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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CAPITAL AUTOMOTIVE REIT
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF CAPITAL AUTOMOTIVE APPEARS HERE]
March 25, 1999
Dear Shareholders:
On behalf of the Board of Trustees and employees of Capital Automotive REIT,
I cordially invite you to attend the 1999 Annual Meeting of Capital Automotive
REIT's shareholders. We will be holding the Annual Meeting on May 7, 1999 at
10:00 a.m. local time at The Ritz-Carlton Hotel of Tysons Corner, located at
1700 Tysons Boulevard, McLean, Virginia 22102.
Enclosed with this letter is a Notice of the Annual Meeting of Shareholders,
a Proxy Statement, a proxy card and a return envelope. Both the Notice of
Annual Meeting and the Proxy Statement provide details of the business that we
will conduct at the Annual Meeting and other information about Capital
Automotive REIT. Also enclosed with this letter is Capital Automotive REIT's
Annual Report to Shareholders for the fiscal year ended December 31, 1998.
At the 1999 Annual Meeting, we will ask you to:
. Elect ten Trustees;
. Approve amendments to our 1998 Equity Incentive Plan;
. Ratify the selection of Arthur Andersen LLP as independent accountants
for the fiscal year ending December 31, 1999; and
. Transact any other business that is properly presented at the Annual
Meeting.
Whether or not you plan to attend the Annual Meeting, please sign, date and
promptly return the proxy card in the enclosed prepaid return envelope. Your
shares will be voted at the Annual Meeting in accordance with your proxy
instructions. Of course, if you attend the Annual Meeting you may vote in
person. If you plan to attend the meeting, please mark the appropriate box on
the enclosed proxy card.
Sincerely,
/s/ John J. Pohanka
John J. Pohanka
Chairman of the Board
YOUR VOTE AT THE ANNUAL MEETING IS VERY IMPORTANT TO US.
Please Sign, Date and Return Your Proxy Card Before the Annual Meeting.
If you have any questions about voting your shares, please contact Lisa M.
Clements, Capital Automotive REIT, 1420 Spring Hill Road, Suite 525, McLean,
Virginia 22102, telephone no. (703) 288-3075.
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CAPITAL AUTOMOTIVE REIT
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date: Friday, May 7, 1999
Time: 10:00 a.m. local time
Place: The Ritz-Carlton Hotel of Tysons Corner
1700 Tysons Boulevard
McLean, Virginia 22102
Dear Shareholders:
At the 1999 Annual Meeting, we will ask you to:
. Elect ten Trustees;
. Approve amendments to our 1998 Equity Incentive Plan;
. Ratify the selection of Arthur Andersen LLP as independent accountants
for the fiscal year ending December 31, 1999; and
. Transact any other business that is properly presented at the Annual
Meeting.
You will be able to vote your shares at the Annual Meeting if you were a
shareholder of record at the close of business on March 10, 1999.
By Order of the Board of Trustees:
/s/ John M. Weaver
John M. Weaver
Secretary
March 25, 1999
YOUR VOTE AT THE ANNUAL MEETING IS VERY IMPORTANT.
PLEASE INDICATE YOUR VOTE ON THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ENCLOSED
ENVELOPE AS SOON AS POSSIBLE, EVEN IF YOU PLAN TO ATTEND THE MEETING.
IF YOU HAVE QUESTIONS ABOUT VOTING YOUR SHARES, PLEASE CONTACT
LISA M. CLEMENTS, CAPITAL AUTOMOTIVE REIT, 1420 SPRING HILL ROAD,
SUITE 525, MCLEAN, VIRGINIA 22102, TELEPHONE NO. (703) 288-3075
IF YOU ATTEND THE MEETING, YOU WILL BE ABLE TO REVOKE YOUR PROXY AND VOTE IN
PERSON.
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CAPITAL AUTOMOTIVE REIT
1420 Spring Hill Road, Suite 525
McLean, Virginia 22102
March 25, 1999
PROXY STATEMENT FOR ANNUAL MEETING
This Proxy Statement provides information that you should read before you
vote on the proposals that will be presented to you at the 1999 Annual Meeting
of the Shareholders of Capital Automotive REIT ("Capital Automotive" or the
"Company"). The 1999 Annual Meeting will be held on Friday, May 7, 1999 at
10:00 a.m. local time at The Ritz-Carlton Hotel of Tysons Corner, 1700 Tysons
Boulevard, McLean,Virginia 22102.
This Proxy Statement provides detailed information about the Annual Meeting,
the proposals you will be asked to vote on at the Annual Meeting, and other
relevant information.
On March 25, 1999 we began mailing information to people who, according to
our records, owned common shares of beneficial interest of Capital Automotive
at the close of business on March 10, 1999. We have mailed with that
information a copy of Capital Automotive REIT's Annual Report to Shareholders
for the fiscal year ended December 31, 1998.
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Table of Contents
<TABLE>
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Information About the 1999 Annual Meeting and Voting........................ 1
Proposals to be Presented at the Annual Meeting............................. 2
1. Election of Trustees................................................... 2
2. Approval of Amendments to the 1998 Equity Incentive Plan............... 3
3. Ratification of Arthur Andersen LLP as Independent Accountants......... 8
Share Ownership............................................................. 9
The Board of Trustees....................................................... 11
Executive Officers.......................................................... 14
Executive Compensation...................................................... 15
Executive Compensation Committee Report on Executive Compensation........... 18
Certain Relationships and Related Transactions.............................. 20
Other Information........................................................... 29
</TABLE>
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INFORMATION ABOUT THE 1999 ANNUAL MEETING AND VOTING
The Annual Meeting
The Annual Meeting will be held on Friday, May 7, 1999 at 10:00 a.m. local
time at The Ritz-Carlton Hotel of Tysons Corner, 1700 Tysons Boulevard, McLean,
Virginia 22102.
This Proxy Solicitation
We are sending you this Proxy Statement because Capital Automotive's Board
of Trustees is seeking a proxy to vote your shares at the Annual Meeting. This
Proxy Statement is intended to assist you in deciding how to vote your shares.
On March 25, 1999, we began mailing this Proxy Statement to all people who,
according to our shareholder records, owned shares at the close of business on
March 10, 1999.
Capital Automotive is paying the cost of requesting these proxies. Capital
Automotive's Trustees, officers and employees may request proxies in person or
by telephone, mail, telecopy or letter. Capital Automotive will reimburse
brokers and other nominees their reasonable out-of-pocket expenses for
forwarding proxy materials to beneficial owners of our common shares.
Voting Your Shares
You have one vote for each common share of Capital Automotive that you owned
of record at the close of business on March 10, 1999. The number of shares you
own (and may vote at the Annual Meeting) is listed on the enclosed proxy card.
You may vote your shares at the Annual Meeting either in person or by proxy.
To vote in person, you must attend the Annual Meeting and obtain and submit a
ballot. Ballots for voting in person will be available at the Annual Meeting.
To vote by proxy, you must complete and return the enclosed proxy card. By
completing and returning the proxy card, you will be directing the persons
designated on the proxy card to vote your shares at the Annual Meeting in
accordance with the instructions you give on the proxy card.
If you decide to vote by proxy, your proxy card will be valid only if you sign,
date and return it before the Annual Meeting.
If you complete the proxy card, except for the voting instructions, then
your shares will be voted FOR each of the Trustees identified on the proxy
card, FOR approval of the amendments to the 1998 Equity Incentive Plan and FOR
ratification of the selection of Arthur Andersen LLP as the independent
accountants of Capital Automotive for the 1999 fiscal year.
Revoking Your Proxy
If you decide to change your vote, you may revoke your proxy at any time
before it is voted. You may revoke your proxy in any one of three ways:
. You may notify the Secretary of Capital Automotive in writing that you
wish to revoke your proxy.
. You may submit a proxy dated later than your original proxy.
. You may attend the Annual Meeting and vote. Merely attending the Annual
Meeting will not by itself revoke a proxy; you must obtain a ballot and
vote your shares to revoke the proxy.
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Vote Required for Approval
YOUR VOTE AT THE ANNUAL MEETING IS VERY IMPORTANT TO US.
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Proposal 1: Election of The ten nominees for Trustee who receive the most
Ten Trustees votes will be elected. If you indicate "withhold
authority to vote" for a particular nominee on your
proxy card, your vote will not count either for or
against the nominee.
Proposal 2: Approval of The affirmative vote of a majority of the votes cast
Amendments to the 1998 at the Annual Meeting is required to approve the
Equity Incentive Plan amendments to the 1998 Equity Incentive Plan. If you
abstain from voting, your abstention will not count
as a vote cast for or against the proposal.
Proposal 3: Ratification The affirmative vote of a majority of the votes cast
of Selection of at the Annual Meeting is required to ratify the
Independent Accountants selection of independent accountants. If you abstain
from voting, your abstention will not count as a vote
cast for or against the proposal.
</TABLE>
If you hold your shares with a broker and you do not tell your broker how to
vote, your broker has the authority to vote on Proposals 1 and 3, but does not
have the authority to vote on Proposal 2. If you do not tell your broker how to
vote on Proposal 2, the effect will be that your vote will not count as a vote
cast for or against the proposal.
Quorum. On the record date for the Annual Meeting (March 10, 1999),
21,607,415 shares were issued and outstanding. A "quorum" must be present at
the Annual Meeting in order to transact business. A quorum will be present if
10,803,708 shares are represented at the Annual Meeting, either in person (by
the shareholders) or by proxy. If a quorum is not present, a vote cannot occur.
In deciding whether a quorum is present, abstentions and broker non-votes will
be counted as shares that are represented at the Annual Meeting.
Additional Information
Capital Automotive's Annual Report to Shareholders for the fiscal year ended
December 31, 1998, including consolidated financial statements, is being mailed
to all shareholders entitled to vote at the Annual Meeting together with this
Proxy Statement. The Annual Report does not constitute a part of the proxy
solicitation material. The Annual Report tells you how to get additional
information about Capital Automotive.
PROPOSALS TO BE PRESENTED AT THE ANNUAL MEETING
Capital Automotive will present the following three proposals at the Annual
Meeting. We have described in this proxy statement all the proposals that we
expect will be made at the Annual Meeting. If we or a shareholder properly
presents any other proposal to the meeting after March 23, 1999, Capital
Automotive will, to the extent permitted by applicable law, use your proxy to
vote your shares on the proposal in Capital Automotive's best judgment.
1.Election of Trustees
Nominees for election to the Board of Trustees are:
Thomas D. Eckert
Craig L. Fuller
William E. Hoglund
R. Michael McCullough
Lee P. Munder
John J. Pohanka
John E. Reilly
Robert M. Rosenthal
Vincent A. Sheehy
William R. Swanson
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Each Trustee will be elected to serve for a one-year term, or thereafter
until his replacement is elected and qualified or until his earlier resignation
or removal. Each of the ten nominees is presently a member of the Board of
Trustees and has consented to serve as a Trustee if re-elected. More detailed
information about each of the nominees is available in the section of this
booklet titled "The Board of Trustees," which begins on page 11.
If any of the nominees cannot serve for any reason (which is not
anticipated), the Board of Trustees may designate a substitute nominee or
nominees. If a substitute is nominated, we will vote all valid proxies for the
election of the substitute nominee or nominees. The Board of Trustees may also
decide to leave the board seat or seats open until a suitable candidate or
candidates are located, or it may decide to reduce the size of the Board.
Proxies for the Annual Meeting may not be voted for more than ten nominees.
The Board of Trustees unanimously recommends that you vote FOR these
Trustees.
2.Approval of Amendments to the 1998 Equity Incentive Plan
In 1998, the Executive Compensation Committee of the Board hired Watson
Wyatt Worldwide, an international benefits consulting firm, to review the
levels of compensation and the equity programs. Based in large part on Watson
Wyatt's recommendations, the Board has revised the 1998 Equity Incentive Plan
(the "1998 Plan") to create the form submitted to a vote of shareholders (the
"Amended Plan").
The Executive Compensation Committee and the Board have concluded that the
options for units of limited partnership interest ("units") of Capital
Automotive L.P. (the "Partnership") were more cumbersome and difficult to
understand than options for shares, even though the unit options could result
in the Company's issuing shares. Consequently, the Amended Plan would eliminate
unit options in exchange for share options (in this case, nonqualified share
options ("NQSOs")). The Amended Plan would also continue to permit "incentive
share options" ("ISOs," a form of option with special tax treatment we describe
below) and would add share grants (with restrictions), and a planned management
deferred compensation arrangement under which the Board expects to require the
executives to defer some of their bonus into "phantom" shares for a period of
time. Capital Automotive and its compensation consultants think this
combination of equity interests will provide better incentives than does the
1998 Plan. In addition, the Amended Plan will increase the number of shares
Capital Automotive can issue from 2,821,344 to 3,771,344, and provide, for tax
reasons, a limit on annual grants to any individual.
What follows is a summary of the 1998 Plan as it will be if the shareholders
approve the Amended Plan. The Company intends for this to be a fair and
complete summary of the Amended Plan, but we are also attaching the full text
of the Amended Plan as Exhibit A, which governs.
The Board and Capital Automotive's shareholders originally approved the 1998
Plan in February 1998, before, but effective as of, the effective date of
Capital Automotive's initial public offering. Under the 1998 Plan, employees of
either the Partnership or Capital Automotive, and Capital Automotive's non-
employee Trustees and other service providers, could receive options for units.
Employees of Capital Automotive could also receive ISOs. The 1998 Plan provided
a combined limit under options of 2,821,344, which would cover either units or
shares, depending upon the kind of option. An individual who exercised a unit
option would receive units that he could then, after meeting certain time
restrictions that no longer apply, cause the Partnership to buy back for cash
(except that Capital Automotive, as general partner, could cause him to receive
shares in place of the cash).
In February 1999, the Board approved amendments to the 1998 Plan, effective
at and contingent on shareholder approval at the 1999 Annual Meeting. As we
noted above, the Amended Plan would eliminate unit options in exchange for
share options. That change would provide easier, and less costly, compliance
with the securities laws and more understandable incentives and tax treatment.
(The Executive Compensation Committee also approved offering to current holders
of unit options a replacement NQSO at the same exercise
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price and other terms as any outstanding unit options those optionees choose to
surrender. The replacements will occur under the Amended Plan if the
shareholders approve the Amended Plan.) The Amended Plan also provides for
other forms of share-based incentives.
Summary of the Amended Plan
Purpose and Scope. Capital Automotive has used and intends to use the plan
to recruit, reward and retain employees, Trustees and certain service
providers. Under the Amended Plan, the Board's Executive Compensation Committee
(or, if it chooses, the Board) may grant options and other interests for up to
3,771,344 common shares. (As with the other numbers in this section of the
proxy, the limit will change to reflect any changes in the number of Capital
Automotive's common shares if Capital Automotive issues share dividends, splits
its shares or makes other specified changes.)
Plan Administration. The Amended Plan authorizes the Executive Compensation
Committee to administer the plan, unless the Board chooses to do so. (The term
"Administrator" will cover whichever body is administering the plan.) The
Administrator's authority includes granting options to purchase shares,
granting or selling shares for a nominal price with certain restrictions
("Restricted Shares"), selling share-related instruments at a discount
("Phantom Shares," discussed further below), determining which options are ISOs
and which are NQSOs, determining the exercise price of the options granted, and
exercising broad discretion to set or amend other terms.
Participants. The Administrator may grant options or Restricted Shares to
employees and Trustees (and other service providers), that total approximately
35 persons as of March 10, 1999. (We will refer to persons who receive options
as "optionees" and persons who receive either options, Restricted Shares or
Phantom Shares as "participants.") The Administrator may also grant options or
other awards to replace awards granted outside the Amended Plan, including
situations where Capital Automotive has acquired or merged with another entity.
Options. The Administrator can grant options (the right to purchase shares
at a fixed price for up to a fixed length of time). Those options can be either
NQSOs or ISOs. The primary difference between the two forms are that stricter
tax rules and limits apply to ISOs.
ISO Limits. Four limits apply to ISOs under the Amended Plan. The first is
that ISO treatment is limited based on when the options first become
exercisable--only the first $100,000 in common shares (valued as of the date of
grant) that becomes exercisable under an individual's ISOs in a given year will
receive ISO tax treatment. The second limitation is that the option price must
at least equal 100% of the fair market value of the shares on the date of grant
of the option. (The Amended Plan applies the same rule to NQSOs.) The third
limitation is that the option price for shareholders holding 10% or more of the
outstanding common shares must at least equal 110% of the fair market value of
the common shares. The fourth limitation, under the Amended Plan's terms, is
that an optionee cannot receive ISOs covering more than 120,000 common shares
in any calendar year.
NQSO and Other Limits. Under the Amended Plan, the Administrator cannot
grant NQSOs, Restricted Shares or Restricted Phantom Shares for more than
500,000 shares per individual in any calendar year. (Under a special transition
rule, that limit goes up to allow replacement of all outstanding unit options,
so that for 1999, the limit would be as high as 1,531,338, but the special
transition rule does not itself increase the total covered by options.)
Counting against this number would be any options or shares granted in a year
that expire or that the Administrator replaces within the same year. The
Amended Plan has an individual limit to assist compliance with the tax rule
described below that may limit executive compensation deductions.
Option Price. The exercise price for all options (the price someone must pay
for a common share of beneficial interest) is the market price when granted.
