE>
(1) Adjustment to net income reflects change in Minority Interest (as
hereafter defined) 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. There were no dilutive options during the three month period ended
March 31, 1999.
5. MORTGAGE LOANS
As of March 31, 1999, Capital Automotive Group had mortgage indebtedness
totaling $162 million secured by 64 properties owned by subsidiaries of the
Operating Partnership. The $162 million consisted of the following:
. A $150 million, non-recourse loan ("Permanent Loan") with Global Alliance
Finance Company, L.L.C. (the "Lender") that closed in November 1998. The
original terms of the Permanent Loan
8
<PAGE>
require consecutive monthly payments of interest only for two years.
Thereafter, monthly payments of principal and interest will be required in an
amount sufficient to amortize the Permanent Loan over a 25-year term. The term
of the Permanent Loan is ten years and bears interest at a coupon rate of
7.67% per annum until maturity on December 1, 2008. The Permanent Loan is
secured by mortgages on the properties financed. The Operating Partnership has
provided a limited $35 million guaranty of the Permanent Loan, which guaranty
is contingent upon the occurrence of certain circumstances. A majority of the
loan proceeds was used to finance acquisitions.
On February 10, 1999, the Company and the Lender modified the terms on
approximately $38 million of the Permanent Loan in order for the Lender to
have more flexibility in structuring a commercial mortgage backed security
execution. The interest rate on this portion of the Permanent Loan was
reduced to 7.59% per annum, the monthly interest only payments were reduced to
approximately one year and the amortization period was reduced to
approximately 17 years.
. A $12 million mortgage note with a financial institution assumed by the
Company in November 1998 as partial consideration for the acquisition of four
dealership properties. The note is secured by the properties acquired. The
mortgage note bears interest at 7.50% per annum until maturity in January
2003. Principal and interest are payable monthly. Any outstanding principal
and interest shall be due and payable upon maturity.
6. CREDIT FACILITIES
As of March 31, 1999, Capital Automotive Group had commitments for short term,
revolving credit facilities, from financial institutions, in the aggregate
amount of $70 million ($50 million from Comerica Bank and $20 million from
United Bank), of which $20 million had been drawn down. The committed credit
facilities will provide funds for the acquisition of dealership properties and
for general corporate purposes. The committed credit facilities will have
three-year terms and borrowings will bear interest at a rate equal to the one
month LIBOR plus 175 basis points.
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999 and does
not require restatement of financial statements from prior periods. SFAS No.
133 requires an entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The Company believes that the adoption of SFAS 133 will not have
a significant impact on the Company's consolidated financial position, results
of operations or cash flows.
8. MINORITY INTEREST
Minority Interest is calculated at approximately 24.1 percent of the Operating
Partnership's partners' capital and net income. The ownership of the Operating
Partnership as of March 31, 1999 is as follows (Units in thousands):
9
<PAGE>
<TABLE>
<CAPTION>
Units Percent
------ --------
<S> <C> <C>
Partners' capital:
Limited Partners 6,855 24.1%
The Company 21,607 75.9%
------ -----
Total 28,462 100.0%
====== =====
</TABLE>
9. 401(K) PLAN
During 1998, the Company adopted the Capital Automotive L.P. Employee 401 (k)
Plan. Employees who are at least 21 years of age 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 ended March 31,
1999.
10. SUBSEQUENT EVENTS
Declaration of Dividend
- -----------------------
On April 27, 1999, the Company declared a dividend of $0.33 per share which will
be paid on May 20, 1999 to shareholders of record as of May 10, 1999.
Commitment
- ----------
During April 1999, Capital Automotive Group entered into a commitment letter
with a financial institution for a $100 million permanent loan to be secured by
various properties owned by subsidiaries of the Operating Partnership. The
commitment expires on July 15, 1999, unless otherwise extended. The term of the
financing is 12 years based upon a 25-year amortization. Principal and interest
will be payable quarterly. The annual fixed interest rate will be based on a
spread of 250 basis points over the 10-year Treasury rate, which on April 9,
1999, was locked in at 7.54% per annum. The proceeds will be used to acquire
additional properties and for general corporate purposes.
10
<PAGE>
CAPITAL AUTOMOTIVE REIT
ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - THREE MONTHS ENDED
MARCH 31, 1999 AND MARCH 31, 1998
The following discussion should be read in conjunction with the accompanying
unaudited consolidated financial statements and notes thereto.
OVERVIEW
Capital Automotive REIT (the "Company") is a Maryland real estate investment
trust formed in October 1997. The Company owns its property interests through
Capital Automotive L.P. (the "Operating Partnership") and its subsidiaries.
The Company is the sole general partner of the Operating Partnership. The
Company completed its initial public offering of common shares and began
generating rental income in February 1998. The term "Capital Automotive
Group" refers to the Company and the Operating Partnership and their
subsidiaries. In this Quarterly Report on Form 10-Q, the term "subsidiary" of
the Company or the Operating Partnership means a corporation, partnership,
limited liability company or similar entity if the Company or the Operating
Partnership, alone or together, directly or indirectly, own at least a majority
of the equity interests of the entity. Typically the Operating Partnership
forms a subsidiary limited liability company or limited partnership to own
properties acquired from a given dealership group. This structure is intended
to facilitate financing and transfers involving such properties.
Capital Automotive Group's primary business purpose is to own and lease real
estate properties (land, buildings and other improvements) to operators of
franchised automobile dealerships, motor vehicle service, repair or parts
businesses and related businesses. In this Quarterly Report on Form 10-Q,
Capital Automotive Group uses the term "dealerships" to refer to these types
of businesses that are operated on its properties. Capital Automotive Group's
strategy focuses on acquiring real estate used by multi-site, multi-franchised
dealerships located predominately in major metropolitan areas throughout the
United States.
All properties are leased under triple-net leases, under which the lessees
typically pay substantially all operating expenses of a property, including, but
not limited to, all taxes, assessments and other government charges, insurance,
utilities, service, repairs and maintenance. The leases are generally for a
period of ten to 20 years, with options to renew upon the same terms and
conditions for one or more additional periods of five to ten years exercisable
at the option of the lessee.
Substantially all of Capital Automotive Group's revenues are derived from (1)
rents received under long-term, triple-net leases; and (2) interest earned from
the temporary investment of funds in short-term investments.
Capital Automotive Group incurs general 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. Capital Automotive Group is self-administered
and managed by its trustees, executive officers and staff. The primary non-cash
expense of Capital Automotive Group is the depreciation of its properties.
Capital Automotive Group 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. Capital Automotive Group does not
own or lease any significant personal property, furniture or equipment at any
property currently owned by it.
11
<PAGE>
ACQUISITIONS
During the three months ended March 31, 1999, Capital Automotive Group closed on
the acquisition of 22 dealership properties, representing 19 automotive
franchises, for an aggregate purchase price of $88 million. Consideration for
the properties consisted of approximately $64.3 million in cash, $19.3 million
in the assumption and repayment of debt and $4.4 million in equity issuance
(approximately $3.8 million in Operating Partnership units ("Units") and
approximately $600,000 allocated to warrants exercisable for common shares of
the Company). The properties were acquired from various dealer groups,
including affiliates of Asbury Automotive Group, Craig Zinn Automotive Group,
FirstAmerica Automotive, Inc., Group 1 Automotive Inc. and its affiliates,
McCluskey Chevrolet, Mulkin Automotive Group, and Park Place Motorcars. The
properties total approximately 700,000 square feet of buildings and improvements
on 81.9 acres of land and are located in five states, including California,
Florida, New York, Ohio and Texas. These properties have initial lease terms
ranging from ten to 20 years, with an average initial term of 14.7 years, and
have multiple renewal options by the tenant.
As of March 31, 1999, Capital Automotive Group had invested approximately $600
million in properties. Capital Automotive Group's portfolio included 142
properties, representing 215 automotive franchises in 19 states. These
properties total approximately 5.0 million square feet of buildings and
improvements on 793 acres of land. The properties are leased on long-term,
triple-net leases with an average initial lease term of 13.2 years. The
Company's portfolio weighted average initial cap rate at March 31, 1999 was
10.6%, which is calculated as the percentage of the initial annual base rent
over the purchase price paid to the sellers for the related properties.
RESULTS OF OPERATIONS
Although the Company was formed prior to January 1, 1998, it did not complete
its initial public offering ("IPO") until February 19, 1998, at which time it
began generating rental income.
Rental revenue for the first quarter of 1999 rose 742% to $14.6 million from
$1.7 million in the same comparable quarter of 1998. The increase was
attributable to the growth of Capital Automotive Group's real estate portfolio
(142 properties as of March 31, 1999 versus 35 properties as of March 31, 1998),
from which the Company generates its rental income. The Company began
generating revenue on February 19, 1998, the date of closing of the Company's
IPO and purchase of its initial properties.
Interest income for the first quarter decreased 86% to $216,000 from $1.6
million in the same comparable quarter of 1998. Interest income during the
first quarter 1998 was primarily generated from the investment of the excess of
the net proceeds of the Company's IPO, a private placement offering and the
exercise of the underwriters' over-allotment option (all completed during the
first quarter of 1998). These net proceeds were fully invested during 1998 and
therefore did not generate interest income during the first quarter of 1999.
Interest income generated in the first quarter of 1999 was primarily generated
from the investment of the excess of debt issuance proceeds over the amount
invested in properties.
Depreciation and amortization for the first quarter of 1999 increased to $3.8
million from $344,000 in the same comparable quarter of 1998 and consisted
primarily of depreciation on buildings and improvements owned during those
periods. The increase is attributable to the growth of Capital Automotive
Group's real estate portfolio.
12
<PAGE>
Capital Automotive Group had general and administrative expenses of $1.9 million
for the first quarter of 1999 compared to $892,000 for the first quarter of
1998, representing an increase of 112%. The increase was due primarily to
increased payroll and related benefits attributable to personnel additions in
1998, and severance payments relating to the elimination of four employees
during the first quarter of 1999, or approximately 15% of the Company's total
staff. Also contributing to the increase was increased marketing expenses as
well as increased professional fees and other administration costs associated
with public reporting requirements.
Interest expense for the first quarter of 1999 increased to $3.3 million from
$41,000 for the first quarter of 1998. The increase was due to interest charged
on the Company's outstanding debt (including mortgage debt and borrowings under
the credit facilities) issued in the later half of 1998 and the first quarter of
1999.
LIQUIDITY AND CAPITAL RESOURCES
During November 1998, Capital Automotive Group closed on a $150 million, non-
recourse loan ("Permanent Loan") with Global Alliance Finance Company, L.L.C.
