1
Pursuant to 424(b)(3)
Registration No. 333-09371
SUPPLEMENT NO. 6
DATED NOVEMBER 12, 1997
TO THE PROSPECTUS OF
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
DATED DECEMBER 23, 1996
This Supplement No. 6 is provided for the purpose of supplementing the
prospectus of Captec Franchise Capital Partners L.P. IV, a Delaware limited
partnership (the "Partnership"), dated December 23, 1996 (the "Prospectus").
This Supplement No. 6 expands upon, supplements, modifies and supersedes
certain information contained in the Prospectus and consolidates and/or
supersedes information in Supplement No. 5 dated October 14, 1997. This
Supplement No. 6 must be read in conjunction with the Prospectus. Unless
otherwise defined, capitalized terms used herein shall have the same meanings
accorded such terms in the Prospectus.
As of November 12, 1997, the Partnership had raised $13,105,465 through
the sale of 13,105.465 Units. The following material sets forth certain
information regarding (i) the Partnership's purchase of Properties and
Equipment Packages, (ii) revisions to the Partnership Agreement in response to
comments made by certain securities administrators in states in which the
Partnership intends to sell Units, and (iii) events that happened after the
date of the Prospectus.
PROPERTY ACQUISITIONS
REAL ESTATE
PURCHASE
DATE CONCEPT/LOCATION PRICE LESSEE
- --------------------------------------------------------------------------------
3/10/97 Boston Market $ 964,000 Finest Foodservice L.L.C.
Rochester, Minnesota
- --------------------------------------------------------------------------------
7/25/97 Carino's Italian Kitchen $1,600,000 Kona Restaurant Group, Inc.
El Paso, Texas
- --------------------------------------------------------------------------------
7/25/97 Golden Corral Restaurant $ 550,000 Corral South Store 3, Inc.
Lakeland, Florida
- --------------------------------------------------------------------------------
8/8/97 Blockbuster Video $1,114,286 Blockbuster Videos, Inc.
Riverdale, Georgia
- --------------------------------------------------------------------------------
10/14/97 Hollywood Video $1,386,000 Hollywood Entertainment Corporation
Hamilton, Ohio
- --------------------------------------------------------------------------------
EQUIPMENT
PURCHASE
DATE CONCEPT/LOCATION PRICE LESSEE
- --------------------------------------------------------------------------------
3/31/97 Applebee's Neighborhood $402,000 J.M.C. Limited Partnership
Grill & Bar
Midvale, Utah
- --------------------------------------------------------------------------------
4/3/97 Black-Eyed Pea $350,000 DenAmerica Corporation
Plano, Texas
- --------------------------------------------------------------------------------
5/27/97 Shells Seafood Restaurant $118,658 Shells Seafood Restaurants, Inc.
Jacksonville, Florida
- --------------------------------------------------------------------------------
5/27/97 Shells Seafood Restaurant $ 93,460 Shells Seafood Restaurants, Inc.
Winter Haven, Florida
- --------------------------------------------------------------------------------
6/4/97 Golden Corral Restaurant $506,198 Corral South Store 4, Inc.
Temple Terrace, Florida
- --------------------------------------------------------------------------------
6/25/97 Arby's $159,471 Girardi-Riva Enterprises, Inc.
Pasco, Washington
- --------------------------------------------------------------------------------
7/9/97 Breckenridge Brewery & Pub $791,000 BBI Acquisition Co.
Breckenridge, Colorado
- --------------------------------------------------------------------------------
7/25/97 Burger King $282,327 Virginia QSC, L.L.C.
Colonial Heights, Virginia
- --------------------------------------------------------------------------------
10/15/97 KFC $231,021 Morgan's Restaurants of
Greensburg, Pennsylvania Pennsylvania, Inc.
- --------------------------------------------------------------------------------
Boston Market Restaurant Lease (Rochester, Minnesota)
On March 10, 1997 the Partnership acquired the land and 3,035 square foot
building comprising a Boston Market restaurant located at 1201 S. Broadway,
Rochester, Minnesota (the "Minnesota Property"). The Minnesota Property was
constructed for its present use in November of 1995 and was fully operational
at the time of the purchase. The Minnesota Property was purchased from, and
leased back to Finest Foodservice L.L.C., a Delaware limited liability company
("Finest Foodservice"). Finest Foodservice operates casual dining restaurants
under the
S-1
2
primary trade name of Boston Market. The Partnership purchased the
Minnesota Property for a purchase price of $964,000.
Finest Foodservice and the Partnership have entered into a lease (the
"Finest Foodservice Lease"), which is an absolute net lease, whereby Finest
Foodservice is responsible for all expenses related to the Minnesota Property,
including real estate taxes, insurance, maintenance and repair costs. The
Finest Foodservice Lease term expires on April 1, 2012 with five renewal
options of five years each. Annual rental (the "Annual Rental") is payable
according to the following schedule:
PERIOD ANNUAL RENTAL
Lease Years 1-5 $101,220
Lease Years 6-10 $111,342
Lease Years 11-15 $122,525
Lease Years 16-20 $134,777
Lease Years 21-25 $148,255
Lease Years 26-30 $163,081
Lease Years 31-40 Fair market value determined for each subsequent five-year
period at the beginning of the 31st and 36th Lease Years
Beginning in the sixth lease year, and in addition to the Annual Rental
provided above, Finest Foodservice will pay percentage rent on an annual basis
equal to the difference between five percent of "gross sales" (as defined in
the Finest Foodservice Lease) during such lease year less the Annual Rental
payable for such lease year.
Boston Chicken, Inc., a Delaware corporation (the "Option Holder"), has an
option to purchase and first right of refusal to purchase the Minnesota
Property. The Option Holder has the right to purchase the Minnesota Property
on the same terms and conditions as set forth in the offer or the Option Holder
may elect an alternate purchase price as follows: (a) during the first and
second lease years, an alternate purchase price equal to the total Annual
Rental payable for the lease year subsequent to the lease year in which the
option is exercised divided by 9.462%; (b) during the third lease year, an
alternate purchase price equal to the total Annual Rental for the third ease
year divided by 9.978%; (c) during the fourth lease year, an alternative
purchase price equal to the Annual Rental for the fourth lease year divided by
9.785%; and (d) during the fifth lease year, an alternative purchase price
equal to the Annual Rental for the fifth lease divided by 9.580%.