(As of March 10, 1999, the fair market value as defined in the Amended Plan was
$12.625 per share, based on that day's closing price.) Capital Automotive does
not receive separate consideration for the granting of options, other than the
services the participants provide, but
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will receive nominal consideration for Restricted Shares and a portion of the
fair market value for Phantom Shares.
Option Exercise and Transfer Restrictions. The Amended Plan provides special
restrictions on issuing shares if the issuance could cause Capital Automotive
to fail to qualify as a real estate investment trust or otherwise violate
Capital Automotive's Declaration of Trust. Except as executive officer
employment agreements otherwise provide, an optionee employee can normally only
exercise an option while employed by Capital Automotive and for 90 days after
employment ends. (Some executive officers can exercise their options for the
entire option term if a change of control occurs or in certain circumstances
when employment ends.) If a former employee violates an agreement not to
compete with Capital Automotive, his options will then expire. If an optionee
becomes disabled or dies, he or his estate will have up to 12 months to
exercise the option. An optionee cannot transfer his options other than to
someone after death.
Trustee Formula Options. The Amended Plan provides for an automatic grant of
a NQSO for 15,000 shares when a non-employee Trustee first joins the Board.
(The 1998 Plan provided for unit options.) These formula options become
exercisable one-third six months after the grant, another third a year after
the grant, and the final third two years after the grant. These options expire
if not already exercisable when a Trustee leaves the Board. The Amended Plan
also adds the ability for the Administrator to make discretionary grants of
other awards under the plan to Trustees, and those can be under different terms
than the formula options.
Option Expiration. Options will terminate no later than 10 years after their
date of grant. However, options intended to be ISOs under the 1998 Plan will
expire no later than five years after the date of grant if the optionee owns
(or is treated as owning) more than 10% of the outstanding shares. The
Administrator may not grant options under the Amended Plan after February 19,
2008.
Restricted Shares. As noted above, the Administrator can issue shares to
employees for par or some other payment. The Administrator can impose
performance targets or time periods or other restrictions before the employee
can keep the shares.
Restricted Phantom Shares. The Amended Plan also authorizes the
Administrator to sell, at a discount, Phantom Shares to certain employees for
compensation. The Board expects to use that authority to establish a management
deferred compensation/retention plan under which it will require some
executives to defer a minimum of 20% of their annual cash bonuses into Phantom
Shares and to permit the executives to defer an additional portion of their
bonuses the same way. (Phantom Shares keep track of the value of actual shares
but do not represent actually issued shares until the participant receives
payment under the plan, at which point he will receive shares.) The
Administrator will impose work-related restrictions on the circumstances in
which the employees can receive payment under the Phantom Shares.
Effects of Certain Changes of Control. The Amended Plan provides that option
exercisability will accelerate and restrictions will lapse if certain events
occur. As with the 1998 Plan, these "Changes of Control" generally occur if (i)
a person, entity or group acquires more than 40% of the total outstanding
shares, (ii) Capital Automotive merges into another entity, unless pre-merger
shareholders hold at least 60% of the combined voting power of securities after
the merger, or (iii) the shareholders approve liquidation or dissolution or
sale of substantially all Company assets, and that approved action occurs.
Under the Amended Plan, in certain additional circumstances, either an acquirer
must assume or replace the awards or the participants will have some period of
time before the transaction occurs to exercise options or take other actions
with respect to the awards after which time the Amended Plan will terminate.
Amendments and Termination. The Board may at any time suspend, terminate,
modify or amend the plan. No suspension, termination, modification or amendment
of the plan may adversely affect any award previously granted, unless the
participant consents.
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Tax Consequences
Nonqualified Share Options. An optionee will not be taxed when he receives a
NQSO. When he exercises a NQSO, he will generally owe taxes on ordinary income
on the difference between the value of the shares he receives and the price he
pays, with the "spread" treated like additional salary for an employee. He may
then owe taxes again if and when he sells the shares. That tax would be on the
difference between the price he received for the shares and his "basis," which
is the sum of the price he originally paid plus the value of the shares on
which he originally paid income taxes. Depending upon how long he held the
shares before selling, he may be eligible for favorable tax rates for certain
kinds of capital gains. In addition, the Partnership will receive an income tax
deduction for any amounts of "ordinary income" to him.
Incentive Share Options. An optionee will not be taxed when he receives an
ISO and will not be taxed when he exercises the ISO, unless he is subject to
the alternative minimum tax ("AMT"). If he holds the shares purchased upon
exercise of the ISO (the "ISO Shares") for more than one year after the date he
exercised the option and for more than two years after the option grant date,
he generally will realize long-term capital gain or loss (rather than ordinary
income or loss) when he sells or otherwise disposes of the ISO Shares. This
gain or loss will equal the difference between the amount realized upon such
disposition and the amount paid for the ISO Shares.
If the optionee sells the ISO Shares in a "disqualifying disposition" (that
is, within one year from the date he exercises the ISO or within two years from
the date of the ISO grant), he generally will recognize ordinary compensation
income equal to the lesser of (i) the fair market value of the shares on the
date of exercise minus the price he paid or (ii) the amount he realized on the
sale. For a gift or another disqualifying disposition where a loss, if
sustained, would not usually be recognized, he will recognize ordinary income
equal to the fair market value of the shares on the date of exercise minus the
price he paid. Any amount realized on a disqualifying disposition that exceeds
the amount treated as ordinary compensation income (or any loss realized) will
be a long-term or a short-term capital gain (or loss), depending, under current
law, on whether he held the shares for at least 12 months. The Partnership can
generally take a tax deduction on a disqualifying disposition corresponding to
the ordinary compensation income he recognizes but cannot deduct the amount of
the capital gain.
Alternative Minimum Tax. The difference between the exercise price and the
fair market value of the ISO Shares on the date of exercise is an adjustment to
income for purposes of the AMT. The AMT (imposed to the extent it exceeds the
taxpayer's regular tax) is a certain percentage of an individual taxpayer's
alternative minimum taxable income that is lower than the regular tax rates but
covers more income. Taxpayers determine their alternative minimum taxable
income by adjusting regular taxable income for certain items, increasing that
income by certain tax preference items, and reducing this amount by the
applicable exemption amount. If a disqualifying disposition of the ISO Shares
occurs in the same calendar year as exercise of the ISO, there is no AMT
adjustment with respect to those ISO Shares. Also, upon a sale of ISO Shares
that is not a disqualifying disposition, alternative minimum taxable income is
reduced when the taxpayer sells the ISO Shares by the excess of the fair market
value of the ISO Shares at exercise over the amount paid for the ISO Shares.
Restricted Share Awards. If a participant receives a Restricted Share award,
he will include the amount of the award in income as compensation at the time
that any forfeiture restrictions on such shares lapse unless he has already
made an election under Section 83(b) of the Internal Revenue Code of 1986, as
amended (the "Code") (an "83(b) election," discussed below). He will include in
income the fair market value of the shares on the date that the restrictions
lapse as to those shares, less any purchase price he paid for such shares. He
will treat the included amount as ordinary income, and it will be subject to
withholding by the Partnership (either by payment in cash or withholding out of
the award), and the Partnership can deduct the amount of the income.
If he makes an 83(b) election, he will include in income as ordinary income
the fair market value of the shares on the date of receipt of the award, less
any purchase price paid for such shares. The income will be subject to
withholding by the Partnership (either by payment in cash or withholding out
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of the award), and the Partnership can deduct the amount of the income. If the
award is subsequently forfeited, the participant will not receive any deduction
for the amount treated as ordinary income. Upon resale of any shares he
received, he can treat any subsequent appreciation or depreciation in the value
of the shares as capital gain or loss.
Phantom Shares. The Phantom Shares typically represent deferred
compensation. The participant would not ordinarily be taxed until he actually
receives payment under the Phantom Shares. At that time, he would have ordinary
compensation income, and the Partnership would have a deduction.
Potential Limitation on Company Deductions. Code Section 162(m) denies a
deduction to any publicly held corporation for compensation it pays to certain
employees in a taxable year to the extent that compensation exceeds $1.0
million for a covered employee. It is possible that compensation attributable
to awards under the Amended Plan, when combined with all other types of
compensation a covered employee receives for the year from the Partnership, may
cause this limitation to be exceeded in any particular year.
The tax rules disregard certain kinds of compensation, including qualified
"performance-based compensation," for purposes of the deduction limitation.
Compensation attributable to share options will qualify as performance-based
compensation, provided that: (i) the plan contains a per-employee limitation on
the number of shares for which options may be granted during a specified
period; (ii) the shareholders approve that per-employee limitation; (iii) the
option is granted by a compensation committee with voting members comprised
solely of "outside trustees or directors"; and (iv) either the exercise price
of the option is at least equal to the fair market value of the shares on the
date of grant, or the option is granted (or exercisable) only upon the
achievement (as certified by the compensation committee) of an objective
performance goal established by the compensation committee while the outcome is
substantially uncertain.
The above Tax Consequences section summarizes the general principles of
current federal income tax law applicable to the purchase of shares under the
Amended Plan. While we believe that the description accurately summarizes
existing provisions of the Code, and its legislative history and regulations,
and the applicable administrative and judicial interpretations, these
statements are only summaries, and the rules in question are quite detailed and
complicated. Moreover, legislative, administrative, regulatory or judicial
changes or interpretations may occur that would modify such statements.
Individual financial situations may vary, and state and local tax consequences
may be significant. Therefore, no one should act based on this description
without consulting his own tax advisors concerning the tax consequences of
purchasing shares under the Amended Plan and the disposing of those shares. In
addition, different rules may apply if the optionee is subject to foreign tax
laws or pays the exercise price using shares he already owns.
7
<PAGE>
New Plan Benefits
Other than the formula grants to non-employee Trustees, the Administrator
makes grants under the Amended Plan in its discretion. Consequently, we cannot
fully determine the amount or dollar value at this time. The following table
sets forth (i) the total number of options for units that we expect to replace
under the Amended Plan with options for shares, (ii) options for shares, the
granting of which are contingent on shareholder approval of the Amended Plan,
and (iii) Restricted Share grants that are also contingent on approval, with
the dollar value of each as of March 10, 1999 based on the closing price of the
shares on such date. We expect to grant additional options and Restricted
Shares under the Amended Plan, but those grants cannot be determined at this
time.
<TABLE>
<CAPTION>
Number of Awards to be
Dollar Value as of Granted under
Name and Position March 10, 1999 (1) the Amended Plan (#) (2)
----------------- ------------------ ------------------------
<S> <C> <C>
Thomas D. Eckert,.................. $147,179 1,149,066
President and Chief Executive
Officer (3)
Scott M. Stahr,.................... 51,091 587,288
Executive Vice President and Chief
Operating Officer (4)
Donald L. Keithley,................ 42,046 271,471
Executive Vice President of
Business Development (5)
David S. Kay,...................... 51,507 587,624
Vice President and Chief Financial
Officer (6)
Peter C. Staaf,.................... 51,507 241,204
Vice President and Treasurer (7)
John M. Weaver,.................... 51,507 191,204
Vice President, General Counsel
and Secretary (8)
Executive Group (9)................ 394,837 3,027,857
Non-Executive Trustee Group (10)... -- 105,000
Non-Executive Officer Employee
Group (11)........................ 142,070 193,656
</TABLE>
- --------
(1) The value for Restricted Shares is based on the difference between the
closing price on March 10, 1999 and the par value (with no discount for the
risk of forfeiture for the Restricted Shares). No value is shown for the
options as of March 10, 1999 because (i) the replacement options' exercise
price exceeded the closing price on March 10, 1999 and (ii) the new options
will have an exercise price equal to the closing price on the Annual
Meeting date, which cannot be determined as of March 10, 1999.
(2) Table does not include incentive share options the individuals already
hold.
(3) The total shown includes 1,031,338 shares under replacement options,
106,061 shares under new options and 11,667 in Restricted Shares.
(4) The total shown includes 546,420 shares under replacement options, 36,818
shares under new options and 4,050 in Restricted Shares.
(5) The total shown includes 237,835 shares under replacement options, 30,303
shares under new options and 3,333 in Restricted Shares.
(6) The total shown includes 546,420 shares under replacement options, 37,121
shares under new options and 4,083 in Restricted Shares.
(7) The total shown includes 200,000 shares under replacement options, 37,121
shares under new options and 4,083 in Restricted Shares.
(8) The total shown includes 150,000 shares under replacement options, 37,121
shares under new options and 4,083 in Restricted Shares.
(9) The total shown includes 2,712,013 shares under replacement options,
284,545 shares under new options and 31,299 in Restricted Shares.
(10) The total shown consists of 105,000 shares under replacement options.
(11) The total shown includes 80,000 shares under replacement options, 102,394
shares under new options and 11,262 in Restricted Shares.
The Board of Trustees unanimously recommends that you vote FOR the Amended
Plan.
3.Ratification of Arthur Andersen LLP as Independent Accountants
Arthur Andersen LLP has been our independent accountants since Capital
Automotive's inception in 1997. The Audit Committee and the Board of Trustees
believe that we should continue this relationship. Representatives from Arthur
Andersen will be available at the Annual Meeting to answer your questions and
make a statement if they desire.
The Board of Trustees unanimously recommends that you vote FOR this
proposal.
8
<PAGE>
SHARE OWNERSHIP
There were 21,607,415 common shares of Capital Automotive issued and
outstanding on March 10, 1999. The following table shows how many shares (or
securities redeemable or convertible or exercisable for shares) on a fully
converted basis were owned on March 10, 1999 (unless otherwise indicated in a
footnote) by (1) each person who owned more than 5% of the issued and
outstanding shares on a fully converted basis, (2) the Trustees and Trustee
nominees of Capital Automotive, (3) the Chief Executive Officer of Capital
Automotive, and (4) the other persons named in the "Executive Compensation--
Summary Compensation Table" on page 15. (In the remainder of this Proxy
Statement, we collectively will refer to the Chief Executive Officer and the
other persons listed in the Summary Compensation Table as the "named
officers.") The table also shows how many shares (calculated on the basis
described below) were owned by all of the Trustees and executive officers of
Capital Automotive together. For purposes of this table, "fully converted
basis" means common shares and securities redeemable or exercisable for common
shares that are currently redeemable or exercisable or that will become
redeemable or exercisable within 60 days of March 10, 1999. The number of
shares set forth below includes the number of (A) common shares the person
holds, (B) common shares the person could receive (if Capital Automotive elects
to issue shares (on a one-for-one basis) rather than pay cash) upon redemption
of units of the Partnership held by the person, (C) common shares the person
could receive on exercise of options for shares or options for units of the
Partnership held by the person, and (D) common shares the person could receive
on exercise of warrants for shares held by the person. The owners have sole
voting and investment power unless otherwise indicated. The address of the
Trustees and the named officers is c/o Capital Automotive, 1420 Spring Hill
Road, Suite 525, McLean, Virginia 22102.
<TABLE>
<CAPTION>
Number of Percent
Name and Address of Beneficial Owner Shares of Shares
------------------------------------ --------- ---------
<S> <C> <C>
Robert M. Rosenthal (1).................................. 4,058,966 15.81%
Friedman, Billings, Ramsey Group, Inc. (2)............... 3,194,909 13.96
1001 19th Street North
Arlington, Virginia 22209-1710
John J. Pohanka (3)...................................... 2,111,431 9.14
The Prudential Insurance Company of America (4).......... 1,180,600 5.46
751 Broad Street
Newark, New Jersey 07102-3777
Wallace R. Weitz and Company (5)......................... 1,090,000 5.04
1125 South 103 Street, Suite 600
Omaha, Nebraska 68124-6008
NewSouth Capital Management Inc. (6)..................... 1,546,760 7.16
1000 Ridgeway Loop Road, Suite 233
Memphis, Tennessee 38120
Thomas D. Eckert (7)..................................... 393,029 1.80
Scott M. Stahr (8)....................................... 150,441 *
David S. Kay (9)......................................... 143,273 *
Donald L. Keithley (10).................................. 73,127 *
John M. Weaver........................................... 5,000 *
Peter C. Staaf........................................... 10,000 *
Vincent A. Sheehy (11)................................... 340,555 1.55
Lee P. Munder (12)....................................... 55,000 *
R. Michael McCullough (12)............................... 11,000 *
Craig L. Fuller (12)..................................... 13,000 *
John E. Reilly (12)...................................... 11,000 *
William E. Hoglund (12).................................. 12,150 *
William R. Swanson (13).................................. 10,000 *
All Executive Officers and Trustees as a Group (15
Persons)................................................ 7,397,972 26.27
</TABLE>
9
<PAGE>
- --------
* Less than 1%.
(1) Mr. Rosenthal's ownership includes his direct and indirect ownership of
common shares of the Company, units of the Partnership and warrants
exercisable for shares. The number of shares and units owned is based on a
report on Schedule 13G filed with the Securities and Exchange Commission on
December 31, 1998. Mr. Rosenthal has sole voting and investment power
directly over 703,795 units of the Partnership and one common share (gifted
to Mr. Rosenthal by Mr. Eckert as a memento of the closing of Capital
Automotive REIT's initial public offering of common shares). The balance of
the units of the Partnership are held as follows: 106,425 units held by
Marion Rosenthal, his spouse; 28,000 units held by Mr. Rosenthal and his
spouse as tenants by the entirety; 144,619 units held by 750 North Glebe
Road Limited Partnership, of which Mr. Rosenthal is general partner;
182,887 units held by 3400 Columbia Pike Limited Partnership, of which Mr.