(the "Lender"). The original terms of the Permanent Loan require consecutive
monthly payments of interest only for two years. Thereafter, monthly payments of
principal and interest will be required in an amount sufficient to amortize the
Permanent Loan over a 25-year term. The term of the Permanent Loan is ten years
and bears interest at a coupon rate of 7.67% per annum until maturity on
December 1, 2008. The Permanent Loan is secured by mortgages on the properties
financed. The Operating Partnership has provided a limited $35 million guaranty
of the Permanent Loan, which guaranty is contingent upon the occurrence of
certain circumstances. A majority of the loan proceeds was used to finance
acquisitions. On February 10, 1999, Capital Automotive Group and the Lender
modified the terms on approximately $38 million of the Permanent Loan in order
for the Lender to have more flexibility in structuring a commercial mortgage
backed security execution. The interest rate on this portion of the Permanent
Loan was reduced to 7.59% per annum, the monthly interest only payments were
reduced to approximately one year and the amortization period was reduced to
approximately 17 years.
As of March 31, 1999, Capital Automotive Group had commitments for short term,
revolving credit facilities, from financial institutions, in the aggregate
amount of $70 million ($50 million from Comerica Bank and $20 million from
United Bank), of which $20 million had been drawn down. The committed credit
facilities will provide funds for the acquisition of dealership properties and
for general corporate purposes. The committed credit facilities will have three-
year terms and borrowings will bear interest at a rate equal to the one month
LIBOR plus 175 basis points. Capital Automotive Group intends to increase the
capacity and term of the revolving credit facilities through the inclusion of
additional financial institutions.
During April 1999, Capital Automotive Group entered into a commitment letter
with a financial institution for a $100 million permanent loan to be secured by
various properties owned by subsidiaries of the Operating Partnership. The
commitment expires on July 15, 1999, unless otherwise extended. The term of the
financing is 12 years based upon a 25-year amortization. Principal and interest
will be payable quarterly. The annual fixed interest rate will be based on a
spread of 250 basis points over the 10-year Treasury rate, which on April 9,
1999, was locked in at 7.54% per annum. The proceeds will be used to acquire
additional properties and for general corporate purposes.
The Company anticipates that cash from operations and existing and future short-
term and long-term debt
13
<PAGE>
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 Internal Revenue Code
of 1986, as amended (the "Code") 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 twelve 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: (1) annual base rent under the
leases; and (2) 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.
Capital Automotive Group also intends to 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 trust under the Code. Capital Automotive Group 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.
Capital Automotive Group has adopted a policy to limit debt to approximately 50%
of assets. This policy may be changed by the Company's Board of Directors at
anytime without shareholder approval.
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 Units as consideration for such
purchases.
YEAR 2000 COMPLIANCE
Management of Capital Automotive Group has adopted a plan to confront year 2000
issues. Under the plan, management is assessing the potential material effect of
year 2000 issues on the Company's business, results of operations, and financial
condition and is determining ways to mitigate those issues.
Capital Automotive Group has completed discussions with a sample of its tenants
regarding their year 2000 compliance. In addition, each of Capital Automotive
Group's tenants were sent questionnaires in the fourth quarter 1998, regarding
the year 2000 compliance of their financial data and operating systems. Capital
Automotive Group is presently obtaining and reviewing the questionnaires and to
date has found no instances where a tenant is not materially year 2000
compliant. Capital Automotive Group is currently not aware of any tenants who
are not materially year 2000 compliant and does not feel a need for a
contingency plan to mitigate year 2000 issues.
Overall, Capital Automotive Group believes that it will not incur significant
costs in modifying its existing software applications, replacing hardware or
hiring consultants in resolving year 2000 issues both internally and externally.
Although Capital Automotive Group has not incurred any material expenditures
relating to year 2000 issues as of March 31, 1999, there can be no assurance as
to the magnitude of future costs until Capital Automotive Group's assessment is
complete.
Failure to correct material year 2000 issues may result in the interruption, or
failure of, certain normal
14
<PAGE>
business activities or operations and may adversely affect the Company's results
of operations, liquidity and financial condition. Management of Capital
Automotive Group believes that continued progress in implementing the year 2000
plan will significantly reduce Capital Automotive Group's potential of a year
2000 operational interruption. As of March 31, 1999, management of Capital
Automotive Group had no knowledge of a year 2000 event or uncertainty that is
likely to materially affect Capital Automotive Group.
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.
FFO of the Operating Partnership for the three months ended March 31, 1999 and
March 31, 1998 is computed as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Net Income before Minority Interest $ 5,774 $ 2,044
Real Estate Depreciation and Amortization 3,820 329
-------- -------
Funds From Operations $ 9,594 $ 2,373
======== =======
</TABLE>
FORWARD LOOKING STATEMENTS
Certain statements in this Form 10-Q are "forward-looking statements" within the
meaning of 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,"
15
<PAGE>
"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.
-----------------------------------------------------------
The Company is exposed to certain financial market risks, the most predominant
being fluctuations in interest rates. Interest rate fluctuations are monitored
by the Company's management as an integral part of the Company's overall risk
management program, which recognizes the unpredictability of financial markets
and seeks to reduce the potentially adverse effect on the Company's results of
operations.
As of March 31, 1999, there have been no material changes in the Company's
financial market risk since December 31, 1998 as reported in the Company's
Annual Report on Form 10-K.
16
<PAGE>
CAPITAL AUTOMOTIVE REIT
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
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 March 31,
1999.
On January 5, 1999, the Company issued a warrant to purchase 133,333 Common
Shares of the Company to Jack I. Tompkins, a warrant to purchase 133,334 Common
Shares of the Company to Bert Wollen, and a warrant to purchase 133,333 Common
Shares of the Company to WS&B Auto REIT, LLC. These warrants were issued in
connection with the identification of certain properties acquired by Capital
Automotive Group. The warrants become exercisable at the rate of 25% per year
over a four year period beginning on January 5, 2000 at an exercise price of
$15.00 per Common Share, subject to anti-dilution protections. The warrants
expire December 31, 2008. The issuance of the warrants was effected in reliance
on an exemption from registration under Section 4(2) of the Securities Act.
On January 8, 1999, the Operating Partnership issued 5,133 Units to M.B.
Holdings, L.P. as partial consideration for the acquisition of one parcel of
real property and improvements located thereon in Dallas, Texas. 50% of the
Units will be eligible for redemption beginning on January 8, 2000 and 50% of
the Units will be eligible for redemption beginning on January 8, 2001 for cash
by the Operating Partnership, 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 January 22, 1999, the Company issued a warrant to purchase 50,000 Common
Shares of the Company to Diamante Properties, Ltd. as partial consideration for
the acquisition of one parcel of real property and improvements. The warrant is
exercisable during the period beginning on January 31, 2000 and ending on
January 22, 2004 at an exercise price of $15.00 per Common Share. The issuance
of the warrant was effected in reliance on an exemption from registration under
Section 4(2) of the Securities Act.
On February 1, 1999, the Operating Partnership issued 116,838 Units to McCluskey
Chevrolet, Inc. as partial consideration for the acquisition of three parcels of
real property and improvements located thereon in Cincinnati, Ohio. The Units
are redeemable beginning on July 31, 2000 for cash by the Operating Partnership,
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 March 25, 1999, the Operating Partnership issued 106,388 Units to John W.
Mulkin, Jr. and 53,195 Units to Anthony Zappone, as partial consideration for
the acquisition of two parcels of real property and improvements located thereon
in Brockport, New York. The Units are redeemable beginning on July 31, 2000 for
cash by the Operating Partnership, or at the option of the Company,
17
<PAGE>
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.
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:
--------
10.44 Amendment to Loan Agreement dated as of February 10, 1999 between CARS
- DB1, L.L.C. as Borrower and Global Alliance Finance Company, L.L.C.
10.45 Revolving Loan Agreement dated as of March 4, 1999 among Comerica Bank
and Capital Automotive, L.P., et al.
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K
-------------------
(1) Current Report on Form 8-K filed on February 26, 1999 (File No.000-
23733)
18
<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
President and Chief Executive Officer
(principal executive officer)
BY: /s/ David S. Kay
----------------------
David S. Kay
Vice President and Chief Financial Officer
(principal financial and accounting officer)
Dated: May 11, 1999
--------------
19
<PAGE>
EXHIBIT 10.44
AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT TO LOAN AGREEMENT, dated as of February 10, 1999 (this
"AMENDMENT"), made by and between GLOBAL ALLIANCE FINANCE COMPANY, L.L.C., a
Delaware limited liability company, having its principal office at 31 West 52nd
Street, 17th Floor, New York, New York 10019 ("LENDER") and CARS-DB1, L.L.C., a
Delaware limited liability company, having an address at 1420 Spring Hill Road,
Suite 525, McLean, Virginia 22102 ("BORROWER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Lender and Borrower are parties to that certain Loan
Agreement dated as of November 18, 1998 (the "LOAN AGREEMENT"), pursuant to
which Lender made a loan to Borrower in the original principal amount of Thirty-
Eight Million Fifty-Thousand and No/100 Dollars ($38,050,000); and
WHEREAS, Lender and Borrower have agreed to modify the terms of the
Loan Agreement in the manner hereinafter set forth.
NOW, THEREFORE, in pursuance of such agreement and for good and
valuable consideration, Lender and Borrower hereby agree as follows:
1. The definition of "Applicable Interest Rate", as set forth in
Section 1.1 of the Loan Agreement, is hereby deleted in its entirety and the
following substituted therefore:
"APPLICABLE INTEREST RATE" shall mean (a) Seven and Sixty-Seven
------------------------
Hundredths Percent (7.67%) per annum for the period from the Closing Date
through and including February 28, 1999, and (b) Seven and Fifty-Nine
Hundredths Percent (7.59%) thereafter.
2. Section 2.2.3 of the Loan Agreement is hereby deleted in its entirety
and the following substituted therefore:
2.2.3 PAYMENT BEFORE MATURITY DATE. On the Closing Date, Borrower
----------------------------
shall make a payment of interest only for the period from the Closing Date
through and including the date immediately prior to the Monthly Payment
Date occurring in December, 1998. If the Closing Date shall occur within
the last ten (10) Business Days of November, Borrower shall pay to Lender,
in addition to the amount set forth in the preceding sentence, in advance
on the Closing Date, the amount of Debt Service scheduled to be payable to
Lender on the Monthly Payment Date occurring in January, 1999. Borrower
shall make a payment to Lender of interest only, in arrears, on the Monthly
Payment Date occurring in January, 1999, and on each Monthly Payment Date
thereafter to and including the Monthly Payment Date occurring in February
2000. Borrower shall make a payment to Lender of principal and interest,
in arrears, in the amount of Three Hundred Thirty-Five Thousand Eight
Hundred Twenty-Eight and
<PAGE>
64/100 Dollars ($335,828.64) on the Monthly Payment Date occurring in
March, 2000 and on each Monthly Payment Date thereafter to and including
the Maturity Date. Each payment shall be applied first to accrued and
unpaid interest and the balance to principal.
3. Except as otherwise provided herein, the Loan Agreement shall
continue in full force and effect, in accordance with their respective terms,
and the parties hereto hereby expressly ratify, confirm and reaffirm all of
their respective liabilities, obligations, duties and responsibilities under and
pursuant to the Loan Agreement, as modified by this Amendment.
4. In the event of a conflict between the terms and conditions of this
Amendment and the terms and conditions of the Loan Agreement, the terms and
conditions of this Amendment shall control.