The Option Holder has the option to purchase the Minnesota Property at the
following times and option prices:
PERIOD OPTION PRICE
Lease Years 6-8 Annual Rent payable for the Lease Year
subsequent to the Lease Year in which
the option is exercised divided by ten
percent (10%)
Last ninety (90) days of the 15th Annual Rent payable for the 16th Lease
Lease Year Year divided by ten percent (10%)
Last ninety (90) days of the 30th The lesser of (i) fair market value or
Lease Year (ii) one hundred ten percent (110%) of
the Annual Rent payable for the 31st
Lease Year divided by ten percent
(10%)
Last ninety (90) days of the 40th The lesser of (i) fair market value or
Lease Year (ii) one hundred ten percent (110%) of
the Annual Rent payable for the 40th
Lease Year divided by ten percent
(10%)
The current annual rent per square foot for the Minnesota Property is
$33.35 per square foot. The depreciable basis of the Minnesota Property for
federal tax purposes if $614,000 and it will be depreciated using the straight
line method over 39 years, a rate of $15,744 per year.
An Affiliate of the Managing General Partner has received an Acquisition
Fee from the Partnership in an amount equal to $38,560 and expects to receive
an additional fee of $9,640 from the Partnership after leveraging the Property,
as provided for in the Prospectus. As provided in the Partnership Agreement,
these fees are being paid for services rendered in connection with the
selection, evaluation and acquisition of the Minnesota Property. In addition,
Finest Foodservice has paid to the same affiliate a closing fee equal to $4,820
as provided for in the Partnership Agreement. Finest Foodservice also paid all
of the expenses incident to the closing of the transaction contemplated by this
commitment including, without limitation, title insurance premiums, recording
fees and expenses and transfer taxes.
The Finest Foodservice Lease contains a substitution option that provides
in the event that Finest Foodservice determines the Minnesota Property is
inadequate or unprofitable or is rendered unsuitable by condemnation or
casualty, Finest Foodservice, subject to the Partnership's approval, may
substitute another property
S-2
3
of equal or greater current value having a Boston Market restaurant
located thereon. All obligations under the Finest Foodservice Lease, including
Annual Rental, percentage rent and taxes attributable to rent and the Minnesota
property, are unconditionally guaranteed by Boston Chicken, Inc., a Delaware
corporation.
The Finest Foodservice Lease contains material default provisions that
include, but are not limited to: (i) the vacating or abandonment of the
Minnesota Property by Finest Foodservice; (ii) the failure by Finest
Foodservice to make any payment due under the Finest Foodservice Lease; (iii)
the failure by Finest Foodservice to observe or perform any of the covenants,
conditions, or provisions of the Finest Foodservice Lease; and (iv) Finest
Foodservice making any general arrangement or general assignment for the
benefit of creditors. In the event of a material default by Finest
Foodservice, the Finest Foodservice Lease contains remedy provisions which are
summarized as follows: (i) the Partnership may terminate the Finest
Foodservice Lease and take possession of the Minnesota Property, in which case
the Partnership would be entitled to damages incurred by reason of the material
default; (ii) the Partnership may permit Finest Foodservice to remain in
possession of the Minnesota Property, in which case the Finest Foodservice
Lease would continue to be in effect; or (iii) the Partnership may pursue any
other legal remedy available.
Carino's Italian Kitchen Lease (El Paso, Texas)
On July 25, 1997 the Partnership acquired the land and 6,257 square foot
building comprising a Carino's Italian Kitchen restaurant located at 675
Sunland Park Drive, El Paso, Texas (the "Carino's Property"). The Carino's
Property was constructed for its present use in 1995 and was fully operational
at the time of the purchase. The Carino's Property was purchased from and
leased back to Kona Restaurant Group, Inc., a Delaware corporation ("Kona
Group"). Kona Group operates casual dining restaurants under the primary trade
names of Carino's Italian Kitchen and Kona Ranch Steak House. The Partnership
purchased a fee simple interest in the Carino's Property for a purchase price
of $1,600,000.
Kona Group and the Partnership have entered into a lease (the "Carino's
Lease"), which is an absolute net lease, whereby Kona Group is responsible for
all expenses related to the Carino's Property including real estate taxes,
insurance, maintenance and repair costs. The Carino's Lease term expires on
July 31, 2014 with one renewal option of six years and one renewal option of
seven years. The initial annual rent is equal to eleven percent (11%) of the
purchase price and will be payable in monthly installments on the first day of
each month. Thus, based on the purchase price of $1,600,000 the rent in
the first year of the Carino's Lease is $176,000 per year, or $14,667 per month.
The annual rent will increase by five percent (5%) on the August 1, 2000 and
every three years thereafter.
Kona Group has an option to purchase the Carino's Property during the
sixty-first (61st) full month of the Carino's Lease. In the event that Kona
Group elects to exercise the option to purchase in the sixty-first full month
of the Carino's Lease, the option price is $1,940,400.
The current annual rent per square foot for the Carino's Property is
$28.13 per square foot. The depreciable basis of the Carino's Property for
federal tax purposes is $500,000 and it will be depreciated using the straight
line method over 39 years, a rate of $12,821 per year.
An affiliate of the Managing General Partner has received an Acquisition
Fee from the Partnership in an amount equal to $64,000 and expects to receive
an additional fee of $16,000 from the Partnership after leveraging the
Property, as provided for in the Prospectus. These fees are being paid for
services rendered in connection with the selection, evaluation and acquisition
of the Carino's Property, as provided for in the Partnership Agreement. In
addition, Kona Group has paid to the same affiliate a commitment fee equal to
$16,000 as provided for in the Partnership Agreement. The Tenant also paid all
of the expenses incident to the closing of the transaction contemplated by this
commitment including, without limitation, title insurance premiums, recording
fees and expenses, and transfer taxes.
