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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
August 13, 1999
Date of Report (Date of earliest event reported)
Capital Automotive REIT
(Exact name of registrant as specified in its charter)
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Maryland 000-23733 54-1870224
(State or Other Jurisdiction of (Commission File Number) (IRS Employer Identification Number)
Incorporation or Organization)
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1420 Spring Hill Road, Suite 525, McLean, Virginia 22102
(Address of principal executive offices, including zip code)
(703) 288-3075
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 13, 1999, Capital Automotive REIT (the "Company"), through a
subsidiary of Capital Automotive L.P. (the "Operating Partnership" and,
collectively with the Company and the subsidiaries of the Operating Partnership,
"Capital Automotive Group"), completed the acquisition of MMR Holdings, L.L.C.
("MMR Holdings"), MMR Tennessee, L.L.C. ("MMR Tennessee") and MMR Viking
Investment Associates, L.P. ("MMR Viking") from O. Bruton Smith, an individual,
and Sonic Financial Corporation (the "Sellers"), for an aggregate purchase
price, including closing costs, of approximately $199 million. Each of MMR
Holdings, MMR Tennessee and MMR Viking (collectively, "MMR") is an affiliate of
Sonic Automotive, Inc. ("Sonic").
As a result of the acquisition of MMR, Capital Automotive Group acquired
the real property and improvements of 57 dealership properties and, following
the acquisition of MMR, subsequently acquired one additional dealership property
through MMR for a total purchase price of approximately $5.2 million and agreed
to acquire another dealership property for an aggregate additional purchase
price of approximately $2.6 million (collectively, the "Properties"). The 59
Properties will continue to be operated, pursuant to long-term leases, as
franchised automobile dealerships, motor vehicle service, repair or parts
businesses and other motor vehicle related businesses. The Properties, all of
which are owned in fee simple, are located in ten states (Alabama, Florida,
Georgia, Maryland, North Carolina, Ohio, South Carolina, Tennessee, Texas and
Virginia).
The aggregate consideration of approximately $207 million, including
closing costs, for the acquisition of the 59 Properties (57 of which were
acquired indirectly through the acquisition of MMR) was based on arms-length
negotiations between Capital Automotive Group and the Sellers, neither of whom
is affiliated with Capital Automotive Group. Capital Automotive Group is
financing the purchase price of the 59 Properties through the assumption of a
$150 million mortgage loan from Ford Motor Credit Company, the use of the
proceeds of a $55 million bridge loan from German American Capital Corporation,
an affiliate of Deutsche Banc Alex. Brown, and cash derived from working
capital. The mortgage loan from Ford Motor Credit Company, which bears interest
at the rate of 8.03% per annum during the 12-year term, is secured by
substantially all of the Properties. No payments of principal are required
during the first two years, after which payments of principal and interest are
required based on a 25-year amortization schedule. The bridge loan bears
interest at the one-month LIBOR plus 200 basis points and does not require
payments of principal during its term. The bridge loan matures on the earlier of
(i) November 10, 1999 or (ii) the closing date of an $85 million permanent
mortgage loan from German American Capital Corporation.
In connection with these acquisitions, Capital Automotive Group, through
MMR, entered into or continued 58 long-term leases of the 59 Properties.
Pursuant to these leases, Capital Automotive Group receives rent from affiliates
of Sonic (in the case of 49 leases) and six other tenants that operate motor
vehicle related businesses (in the case of nine leases).
The terms of the Sonic leases are identical to each other except that the
lessee, the amount of the rent and the expiration dates of the leases vary. The
leases with Sonic affiliates are guaranteed by Sonic, and Sonic has agreed to
renew leases representing at least 75% of the total rental payments due under
the Sonic leases for an additional five-year term. During the terms of the
leases with Sonic affiliates, Sonic may substitute replacement properties for
leased properties with an aggregate original purchase price and allocated costs
of up to an aggregate of $51 million. Any substituted property must be subject
to a lease with a Sonic affiliate that is guaranteed by Sonic and have a value
approximately equal to, but not less than, the purchase price and allocated
costs of the original property. The leases with Sonic affiliates represent
approximately 90% of the rent due under the
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leases of the 59 Properties and are expected to contribute approximately 23% of
Capital Automotive Group's total rental revenues on an annualized basis.
The leases of the Properties leased to the other six tenants are triple-net
leases with terms that are similar to those of Capital Automotive Group's
remaining lease portfolio.
The tenants that lease the Properties operate an aggregate of approximately
76 franchises on the Properties, including BMW, Chevrolet, Chrysler-Plymouth,
Jeep and Ford. The Properties contain an aggregate of approximately 350 acres of
land, with improvements that contain an aggregate of approximately 2 million
square feet.
In connection with the acquisition of MMR, Capital Automotive Group also
issued a firm commitment to Sonic to purchase up to $75 million in additional
dealership properties by the end of 1999 in conjunction with future acquisitions
of dealership operations by Sonic.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
FINANCIAL STATEMENTS UNDER REGULATION S-X
Sonic Automotive, Inc. ("Sonic") has guaranteed leases relating to properties
with an aggregate purchase price representing more than 20% of the total assets
of the Registrant and its consolidated subsidiaries at December 31, 1998.
Financial information of Sonic, as prescribed by Regulation S-X, will be
provided in an amendment to this Form 8-K.
PRO FORMA FINANCIAL INFORMATION
Pro forma financial statements for the Registrant, as prescribed by Article 11
of Regulation S-X, will be provided in an amendment to this Form 8-K.
EXHIBITS
The following is a list of the exhibits filed as a part of this Form 8-K.
Exhibit No. Description of Exhibit
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*2.1 Acquisition Agreement dated as of June 30, 1999, as
amended, by and among CAR MMR L.L.C., O. Bruton Smith,
Sonic Financial Corporation, MMR Holdings L.L.C., MMR
Viking Investment Associates, L.P. and MMR Tennessee,
L.L.C. (Incorporated by reference from the Registrant's
Form 10-Q for the Quarter Ended June 30, 1999)
*2.2 Sonic Agreement made and entered into as of June 30,
1999, by and among (i) Sonic Automotive, Inc. (the
"Guarantor"), (ii) certain subsidiaries or affiliates
of the Guarantor (the "Tenants"), and (iii) CAR MMR
L.L.C. (the "Acquirer"), in connection with that
certain Acquisition Agreement dated of even date.
(Incorporated by reference from the Registrant's Form
10-Q for the Quarter Ended June 30, 1999)
99.1 Form of Lease Agreement for 49 separate leases, each
between an affiliate of the Registrant, as landlord,
and an affiliate of Sonic Automotive, Inc., as tenant
(Filed herewith)
99.2 Form of Lease Guaranty from Sonic Automotive, Inc.,
relating to 49 separate leases with affiliates of Sonic
Automotive, Inc., in favor of affiliates of the
Registrant, as landlord (Filed herewith)
________________
* Confidential portions have been omitted pursuant to a request for
confidential treatment and supplied separately to the Securities and Exchange
Commission. Exhibits and Schedules have been omitted but will be furnished
supplementally to the Securities and Exchange Commission upon request.
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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 hereunto duly authorized.
CAPITAL AUTOMOTIVE REIT
By: /s/ David S. Kay
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Title: Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: August 26, 1999
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
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*2.1 Acquisition Agreement dated as of June 30, 1999, as
amended, by and among CAR MMR L.L.C., O. Bruton Smith,
Sonic Financial Corporation, MMR Holdings L.L.C., MMR
Viking Investment Associates, L.P. and MMR Tennessee,
L.L.C. (Incorporated by reference from the Registrant's
Form 10-Q for the Quarter Ended June 30, 1999)
*2.2 Sonic Agreement made and entered into as of June 30,
1999, by and among (i) Sonic Automotive, Inc. (the
"Guarantor"), (ii) certain subsidiaries or affiliates
of the Guarantor (the "Tenants"), and (iii) CAR MMR
L.L.C. (the "Acquirer"), in connection with that
certain Acquisition Agreement dated of even date.
(Incorporated by reference from the Registrant's Form
10-Q for the Quarter Ended June 30, 1999)
99.1 Form of Lease Agreement for 49 separate leases, each
between an affiliate of the Registrant, as landlord,
and an affiliate of Sonic Automotive, Inc., as tenant.
(Filed herewith)
99.2 Form of Lease Guaranty from Sonic Automotive, Inc.,
relating to 49 separate leases with affiliates of Sonic
Automotive, Inc., in favor of affiliates of the
Registrant, as landlord (Filed herewith)
________________
* Confidential portions have been omitted pursuant to a request for
confidential treatment and supplied separately to the Securities and Exchange
Commission. Exhibits and Schedules have been omitted but will be furnished
supplementally to the Securities and Exchange Commission upon request.
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EXHIBIT 99.1
FORM OF
LEASE AGREEMENT
BY AND BETWEEN
MMR _______________,
A ____________
AND
______________________________________________________________________,
A ___________________________________________
DATED
AUGUST ___, 1999
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TABLE OF CONTENTS
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Page
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1. Premises.......................................................... 1
2. Condition of Premises............................................. 1
3. Term.............................................................. 2
4. Rent.............................................................. 2
5. Holding Over...................................................... 4
6. Use of Leased Premises; Compliance With Laws...................... 4
7. Tenant's Covenant to Repair....................................... 5
8. Landlord's Obligation............................................. 5
9. Surrender......................................................... 5
10. Alterations....................................................... 6
11. Utilities and Other Services...................................... 8
12. Performance by Landlord of Tenant's Obligations................... 8
13. Entry............................................................. 9
14. Assignment and Subletting......................................... 9
15. Taxes and Assessments............................................. 10
16. Casualty.......................................................... 11
17. Insurance......................................................... 12
18. Environmental Matters............................................. 13
19. Costs and Attorneys' Fees......................................... 14
20. Default; Remedies................................................. 15
21. Eminent Domain.................................................... 18
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22. Liability of Landlord............................................. 19
23. Indemnification of Landlord....................................... 20
24. Notice of Claim or Suit........................................... 20
25. Liens, Generally.................................................. 21
26. Mechanics' Liens.................................................. 21
27. Contest of Liens.................................................. 21
28. Notices of Commencement of Construction........................... 22
29. Limitation on Liability of Landlord............................... 22
30. Franchise and License Agreements.................................. 22
31. Net Lease......................................................... 22
32. Representations, Warranties and Special Covenants................. 23
33. Notices........................................................... 23
34. No Waiver......................................................... 24
35. Quiet Enjoyment................................................... 24
36. Subordination, Non-Disturbance and Attornment..................... 24
37. Brokers........................................................... 24
38. Invalidity........................................................ 25
39. Counterparts...................................................... 25
40. Intentionally Omitted............................................. 25
41. Governing Law..................................................... 25
43. Successors and Assigns; Relationship.............................. 25
44. Entire Agreement.................................................. 25
45. Survival.......................................................... 25
46. Estoppel Certificates............................................. 25
47. Time.............................................................. 26
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48. Captions and Headings............................................. 26
50. Signage........................................................... 26
51. Guaranty.......................................................... 26
52. Pre-Existing Conditions........................................... 26
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EXHIBITS:
EXHIBIT A Legal Description
EXHIBIT B [Intentionally Omitted]
EXHIBIT C Inventory of Personality
EXHIBIT D Tenant Estoppel Certificate
EXHIBIT E Representations, Warranties and Special Covenants
EXHIBIT E-1 Material Agreements
EXHIBIT F Lease Guaranty
SCHEDULE 14d Subleases, Concessions, Agreements or License Agreements
[EXHIBITS AND SCHEDULE OMITTED]
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PARTIAL SUMMARY OF TERMS
Tenant: ___________________________________
Commencement Date: August __, 1999
Business Entity Form: ___________________________________
Property Locality: ___________________________________
Prior Commencement Date: __________________, 199_
First Year Annual Base Rent Amount: $___________________
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INDEX OF DEFINED TERMS
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Term............................................ Paragraph
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Accessibility Laws.............................. 6(c)
Affiliate....................................... Exhibit E(1)(c)
Annual Financial Statements..................... Exhibit E(10)(b)
Bank............................................ 4(c)
Base Month...................................... 4(b)(i)
Base Rent....................................... 4(a)
Beneficiary..................................... Exhibit D
Business........................................ Exhibit E(1)(a)
CERCLA.......................................... 18(a)
Certificate..................................... Exhibit D
Change of Control............................... 14(b)
Code............................................ Exhibit E(14)(a)
Cure Period..................................... 20(a)(iii)
ERISA Affiliate................................. Exhibit E(8)(e)
ERISA........................................... Exhibit E(8)(e)
Events of Default............................... 20(a)
Five Year Adjustment Date....................... 4(b)(ii)
Franchise....................................... 20(a)(ix)
GAAP............................................ Exhibit E(10)(b)
Guarantor....................................... 51
Guaranty........................................ 51
Hazardous Materials............................. 18(a)
Improvements.................................... 1
Initial Term.................................... 3(a)
Inspection Report............................... 12(b)
Intellectual Property........................... Exhibit E(4)
Land............................................ 1
Landlord........................................ Preamble
Lease .......................................... Preamble
Lease Term...................................... 3(b)
Leased Premises................................. Exhibit D Recitals
Liabilities..................................... 18(c)
Material Adverse Change......................... Exhibit E(3)
Material Agreements............................. Exhibit E(2)
Net Worth....................................... Exhibit E(13)
Notice of Commencement.......................... 28
Permitted Use................................... 6(a)
Person.......................................... Exhibit E(1)(c)
Personalty...................................... 1
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Pre-Existing Conditions......................... 52
Premises........................................ 1
Price Index..................................... 4(b)(i)
Price Index for the Base Month.................. 4(b)(i)
RCRA............................................ 18(a)
Renewal Term(s)................................. 3(b)
Rent............................................ 4(c)
Rent Collection Account......................... 4(c)
Tenant Benefit Plan............................. Exhibit E(8)(e)
Term............................................ 3(b)
Title IV Plan................................... Exhibit E(8)(e)
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FORM OF LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is made as of the Commencement Date (as
defined in the Partial Summary of Terms), by and between MMR _________, a
____________ ("Landlord"), and the entity stated in the Partial Summary of Terms
as the Tenant.