[NO FURTHER TEXT ON THIS PAGE]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their duly authorized representatives, all as of the day and
year first above written.
BORROWER:
CARS-DB1, L.L.C., a Delaware limited liability
company
By: CARS-DBSPE1, INC., a Delaware
corporation, its managing member
By: /s/ Peter C. Staaf
-----------------------------------------------
Name: Peter C. Staaf
Title: Vice President and Treasurer
LENDER:
GLOBAL ALLIANCE FINANCE COMPANY,
L.L.C., a Delaware limited liability company
By: /s/ Joel Horne
-----------------------------------------------
Name: Joel Horne
Title: President - GAFCO
By: /s/ Carolynn Heitbaum
-----------------------------------------------
Name: Carolynn Heitbaum
Title: Vice President - GAFCO
<PAGE>
EXHIBIT 10.45
REVOLVING LOAN AGREEMENT
DATED AS OF MARCH 4, 1999
AMONG
COMERICA BANK
AND
CAPITAL AUTOMOTIVE, L.P., ET AL.
<PAGE>
THIS REVOLVING LOAN AGREEMENT is made as of the 4th day of March, 1999, by
and among Capital Automotive, L.P., a Delaware limited partnership ("CALP"), CAR
GR1 L.P., CAR Alexander L.P., CAR MOT II L.L.C., and CAR MOT L.L.C. and such
additional entities as shall execute a Joinder Agreement in form attached as
Exhibit A (all of the foregoing entities, including CALP and such additional
entities as hereafter execute a Joinder Agreement, being collectively identified
as "Companies" and individually as a "Company") and COMERICA BANK, a Michigan
banking corporation, of Detroit, Michigan (herein called "Bank");
R E C I T A L S:
NOW, THEREFORE, Bank and Companies agree as follows:
W I T N E S S E T H:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
1.1 "Adjusted Net Worth" shall mean, as of any date, the
stockholders' equity of the REIT and its Consolidated Subsidiaries as determined
in accordance with GAAP plus, to the extent not included in stockholders'
----
equity, the minority interest held in CALP, minus, to the extent included in
-----
stockholder's equity, all amounts owing to the REIT from its stockholders or
other Affiliates other than amounts which Bank reasonably determines may be
included in the calculation of stockholders' equity, minus the REIT's
-----
Consolidated intangible assets, including, without limit, goodwill, trademarks,
tradenames, mailing lists, catalogs, bond discount and underwriting expenses,
organization expenses, patents, licenses and similarly classified assets, plus
----
the REIT's Consolidated Subordinated Debt.
1.2 "Advance" shall mean a borrowing requested by any Company and
made by Bank under Section 2.3 of this Agreement.
1.3 "Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
Person for the purposes of this definition if such Person possesses, directly or
indirectly, the power (i) to vote 10% or more of the securities or other equity
interest having ordinary voting power for the election/appointment of directors
general partners/managers of such Person or (ii) to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or other voting equity interests, by contract or
otherwise.
1.4 "Agreement" shall mean this Revolving Loan Agreement as the same
may hereafter be amended, modified or restated from time to time.
1.5 "Applicable Interest Rate" shall mean the LIBOR-based Rate. If
the LIBOR-based Rate is not available as later set forth in this Agreement, then
the Prime-based Rate shall be the Applicable Interest Rate, provided, further,
that if the Prime-based Rate is not available as later provided, then the Base
Rate shall be the Applicable Interest Rate.
<PAGE>
1.6 "Appraisal" shall mean an MAI appraisal of a Property, by an
appraiser and in form satisfactory to Bank.
1.7 "Appraised Value" shall mean the value of a Property determined
under an appraisal prepared by an appraiser acceptable to Bank, which value is
accepted by Bank's in-house appraiser.
1.8 "Base Rate" shall mean for any calendar day a rate per annum
(rounded upwards, if necessary, to the next higher 1/16 of 1%) equal to the
Federal Funds Effective Rate in effect on such day plus one percent (1%).
1.9 "Borrowing Base " shall mean an amount equal to the Mortgaged
Property Values plus the Nonmortgaged Property Values, subject to the following
----
limitations:
a. Any Mortgaged Properties that constitute a portion of the
Borrowing Base (i) for more than 365 consecutive days shall be valued at the
lesser of (A) 50% of the Cost or (B) 50% of Appraised Value, or (ii) for more
than 730 consecutive days shall be valued at $0.
b. Any Property on which the lease is in default beyond the lesser
of (i) thirty (30) days for a material payment default, including by way of
illustration and not limitation, failure to pay rent, property taxes insurance
premiums or (ii) sixty (60) days for all other material defaults, shall be
valued at $0.
c. Not more than 10% of the Borrowing Base may consist of
miscellaneous parcels used in connection with the operation of an automobile
dealership; all other Properties in the Borrowing Base must be new automobile
vehicle sales and service facilities.
d. The Borrowing Base value of Properties acquired from a
Dealership Group will not exceed $17,500,000.
e. If and when the Indebtedness exceeds $25,000,000, the
Nonmortgaged Properties Value shall not be included in the Borrowing Base.
f. In no event shall the Borrowing Base exceed the lesser of (i)
85% of the Cost, or (ii) 85% of the Appraised Value of the Mortgaged Properties.
For purposes of determining/calculating the Borrowing Base, examples of such
calculation are annexed hereto as Exhibit 1.9.
1.10 Borrowing Base Certificate" shall mean the certificate referenced in
Section 7.1.d of this Agreement in the form annexed hereto as Exhibit 1.10 .
1.11 "Business Day" shall mean any day, other than a Saturday, Sunday or
holiday, during which Bank is open for domestic and international business
(including dealings in foreign exchange) in Detroit, Michigan and, in respect of
notices and determinations relating to the LIBOR-based Rate, also a day on which
transactions in the interbank eurodollar market are conducted.
1.12 "Capital Lease" shall mean any lease of any property (whether real,
personal or mixed) by a Person as lessee which, in conformity with GAAP, is, or
is required to be accounted for as a
PAGE 2
<PAGE>
capital lease on the balance sheet of such Person, together with any renewals of
such leases (or entry into new leases) on substantially similar terms.
1.13 "Consolidated" or "Consolidating" shall, when used with reference to
any financial information pertaining to (or when used as a part of any defined
term or statement pertaining to the financial condition of) REIT and its
Consolidated Subsidiaries, mean the accounts of REIT and its Consolidated
Subsidiaries determined on a consolidated or consolidating basis, as the case
may be, all determined as to principles of consolidation and, except as
otherwise specifically required by the definition of such term or by such
statements, as to such accounts, in accordance with GAAP and consistent with the
financial statements, if any, as at and for the fiscal year ended December 31,
1998.
1.14 "Cost" shall mean the actual gross cost of a Property, including
closing costs, transfer taxes, recording fees, sales commissions and other costs
customarily incurred in connection with the acquisition of a Property.
1.15 "Current Liabilities" shall mean current liabilities as
determined in accordance with GAAP plus, to the extent not included in current
liabilities as determined in accordance with GAAP, all amounts owing by the
---
Companies to Bank under the Revolving Credit.
1.16 "Dealership Group" shall mean an entity or its Affiliates that
owned, prior to acquisition by a Company, a Property and which operates the
automobile dealership on such Property, together with all Affiliates of such
entity.
1.17 "Debt to Adjusted Net Worth Ratio" shall mean, at the date of
determination, the ratio, expressed as a fraction, the numerator of which is
Debt and the denominator of which is Adjusted Net Worth.
1.18 "Debt Service Coverage Ratio" shall mean, at the date of
determination, the ratio, expressed as a fraction, the numerator of which is
EBITDA and the denominator of which is the current portion of long term debt
amortization plus interest expense for the four (4) preceding fiscal quarters.
1.19 "Debt" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP plus certain contingent liabilities that would not be
classified as liabilities in accordance with GAAP but are to be considered Debt
under this Agreement pursuant to the written determination of Bank in the
reasonable exercise of its discretion.
1.20 "EBITDA" shall mean, as of any date of determination, the sum of
the Net Income of REIT and its Consolidated Subsidiaries, for the four (4)
preceding fiscal quarters ending on such date of determination, plus, to the
extent deducted in computation of such Consolidated Net Income, (i) income taxes
for that period, (ii) interest expense for that period and (iii) depreciation
and amortization expense for that period, in each case determined in accordance
with GAAP.
1.21 "Environmental Laws" shall mean all federal, state and local laws
including statutes, regulations, ordinances, codes, rules, and other
governmental restrictions and requirements, relating to environmental pollution,
contamination or other impairment of the environment or any hazardous or toxic
substances of any nature. These Environmental Laws shall include but not be
limited to the
PAGE 3
<PAGE>
Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource Conservation and Recovery Act of 1976, the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, and the Federal Superfund Amendments and Reauthorization Act of 1986.
1.22 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, or any successor act or code.
1.23 "Eurodollar Lending Office" shall mean Bank's office located in the
Cayman Islands, British West Indies, or such other branch of Bank, domestic or
foreign, as Bank may hereafter designate as its Eurodollar Lending Office by
notice to Companies.
1.24 "Event of Default" shall mean any of the Events of Default
specified in Section 10 of this Agreement following notice and opportunity to
cure such default provided in Section 10, if any.
1.25 "Federal Funds Effective Rate" shall mean, for any day, a
fluctuating interest rate per annum equal to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by Bank from three federal funds brokers of recognized
standing selected by Bank.
1.26 "GAAP" shall mean, as of any applicable date of determination,
generally accepted accounting principles consistently applied, as in effect from
time to time.
1.27 "Indebtedness" shall mean all loans, advances, indebtedness,
obligations and liabilities of Companies to Bank under this Agreement, together
with all other indebtedness, obligations and liabilities whatsoever of Companies
to Bank arising under or in connection with the Loan Documents, whether matured
or unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising.
1.28 "Interest Period" shall mean a period of one (1) month, two (2)
months or three (3) months as selected by Companies in accordance with Section
2.3b of this Agreement, provided that any Interest Period which would otherwise
end on a day which is not a Business Day shall be extended to the next
succeeding Business Day, except that as to an Interest Period with respect to a
LIBOR Advance, if the next succeeding Business Day falls in another calendar
month, the Interest Period shall end on the next preceding Business Day, and
when an Interest Period begins on a day which has no numerically corresponding
day in the calendar month during which such Interest Period is to end, it shall
end on the last Business Day of such calendar month.
1.29 "LIBOR Advance" shall mean an Advance which bears interest at
the LIBOR-based Rate.
1.30 "LIBOR-based Rate" shall mean the LIBOR Rate plus the LIBOR
Margin.
1.31 "LIBOR Margin" shall mean one and seventy five hundredths
(1.75%) percent per annum.
PAGE 4
<PAGE>
1.32 "LIBOR Rate" shall mean the British Banker's Association ("BBA")
interest settlement rate based on an average of rates quoted by BBA designated
banks as being, in BBA's view the offered rate at which deposits in U.S. Dollars
are being quoted to prime banks in the London interbank market at 11:00 a.m.