Rosenthal is general partner; 286,518 units held by R.P. Gaithersburg
Limited Partnership, of which Mr. Rosenthal is general partner; and
1,578,940 units held by 8525 Leesburg Pike Limited Partnership, of which
Mr. Rosenthal is general partner. In addition, Mr. Rosenthal has sole
voting and investment power over a warrant exercisable for 50,000 common
shares. Mr. Rosenthal has shared voting and investment power over a warrant
exercisable for 657,079 common shares that is held through a limited
liability company of which 99% of the ownership interests are held by a
grantor's retained annuity trust established by Mr. Rosenthal and 1% of the
ownership interests are owned by his spouse. Mr. Rosenthal disclaims voting
and investment power over 320,702 units held by relatives not living in his
home or held by employees of entities which he controls.
(2) Number of shares owned is based on a report on Schedule 13G/A filed with
the Securities and Exchange Commission on March 15, 1999. In the Schedule
13G/A, Friedman, Billings, Ramsey Group, Inc. reported beneficial ownership
of 1,917,115 common shares and a currently exercisable warrant for
1,277,794 common shares. Eric F. Billings, Emanuel J. Friedman and W.
Russell Ramsey may be deemed to indirectly beneficially own the common
shares and warrant by virtue of their positions as "control persons" of
Friedman, Billings, Ramsey Group, Inc. Friedman, Billings, Ramsey Group,
Inc. and Messrs. Billings, Friedman and Ramsey disclaim beneficial
ownership of all such common shares and the warrant for common shares. The
common shares and warrant are directly held as follows: 1,792,115 common
shares held by FBR Asset Investment Corporation, a REIT fund; 125,000
common shares held by an affiliated fund; and the warrant for 1,277,794
common shares held by Friedman, Billings, Ramsey & Co., Inc., all of whom
are related to Friedman, Billings, Ramsey Group, Inc. William R. Swanson, a
Trustee of Capital Automotive, is an Executive Vice President and the Chief
Operating Officer of FBR Asset Investment Corporation and a Managing
Director of Friedman, Billings, Ramsey & Co., Inc.
(3) Mr. Pohanka's ownership includes his direct and indirect ownership of
common shares of the Company, units of the Partnership and a warrant
exercisable for shares. The number of shares and units owned is based on a
report on Schedule 13G filed with the Securities and Exchange Commission on
January 13, 1999. Mr. Pohanka has sole voting and investment power directly
over a warrant exercisable for 707,079 common shares. The balance of the
common shares and units are held as follows: 5,250 common shares held by
Pohanka Grandchildren Trust; 616,239 common shares and 774,462 units held
by Pohanka Properties, Inc.; and 8,400 common shares held by Pohanka
Imports, Inc. The Pohanka Grandchildren Trust, of which John J. Pohanka is
the Trustee, has sole voting and investment power over its 5,250 common
shares. Pohanka Properties, Inc., of which John J. Pohanka is President,
has sole voting and investment power over its 616,239 common shares,
Pohanka Properties, Inc. shares investment power over the 774,462 common
shares which are potentially issuable to Pohanka Properties, Inc. upon
redemption of its 774,462 units (upon tender of the units by Pohanka
Properties, Inc. for redemption by the Partnership, Capital Automotive, in
its discretion, could assume the obligations of the Partnership to redeem
such units and, in its discretion, could redeem such units for common
shares, on a one-for-one basis, or cash). Pohanka Imports, Inc., of which
John J. Pohanka is the President, has sole voting and investment power over
its 8,400 common shares. Mr. Pohanka disclaims beneficial ownership of
7,000 common shares held by his spouse. Includes one common share gifted to
Mr. Pohanka by Mr. Eckert as a memento of the closing of Capital Automotive
REIT's initial public offering of common shares not reported on Schedule
13G.
(4) Number of shares owned is based on a report on Schedule 13G filed with the
Securities and Exchange Commission on February 2, 1999.
(5) Number of shares owned is based on a report on Schedule 13G filed with the
Securities and Exchange Commission on February 9, 1999.
(6) Number of shares owned is based on a report on Schedule 13G filed with the
Securities and Exchange Commission on February 11, 1999.
(7) Includes currently exercisable options for 6,667 common shares and 257,835
units.
(8) Includes currently exercisable options for 6,667 common shares and 136,605
units.
(9) Includes currently exercisable options for 6,667 common shares and 136,605
units.
(10) Includes currently exercisable options for 6,667 common shares and 59,459
units.
(11) Includes currently exercisable options for 10,000 units. Mr. Sheehy
indirectly owns 330,555 units of the Partnership, as follows: 241,755
units held by Sheehy Investments One Limited Partnership, of which Mr.
Sheehy is a limited partner with a 22.1% pecuniary interest; and 88,800
units held by Sheehy Investments Two, L.C., of which Mr. Sheehy is a
limited partner with an 18% pecuniary interest.
(12) Includes currently exercisable options for 10,000 units.
(13) Includes currently exercisable options for 10,000 units. Mr. Swanson, a
Trustee of Capital Automotive, is an Executive Vice President and the
Chief Operating Officer of FBR Asset Investment Corporation and a Managing
Director of Friedman, Billings, Ramsey & Co., Inc.
10
<PAGE>
THE BOARD OF TRUSTEES
The following table and biographical descriptions set forth the name, age
and principal occupations during the past five years for each nominee, and the
positions they currently hold with Capital Automotive. The information is as of
March 10, 1999 unless otherwise indicated.
<TABLE>
<CAPTION>
Name Age Position Trustee Since
---- --- -------- -------------
<C> <C> <S> <C>
John J. Pohanka (Y)(Z)........... 70 Chairman of the Board of February 1998
Trustees
Thomas D. Eckert (Z)............. 51 President and Chief
Executive Officer
and Trustee October 1997
Craig L. Fuller (X)(Y)........... 48 Trustee April 1998
William E. Hoglund (X)(Y)........ 64 Trustee February 1998
R. Michael McCullough (X)(Z)..... 60 Trustee April 1998
Lee P. Munder (Z)................ 53 Trustee April 1998
John E. Reilly (Y)(Z)............ 72 Trustee February 1998
Robert M. Rosenthal.............. 71 Trustee February 1998
Vincent A. Sheehy................ 40 Trustee April 1998
William R. Swanson (Z)........... 50 Trustee February 1998
</TABLE>
- --------
(X) Members of the Audit Committee
(Y) Members of the Executive Compensation Committee
(Z) Members of the Executive Committee
John J. Pohanka is the Chairman of the Board of Trustees of Capital
Automotive REIT. Mr. Pohanka has been involved in the automotive industry for
almost 50 years and is also the Chairman of the Pohanka Automotive Group.
Founded in 1919, the Pohanka Automotive Group is currently comprised of 11
dealerships, each of which is located in the greater Washington, D.C.
Metropolitan Area. The Pohanka Automotive Group's dealerships have received
numerous awards, including the Time Magazine Quality Dealer Award. Mr. Pohanka
has been active in a number of national and local industry and business groups
during his career including having served as a past President of the National
Automobile Dealers Association, a past President of the National Capitol Area
Automotive Trade Association and a past Chairman of the National Institute for
Automotive Service Excellence, a group which he co-founded.
Thomas D. Eckert is Capital Automotive's President and Chief Executive
Officer and is a member of the Board of Trustees joining Capital Automotive in
October 1997. From 1983 to 1997, Mr. Eckert was employed by Pulte Home
Corporation, the largest homebuilding firm in the U.S. Most recently, Mr.
Eckert served as President of Pulte's Mid-Atlantic Region, which included
oversight of the company's land acquisition, development and homebuilding
operations from Virginia to New Jersey. Prior to working at Pulte, Mr. Eckert
was employed with the public accounting firm of Arthur Andersen LLP for over
seven years. Mr. Eckert is a former director of PMH Mortgage Company and is
currently a director of 33 Munder Funds, a $7.0 billion mutual fund group, and
the Celotex Corporation, a building products manufacturing entity with $700.0
million in annual revenues. From November 1996 to November 1997, Mr. Eckert was
a director of the FBR Funds, a diversified family of two mutual funds
affiliated with Friedman, Billings, Ramsey & Co., Inc.
Craig L. Fuller has served as a member of the Board of Trustees of Capital
Automotive since April 22, 1998. From June 1996 to present, Mr. Fuller has
served as the Managing Director of Korn/Ferry International, an executive
recruiting firm. Prior to joining Korn/Ferry International, he was the Vice
Chairman of the public relations and consulting firm of Burson-Marsteller from
December 1995 to June 1996, and he was the Chairman of the Fuller Company, a
political consulting firm, from May 1995 to December 1995. From January 1992
until May 1995, Mr. Fuller served as a Senior Vice President in the Corporate
Affairs Division of Philip Morris Companies, Inc.
William E. Hoglund has served as a member of the Board of Trustees of
Capital Automotive since February 11, 1998. From 1956 until his retirement in
1994, Mr. Hoglund was employed by General Motors
11
<PAGE>
Corporation. At the time of his retirement in 1994, Mr. Hoglund was serving as
an Executive Vice President and member of the General Motors Corporation Board
of Directors. His previous assignments at General Motors Corporation included
serving as Corporate Comptroller, Chief Financial Officer, President of Saturn,
General Manager of the Pontiac Division, and Group Executive for the Buick-
Oldsmobile-Cadillac Group. Currently, Mr. Hoglund is a director of the Mead
Corporation, Detroit Diesel Corporation and the Sloan Foundation.
R. Michael McCullough has served as a member of the Board of Trustees of
Capital Automotive since April 22, 1998. Mr. McCullough was employed by Booz,
Allen & Hamilton Inc. from 1965 through 1996. He was the Chairman and Chief
Executive Officer of Booz, Allen & Hamilton Inc. from 1984 to 1992. From 1992
until his retirement in 1996, Mr. McCullough was the Senior Chairman of Booz,
Allen & Hamilton Inc. Currently, Mr. McCullough is a Director of O'Sullivan
Corporation, Host Marriott Services, Watson Wyatt Worldwide and National
Rehabilitation Hospital. Mr. McCullough is also Chairman of the Suburban
Hospital Foundation.
Lee P. Munder has served as a member of the Board of Trustees of Capital
Automotive since April 22, 1998. Currently, Mr. Munder is serving as the
Chairman of Munder Capital Management, an investment advisory firm. Mr. Munder
has been employed by Munder Capital Management since 1985 and focuses on the
strategic planning aspect of the company's business.
John E. Reilly has served as a member of the Board of Trustees of Capital
Automotive since February 11, 1998. Currently, Mr. Reilly is serving as a
consultant to American Isuzu Motors, Inc. From 1980 until his retirement in
1997, Mr. Reilly was employed by American Isuzu Motors, Inc. At the time of his
retirement, Mr. Reilly was serving as a Senior Executive Advisor. His previous
assignments at American Isuzu Motors, Inc. included serving as Chairman and
Senior Vice President.
Robert M. Rosenthal has served as a member of the Board of Trustees of
Capital Automotive since February 11, 1998. Mr. Rosenthal has been the Chairman
of the Rosenthal Automotive Organization since 1954. Mr. Rosenthal has been
involved in the automotive industry for 50 years and during that time has
founded more than 35 dealerships. He is currently a Director of the
Metropolitan Washington Airport Authority, First Virginia Bank and a Director
and Officer of the Phillips Collection. Rosenthal Automotive is currently
comprised of 15 dealerships located in the greater Washington, D.C.
Metropolitan Area. Rosenthal Automotive Organization has received numerous
awards including a Time Magazine Quality Dealer Award and the Award of
Distinction from Sports Illustrated and the American International Automobile
Dealer Association. He has served as past President of the Washington Area New
Automobile Dealers Association.
Vincent A. Sheehy has served as a member of the Board of Trustees of Capital
Automotive since April 22, 1998. Mr. Sheehy has been the President of Sheehy
Auto Stores since July 1, 1998. From 1991 to present, Mr. Sheehy has owned
and/or acted as General Manager or President of various Sheehy dealerships. Mr.
Sheehy was a member of the Nissan National Dealer Advisory Board and is a
member of the Nissan National Dealer Product Committee. Mr. Sheehy is a
Director of the Virginia Automobile Dealers Association and Secretary of the
Washington Area New Automobile Dealers Association.
William R. Swanson has served as a member of the Board of Trustees of
Capital Automotive since February 19, 1998. Mr. Swanson has been a Managing
Director of Friedman, Billings, Ramsey & Co., Inc., which is related to
Friedman, Billings, Ramsey Group, Inc., in its real estate investment banking
group, since February 1994. Since November 1998, Mr. Swanson has been an
Executive Vice President and the Chief Operating Officer of FBR Asset
Investment Corporation, a REIT fund. From November 1997 to November 1998, Mr.
Swanson was Chief Operating Officer of FBR Asset Investment Corporation. From
1993 to 1994, Mr. Swanson served as President of H.G. Smithy Company, Inc., a
full service commercial, multi-family and mortgage servicing real estate
company headquartered in Washington, D.C.
12
<PAGE>
Board Organization and Meetings
Board of Trustees. Capital Automotive is managed by a ten-member Board of
Trustees. The Board of Trustees met three times in person, held one telephonic
meeting and acted once by unanimous written consent in the fiscal year ended
December 31, 1998. Each of the current nominees attended at least 75% of the
total number of meetings of the Board of Trustees and meetings of the
committees of the Board of Trustees that he was eligible to attend.
Audit Committee. The Board of Trustees of Capital Automotive has established
an Audit Committee. The Audit Committee makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of Capital Automotive's
internal accounting controls. The Audit Committee met once in the fiscal year
ended December 31, 1998. Messrs. Fuller, Hoglund and McCullough are members of
the Audit Committee.
Executive Committee. The Board of Trustees of Capital Automotive has
established an Executive Committee. Subject to Capital Automotive's conflicts
of interest policies, the Executive Committee has been granted certain power to
authorize, on behalf of the full Board of Trustees, the execution of certain
contracts and agreements, including those related to the borrowing of money by
Capital Automotive. The Executive Committee may also authorize actions on
behalf of Capital Automotive in its capacity as general partner of Capital
Automotive L.P. The Executive Committee did not meet and acted once by
unanimous written consent in the fiscal year ended December 31, 1998. Messrs.
Eckert, McCullough, Munder, Pohanka, Reilly and Swanson are members of the
Executive Committee.
Executive Compensation Committee. The Board of Trustees of Capital
Automotive has established an Executive Compensation Committee. The Executive
Compensation Committee is responsible for establishing Capital Automotive's
compensation programs for executive officers. The President and Chief Executive
Officer makes recommendations to the Executive Compensation Committee for
consideration. The Executive Compensation Committee makes an independent
determination of the executive compensation (including any bonus or incentive
compensation) to be paid to each executive officer. The Executive Compensation
Committee met three times, held one telephonic meeting and acted twice by
unanimous written consent in the fiscal year ended December 31, 1998. Messrs.
Fuller, Hoglund, Pohanka and Reilly are members of the Executive Compensation
Committee.
Compensation of Trustees
Capital Automotive pays its Trustees who are not employees of Capital
Automotive $3,750 per calendar quarter for their services as Trustees. In 1998,
Capital Automotive paid each non-employee Trustee $11,250, or $3,750 per
quarter. Each non-employee Trustee (other than Messrs. Pohanka and Rosenthal)
also received a grant of options to purchase 15,000 units under the 1998 Plan
upon election or appointment to the Board of Trustees.
13
<PAGE>
EXECUTIVE OFFICERS
The following table and biographical descriptions set forth the name, age
and principal occupations during the past five years for each executive officer
who is not also a Trustee of Capital Automotive. The information is as of March
10, 1999, unless otherwise indicated:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Scott M. Stahr................... 42 Executive Vice President and Chief
Operating Officer
Donald L. Keithley............... 59 Executive Vice President of Business
Development
David S. Kay..................... 32 Vice President and Chief Financial
Officer
Peter C. Staaf................... 52 Vice President and Treasurer
John M. Weaver................... 39 Vice President, General Counsel and
Secretary
</TABLE>
The executive officers are elected by the Board of Trustees and hold office
until their successors are elected and qualify.
Scott M. Stahr is Capital Automotive's Executive Vice President and Chief
Operating Officer joining Capital Automotive in November 1997. From 1985 to
1997, Mr. Stahr was a Principal at LaSalle Partners, Inc., a Chicago-based
institutional real estate investment firm. In that role, Mr. Stahr was
responsible for sourcing, underwriting and negotiating acquisitions of office,
retail, parking and industrial properties. Mr. Stahr has also advised and
provided consulting services to corporate and institutional clients on the
acquisition, disposition and value enhancement of their real estate related
holdings. Prior to joining LaSalle Partners, Mr. Stahr was a practicing
attorney with a broad commercial litigation and real estate practice.
Donald L. Keithley is Capital Automotive's Executive Vice President of
Business Development joining Capital Automotive in November 1997. Prior to
joining Capital Automotive, Mr. Keithley was the J.D. Power and Associates
Partner in charge of Dealer Relations from 1984 to 1997. In 1996, Mr. Keithley
authored "The Revolution in Automotive Retailing: A Perspective of the New
Millennia," a book which addresses the rapidly evolving changes in the
dealership franchise system. He has given numerous presentations on this
subject to executives within the industry. Before his tenure at J.D. Power and
Associates, Mr. Keithley was employed by Toyota Motor Company and the Ford
Motor Company.