The Carino's Lease contains material default provisions that include, but
are not limited to: (i) the vacating or abandonment of the Carino's Property by
Kona Group; (ii) the failure by Kona Group to make any payment due under the
Carino's Lease; (iii) the failure by Kona Group to observe or perform any of
the covenants, conditions, or provisions of the Carino's Lease; and (iv) the
making by Kona Group of any general arrangement or general assignment for the
benefit of creditors. In the event of a material default by Kona Group, the
Carino's Lease contains remedy provisions which are summarized as follows: (i)
the Partnership may terminate the Carino's Lease and take possession of the
Carino's Property, in which case the Partnership would be entitled to damages
incurred by reason of the material default; (ii) the Partnership may permit
Kona Group to remain in possession of the Carino's Property, in which case the
Carino's Lease would continue to be in effect; or (iii) the Partnership may
pursue any other legal remedy available.
Golden Corral Restaurant Lease (Lakeland, Florida)
On July 25, 1997, the Partnership acquired an undivided 34.375% interest
as a tenant in common with Captec Franchise Capital Partners L.P. III, a
Delaware limited partnership and affiliate of the Managing General Partner
("Captec III"), in the land and 8,825 square foot building located at 4532
South Florida Avenue, Lakeland, Florida (the "Lakeland Property"). The
Lakeland Property was constructed for its present use in May of 1997 and
S-3
4
leased to Corral South Store 3, Inc., a Florida corporation ("Corral South 3").
Corral South 3 operates casual dining restaurants under the primary trade name
of Golden Corral Restaurants. Captec 3 purchased the Lakeland Property for a
total purchase price of $1,600,000 and sold the 34.375% interest to the
Partnership for $550,000.
Corral South 3 and the Partnership have entered into a lease (the "Corral
South 3 Lease"), which is an absolute net lease, whereby Corral South 3 is
responsible for all expenses related to the Lakeland Property including real
estate taxes, insurance, maintenance and repair costs. The Corral South 3
Lease term commenced on June 1, 1997 and expires fifteen years thereafter. The
Corral South 3 Lease has two renewal options of five years each. The initial
annual rent is $174,400, or $14,533 per month, and increases by 8% on the
five-year anniversary of the Corral South 3 Lease and every five years
thereafter (including any renewal options). The Partnership's pro-rata share
of the initial annual rent will be $59,950 or $4,996 per month. The initial
annual rent per square foot on the Lakeland Property is $19.76. The
depreciable basis of the Lakeland Property for federal tax purposes is
$1,080,000 and it will be depreciated using the straight line method over 39
years, a rate of $27,692 per year.
The obligations under the Corral South 3 Lease are guaranteed for the
benefit of the Partnership by David C. Brown, an individual. David C. Brown is
the sole stockholder of Corral South 3. Corral South 3 has an option to
purchase the Lakeland Property commencing on the sixty-first month of the
Corral South 3 Lease. In the event that Corral South 3 elects to exercise the
option to purchase, the option price shall be $1,833,520.
An affiliate of the Managing General Partner has received an acquisition
fee from the Partnership in an amount equal to $22,000 and expects to receive
an additional fee of $5,500 from the Partnership after leveraging the Lakeland
Property as provided for in the Prospectus. These fees are being paid for
services rendered in connection with the selection, evaluation and acquisition
of the Lakeland Property, as provided for in the Partnership Agreement. In
addition, Corral South 3 has paid to the same affiliate a commitment fee equal
to $5,500, as provided for in the Partnership Agreement. Corral South 3 has
paid all of the expenses incident to the closing of the transaction
contemplated by this commitment including, without limitation, the
Partnership's attorney's fees, title insurance premiums, recording fees and
expenses and transfer taxes.
The Corral South 3 Lease contains material default provisions that
include, but are not limited to: (i) the vacating or abandonment of the
Lakeland Property by Corral South 3; (ii) the failure by Corral South 3 to make
any payment due under the Corral South 3 Lease; (iii) the failure by Corral
South 3 to observe or perform any of the covenants, conditions, or provisions
of the Corral South 3 Lease; and (iv) the making by Corral South 3 of any
general arrangement or general assignment for the benefit of creditors. In the
event of a material default by Corral South 3, the Corral South 3 Lease
contains remedy provisions which are summarized as follows: (i) the Partnership
may terminate the Corral South 3 Lease and take possession of the Lakeland
Property, in which case the Partnership would be entitled to damages incurred
by reason of the material default; (ii) the Partnership may permit Corral South
3 to remain in possession of the Lakeland Property, in which case the Corral
South 3 Lease would continue to be in effect; or (iii) the Partnership may
pursue any other legal remedy available.
Blockbuster Video Lease (Riverdale, Georgia)
On August 8, 1997 the Partnership acquired the land and 6,500 square foot
building comprising a Blockbuster Video located at 8529 Georgia Highway 85,
Riverdale, Georgia (the "Blockbuster Property"). The Blockbuster Property was
constructed for its present use in 1995 and was fully operational at the time
of the purchase. The Blockbuster Property was purchased from Atlantis
Properties, L.L.C., a Georgia limited liability company ("Atlantis
Properties"), for a purchase price of $1,114,286.
The Partnership purchased the Blockbuster Property subject to a lease
dated April 4, 1997 (the "Blockbuster Lease") between Atlantis Properties and
Blockbuster Videos, Inc., a Texas corporation ("Blockbuster"), which is a net
lease, whereby Blockbuster is responsible for most expenses related to the
Blockbuster Property including real estate taxes, insurance, maintenance and
repair costs, except that the Partnership will be responsible for the repair
and maintenance of the structural systems including the roof, load-bearing
walls and floor slabs and exterior masonry walls and foundations. The
Blockbuster Lease term expires on June 30, 2007 with three renewal options of
five years each. Annual rental is payable according to the following schedule:
PERIOD ANNUAL RENTAL
Lease Years 1-5 $117,975
Lease Years 6-10 $132,145
Lease Years 11-15 $145,360
Lease Years 16-20 $159,900
Lease Years 21-25 $175,890
The rent is payable in monthly installments on the first day of each month.
Thus, the monthly rent in the first five years of the Blockbuster Lease is
$9,831. Viacom International, Inc., a Delaware corporation, unconditionally
and irrevocably guaranteed the full and complete performance of the Blockbuster
Lease.
S-4
5
The current annual rent per square foot for the Blockbuster Property is
$18.15 per square foot. The depreciable basis of the Blockbuster Property for
federal tax purposes is $754,286 and it will be depreciated using the straight
line method over 39 years, a rate of $19,341 per year.