(London Time) two (2) Business Days prior to the day with respect to which the
LIBOR Rate is being determined, for one (1) month, two (2) month or three (3)
month deposits, as applicable, in amount equal or comparable to the applicable
LIBOR Advance, as such rates are determined by the BBA, as reported by "The
Bloomberg Financial Markets, Commodities and News" financial reporting service.
The LIBOR Rate shall be rounded to 4 decimal places.
1.33 Loan Documents" shall mean collectively, this Agreement, the
Note required by Section 2.1 and any other instruments or agreements executed at
any time pursuant to or in connection with any such documents.
1.34 "Mortgage" shall mean a mortgage, deed of trust or similar
instrument and/or an assignment of leases and rents which creates or purports
to create a lien, encumbrance and/or security interest in a Property and the
rents thereof in favor of Bank upon execution by a Company and delivery to Bank.
1.35 "Mortgaged Property" shall mean a Property on which:
a. A Company has granted to Bank a Mortgage securing all or a
portion of the Indebtedness that is a first priority lien on the Property and
which Mortgage is or is to be recorded or filed in the appropriate governmental
office to provide record notice of Bank's lien in the property; and
b. Bank has received an ALTA title policy without standard
exceptions, issued by a title company satisfactory to Bank, insuring the
Mortgage to be a first priority lien on the Property, subject only to such
exceptions as Bank shall approve in writing, in the amount of the Advance
attributable to the Property encumbered by such Mortgage.
1.36 "Mortgaged Property Values" shall mean the lesser of (i) 60% of
the Cost or (ii) 60% of the Appraised Value of the Mortgaged Properties.
1.37 "Net Income" shall mean the net income (or loss) of REIT and its
Consolidated Subsidiaries for any period determined in accordance with GAAP on a
Consolidated basis.
1.38 "Nonmortgaged Property" shall mean a Property that is identified
by a Company as part of the Borrowing Base, and which is not a Mortgaged
Property because the recording of the Bank's Mortgage is to be deferred,
pursuant to Section 5.2.a. of this Agreement below, but otherwise meets the
conditions of being a Mortgaged Property except that the title commitment
referenced in Section 1.46 a.vi is permitted in lieu of the title policy
referenced in Section 1.35 b.
1.39 "Nonmortgaged Property Values" shall mean the lesser of (i) 50%
of the Cost, or (ii) 50% of the Appraised Value of the Nonmortgaged Properties.
1.40 "Note" or "Revolving Credit Note" shall mean the Revolving
Credit Note executed by the Companies pursuant to this Agreement.
1.41 "Permitted Liens" shall mean with respect to any Property:
PAGE 5
<PAGE>
a. liens for taxes not yet delinquent or which are being contested
in good faith by appropriate proceedings diligently pursued, provided that
provision for the payment of all such taxes has been made on the books of such
Person as may be required by GAAP;
b. easements or reservations, or rights of others for rights-of-
way, utilities and other similar purposes, or zoning or other restrictions as to
the use of real properties, which do not materially interfere with the business
operated on the Property;
c. exceptions to the title of Properties approved by Bank in
writing; or
d. leasehold mortgages that only encumber or attach to the
leasehold interest of the tenant of a Property.
1.42 "Person" or "person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency, or other entity.
1.43 "Prime-based Rate" shall mean the Prime Rate minus three
quarters of one (.75%) percent per annum.
1.44 "Prime Rate" shall mean the per annum interest established by
Bank as its prime rate for its borrowers as such rate may vary from time to
time, which rate is not necessarily the lowest rate on loans made by Bank at any
such time.
1.45 "Prime-based Advance" shall mean an Advance which bears interest
at the Prime-based Rate.
1.46 "Property" shall mean a parcel of real estate as to which all of
the following conditions have been satisfied:
a. Bank has received the following, each dated not later than the
first Advances of the Revolving Credit in connection with such property,
prepared by a company acceptable to Bank, and in form and substance satisfactory
to Bank:
i. an Appraisal;
ii. a Phase I Environmental Report;
iii. an ALTA survey conforming to Bank's standard survey
requirements annexed hereto as Exhibit "1.46";
iv. Property and liability insurance, showing Bank as a
mortgagee and additional insured, respectively, and under which Bank will be
provided 30 calendar days notice of cancellation or material modification of
coverage;
v. copies of all leases and subleases;
vi. a commitment for an ALTA mortgagee's policy, without
standard exceptions if the Property is a Mortgaged Property and, if the Property
is a Nonmortgaged Property, a copy of an ALTA commitment for an owner's policy
of title insurance without standard
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exceptions;
vii. an executed Mortgage;
b. it is improved as an automotive dealership operated by a new
vehicle franchised dealer;
c. it is owned by a Company and has been leased to a franchised
new vehicle automotive dealer or an affiliate of such dealer;
d. The lease of the Property is for a term of at least eight (8)
years and is satisfactory to Bank as to form, substance and detail;
e. The tenant under the lease has signed a Subordination Agreement
and Estoppel Certificate satisfactory to Bank;
f. The lease of the Property satisfies CALP's general internal
leasing policies, as they may be modified from time to time; and
g. that is acceptable to Bank for inclusion in the Borrowing Base.
1.47 "REIT" shall mean Capital Automotive REIT, a real estate
investment trust formed under the laws of the State of Maryland.
1.48 "Request for Advance" shall mean a form Request for Advance
issued by a Company under this Agreement in the form annexed to this Agreement
as Exhibit "1.48".
1.49 "Revolving Credit" shall mean the revolving credit facility
described in Section 2 of this Agreement.
1.50 "Revolving Credit Commitment Amount" shall mean Fifty Million
($50,000,000) Dollars.
1.51 "Revolving Credit Maturity Date" shall mean three (3) years from
the date of this Agreement.
1.52 "Subordinated Debt" shall mean Debt of any Person which has been
subordinated in right of payment and priority to the Indebtedness, all on terms
and conditions satisfactory to the Bank.
1.53 "Subsidiary" shall mean a corporation or other entity of which
more than fifty percent (50%) of the outstanding voting stock or other equity
interests is owned by a Company, either directly or indirectly, through one or
more intermediaries.
1.54 "UCC" or "Uniform Commercial Code" shall mean the Uniform
Commercial Code in effect in the State of Michigan from time to time.
2. THE INDEBTEDNESS: REVOLVING CREDIT
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2.1 Subject to the terms and conditions of this Agreement and provided
no Event of Default then exists, Bank agrees to make Advances to Companies from
time to time from the effective date hereof until the Maturity Date. Advances of
the Revolving Credit outstanding at any time shall not, in the aggregate, exceed
the lesser of the Borrowing Base or the Revolving Credit Commitment Amount. All
of the Advances under the Revolving Credit shall be evidenced by the Revolving
Credit Note under which advances, repayments and readvances may be made, subject
to the terms and conditions of this Agreement.
2.2 The Revolving Credit Note shall mature on the Revolving Credit
Maturity Date. Each time a Company executes a Joinder Agreement, at Bank's
request all Companies shall execute a replacement Revolving Credit Note
consistent with this Agreement which replacement Note shall be delivered to Bank
concurrently with cancellation of the prior Note. Each Advance from time to
time outstanding under the Revolving Credit Note shall bear interest at the
Applicable Interest Rate. The amount and date of each Advance, its Applicable
Interest Rate, and the amount and date of any repayment shall be noted on Bank's
records, which records will be conclusive evidence thereof absent manifest
error.
2.3 Companies may request an Advance under the Revolving Credit
upon the delivery to Bank at its address set forth in Section 11.5 of this
Agreement of a Request for Advance executed by an authorized signatory of CALP
subject to the following:
a. no Event of Default shall have occurred and be continuing;
b. each such Request for Advance shall set forth the information
required on the Request for Advance form annexed hereto as Exhibit "1.48";
c. each such Request for Advance shall be delivered to Bank by
11:00 a.m. (Detroit, Michigan time) on the proposed date of Advance;
d. the requested Advance when combined with all outstanding
Advances, will not exceed the lesser of the Borrowing Base or the Revolving Loan
Commitment Amount;
e. the principal amount of each Advance, plus the amount of any
outstanding indebtedness to then be combined therewith having the same
Applicable Interest Rate and Interest Period shall be at least One Million
($1,000,000.00) Dollars and if greater, in integral multiples of One Hundred
Thousand ($100,000) Dollars;
f. the proposed date of any refunding of any outstanding LIBOR
Advance shall only be on the last day of the Interest Period applicable thereto;
g. a Request for Advance, once delivered to Bank, shall not be
revocable by Companies: and
h. a Borrowing Base Certificate if required by Section 7.1d
hereof.
Bank may, at its option, lend under this Section 2 upon the telefacsimile
request of an authorized officer of a Company and, in the event Bank makes any
such advance upon a telefacsimile request, the requesting officer shall, if so
requested by Bank, mail to Bank, on the same day as such telephone
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request, a Request for Advance in the form attached as Exhibit "1.48". Companies
hereby authorize Bank to disburse advances under this Section 2 pursuant to the
telefacsimile instructions of any person purporting to be an authorized officer
of CALP and Companies shall bear all risk of loss resulting from disbursements
made upon any telefacsimile request. Each telefacsimile request for an Advance
shall constitute a certification of the matters set forth in the Request for
Advance form as of the date of such requested Advance.
2.4 Proceeds of Advances under the Revolving Credit Note shall be
used solely for acquisition or financing of real properties and for working
capital for Companies.
2.5 The sum of the aggregate principal amount at any one time
outstanding under the Revolving Credit Note shall never exceed the Borrowing
Base. Companies shall immediately make all payments necessary to comply with
this provision.
2.6 Beginning sixty (60) days from the date hereof until the
termination of this Agreement, Companies shall pay to Bank an unused facility
fee equal to fifteen basis points (0.15%) per annum multiplied by the average
unused Revolving Credit Commitment Amount for each month. The unused facility
fee shall be payable monthly in arrears commencing June 1, 1999 and on the first
day of each month thereafter and on the Revolving Credit Maturity Date and shall
be computed on the basis of a year of 360 days and assessed for the actual
number of days elapsed.
2.7 Companies also agrees to pay to Bank a loan origination fee as
set forth in a separate letter agreement between the Bank and Companies.
3. INTEREST, INTEREST PERIODS, CONVERSIONS, PREPAYMENTS.
3.1 Advances under the Revolving Credit shall bear interest from the
date thereof on the unpaid principal balance thereof from time to time
outstanding, at a rate per annum equal to the LIBOR-based Rate unless the LIBOR-
based Rate is not available pursuant to sections 4.2 or 4.3 below. Interest for
the preceding month shall be payable in arrears on the tenth (10th) calendar day
of the following month. Notwithstanding the foregoing, from and after the
occurrence of any Event of Default and solely during the continuation thereof,
the Advances shall bear interest, payable on demand, at a rate per annum equal
to three percent (3%) above the rate which would otherwise be applicable under
this Section 3.1. Interest on all Advances shall be calculated on the basis of a
360 day year for the actual number of days elapsed. The interest rate with
respect to any Advance that accrues interest at either the Prime-based Rate or
the Base Rate shall change on the effective date of any change in the Prime-
based Rate or the Base Rate.