David S. Kay is Capital Automotive's Vice President and Chief Financial
Officer joining Capital Automotive in October 1997. Prior to joining Capital
Automotive, Mr. Kay was employed by the public accounting firm of Arthur
Andersen LLP in Washington, D.C. for approximately ten years. His areas of
expertise included emerging companies in the automotive, retail and
distribution industries. While at Arthur Andersen LLP, Mr. Kay provided clients
with consultation regarding mergers and acquisitions, business planning and
strategy, and equity financing. He also has several years of experience in
capital formation projects, roll-up transactions and initial public offerings
for motor vehicle dealerships across the nation. Mr. Kay has participated on a
NADA task force and has given presentations at NADA conventions, AICPA
conferences and at other industry seminars.
Peter C. Staaf is Capital Automotive's Vice President and Treasurer joining
Capital Automotive in October 1998. Prior to joining Capital Automotive, from
1997 to 1998, Mr. Staaf was Senior Vice President, head trader and manager of
fixed income at Ziegler Securities, a Chicago-based investment banking
boutique. In that role, Mr. Staaf was responsible for establishing the regional
mortgage trading and sales effort focused primarily on credit sensitive and
subordinated mortgage backed securities. From 1994 to 1997, Mr. Staaf was a
Managing Director of Cleary Gull Reiland & McDevitt, Inc. From 1991 to 1994,
Mr. Staaf served as Vice President of mortgage trading at Smith Barney Shearson
Incorporated. In his positions with Cleary Gull Reiland & McDevitt, Inc. and
Smith Barney Shearson Incorporated, Mr. Staaf had responsibility for
structuring, bidding, hedging and marketing non-agency pass throughs, whole
loans and managing secondary mortgage positions. He also served as President of
Pulte Financial Companies, Inc. for seven years and held a senior position at
Blunt Ellis and Loewi, Inc.
14
<PAGE>
John M. Weaver is Capital Automotive's Vice President, General Counsel and
Secretary joining Capital Automotive in July 1998. Mr. Weaver joined Capital
Automotive from Shaw, Pittman, Potts & Trowbridge, a 250-attorney, Washington
DC-based law firm where he was a partner concentrating on all aspects of real
estate law and transactional matters. As a member of Shaw Pittman's Real Estate
Group, nationally recognized for its work with REITs, Mr. Weaver focused
primarily on real estate developers, investors and lenders. Since joining Shaw
Pittman in 1991, Mr. Weaver had been involved in a number of acquisitions and
financings within the REIT sector. Prior to joining Shaw Pittman, Mr. Weaver
had been an associate attorney with Hazel & Thomas, P.C., Northern Virginia's
largest law firm.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation earned by Capital
Automotive's Chief Executive Officer and each of its five other most highly
compensated executive officers (the "named officers") who were serving as
executive officers on December 31, 1998. Capital Automotive was organized on
October 20, 1997 and did not conduct any operations prior to that date.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual -------------
Name and Principal Compensation Options (# All Other
Position Year Salary($) Bonus($) shares/units) Compensation($)(2)
------------------ ---- ------------ -------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Thomas D. Eckert,....... 1998 350,000 230,000 1,058,004 --
President and Chief 1997 65,175 -- -- --
Executive Officer
Scott M. Stahr,......... 1998 225,000 120,000 573,086 --
Executive Vice 1997 24,231 250,000(1) -- --
President and Chief
Operating Officer
Donald L. Keithley,..... 1998 200,000 100,000 264,501 --
Executive Vice 1997 15,128 -- -- --
President of Business
Development
David S. Kay,........... 1998 150,000 150,000 573,086 --
Vice President and 1997 33,172 -- -- --
Chief Financial
Officer
Peter C. Staaf,......... 1998 33,878 -- 200,000 --
Vice President and 1997 -- -- -- --
Treasurer
John M. Weaver,......... 1998 68,269 85,000 150,000 --
Vice President, 1997 -- -- -- --
General Counsel
and Secretary
</TABLE>
- --------
(1) In 1997, Mr. Stahr received a signing bonus of $250,000 to compensate him
for terminating his employment with his prior employer.
(2) Other annual compensation for each named officer totaled less than $50,000
and 10% of the total of annual salary and bonus reported for such named
officer.
15
<PAGE>
Share/Unit Option Grants in Last Fiscal Year
The following table sets forth the options granted to Capital Automotive's
named officers during the fiscal year ended December 31, 1998.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Share Price Appreciation
Individual Grants for Option Term
-------------------------------------------------------- --------------------------
Number of
Securities Percent of Total
Underlying Options Granted Exercise or
Options to Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Sh/Unit)(3) Date(4) 5% ($)(3)(5) 10% ($)(3)(5)
---- ---------- ---------------- -------------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas D. Eckert,
President and Chief
Executive Officer (1).. 1,058,004 35.2 15.00 2/19/08 9,980,595 25,292,788
Scott M. Stahr,
Executive Vice
President and Chief
Operating Officer (1).. 573,086 19.1 15.00 2/19/08 5,406,161 13,700,272
Donald L. Keithley,
Executive Vice
President of Business
Development (1)........ 264,501 8.8 15.00 2/19/08 2,495,149 6,323,197
David S. Kay, Vice
President and Chief
Financial Officer (1).. 573,086 19.1 15.00 2/19/08 5,406,161 13,700,272
Peter C. Staaf, Vice
President and Treasurer
(1).................... 200,000(6) 6.7 14.00 10/19/08 1,760,905 4,462,479
John M. Weaver, Vice
President, General
Counsel and
Secretary(2)........... 150,000(6) 5.0 13.75 6/22/08 1,297,095 3,287,094
</TABLE>
- --------
(1) The Board of Trustees has accelerated the exercise schedule for such
options causing them to become exercisable at a rate of 25% per year over
four years commencing on the first anniversary of the named officer's date
of hire.
(2) Options become exercisable 25% per year over four years commencing on the
first anniversary of the date of grant.
(3) Units issued on exercise of options may be redeemed by the holder. The
Partnership will redeem such units for cash, or Capital Automotive may
assume the obligation of the Partnership, and may redeem the units for
common shares, on a one-for-one basis, or cash.
(4) The expiration date of the options is ten years after the date of the
grant.
(5) The potential realizable value is reported net of the option price, but
before the income taxes associated with exercise. These amounts represent
assumed compounded rates of appreciation at 5% and 10% from the date of the
grant to the expiration date of the options.
(6) These options were issued outside the 1998 Plan pursuant to a written
option agreement with the named officer.
16
<PAGE>
Aggregated Option Exercises in Last Fiscal Year, and Fiscal Year-End Share/Unit
Option Values
As the following table reflects, none of Capital Automotive's named officers
exercised options in fiscal year 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares/Units Value December 31, 1998 Fiscal Year End
Acquired on Realized Exercisable/Unexercisable Exercisable/Unexercisable
Name Exercise (#) ($)(1) (2) ($)(5)
---- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Thomas D. Eckert,
President and Chief
Executive Officer (3).. -- -- 264,502/793,502 --/--
Scott M. Stahr,
Executive Vice
President and Chief
Operating Officer (3).. -- -- 143,272/429,814 --/--
Donald L. Keithley,
Executive Vice
President of Business
Development (3)........ -- -- 66,126/198,375 --/--
David S. Kay, Vice
President and Chief
Financial Officer (3).. -- -- 143,272/429,814 --/--
Peter C. Staaf, Vice
President and Treasurer
(3).................... -- -- --/200,000 --/175,000
John M. Weaver, Vice
President, General
Counsel and Secretary
(4).................... -- -- --/150,000 --/168,750
</TABLE>
- --------
(1) Based on the fair market value of Capital Automotive's common shares on the
date of exercise (the closing price) minus the exercise price and
multiplied by the number of securities acquired.
(2) Includes both "in-the-money" and "out-of-the-money" options. "In-the-money"
options are options with exercise prices below the market price of Capital
Automotive's common shares on December 31, 1998.
(3) The Board of Trustees has accelerated the exercise schedule for such
options causing them to become exercisable at a rate of 25% per year over
four years commencing on the first anniversary of the named officer's date
of hire.
(4) Options vest 25% per year over four years commencing on the first
anniversary of the date of grant.
(5) Based on the closing price of Capital Automotive's common shares on
December 31, 1998 ($14.875) minus the exercise price.
Employment Agreements
Capital Automotive and the Partnership have entered into employment
agreements with Messrs. Eckert, Stahr, Kay, Keithley and Weaver. Each agreement
currently terminates in October 2001 and provides that the executive officer
agrees to devote his full business time to the operation of Capital Automotive
(except as Capital Automotive otherwise agrees, including on behalf of the
Partnership). The employment agreement permits Capital Automotive to terminate
the executive officer's employment with appropriate notice for or without
cause. In general, cause is defined to include: (1) engaging in dishonesty
relating materially to performance of services or obligations contained in the
employment agreement; (2) conviction of any misdemeanor (other than minor
infractions) involving fraud, breach of trust, misappropriation or other
similar activity or any felony; (3) performance of duties in a grossly
negligent manner; or (4) wilful breach of the employment agreement in a manner
materially injurious to Capital Automotive. In addition, executives may resign
for good reason (generally defined in the employment agreement to include
Capital Automotive's failure to comply with such agreement's material terms,
the reduction of responsibilities and duties or, for Mr. Eckert, his
involuntary departure from the Board of Trustees), relocation or a change of
control. In general terms, a change of control occurs (1) if a person, entity
or group (with certain exceptions) acquires more than 40% of
17
<PAGE>
Capital Automotive's then outstanding voting securities, (2) if Capital
Automotive merges into another entity unless prior shareholders of Capital
Automotive have at least 60% of the combined voting power of the securities in
the merged entity, or (3) upon the liquidation or dissolution of Capital
Automotive or sale or disposition of substantially all of Capital Automotive's
assets.
If an executive officer's employment ends for any reason, Capital Automotive
will pay accrued salary, bonuses already determined, and other existing
obligations. In addition, if Capital Automotive terminates Messrs. Eckert,
Stahr, Kay and Keithley's employment without cause or any of them resigns for
good reason, Capital Automotive will be obligated to pay (1) a lump sum payment
of severance equal to 24 months' salary, (2) premiums for the period for group
health coverage, if any, to which he is entitled by law, and (3) a pro rata
annual bonus for the year of termination. Mr. Weaver is employed under similar
terms except that Capital Automotive would be obligated to pay a lump sum
payment of severance equal to 12 months' salary. Notwithstanding the foregoing,
Capital Automotive has not agreed to pay severance and provide the foregoing
benefits if the executive officer's employment ends because of expiration or
non-extension of his employment agreement.
While employed and for a one-year period after employment, Messrs. Eckert,
Stahr, Kay, Keithley and Weaver have agreed not to compete with Capital
Automotive by working with or investing in any enterprise engaged in forming or
operating dealerships or that invests primarily in dealerships or motor vehicle
related businesses or properties used by dealerships or related businesses or
that provides real estate financing to dealerships or related businesses (with
a special exception for legal services Mr. Weaver may provide during that
period).
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy. Our goal is to design and administer an executive
compensation program to (i) attract and retain qualified executive officers,
(ii) reward executive officers for superior performance in achieving Capital
Automotive's business objectives and enhancing shareholder value, (iii) align
the executive officers' interests with those of the shareholders, and (iv)
provide incentives for the creation of long-term shareholder value. The key
elements of executive compensation are base salary, annual incentive and
performance bonuses and equity options. The Committee reviews and approves
Capital Automotive's policies and practices regarding executive compensation,
including (a) base salary levels, (b) incentive compensation plans and related
performance awards, and (c) long-term incentives, principally equity option
awards. As part of this review, the Committee decides what portion of the
salary and other compensation appropriately belongs with the Partnership and
what portion is an expense of Capital Automotive. (For purposes of this report,
and as a reflection of economic reality, we describe the combined compensation
from the Partnership and Capital Automotive.)
Pre-Public Actions. The employment contracts and compensation for Messrs.
Eckert, Stahr, Keithley and Kay were established before Capital Automotive
completed its public offering. The compensation decisions were made in
consultation with Capital Automotive's financial advisers and managing
underwriter for the initial public offering.
Base Salary Levels. We believe that base salary levels at Capital Automotive
are reasonably related to the salary levels of executive officers of comparable
real estate investment trusts at similar stages of development. We set base
salaries and determined other compensation for 1998 based on those factors. We
also believe that the current base salary levels of our executive officers take
into account the unique talents and skills of our executive officers. The
senior executives have employment agreements that set floors on base salary and
other elements of compensation for their contract terms, but the Committee can
increase the base salary at any point. We expect that any such increases will
take into account such factors as individual past performance, changes in
responsibilities, changes in pay levels of companies deemed comparable by the
Committee, and inflation.
Bonus Awards. Capital Automotive uses performance bonuses to reflect the
level of involvement and success of its executive officers in advancing
corporate goals. The awards earned depend on the extent to which
18
<PAGE>
Capital Automotive and individual performance objectives are achieved. Capital
Automotive's objectives consist of operating, strategic and financial goals
that are considered to be critical to our fundamental long-term goal of
building shareholder value. For fiscal year 1998, these objectives were: (i)
evaluating, negotiating and reaching agreement as to the initial properties as
Capital Automotive advanced toward its public offering; (ii) effective
implementation of the planned growth of Capital Automotive; (iii) continued
advances toward project goals in property acquisition and management; (iv)
progress in certain financial and administrative activities; and (v)
achievement of superior total shareholder return as compared to Capital
Automotive's peer group. The Committee awarded $685,000 in bonuses to named
officers for fiscal year 1998.
Long-Term Incentive Compensation. The Board and shareholders approved the
1998 Equity Incentive Plan as the principal means of providing long-term
incentives. The Committee believes that the use of equity incentives aligns the
interest of executive officers with those of shareholders and promotes long-
term shareholder value better than does cash alone. The Committee administers
the 1998 Plan, and determines the terms of the options and the number of option
grants. In 1998, the Committee hired Watson Wyatt to review the levels of
compensation and the equity programs, and the Board has used Watson Wyatt's
recommendations to redesign the 1998 Plan.
Compensation of the Chief Executive Officer. The Committee intends to use
the same procedures described above in setting the annual salary, bonus and
long-term incentive compensation of the Chief Executive Officer (the "CEO").
The Board had established the CEO's salary for this report's period by contract
before the public offering and had granted him unit options and incentive share
options for a total of 1,058,004 shares and units at $15.00 per equity interest
in fiscal year 1998. The Committee approved his 1998 bonus award of $230,000.
In doing so, the Committee used the Watson Wyatt study and considered Capital
Automotive's satisfaction of performance goals such as achievement of superior
funds from operations ("FFO") and, as compared to its peer group, total
shareholder return, and key subjective factors such as the CEO's continued
success in building a solid base of automotive dealership properties, creating
a solid, efficient officer group and staff to manage the rapid expansion, and
recruiting and retaining highly qualified executives. In awarding any future
long-term incentive compensation, the Committee will consider the CEO's
performance, overall contribution to Capital Automotive, retention of
employees, and achievement of superior FFO growth per share and total
shareholder return, as compared to its peer group.
Compensation Deduction Limit. The Securities and Exchange Commission (the
"SEC") requires that this report comment on Capital Automotive's policy with
respect to a special rule under the tax laws, Section 162(m) of the Code. That
section can limit the deductibility on a Subchapter C corporation's federal
income tax return of compensation of $1.0 million to any of the executive
officers. (Most public companies are Subchapter C corporations, but Capital
Automotive is not, so we describe the difference below.)
19
<PAGE>
A company can deduct compensation (including from exercising options)
outside that limit if it pays the compensation under a plan that its
shareholders approve and that is performance-related and non-discretionary.
Option exercises are typically deductible under such a plan if granted with
exercise prices at or above the market price when granted. The Committee's
policy with respect to this section is to make every reasonable effort to
ensure that compensation complies with Section 162(m), while simultaneously
providing Capital Automotive's executives with the proper incentives to remain
with and increase the prospects of Capital Automotive. We note that Section
162(m) does not affect Capital Automotive as directly as it does Subchapter C
corporations, because Capital Automotive does not ordinarily pay taxes.
Instead, if optionees buy a large number of shares at the same time by
exercising options, Capital Automotive might not be able to deduct all of the
compensation income from those purchases. That loss of deduction could increase
the amount that Capital Automotive must distribute to its shareholders, which
might mean it would need to borrow to make distributions. Given the way we
administer the incentive plan, we think it is unlikely that this result will
occur. Capital Automotive did not pay any compensation with respect to 1998
that would be outside the limits of Section 162(m).
Executive Compensation Committee
John E. Reilly, Chairman
Craig L. Fuller
William E. Hoglund
John J. Pohanka
Compensation Committee Interlocks and Insider Participation
Messrs. Reilly, Fuller, Hoglund, and Pohanka have never been officers or
employees of Capital Automotive. See "Certain Relationships and Related
Transactions" for a discussion of Capital Automotive's transactions with Mr.