In consideration of the mutual promises and agreements herein contained,
the parties agree as follows:
1. Premises. Landlord shall lease to Tenant, and Tenant shall lease from
--------
Landlord, subject to the conditions hereinafter expressed: (a) the real property
located in the Property Locality (as defined in the Partial Summary of Terms),
which real property is more particularly described on Exhibit A hereto (the
---------
"Land"), upon which exists certain improvements in the nature of an automobile
dealership, together with related paved parking and appurtenant improvements and
any replacements thereof (together, the "Improvements"); and (b) certain
furniture, fixtures, equipment, furnishings and other personal property and any
replacements thereof used or utilized in connection with the ownership and
operation of the Improvements as more particularly described on Exhibit C hereto
---------
(collectively the "Personalty"). As used herein, the Land, Improvements and the
Personalty are collectively referred to as the "Premises".
2. Condition of Premises. Tenant acknowledges and agrees that the
---------------------
Premises are and shall be leased by Landlord to Tenant in its present "as-is"
condition, subject to all liens, encumbrances and restrictions affecting the
Premises. Landlord makes absolutely no representations or warranties whatsoever
with respect to the Premises or the condition thereof, either to its fitness for
use, condition, purpose or otherwise as to the quality of material or
workmanship therein, latent or patent, it being agreed that all such risks are
to be borne by Tenant. Tenant acknowledges that Landlord has not investigated
and does not warrant or represent to Tenant that the Premises are fit for the
purposes intended by Tenant or for any other purposes whatsoever. Tenant
acknowledges and agrees that the Premises are to be leased to Tenant in their
existing condition, i.e., "as-is", as of the Commencement Date and at all times
thereafter. Tenant acknowledges that Tenant shall be solely responsible for any
and all actions, repairs, permits, approvals and costs required for the
rehabilitation, renovation, use, occupancy and operation of the Premises in
accordance with applicable governmental requirements, including, without
limitation, all governmental charges and fees, if any, which may be due or
payable to applicable authorities. By leasing the Premises, Tenant warrants and
represents to Landlord that Tenant has examined and approved all things
concerning the Premises which Tenant deems material to Tenant's leasing and use
of the Premises. Tenant further acknowledges and agrees that: (a) neither
Landlord nor any agent of Landlord has made any representation or warranty,
express or implied, concerning the Premises or which have induced Tenant to
execute this Lease except as contained in this Lease; and (b) any other
representations and warranties are expressly disclaimed by Landlord.
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3. Term.
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(a) Initial Term. This Lease shall be for a period beginning on the
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Commencement Date, and ending on the day before the tenth (10/th/) anniversary
of the Prior Commencement Date (as defined in the Partial Summary of Terms),
unless modified or earlier terminated pursuant to the terms hereof (the "Initial
Term").
(b) Renewal Term. Provided Tenant is not in default hereunder
------------
(unless such default is waived by Landlord in its sole discretion), at the
expiration of the Initial Term, Tenant shall have the option to renew this Lease
for two (2) additional five (5) year periods (the "Renewal Term(s)"). Each
Renewal Term shall automatically commence as of the end of the Initial Term or
the initial Renewal Term, as applicable, unless Tenant gives Landlord written
notice of termination not less than one hundred eighty (180) days prior to the
expiration of the Initial Term or the expiration of the initial Renewal Term, as
applicable. As used herein, the Term, the Initial Term and the Renewal Term(s),
if exercised, shall be referred to hereinafter collectively as the "Term" or
"Lease Term".
Notwithstanding the foregoing provisions of Section 3(b) to the
contrary, Tenant shall renew the Lease for the initial Renewal Term (and Tenant
shall have no right to give the notice effecting the termination of this Lease
at the expiration of the Initial Term), if the failure to renew this Lease for
the initial Renewal Term would cause the Non-Renewal Percentage (as hereinafter
defined) to exceed twenty-five percent (25%). The term "Non-Renewal Percentage"
shall mean, for each calendar year, a fraction with a numerator equal to the
aggregate annual Base Rent payable during the last year of the Initial Term of
all Sonic Leases (as defined in that certain Sonic Agreement dated as of June
30, 1999, by and among Guarantor, Tenant, Guarantor's affiliates and CAR MMR
L.L.C.), the Initial Terms of which have not been renewed for the initial
Renewal Term (and thus will expire during such calendar year), and a denominator
equal to the aggregate annual Base Rent payable during the last year of the
Initial Term of all Sonic Leases expiring in such calendar year.
4. Rent.
----
(a) Base Rent. "Base Rent" for the first year of the Initial Term
---------
shall be the First Year Annual Base Rent Amount (as defined in the Partial
Summary of Terms) per year.
(b) Adjustment of Base Rent.
-----------------------
(i) Definitions: For the purpose of calculating the cost of
-----------
living adjustments, the following definitions shall apply: (A) the term "Base
Month" shall mean the calendar month which is five years prior to the applicable
Five Year Adjustment Date (as hereinafter defined); (B) the term "Price Index"
shall mean the "Consumer Price Index-United States City Average All Urban
Consumers" published by the Bureau of Labor Statistics of the United States
Department of Labor (1982-84 = 100), or, in the event such index is discontinued
or no longer readily available, any renamed local index covering the
metropolitan area in which the Premises are located or any other successor or
substitute index
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appropriately adjusted; and (C) the term "Price Index for the Base Month" shall
mean the Price Index for the Base Month.
(ii) Effective as of: (A) the fifth (5th) anniversary of the
Prior Commencement Date; and (B) each five year anniversary date thereafter
throughout the Term (each, a "Five Year Adjustment Date"), there shall be made a
cost of living adjustment of the annual Base Rent payable hereunder. Each five
year adjustment shall be calculated by multiplying the Base Rent for the prior
lease year by the percentage difference between the Price Index for the month
preceding the applicable Five Year Adjustment Date and the Price Index for the
Base Month; provided that in no event shall the cost of living adjustment on any
Five Year Adjustment Date be an upward adjustment of less than five percent (5%)
or greater than fifteen percent (15%) or be a downward adjustment. If the Price
Index for the month preceding the applicable Five Year Adjustment Date is not
available as of any Five Year Adjustment Date, then the cost of living
adjustment shall be calculated using the most current available Price Index. In
no event shall any adjustment made pursuant to this Paragraph 4, or any decrease
in the Price Index, ever result in a decrease in the annual Base Rent payable
hereunder to below the then current Base Rent.
(c) Payment of Base Rent. Tenant shall pay one-twelfth of the Base
--------------------
Rent monthly, in advance, on the first (1st) day of each calendar month during
the Lease Term without notice, demand or setoff. The Base Rent for any partial
month shall be paid in advance and prorated daily from such date to the first
(1st) day of the next calendar month. The first (1st) payment of Base Rent shall
be due and payable on or before the execution of this Lease. All Rent shall be
made by direct deposit by Tenant of immediately available funds into a checking
account established with a bank, savings bank or other depository institution
designated by Landlord ("Bank") and controlled exclusively by Landlord entitled
"Rent Collection Account" (or such other name as may be designated by Landlord)
("Rent Collection Account"). Landlord (or, at Landlord's option, Landlord's
agent, if any), or such officers or other agents as may be designated by
Landlord, shall be the sole signatory on the Rent Collection Account. All
interest accrued in the Rent Collection Account shall belong to Landlord and
shall not be credited to Tenant. No funds in the Rent Collection Account shall
be subject to withdrawal by or for the benefit of Tenant. "Rent" shall mean and
include all Base Rent, additional rent and other sums due hereunder.
(d) Draft Withdrawal of Rent. Instead of requiring Tenant to pay
------------------------
Rent in the manner set forth in Paragraph 4(c) above, Landlord may require
Tenant, within thirty (30) days after notice to Tenant, to execute and deliver
to Landlord any documents or authorizations required by Landlord to give effect
to an automated debiting system, whereby any or all payments of Base Rent by
Tenant shall be debited monthly from such account as Tenant shall designate from
time to time, and such amounts shall be credited to Landlord's bank account as
Landlord shall designate from time to time. Tenant shall maintain sufficient
funds in Tenant's account to cover all such payments. Tenant shall promptly pay
all service fees and other charges connected therewith, including, without
limitation, any charges resulting from insufficient funds in Tenant's bank
account or any charges imposed on Landlord. Tenant shall remain responsible to
Landlord for all payments of Rent, even if
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Tenant's bank account is insufficiently debited in any given month. Such
insufficient amounts shall be immediately due and payable to Landlord without
notice or demand.
(e) Late Charge; Interest. If Tenant fails to make any payment of
---------------------
Rent or any other sums or amounts to be paid by Tenant hereunder on or before
the date such payment is due and payable and such amount remains unpaid for a
period of five (5) days thereafter, or such longer time as required by the law
of the State in which the Premises are located, Tenant shall pay to Landlord an
administrative late charge of five percent (5%) of the amount of such payment or
such lesser amount then allowable under the laws of the State in which the
Premises are located. In addition, if such amount remains past due for more than
thirty (30) days following its due date, such past due payment shall bear
interest at the lesser of twelve percent (12%) or the maximum interest rate then
allowable under the laws of the State in which the Premises are located from the
date such payment became due to the date of payment thereof by Tenant. Such late
charge and interest shall constitute additional rent and shall be due and
payable with the next installment of Rent due hereunder.
(f) Payment without Abatement. No abatement, diminution or reduction
-------------------------
of Rent shall be allowed to Tenant or any person claiming under Tenant, under
any circumstances or for any reason whatsoever.
5. Holding Over. If Tenant or any other person or party shall remain in
------------
possession of the Premises or any part thereof following the expiration of the
Term or earlier termination of this Lease without an agreement in writing
between Landlord and Tenant with respect thereto, the person or party remaining
in possession shall be deemed to be a tenant at sufferance, and during any such
holdover, the Rent payable under this Lease by such tenant at sufferance shall
be one hundred fifty percent (150%) of the rate or rates in effect immediately
prior to the expiration of the Term or earlier termination of this Lease. In no
event, however, shall such holding over be deemed or construed to be or
constitute a renewal or extension of this Lease.
6. Use of Leased Premises; Compliance With Laws.
--------------------------------------------
(a) Permitted Use. Tenant shall use the Premises for an automobile
-------------
dealership and related uses ("Permitted Use") and for no other purpose. Tenant's
use of the Premises shall, subject to the right of diligent contest, comply with
all laws, ordinances, orders, regulations or zoning classifications of any
lawful governmental authority, agency or other public or private regulatory
authority (including insurance underwriters or rating bureaus) having
jurisdiction over the Premises. Tenant, shall make or cause to be made all
alterations, additions and improvements requiring expenditures as are required
to be made under any applicable laws, ordinances, rules or regulations, now or
hereinafter adopted or enacted, provided all such alterations, additions and
improvements are made in accordance with Paragraph 10 hereof. Tenant shall not
perform any act or follow any practice relating to the Premises which shall
constitute a nuisance and shall conduct any Permitted Use on the Premises in an
efficient and professional manner. Subject to the terms and provisions of this
Lease, Tenant shall have the right to control the automobile dealership business
being conducted at the Premises.
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(b) Continuous Operations. During the Term, Tenant shall keep the
---------------------
Premises and the Business (as defined in Exhibit E) open to the public and
---------
continuously operating for the Permitted Use during normal business hours
standard for the industry of which the Business is a part or, in the event that
the Tenant does not continuously operate on the Premises, shall conduct periodic
tests, which shall occur at least monthly, of mechanical and other systems
located on the Premises and take all steps necessary to comply with its
maintenance and repair obligations hereunder. If Tenant fails to continuously
operate on the Premises for a period of six (6) months or more, Landlord, at its
option, upon 30 days written notice to Tenant and right to cure, may declare an
Event of Default and exercise its rights and remedies hereunder.
(c) Laws. Notwithstanding the generality of the foregoing, Tenant
----
shall, at its sole expense, maintain the Premises in full compliance with all
applicable federal, state or municipal laws, ordinances, rules and regulations
currently in existence or hereafter enacted or rendered governing accessibility
for the disabled or handicapped, including, but not limited to, any applicable
provisions of The Architectural Barriers Act of 1968, The Rehabilitation Act of
1973, The Fair Housing Act of 1988, The Americans With Disabilities Act, the
accessibility code(s), if any, of the State in which the Premises are located,
and all regulations and guidelines promulgated under any or all of the
foregoing, as the same may be amended from time to time (collectively the
"Accessibility Laws"). In the event that Tenant disputes the applicability of an
Accessibility Law to the Premises, Tenant may take reasonable steps to contest
the applicability of such Accessibility Laws, so long as Tenant provides
Landlord with reasonable assurances that Landlord's interest in the Premises is
not in any way jeopardized by such contest.