4. SPECIAL PROVISIONS, CHANGES IN CIRCUMSTANCES AND YIELD PROTECTION.
4.1 For any Interest Period for which the Applicable Interest Rate is
the LIBOR-based Rate, if Bank shall designate a Eurodollar Lending Office which
maintains books separate from those of the rest of Bank, Bank shall have the
option of maintaining and carrying the relevant Advance or portion of the
Revolving Credit on the books of such Eurodollar Lending Office.
4.2 If Bank reasonably determines that, by reason of circumstances
affecting the foreign exchange and interbank markets generally, deposits in
eurodollars in the applicable amounts are not
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being offered to the Bank for such Interest Period, then Bank shall forthwith
give notice thereof to the Companies. Thereafter, until Bank notifies Companies
that such circumstances no longer exist, the obligation of Bank to make LIBOR-
based Advances shall be suspended, and all Advances shall bear interest at the
Prime-based Rate, and if the Prime-based Rate is not available, then at the Base
Rate.
4.3 If, after the date hereof, the introduction or implementation of,
or any change in, any applicable law, rule or regulation, or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by Bank (or its
Eurodollar Lending Office) with any request or directive (whether or not having
the force of law) of any such authority, shall make it unlawful or impossible
for the Bank (or its Eurodollar Lending Office) to honor its obligations
hereunder to make or maintain any Advance or the Indebtedness at the LIBOR-based
Rate, Bank shall forthwith give notice thereof to Companies. Thereafter (a) the
obligation of Bank to make LIBOR-based Advances and the right of Companies to
refund an Advance as a LIBOR-based Advance and to elect the LIBOR-based Rate
shall be suspended, and thereafter the Applicable Interest Rate shall be that
rate which remains available, and (b) if Bank may not lawfully continue to
maintain an Advance to the end of the then current Interest Period applicable
thereto, the Prime-based Rate shall be the Applicable Interest Rate for the
remainder of such Interest Period.
4.4 If the adoption or implementation after the date hereof, or any
change after the date hereof in, any applicable law, rule or regulation of any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
Eurodollar Lending Office) with any request or directive (whether or not having
the force of law) made by any such authority, central bank or comparable agency
after the date hereof:
a. shall subject Bank (or its Eurodollar Lending Office) to any
tax, duty or other charge with respect to any Advance or the Revolving Credit
Note or shall change the basis of taxation of payments to Bank (or its
Eurodollar Lending Office) of the principal of or interest on any Advance or the
Revolving Credit Note or any other amounts due under this Agreement in respect
thereof (except for changes in the rate of tax on the overall net income of Bank
or its Eurodollar Lending Office imposed by any jurisdiction in which Bank is
organized or engaged in business); or
b. shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirement against assets of, deposits with
or for the account of, or credit extended by Bank (or its Eurodollar Lending
Office) or shall impose on Bank (or its Eurodollar Lending Office) or the
foreign exchange and interbank markets any other condition affecting any Advance
or the Note;
c. and the result of any of the foregoing is to increase the costs
to Bank of maintaining any part of the Indebtedness or to reduce the amount of
any sum received or receivable by Bank under this Agreement or under the
Revolving Credit Note by an amount deemed by the Bank to be material, then Bank
shall promptly notify Companies of such fact and demand compensation therefor
and, within fifteen days after demand by Bank, Companies agree to pay to Bank
such additional amount or amounts as will compensate Bank for such increased
cost or reduction. Bank will promptly notify Companies of any event of which it
has knowledge which will entitle Bank to compensation pursuant to this Section
4.4. A certificate of Bank setting forth the basis for determining such
additional amount or amounts necessary to compensate Bank shall be conclusively
presumed to be correct save for manifest error. Bank agrees that, as promptly as
practical after it becomes aware of
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the occurrence of any event or the existence of a condition that will cause Bank
to be entitled to compensation under this Section 4.4, it will, to the extent
not inconsistent with Bank's internal policies, use reasonable efforts to make,
fund or maintain any affected LIBOR-based Advance through another lending office
of Bank if as a result thereof the additional monies which would otherwise be
required to be paid in respect of such LIBOR-based Advance would be materially
reduced and if, as determined by Bank in its reasonable discretion, the making,
funding or maintaining of such LIBOR-based Advance through such other lending
office would not materially adversely affect such Advance or portion of a loan
or Bank. Companies shall pay all reasonable expenses incurred by Bank in
utilizing another lending office pursuant to this Section 4.4.
4.5 In the event that at any time after the date of this Agreement
any change in law such as described in Section 4.4 hereof shall, in the
reasonable opinion of Bank, require that the credit provided under this
Agreement be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by Bank or any
corporation controlling Bank and such change has or would have the effect of
reducing the rate of return on Bank's or Bank's parent corporation's capital or
assets as a consequence of the Bank's obligations hereunder to a level below
that which Bank or Bank's parent corporation would have achieved but for such
change, then Bank shall notify Companies and demand compensation therefor and,
within fifteen days after demand by Bank, Companies agree to pay to Bank such
additional amount or amounts as will compensate Bank for such reduction. Bank
will promptly notify Companies of any event of which it has knowledge which will
entitle Bank to compensation pursuant to this Section 4.5. A certificate of
Bank setting forth the basis for determining such additional amount or amounts
necessary to compensate Bank shall be conclusively presumed to be correct save
for manifest error.
4.6 If, as to any outstanding LIBOR-based Advance, Bank shall not
timely receive a Request for Advance in accordance with Section 2.3b hereof
requesting the refunding of such Advance as a LIBOR-based Advance and
establishing the Interest Period with respect thereto, the principal amount of
such Advance which is not then repaid shall automatically on the last day of the
Interest Period applicable thereto be deemed a LIBOR-based Advance having an
Interest Period of one (1) month, subject in all respects to the terms and
conditions of this Agreement. The foregoing shall not in any way whatsoever
limit or otherwise affect any of Bank's rights or remedies upon the occurrence
of any Event of Default.
4.7 Companies may prepay all or part of the outstanding balance of
any LIBOR-based Advance as to which the Interest Period is one (1) month, any
Prime-based Advance or Base-Rate Advance at any time. Companies may prepay all
or part of any other LIBOR-based Advance as to which the Interest Period is
either two (2) or (3) months on the last day of the Interest Period applicable
thereto, provided that with respect to any partial prepayment of such LIBOR-
based Advance (i) the aggregate balance of the unpaid LIBOR-based Advances
having the same Interest Period outstanding after such prepayment shall be at
least Five Hundred Thousand and 00/100 ($500,000.00) Dollars plus, with respect
to any portion of the aggregate balance of LIBOR-based Advances having the same
Interest Period which is in excess of Five Hundred Thousand and 00/100
($500,000.00) Dollars, such amount shall be in integral multiples of One Hundred
Thousand and 00/100 ($100,000.00) Dollars, and (ii) the unpaid portion of such
LIBOR-based Advance which is refunded or converted shall be subject to the
limitations set forth in this Agreement. Any prepayment made in accordance with
this Section 4.7 shall be without premium or penalty. Any other prepayment shall
be otherwise restricted by and subject to the terms of this Agreement.
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4.8 Subject to the definition of an "Interest Period" contained in
Section 1.28 hereof, in the event that any payment under the Note becomes due
and payable on any day which is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day, and, to the extent applicable,
interest shall continue to accrue and be payable thereon during such extension
at the rates set forth in the Note.
4.9 If Companies make any payment of principal with respect to any
LIBOR-based Advance which has an Interest Period of two (2) months or three (3)
months on any day other than the last day of the Interest Period applicable
thereto (whether voluntarily, by acceleration, or otherwise), or if Companies
fail to borrow any LIBOR-based Advance after notice has been given by Companies
to Bank in accordance with the terms of a Request for Advance given to Bank by
Companies requesting such Advance, or if Companies fail to make any payment of
principal or interest in respect of a LIBOR-based Advance when due, Companies
shall reimburse Bank on demand for any resulting loss, cost or expense incurred
by Bank as a result thereof, including, without limitation, any such loss, cost
or expense incurred in obtaining, liquidating, employing or redeploying deposits
from third parties, whether or not Bank shall have funded or committed to fund
such Advance. Such amount payable by Companies to Bank may include, without
limitation, an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed, refunded
or converted, for the period from the date of such prepayment or of such failure
to borrow, refund or convert through the last day of the relevant Interest
Period, at the applicable rate of interest for said Advance(s) less the LIBOR
Margin (ii) the amount of interest (as reasonably determined by Bank) which
would have accrued to Bank on such amount by placing such amount on deposit for
a comparable period with leading banks in the interbank Eurodollar market.
Calculation of any amounts payable to Bank under this Section 4.9 shall be made
as though Bank shall have actually funded or committed to fund the relevant
LIBOR-based Advance through the purchase of an underlying deposit in an amount
equal to the amount of such Advance and having a maturity comparable to the
relevant Interest Period; provided, however, that Bank may fund any LIBOR-based
Advance in any manner it deems appropriate and the foregoing assumptions shall
be utilized only for the purpose of the calculation of amounts payable under
this Section 4.9. Upon the written request of Companies, Bank shall deliver to
Companies a certificate setting forth the basis for determining such losses,
costs and expenses, which certificate shall be presumed correct, absent manifest
error.
5. CONDITIONS
5.1 Companies agree to furnish Bank prior to the initial borrowing
under this Agreement, in form and substance to be satisfactory to Bank, with (i)
certified copies of resolutions of the managers/general partners/directors of
Companies evidencing approval of the borrowings and transactions contemplated
hereunder; (ii) a certificate of good standing/fact/status from the state of
each Company's organization and from the state(s) in which each of them is
required to be qualified to do business; (iii) the certified copies of the
articles of incorporation/articles of organization/limited partnership
certificate of each of the Companies as filed in the state of such Companies'
organization; (iv) the limited partnership certificate and limited partnership
agreement of CALP; (v) the certified organizational documents of REIT conforming
to clauses (i), (ii) and (iii) above; and (vi) such other documents and
instruments as Bank may reasonably require. In each instance of a borrowing
which includes a Company not previously a part of the Companies requesting
borrowings under this Agreement, Companies shall furnish Bank the organizational
documents of such new Company as required by the preceding sentence.
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5.2 As security for all indebtedness of Companies to Bank hereunder,
Companies agree to furnish, execute and deliver to Bank, or cause to be
furnished, executed and delivered to Bank, prior to or simultaneously with the
initial borrowing hereunder, in form, substance and detail satisfactory to Bank
and supported by appropriate resolutions in certified form authorizing same, the
following:
a. A Mortgage on each Property. For each Mortgage as to a
NonMortgaged Property, such Mortgage may be recorded by Bank upon the earlier of
(i) an Event of Default or (ii) the Revolving Credit Maturity Date.
b. At the Request of Companies, Bank will release Properties from the
respective Mortgages subject to the following conditions:
i. Companies shall have provided to Bank a Borrowing Base
Certificate reflecting the release of the Property or the substitution of a new
Property therefor;
ii. Companies shall have paid to Bank an amount necessary in
order to remain in conformance/compliance with the Borrowing Base Requirements,
or shall have substituted sufficient new Properties to maintain such compliance;
iii. No Event of Default shall exist unless such a release and
coincident pay-down or substitution cures the Event of Default; and
iv. All Properties operated by a Dealership Group must be
released concurrently, unless Bank agrees otherwise.