Pohanka.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended December 31, 1998, Capital Automotive or its
subsidiaries, including the Partnership and its subsidiaries, entered into the
following transactions involving an executive officer, Trustee or 5% or greater
shareholder (on a fully converted basis, as if units that are eligible for
redemption beginning on February 19, 1999 were redeemed by Capital Automotive
for common shares on a one-for-one basis):
Trustees
John J. Pohanka. John J. Pohanka joined the Board of Trustees of Capital
Automotive as Chairman of the Board on February 11, 1998. On February 19, 1998,
Capital Automotive issued a warrant to John J. Pohanka exercisable for 638,897
units of the Partnership at an exercise price of $15.00 per share, exercisable
beginning on February 19, 1998 until February 19, 2003. On March 12, 1998, the
number of units for which the warrant was exercisable increased by 68,182 units
to a total of 707,079 units. As of December 30, 1998, Capital Automotive
exchanged the warrant for 707,079 units held by Mr. Pohanka for a warrant
exercisable for 707,079 common shares at an exercise price of $15.00 per share
on identical terms as the warrant for units. The warrant for units has been
cancelled.
On February 19, 1998, Capital Automotive closed its initial public offering
of common shares at a price of $15.00 per share. Pohanka Properties, Inc.
acquired a total of 136,760 common shares at a purchase price of $13.95 per
share (which price was net of the 7% underwriting discounts and commissions).
The John J. Pohanka Trust owns 15.937% of the stock of Pohanka Properties, Inc.
(having an indirect pecuniary interest in 21,795 common shares). John J.
Pohanka is the Trustee of The John J. Pohanka Trust. Mr. Pohanka's children,
Geoffrey P. Pohanka, Susan Pohanka Schantz and Brian C. Pohanka own,
respectively, 44.156%, 38.938% and .969% of Pohanka Properties, Inc. (having
indirect pecuniary interests in 60,388, 53,252 and 1,325 common shares,
respectively). Pohanka Properties, Inc. is an "S" corporation. Pohanka Virginia
Properties Partnership,
20
<PAGE>
of which Mr. Pohanka was a general partner, acquired 58,612 common shares at a
purchase price of $13.95 per share (which price was net of the 7% underwriting
discounts and commissions). John J. Pohanka owned 4% of Pohanka Virginia
Properties Partnership (having a pecuniary interest in 2,344.48 common shares),
and Mr. Pohanka's children, Brian C. Pohanka, Geoffrey P. Pohanka and Susan
Pohanka Schantz, owned, respectively, 10%, 32% and 32% of Pohanka Virginia
Properties Partnership (having a pecuniary interest in 5,861.2, 18,755.84 and
18,755.84 common shares, respectively). Mr. Pohanka ceased to be a general
partner of Pohanka Virginia Properties Partnership when it was reorganized on
April 2, 1998 into a limited liability company, Pohanka Virginia Properties,
L.L.C. Mr. Pohanka is not a controlling member of Pohanka Virginia Properties,
L.L.C. Each of John J. Pohanka and Mr. Pohanka's children owns the same
percentage of Pohanka Virginia Properties, L.L.C. as he owned of Pohanka
Virginia Properties Partnership.
On February 19, 1998, entities related to Mr. Pohanka contributed real
estate and improvements to Capital Automotive L.P. for a total acquisition cost
of $31,480,809 as follows:
<TABLE>
<CAPTION>
Allocation of Acquisition Cost
---------------------------------
Total Assumption and
Acquisition Repayment of Number of
Selling Group Cost(1) Cash Mortgage Debt Units(2)(3)
------------- ----------- -------- -------------- ---------
<S> <C> <C> <C> <C>
Pohanka Automotive Group....... $31,480,809 $695,809 $13,382,514 1,160,162
</TABLE>
- --------
(1) Includes acquisition closing costs allocated by the Partnership to these
transactions.
(2) The units were issued based on a price of $15.00 per unit.
(3) Beginning on February 19, 1999, the units are eligible to be redeemed by
the Partnership at the request of the unit holder. Capital Automotive may
assume the obligation of the Partnership to redeem the units for cash or
common shares. Capital Automotive could exchange units for common shares on
a one-for-one basis.
Set forth below is certain information relating to the properties acquired
from entities related to Mr. Pohanka:
<TABLE>
<CAPTION>
Acquisition
Dealerships(1) Location Cost(1)
-------------- -------- -----------
<S> <C> <C>
Pohanka Acura & Chevrolet/GEO................... Chantilly, VA $ 7,675,339
Pohanka Saturn/Isuzu Oldsmobile & GMC Truck..... Marlow Heights, MD 4,363,392
Pohanka Saturn.................................. Bowie, MD 4,105,376
Pohanka Honda................................... Marlow Heights, MD 3,705,822
Pohanka Lexus................................... Chantilly, VA 3,440,286
Pohanka Cadillac, Hyundai, Nissan & Kia......... Fredericksburg, VA 3,444,486
Pohanka Undeveloped Dealership Lot.............. Chantilly, VA 2,461,943
Pohanka Hyundai & Subaru........................ Marlow Heights, MD 1,571,392
Pohanka Body Shop............................... Marlow Heights, MD 712,773
-----------
Total....................................... $31,480,809
===========
</TABLE>
- --------
(1) Includes acquisition closing costs allocated by the Partnership to these
transactions.
On February 19, 1998, Pohanka Properties, Inc. acquired a total of 774,462
units of the Partnership at $15.00 per unit as part of the acquisition cost for
properties contributed to the Partnership. A portion of the cash allocated to
the acquisition cost represents closing costs paid on behalf of Pohanka
Properties, Inc. The John J. Pohanka Trust owns 15.937% of the stock of Pohanka
Properties, Inc. (having an indirect pecuniary interest in approximately
123,426 units). Mr. Pohanka's children, Geoffrey P. Pohanka, Susan Pohanka
Schantz and Brian C. Pohanka owns, respectively, 44.156%, 38.938% and .969% of
the stock of Pohanka Properties, Inc. (having indirect pecuniary interests in
approximately 341,971, 301,560 and 7,505 units, respectively).
21
<PAGE>
On February 19, 1998, Pohanka Virginia Properties Partnership, of which Mr.
Pohanka was a general partner, acquired 385,700 units of the Partnership at
$15.00 per unit as part of the acquisition cost for properties contributed to
the Partnership. A portion of the cash allocated to the acquisition cost
represents closing costs paid on behalf of Pohanka Virginia Properties
Partnership. John J. Pohanka owned 4% of Pohanka Virginia Properties
Partnership (having a pecuniary interest in 15,428 units) and Mr. Pohanka's
children, Geoffrey P. Pohanka, Susan Pohanka Schantz and Brian C. Pohanka
owned, respectively, 32%, 32% and 10% of Pohanka Virginia Properties
Partnership (having indirect pecuniary interests in 123,424, 123,424 and 38,570
units, respectively). Mr. Pohanka ceased to be a general partner of Pohanka
Virginia Properties Partnership when it was reorganized on April 2, 1998 into a
limited liability company, Pohanka Virginia Properties, L.L.C. Mr. Pohanka is
not a controlling member of Pohanka Virginia Properties, L.L.C. Each of John J.
Pohanka and Mr. Pohanka's children owns the same percentage of Pohanka Virginia
Properties, L.L.C. as he owned of Pohanka Virginia Properties Partnership.
In connection with the acquisitions of the properties on February 19, 1998,
the Partnership assumed and paid in full debt as follows: (1) Pohanka
Properties, Inc. was relieved of an aggregate of $9,372,406 of bank debt under
several loans from NationsBank, N.A., and (2) Pohanka Virginia Properties
Partnership was relieved of an aggregate of $4,010,108 of bank debt under
several loans from NationsBank, N.A.
Capital Automotive has leased the properties acquired from entities related
to Mr. Pohanka back to other entities related to Mr. Pohanka as follows:
<TABLE>
<CAPTION>
Annual
Lessees (Dealerships)(1) Location Base Rent
------------------------ -------- ---------
<S> <C> <C>
Pohanka Properties, Inc. (Chevrolet/GEO and
Acura)(2)...................................... Chantilly, VA $ 839,549
Pohanka Properties, Inc. (Saturn, Isuzu,
Oldsmobile and GMC Truck)(2)................... Marlow Heights, MD 475,608
Pohanka Virginia Properties, L.L.C.
(Saturn)(3).................................... Bowie, MD 447,171
Pohanka Properties, Inc. (Honda) (2)............ Marlow Heights, MD 406,575
Pohanka Properties, Inc. (Lexus) (2)............ Chantilly, VA 377,366
Pohanka Virginia Properties, L.L.C. (Cadillac,
Hyundai, Nissan, Oldsmobile & Kia) (3)......... Fredericksburg, VA 377,830
Pohanka Virginia Properties, L.L.C. (Undeveloped
Dealership Lot) (3)............................ Chantilly, VA 270,008
Pohanka Properties, Inc. (Hyundai & Subaru)(2).. Marlow Heights, MD 171,787
Pohanka Properties, Inc. (Body Shop)(2)......... Marlow Heights, MD 77,340
----------
Total....................................... $3,443,234
==========
</TABLE>
- --------
(1) Each lease with an affiliate of Pohanka Automotive Group has been
guaranteed by each other lessee and dealership affiliated with Pohanka
Automotive Group.
(2) Owned by The John J. Pohanka Trust (15.937%) and Mr. Pohanka's children,
Geoffrey P. Pohanka (44.156%), Susan Pohanka Schantz (38.938%) and Brian C.
Pohanka (.969%).
(3) Owned by John J. Pohanka (4%) and Mr. Pohanka's children, Geoffrey P.
Pohanka (32%), Susan Pohanka Schantz (32%) and Brian C. Pohanka (10%).
Robert M. Rosenthal. Robert M. Rosenthal joined the Board of Trustees of
Capital Automotive on February 11, 1998. On February 19, 1998, Capital
Automotive issued a warrant to Robert M. Rosenthal exercisable for 638,897
units at an exercise price of $15.00 per share, exercisable beginning on
February 19, 1998 until February 19, 2003. On March 12, 1998, the number of
units for which the warrant was exercisable increased by 68,182 units to a
total of 707,079 units. In September 1998, Mr. Rosenthal and his spouse
completed a series of independent transfers that resulted in Mr. Rosenthal
owning a warrant exercisable for 50,000 units and Rosenthal & Daughters L.L.C.
owning a warrant exercisable for 657,079 units. The outstanding limited
liability company interests of Rosenthal & Daughters L.L.C. are 99% owned by a
grantor retained annuity trust (Robert M. Rosenthal Annuity Trust Number One)
established by Mr. Rosenthal and 1% owned by Mr. Rosenthal's spouse. As of
December 31, 1998, Capital Automotive exchanged a warrant
22
<PAGE>
exercisable for 50,000 units held by Mr. Rosenthal for a warrant exercisable
for 50,000 common shares. As of December 31, 1998, Capital Automotive exchanged
a warrant exercisable for 657,079 units held by Rosenthal & Daughters L.L.C.
for a warrant exercisable for 657,079 common shares. The warrants for common
shares are exercisable at a price of $15.00 per share and have identical terms
as the warrants for units. The warrants for units have been cancelled.
On February 19, 1998, Mr. Rosenthal and entities related to Mr. Rosenthal
contributed real estate and improvements to Capital Automotive L.P. for a total
acquisition cost of $65,256,231 as follows:
<TABLE>
<CAPTION>
Allocation of Acquisition Cost
-----------------------------------
Total Assumption and
Acquisition Repayment of Number of
Selling Group Cost (1) Cash Mortgage Debt Units(2)(3)
------------- ----------- ---- -------------- -----------
<S> <C> <C> <C> <C>
Rosenthal Automotive
Organization................. $65,256,231 $745,560 $14,232,309 3,351,886
</TABLE>
- --------
(1) Includes acquisition closing costs allocated by the Partnership to these
transactions.
(2) The units were issued based on a price of $15.00 per unit.
(3) Beginning on February 19, 1999, the units are eligible to be redeemed by
the Partnership at the request of the unitholder. Capital Automotive may
assume the obligation of the Partnership to redeem the units for cash or
common shares. Capital Automotive could redeem units for common shares on a
one-for-one basis.
Set forth below is certain information relating to the properties acquired
from Mr. Rosenthal and entities related to Mr. Rosenthal:
<TABLE>
<CAPTION>
Acquisition
Dealerships Location Cost (1)
----------- -------- -----------
<S> <C> <C>
Rosenthal Infiniti Mazda/Nissan.................. Tysons Corner, VA $23,843,104
Rosenthal Nissan Acura, Mazda & Isuzu............ Gaithersburg, MD 11,809,094
Rosenthal Honda & Jaguar......................... Tysons Corner, VA 11,449,101
Rosenthal Chevrolet & Jeep....................... Arlington, VA 6,792,709
Rosenthal Mazda.................................. Arlington, VA 5,367,927
Rosenthal Storage Lot............................ Arlington, VA 4,909,219
Rosenthal Body Shop.............................. Tysons Corner, VA 1,085,077
-----------
Total........................................ $65,256,231
===========
</TABLE>
- --------
(1) Includes acquisition closing costs allocated by the Partnership to these
transactions.
On February 19, 1998, Geneva Enterprises, Inc. ("Geneva") acquired a total
of 228,823 units of the Partnership at $15.00 per unit as part of the
acquisition cost for properties contributed to the Partnership. A portion of
the cash allocated to the acquisition cost represents closing costs paid on
behalf of Geneva. Effective on October 8, 1998, Geneva Enterprises, Inc.
distributed, in the form of a dividend in kind, these units on a pro rata basis
to its stockholders. Based on the following ownership of Geneva, Mr. Rosenthal
and his family members received the following units: (1) Mr. Rosenthal owns
approximately 58.660% of Geneva and received 134,228 units; (2) Mr. Rosenthal's
spouse, Marion Rosenthal, owns approximately 1.248% of Geneva and received
2,856 units; and (3) Mr. Rosenthal's daughters, Brooke E. Peterson, Jane R.
Cafritz and Nancy L. Rosenthal each owns approximately 8.838% of Geneva and
received 20,222 units. The remaining units were distributed to certain
employees of Geneva who are not otherwise related to Mr. Rosenthal or his
family members.
The remaining 3,123,063 units of the Partnership issued at $15.00 per unit
as part of the acquisition cost for the properties listed above were issued as
follows: (A) 569,567 units to Mr. Rosenthal; (B) 103,569 units to his spouse,
Marion Rosenthal; (C) 28,000 units to Mr. Rosenthal and Marion Rosenthal, as
tenants by the entirety;
23
<PAGE>
(D) 76,321 units to each of Brooke E. Peterson, Jane R. Cafritz and Nancy L.
Rosenthal, Mr. Rosenthal's children; (E) 144,619 units to 750 North Glebe Road
Limited Partnership; (F) 182,887 units to 3400 Columbia Pike Limited
Partnership; (G) 286,518 units to R.P. Gaithersburg Limited Partnership; and
(H) 1,578,940 units to 8525 Leesburg Pike Limited Partnership.
In connection with the acquisitions of the properties on February 19, 1998,
the Partnership assumed and paid in full debt as follows: (1) Mr. Rosenthal,
his spouse, Marion Rosenthal, and his children, Nancy L. Rosenthal, Brooke E.
Peterson and Jane R. Cafritz, were relieved of $3,535,124 of bank debt under a
loan from First Virginia Bank; (2) Mr. Rosenthal and his children, Nancy L.
Rosenthal, Brooke E. Peterson and Jane R. Cafritz, were relieved of $198,143 of
bank debt under a loan from First Virginia Bank; (3) Mr. Rosenthal was relieved
of $2,725,169 of bank debt under a loan from First Virginia Bank; (4) Geneva
d/b/a Rosenthal Chevrolet was relieved of $550,000 of debt; and (5) R.P.
Gaithersburg Limited Partnership was relieved of $7,223,873 of bank debt under
a loan from First Virginia Bank.
Mr. Rosenthal, his spouse, Marion Rosenthal, and his children, Brooke E.
Peterson, Jane R. Cafritz and Nancy L. Rosenthal, hold ownership interests in
entities that acquired units as follows:
<TABLE>
<CAPTION>
Ownership Interest in Ownership Interest in Ownership Interest in Ownership Interest in
750 North Glebe Road 3400 Columbia Pike R.P. Gaithersburg 8525 Leesburg Pike
Name Limited Partnership Limited Partnership Limited Partnership Limited Partnership
---- --------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Robert M. Rosenthal
(1).................... 40% 67% 40% 45%
Marion Rosenthal........ -- -- -- --
Brooke E. Peterson (2).. 20% 11% 20% 10.20%
Jane R. Cafritz (2)..... 20% 11% 20% 10.20%
Nancy L. Rosenthal (2).. 20% 11% 20% 10.20%
</TABLE>
- --------
(1) Mr. Rosenthal is the general partner of 750 North Glebe Road Limited
Partnership, 3400 Columbia Pike Limited Partnership, R.P. Gaithersburg
Limited Partnership and 8525 Leesburg Pike Limited Partnership. Represents
pecuniary interest in 57,847.6 units held by 750 North Glebe Road Limited
Partnership, 122,534.3 units held by 3400 Columbia Pike Limited
Partnership, 114,607.2 units held by R.P. Gaithersburg Limited Partnership
and 710,523 units held by 8525 Leesburg Pike Limited Partnership.