An affiliate of the Managing General Partner has received an Acquisition
Fee from the Partnership in an amount equal to $44,571 and expects to receive
an additional fee of $11,143 from the Partnership after leveraging the
Property, as provided for in the Prospectus. These fees are being paid for
services rendered in connection with the selection, evaluation and acquisition
of the Blockbuster Property, as provided for in the Partnership Agreement.
In addition, Blockbuster has paid to the same affiliate a commitment fee equal
to $11,143 as provided for in the Partnership Agreement. The Tenant also paid
all of the expenses incident to the closing of the transaction contemplated by
this commitment including, without limitation, title insurance premiums,
recording fees and expenses and transfer taxes.
The Blockbuster Lease contains material default provisions that include,
but are not limited to: (i) the failure by Blockbuster to make any payment due
under the Blockbuster Lease; (ii) the failure by Blockbuster to observe or
perform any of the covenants, conditions, or provisions of the Blockbuster
Lease; and (iii) the making by Blockbuster of any general arrangement or
general assignment for the benefit of creditors. In the event of a material
default by Blockbuster, the Blockbuster Lease contains remedy provisions which
are summarized as follows: (i) the Partnership may terminate the Blockbuster
Lease and take possession of the Blockbuster Property, in which case the
Partnership would be entitled to damages incurred by reason of the material
default; (ii) the Partnership may permit Blockbuster to remain in possession of
the Blockbuster Property, in which case the Blockbuster Lease would continue to
be in effect; or (iii) the Partnership may pursue any other legal remedy
available; provided, however, that the Partnership may not accelerate rent and
is required to mitigate damages.
Hollywood Video Lease (Hamilton, Ohio)
On October 14, 1997, the Partnership acquired the land and 7,488 square
foot building comprising a Hollywood Video located at 1491 Main Street,
Hamilton, Ohio (the "Hollywood Video Property"). The Hollywood Video Property
was constructed for its present use in 1997 and was fully operational at the
time of the purchase. The Hollywood Video Property was purchased from Blue
Freedom Holdings, LLC, a Kentucky limited liability company, and leased to
Hollywood Entertainment Corporation, an Oregon corporation ("Hollywood
Entertainment"). The Partnership purchased a fee simple interest in the
Hollywood Video Property for a purchase price of $1,386,000
The Partnership purchased the property subject to a lease between Blue
Freedom Holdings, LLC and Hollywood Entertainment which commenced on July 24,
1997 (the "Hollywood Video Lease"). The Hollywood Video Lease is an absolute
net lease, whereby Hollywood Entertainment is responsible for all expenses
related to the Hollywood Video Property including real estate taxes, insurance,
maintenance and repair costs. The Hollywood Video Lease term expires on July
30, 2012 with three renewal options of five years each. The initial annual
rent is equal to eleven percent (11%) of the purchase price and will be payable
in monthly installments on the first day of each month. Thus, based on the
purchase price of $1,386,000 the rent in the first year of the Hollywood Video
Lease is $152,418 per year, or $12,701.50 per month. The annual rent shall be
adjusted on the first day of the sixty-first month and every sixty months
thereafter by the lesser of the Percentage CPI Increase, as defined in the
Hollywood Video Lease, or ten percent (10%).
The current annual rent per square foot for the Hollywood Video Property
is $20.35 per square foot. The depreciable basis of the Hollywood Video
Property for federal tax purposes is $811,000 and it will be depreciated using
the straight line method over 39 years, a rate of $20,795 per year.
An affiliate of the Managing General Partner has received an Acquisition
Fee from the Partnership in an amount equal to $55,440 and expects to receive
an additional fee of $13,860 from the Partnership after leveraging the
Property, as provided for in the Prospectus. These fees are being paid for
services rendered in connection with the selection, evaluation and acquisition
of the Hollywood Video Property, as provided for in the Partnership Agreement.
In addition, Hollywood Entertainment has paid to the same affiliate a
commitment fee equal to $13,860 as provided for in the Partnership Agreement.
The tenant also paid all of the expenses incident to the closing of the
transaction contemplated by this commitment including, without limitation,
title insurance premiums, recording fees and expenses and transfer taxes.
The Hollywood Video Lease contains material default provisions that
include, but are not limited to: (i) the failure by Hollywood Entertainment to
make any payment due under the Hollywood Video Lease; (ii) the failure by
Hollywood Entertainment to observe or perform any of the covenants, conditions,
or provisions of the Hollywood Video Lease; and (iii) the making by Hollywood
Entertainment of any general arrangement or general assignment for the benefit
of creditors. In the event of a material default by Hollywood Entertainment,
the Hollywood Video Lease contains remedy provisions which are summarized as
follows: (i) the Partnership may terminate the Hollywood Video Lease and take
possession of the Hollywood Video Property, in which case the Partnership would
be entitled to damages incurred by reason of the material default; (ii) the
Partnership may permit Hollywood Entertainment to remain in possession of the
Hollywood Video Property, in which case the Hollywood Video Lease would continue
to be in effect; or (iii) the Partnership may pursue any other legal remedy
available.
S-5
6
Applebee's Neighborhood Grill & Bar Equipment Lease (Midvale, Utah)
On March 31, 1997, the Partnership acquired, effective as of February 20,
1997, restaurant equipment (the "Applebee's Equipment") to be used in the
operation of an Applebee's Neighborhood Grill & Bar, located at 7045 South 1300
East, Midvale, Utah for $402,000.00. The Applebee's Equipment was acquired
from Captec Financial Group, Inc. ("Captec"), an affiliate of the General
Partners, which purchased the Applebee's Equipment from various vendors for a
total cost of $402,000 and leased it to J.M.C. Limited Partnership, a Utah
limited partnership, DBA Applebees ( "JMC"), by entering into a lease dated
March 1, 1997 (the "JMC Lease") with JMC on the Partnership's standard form of
equipment lease. JMC owns and operates the Applebee's Neighborhood Grill & Bar
restaurant under a franchise agreement.
On March 31, 1997, Captec assigned the JMC Lease to the Partnership,
effective as of February 20, 1997. Under the terms of the JMC Lease, JMC is
responsible for all expenses related to the Applebee's Equipment including
taxes, insurance, maintenance and repair costs. The lease term is 84 months
and the minimum annual rent is $82,056 payable in monthly installments of
$6,838 on the 1st day of each month. The annual rent remains fixed for the
entire JMC Lease term. The JMC Lease is guaranteed by the following: John B.