Upon a release of a Property, the released Property will no longer be
deemed a Property under this Agreement, including for purposes of determining
the Borrowing Base, and any Event of Default that relates solely to such
Property shall be deemed cured.
If a new Property is owned by a Person not yet a Company under this
Agreement, then such Property shall not become a part of the Borrowing Base
until that Person (i) becomes a Company by virtue of execution and delivery of a
Joinder Agreement, (ii) delivery of a copy of its organizational documents as
required by Section 5.1 hereof and (iii) provides for execution and delivery to
Bank of an amendment to or replacement of the Note, as Bank may require.
If, as a result of the release of any Property owned by a Company, the
Borrowing Base no longer is comprised of any Properties owned by such Company,
then such Company's liability under this Agreement, the Note and the Loan
Documents shall cease except for its liability to Bank under Section 9, which
liability to Bank shall continue as set forth in Section 9.
6. REPRESENTATIONS AND WARRANTIES
Each of the Companies represents and warrants, and, except for the
warranties and representations contained in Sections 6.5, 6.10 and 6.11, such
representations and warranties shall be deemed to be continuing representations
and warranties during the entire term of this Agreement:
6.1 It is an entity duly organized and existing in good standing
under the laws of the jurisdiction of its organization and is duly qualified to
do business and in good standing in every
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jurisdiction in which such qualification is material to its business and
operation or the ownership or lease of its properties; execution, delivery and
performance of this Agreement and other documents and instruments required under
this Agreement, and the issuance of the Note and execution of a Mortgage by
Companies are within its powers, have been duly authorized, are not in
contravention of law or the terms of its organizational documents, and do not
require the consent or approval of any governmental body, agency or authority;
and this Agreement, the Note, the Mortgage and the other Loan Documents, when
issued and delivered, will be valid and binding in accordance with their terms;
6.2 The execution, delivery and performance of this Agreement and any
other Loan Documents, and the issuance of the Note and the Mortgage by Companies
are not in contravention of the unwaived terms of any indenture, agreement or
undertaking to which any Company is a party or by which any Company is bound.
6.3 No litigation or other proceeding before any court or
administrative agency is pending, or to the knowledge of its officer general
partners/managers is threatened against Companies the outcome of which could
materially impair any of the Companies' financial condition or its or their
ability to carry on its or their businesses, taken as a whole.
6.4 There are no security interests in, liens, mortgages, or other
encumbrances on any of the Properties, except in favor of the Bank or which are
not Permitted Liens.
6.5 None of the Companies nor any Subsidiary maintains or contributes
to any employee pension benefit plan subject to ERISA at the date of this
Agreement. There is no unfunded past service liability of the pension plan and
there is no accumulated funding deficiency within the meaning of ERISA, or any
existing material liability with respect to any pension plan owed to the Pension
Benefit Guaranty Corporation ("PBGC") or any successor thereto, except any
funding deficiency for which an application to the PBGC for waiver is pending or
for which a waiver has been granted by the PBGC.
6.6 The financial statements of REIT dated December 31, 1998,
previously furnished Bank, are complete and correct in all material respects and
fairly present the financial condition of REIT and its Consolidated Subsidiaries
as of their respective dates; since December 31, 1998 there has been no material
adverse change in the financial condition of any of the REIT and its
Consolidated Subsidiaries; to the knowledge of its officers/general
partners/managers, the REIT and its Consolidated Subsidiaries have no contingent
obligations (including any liability for taxes) not disclosed by or reserved
against in said financial statements and at the present time there are no
material unrealized or anticipated losses from any present commitment of the
REIT and its Consolidated Subsidiaries.
6.7 All tax returns and tax reports of Companies required by law to
have been filed have been duly filed or extensions obtained, and all taxes,
assessments and other governmental charges or levies (other than those presently
payable without penalty and those currently being contested in good faith for
which adequate reserves have been established) upon Companies or any of their
properties which are due and payable or which the failure to pay would
materially adversely affect their business or the value of their property or
assets (taken as a whole) have been paid. The charges, accruals and reserves on
the books of Companies in respect of the federal income tax for all periods are
adequate in the opinion of Companies.
6.8 Each Company is, in the conduct of its respective business, in
compliance in all
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material respects with all federal, state or local laws, statutes, ordinances
and regulations applicable to any of them, the enforcement of which, if such
Company was not in compliance, would reasonably be expected to materially
adversely affect its business or the value of its property or assets (taken as a
whole). Each Company has all approvals, authorizations, consents, licenses,
orders and other permits of all governmental agencies and authorities, whether
federal, state or local, required to permit the operation of its business as
presently conducted, except such approvals, authorizations, consents, licenses,
orders and other permits with respect to which the failure to have would
reasonably be expected to materially adversely affect its business or the value
of its property or assets (taken as a whole).
6.9 None of the Companies is party to any material litigation or
administrative proceeding nor, so far as is known by it, is any material
litigation or administrative proceeding threatened against it or any other
Company, which (A) asserts or alleges that any Company violated Environmental
Laws, (B) asserts or alleges that any Company is required to clean up, remove,
or take remedial or other response action due to the disposal, deposit,
discharge, leak or other release of any hazardous substances or materials, or
(C) asserts or alleges that any Company is required to pay all or a portion of
the cost of any past, present, or future cleanup, removal or remedial or other
response action which arises out of or is related to the disposal, deposit,
discharge, leak or other release of any hazardous substances or materials by any
Company.
6.10 To the best of its knowledge, after due inquiry, and except as
otherwise previously disclosed in writing by Companies to Bank, there are no
conditions existing currently or likely to exist during the term of this
Agreement which would subject any Company to material damages, penalties,
injunctive relief or cleanup costs under any Environmental Law or which require
or are likely to require material cleanup, removal, remedial action or other
response pursuant to Environmental Law by any Company.
6.11 None of the Companies is subject to any material judgment,
decree, order or citation related to or arising out of Environmental Law and to
the best of their knowledge, after due inquiry, except as otherwise previously
disclosed in writing to the Bank, no Company has been named or listed as a
potentially responsible party by any governmental body or agency in a material
matter arising under any Environmental Law.
6.12 Each of the Companies has all material permits, licenses and
approvals required under applicable Environmental Laws.
6.13 None of the Companies is an "investment company" within the
meaning of the Investment Company Act of 1940, as amended. None of the Companies
is engaged principally, or as one of its important activities, directly or
indirectly, in the business of extending credit for the purpose of purchasing or
carrying margin stock, and none of the proceeds of any of the loans hereunder
will be used, directly or indirectly, for any purpose which would violate the
provisions of Regulation U or X of the Board of Governors of the Federal Reserve
System. Terms for which meanings are provided in Regulation U of the Board of
Governors of the Federal Reserve System or any regulations substituted therefor,
as from time to time in effect, are used in this paragraph with such meanings.
6.14 Each Company has good and valid title to the property pledged,
mortgaged or otherwise encumbered or to be encumbered by it under the Loan
Documents to which such Company is a party.
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7. AFFIRMATIVE COVENANTS
Each of the Companies covenants and agrees that it will, so long as
Bank may make any Advance under this Agreement, and thereafter so long as any
Indebtedness remains outstanding under this Agreement to:
7.1 Furnish Bank:
a. prompt notification of any condition or event which constitutes or
with the running of time and/or the giving of notice would constitute an Event
of Default under this Agreement, and promptly inform the Bank of any material
adverse change in any of the Companies' financial condition;
b. as soon as available and in any event within 5 days after the time
required for filing, forms 10Q and 10K with the Securities and Exchange
Commission;
c. on a quarterly basis coincident with the timely filing of the
forms 10Q and/or 10K, as the case may be, a report providing detailed
information respecting each and every property owned, directly or indirectly, by
REIT, CALP and/or Companies including, by property, the name of each tenant,
whether such property is included within a group of properties acquired from a
related seller or sellers, the appraised value of the property, whether the
property is a Mortgaged Property or a Nonmortgaged Property, and other
information as required by Bank, in form acceptable to Bank, certified by an
officer/general partner/manager of REIT, CALP and/or each of the Companies;
d. coincident with the Request for Advance for purposes of the
Companies' acquisition of new Properties or the reduction of the principal
portion of the Indebtedness, a Borrowing Base Certificate in the form annexed
hereto as Exhibit "1.10"; and
e. from time to time, such further information regarding the business
affairs and financial condition of the Companies as the Bank may reasonably
request.
7.2 Pay and discharge, and/or cause its tenants to pay and discharge,
all taxes and other governmental charges and all contractual obligations calling
for the payment of money, before the same shall become overdue, unless and to
the extent only that such payment is being contested in good faith and adequate
reserves have been established therefor in accordance with GAAP.
7.3 Maintain, and/or cause its tenants to maintain insurance coverage
on the Properties and against other business risks in such amounts and of such
types as are customarily carried by companies similar in size and nature, and in
the event of acquisition of additional property, real or personal, or of
incurrence of additional risks of any nature, increase such insurance coverage
in such manner and to such extent as prudent business judgment and present
practice would dictate; and in the case of all policies covering property
mortgaged or pledged to Bank or property in which Bank shall have a security
interest of any kind whatsoever, other than those policies protecting against
casualty liabilities to strangers, all such insurance policies shall provide
that the loss payable thereunder shall be payable to Companies and Bank as their
respective interests may appear; copies of all certificates of insurance,
including all endorsements thereto and those required hereunder, to be deposited
with Bank.
7.4 Permit Bank, through its authorized attorneys, accountants, and
representatives, to
PAGE 16
<PAGE>
examine each Company's books, accounts, records, ledgers and assets of every
kind and description at all reasonable times upon written request of Bank,
including, without limitation, collateral audits of Companies at the expense of
Companies following an Event of Default and at Bank's expense at all other
times.
7.5 Intentionally Omitted.
7.6 Furnish to the Bank concurrently with the delivery of each of the
reports and forms 10Q or 10K, as applicable, required by Section 7.1b. hereof, a
statement prepared and certified by any of the chief financial officer, chief
executive officer, chief operating officer or treasurer of the consolidated
Companies (a) setting forth all computations necessary to show compliance by
Companies with the financial covenants contained in Sections 7.10 and 7.11 of
this Agreement as of the date of such reports and/or forms, (b) stating that as
of the date thereof to the signer's best knowledge after due inquiry, no
condition or event which constitutes an Event of Default or which with the
running of time and/or the giving of notice would constitute an Event of Default
has occurred and is continuing, or if any such event or condition has occurred
and is continuing or exists, specifying in detail the nature and period of
existence thereof and any action taken with respect thereto taken or
contemplated to be taken by Companies and (c) stating that the signer has
personally reviewed this Agreement and that such certificate is based on an
examination sufficient to assure that such certificate is accurate.