(2) Represents pecuniary interest in 28,923.8 units held by 750 North Glebe
Road Limited Partnership, 20,117.6 units held by 3400 Columbia Pike Limited
Partnership, 57,303.6 units held by R.P. Gaithersburg Limited Partnership
and 161,051.9 units in 8525 Leesburg Pike Limited Partnership.
Following the October 8, 1998 distribution of units as a dividend-in-kind by
Geneva, Mr. Rosenthal, his spouse, related entities and his family members
currently hold aggregate units of the Partnership as follows: (1) 703,795 units
held by Mr. Rosenthal; (2) 106,425 units held by Marion Rosenthal, his spouse;
(3) 28,000 units held by Mr. Rosenthal and his spouse as tenants by the
entirety; (4) 144,619 units held by 750 North Glebe Road Limited Partnership;
(5) 182,887 units held by 3400 Columbia Pike Limited Partnership; (6) 286,518
units held by R.P. Gaithersburg Limited Partnership; (7) 1,578,940 units held
by 8525 Leesburg Pike Limited Partnership; and (8) 96,543 units held by each of
Mr. Rosenthal's children, Brooke E. Peterson, Jane R. Cafritz and Nancy L.
Rosenthal.
24
<PAGE>
Capital Automotive has leased the properties acquired from entities related
to Mr. Rosenthal and his family members back to Geneva and another related
entity as follows:
<TABLE>
<CAPTION>
Annual
Lessees (Dealerships) Location Base Rent
--------------------- -------- ---------
<S> <C> <C>
Geneva Enterprises, Inc.
d/b/a Rosenthal Nissan/Mazda (1) ............... Tysons Corner, VA $2,499,396
Geneva Enterprises, Inc. d/b/a Rosenthal Mazda
(1)............................................. Arlington, VA 619,930
Geneva Enterprises, Inc. d/b/a Rosenthal
Chevrolet/Jeep
(Storage Lot) (1)............................... Arlington, VA 561,835
Geneva Enterprises, Inc. d/b/a Rosenthal Honda
(1)............................................. Tysons Corner, VA 510,536
Geneva Enterprises, Inc. d/b/a Rosenthal Jaguar
(1)............................................. Tysons Corner, VA 510,524
Geneva Enterprises, Inc. d/b/a Geneva Management
(Related Business) (1).......................... Arlington, VA 452,902
Geneva Enterprises, Inc. d/b/a Rosenthal Isuzu
(1)............................................. Gaithersburg, MD 448,739
Geneva Enterprises, Inc. d/b/a Nissan
Gaithersburg(1)................................. Gaithersburg, MD 348,135
Geneva Enterprises, Inc. d/b/a Rosenthal Acura
(1)............................................. Gaithersburg, MD 328,152
Geneva Enterprises, Inc. d/b/a Rosenthal
Chevrolet/Jeep (1).............................. Arlington, VA 311,996
Maryland Imported Cars, Inc. d/b/a Gaithersburg
Mazda (2)(3).................................... Gaithersburg, MD 259,758
Geneva Enterprises, Inc. d/b/a Rosenthal Honda
(2-acre lot) (1)................................ Tysons Corner, VA 178,533
Geneva Enterprises, Inc. d/b/a Rosenthal Honda
(Body Shop) (1)................................. Tysons Corner, VA 127,365
----------
Total........................................ $7,157,801
==========
</TABLE>
- --------
(1) Owned by (1) Mr. Rosenthal (58.660%), (2) Mr. Rosenthal's spouse, Marion
Rosenthal (1.248%), (3) Mr. Rosenthal's daughters, Brooke E. Peterson, Jane
R. Cafritz and Nancy L. Rosenthal (8.838% each), and (4) certain employees
of Rosenthal Automotive Organization.
(2) Guaranteed by Geneva Enterprises, Inc., an affiliate of Mr. Rosenthal.
(3) Owned by (1) Mr. Rosenthal (51%), and (2) an employee of Rosenthal
Automotive Organization.
On February 19, 1998, Mr. Rosenthal entered into a guaranty agreement with
NationsBank, N.A. to guarantee $960,444 of the Partnership's indebtedness to
NationsBank, N.A. On February 19, 1998, Mr. Rosenthal's spouse entered into a
guaranty agreement with NationsBank, N.A. to guarantee $349,514 of the
Partnership's indebtedness to NationsBank, N.A. On February 19, 1998, the three
children of Mr. Rosenthal entered into guarantee agreements, each guaranteeing
$485,418 of the Partnership's indebtedness to NationsBank, N.A. On November 20,
1998, Mr. and Mrs. Rosenthal and their children were released from their
guarantees.
On November 18, 1998, Capital Automotive entered into an agreement to
guaranty up to an aggregate of $35,000,000 of indebtedness of four subsidiaries
of the Partnership under loan agreements with Global Alliance Finance Company,
L.L.C., a third party lender. Mr. Rosenthal has entered into an agreement
whereby he will indemnify Capital Automotive for up to $960,444 for claims,
actions, proceedings and expenses arising out of that guaranty. Mr. Rosenthal's
spouse has entered into an agreement whereby she will indemnify Capital
Automotive for up to $349,514 for claims, actions, proceedings and expenses
arising out of that guaranty. Mr. Rosenthal's children have entered into
agreements whereby each of them will indemnify Capital Automotive for up to
$485,418 for claims, actions, proceedings and expenses arising out of that
guaranty.
Vincent A. Sheehy. Vincent A. Sheehy joined the Board of Trustees of Capital
Automotive on April 22, 1998. On February 19, 1998, Capital Automotive acquired
real estate and improvements for an aggregate acquisition cost of $14,070,669
from partnerships in which Mr. Sheehy, his parents and his brothers and
sisters, hold ownership interests, and directly from Mr. Sheehy's parents, as
follows:
25
<PAGE>
<TABLE>
<CAPTION>
Allocation of Acquisition Cost
----------------------------------
Total Assumption and
Acquisition Repayment of Number of
Selling Group Cost(1) Cash Mortgage Debt Units(2)(3)
------------- ----------- ------- -------------- -----------
<S> <C> <C> <C> <C>
Sheehy Auto Stores.............. $14,070,669 $64,744 $8,885,855 341,336(4)
</TABLE>
- --------
(1) Includes acquisition closing costs allocated by the Partnership to these
transactions.
(2) The units were issued based on a price of $15.00 per unit.
(3) Beginning on February 19, 1999, the units are eligible to be redeemed by
the Partnership at the request of the unit holder. Capital Automotive may
assume the obligation of the Partnership to redeem the units for cash or
common shares. Capital Automotive could exchange units for common shares on
a one-for-one basis.
(4) Includes 10,781 units owned by Mr. Sheehy's parents.
Set forth below is certain information relating to the properties acquired
from Mr. Sheehy and persons or entities related to Mr. Sheehy:
<TABLE>
<CAPTION>
Acquisition
Dealerships Location Cost(1)
----------- -------- -----------
<S> <C> <C>
Sheehy Ford & Kia............................... Springfield, VA $ 6,328,686
Chapman Ford Sales (2).......................... Philadelphia, PA 3,014,686
Sheehy Lincoln-Mercury & Mitsubishi............. Woodbridge, VA 2,580,611
Sheehy Ford..................................... Marlow Heights, MD 2,146,686
-----------
Total....................................... $14,070,669
===========
</TABLE>
- --------
(1) Includes acquisition closing costs allocated by the Partnership to these
transactions.
(2) The occupant is Chapman Ford, which is a third party unrelated to Mr.
Sheehy.
On February 19, 1998, Sheehy Investments One Limited Partnership acquired
241,755 units at $15.00 per unit as part of the acquisition cost for properties
contributed to the Partnership. A portion of the cash allocated to the
acquisition cost represents closing costs paid on behalf of Sheehy Investments
One Limited Partnership. Based on the following ownership of Sheehy Investments
One Limited Partnership, Mr. Sheehy and his family members have pecuniary
interests in the following units: (1) Mr. Sheehy owns approximately 22.1%
(53,427.9 units); (2) Mr. Sheehy's brothers and sisters, Ann Sheehy, Elizabeth
Sheehy, Patricia Malloy and Paul Sheehy, each owns approximately 17.1% (41,343
units); (3) Mr. Sheehy's father, Vincent A. Sheehy, owns approximately 5.7%
(13,773 units); and (4) Mr. Sheehy's mother, Helen M. Sheehy, owns
approximately 3.8% (9,182 units).
On February 19, 1998, Sheehy Investments Two, L.C. acquired 88,800 units at
$15.00 per unit as part of the acquisition cost for properties contributed to
the Partnership. A portion of the cash allocated to the acquisition cost
represents closing costs paid on behalf of Sheehy Investments Two, L.C. Based
on the following ownership of Sheehy Investments Two, L.C., Mr. Sheehy and his
family members have pecuniary interests in the following units: (1) Mr. Sheehy
owns approximately 18% (15,984 units); (2) Mr. Sheehy's brothers and sisters,
Ann Sheehy, Elizabeth Sheehy, Patricia Malloy and Paul Sheehy, each owns
approximately 18% (15,984 units); (3) Mr. Sheehy's father, Vincent A. Sheehy,
owns approximately 6% (5,328 units); and (4) Mr. Sheehy's mother, Helen M.
Sheehy, owns approximately 4% (3,552 units).
In connection with the acquisitions of the properties on February 19, 1998,
the Partnership assumed and paid in full debt as follows: (1) Sheehy
Investments One Limited Partnership was relieved of $5,247,574 in Ford Motor
Credit Company debt; (2) Sheehy Investments Two, L.C. was relieved of $800,000
of Vinco, Inc. (which is 100% owned by Mr. Sheehy's father) debt; and (3) Mr.
Sheehy's parents, Vincent A. Sheehy and Helen M. Sheehy, as tenants by the
entirety, were relieved of $2,838,281 of Ford Motor Credit Company debt.
On February 19, 1998, Mr. Sheehy's parents, Vincent A. Sheehy and Helen M.
Sheehy, as tenants by the entirety, acquired, as part of the acquisition cost
for properties, 10,781 units valued at $15.00 per unit.
26
<PAGE>
Capital Automotive has leased the properties acquired from entities related
to Mr. Sheehy back to other entities as follows:
<TABLE>
<CAPTION>
Annual
Lessees (Dealerships) Location Base Rent
--------------------- -------- ----------
<S> <C> <C>
Sheehy Ford of Marlow Heights(1)................. Marlow Heights, MD $ 255,840
Sheehy Lincoln-Mercury, Inc. (2)................. Woodbridge, VA 282,252
Chapman Ford Sales............................... Philadelphia, PA 330,000
Sheehy Ford of Springfield, Inc. (3)............. Springfield, VA 662,340
----------
Total........................................ $1,530,432
==========
</TABLE>
- --------
(1) Owned by (1) Mr. Sheehy (0.533%), (2) Vinco, Inc. (62.457%), which is owned
100% by Mr. Sheehy's father, Vincent A. Sheehy, (3) Sheehy Family Trust
(19.164%), of which each of Mr. Sheehy and his brothers and sisters, Ann
Sheehy, Elizabeth Sheehy, Patricia Malloy and Paul Sheehy, are 20%
beneficiaries, (4) Sheehy Investments One Limited Partnership (7.629%),
owned as described above, and (5) Mr. Sheehy's sister, Ann Sheehy (.535%).
(2) Owned by (1) Mr. Sheehy's father (51%), and (2) Mr. Sheehy's brother-in-
law, Geoff Malloy (49%).
(3) Owned by (1) Mr. Sheehy (9.30%), and (2) Sheehy Investments One Limited
Partnership (65.7%) (ownership as previously described).
On February 19, 1998, Vincent A. Sheehy and Helen M. Sheehy, Mr. Sheehy's
parents, entered into a guaranty agreement with NationsBank, N.A. to guarantee
$2,300,000 of the Partnership's indebtedness to NationsBank, N.A. On November
20, 1998, Mr. Sheehy's parents were released from their guarantees.
On November 18, 1998, Capital Automotive entered into an agreement to
guaranty up to an aggregate of $35,000,000 of indebtedness of four subsidiaries
of the Partnership under loan agreements with Global Alliance Finance Company,
L.L.C., a third party lender. Mr. Sheehy's parents have entered into an
agreement whereby they will indemnify Capital Automotive for up to $2,300,000
for claims, actions, proceedings and expenses arising out of that guaranty.
Executive Officers
Thomas D. Eckert purchased ten common shares at a purchase price of $10.00
per share in connection with the organization of Capital Automotive on October
20, 1997. On February 19, 1998, Capital Automotive repurchased these shares
from Mr. Eckert at a purchase price of $10.00 per share. Mr. Eckert purchased
107,526 common shares in connection with Capital Automotive's initial public
offering at a purchase price of $13.95 per share (which price was net of the 7%
underwriting discounts and commissions).
5% or Greater Shareholders
Friedman, Billings, Ramsey Group, Inc. and its related parties received
certain benefits in connection with the initial public offering in addition to
the compensation paid to Friedman, Billings, Ramsey & Co., Inc. as an
underwriter of the initial public offering. William R. Swanson, a trustee of
Capital Automotive, is a Managing Director of Friedman, Billings, Ramsey & Co.,
Inc., which is related to Friedman, Billings, Ramsey Group, Inc. Mr. Swanson is
also an Executive Vice President and the Chief Operating Officer of FBR Asset
Investment Corporation. Capital Automotive has entered into the following
transactions with Friedman, Billings, Ramsey Group, Inc. or its related
persons:
On February 19, 1998, Capital Automotive repaid a loan in the principal
amount of $2,525,000 made by Friedman, Billings, Ramsey Group, Inc. in October
1997 and amended in January 1998. The loan accrued interest at the rate of 10%
per annum. On February 19, 1998, Capital Automotive paid the principal balance
and all accrued interest in full.
27
<PAGE>
Friedman, Billings, Ramsey & Co., Inc. received a warrant representing the
right to acquire up to 1,277,794 common shares at an exercise price of $15.00
per share, exercisable beginning on February 19, 1998 until February 19, 2003,
as compensation for its assistance in the formation and structuring of Capital
Automotive, identifying key managers of Capital Automotive and raising the
initial capital necessary to form Capital Automotive.
In a private placement that closed on February 19, 1998, Capital Automotive
sold 1,792,115 common shares to FBR Asset Investment Corporation at a purchase
price of $13.95 per share. Capital Automotive has granted demand and piggyback
registration rights for such common shares.
28
<PAGE>
OTHER INFORMATION
Company Performance
The following graph compares the cumulative total shareholder return on the
common shares of Capital Automotive from February 13, 1998 (the date the common
shares were first offered and sold to the public at the initial public offering
price of $15.00 per share) through December 31, 1998 with the cumulative total
return of the NAREIT Equity Total Return Index and the cumulative total return
of the Standard and Poors ("S&P") 500 Index. Capital Automotive's common share
price and the price of the S&P 500 Index are published daily. The NAREIT Equity
Total Return Index is published monthly and for purposes of this presentation
was interpolated to February 13, 1998.
The graph assumes an investment of $100 in each of Capital Automotive REIT,
the NAREIT Equity Total Return Index and the S&P 500 Index on February 13,
1998. The comparison assumes that all dividends are reinvested into additional
common shares during the holding period.
29
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Based on our records and other information, we believe that our Trustees and
executive officers who are required to file reports under Section 16 reported
all transactions in Capital Automotive's common shares and derivative
securities, including units of the Partnership, options for shares and units,
and warrants, on a timely basis during the fiscal year ended December 31, 1998,
except as follows: (1) Thomas D. Eckert filed a Form 5 on February 12, 1999 to
report the purchase of 11 shares that were inadvertently omitted from the Form
4 filed on March 10, 1998; (2) Lee P. Munder (A) filed his Form 4 to report the
acquisition of 30,000 shares on May 4, 1998 and 15,000 shares on May 7, 1998 on
July 2, 1998, and (B) filed a Form 5 on February 12, 1999 to report that he
reported the acquisition of 30,000 shares twice, once on the Form 3 filed on
May 12, 1998 and once on the Form 4 filed on July 2, 1998, and to report that
the total number of shares owned at the end of fiscal 1998 was 45,000 shares;
(3) Vincent A. Sheehy (A) filed an amendment to his Form 3 initially filed on
May 8, 1998 on August 25, 1998 to change the number of shares that were
acquired on April 22, 1998 from 15,000 shares to 10,000 shares and to change
the indirect ownership information relating to units, and (B) filed a Form 5 on
February 12, 1999 to correct his Form 3 filed on May 8, 1998 and Amendment No.