7. Tenant's Covenant to Repair. Tenant shall, at all times during the
---------------------------
Term and at its sole cost and expense, put, keep, replace and maintain the
Premises (including, without limitation, the Improvements and the Personalty) in
good repair and in good, safe and substantial order and condition, shall make
all repairs and replacements thereto, both inside and outside, structural and
non-structural, ordinary and extraordinary, howsoever the necessity or
desirability for repairs and replacements may occur, and whether or not
necessitated by wear, tear, obsolescence or defects, latent or otherwise, and
shall use all reasonable precautions to prevent waste, damage or injury. Tenant
shall also at its own cost and expense install, maintain and replace all
landscaping, signs, sidewalks, roadways, driveways and parking areas within the
Premises in good repair and in good, safe and substantial order and condition
and free from dirt, standing water, rubbish and other obstructions or obstacles.
8. Landlord's Obligation. Landlord shall not be required to make any
---------------------
alterations, reconstructions, replacements, changes, additions, improvements or
repairs of any kind or nature whatsoever to the Premises or any portion thereof
(including, without limitation, any portion of the Improvements or any
Personalty) located therein at any time during the Term.
9. Surrender. Tenant shall on the last day of the Lease Term, or upon
---------
the sooner termination of this Lease, peaceably and quietly surrender the
Premises to Landlord, in as good condition as they were when received, ordinary
wear and tear excepted, and free of all liens and encumbrances.
-5-
<PAGE>
10. Alterations.
-----------
(a) Prohibition. Except as hereinafter expressly provided in this
-----------
Paragraph 10, no portion of the Premises shall be demolished, removed or altered
by Tenant in any manner whatsoever without the prior written consent and
approval of Landlord, which may not be unreasonably withheld or delayed.
Notwithstanding the foregoing, however, Tenant shall be entitled and obligated
to undertake all alterations to the Premises required by any applicable law or
ordinance including, without limitation, any alterations required by any
Accessibility Laws, and, in such event, Tenant shall comply with the provisions
of Paragraph 10(c) below. The foregoing notwithstanding, if the existing
Premises are "grandfathered" such that alterations which would normally be
required to comply with law are not required with respect to the Premises,
Tenant shall not be entitled to alter the otherwise "grandfathered" structure
without Landlord's prior written consent, which shall not be unreasonably
withheld or delayed.
(b) Permitted Renovations. Landlord acknowledges that various minor,
---------------------
non-structural alterations may be undertaken by Tenant from time to time without
the approval of Landlord. Tenant shall be entitled to perform all such work on
or about the Improvements; provided, however, that the conditions in Paragraph
10(c) below shall be met.
(c) Conditions. The following conditions shall be met by Tenant for
----------
any alterations to the Premises permitted under Paragraphs 10(a) and 10(b):
(i) Before the commencement of any such work, plans and
specifications therefor or a detailed itemization including costs thereof shall
be furnished to Landlord for its review and approval. Landlord's approval of
Tenant's plans shall create no responsibility or liability on the part of
Landlord for their completeness, design, sufficiency or compliance with all
laws, rates, and regulations of governmental agencies or authorities.
(ii) If the cost of such work will exceed FIFTY THOUSAND AND
NO/100 DOLLARS ($50,000.00), then Tenant shall deposit in Landlord's name, in an
escrow account at the Bank or other financial institution designated by
Landlord, the anticipated cost of such work, as certified by Tenant's
contractor, who shall be approved by Landlord, or, in the alternative, shall
provide Landlord with other reasonable assurances that such work will be
performed and paid for in a lien-free fashion, such as demonstrating to Landlord
the strength of Tenant's financial condition or by demonstrating to Landlord
that a lender has committed to loan Tenant construction funds for the proposed
alterations. Such proceeds shall be disbursed periodically by Landlord upon
certification of Tenant's contractor that such amounts are the amounts paid or
payable for such work. Tenant shall, at the time of establishment of such escrow
account and from time to time thereafter until said work shall have been
completed and paid for, furnish Landlord with adequate evidence that at all
times the undisbursed portion of the escrowed funds, together with any funds
made available by Tenant, is sufficient to pay for the work in its entirety.
Tenant shall obtain, and make available to Landlord, receipted bills and, upon
completion of the work, full and final waivers of lien.
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<PAGE>
(iii) Before the commencement of any such work, Tenant shall
obtain any required approvals from all governmental departments or authorities
having or claiming jurisdiction of or over the Premises, and from any public
utility companies having an interest therein. In any such work, Tenant shall
comply with all applicable laws, ordinances, requirements, orders, directions,
rules and regulations of the federal, state, county and municipal governments
and of all other governmental authorities having or claiming jurisdiction of or
over the Premises and of all their respective departments, bureaus and offices,
and with the requirements and regulations, if any, of such public utilities, of
the insurance underwriting board or insurance inspection bureau having or
claiming jurisdiction, or any other body exercising similar functions, and of
all insurance companies then writing policies covering the Premises or any part
thereof.
(iv) Tenant represents and warrants to Landlord that all such
construction work will be performed in a good and workmanlike manner and in
accordance with the terms, provisions and conditions of this Lease and all
governmental requirements.
(v) Landlord shall have the right to inspect any such
construction work at all times during normal working hours and to maintain at
the Premises for that purpose (at its own expense) such inspector(s) as it may
deem necessary so long as such inspections do not interfere with Tenant's work
(but Landlord shall not thereby assume any responsibility for the proper
performance of the work in accordance with the terms of this Lease, nor any
liability arising from the improper performance thereof).
(vi) All such work shall be performed at Tenant's cost and
expense and free of any expense to Landlord and free of any liens on Landlord's
fee simple interest on or Tenant's leasehold interest in the Premises.
(vii) Upon substantial completion of any such work Tenant shall
procure a certificate of occupancy, if applicable, from the appropriate
governmental authorities verifying the substantial completion thereof.
(viii) Tenant shall, indemnify and save and hold Landlord
harmless from and against and reimburse Landlord for any and all loss, damage,
cost and expense (including, without limitation, reasonable attorneys' fees)
incurred by or asserted against Landlord which are occasioned by or result,
directly or indirectly, from any construction or renovation activities conducted
upon the Premises; whether or not the same is caused by or the fault of Tenant
or any contractor, subcontractor, laborer, supplier, materialman or any other
third party.
(d) Additions, Expansions and Structural Alterations. Except as
------------------------------------------------
expressly permitted in Paragraph 10(a) or 10(b) above, nothing in this Lease
shall be deemed to authorize Tenant to construct and erect any additions to or
expansions of the Improvements, or perform any alterations of a structural
nature whatsoever; it being understood that Tenant may do so only with the prior
written consent and approval of Landlord, which consent and approval may not be
unreasonably withheld or delayed by Landlord.
-7-
<PAGE>
11. Utilities and Other Services. Tenant shall be liable for and
----------------------------
shall pay directly all charges, fees and amounts (together with any applicable
penalties, late charges, taxes or assessments thereon) when due for water, gas,
electricity, air conditioning, heat, septic, sewer, refuse collection, telephone
and any other utility charges or similar items in connection with the use or
occupancy of the Premises. Landlord shall not be responsible or liable in any
way whatsoever for the quality, quantity, impairment, interruption, stoppage, or
other interference with any utility service, including, without limitation,
water, air conditioning, heat, gas, electric current for light and power,
telephone, or any other utility service provided to or serving the Premises or
any damage or injury caused thereby. No such interruption, termination or
cessation of utility services shall relieve Tenant of its duties and obligations
pursuant to this Lease, including, without limitation, its obligation to pay all
Rent as and when the same shall be due hereunder.
12. Performance by Landlord of Tenant's Obligations
-----------------------------------------------
(a) Landlord's Self Help. If Tenant shall default in the performance
--------------------
of any term, provision, covenant or condition on its part to be performed
hereunder and such default shall continue beyond any notice or cure period
recited herein, Landlord may, after notice to Tenant and a reasonable time to
perform after such notice (or without notice if, in Landlord's reasonable
opinion, an emergency exists) perform the same for the account and at the
expense of Tenant. If, at any time and by reason of such default, Landlord is
compelled to pay, or reasonably elects to pay, any sum of money or do any
reasonable act which will require the payment of any sum of money, or is
compelled to incur any expense in the enforcement of its rights hereunder or
otherwise, such sum or sums, together with interest thereon at the highest rate
allowed under the laws of the State where the Premises are located, shall be
deemed additional rent hereunder and shall be repaid to Landlord by Tenant
promptly when billed therefor, and Landlord shall have all the same rights and
remedies in respect thereof as Landlord has in respect of the Rents herein
reserved.
(b) Landlord's Inspections. Landlord, its agents or representatives
----------------------
shall have the right, but not the obligation, to enter upon the Premises to
perform annual inspections of the Premises to confirm that Tenant is performing
all of Tenant's obligations under this Lease, including, but not limited to,
Tenant's obligations under Paragraph 7 and that Tenant has not violated any of
its covenants under this Lease, including, but not limited to, the covenants
under this Paragraph 12. Upon completion of such inspection, Landlord may
deliver to Tenant a written report ("Inspection Report") outlining certain
defaults, if any, in Tenant's obligations hereunder. Within ten (10) days of
Tenant's receipt of such Inspection Report, Tenant shall either: (i) object to
Landlord in writing as to any portion of the Inspection Report, specifically
describing such objection; or (ii) begin to perform any and all required work
outlined in the Inspection Report which Tenant has not objected to, and
diligently complete such work. If Tenant objects to any item in the Inspection
Report, then within ten (10) days of Landlord's receipt of Tenant's objection
notice, both Landlord and Tenant shall select a third party licensed engineer
mutually satisfactory to Landlord and Tenant or if a single engineer cannot be
agreed upon, then Landlord and Tenant shall each, at their own cost, select a
licensed engineer and the two chosen engineers shall select a third licensed
engineer, the cost of the third engineer being paid equally by Landlord and
Tenant. The
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<PAGE>
engineer(s) shall determine, by majority vote, if the work outlined in the
Inspection Report should be performed by Tenant. Such determination shall be
final and binding on Landlord and Tenant.
13. Entry. Landlord, any mortgagee for the Premises and their agents or
-----
representatives may enter the Premises at reasonable times during normal
business hours upon twenty-four (24) hours prior written notice (except during
emergencies, in which case Landlord shall endeavor to give such notice as
Landlord deems reasonable under the circumstances or as provided for inspections
under Paragraphs 10 and 12) for the purpose of inspecting the Premises, or
performing any work which Landlord elects to undertake by reason of Tenant's
default under the terms of this Lease. Landlord shall use reasonable efforts not
to disturb Tenant as a result of any such entry by Landlord, its agents or
representatives.
14. Assignment and Subletting.
-------------------------
(a) Transfers Prohibited Without Consent. Tenant shall not, without
------------------------------------
the prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed, in each instance, sell, assign or otherwise transfer this
Lease, or Tenant's interest in the Premises, in whole or in part, or any rights
or interest which Tenant may have under this Lease, or sublet the Premises, or
any part thereof, or grant or permit any lien or encumbrance on or security
interest in Tenant's interest in this Lease. When given, the consent of Landlord
to an assignment, transfer, subletting or encumbrance shall in no event be
construed to relieve Tenant or such assignee or subtenant from the obligation of
obtaining the express consent in writing of Landlord to any further assignment,
transfer, subletting or encumbrance. Any assignment, transfer, sublease or
encumbrance in violation of this Article shall be voidable at Landlord's option.
Notwithstanding the foregoing, Tenant may assign or sublet the Premises to any
affiliate of Guarantor (hereinafter defined) without first obtaining the consent
of Landlord, so long as the Guaranty contemplated by Paragraph 51 hereof shall
remain in full force and effect.
(b) Change of Control Prohibited Without Consent. Tenant shall not,
--------------------------------------------
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed, in each instance, engage in or permit to occur
a Change of Control. Change of Control shall be deemed an assignment hereunder.
"Change of Control" of Tenant shall mean: (i) the issuance or sale by Tenant or
the sale by any shareholder, stockholder, member, partner or owner of equity
interests of Tenant of a controlling interest in Tenant (which shall mean the
effective voting control of Tenant); (ii) the sale, conveyance or other transfer
of all or substantially all of the assets of Tenant (whether by operation of law
or otherwise); or (iii) any transaction, or series of transactions, pursuant to
which Tenant is merged with or consolidated into another entity and Tenant is
not the surviving entity, or (iv) the sale, assignment, transfer, exchange or
other disposition of the stock, membership interest, general interest, or other
legal or beneficial interest in Tenant (or any direct or indirect owner thereof)
which results in a direct or indirect change or transfer of management or
control of Tenant, or a merger, consolidation or other combination of Tenant (or
any direct or indirect owner thereof) with another entity which results in a
change or transfer of management or control of Tenant. Notwithstanding the
foregoing, the stock, membership
-9-
<PAGE>
interest, general partner interest, or other legal or beneficial interest may be
sold, assigned, transferred, exchanged or disposed of to any affiliate of
Guarantor without first obtaining the consent of Landlord, so long as the
Guaranty contemplated by Paragraph 51 hereof shall remain in full force and
effect.