7.7 Maintain in good standing, and cause each Subsidiary to maintain
in good standing, all material, licenses required by the governmental authority
having jurisdiction over such matters that may be necessary or required for a
Company or any Subsidiary to carry on its general business objects and purposes.
7.8 Comply, and cause each Subsidiary to comply, with all material
requirements imposed by ERISA as presently in effect or hereafter promulgated
including, but not limited to, the minimum funding requirements of the Pension
Plans.
7.9 Promptly notify Bank after the occurrence thereof in writing of
any of the following events:
a. the termination of any Company's or any Subsidiary's Pension
Plan pursuant to Subtitle C of Title IV of ERISA or otherwise;
b. the appointment of a trustee by a United States District Court
to administer the Pension Plan;
c. the commencement by the Pension Benefit Guaranty Corporation,
or any successor thereto of any proceeding to terminate any Company's or any
Subsidiary's Pension Plan;
d. the failure of any Company's or any Subsidiary's Pension Plan
to satisfy the minimum funding requirements for any plan year as established in
Section 412 of the Internal Revenue Code of 1954, as amended;
e. the withdrawal of any Company or any Subsidiary from a Pension
Plan; or
PAGE 17
<PAGE>
f. a reportable event, within the meaning of Title IV of ERISA.
7.10 Maintain, on a Consolidated basis as of the end of each fiscal
year a Debt Service Coverage Ratio of not less than 1.50:1.00.
7.11 Maintain on a Consolidated basis as of the end of each fiscal
year a Debt to Adjusted Net Worth Ratio of not more than 1.4:1.00.
7.12 Perform all acts reasonably necessary to ensure, in all material
respects, that each Company and Subsidiary and any business in which any
Company holds a substantial interest, and all customers, suppliers and vendors
that are material to a Company's business, become Year 2000 Compliant in a
timely manner. Such acts shall include, without limitation, performing a
comprehensive review and assessment of all of the Companies' systems and
adopting a detailed plan, with itemized budget, for the remediation, monitoring
and testing of such systems. As used in this paragraph, "Year 2000 Compliant"
shall mean, in regard to any entity, that all software, hardware, firmware,
equipment, goods or systems utilized by or material to the business operations
or financial condition of such entity, will properly perform date sensitive
functions before, during and after the year 2000. The Companies' shall, promptly
upon request, provide to the Bank such certifications or other evidence of the
Companies' compliance with the terms of this Section 7.12 as the Bank may from
time to time reasonably require.
7.13 Assure that all Companies shall be wholly owned, directly or
indirectly, by CALP and/or REIT.
8. NEGATIVE COVENANTS
Each of the Companies covenants and agrees that, so long as Bank may
make any Advances under this Agreement and thereafter so long as any
Indebtedness remains outstanding under this Agreement, it will not, without the
prior written consent of Bank:
8.1 Except for the Permitted Liens, affirmatively pledge or mortgage
any Property, whether now owned or hereafter acquired, or create, suffer or
permit to exist any lien, security interest in, or encumbrance thereon, except
in favor of Bank.
8.2 Materially alter the character of its businesses from that
conducted as of the date of this Agreement.
8.3 Enter into any transaction or series of transactions with any
Affiliate other than on terms and conditions as favorable to Companies as would
be obtainable in a comparable arms-length transaction with a Person other than
an Affiliate.
8.4 Allow any fact, condition or event to occur or exist with respect
to any employee pension and/or profit sharing plan of any of the Companies or
any Subsidiaries, which shall constitute grounds for termination of such plan by
the PBGC or for the appointment by a United States District Court of a trustee
to administer any such plan.
9. ENVIRONMENTAL PROVISIONS
REVOLVING LOAN AGREEMENT
Page 18
<PAGE>
With respect to the Properties:
9.1 Each of the Companies shall timely comply or cause its tenants to
timely comply, in all material respects, with all applicable Environmental Laws.
9.2 Each of the Companies shall provide to the Bank, immediately
upon receipt, copies of any correspondence, notice, pleading, citation,
indictment, complaint, order, decree, or other document from any source
asserting or alleging a material circumstance or condition which requires or may
require a substantial financial contribution by any of the Companies or a
cleanup, removal, remedial action, or other response by or on the part of either
of the Companies under applicable Environmental Laws or which seeks damages or
civil, criminal or punitive penalties from any Company for an alleged violation
of Environmental Laws.
9.3 Each of the Companies shall promptly notify the Bank in writing
as soon as it becomes aware of any condition or circumstance which makes the
environmental warranties contained in this Agreement incomplete or inaccurate in
any material respect as of any date.
9.4 In the event of any condition or circumstance that makes any
environmental warranty, representation and/or agreement incomplete or inaccurate
in any material respect as of any date, Companies shall, at their sole expense,
if reasonably requested by Bank, retain an environmental professional
consultant, reasonably acceptable to Bank, to conduct a thorough and complete
environmental audit regarding the changed condition and/or circumstance and any
environmental concerns arising from that changed condition and/or circumstance.
A copy of the environmental consultant's report will be promptly delivered to
both Bank and Companies upon completion.
9.5 At any time any of the Companies, directly or indirectly through
any professional consultant or other representative, determines to undertake an
environmental audit, assessment or investigation, it shall promptly provide the
Bank with written notice of the initiation of the environmental audit, fully
describing the purpose and intended scope of the environmental audit. Upon
receipt, Companies will promptly provide to Bank copies of all final findings
and conclusions of any such environmental investigation. Preliminary findings
and conclusions shall be provided if final reports have not been completed and
delivered to the Bank within 60 days following completion of the preliminary
findings and conclusions.
9.6 Each of the Companies hereby indemnifies, saves and holds the
Bank and any of its past, present and future officers, directors, shareholders,
employees, representatives and consultants harmless from any and all loss,
damages, suits, penalties, costs, liabilities and expenses (including but not
limited to reasonable investigation, environmental audit(s), and legal expenses)
arising out of any claim, loss or damage of any property, injuries to or death
of persons, contamination of or adverse affects on the environment, or any
violation of any applicable Environmental Laws, caused by or in any way related
to any property owned, leased or operated by Companies, or due to any acts of
either of the Companies, its officers, directors, shareholders, employees,
consultants and/or representatives. In no event shall either of the Companies be
liable hereunder for any loss, damages, suits, penalties, costs, liabilities or
expenses arising from any act of gross negligence of the Bank, or its agents or
employees.
9.7 It is expressly understood and agreed that the indemnifications
granted herein are intended to protect the Bank, its past, present and future
officers, directors, shareholders,
REVOLVING LOAN AGREEMENT
Page 19
<PAGE>
employees, consultants and representatives from any claims that may arise by
reason of the security interest, liens and/or mortgages granted to the Bank, or
under any other document or agreement given to secure repayment of any
indebtedness from either of the Companies, whether or not such claims arise
before or after the Bank has foreclosed upon and/or otherwise become the owner
of any such property. All obligations of indemnity as provided hereunder shall
be secured by the collateral documents.
9.8 It is expressly agreed and understood that the provisions hereof
shall and are intended to be continuing and shall survive the repayment of any
Indebtedness from Companies to the Bank.
9.9 Each of the Companies have and shall maintain all permits,
licenses and approvals required under applicable Environmental Laws.
10. EVENTS OF DEFAULT
10.1 Upon occurrence of any of the following events:
a. non-payment of any installment of the principal or interest on the
Note within five (5) days of the date when due in accordance with the terms
thereof;
b. upon non-payment of any other outstanding Indebtedness within
thirty (30) days of the date when due in accordance with the terms thereof;
c. default in observance or performance of any of the other
conditions, covenants or agreements of any Company in this Agreement or any of
the Loan Documents, and continuance thereof for thirty (30) days after notice to
Companies by Bank; provided, that Bank may, in writing, extend the time within
which Companies may fully cure such default if Companies demonstrate to Bank
that they have timely commenced action to cure such default and are diligently
and continuously pursuing the curing of such default;
d. any representation or warranty made by any Company herein or in
any instrument submitted pursuant hereto proves untrue in any material respect
when made or deemed made;
e. judgments for the payment of money in excess of the sum of One
Million ($1,000,000) Dollars in the aggregate shall be rendered against REIT and
the Consolidated Subsidiaries and such judgments shall remain unpaid, unvacated,
unbonded or unstayed by appeal or otherwise for a period of thirty (30)
consecutive days from the date of its entry and such judgment is not covered by
insurance from a solvent insurer who is defending such action without
reservation of rights;
f. the occurrence of any "reportable event", as defined in the
Employee Retirement Income Security Act of 1974 and any amendments thereto,
which is determined to constitute grounds for termination by the Pension Benefit
Guaranty Corporation of any employee pension benefit plan maintained by or on
behalf of any Company for the benefit of any of its employees or for the
appointment by the appropriate United States District Court of a trustee to
administer such plan and is reasonably likely that the occurrence of such event
would result in a material adverse effect on Companies, and such reportable
event is not corrected and such determination is not revoked within
REVOLVING LOAN AGREEMENT
Page 20
<PAGE>
thirty (30) days after notice thereof has been given to the plan administrator
or Companies; or the institution of proceedings by the Pension Benefit Guaranty
Corporation to terminate any such employee benefit pension plan or to appoint a
trustee to administer such plan; or the appointment of a trustee by the
appropriate United States District Court to administer any such employee benefit
pension plan;
g. if there shall be any change for any reason whatsoever in the
management, ownership or control of any of the Companies which shall in the
reasonable judgment of Bank materially, adversely affect future prospects for
the successful operation of any Company or adversely affects such Company; or
h. if REIT shall lose its qualification as a real estate investment
trust under the Internal Revenue Code; then, or at any time thereafter, unless
such default is remedied, Bank may give notice to Companies declaring all
outstanding indebtedness hereunder and under the Note to be due and payable,
whereupon all indebtedness then outstanding hereunder and under the Note shall
immediately become due and payable without further notice and demand, and Bank
shall not be obligated to make further Advances under this Agreement.
10.2 If a creditors' committee shall have been appointed for the
business of any Company in connection with any bankruptcy or insolvency; or if
any Company shall have made a general assignment for the benefit of creditors or
shall have been adjudicated bankrupt, or shall have filed a voluntary petition
in bankruptcy or for reorganization or to effect a plan or arrangement with
creditors; or shall file an answer to a creditor's petition or other petition
filed against it, admitting the material allegations thereof for an adjudication
in bankruptcy or for reorganization; or shall have applied for or permitted the
appointment of a receiver, or trustee or custodian for any of its property or
assets; or such receiver, trustee or custodian shall have been appointed for any
of its property or assets (otherwise than upon application or consent of the
applicable Company), and such receiver, trustee or custodian so appointed shall
not have been discharged within sixty (60) days after the date of his
appointment or if an order shall be entered and shall not be dismissed or stayed
within sixty (60) days from its entry, approving any petition for reorganization
of any Company; then the Note and all indebtedness then outstanding hereunder
shall automatically become immediately due and payable and Bank shall not be
obligated to make further Advances under this Agreement.