1 to his Form 3 filed on August 25, 1998 to indicate that he has never owned
common shares of Capital Automotive and that he has a 22.1% (and not an 18%)
pecuniary interest in Sheehy Investments One Limited Partnership, the holder of
241,755 units; (4) William E. Hoglund filed a Form 5 on February 12, 1999 to
report a different date for the acquisition of options for units that were
reported on his Form 3 filed February 11, 1998; (5) John E. Reilly filed a Form
5 on February 12, 1999 to report a different date for the acquisition of
options for units that were reported on his Form 3 filed February 11, 1998; and
(6) John J. Pohanka filed (A) an amendment to Form 4 on February 5, 1999 (a)
changing his reporting of indirect ownership of common shares acquired on
February 19, 1998 and previously reported on Form 4 filed on March 10, 1998,
(b) disclaiming beneficial ownership of 7,000 common shares owned by his wife,
and (c) reporting that the Form 4 filed on March 10, 1998 inadvertently
attributed to Mr. Pohanka ownership of common shares held by corporations that
are not affiliated with Mr. Pohanka, and (B) a Form 5 on February 5, 1999
reporting (a) the disposition on April 2, 1998 of 58,612 common shares and
205,491 common shares and 385,700 units by Pohanka Virginia Properties
Partnership when it was reorganized on April 2, 1998 into a limited liability
company, of which Mr. Pohanka is not a controlling member and does not share
investment control, and (b) the acquisition on March 12, 1998 of a warrant
exercisable for 68,182 units by Mr. Pohanka.
Proposals for the 1999 Annual Meeting
If you want to include a proposal in the proxy statement for Capital
Automotive's 2000 Annual Meeting, send the proposal to Capital Automotive at
1420 Spring Hill Road, Suite 525, McLean, Virginia 22102, Attn: Secretary and
General Counsel. Proposals must be received on or before November 18, 1999 to
be included in next year's proxy statement. Please note that proposals must
comply with all of the requirements of Rule 14a-8 under the Securities Exchange
Act of 1934, as well as the requirements of Capital Automotive's Declaration of
Trust and Bylaws.
Capital Automotive, in its discretion, will be able to use proxies given to
it for next year's meeting to vote for or against any shareholder proposal that
is not included in the proxy statement unless the proposal is submitted to
Capital Automotive on or before 45 days before next year's meeting.
30
<PAGE>
Exhibit A
Capital Automotive Group
Amended 1998 Equity Incentive Plan
Purpose
Capital Automotive REIT, a Maryland real estate investment trust (the "REIT"
or the "Company"), and Capital Automotive L.P. (the "Operating Partnership")
wish to recruit, reward, and retain employees and trustees. To further these
objectives, the Company and the Operating Partnership hereby set forth the
Capital Automotive Group Amended 1998 Equity Incentive Plan (the "Plan"),
originally effective as of the effective date (the "Effective Date") of the
Company's initial public offering ("IPO") and amended as of [insert date of
annual meeting], 1999 (the "1999 Amendment Date"), to provide options
("Options") or direct grants or sales ("Share Grants" and, together with the
Options, "Awards") to employees and trustees to purchase common shares of
beneficial interest of the Company (the "Shares").
Participants
All Employees of the REIT, its Eligible Subsidiaries, and the Operating
Partnership are eligible for Awards under this Plan, as are the Trustees of the
REIT and the directors of the Eligible Subsidiaries who are not employees
("Eligible Trustees"). Eligible employees and trustees become "optionees" when
the Administrator grants them an option under this Plan or "recipients" when
they receive a Share Grant. (Optionees and recipients are referred to
collectively as "participants." The term participant also includes, where
appropriate, a person authorized to exercise an Award in place of the original
participant.) The Administrator may also grant Awards to certain other service
providers.
Employee means any person employed as a common law employee of the Company,
its Eligible Subsidiaries, or the Operating Partnership.
Administrator
The Administrator will be the Executive Compensation Committee of the Board
of Trustees of the REIT (the "Compensation Committee"). The Board may also act
under the Plan as though it were the Compensation Committee.
The Administrator is responsible for the general operation and
administration of the Plan and for carrying out its provisions and has full
discretion in interpreting and administering the provisions of the Plan.
Subject to the express provisions of the Plan, the Administrator may exercise
such powers and authority of the Board as the Administrator may find necessary
or appropriate to carry out its functions. The Administrator may delegate its
functions (other than those described in the Granting of Awards section) to
officers or employees of the REIT with respect to the REIT and to managers or
employees of the Operating Partnership with respect to the Operating
Partnership.
The Administrator's powers will include, but not be limited to, the power to
amend, waive, or extend any provision or limitation of any Award. The
Administrator may act through meetings of a majority of its members or by
unanimous consent.
Granting of Awards
Subject to the terms of the Plan, the Administrator will, in its sole
discretion, determine:
. the participants who receive Awards;
. the terms of such Awards;
1
<PAGE>
. the schedule for exercisability or nonforfeitability (including any
requirements that the participant or the Company satisfy performance
criteria);
. the time and conditions for expiration of the Award; and
. the form of payment due upon exercise; if any.
The Administrator's determinations under the Plan need not be uniform and
need not consider whether possible participants are similarly situated.
Employees of the REIT or any Eligible Subsidiary may receive "incentive
stock options" ("ISOs") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, or the corresponding provision of any
subsequently enacted tax statute (the "Code"). In addition, effective as of the
1999 Amendment Date, the Administrator may grant nonqualified options ("NQSOs")
that cover Shares but are not intended to be ISOs to both Employees and
Eligible Trustees, and the Administrator will specify which type of option it
is granting. If the Administrator fails to specify the type, it will be an ISO,
to the extent the tax laws permit, for Employees and an NQSO for Eligible
Trustees.
The Administrator may grant or sell Shares (as Share Grants) to eligible
participants for payment sufficient to satisfy any state laws on adequate
consideration. The Administrator may impose such conditions on or charge such
price for the Share Grants as it deems appropriate. The Administrator may also
provide for discounted share purchases by some or all Employees through this
Plan, or for the grant, purchase, or deemed purchase of phantom shares
("Restricted Phantom Shares") that can later be paid out in Shares from this
Plan.
Replacement Awards
The Administrator may grant Awards in substitution for options or other
equity-based compensation held by individuals, including with respect to
individuals who do not become Employees, if the Company, the Operating
Partnership, or an Eligible Subsidiary acquires or merges with the individual's
employer or acquires substantially all of its assets. In addition, the
Administrator may provide for the Plan's assumption of options granted outside
the Plan to persons who would have been eligible under the terms of the Plan to
receive a grant. If necessary to conform the Awards to the interests for which
they are substitutes, the Administrator may grant substitute Awards under terms
and conditions that vary from those the Plan otherwise requires.
Effective as of the 1999 Amendment Date, the Plan will not grant further
options ("Unit Options") to acquire units of limited partnership interest in
the Operating Partnership (the "Units"). In addition, the Administrator is
authorized to replace outstanding Unit Options, whether or not granted under
this Plan, with comparable NQSOs, with the optionees' consent.
Date of Grant
The Date of Grant will be the date as of which this Plan or the
Administrator grants an Award to a participant, as specified in the Plan or in
the Administrator's minutes. Awards made under the Replacement Awards section
will be treated as though their Date of Grant were the corresponding date under
the original grant, unless the Administrator specifies otherwise.
Exercise Price or Consideration
The Exercise Price is the value of the consideration that an optionee must
provide in exchange for one Common Share. The Administrator will determine the
Exercise Price under each Option and may set the Exercise Price without regard
to the Exercise Price of any other Options granted at the same or any other
time.
2
<PAGE>
The Exercise Price per Share for NQSOs may not be less than 100% of the Fair
Market Value of a Share on the Date of Grant. If an Option is intended to be an
ISO, the Exercise Price may not be less than 100% of the Fair Market Value (on
the Date of Grant) of a Common Share covered by the Option; provided, however,
that if the Administrator decides to grant an ISO to someone covered by
Sections 422(b)(6) and 424(d) (as a more-than-10%-stock owner), the Exercise
Price of the Option must be at least 110% of the Fair Market Value (on the Date
of Grant).
The Administrator may satisfy any state law requirements regarding adequate
consideration for Share Grants by charging the recipients at least the par
value for the Shares covered by the Share Grant.
Fair Market Value
The Administrator will determine Fair Market Value of Shares for purposes of
the Plan as follows:
. if the Shares trade on a national securities exchange, the closing sale
price on that date;
. if the Shares do not trade on any such exchange, the closing sale price
that the National Association of Securities Dealers, Inc. Automated
Quotation System ("Nasdaq") reports for such date;
. if no such closing sale price information is available, the average of
the closing bid and asked prices that Nasdaq reports for such date;
. if there are no such closing bid and asked prices, the average of the
closing bid and asked prices as reported by any other commercial service
for such date; or
. for any date that is not a trading day, the Fair Market Value of a
Common Share for such date shall be determined by using the closing sale
price or the average of the closing bid and asked prices, as
appropriate, for the immediately preceding trading day.
Exercisability and Lapse of Restrictions
The Administrator will determine the times and conditions for exercise of
each Option but may not extend the period for exercise beyond the tenth
anniversary of its Date of Grant (or five years for ISOs granted to 10% owners
covered by Code Sections 422(b)(6) and 424(d)).
Awards will become exercisable or nonforfeitable at such times and in such
manner as the Administrator determines and the Award Agreement, if any,
indicates; provided, however, that the Administrator may, on such terms and
conditions as it determines appropriate, accelerate the time at which the
participant may exercise any portion of an Award or at which restrictions on
Share Grants lapse.
If the Administrator does not specify otherwise, Options will become
exercisable as to one-quarter of the covered Shares on each anniversary of the
Option's Date of Grant or, for initial grants to Employees, on each anniversary
of the Employee's date of hire.
In addition, the Administrator may delay or prohibit the exercise of an
Option or the release of restrictions on Share Grants if it would adversely
affect the Company's REIT status or would cause the Operating Partnership to be
treated as an association taxable as a corporation (other than a qualified REIT
subsidiary within the meaning of section 856(i) of the Code).
No portion of an Award that is unexercisable or forfeitable at a
participant's termination of employment will thereafter become exercisable or
nonforfeitable, unless the Award Agreement provides otherwise, either initially
or by amendment.
After the participant has satisfied any restrictions set forth in the terms
of a Share Grant or Restricted Phantom Share and has paid for the Shares, if
required, the Shares will no longer be subject to any provisions of this Plan.
3
<PAGE>
Change of Control
Upon a Change of Control (as defined below), all Options will become fully
exercisable. Upon a Change of Control, all restrictions on Share Grants will
lapse, and the covered Shares will be nonforfeitable. A Change of Control for
this purpose means the occurrence of any one or more of the following events:
. a person, entity, or group (other than the Company, the Operating
Partnership, any subsidiary of either, any Company benefit plan, or any
underwriter temporarily holding securities for an offering of
such securities) acquires ownership of more than 40% of the undiluted
total voting power of the Company's then-outstanding securities eligible
to vote to elect members of the Board ("Company Voting Securities");
. consummation of a merger or consolidation of the Company into any other
entity--unless the holders of the Company Voting Securities outstanding
immediately before such consummation, together with any trustee or other
fiduciary holding securities under a Company benefit plan, hold
securities that represent immediately after such merger or consolidation
more than 60% of the combined voting power of the then outstanding
voting securities of either the Company or the other surviving entity or
its parent; or
. the stockholders of the Company approve (i) a plan of complete
liquidation or dissolution of the Company or (ii) an agreement for the
Company's sale or disposition of all or substantially all the Company's
assets, and such liquidation, dissolution, sale, or disposition is
consummated.
Even if other tests are met, a Change of Control has not occurred under any
circumstance in which the Company files for bankruptcy protection or is
reorganized following a bankruptcy filing.
The Adjustment Upon Changes in Shares provisions will also apply if the
Change of Control is a Substantial Operational Change (as defined in those
provisions).
Limitation on ISOs
An Option granted to an employee will be an ISO only to the extent that the
aggregate Fair Market Value (determined at the Date of Grant) of the Shares
with respect to which ISOs are exercisable for the first time by the optionee
during any calendar year (under the Plan and all other plans of the Company and
its subsidiary corporations, within the meaning of Code Section 422(d)), does
not exceed $100,000. This limitation applies to Options in the order in which
such Options were granted. If, by design or operation, the Option exceeds this
limit, the excess will be treated as an NQSO.
Trustee Formula Grants
As of each Eligible Trustee's initial election or appointment as an Eligible
Trustee, he will receive a Formula Option to purchase 15,000 Shares. An
Eligible Trustee can also receive other Awards under the Plan.
Exercise Price
The Exercise Price of each Option granted to an Eligible Trustee will be the
Fair Market Value on the Date of Grant.
Exercise Schedule
A Formula Option will become exercisable for one-third of the Shares it
covers six months after the Date of Grant, for another one-third on the first
anniversary of the Date of Grant, and for the remaining one-third on the second
anniversary of the Date of Grant. Formula Options will be forfeited to the
extent they are not then exercisable if a Trustee resigns or fails to be
reelected as a Trustee.
4
<PAGE>
Method of Exercise
To exercise any exercisable portion of an Option, the optionee must:
. deliver a written notice of exercise to the Secretary of the Company (or
to whomever the Administrator designates), in a form complying with any
rules the Administrator may issue, signed by the participant, and
specifying the number of Shares underlying the portion of the Option the
participant is exercising;
. pay the full Exercise Price, if any, by cashier's or certified check for
the Shares with respect to which the Option is being exercised, unless
the Administrator consents to another form of payment (which could
include the use of Shares); and
. deliver to the Administrator such representations and documents as the
Administrator, in its sole discretion, may consider necessary or
advisable.
Payment in full of the Exercise Price need not accompany the written notice
of exercise with respect to Shares provided the notice directs that the
certificates for the Shares issued upon the exercise be delivered to a licensed
broker acceptable to the Company as the agent for the individual exercising the
option and at the time the certificates are delivered to the broker, the broker
will tender to the Company cash or cash equivalents acceptable to the Company
and equal to the Exercise Price and any required tax withholdings. The
Administrator can, in its discretion, provide other methods of cashless
exercise.
If the Administrator agrees to allow a participant to pay through tendering
Shares to the Company, the individual can only tender Shares he has held for at
least six months at the time of surrender. Shares offered as payment will be
valued, for purposes of determining the extent to which the participant has
paid the Exercise Price, at their Fair Market Value on the date of exercise.
The Administrator may also, in its discretion, accept attestation of ownership
of Shares and issue a net number of Shares upon Award exercise.
The Company or the Operating Partnership may use the consideration it
receives from the participant for general corporate or partnership purposes.
Award Expiration
No one may exercise an Option or hold a Share Grant subject to unexpired
restrictions more than ten years after its Date of Grant (or five years, for an
ISO granted to a more-than-10% shareholder).
Unless the Option Agreement provides otherwise, either initially or by
amendment, no one may exercise an Option after the first to occur of:
Employment Termination
. the 90th day after the date of termination of employment (other than for
death or disability), where termination of employment means the time
when the employer-employee or other service-providing relationship
between the employee and the Company ends for any reason, including
retirement. Unless the Award Agreement provides otherwise, termination
of employment does not include instances in which the Company
immediately rehires a common law employee as an independent contractor
or in which the Company or the Operating Partnership hires someone
employed by the other. The Administrator, in its sole discretion, will
determine all questions of whether particular terminations or leaves of
absence are terminations of employment;
Disability
. for disability, the earlier of (i) the first anniversary of the
participant's termination of employment for disability and (ii) 30 days
after the participant no longer has a disability, where disability means
the
5
<PAGE>
inability to engage in any substantial gainful activity because of any
medically determinable physical or mental impairment that can be
expected to result in death or that has lasted or can be expected to
last for a continuous period of not less than 12 months; or
Death
. the date 12 months after the participant's death.
If exercise is permitted after termination of employment, the Option will
nevertheless expire as of the date that the former employee violates any
covenant not to compete in effect between the Company and the former employee.
In addition, an optionee who exercises an Option more than 90 days after
termination of employment with the Company and/or the Eligible Subsidiaries
will only receive ISO treatment to the extent permitted by law, and becoming
or remaining an employee of another related company (including the Operating
Partnership) or an independent contractor to the Company will not prevent loss
of ISO status as a result of the formal termination of covered employment.
Unless the Award Agreement provides otherwise, either initially or by
amendment, all unexercisable portions of an Option and all forfeitable
portions of a Share Grant will expire immediately upon termination of
employment for any reason, other than Share Grants held by a participant at
his termination of employment as a result of Disability or death, which Share
Grants will have the same expiration periods as set forth above for Options.
Award Agreement
Option Agreements will set forth the terms of each Option and will include
such terms and conditions, consistent with the Plan, as the Administrator may
determine are necessary or advisable. To the extent the agreement is
inconsistent with the Plan, the Plan will govern. The Option Agreements may
contain special rules. The Administrator may, but is not required to, issue
agreements for Share Grants.
Shares Subject to Plan
The Shares will come from either authorized but unissued Shares or from
previously issued Shares that the Company reacquires, including Shares it
purchases on the open market.
Except as adjusted below under Adjustments upon Changes in Shares:
. the aggregate number of Shares that the Plan may issue under the Options
(whether ISOs or NQSOs), Share Grants, or in satisfaction of Restricted
Phantom Shares may not exceed 2,821,344, provided that the number of
Shares available will increase to 3,771,344 upon the approval of the
increase by the Company's shareholders at their 1999 annual meeting;
. the aggregate number of Shares that the Plan may issue under ISOs may
not exceed 1,000,000 Shares;
. the maximum number of Shares that may be subject to ISOs granted to a
single individual in any calendar year may not exceed 120,000; and
. the maximum number of Shares that may be subject to NQSOs, Share Grants,
and Restricted Phantom Shares granted to or purchased by a single
individual in a calendar year may not exceed 500,000, plus the number
necessary to replace any Unit Options granted before the 1999 Amendment
Date to that individual.