(c) Adequate Assurances. Without limiting any of the foregoing
-------------------
provisions of this Paragraph 14, if, pursuant to the U.S. Bankruptcy Code, as
the same may be amended from time to time, Tenant is permitted to assign or
otherwise transfer its rights and obligations under this Lease in disregard of
the restrictions contained in this Paragraph 14, the assignee agrees to provide
adequate assurance to Landlord: (i) of the continued use of the Premises solely
in accordance with the Permitted Use thereof and in compliance with all other
terms of this Lease; (ii) of the continuous operation of the Business in the
Premises in strict accordance with the requirements of Paragraph 6 hereof; and
(iii) of such other matters as Landlord may reasonably require at the time of
such assumption or assignment. Such assignee shall expressly assume this Lease
by an agreement in recordable form.
(d) Subleases, Concessions and Licenses. Tenant may continue any
-----------------------------------
subleases, concession agreements or license agreements at the Premises which
were in effect, with Landlord's written approval, immediately prior to the
Commencement Date and as identified on Schedule 14(d) hereto. Further, Landlord
--------------
shall not unreasonably withhold its consent to any future sublease, concession
agreement or license agreement proposed to be entered into in replacement of any
such currently existing sublease, concession agreement or license agreement.
(e) Effect of Consent. Unless expressly agreed by Landlord in
-----------------
writing to the contrary, Landlord's consent to any assignment, sublease,
concession agreement, license agreement or any transfer of this Lease shall not
operate to release Guarantor from the Guaranty.
15. Taxes and Assessments. Throughout the Term, Tenant shall bear, pay
---------------------
and discharge all taxes, assessments and other governmental impositions and
charges of every kind and nature whatsoever, extraordinary as well as ordinary,
and each and every installment thereof which shall or may during the Term hereof
be assessed or imposed upon, or arise in connection with, the use, occupancy or
possession of the Premises or any part thereof, including, without limitation,
ad valorem real and personal property taxes, and all taxes assessed or imposed
in lieu of or in addition to any of the foregoing by virtue of all present or
future laws, ordinances, rules or regulations of federal, state, county and
municipal governments and of all other governmental authorities which relate to
the use, occupancy or possession of the Premises, but specifically excluding any
income or capital gains taxes. Upon request of Landlord, Tenant shall promptly
furnish to Landlord satisfactory evidence of the payment of any tax, assessment,
imposition or charge required to be paid by Tenant pursuant to the foregoing.
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<PAGE>
16. Casualty.
--------
(a) Restoration and Repair. In the event that during the Initial
----------------------
Term the Improvements and/or Personalty shall be destroyed or damaged in whole
or in part by fire or any cause whatsoever ("Casualty"), Tenant shall give
Landlord immediate notice thereof and shall repair, reconstruct or replace the
Improvements and/or Personalty, or the portion thereof so destroyed or damaged
(whichever is reasonably required), at least to the extent of the value and
character thereof existing immediately prior to such occurrence. All work shall
be started as soon as practicable and completed at Tenant's sole cost and
expense. Tenant shall, however, immediately take such action as is necessary to
assure that the Premises (or any portion thereof) does not constitute a nuisance
or otherwise presents a health or safety hazard. Tenant shall continue to pay
all Rent and additional charges due hereunder without abatement. Notwithstanding
the foregoing, in the event that a period of two (2) years or less remains on
the Term of this Lease and the Tenant has not given Landlord notice of its
intent to renew the Lease for a Renewal Term, Landlord may elect to terminate
the Lease upon the occurrence of a Casualty in which more than eighty percent
(80%) of the value of the Improvements and/or Personalty is damaged or destroyed
and, in such case, Tenant shall assign all insurance proceeds for such damage or
destruction to Landlord.
(b) Escrow of Insurance Proceeds. In the event of a casualty
----------------------------
resulting in an insurance loss payment for the Improvements and/or Personalty in
an amount greater than ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00),
the proceeds of all insurance policies maintained by Tenant plus the amount of
any deductible shall be deposited in Landlord's and Tenant's name in an escrow
account at the Bank or another financial institution designated by Landlord
("Escrow Agent"), and shall be used by Tenant (subject to subparagraph (a)
above) for the repair, reconstruction or restoration of the Improvements and/or
Personalty. Such proceeds shall be disbursed periodically by Escrow Agent upon
certification of the architect or engineer having supervision of the work that
such amounts are the amounts paid or payable for the repair, reconstruction or
restoration. Tenant shall, at the time of establishment of such escrow account
and from time to time thereafter until said work shall have been completed and
paid for, furnish Landlord with adequate evidence that at all times the
undisbursed portion of the escrowed funds, together with any funds made
available by Tenant, is sufficient to pay for the repair, reconstruction or
restoration in its entirety. If a Casualty results in a loss payment for the
Improvements and/or Personalty in an amount equal to or less than the amount
stated above, then the proceeds shall be paid to Tenant, and shall be applied by
Tenant (subject to subparagraph (a) above) toward the repair, reconstruction and
restoration of the Premises in its entirety. Tenant shall obtain, and make
available to Landlord, receipted bills and, upon completion of the work, full
and final waivers of lien.
(c) Uninsured Losses. Nothing contained herein shall relieve Tenant
----------------
of its obligations under this Paragraph 16 even if the destruction or damage is
not covered, either in whole or in part, by insurance.
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<PAGE>
17. Insurance.
---------
(a) Insurance By Tenant. Throughout the Term, Tenant shall, at its
-------------------
sole cost and expense, maintain in full force and effect the following types and
amounts of insurance coverage:
(i) Hazard Insurance. Tenant shall keep the Improvements and
----------------
Personalty, including all permitted alterations, changes, additions and
replacements thereof and thereto, insured against loss or damage caused by: (A)
fire, and other hazards and perils generally included under extended coverage,
including flood and earthquake; (B) sprinkler leakage; (C) vandalism and
malicious mischief; (D) boiler and machinery; and (E) other perils commonly
covered by "All Risk" insurance, all in an amount which reasonably assures there
will be sufficient proceeds to replace the Improvements and Personalty in the
event of a loss against which such insurance is issued but in no event less than
100% of the full replacement value thereof (exclusive of foundations). All
insurance required hereunder, and all other insurance maintained by Tenant on
the Improvements and Personalty in excess of or in addition to that required
hereunder, shall be carried in favor of Landlord and Tenant, as their respective
interests may appear.
(ii) Liability Insurance. Tenant shall provide and keep in
-------------------
full force and effect a policy of broad form comprehensive general public
liability and property damage insurance providing coverage against liability for
personal injury, death and property damage having limits of not less than Five
Million Dollars ($5,000,000) per occurrence, and Five Million Dollars
($5,000,000) in the aggregate.
(iii) Worker's Compensation and Employer's Liability Insurance.
--------------------------------------------------------
Tenant shall provide and keep in full force and effect workers' compensation
insurance, in a form prescribed by the laws of the State in which the Premises
are located, and employers' liability insurance with limits of not less than
Five Million Dollars ($5,000,000).
(iv) Builder's Risk Insurance. Tenant shall, prior to the
------------------------
commencement of and during the construction of any construction, restoration,
renovation or alteration to the Premises, provide and keep in full force and
effect builders' risk insurance in accordance with the requirements of this
Paragraph 17.
(v) Other Insurance. In addition, Tenant shall, at Landlord's
---------------
request, provide and keep in full force and effect such other insurance for such
risks and in such amounts as may from time to time be commonly insured against
in the case of business operations similar to those contemplated by this Lease
to be conducted by Tenant on the Premises.
(vi) Landlord as Additional Insured. Any and all insurance
------------------------------
maintained by Tenant as required by this Lease, or in excess of or in addition
to that required hereunder, shall name Landlord and any mortgagee requested by
Landlord as an additional insured(s), and shall use its best efforts to provide
a waiver of subrogation from its insurance carrier.
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<PAGE>
(vii) Evidence of Payment. Upon request of Landlord, Tenant
-------------------
shall promptly furnish to Landlord satisfactory evidence of the payment of any
insurance premium required to be paid by Tenant pursuant to the foregoing.
(b) Carriers and Features. All insurance policies required to be
---------------------
carried by Tenant as provided in this Paragraph 17 shall be issued by insurance
companies approved by Landlord and authorized and licensed to do business in the
State in which the Premises are located with a Best's Insurance Rating of not
less than "A-" or a Best's Financial Category of not less than "VIII" or as
otherwise required by Landlord, with reasonable deductibles per occurrence as
Landlord and any mortgagee of the Premises may reasonably approve. Landlord
shall have the right from time to time to require Tenant to increase the amount
and/or type of coverage to be maintained under this Lease. All such policies
shall be for periods of not less than one year and Tenant shall renew the same
at least thirty (30) days prior to the expiration thereof. All such policies
shall require not less than thirty (30) days written notice to Landlord prior to
any cancellation thereof or any change reducing coverage thereunder.
Notwithstanding the foregoing, Tenant may elect to obtain blanket insurance for
each of the foregoing required types of insurance, so long as it obtains the
prior written consent of Landlord, which consent shall not be unreasonably
withheld or delayed, and the consent of any mortgagee of the Premises. Any
insurance policies required herein may contain a commercially reasonable
deductible for a company of Tenant's size and financial condition, provided,
that such deductible is reasonably acceptable to Landlord (it being understood
that Landlord's disapproval or non-acceptance of a deductible amount shall not
be deemed unreasonable if the lender under a mortgage does not consent to such
deductible amount). Tenant shall pay the premiums for all insurance policies
which Tenant is obligated to carry under this Article and, at least twenty (20)
days prior to the date any such insurance must be in effect, deliver to Landlord
a copy of the policy or policies, or a certificate or certificates thereof,
along with evidence that the premiums therefor have been paid for at least the
next ensuing quarter-annual period.
(c) Failure to Procure Insurance. If Tenant fails to procure
----------------------------
insurance required under this Paragraph 17 or fails to maintain the same in full
force and effect continuously during the Term, Landlord shall be entitled to
procure the same and Tenant shall immediately reimburse Landlord for such
premium expense as additional rent.
(d) Waiver of Subrogation. If any property owned by Tenant and
---------------------
located in the Premises shall be stolen, damaged or destroyed by an insured
peril, Landlord shall not have any liability to Tenant, nor to any insurer of
Tenant, for or in respect of such theft, damage or destruction, and Tenant shall
use its best efforts to require all policies of insurance carried by it on its
property in the Premises to contain or be endorsed with a provision by which the
insurer designated therein shall waive its right of subrogation against
Landlord.
18. Environmental Matters.
---------------------
(a) Tenant's Covenant. Throughout the Term of this Lease, Tenant
-----------------
covenants that it shall not cause, permit or allow any chemical substances,
asbestos, asbestos containing materials, oil, gasoline, other petroleum products
or by-products, formaldehyde,
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<PAGE>
polychlorinated biphenals (PCB's), lead or lead dust, fuel storage tanks,
natural or synthetic gas products or any toxic, carcinogenic, radioactive,
dangerous or hazardous material, substance, chemical, waste, contamination or
pollutant, the generation, use, maintenance, storage or removal of which is
regulated, prohibited or penalized under the Resources Conservation Recovery Act
("RCRA"), 42 U.S.C. Section 6901, et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601, et
seq.; and any other federal, state or local laws pertaining to so-called
"hazardous substances" or "hazardous materials" (collectively, the "Hazardous
Materials") to be placed, stored, dumped, dispensed, released, discharged,
deposited, used, transported, located or generated on any portion of the
Premises; provided, however, that commercially reasonable quantities of such
substances may be used or stored by Tenant on the Premises on the condition that
such quantities and the use thereof are permitted by and in compliance with, or
are exempt from applicable governmental regulations.
(b) Clean Up. Subject to the provisions of Paragraph 52 hereof,
--------
Tenant shall immediately clean up any Hazardous Materials found on or within any
portion of the Premises, and shall remediate the Premises, to comply with any
and all laws, ordinances, rules or regulations regarding Hazardous Materials and
clean-up thereof, and to pay for all clean-up and remediation costs at no cost
to Landlord.
(c) Indemnification. Subject to the provisions of Paragraph 52
---------------
hereof, Tenant shall indemnify, release and hold Landlord its successors,
assigns, officers, directors, shareholders and employees, harmless from and
against all Liabilities, suffered by, incurred by or assessed against such
parties, their agents or other representatives, whether incurred as a result of
legal action taken by any governmental entity or agency, taken by any private
claimant, or taken by Landlord, before or after the expiration of the Term as a
result of the presence, disturbance, discharge, release, removal or clean-up of
any Hazardous Materials upon or under, on or off site, associated with,
generated on or flowing or originating from the Premises. The term "Liabilities"
as used in this Paragraph 18 is hereby defined as any and all liabilities,
expenses, demands, damages, punitive or exemplary damages, consequential
damages, costs, cleanup costs, response costs, losses, causes of action, claims
for relief, attorneys and other legal fees, other professional fees, penalties,
fines, assessments and charges.