10.3 Upon the occurrence and during the continuance of an Event of
Default, unless the Indebtedness is then immediately fully paid, Bank shall have
and may exercise any one or more of the rights and remedies for which provision
is made for a secured party under the UCC, under the Loan Documents or under any
other document contemplated hereby or for which provision is provided by law or
in equity, including, without limitation, the right to take possession and sell,
lease or otherwise dispose of any or all of the collateral as permitted by law,
and to set off against the Indebtedness any amount owing by Bank to a Company
and/or any property of a Company in possession of Bank. Companies agree, upon
request of Bank, to assemble the collateral and make it available to Bank at any
place designated by Bank which is reasonably convenient to Bank and Companies.
10.4 All of the Indebtedness shall constitute one loan secured by
Bank's security interest in the collateral and by all other security interests,
mortgages, liens, claims, and encumbrances now and from time to time hereafter
granted from Companies to Bank under the Loan Documents. Upon the occurrence
and during the continuance of an Event of Default, Bank may in its sole
discretion apply the collateral to any portion of the Indebtedness. The
proceeds of any sale or other disposition of the
REVOLVING LOAN AGREEMENT
Page 21
<PAGE>
Collateral authorized by this Agreement shall be applied by Bank, first upon all
expenses authorized by the Michigan Uniform Commercial Code (or other applicable
law) or otherwise in connection with the sale and all reasonable attorneys' fees
and legal expenses incurred by Bank; the balance of the proceeds of such sale or
other disposition shall be applied in the payment of the Indebtedness, first to
interest, then to principal, then to other Indebtedness and the surplus, if any,
shall be paid over to Companies or to such other Person or Persons as may be
entitled thereto under applicable law. Companies shall remain liable for any
deficiency, which Companies shall pay to Bank immediately upon demand.
10.5 The remedies provided for herein are in addition to the remedies
for collection of the Indebtedness as provided by law, in equity or by any
mortgage, security agreement or other document contemplated hereby. Nothing
herein contained is intended, nor shall it be construed, to preclude Bank from
pursuing any other remedy for the recovery of any other sum to which Bank may be
or become entitled for the breach of this Agreement by Companies.
10.6 Upon the occurrence of an Event of Default, any or all
unrecorded Mortgages held by Bank may be recorded.
11. MISCELLANEOUS
11.1 This Agreement shall be binding upon and shall inure to the
benefit of Companies and Bank and their respective successors and assigns,
except that the credit provided for under this Agreement and no part thereof and
no obligation of Bank hereunder shall be assignable or otherwise transferable by
any Companies.
11.2 Companies shall pay all closing costs and expenses, including,
by way of description and not limitation, reasonable attorney fees (including
the fee of special and local counsel to the Bank), lien search fees, and title
policy fees incurred by Bank in connection with the commitment, consummation and
closing of this Agreement. All costs, including reasonable attorney fees
incurred by Bank in protecting or enforcing any of its or any of the Bank's
rights against Companies or any collateral or in defending Bank from any claims
or liabilities by any party or otherwise incurred by Bank in connection with an
event of default or the enforcement of this Agreement or the related documents,
including by way of description and not limitation, such charges in any court or
bankruptcy proceedings or arising out of any claim or action by any person
against Bank which would not have been asserted were it not for Bank's
relationship with Companies hereunder, shall also be paid by Companies.
11.3 Where the character or amount of any asset or liability or item
of income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, it shall be done in accordance with GAAP.
11.4 No delay or failure of Bank in exercising any right, power or
privilege hereunder shall affect such right, power or privilege, nor shall any
single or partial exercise thereof preclude any further exercise thereof, or the
exercise of any other power, right or privilege. The rights of Bank under this
Agreement are cumulative and not exclusive of any right or remedies which Bank
would otherwise have.
11.5 All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed to have been duly given (i) if
physically delivered, (ii) three (3) business days after
REVOLVING LOAN AGREEMENT
Page 22
<PAGE>
having been deposited in the United States Mail, as certified mail with return
receipt requested and with postage prepaid, or (iii) one (1) business day after
having been transmitted to a third party providing delivery services in the
ordinary course of business which guarantees delivery on the next business day
after such transmittal (e.g., via Federal Express), all of which notices or
other communications shall be addressed to the recipient as follows:
To Companies: c/o Capital Automotive REIT
1420 Spring Hill Rd., Suite 525
McLean, Virginia 22102
Attention: Treasurer
courtesy copy to: c/o Capital Automotive REIT
1420 Spring Hill Rd., Suite 525
McLean, Virginia 22102
Attention: General Counsel
To Bank: Comerica Bank
One Detroit Center (M/C 3256)
500 Woodward Avenue, 7th Floor
Detroit, Michigan 48226
Attention: David J. Campbell
effective for all purposes if delivered to Treasurer c/o REIT, whether or not
notice is delivered to General Counsel. However, Bank will use its best efforts
to deliver a courtesy copy of a required notice to REIT's General Counsel.
11.6 This Agreement and the Note have been delivered at Detroit,
Michigan, and shall be governed by and construed and enforced in accordance with
the laws of the State of Michigan. Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.7 No amendments or waiver of any provisions of this Agreement nor
consent to any departure by Companies therefrom shall in any event be effective
unless the same shall be in writing and signed by the Bank and Companies, and
then such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given. No amendment, waiver or
consent with respect to any provision of this Agreement shall affect any other
provision of this Agreement.
11.8 All sums payable by Companies to Bank under this Agreement or
the other documents contemplated hereby shall be paid directly to Bank at its
principal office set forth in Section 11.5 hereof in immediately available
United States funds, without set off, deduction or counterclaim. In its sole
discretion, Bank may charge any and all deposit or other accounts (including
without limit an account evidenced by a certificate of deposit) of each Company
with Bank for all or a part of any Indebtedness then due; provided, however,
that this authorization shall not affect Companies' obligation to pay, when due,
any Indebtedness whether or not account balances are sufficient to pay amounts
due.
REVOLVING LOAN AGREEMENT
Page 23
<PAGE>
11.9 Any payment of the Indebtedness made by mail will be deemed
tendered and received only upon actual receipt by Bank at the address designated
for such payment, whether or not Bank has authorized payment by mail or any
other manner, and shall not be deemed to have been made in a timely manner
unless received on the date due for such payment, time being of the essence.
Companies expressly assume all risks of loss or liability resulting from non-
delivery or delay of delivery of any item of payment transmitted by mail or in
any other manner. Acceptance by Bank of any payment in an amount less than the
amount then due shall be deemed an acceptance on account only, and the failure
to pay the entire amount then due shall be and continue to be an Event of
Default, and at any time thereafter and until the entire amount then due has
been paid, Bank shall be entitled to exercise any and all rights conferred upon
it herein upon the occurrence of an Event of Default. Upon the occurrence and
during the continuance of an Event of Default, Companies waive the right to
direct the application of any and all payments at any time or times hereafter
received by Bank from or on behalf of Companies. Upon the occurrence and during
the continuance of an Event of Default, Companies agree that Bank shall have the
continuing exclusive right to apply and to reapply any and all payments received
at any time or times hereafter against the Indebtedness in such manner as Bank
may deem advisable, notwithstanding any entry by Bank upon any of its books and
records. Companies expressly agree that to the extent that Bank receives any
payment or benefit and such payment or benefit, or any part thereof, is
subsequently invalidated, declared to be fraudulent or preferential, set aside
or is required to be repaid to a trustee, receiver, or any other party under any
bankruptcy act, state or federal law, common law or equitable cause, then to the
extent of such payment or benefit, the Indebtedness or part thereof intended to
be satisfied shall be revived and continued in full force and effect as if such
payment or benefit had not been made and, further, any such repayment by Bank,
to the extent that Bank did not directly receive a corresponding cash payment,
shall be added to and be additional Indebtedness payable upon demand by Bank.
11.10 In the event Companies' obligation to pay interest on the
principal balance of the Note is or becomes in excess of the maximum interest
rate which Companies are permitted by law to contract or agree to pay, giving
due consideration to the execution date of this Agreement, then, in that event,
the rate of interest applicable shall be deemed to be immediately reduced to
such maximum rate and all previous payments in excess of such maximum rate shall
be deemed to have been payments in reduction of principal and not of interest.
11.11 This Agreement shall become effective upon the execution hereof
by Bank and Companies.
11.12 COMPANIES AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT, THE NOTES OR THE
INDEBTEDNESS.
11.13 When used in this Agreement, the term "Companies" shall mean
all or any of them. The obligations and liabilities of Companies under this
Agreement are joint and several.
11.14 The Indebtedness and the obligations of the Companies under the
Note and the Loan Documents will be without recourse to REIT in its capacity as
general partner of CALP; provided, however, that notwithstanding the foregoing
limitation of liability, REIT shall be fully liable under and
REVOLVING LOAN AGREEMENT
Page 24
<PAGE>
to the extent of the guaranty agreement executed of even date herewith.
Witness the due execution hereof as of the day and year first above written.
COMPANIES:
CAPITAL AUTOMOTIVE L.P.
By: Capital Automotive REIT
Its: General Partner
By: /s/ Peter C. Staaf
------------------
Peter C. Staaf
Its: Treasurer
CAR GR1 L.P.
By: CAR GP1 Inc.
Its: General Partner
By: /s/ Peter C. Staaf
------------------
Peter C. Staaf
Its: Treasurer
CAR ALEXANDER L.P.
By: CAR I Alexander Inc.
Its: General Partner
By: /s/ Peter C. Staaf
------------------
Peter C. Staaf
Its:Treasurer
CAR MOT II L.L.C.
By: Capital Automotive L.P.
Its: Managing Member
By: Capital Automotive REIT
Its: General Partner
By: /s/ Peter C. Staaf
------------------
Peter C. Staaf
Its:Treasurer
REVOLVING LOAN AGREEMENT
Page 25
<PAGE>
CAR MOT L.L.C.
By: Capital Automotive L.P.
Its: Managing Member
By: Capital Automotive REIT
Its: General Partner
By: /s/ Peter C. Staaf
------------------
Peter C. Staaf
Its:Treasurer
CAR MOT L.L.C.
By: Capital Automotive L.P.
Its: Managing Member
By: Capital Automotive REIT
Its: General Partner
By: /s/ Peter C. Staaf
------------------
Peter C. Staaf
Its:Treasurer
REVOLVING LOAN AGREEMENT
Page 26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,939
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,375
<PP&E> 599,484
<DEPRECIATION> 10,041
<TOTAL-ASSETS> 601,757
<CURRENT-LIABILITIES> 22,872
<BONDS> 161,929
0
0
<COMMON> 248
<OTHER-SE> 312,989
<TOTAL-LIABILITY-AND-EQUITY> 601,757
<SALES> 0
<TOTAL-REVENUES> 14,788
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,739
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,275
<INCOME-PRETAX> 4,389
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,389
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<EXTRAORDINARY> 0
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