If any Award expires, is canceled, or terminates for any other reason, the
Shares or Units available under that Award will again be available for the
granting of new Awards (but will be counted against that calendar year's limit
for a given individual).
6
<PAGE>
No adjustment will be made for a dividend or other right for which the
record date precedes the date of exercise.
The optionee will have no rights of a shareholder with respect to the Shares
subject to an Option except to the extent that the Company has issued
certificates for or otherwise confirmed ownership of such Shares upon the
exercise of the Option. The Award may provide that participants will receive
dividends or dividend equivalents with respect to Share Grants and Restricted
Phantom Shares and may provide that participants can vote Shares still subject
to Share Grant restrictions.
The Company will not issue fractional Shares pursuant to the exercise of an
Option or settlement of a Restricted Phantom Share, but the Administrator may,
in its discretion, direct the Company to make a cash payment in lieu of
fractional Shares.
Person who may Exercise
During the optionee's lifetime, only the optionee or his duly appointed
guardian or personal representative may exercise the Options or receive or
retain Share Grants and Restricted Phantom Shares. After his death, his
personal representative or any other person authorized under a will or under
the laws of descent and distribution may exercise any then exercisable portion
of an Option or receive or retain Share Grants and Restricted Phantom Shares.
If someone other than the original participant seeks to exercise any portion of
an Option or receive or retain Share Grants and Restricted Phantom Shares, the
Administrator may request such proof as it may consider necessary or
appropriate of the person's right to do so.
Adjustments upon Changes in Shares
Subject to any required action by the Company (which it shall promptly take)
or its shareholders, and subject to the provisions of applicable corporate law,
if, after the Date of Grant of an Award:
. the outstanding Shares increase or decrease or change into or are
exchanged for a different number or kind of security because of any
recapitalization, reclassification, share split, reverse share split,
combination of shares, exchange of shares, share dividend, or other
distribution payable in capital shares; or
. some other increase or decrease in such Shares occurs without the
Company's receiving consideration.
The Administrator will make an appropriate adjustment in the number and kind of
Shares underlying each Award and to the exercise price of any Award, so that
the rights of the participant immediately following such event will neither be
enlarged nor diminished from those in effect immediately before such event.
Unless the Administrator determines another method would be appropriate, any
such adjustment in outstanding Awards will not change the aggregate Exercise
Price payable with respect to Shares subject to the unexercised portion of the
Awards outstanding but will include a corresponding proportionate adjustment in
the Exercise Price per Share, so that the proportionate interest of the
participant immediately following such event will, to the extent practicable,
be the same as immediately before such event. Any such adjustment to an Award
will not change the total price with respect to Shares underlying the
unexercised portion of the Award but will include a corresponding proportionate
adjustment in the Award's Exercise Price. After the restrictions of the Plan
cease to apply to a participant's Shares, this adjustment section will also
cease to apply to those interests.
The Administrator will make a commensurate change to the maximum number and
kind of shares provided in the Shares Subject to Plan section.
Any issue by the Company of any class of preferred shares, or securities
convertible into shares of common or preferred shares of any class will not
affect, and no adjustment by reason thereof will be made with
7
<PAGE>
respect to, the number of Shares subject to any Award or the Exercise Price
except as this Adjustments section specifically provides. The grant of an Award
under the Plan will not affect in any way the right or power of the Company or
the Operating Partnership to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, or to merge or
to consolidate, or to dissolve, liquidate, sell, or transfer all or any part of
its business or assets.
Substantial Operational Change
Upon a Substantial Operational Change, the Plan, any unexercised Options,
and any still forfeitable Share Grants (after taking into account the Change of
Control provisions) will terminate unless provision is made in writing in
connection with such transaction for:
. the assumption or continuation of outstanding Awards; or
. the substitution for such awards or grants of any awards covering the
stock or securities of a successor employer corporation or partnership,
or a parent or subsidiary of such successor, with appropriate
adjustments as to the number and kind of shares of stock or securities
and prices, in which event the Awards will continue in the manner and
under the terms so provided.
If an Award would otherwise terminate under the preceding sentence, the
participant will have the right, at such time before the consummation of the
transaction causing such termination as the Board reasonably designates, to
exercise any unexercised portions of the Award, whether or not they had
previously become exercisable, and to have treated as nonforfeitable any
otherwise forfeitable Share Grants.
A Substantial Operational Change means the:
. dissolution or liquidation of the Company;
. merger, consolidation, or reorganization of the Company with one or more
corporations or other entities in which the Company is not the surviving
entity;
. the sale of substantially all of the assets of the Company to another
entity or individual; or
. any transaction (including a merger or reorganization in which the
Company survives) approved by the Board that results in any person or
entity (other than any affiliate of the Company as defined in Rule
144(a)(1) under the Securities Act) owning 100% of the combined voting
power of all classes of shares of the Company.
Subsidiary Employees
Employees of Company Subsidiaries will be entitled to participate in the
Plan, except as otherwise designated by the Board of Trustees or the Committee.
Eligible Subsidiary means each of the Company's Subsidiaries, except as the
Board otherwise specifies. For ISO grants, Subsidiary means any corporation
(other than the Company) in an unbroken chain of corporations beginning with
the Company if, at the time an ISO is granted to an Optionee under the Plan,
each corporation (other than the last corporation in the unbroken chain) owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in another corporation in such chain. For ISOs, Subsidiary also
includes a single-member limited liability company included within the chain
described in the preceding sentence. The Board or the Administrator may use a
different definition of Subsidiary for NQSOs.
Legal Compliance
The Company will not issue any Shares under an Award until all applicable
requirements imposed by Federal and state securities and other laws, rules, and
regulations, and by any applicable regulatory agencies or stock exchanges, have
been fully met. To that end, the Company may require the participant to take
any
8
<PAGE>
reasonable action to comply with such requirements before issuing such Shares.
No provision in the Plan or action taken under it authorizes any action that
Federal or state laws otherwise prohibit.
The Plan is intended to conform to the extent necessary with all provisions
of the Securities Act of 1933 ("Securities Act") and the Securities Exchange
Act of 1934 and all regulations and rules the Securities and Exchange
Commission issues under those laws. Notwithstanding anything in the Plan to the
contrary, the Administrator must administer the Plan, and Awards may be granted
and exercised, only in a way that conforms to such laws, rules, and
regulations. To the extent permitted by applicable law, the Plan and any Awards
will be treated as amended to the extent necessary to conform to such laws,
rules, and regulations.
REIT Qualification
The Administrator has sole discretion to refrain from selling or issuing any
Shares under Awards if the sale or issuance of such Shares would cause the
Company to fail to qualify as a real estate investment trust for Federal income
tax purposes or would result in the participant's ownership of Shares in
violation of the restrictions on ownership and transfer of Shares set forth in
the Company's Declaration of Trust.
Operating Partnership Qualification
The Administrator has sole discretion to refrain from selling or issuing any
Shares under Awards if the sale or issuance of such Shares would cause the
Partnership to be treated as an association taxable as a corporation (other
than a qualified REIT subsidiary within the meaning of section 856(i) of the
Code).
Purchase for Investment and Other Restrictions
Unless a registration statement under the Securities Act covers the Shares a
participant receives upon exercise of his Award or receipt of his Share Grant,
the Administrator may require, at the time of such exercise or receipt (or the
lapse of forfeiture restrictions), that the participant agree in writing to
acquire such Shares for investment and not for public resale or distribution,
unless and until the Shares subject to the Award are registered under the
Securities Act. Unless the Shares are registered under the Securities Act, the
participant must acknowledge:
. that the Shares purchased on exercise of the Award or received under a
Share Grant are not so registered;
. that the participant may not sell or otherwise transfer the Shares
unless:
. the Shares have been registered under the Securities Act in
connection with the sale or transfer thereof; or
. counsel satisfactory to the Company has issued an opinion
satisfactory to the Company that the sale or other transfer of
such Shares is exempt from registration under the Securities Act;
and
. such sale or transfer complies with all other applicable laws,
rules, and regulations, including all applicable Federal and
state securities laws, rules, and regulations.
Additionally, the Shares and, when issued upon the exercise of an Award or
received under a Share Grant, will be subject to any other transfer
restrictions, rights of first refusal, and rights of repurchase set forth in or
incorporated by reference into other applicable documents, including the
Company's articles or certificate of incorporation, by-laws, or generally
applicable shareholders' agreements.
The Administrator may, in its sole discretion, take whatever additional
actions it deems appropriate to comply with such restrictions and applicable
laws, including placing legends on certificates and issuing stop-transfer
orders to transfer agents and registrars.
9
<PAGE>
Tax Withholding
The participant must satisfy all applicable Federal, state, and local income
and employment tax withholding requirements before the Company or the Operating
Partnership will deliver certificates upon the exercise of an Option or the
lapse of restrictions under a Share Grant. The Company or the Operating
Partnership, as appropriate, may decide to satisfy the withholding obligations
through additional withholding on salary or wages. If the Company or the
Operating Partnership does not or cannot withhold from other compensation, the
participant must pay the Company or the Partnership, with a cashier's check or
certified check, the full amounts required by withholding. Payment of
withholding obligations is due before the Company issues or releases Shares
with respect to the Award. If the Administrator so determines, the participant
may instead satisfy the withholding obligations by directing the Company to
retain Shares from the Option exercise or from the nonforfeitable Shares
received under a Share Grant, by tendering previously owned Shares, or by
attesting to his ownership of Shares (with the distribution of net Shares), or,
by having a broker tender to the Company cash equal to the withholding taxes.
Transfers, Assignments, and Pledges
An Award may not be assigned, pledged, or otherwise transferred in any way,
whether by operation of law or otherwise or through any legal or equitable
proceedings (including bankruptcy), by the participant to any person, except by
will or by operation of applicable laws of descent and distribution. The
foregoing sentence does not apply to Shares a participant owns after satisfying
the Award's conditions. If Rule 16b-3 then applies to an Award, the participant
may not transfer or pledge Shares acquired upon exercise of an Option or lapse
of restrictions on a Share Grant until at least six months have elapsed from
(but excluding) the Date of Grant, unless the Administrator approves otherwise
in advance in writing.
Notwithstanding the prior paragraph, under no circumstances may an Option be
transferred if the exercise of such Option would cause the Operating
Partnership to be taxable as an association for federal income tax purposes.
Amendment or Termination of Plan and Awards
Subject to the restrictions of this section, the Board may amend, suspend,
or terminate the Plan at any time, without the consent of the participants or
their beneficiaries. Except as required by law or by the Operational Changes
section, the Administrator may not, without the participant's or beneficiary's
consent, modify the terms and conditions of an Award so as to adversely affect
the participant. No amendment, suspension, or termination of the Plan will,
without the participant's or beneficiary's consent, terminate or adversely
affect any right or obligations under any outstanding Awards.
Privileges of Ownership
No participant and no beneficiary or other person claiming under or through
such participant will have any right, title, or interest in or to any Shares
allocated or reserved under the Plan or subject to any Award except as to such
Shares , if any, that have been issued to such participant. For Shares still
subject to Share Grants, the Administrator may provide that a participant will
receive dividends or dividend equivalents and may vote the Shares.
Effect on Other Plans
Whether exercising an Option, receiving a Share Grant or Restricted Phantom
Share, or becoming free from restrictions under any form of Award causes the
participant to accrue or receive additional benefits under any pension or other
plan is governed solely by the terms of such other plan.
10
<PAGE>
Nature of Restricted Phantom Shares
The Restricted Phantom Shares are solely a device for measuring and
determining the amount to be paid to participants. The Restricted Phantom
Shares do not constitute and should not be treated as property or as a trust
fund of any kind. All amounts at any time attributable to the Restricted
Phantom Shares are the sole property of the Company, and all participants'
rights hereunder are limited to the rights to receive Shares or, if the
Administrator so determines, cash as provided in this Plan. The Company will
pay all amounts with respect to Restricted Phantom Shares from its general
assets. (The Company may establish a rabbi trust to hold the interests.) No
person will have any right or interest or claim to the payment of a benefit
under the Plan from any person other than the Company, and no person will have
any right or interest to the payment of a benefit under this Plan that is
superior in any manner to the right of any other general and unsecured creditor
of the Company. No participant and no beneficiary or other person claiming
under or through such participant will have any right, title, or interest in or
to any Shares then measured by any Restricted Phantom Shares. The participant
will have no rights of a shareholder with respect to the number of Shares
underlying Restricted Phantom Shares except to the extent that the Company has
issued documents indicating purchase, or otherwise confirmed ownership, of such
Shares. The Administrator may provide that a participant or his account will
receive dividend equivalents with respect to Restricted Phantom Shares.
Limitations on Liability
Notwithstanding any other provisions of the Plan, no individual acting as a
Trustee, employee, or agent of the Company or the Operating Partnership shall
be liable to any participant, former participant, spouse, beneficiary, or any
other person for any claim, loss, liability, or expense incurred in connection
with the Plan, nor shall such individual be personally liable because of any
contract or other instrument he executes in such other capacity. The Company or
the Operating Partnership will indemnify and hold harmless each Trustee,
employee, or agent of the Company or the Operating Partnership to whom any duty
or power relating to the administration or interpretation of the Plan has been
or will be delegated, against any cost or expense (including attorneys' fees)
or liability (including any sum paid in settlement of a claim with the Board's
approval) arising out of any act or omission to act concerning this Plan unless
arising out of such person's own fraud or bad faith.
No Employment Contract
Nothing contained in this Plan constitutes an employment contract between
the Company or the Operating Partnership and any individual. The Plan does not
give the participant any right to be retained in the Company's or Operating
Partnership's employ, nor does it enlarge or diminish the Company's or
Operating Partnership's right to terminate the participant's employment.
Applicable Law
The laws of the State of Maryland (other than its choice of law provisions)
govern this Plan and its interpretation.
Duration of Plan
Unless the Board extends the Plan's term, the Administrator may not grant
Awards after February 19, 2008. The Plan will then terminate but will continue
to govern unexercised and unexpired Awards.
Approval of Shareholders
The Company's shareholders have approved the granting of ISOs provided in
the Plan.
11
<PAGE>
|------------------------------------------------------------------------------|
| |
| PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS OF |
| |
| CAPITAL AUTOMOTIVE REIT |
| |
| THIS PROXY IS SOLICITED ON BEHALF OF THE |
| BOARD OF TRUSTEES AND MAY BE REVOKED PRIOR TO ITS EXERCISE |
| |
| The undersigned shareholder(s) of Capital Automotive REIT (the |
| "Company") hereby appoints Messrs. Thomas D. Eckert and David S. Kay, and |
| each of them singly, as proxies, each with full power of substitution, for |
| and in the name of the undersigned at the Annual Meeting of Shareholders of |
| the Company to be held on May 7, 1999, and at any and all adjournments |
| thereof, to vote all common shares of said Company held of record by the |
| undersigned on March 10, 1999, as if the undersigned were present and voting |
| the shares. |
| |
| (TO BE SIGNED ON REVERSE SIDE) |
| |
|------------------------------------------------------------------------------|
<PAGE>
<TABLE>
<CAPTION>
<S><C>
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
CAPITAL AUTOMOTIVE REIT
May 7, 1999
<CAPTION>
Please Detach and Mail in the Envelope Provided
- ------------------------------------------------------------------------------------------------------------------------------------
Please mark your |
A [ x ] vote as in this |
example. --------
<S> <C> <C> <C> <C>
FOR WITHHOLD
all nominees AUTHORITY
listed at right to vote for all Nominees: Thomas D. Eckert
(except as indicated nominees Craig L. Fuller
to the contrary) listed at right William E. Hoglund FOR AGAINST ABSTAIN
1. ELECTION R. Michael McCullough 2. Approval, ratification [_] [_] [_]
OF [_] [_] Lee P. Munder and confirmation of
TRUSTEES John J. Pohanka amendments to the
John E. Reilly Capital Automotive
(INSTRUCTIONS: To withhold authority to vote for any Robert M. Rosenthal Group 1998 Equity
individual nominee, write the nominee's name on the Vincent A. Sheehy Incentive Plan.
space provided below.) William R. Swanson
3. Ratification of the [_] [_] [_]
- ---------------------------------------------------- appointment of the
accounting firm of
Arthur Andersen LLP
to serve as independent
accountants for Capital
Automotive REIT for the
fiscal year ending
December 31, 1999.
4. The proxies are authorized to vote in
their discretion upon such other business
as may properly come before the meeting to
the extent permitted by law.
THE COMMON SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED IN THE MANNER DIRECTED. IN THE
ABSENCE OF ANY DIRECTION, THE SHARES WILL BE
VOTED FOR EACH NOMINEE NAMED IN PROPOSAL 1,
FOR PROPOSAL 2 AND FOR PROPOSAL 3, AND IN
ACCORDANCE WITH THE PROXIES' DISCRETION ON
SUCH OTHER BUSINESS THAT MAY PROPERLY COME
BEFORE THE MEETING TO THE EXTENT PERMITTED BY
LAW.
I PLAN TO ATTEND THE MEETING [_]
SIGNATURE _______________________________________________ _______________________________________________ Dated: ___________, 1999
SIGNATURE IF HELD JOINTLY
NOTE: Please date this Proxy and sign exactly as your name appears hereon. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If there is more than one trustee, all should sign. All joint owners should sign.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