19. Costs and Attorneys' Fees. If either party shall bring an action to
-------------------------
recover any sum due hereunder, or for any breach hereunder, and shall obtain a
judgment or decree in its favor, the court may award to such prevailing party
its reasonable costs and reasonable attorneys' fees, specifically including
reasonable attorneys' fees incurred in connection with any appeals (whether or
not taxable or assessable as such by law). Landlord shall also be entitled to
recover from Tenant Landlord's reasonable attorneys' fees and costs incurred in
any bankruptcy action filed by or against Tenant, including, without limitation,
those incurred in seeking relief from the automatic stay, in dealing with the
assumption or rejection of this Lease, in any adversary proceeding, and in the
preparation and filing of any proof of claim.
-14-
<PAGE>
20. Default; Remedies.
-----------------
(a) Default. Upon the occurrence of any one or more of the following
-------
events (the "Events of Default"), Landlord shall have the right to exercise any
rights or remedies available in this Lease, at law or in equity. Events of
Default shall be:
(i) Tenant's failure to pay when due any regularly scheduled
payment of Rent, or any other sum of money payable hereunder (whether as
additional rent or otherwise) and such failure is not cured within ten (10) days
after receipt of written notice thereof from Landlord (but Landlord shall be
obligated to tender notice of such default only once in any given twelve (12)
month period, and thereafter it shall be an Event of Default any time a required
payment is not received within ten (10) days of the date such sum was due if
Landlord has given notice of default relating to Tenant's failure to pay any
regularly scheduled payment of Rent in the preceding twelve (12) month period);
(ii) Tenant's failure to pay when due any other payment of
Rent, or any other sum of money payable hereunder (whether as additional rent or
otherwise) and such failure is not cured within thirty (30) days after receipt
of written notice thereof from Landlord;
(iii) Tenant's failure to perform any of the other terms,
covenants or conditions contained in this Lease if not remedied within thirty
(30) days after receipt of written notice thereof, or, if such default cannot
reasonably be remedied within such period, Tenant does not within thirty (30)
days after written notice thereof commence such act or acts as shall be
necessary to remedy the default and shall not thereafter diligently complete
such act or acts within a reasonable time, provided, however, in no event shall
such "Cure Period" extend beyond one hundred twenty (120) days after written
notice thereof;
(iv) if Tenant becomes bankrupt or insolvent, or files any
debtor proceedings, or files pursuant to any statute a petition in bankruptcy or
insolvency or for reorganization, or files a petition for the appointment of a
receiver or trustee for all or substantially all of its assets, and such
petition or appointment shall not have been set aside within sixty (60) days
from the date of such petition or appointment, or if any of the foregoing are
filed against Tenant, or if Tenant makes an assignment for the benefit of
creditors or shall admit in writing its inability to pay its debts generally as
they become due, or if Tenant's interest in this Lease is attached, seized or
made subject to any other judicial seizure and such seizure or attachment is not
discharged within sixty (60) days;
(v) Tenant's failure to provide insurance coverage (or allows
such coverage to be canceled or lapse) pursuant to its obligation hereunder;
(vi) if Tenant is liquidated or dissolved, or begins
proceedings toward such liquidation or dissolution, or, in any manner, permits
the sale or divestiture of substantially all of its assets;
(vii) if a Change of Control occurs or the estate or interest of
Tenant in the Premises or any part thereof is voluntarily or involuntarily
transferred, assigned,
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<PAGE>
conveyed, levied upon or attached in any proceeding, unless Tenant is contesting
such lien or attachment in good faith in accordance with Paragraph 27 hereof;
(viii) if Tenant ceases continuous operations on the Premises
required by Paragraph 6(b) hereof;
(ix) if there has been a notice of default under or a
termination or relinquishment of the franchise or license pursuant to which
Tenant or an Affiliate (as defined in Exhibit E) conducts business on or from
---------
the Premises ("Franchise"), provided that such event shall not constitute an
Event of Default if (i) no other Event of Default enumerated in this Paragraph
20 shall occur and be continuing, and (ii) at a date no later than the period
allowed to Tenant pursuant to the Franchise to cure such default, termination or
relinquishment, Tenant or an Affiliate has cured such default thereunder so that
there is no default, termination or relinquishment of the Franchise, or Tenant
has entered into a written new or amended Franchise for operation of motor
vehicle retail or motor vehicle related businesses at the Premises with a
substitute franchisor or licensor acceptable to Landlord on terms and conditions
acceptable to Landlord, which acceptance shall not be unreasonably withheld or
delayed;
(x) Tenant's failure to provide Landlord immediate notice of
Tenant's receipt of notice of (A) a default or potential default by Tenant under
the Franchise, or (B) the franchisor's intent to terminate, suspend or not renew
the Franchise;
(xi) if Tenant or any of its Affiliates defaults under any
other lease with Landlord or an Affiliate of Landlord, unless such default is
premised upon a default, suspension or termination of any Franchise agreement;
and
(xii) if Guarantor violates the provisions of Section 9 of the
Guaranty.
(b) Remedies. If any of the Events of Default hereinabove specified
--------
shall occur and be continuing, Landlord shall have and may exercise any one or
more of the following rights and remedies:
(i) Landlord may, by written notice thereof to Tenant,
terminate this Lease and, peaceably or pursuant to appropriate legal
proceedings, re-enter, retake and resume possession of the Premises for
Landlord's own account and, for Tenant's breach of and default under this Lease,
recover immediately from Tenant any and all Rent and other sums and damages due
or in existence at the time of such termination, including, without limitation:
(A) all Rent and other sums, charges, payments, costs and expenses agreed and/or
required to be paid by Tenant to Landlord hereunder; (B) all reasonable costs
and expenses of Landlord in connection with the recovery of possession of the
Premises, including reasonable attorneys' fees and court costs; and (C) all
costs and expenses of Landlord in connection with any reletting or attempted
reletting of the Premises or any part or parts thereof, including, without
limitation, brokerage fees, attorneys' fees and the cost of any alterations or
repairs which may be reasonably required to so relet the Premises, or any part
or parts thereof.
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<PAGE>
(ii) Landlord may, by written notice thereof to Tenant,
terminate Tenant's option to renew this Lease for any or all of the Renewal
Terms.
(iii) Landlord may, pursuant to any prior notice required by
law, and without terminating this Lease, peaceably or pursuant to appropriate
legal proceedings, re-enter, retake and resume possession of the Premises for
the account of Tenant, make such alterations of and repairs to the Premises as
may be reasonably necessary in order to relet the same or any part or parts
thereof and relet or attempt to relet the Premises or any part or parts thereof
for such term or terms (which may be for a term or terms extending beyond the
Term), at such Rent and upon such other terms and provisions as Landlord, in its
reasonable discretion may deem advisable. In the event that Landlord retakes and
resumes possession of the Premises, it shall use reasonable efforts to mitigate
any damages it suffered by virtue of Tenant's default. Upon any such reletting,
all rents received by Landlord from such reletting shall be applied: (A) first,
to the payment of all costs and expenses of recovering possession of the
Premises; (B) second, to the payment of any costs and expenses of such
reletting, including brokerage fees, attorneys' fees and the cost of any
alterations and repairs reasonably required for such reletting; (C) third, to
the payment of any indebtedness, other than Rent, due hereunder from Tenant to
Landlord, and to satisfy any liens encumbering Tenant's leasehold interest; (D)
fourth, to the payment of all Rent and other sums due and unpaid hereunder; and
(E) fifth, the residue, if any, shall be held by Landlord and applied in payment
of future Rent as the same may become due and payable hereunder. If the rents
received from such reletting during any period shall be less than that required
to be paid during that period by Tenant hereunder, then Tenant shall promptly
pay any such deficiency to Landlord and failing the prompt payment thereof by
Tenant to Landlord, Landlord shall immediately be entitled to institute legal
proceedings for the recovery and collection of the same. Such deficiency shall
be calculated and paid at the time each payment of Rent shall otherwise become
due under this Lease, or, at the option of Landlord, immediately. Landlord
shall, in addition, be immediately entitled to sue for and otherwise recover
from Tenant any other damages occasioned by or resulting from any abandonment of
the Premises or other breach of or default under this Lease other than a default
in the payment of Rent. No such re-entry, retaking or resumption of possession
of the Premises by Landlord for the account of Tenant shall be construed as an
election on the part of Landlord to terminate this Lease unless a written notice
of such intention shall be given to Tenant or unless the termination of this
Lease be decreed by a court of competent jurisdiction. Notwithstanding any such
re-entry and reletting or attempted reletting of the Premises or any part or
parts thereof for the account of Tenant without termination, Landlord may at any
time thereafter, upon written notice to Tenant, elect to terminate this Lease or
pursue any other remedy available to Landlord for Tenant's previous breach of or
default under this Lease.
(iv) Landlord may, without re-entering, retaking or resuming
possession of the Premises, sue for all Rent and all other sums, charges,
payments, costs and expenses due from Tenant to Landlord hereunder either: (A)
as they become due under this Lease, taking into account that Tenant's right and
option to pay the Rent hereunder on a monthly basis in any particular Lease Year
is conditioned upon the absence of a default on Tenant's part in the performance
of its obligations under this Lease; or (B) at Landlord's option, accelerate the
maturity and due date of the whole or any part of the Rent for the entire
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then-remaining unexpired balance of the Term (reduced to its present value,
applying an interest rate of ten and one-half percent (10.5%), as well as all
other sums, charges, payments, costs and expenses required to be paid by Tenant
to Landlord hereunder, including, without limitation, damages for breach or
default of Tenant's obligations hereunder in existence at the time of such
acceleration, such that all sums due and payable under this Lease shall,
following such acceleration, be treated as being and, in fact, be due and
payable in advance as of the date of such acceleration. Landlord may then
proceed to recover and collect all such unpaid Rent and other sums so sued for
from Tenant by distress, levy, execution or otherwise.
(v) Landlord may require Tenant to pay to Landlord on the first
day of each month together with and in addition to the regular installment of
Rent, an amount equal to one-twelfth (1/12) of the yearly taxes and assessments
as estimated by Landlord to be sufficient to enable Landlord to pay, at least
thirty (30) days before they become delinquent, all taxes, assessments, and
other similar charges and insurance premiums against the Premises or any part
thereof. Such added payments shall not be, nor be deemed to be, trust funds, but
may be commingled with the general funds of Landlord, and no interest shall be
payable with respect thereto. Upon demand of Landlord, Tenant shall deliver to
Landlord such additional moneys as are necessary to make up any deficiencies in
the amounts necessary to enable Landlord to pay such taxes, assessments and
similar charges and insurance premiums.
In addition to the remedies hereinabove specified and enumerated,
Landlord shall have and may exercise the right to invoke any other remedies
allowed at law or in equity as if the remedies of re-entry, unlawful detainer
proceedings and other remedies were not herein provided. Accordingly, the
mention in this Lease of any particular remedy shall not preclude Landlord from
having or exercising any other remedy at law or in equity. Nothing herein
contained shall be construed as precluding Landlord from having or exercising
such lawful remedies as may be and become necessary in order to preserve
Landlord's right or the interest of Landlord in the Premises and in this Lease,
even before the expiration of any notice periods provided for in this Lease, if
under the particular circumstances then existing the allowance of such notice
periods will prejudice or will endanger the rights and estate of Landlord in
this Lease and in the Premises.
21. Eminent Domain.
--------------
(a) Complete Taking. If the whole of the Premises shall be taken for
---------------
any public or quasi-public use under any statute or by right of eminent domain,
or by private purchase in lieu thereof, then this Lease shall automatically
terminate as of the date that title shall be taken.
(b) Partial Taking. If any part of the Premises shall be so taken,
--------------
such that the Premises may still be used for its intended purposes, this Lease
shall not terminate or be terminated and Tenant shall restore the remaining
portion of the Premises to the extent necessary to render it reasonably suitable
for the purposes for which it was leased and make all repairs to any building
damaged by such taking to the extent necessary to constitute such building a
complete architectural unit. If after such partial taking, Landlord and Tenant
shall
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<PAGE>
determine in their reasonable discretion that the Premises cannot be used for
their intended purposes, then the term of this Lease shall end on the effective
date of such taking. If after such partial taking, this Lease shall not so
terminate, then the Rent to be paid by Tenant after such taking shall be
equitably adjusted as Landlord and Tenant shall then agree. Any disagreement
between Landlord and Tenant regarding the foregoing matters shall be determined
by arbitration in accordance with the Commercial Rules of the American
Arbitration Association.
(c) Award. All awards and other compensation made to Tenant in any
-----
taking by eminent domain or recovery for inverse condemnation, either permanent
or temporary, of all or any part of the Premises or any easement or any
appurtenance thereto, including severance and consequential damages and change
in grade of any street, are hereby assigned to Landlord, and Tenant hereby
irrevocably appoints Landlord as its attorney-in-fact, coupled with an interest,
and authorizes, directs and empowers such attorney, at the option of said
attorney, on behalf of Tenant, its successors and assigns, to adjust or
compromise the claim for any such award and alone to collect and receive the
proceeds thereof, to give proper receipts and acquittances therefor and, after
deducting any expenses of collection and subject to the conditions and
limitations set forth below, to hold such proceeds without any allowance of
interest and make the same available for restoration or rebuilding the
improvements which are part of the Premises. Such proceeds shall be paid to and
held and disbursed by an Escrow Agent in the manner and under the conditions
provided in Paragraph 16 above. If the proceeds are made available by Landlord
to reimburse Tenant for the cost of restoration or rebuilding, any surplus which
may remain out of any award after payment of such cost of restoration or
rebuilding shall be the sole property of Landlord.