Prince, an individual; and William Tell, Inc., a Utah corporation. At the end
of the JMC Lease term, upon at least 90 days prior irrevocable notice to the
Partnership, JMC may purchase all of the Equipment for the lesser of fair
market value or Forty Thousand Two Hundred Dollars ($40,200).
JMC paid the first and last month's rent of $13,676 and interim rent in
the amount of $2,051 to the Partnership. An affiliate of the Managing General
Partner received an Acquisition Fee from the Partnership in an amount equal to
$16,080, and expects to receive an additional fee of $4,020 from the
Partnership after leveraging the Applebee's Equipment, as provided for in the
Partnership Agreement. In addition, JMC paid a commitment fee equal to $4,020
to the same affiliate as provided for in the Partnership Agreement.
Black-Eyed Pea Equipment Lease (Plano, Texas)
On April 3, 1997, the Partnership acquired restaurant equipment (the
"Black-Eyed Pea Equipment") to be used in the operation of a Black-Eyed Pea
restaurant located at 1905 Preston Road, Plano, Texas for $350,000. The
Black-Eyed Pea Equipment was acquired from DenAmerica Corp., which purchased
the Black-Eyed Pea Equipment from various vendors for a total cost of $350,000.
The Partnership leased the Black-Eyed Pea Equipment to DenAmerica Corporation,
a Georgia corporation d/b/a Black-Eyed Pea ("DenAmerica"), by entering into a
lease dated as of April 15, 1997 (the "DenAmerica Lease") with DenAmerica on
the Partnership's standard form of equipment lease. DenAmerica operates and
franchises restaurants under the primary trade names of Denny's and Black-Eyed
Pea.
Under the terms of the DenAmerica Lease, DenAmerica is responsible for all
expenses related to the Black-Eyed Pea Equipment including taxes, insurance,
maintenance and repair costs. The lease term is 84 months and the minimum
annual rent is $70,392 payable in monthly installments of $5,866 on the 15th
day of each month. The annual rent remains fixed for the entire DenAmerica
Lease term. At the end of the DenAmerica Lease term, upon at least 90 days
prior irrevocable notice to the Partnership, DenAmerica may purchase all of the
Black-Eyed Equipment for its fair market value at the date of the exercise of
the option.
The Partnership consented to a sublease between DenAmerica and Texas BEP.,
LP., a Texas limited partnership, on the same terms and conditions as the
DenAmerica Lease. DenAmerica remains the obligor under the DenAmerica Lease.
DenAmerica paid the first and last month's rent of $11,732 and interim
rent in the amount of $2,346 to the Partnership. An affiliate of the Managing
General Partner received an Acquisition Fee from the Partnership in an amount
equal to $14,000 and expects to receive an additional fee of $3,500 from the
Partnership after leveraging the Black-Eyed Pea Equipment, as provided
for in the Partnership Agreement. In addition, DenAmerica paid a commitment fee
equal to $3,500 to the same affiliate as provided for in the Partnership
Agreement.
Jacksonville Shells Seafood Equipment Lease (Jacksonville, Florida)
On May 27,1997, the Partnership acquired restaurant equipment to be used
in the operation of a Shells Seafood Restaurant, located at 9965 San Jose
Blvd., Jacksonville, Florida (the "Jacksonville Shells Equipment"). The
Jacksonville Shells Equipment was purchased from various vendors for a total
cost of $118,658.30 and leased to Shells Seafood Restaurants, Inc., a Delaware
corporation ("Shells Seafood"). Shells Seafood owns and operates Shells
Seafood Restaurants.
The Partnership and Shells Seafood entered into the Partnership's standard
form of equipment lease commencing on June 1, 1997 (the "Jacksonville Shells
Seafood Lease"). Under the terms of the Jacksonville Shells Seafood Lease,
Shells Seafood is responsible for all expenses related to the Jacksonville
Shells Equipment including taxes, insurance, maintenance and repair costs. The
lease term is 60 months and the minimum annual rent is $31,781 payable in
monthly installments of $2,648 on the 1st day of each month. The annual rent
remains fixed for the entire
S-6
7
Jacksonville Shells Lease term. At the end of the Jacksonville Shells Seafood
Lease term, upon at least 90 days prior irrevocable notice to the
Partnership, Shells Seafood may purchase all of the Jacksonville Shells
Equipment for $11,866.
Shells Seafood paid the first and last month's rent of $5,297 and interim
rent in the amount of $441 to the Partnership. An affiliate of the Managing
General Partner received an Acquisition Fee from the Partnership in an amount
equal to $4,746, and expects to receive an additional fee of $1,187 from the
Partnership after leveraging the Jacksonville Shells Equipment, as provided for
in the Partnership Agreement. In addition, Shells Seafood paid a commitment
fee equal to $1,187 to the same affiliate as provided for in the Partnership
Agreement.
Winter Haven Shells Seafood Equipment Lease (Winter Haven, Florida)
On May 27,1997, the Partnership acquired restaurant equipment to be used
in the operation of a Shells Seafood Restaurant, located at 1551 3rd Street,
SW, Winter Haven, Florida (the "Winter Haven Shells Equipment"). The Winter
Haven Shells Equipment was purchased from various vendors for a total cost of
$93,460 and leased to Shells Seafood.
The Partnership and Shells Seafood entered into the Partnership's standard
form of equipment lease commencing on June 1, 1997 (the "Winter Haven Shells
Seafood Lease"). Under the terms of the Winter Haven Shells Seafood Lease,
Shells Seafood is responsible for all expenses related to the Winter Haven
Shells Equipment including taxes, insurance, maintenance and repair costs. The
lease term is 60 months and the minimum annual rent is $25,032 payable in
monthly installments of $2,086 on the 1st day of each month. The annual rent
remains fixed for the entire Winter Haven Shells Lease term. At the end of the
Winter Haven Shells Seafood Lease term, upon at least 90 days prior irrevocable
notice to the Partnership, Shells Seafood may purchase all of the Winter Haven
Shells Equipment for $9,346.