(d) Notices; Assignments. Each of Landlord and Tenant further
--------------------
covenants and agrees to give the other immediate notice of the actual or
threatened commencement of any proceedings under eminent domain and to deliver
to the other copies of any and all papers served in connection with any such
proceedings. Tenant shall make, execute and deliver to Landlord, at any time or
times, upon request, free, clear and discharged of any encumbrance of any kind
whatsoever, any and all further assignments and/or other instruments deemed
necessary by Landlord for the purpose of validly and sufficiently assigning all
such awards and other compensation heretofore or hereafter made to Landlord
(including the assignment of any award from the United States government at any
time after the allowance of the claim therefor, the ascertainment of the amount
thereof and the issuance of the warrant for payment thereof).
22. Liability of Landlord. Landlord shall not be liable to Tenant, its
---------------------
employees, agents, contractors, business invitees, licensees, customers,
clients, family members or guests for any damage, injury, loss, compensation or
claim, including, but not limited to, claims for the interruption of or loss to
Tenant's business, based on, arising out of or resulting from any cause
whatsoever, except in the event of its clear failure to comply with its
obligations hereunder, including, but not limited to: (a) repairs to any
portion of the Premises; (b) interruption in Tenant's use of the Premises; (c)
any accident or damage resulting from the use or operation (by Landlord, Tenant
or any other person or persons) of any equipment within the Premises, including
without limitation, heating, cooling, electrical or plumbing equipment or
apparatus; (d) the termination of this Lease by reason of the condemnation or
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<PAGE>
destruction of the Premises in accordance with the provisions of this Lease; (e)
any fire, robbery, theft, mysterious disappearance or other casualty; (f) the
actions of any other person or persons; and (g) any leakage or seepage in or
from any part or portion of the Premises, whether from water, rain or other
precipitation that may leak into, or flow from, any part of the Premises, or
from drains, pipes or plumbing fixtures in the Improvements. Any goods, property
or personal effects stored or placed by Tenant or its employees in or about the
Premises shall be at the sole risk of Tenant.
23. Indemnification of Landlord. In addition to any other indemnification
---------------------------
obligations in this Lease, Tenant shall defend, indemnify and save and hold
Landlord harmless from and against any and all liabilities, obligations, losses,
damages, injunctions, suits, actions, fines, penalties, claims, demands, costs
and expenses of every kind or nature, including reasonable attorneys' fees and
expenses and court costs and actual or consequential damages, incurred by,
imposed upon or asserted against Landlord, its officers, trustees, employees,
shareholders, agents or Affiliates, arising directly or indirectly from or out
of: (a) any breach, violation or nonperformance by Tenant or any person claiming
under Tenant, or the employees, agents, contractors, invitees or visitors of
Tenant of any of the terms, provisions, representations, warranties, covenants
or conditions of this Lease on Tenant's part to be performed or any law,
ordinance or governmental requirement of any kind; (b) any use, condition,
operation or occupancy of the Premises during the Term hereof; (c) any acts,
omissions or negligence of Tenant, in, on, or about the Premises during the Term
hereof; (d) any accident, injury, death or damage to the person, property or
business of Tenant, its employees, agents, contractors, invitees, visitors or
any other person which shall happen at, in or upon the Premises, however
occurring during the Term hereof; (e) any matter or thing growing out of the
condition, occupation, maintenance, alteration, repair, use or operation by any
person of the Premises, or any part thereof, or the operation of the business
contemplated by this Lease to be conducted thereon, thereat, therein, or
therefrom which occurs during the Term hereof; (f) any failure of Tenant to
comply with any laws, ordinances, requirements, orders, directions, rules or
regulations of any governmental authority, including, without limitation, the
Accessibility Laws; (g) any contamination of the Premises, or the ground waters
thereof, arising on or after the date Tenant takes possession of the Premises
and occasioned by the use, transportation, storage, spillage or discharge
thereon, therein or therefrom of any toxic or hazardous chemicals, compounds,
materials or substances or any violation of the covenants of Paragraph 18 above;
(h) any discharge of toxic or hazardous sewage or waste materials from the
Premises into any septic facility or sanitary sewer system serving the Premises
arising on or after the date Tenant takes possession of the Premises; (i) any
brokers or agents fees and commissions incurred during or with respect to the
Term hereof; or (j) any other act or omission of Tenant, its employees, agents,
invitees, customers, licensees or contractors which occurs during the Term
hereof. Tenant's indemnity obligations under this Paragraph 23 and elsewhere in
this Lease arising prior to the termination or assignment of this Lease shall
survive any such termination or assignment.
24. Notice of Claim or Suit. Tenant shall promptly notify Landlord of any
-----------------------
claim, action, proceeding or suit instituted or threatened against Tenant or
Landlord which relates to the Premises of which Tenant receives notice or of
which Tenant acquires knowledge. If Landlord is made a party to any action for
damages or other relief against which Tenant has
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<PAGE>
indemnified Landlord, as aforesaid, then Tenant shall defend Landlord, pay all
costs and shall provide effective counsel to Landlord in such litigation with
counsel reasonably satisfactory to Landlord and shall pay any and all judgments
or sums due pursuant to any settlement agreement which is mutually satisfactory
to Landlord and Tenant.
25. Liens, Generally. Tenant shall not create or cause to be imposed,
----------------
claimed or filed upon the Premises, or any portion thereof, or upon the interest
of Landlord therein, any lien, charge or encumbrance whatsoever. If, because of
any act or omission of Tenant, any such lien, charge or encumbrance shall be
imposed, claimed or filed, Tenant shall, at its sole cost and expense, cause the
same to be fully paid and satisfied or otherwise discharged of record (by
bonding or otherwise) and Tenant shall indemnify and save and hold Landlord
harmless from and against any and all costs, liabilities, suits, penalties,
claims and demands whatsoever, and from and against any and all attorneys' fees,
at both trial and all appellate levels, resulting or on account thereof and
therefrom. If Tenant shall fail to comply with the foregoing provisions of this
Paragraph 25, then Landlord shall have the option of paying, satisfying or
otherwise discharging (by bonding or otherwise) such lien, charge or encumbrance
and Tenant shall reimburse Landlord, upon demand and as additional rent, for all
sums so paid and for all costs and expenses incurred by Landlord in connection
therewith, together with interest thereon, until paid.
26. Mechanics' Liens. Landlord's interest in the Premises shall not be
----------------
subjected to liens of any nature by reason of Tenant's construction, alteration,
renovation, repair, restoration, replacement or reconstruction of any
improvements on or in the Premises, or by reason of any other act or omission of
Tenant (or of any person claiming by, through or under Tenant) including, but
not limited to, mechanics' and materialmen's liens. All persons dealing with
Tenant are hereby placed on notice that such persons shall not look to Landlord
or to Landlord's credit or assets (including Landlord's interest in the
Premises) for payment or satisfaction of any obligations incurred in connection
with the construction, alteration, renovation, repair, restoration, replacement
or reconstruction thereof by or on behalf of Tenant. Tenant has no power, right
or authority to subject Landlord's interest in the Premises to any mechanics or
materialmen's lien or claim of lien. If a lien, a claim of lien or an order for
the payment of money shall be imposed against the Premises on account of work
performed, or alleged to have been performed, for or on behalf of Tenant, Tenant
shall, within thirty (30) days after written notice of the imposition of such
lien, claim or order, cause the Premises to be released therefrom by the payment
of the obligation secured thereby or furnish a bond or by any other method
prescribed or permitted by law. If a lien is released, Tenant shall thereupon
furnish Landlord with a written instrument of release in form for recording or
filing in the appropriate office of land records of the County in which the
Premises are located, and otherwise sufficient to establish the release as a
matter of record.
27. Contest of Liens. Tenant may, at its option, contest the validity of
----------------
any lien or claim of lien if Tenant shall first posted an appropriate and
sufficient bond in favor of the claimant or paid the appropriate sum into court,
if permitted by law, and thereby obtained the release of the Premises from such
lien. If judgment is obtained by the claimant under any lien, Tenant shall pay
the same immediately after such judgment shall have become final and the time
for appeal therefrom has expired without appeal having been taken. Tenant shall,
at
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<PAGE>
its own expense, defend the interests of Tenant and Landlord in any and all such
suits; provided, however, that Landlord may, at its election, engage its own
counsel and assert its own defenses, in which event Tenant shall cooperate with
Landlord and make available to Landlord all information and data which Landlord
deems necessary or desirable for such defense.
28. Notices of Commencement of Construction. If required by the laws of
---------------------------------------
the State in which the Premises are located or in the event permitted by the
laws of the State in which the Premises are located and Landlord so requests
upon Tenant giving notice to Landlord of its intended construction, and in the
event that Tenant reasonably contemplates construction of any work on the
Premises will cost, in the aggregate, Fifty Thousand Dollars ($50,000.00) or
more, prior to commencement by Tenant of any work on the Premises which shall
have been previously permitted by Landlord as provided in this Lease, Tenant
shall record or file a notice of the commencement of such work (the "Notice of
Commencement") in the land records of the County in which the Premises are
located, identifying Tenant as the party for whom such work is being performed,
stating such other matters as may be required by law and requiring the service
of copies of all notices, liens or claims of lien upon Landlord. Any such Notice
of Commencement shall clearly reflect that the interest of Tenant in the
Premises is that of a leasehold estate and shall also clearly reflect that the
interest of Landlord as the fee simple owner of the Premises shall not be
subject to mechanics or materialmen's liens on account of the work which is the
subject of such Notice of Commencement. A copy of any such Notice of
Commencement shall be furnished to and approved by Landlord and its attorneys
prior to the recording or filing thereof, as aforesaid.
29. Limitation on Liability of Landlord. If Tenant is awarded a money
-----------------------------------
judgment against Landlord, then Tenant's sole recourse for satisfaction of such
judgment shall be limited to execution against the Premises and any other
premises leased by Landlord to an Affiliate of Tenant. In no event shall any
stockholder, shareholder, partner, employee, officer or beneficiary of Landlord
be personally liable for the obligations of Landlord hereunder.
30. Franchise and License Agreements. Tenant shall keep and maintain in
--------------------------------
full force during the Term all Franchise agreements, management agreements,
service and maintenance contracts, equipment leases and other contracts or
agreements reasonably necessary to the operation of the Premises for its
Permitted Use. Tenant shall, at its sole cost and expense, pay all franchise
fees, license fees, management fees or other expenses of any kind or nature
whatsoever in connection with its operation of the Premises for its Permitted
Use.
31. "Net" Lease. Landlord and Tenant acknowledge and agree that this Lease
----------
shall be and constitute what is generally referred to as a "triple net" or
"absolute net" lease, such that Tenant shall be obligated hereunder to pay all
costs and expenses incurred with respect to, and associated with, the Premises
and the business operated thereon and therein, including, without limitation,
all taxes and assessments, utility charges, insurance costs, maintenance costs
and repair and restoration expenses (all as more particularly herein provided).
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<PAGE>
32. Representations, Warranties and Special Covenants. The
-------------------------------------------------
Representations, Warranties and Special Covenants attached hereto as Exhibit E
---------
are incorporated herein by this reference.
33. Notices. All notices, approvals, requests, consents and other
-------
communications given pursuant to this Lease shall be in writing and shall be
deemed to have been duly given (i) when actually received if either (x) hand
delivered or (y) sent by facsimile transmission (in which event proof of
delivery shall be by telephone) (and a duplicate of such notice in (x) or (y) or
such notice shall be deposited in a regularly maintained receptacle for the
deposit of United States mail, sent by registered or certified mail, postage and
charges prepaid); (ii) two (2) days after the same was deposited in a regularly
maintained receptacle for the deposit of United States mail, sent by registered
or certified mail, postage and charges prepaid; or (iii) the next business day
if sent via a national overnight delivery service, addressed as follows or at
such other address as either party may specify from time to time by notice to
the other party at least five (5) days prior notice of the changed address:
If to Tenant: c/o Sonic Automotive, Inc.
5401 East Independence Boulevard
Charlotte, North Carolina 28212
Attn: Theodore M. Wright
Telephone: 704-532-3320
Telecopy: 704-536-5116
with a copy to: Parker, Poe, Adams & Bernstein L.L.P.
2500 Charlotte Plaza
Charlotte, North Carolina 28244
Attn: Charles B. Lee, Jr., Esq.
Telephone: 704-335-9001
Telecopy: 704-334-4706
If to Landlord: c/o Capital Automotive REIT
1420 Spring Hill Road, Suite 525
McLean, Virginia 22102
Attn: Portfolio Manager
Telephone: 703-288-3075
Telecopy: 703-288-3375
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<PAGE>
with a copy to: Shaw Pittman
2300 N Street, N.W.
Washington, D.C. 20037
Attn: Richard F. Williamson, Esq.
Telephone: 202-663-8000
Telecopy: 202-663-8007
34. No Waiver. No course of dealing between Landlord and Tenant, or any
---------
delay or omission of Landlord or Tenant to insist upon a strict performance of
any term or condition of this Lease shall be deemed a waiver of any right or
remedy that such party may have, and shall not be deemed a waiver of any
subsequent breach of such term or condition.