Shells Seafood paid the first and last month's rent of $4,172 and interim
rent in the amount of $348 to the Partnership. An affiliate of the Managing
General Partner received an Acquisition Fee from the Partnership in an amount
equal to $3,738, and expect to receive an additional fee of $935 from the
Partnership after leveraging the Winter Haven Shells Equipment, as provided for
in the Partnership Agreement. In addition, Shells Seafood paid a commitment
fee equal to $935 to the same affiliate as provided for in the Partnership
Agreement.
Golden Corral Equipment Lease (Temple Terrace, Florida)
On June 4,1997, the Partnership acquired restaurant equipment to be used
in the operation of a Golden Corral Restaurant located at 11801 56th Street
North, Temple Terrace, Florida (the "Golden Corral Equipment"). The Golden
Corral Equipment was purchased from various vendors for a total cost of
$506,198 and leased to Corral South Store 4, Inc. a Florida corporation dba
Golden Corral Restaurant ("Corral South 4"). Corral South 4 owns and operates
the Golden Corral Restaurant under a franchise agreement.
The Partnership and Corral South 4 entered into the Partnership's standard
form of equipment lease commencing on June 15, 1997 (the "Corral South 4
Lease"). Under the terms of the Corral South 4 Lease, Corral South 4 is
responsible for all expenses related to the Golden Corral Equipment including
taxes, insurance, maintenance and repair costs. The lease term is 60 months
and the annual rent is $131,207 payable in monthly installments of $10,934 on
the 15th day of each month. The annual rent remains fixed for the entire
Golden Corral Lease term. All obligations under the Corral South 4 Lease are
guaranteed by David C. Brown, an individual. At the end of the Corral South 4
Lease term, upon at least 90 days prior irrevocable notice to the Partnership,
Corral South 4 may purchase all of the Golden Corral Equipment for $1.00.
At closing Corral South 4 paid the first and last month's rent of $21,868
and interim rent in the amount of $4,374 to the Partnership. An affiliate of
the Managing General Partner received an Acquisition Fee from the Partnership
in an amount equal to $20,248, and expects to receive an additional fee of
$5,062 from the Partnership after leveraging the Golden Corral Equipment, as
provided for in the Partnership Agreement. In addition, Corral South 4 paid a
commitment fee equal to $5,500 to the same affiliate as provided for in the
Partnership Agreement.
Arby's Equipment Lease (Pasco, Texas)
On June 25,1997, the Partnership acquired restaurant equipment to be used
in the operation of an Arby's restaurant, located at 2411 West Court, Pasco,
Washington (the "Arby's Equipment"). The Arby's Equipment was acquired from
various vendors for a total cost of $159,470.62 and leased to Girardi-Riva
Enterprises, Inc., an Arizona corporation dba Arby's Restaurant
("Girardi-Riva"). Girardi-Riva owns and operates the Arby's restaurant under a
franchise agreement.
The Partnership and Girardi-Riva entered into the Partnership's standard
form of equipment lease (the "Girardi-Riva Lease") commencing July 1, 1997.
Under the terms of the Girardi-Riva Lease, Girardi-Riva is responsible for all
expenses related to the Arby's Equipment including taxes, insurance,
maintenance and repair costs. The lease term is 84 months and the minimum
annual rent is $32,724 payable in monthly installments of $2,727 on the 1st day
of each month. The annual rent remains fixed for the entire Girardi-Riva Lease
term. All
S-7
8
obligations under the Girardi-Riva Lease are jointly and severally
guaranteed by the following individuals: Richard Riva, Sharri Riva, Thomas
Girardi and Kathy Girardi. At the end of the Girardi-Riva Lease term, upon at
least 90 days prior irrevocable notice to the Partnership, Girardi-Riva may
purchase all of the Arby's Equipment for $1.00.
Girardi-Riva paid the first and last month's rent of $5,454 and interim
rent in the amount of $545 to the Partnership. An affiliate of the Managing
General Partner received an acquisition fee from the Partnership in an amount
equal to $6,379, and expects to receive an additional fee of $1,595 from the
Partnership after leveraging the Arby's Equipment, as provided for in the
Partnership Agreement. In addition, Girardi-Riva paid a commitment fee equal
to $1,595 to the same affiliate as provided for in the Partnership Agreement.
Breckenridge Brewery & Pub Equipment Lease (Breckinridge, Colorado)
On July 9, 1997, the Partnership purchased restaurant equipment to be used
in the operation of an Breckenridge Brewery & Pub, located at 600 South Main,
Breckenridge, Colorado (the "Breckenridge Equipment") for $791,000. The
Breckenridge Equipment was acquired from, and leased back to BBI Acquisition
Co., a Colorado corporation dba Breckenridge Brewery & Pub ("BBI").
The Partnership and BBI entered into the Partnership's standard form of
equipment lease ("BBI Lease") commencing August 1, 1997. Under the terms of
the BBI Lease, BBI is responsible for all expenses related to the Breckenridge
Equipment including taxes, insurance, maintenance and repair costs. The lease
term is 84 months and the minimum annual rent is $163,262 payable in monthly
installments of $13,605.20 on the 1st day of each month. The annual rent
remains fixed for the entire BBI Lease term. All obligations under the BBI
Lease are unconditionally guaranteed by Breckenridge Holding Company, a
Colorado corporation. At the end of the BBI Lease term, upon at least 90 days
prior irrevocable notice to the Partnership, BBI may purchase all of the
Breckenridge Equipment for $1.00.
BBI paid the first and last month's rent of $27,210 and interim rent in
the amount of $10,094 to the Partnership. An affiliate of the Managing General
Partner received an acquisition fee from the Partnership in an amount
equal to $31,640, and expects to receive an additional fee of $7,910 from the
Partnership after leveraging the Breckenridge Equipment, as provided for in the
Partnership Agreement. In addition, BBI paid a commitment fee equal to $7,910
to the same affiliate as provided for in the Partnership Agreement.
Burger King Equipment Lease (Colonial Heights, Virginia)
On July 25,1997, the Partnership made an initial disbursement of $30,600
for restaurant equipment to be used in the operation of a Burger King
restaurant, located at 401 Southpark Blvd., Colonial Heights, Virginia ("Burger
King Equipment"). The final disbursement was made on November 1, 1997. The
Burger King Equipment was acquired from various vendors for a total cost of
$282,327 and leased to Virginia QSC, LLC, a Delaware limited liability company
dba Burger King ("Virginia QSC"). Virginia QSC owns and operates the Burger
King restaurant under a franchise agreement.