35. Quiet Enjoyment . Landlord covenants that Tenant, upon paying the Rent
---------------
and observing and keeping the covenants, agreements and stipulations of this
Lease on its part to be kept, shall lawfully, peaceably and quietly hold, occupy
and enjoy the Premises during the Term without hindrance, ejection or
molestation. Landlord covenants and warrants that it is lawfully seized of the
Premises and has good, right and lawful authority to enter into this Lease for
the full term aforesaid, that the Premises are free and clear of all
encumbrances that would prevent Landlord from having such right and authority
and that Landlord will put Tenant in actual possession of the Premises on the
Commencement Date .
36. Subordination, Non-Disturbance and Attornment. In the event that
---------------------------------------------
Landlord elects, in its sole discretion, to place any form of financing on the
Premises, Tenant agrees to promptly enter into, execute and deliver to the
requesting party a commercially reasonable subordination, non-disturbance and
attornment agreement with any such lender, which shall acknowledge that this
Lease, Tenant's interest hereunder and Tenant's leasehold interest in and to the
Premises are junior, inferior, subordinate and subject in right, title,
interest, lien, encumbrance, priority and all other respects to any such
mortgage (which term when used anywhere in this Lease includes deeds of trust
and other security instruments and interests) or mortgages now or hereafter in
force and effect upon or encumbering Landlord's interest in the Premises, or any
portion thereof, and to all collateral assignments by Landlord to any third
party or parties of any of Landlord's rights under this Lease or the rents,
issues and profits thereof or therefrom as security for any liability or
indebtedness, direct, indirect or contingent, of Landlord to such third party or
parties, and to all future modifications, extensions, renewals, consolidations
and replacements of, and all amendments and supplements to any such mortgage,
mortgages or assignments. If, within fifteen (15) days following Tenant's
receipt of a written request by Landlord or the holder or proposed holder of any
such mortgage, mortgages or assignments, Tenant shall fail or refuse or shall
have not executed any such subordination, non-disturbance and attornment
agreement, Tenant shall be in breach and default of its obligation to do so and
of this Lease and Landlord shall be entitled thereupon to exercise any and all
remedies available to Landlord pursuant to this Lease or otherwise provided by
law.
37. Brokers. Landlord and Tenant represent and warrant to the other that
-------
neither of them have engaged or contracted with any person, firm or entity to
serve or act as a broker,
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<PAGE>
agent or finder for the purpose of leasing the Premises, and that no broker's or
real estate or other similar commissions or fees are or shall be due in respect
of the transaction contemplated by this Lease. Landlord and Tenant each shall
indemnify, defend and save harmless the other from and against any cost and
expense, including reasonable attorney's fees, incurred by the other as a result
of the untruth of any of the foregoing representations made by it.
38. Invalidity. If any provision of this Lease shall be declared invalid
----------
or unenforceable, the remainder of this Lease shall continue in full force and
effect.
39. Counterparts. This Lease may be executed in two (2) or more
------------
counterparts, which taken together shall be deemed one (1) original.
40. [Intentionally Omitted]
---------------------
41. Cumulative. All rights and remedies of Landlord and Tenant herein
----------
shall be cumulative and none shall be exclusive of any other or of any rights
and remedies allowed by law.
42. Governing Law. This Lease shall be governed by, construed, and
-------------
enforced in accordance with the laws of the state in which the Premises are
located.
43. Successors and Assigns; Relationship. The covenants, terms,
------------------------------------
conditions, provisions, and undertakings in this Lease shall extend to and be
binding upon the permitted successors, and assigns of the respective parties
hereto, and shall be construed as covenants running with the land. This Lease
creates and evidences a lease between Landlord and Tenant, and not a
partnership, joint venture, or other type of ownership inconsistent with a
lease, and neither Landlord nor Tenant shall make any representation to the
contrary.
44. Entire Agreement. This Lease, together with any exhibits attached
----------------
hereto, contains the entire agreement and understanding between the parties.
There are no oral understandings, terms, or conditions, and neither party has
relied upon any representation, express or implied, not contained in this Lease.
All prior understandings, terms, or conditions are deemed merged in this Lease.
This Lease cannot be changed or supplemented orally, but may be modified or
amended only by a written instrument executed by the parties. Any disputes
regarding the interpretation of any portion of this Lease shall not be
presumptively construed against the drafting party.
45. Survival. Tenant's indemnity obligations herein, including, without
--------
limitation, those set forth in Paragraph 18, shall survive termination of this
Lease.
46. Estoppel Certificates. Tenant shall from time to time, within fifteen
---------------------
(15) days after request by Landlord and without charge, give a Tenant Estoppel
Certificate in the form attached hereto as Exhibit D and containing such other
---------
matters as may be reasonably requested by Landlord to any person, firm or
corporation specified by Landlord. If Tenant does not return the Tenant Estoppel
Certificate within such fifteen-day period, Tenant shall be deemed to have
consented to the information contained therein as if Tenant had executed such
Tenant Estoppel Certificate and returned it to Landlord.
-25-
<PAGE>
47. Time. Time is of the essence in every particular of this Lease,
----
including, without limitation, obligations for the payment of money.
48. Captions and Headings. The captions and headings in this Lease have
---------------------
been inserted herein only as a matter of convenience and for reference and in no
way define, limit or describe the scope or intent of, or otherwise affect, the
provisions of this Lease.
49. Waiver of Jury Trial. TO THE EXTENT ALLOWED BY APPLICABLE LAW, TENANT
--------------------
AND LANDLORD HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT
EITHER OF THEM OR THEIR HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS OR ASSIGNS
MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS LEASE OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN
CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT TO LANDLORD'S ACCEPTING THIS LEASE.
50. Signage. Tenant shall have the right to install signs containing
-------
Tenant's trade name and such other identification signs on the Premises as are
permitted by applicable governmental laws and regulations. Tenant shall obtain
all governmental permits, licenses and approvals necessary to erect such signs,
and shall maintain such signs in good condition and repair. Tenant shall not
remove any identification signs without first obtaining Landlord's written
consent, which shall not be unreasonably withheld or delayed.
51. Guaranty. At the time of Tenant's execution of this Lease, Tenant
--------
shall obtain the execution of the lease guaranty agreement ("Guaranty") in the
form of Exhibit F attached hereto by the Guarantor named therein ("Guarantor").
As a condition to Tenant's exercise of a Renewal Term and accompanying Tenant's
notice of such exercise, Tenant shall deliver to Landlord a reaffirmation of the
Guaranty executed by Guarantor.
52. Pre-Existing Conditions. Notwithstanding anything to the contrary
-----------------------
contained herein, with respect to any condition on the Premises which was
created prior to the Prior Commencement Date which is or has been rendered
unlawful or no longer in compliance with any applicable law or regulation,
including, but not limited to, the discovery of Hazardous Materials on the
Premises which were not caused by Tenant's use or occupancy of the Premises
(whether during the Term or during the term of that certain lease demising the
Premises to Tenant, which lease was terminated immediately prior to the
Commencement Date) or the requirement of any governmental entity to make
alterations or repairs to the Premises which are not necessitated by Tenant's
use or occupancy of the Premises ("Pre-Existing Conditions"), Landlord agrees to
use commercially reasonable efforts to have the condition remedied or payment
for such condition paid by the party who created such condition or any other
third party who might reasonably be deemed liable for such condition within six
(6) months after notice thereof. In the event that Landlord is unable to seek
recovery from any such third party after reasonable efforts to do so (within the
aforesaid six (6) month period), Landlord shall notify Tenant of the condition
and the costs associated with
-26-
<PAGE>
remediation or correction thereof or of any liability it has incurred thereby.
Within ten (10) days following receipt of notice thereof, Tenant shall notify
Landlord of its intent to (i) correct or remediate the condition within a
reasonable time thereafter or (ii) request that Landlord remediate or correct
the condition, in which case Tenant's Base Rent hereunder shall increase by the
product of such amount, multiplied by the then existing capitalization rate for
the Premises, but in no event less than ten and 40/100 percent (10.40%) annually
throughout the remainder of the Term or until Landlord has been compensated in
full for such costs, whichever comes first. In the event that Tenant agrees to
correct or remediate the Pre-Existing Conditions and fails to do within a
reasonable time thereafter, Landlord shall give the Tenant written notice of its
failure to comply. If the condition is not fully corrected or remediated within
thirty (30) days thereafter, Landlord may commence to correct or remediate the
Pre-Existing Conditions and raise Tenant's Base Rent hereunder in the manner set
forth above.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
[SIGNATURES FOLLOW ON NEXT PAGE]
-27-
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto executed this Lease the day
and year first above written.
LANDLORD:
MMR ____________,
a ________________
By:
By:
By:
By: [SEAL]
-------------------
Name: ___________________
Title: ___________________
TENANT:
______________________________________
By: [SEAL]
--------------------------------
Name: ________________________________
Its: ________________________________
[EXHIBITS AND SCHEDULE OMITTED]
The Registrant undertakes to furnish supplementally to the Securities and
Exchange Commission, upon its request, a copy of any omitted exhibit or
schedule.
<PAGE>
EXHIBIT 99.2
FORM OF LEASE GUARANTY
THIS LEASE GUARANTY (this "Guaranty") is made this ___ day of August, 1999,
by SONIC AUTOMOTIVE, INC., a Delaware corporation ("Guarantor"), in favor of MMR
________________, a ________________________________________ ("Landlord").
WHEREAS, _________________________________________________________, a
________________________________________________________ ("Tenant"), and
Landlord executed that certain lease, dated August ___, 1999 (the "Lease"), the
terms and conditions of which Lease are hereby incorporated by reference, for
certain premises located at ___________________________________________________
in _________________________ County, ___________________ (the "Premises"); and
WHEREAS, Landlord under the Lease requires as a condition to its execution
of the Lease that Guarantor guarantee the performance and obligations of Tenant
under the Lease. Guarantor desires to have Landlord and Tenant enter into the
Lease and therefore desires to guaranty Tenant's performance under the Lease as
hereinafter provided.
NOW, THEREFORE, in consideration of, and as an inducement for the granting,
execution and delivery of the Lease, and in further consideration of the sum of
One Dollar ($1.00) and other good and valuable consideration paid by Landlord,
the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby
covenants as follows:
1. Guaranty. Guarantor absolutely, unconditionally and irrevocably
--------
guarantees to Landlord the full, faithful and prompt performance of all
obligations imposed on Tenant by the terms of the Lease, including, but not
limited to: (a) the payment of any and all Rent payable by Tenant under the
Lease, and (b) the performance and observance of all the covenants, terms,
conditions and agreements of the Lease (including, without limitation, Section
3(c) thereof) to be performed and observed by Tenant. Guarantor does hereby
become surety to Landlord for and with respect to all of the aforesaid
obligations of Tenant under the Lease.
2. Covenants. If Tenant defaults in the payment of any Rent payable by
---------
Tenant under the Lease or in the performance of any of the covenants, terms,
conditions or agreements contained in the Lease, Guarantor will immediately: (a)
pay such Rent to Landlord and any arrears thereof; (b) faithfully perform and
fulfill all of such covenants, terms, conditions and agreements; and (c) pay to
Landlord all damages, costs and expenses that may arise in consequence of any
default by Tenant under the Lease (including, without limitation, all Reasonable
Attorneys' Fees (as defined hereafter) incurred by Landlord or caused by any
such default and/or by the enforcement of this Guaranty). This Guaranty is a
primary, absolute, continuing and unconditional guaranty of payment and of
performance and not of mere collection. Guarantor's liability hereunder is
direct and may be enforced without Landlord being required to resort to any
other right, remedy or security. The validity of this
<PAGE>
Guaranty and the obligations of Guarantor hereunder shall not be terminated,
affected or impaired by reason of the assertion or the failure to assert by
Landlord against Tenant of any of the rights or remedies reserved to Landlord
pursuant to the provisions of the Lease.
3. Non-Release. This Guaranty shall remain in full force and effect
-----------
without regard to, and shall not be released, discharged or in any way impaired
by: (a) any amendment or modification of, or supplement to, or extension or
renewal (pursuant to an option granted, holding over, or otherwise) of the Lease
(whether material or otherwise) or any assignment or transfer thereof, all of
which Guarantor hereby consents to; (b) any exercise or non-exercise of any
right, power, remedy or privilege under or in respect of the Lease or this
Guaranty or any waiver, consent or approval by Landlord with respect to any of
the covenants, terms, conditions or agreements contained in the Lease or any
indulgences, forbearance or extensions of time for performance or observance
allowed to Tenant from time to time and for any length of time; (c) the
voluntary or involuntary liquidation or dissolution of Tenant, the sale of
substantially all of the assets of Tenant, the marshaling of assets on
liabilities, receiverships, conservatorship, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganizations, arrangement, composition or
readjustment of, or other similar proceeding affecting Tenant or any of Tenant's
assets; (d) any limitation on the liability or obligation of Tenant under the
Lease or its estate in bankruptcy or of any remedy for the enforcement thereof,
resulting from the operation of any present or future provision of the National
Bankruptcy Act or other statute or from the decision of any court; or (e) any
extension, forbearance or leniency extended by Landlord to Tenant.
4. Rejection of Lease. This Guaranty will continue unchanged by any
------------------
bankruptcy, reorganization or insolvency of Tenant or any successor or assignee
thereof, or by a disaffirmance or abandonment by a trustee of Tenant. If the
Lease is rejected or disaffirmed by Tenant or Tenant's trustee in bankruptcy
pursuant to any bankruptcy law or any other law affecting creditor's rights,
then Guarantor shall, and does hereby (without the necessity of any further
agreement or act) assume all obligations and liabilities of Tenant under the
Lease to the same extent as if: (a) Guarantor were originally named Tenant under
the Lease; and (b) there had been no such rejection or disaffirmance. Guarantor
shall, upon Landlord's request, promptly confirm in writing such assumption. No
limitation on the liability of Tenant under the Lease which may now or hereafter
be imposed by any federal, state or other statute, law or regulation applicable
to such proceedings shall in any way limit the obligation of Guarantor
hereunder, which obligation is co-extensive with Tenant's liability set forth
within the Lease without regard to any such statutory or legal limitation.
5. Waiver. Guarantor has been advised of and hereby waives and agrees
------
not to assert or take advantage of any of the following rights: (a) presentment,
demand for payment, and protest of non-performance under the Lease; (b) notice
of any kind, including but not limited to notice of acceptance, notice of
default and/or notice of any obligations or liabilities contracted or incurred
by Tenant; (c) any right to require Landlord to enforce its rights and remedies
against Tenant under the Lease or otherwise; (d) any right to require Landlord
to proceed against any security held from Tenant or any other penalty; (e) any
and all right of subrogation; (f) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other person or
persons or the failure of Landlord to file or enforce a claim against the estate
(in administration, bankruptcy or any other proceeding) of any other person or
persons; (g) any defense based upon an election of remedies by Landlord; (h) any
invalidity, irregularity or unenforceability, in whole or in part, of any one or
more provisions
<PAGE>
of the Lease; and (i) any defense based upon Sections 49-25 and/or 49-26 of the
Code of Virginia (1950), as amended.
6. Joint and Several Liability. Guarantor's liability shall be primary
---------------------------
and joint and several with that of Tenant, notwithstanding the fact that
Guarantor has had no prior notice of any default or of any forbearance or
extension. Landlord may proceed against Guarantor under this Guaranty without
initiating or exhausting any legal remedy against Tenant and may proceed against
Tenant and Guarantor separately or concurrently. This is a guaranty of payment
and not of collection.
7. Assignment by Landlord. Landlord may, without notice, assign this
----------------------
Guaranty in whole or in part and no assignment or transfer of the Lease shall
operate to extinguish or diminish the liability of the Guarantor hereunder.
8. Tenant's Affiliates. Landlord may enter into leases with Affiliates
-------------------
of Tenant. As an inducement to Landlord entering into leases with Tenant's
Affiliates: (a) Guarantor hereby unconditionally and irrevocably subordinates
all payments due or to become due by Tenant by reason of any and all debts and
other obligations, including the obligation to pay salaries or other
compensation, and (b) Guarantor, Tenant and Tenant's Affiliates shall not
receive or collect any payments, dividends, disbursements, distributions,
contributions or any other sums from Tenant or Tenant's Affiliates at any time
after an Event of Default has occurred under the Lease or any other lease
between Landlord and: (i) Tenant; (ii) any Affiliate of Tenant; (iii) Guarantor;
or (iv) any Affiliate of Guarantor.
9. Representations, Warranties and Covenants. Guarantor hereby
-----------------------------------------
represents, warrants and covenants to Landlord as follows:
(a) Change in Financial Condition. The financial statements of
-----------------------------
Guarantor, and the notes related thereto, included in the Form 10K for the
fiscal year ended December 31, 1998, and 10Q for the quarter ended March 31,
1999, present fairly the consolidated financial condition of Guarantor as of the
dates indicated and the results of the operations and changes in consolidated
cash flows for the periods specified; such financial statements have been
prepared in conformity with generally accepted accounting principles applied on
a consistent basis; and as of the date of this Guaranty, there has occurred no
material adverse change in the financial condition of Guarantor since the date
of such financial statements.
(b) Proceedings. There is no action, suit, litigation or proceeding
-----------
pending or, to the knowledge of Guarantor, threatened against the Tenants,
Guarantor, or the Premises that could reasonably be expected to have a material
adverse effect on the financial condition of Guarantor or its ability to execute
or deliver, or perform its obligations under, this Guaranty.
(c) Financial Statements. Guarantor shall provide Landlord and any
--------------------
mortgagee (as defined in the Lease), at the times set forth herein (or more
often as may be reasonably requested by Landlord), the following financial
information during the Lease Term (as defined in the Lease): (i) within forty-
five (45) days after the end of each fiscal quarter, Guarantor-prepared year-to-
date financial statements of Guarantor, prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied (the "Quarterly
Statements"); and (ii) within ninety (90) days after the end of each fiscal year
of Guarantor,
<PAGE>
annual financial statements prepared in accordance with GAAP, consistently
applied, audited or reviewed by an independent certified public accountant (the
"Annual Statements").
(d) EBTDAR to Rent Ratio Certification. Guarantor shall provide to
----------------------------------
Landlord, within forty-five (45) days after the end of each fiscal quarter, a
written calculation, prepared by Guarantor and certified by Guarantor's chief
financial officer, evidencing that Guarantor shall have maintained a EBTDAR to
Rent Ratio, during the past four (4) calendar quarters taken as a whole, of no
less than 1.5 to 1.0, based on the Quarterly Statements and Annual Statements
delivered to Landlord pursuant to Section 10.1(c) above. For purposes of this
Guaranty, "EBTDAR Ratio" shall mean the quotient of (i) the sum of Guarantor's
net income (computed in accordance with GAAP, consistently applied) plus (A)
income taxes, (B) all rent payable under all leases for real property and
improvements that Guarantor has agreed to guarantee ("Aggregate Rent
Obligations"), (C) depreciation and amortization, (D) the annual LIFO
adjustment, and (E) other non-cash expenses, less recurring capital expenditures
----
and principal payments under long-term debt, divided by (ii) the Aggregate Rent
Obligations. Guarantor shall provide to Landlord, within ten (10) days after
request, all evidence reasonably requested supporting the EBTDAR to Rent Ratio
calculations delivered to Landlord.
(e) Liquidity Ratio Certification. Guarantor shall provide to
-----------------------------
Landlord within forty-five (45) days after the end of each fiscal quarter, a
written calculation, prepared by Guarantor and certified by Guarantor's chief
financial officer, evidencing that Guarantor shall have maintained a Liquidity
Ratio during the past four (4) calendar quarters taken as a whole, of no less
than 1.25 to 1.00, based on the Quarterly Statements and Annual Statements
delivered to Landlord pursuant to Section 10.1(c) above. For purposes of this
Guaranty, "Liquidity Ratio" shall mean the ratio of current assets to current
liabilities, both computed in accordance with GAAP, consistently applied, except
that current liabilities shall mean all current liabilities, including all
floorplan borrowings, but excluding other indebtedness under short-term bridge
facilities and revolving credit agreements.
10. Miscellaneous.
-------------
(a) No Waiver;. All of Landlord's rights and remedies under the
---------
Lease and under this Guaranty are intended to be distinct, separate and
cumulative and no such right and remedy therein or herein mentioned is intended
to be in exclusion of or a waiver of any of the others. The failure of Landlord
to enforce any of the respective rights or remedies hereunder, or to promptly
enforce any such rights or remedies, shall not constitute a waiver thereof nor
give rise to any estoppel against Landlord nor excuse any of the parties hereto
from their respective obligations hereunder. Any waiver of such right or remedy
must be in writing and signed by the party to be bound and must expressly state
that such right or remedy has been or thereby is waived.
(b) Authority. Guarantor represents and warrants to Landlord that:
---------
(i) the execution and delivery of this Guaranty has been duly authorized by the
Board of Directors of Guarantor and constitutes Guarantor's valid and legally
binding agreement in accordance with its terms; (ii) the making of this Guaranty
does not require any vote or consent of shareholders of Guarantor; and (iii)
Tenant is an indirect, wholly owned subsidiary of Guarantor. Guarantor hereby
acknowledges and agrees that the Leases to Tenant is a direct material
<PAGE>
benefit to Guarantor, and that Landlord would not enter into the Lease without
the benefit of this Guaranty.
(c) Successors and Assigns. This Guaranty shall be legally binding
----------------------
upon Guarantor and its successors and assigns (but in the event of an
assignment, Guarantor shall not be relieved of its obligations hereunder) and
shall inure to the benefit of Landlord and its successors and assigns. Guarantor
hereby waives any acceptance of this Guaranty by Landlord and this Guaranty
shall immediately be binding upon Guarantor.
(d) Governing Law. This Guaranty shall be governed by the laws of
-------------
the Commonwealth of Virginia without regard to conflicts of laws principles
thereof.
(e) Reasonable Attorney's Fees. As used herein, the term "Reasonable
--------------------------
Attorney's Fees" shall mean reasonable attorney's fees actually incurred (based
on the actual number of hours worked by outside legal counsel and paralegals
multiplied by their usual and customary hourly rates then in effect) and actual
out-of-pocket legal expenses.
(f) Invalidity. The invalidity or unenforceability of any term here
----------
shall not affect the validity or enforceability of any other term.
(g) Waiver of Jury Trial. TO THE EXTENT ALLOWED BY APPLICABLE LAW,
--------------------
GUARANTOR AND LANDLORD HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE
RIGHT EITHER OF THEM OR THEIR HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS OR
ASSIGNS MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS GUARANTY OR ANY AGREEMENT CONTEMPLATED TO BE
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION
IS A MATERIAL INDUCEMENT TO LANDLORD'S ACCEPTING THIS GUARANTY.
(h) Terms. All capitalized terms used but not defined herein shall
-----
have the meaning designated to them in the Lease unless otherwise set forth
herein.
(i) Survival. This Agreement shall be deemed to be continuing in
--------
nature and shall remain in full force and effect and shall survive the exercise
of any remedy by Landlord under the Lease.
(j) No Subrogation; No Recourse Against Landlord. Notwithstanding
--------------------------------------------
the satisfaction by Guarantor of any liability hereunder, Guarantor's rights of
subrogation, contribution, reimbursement or indemnity, if any, or any right of
recourse to or with respect to the assets or property of Tenant, shall be
subject and subordinate to the rights of Landlord. Guarantor expressly agrees
not to exercise any and all rights of subrogation against Landlord.
(k) Amendment; Severability. Any amendments or modifications to
-----------------------
this Guaranty, in order to be effective, shall be in writing and executed by
Landlord and Guarantor. A determination that any provision of this Guaranty is
unenforceable or invalid shall not affect the enforceability or validity of any
other provision, and any determination that the application of any provision of
this Guaranty to any person or circumstance is illegal or
<PAGE>
unenforceable shall not affect the enforceability or validity of such provision
as it may apply to any other persons or circumstances.
(l) Notice. All notices, demands, requests or other communications
------
to be sent by one party to the other hereunder or required by law shall be in
writing and shall be deemed to have been validly given or served by delivery of
the same in person to the intended addressee, or certified mail or by depositing
the same with Federal Express or another reputable private courier service for
next business day delivery to the intended addressee at its address set forth in
the last section of this Agreement or at such other address as may be designated
by such party as herein provided. All notices, demands and requests shall be
effective upon such personal delivery, or one (1) business day after being
deposited with the private courier service, or two (2) business days after being
deposited in the United States mail as required above. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given as herein required shall be deemed to be receipt of
the notice, demand or request sent. By giving to the other party hereto at least
seven (7) days' prior written notice thereof in accordance with the provisions
hereof, each party shall have the right from time to time to change their
respective addresses and each shall have the right to specify as its address any
other address within the United States of America. The following addresses shall
be used for notice purposes:
If to Landlord: MMR Holdings, L.L.C.
c/o Capital Automotive REIT
1420 Spring Hill Road, Suite 525
McLean, Virginia 22102
Attn: Portfolio Manager
Facsimile: 703-288-3375
with a copy to: Shaw Pittman
2300 N Street, N.W.
Washington, D.C. 20037
Attn: Richard F. Williamson, Esq.
Facsimile: 202-663-8007
If to Guarantor: Sonic Automotive, Inc.
5401 E. Independence Blvd.
Charlotte, North Carolina 28212
Attn: Theodore M. Wright
Facsimile: 704-536-5116
(m) Captions for Convenience. The captions and headings of the
------------------------
section and paragraphs of this Guaranty are for convenience of reference only
and shall not be construed in interpreting the provisions hereof.
(n) Successive Actions. Separate and successive actions may be
------------------
brought hereunder to enforce any of the provisions hereof at any time and from
time to time. No action hereunder shall preclude any subsequent action, and
Guarantor hereby waives any covenants to the maximum extent permitted by law not
to assert any defense in the nature of splitting of causes of action or merger
of judgments.
<PAGE>
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[Signature Follows On Next Page]
<PAGE>
IN WITNESS WHEREOF, Guarantor, intending to be legally bound hereby, has
caused this Guaranty to be executed, sealed and delivered the date first written
above.
ATTEST: GUARANTOR:
SONIC AUTOMOTIVE, INC.,
a Delaware corporation
By: ____________________________ By: __________________________
Name: ____________________________ Name: __________________________
Its: ____________________________ Its: __________________________
Address:
5401 E. Independence Blvd.
Charlotte, NC 28212
Attn: Theodore M. Wright,
Chief Financial Officer