The Partnership and Virginia QSC have entered into a Progress Payment
Agreement dated July 15, 1997, ("Agreement") whereby the Partnership shall
provide disbursements of down payments and interim payments to pay approved
costs associated with the purchase of the Burger King Equipment. Under the
terms of the Agreement, all of the Burger King Equipment will be delivered and
installed and all disbursements made on or before October 31, 1997. Virginia
QSC paid to the Partnership a daily progress rental payment for each day that
any down payment and/or interim payment remained outstanding. The daily
progress payment was equal to .00031944 times the total amount outstanding and
was paid from July 25, 1997 to October 22, 1997. All of the Burger King
Equipment was delivered, installed, and accepted by Virginia QSC on October 22,
1997.
The Partnership and Virginia QSC entered into the Partnership's standard
form of equipment lease (the "Virginia QSC Lease") dated July 15, 1997 and
amended October 22, 1997 and November 1, 1997. Under the terms of the Virginia
QSC Lease, Virginia QSC is responsible for all expenses related to the Burger
King Equipment including taxes, insurance, maintenance and repair costs. The
base lease term is 84 months and will commence on the first or fifteenth of the
month following the final funding under the Agreement. Under the terms of the
Virginia QSC Lease, the minimum annual rent is $58,340 and is payable in
monthly installments of $4,862. The annual rent remains fixed for the entire
Virginia QSC Lease term. All obligations under the Virginia QSC Lease are
jointly and severally unconditionally guaranteed by the following individuals:
Justin Hathaway, Steven Porath and Alan Buford, each of whom is a member of
Virginia QSC. At the end of the Virginia QSC Lease term, upon at least 90 days
prior irrevocable notice to the Partnership, Virginia QSC may purchase all of
the Burger King Equipment for $1.00.
Virginia QSC paid the first and last month's rent of $9,723 and interim
rent of $1,094 to the Partnership at final funding. An affiliate of the
Managing General Partner received an acquisition fee from the Partnership in an
amount equal to $1,288, and expects to receive an additional fee of $2,822 from
the Partnership after leveraging the Burger King Equipment, as provided for in
the Partnership Agreement. Virginia QSC paid a commitment fee equal to $3,100
to the same affiliate, as provided for in the Partnership Agreement.
S-8
9
KFC (Greensburg, Pennsylvania)
On October 15,1997, the Partnership acquired restaurant equipment to be
used in the operation of a KFC restaurant, located at 975 E. Pittsburg Street,
Greensburg, Pennsylvania (the "KFC Equipment"). The KFC Equipment was acquired
from various vendors for a total cost of $231,021 and leased to Morgan's
Restaurants of Pennsylvania, Inc., a Pennsylvania corporation dba KFC
Restaurant ("Morgan's"). Morgan's owns and operates the KFC restaurant under a
franchise agreement.
The Partnership and Morgan's entered into the Partnership's standard form
of equipment lease (the "Morgan's Lease") commencing on October 15, 1997.
Under the terms of the Morgan's Lease, Morgan's is responsible for all expenses
related to the KFC Equipment including taxes, insurance, maintenance and repair
costs. The lease term is 84 months and the minimum annual rent is $45,188
payable in monthly installments of $3,766 on the 15th day of each month. The
annual rent remains fixed for the entire Morgan's Lease term. All obligations
under the Morgan's Lease are unconditionally guaranteed by Morgan's Foods,
Inc., an Ohio corporation and parent company of Morgan's. At the end of the
Morgan's Lease term, upon at least 90 days prior irrevocable notice to the
Partnership, Morgan's may purchase all of the KFC Equipment for $1.00.
Morgan's paid the first and last month's rent of $7,531 to the
Partnership. An affiliate of the Managing General Partner received an
acquisition fee from the Partnership in an amount equal to $9,241 and expects
to receive an additional fee of $2,310 from the Partnership after leveraging
the KFC Equipment, as provided for in the Partnership Agreement. In addition,
Morgan's paid a commitment fee equal to $2,310 to the same affiliate as
provided for in the Partnership Agreement.
Property and Equipment Acquisitions-General
With respect to each of the Properties, an affiliate of the Managing
General Partner (i) considered factors such as the potential value of the site,
the financial condition and business and operating history of the tenant, and
demographic data for the area in which the Property is located, (ii) analyzed
demographic, geographic and market diversification data for the area in which
each Property is located and reviewed an independent MAI appraisal of each
Property and the analysis regarding comparable properties contained therein,
and (iii) negotiated the purchase price.
The Partnership purchased each Property and Equipment package with cash
from Offering proceeds. It is anticipated that each such Property and
Equipment package will be leveraged as provided for in the Prospectus.
However, the Partnership presently does not have a financing commitment. With
respect to each of the Properties and the Equipment packages, the General
Partners believe that the amount of insurance carried by each tenant is
adequate.
RISK FACTORS
The following paragraph is added to the end of the section of the
Prospectus entitled "Risk Factors - Litigation against General Partner and
Possible Adverse Effect on Net Worth":
On January 31, 1997, the Court's decision was reversed on
appeal by the Michigan Court of Appeals and the case will either
be dismissed or subject to further proceedings if the plaintiffs
appeal the Court of Appeals decision.
PRIOR OFFERINGS
The following text has been added to the first paragraph of this Section
of the Prospectus:
On January 29, 1997, effective as of January 1, 1997, Captec L.P.
II sold all of its equipment packages and real estate properties
to an Affiliate of the Managing General Partner for $2,760,000 in
a transaction that was consented to by a majority in interest of
the limited partners. Simultaneously with such sale, Captec L.P.
II paid all of its expenses and distributed its remaining
$2,000,569 to its limited partners.
PLAN OF DISTRIBUTION
The subsections of this section of the Prospectus titled "General",
"Compensation", and "Indemnification" are amended, effective as of the date of
this Prospectus Supplement, to read in their entirety as follows:
GENERAL
The Offering is being made on a "best efforts, part or none" basis through
broker-dealers who are members of the National Association of Securities
Dealers, Inc. (the "Participating Dealers") and Captec Securities
S-9
10
Corporation, which will act as Dealer-Manager. The individual General
Partner and the corporate General Partner are each an Affiliate of the
Dealer-Manager. The Offering is conditioned upon sale of the Minimum Number of
Units prior to the close of business one year after the effective date of this
Prospectus (the "Termination Date"). Since the Minimum Number of Units was
sold on March 5, 1997, prior to the Termination Date, the General
Partners may extend the Offering to a date not later than the earlier to occur:
(i) sale of all Units offered hereby; or (ii) two years after the effective
date of this Prospectus (the "Extended Termination Date"). After the Minimum
Number of Units was sold, the Partnership has and will schedule interim
closings at which subscribers will be admitted as Limited Partners on at least
a monthly basis.
The Offering is made pursuant to agreements among the General Partners,
the Partnership, the Dealer-Manager and the Participating Dealers pursuant to
which the Participating Dealers are acting as agents of the Partnership for the
purpose of offering and selling Units. The Units are being offered on a "best
efforts, part or none" basis, which means that Participating Dealers are not
obligated to purchase any Units but are required only to use their best efforts
to sell Units to investors.
COMPENSATION
Subject to the provisions for reduced selling commissions, the Partnership
will pay selling commissions equal to 8.0% of Gross Proceeds to the
Dealer-Manager for Units sold by it. The Dealer-Manager may reallow fees of
up to 8% to the Participating Dealers with respect to Units sold by them. The
General Partners also paid an additional selling commission equal to 1% of
Gross Proceeds to Participating Dealers from Units sold until the Minimum
Number of Units was sold. The Dealer-Manager may also receive up to 0.5% of
Gross Proceeds as reimbursement for bona fide due diligence expenses. The
Dealer-Manager may reallow to any Participating Dealer or its registered
representatives all or any portion of this fee based upon the bona fide due
diligence expenses incurred. The General Partners will receive a
Non-Accountable Expense Allowance in an amount equal to 2% of Gross Proceeds to
cover certain expenses relating to the offer and sale of Units (including the
additional 1% selling commission payable until the Minimum Number of Units is
sold). In no event will sales commissions, the Non-Accountable Expense
Allowance, Organization and Offering Expenses, wholesaling salaries and
expenses and expenses of sales seminars, exceed in the aggregate, 13% of Gross
Proceeds.
The General Partners, their Affiliates and Participating Dealers may
purchase up to 10% of the Units, net of any selling commissions but otherwise
on the same terms as purchasers who are not Affiliates. Purchase of Units by
the General Partners and their Affiliates will not be counted for purposes of
reaching the Minimum Number of Units. Any purchases by the General Partners
will be for investment purposes only and not with a view toward resale.
Investors will not have a right to withdraw and receive a return of their
contributions. Neither the General Partners nor any of their Affiliates will
directly or indirectly pay or award any compensation to a third party engaged
as an investment adviser as inducement to advise favorably toward investment in
the Partnership. In addition, the selling commissions to the Dealer-Manager and
Participating Dealers will be reduced on sales of 501 or more Units in
accordance with the following Schedule:
Investor's
Dollar Amount Purchased Purchase Price Selling Commission Per Unit
- ----------------------- -------------- ---------------------------
Per Unit Percent Dollar Amount
-------- ------- -------------
$1,000 - $500,000 $1,000 8.0% $80.00
$501,000 - $750,000 $980 6.0% $60.00
$751,000 - $1,000,000 $970 5.0% $50.00
$1,001,000 - $1,500,000 $960 4.0% $40.00
$1,501,000 - $2,000,000 $950 3.0% $30.00
$2,001,000 and above $940 2.0% $20.00
The purchaser of such Units will be credited with such reduced commission
and the net proceeds to the Partnership will not be affected by the discount.
Subscriptions may be combined for purposes of determining the volume discounts
applicable to subscriptions from a purchaser.
INDEMNIFICATION
The Partnership, General Partners, and Dealer-Manager have agreed to
indemnify the Participating Dealers and the Participating Dealers have agreed
to indemnify the General Partners, Dealer-Manager, and the Partnership
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Act"). In the opinion of the Securities and Exchange
Commission, indemnification for liabilities under the Act is against public
policy and therefore unenforceable. The Participating Dealers may be deemed to
be underwriters as that term is defined in the Act.
S-10
11
AMENDMENT TO THE AGREEMENT OF LIMITED
PARTNERSHIP OF CAPTEC FRANCHISE
CAPITAL PARTNERS IV
Sections 9, 12, 14, and 15 of the Partnership's Agreement of Limited
Partnership included as Exhibit B to the Prospectus (the "Partnership
Agreement"), have been corrected and amended, consistent with the disclosures
in the Prospectus as set forth below:
9. COMPENSATION TO THE GENERAL PARTNERS AND THEIR AFFILIATES
The second sentence of Section 9.7 of the Partnership Agreement has been
amended so as to read in its entirety as follows:
Such fees shall accrue and be subordinated to receipt by the
Limited Partners of aggregate Distributions equal to a 10.5% per
annum cumulative, non-compounded return on their Adjusted
Investment plus aggregate distributions of Net Sale or Refinancing
Proceeds equal to 100% of their Original Contributions.
12. TRANSFERABILITY OF UNITS
Section 12.1.4 of the Partnership Agreement has been amended so as to read
in its entirety as follows:
12.1.4 if the Managing General Partner determines in its
sole discretion that such assignment would prevent the Partnership
from being able to satisfy either the 2% or 5% "safe harbors"
contained in Service Advance Notice 88-75 or in corresponding
regulations or the Partnership has received an opinion of counsel
or a favorable service ruling that such transfer would result in
the Partnership being classified as a "publicly-traded
partnership" for federal income tax purposes.
14. RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND DUTIES OF THE MANAGING
GENERAL PARTNER
The first sentence of Section 14.4.5 has been amended so as to permit the
Partnership to only enter into co-tenancy arrangements, joint ventures or
general partnerships with non-affiliates that own one or more Assets, and
Section 14.4.5 now reads in its entirety as follows:
cause the Partnership to invest in any Asset with unaffiliated
parties that own one or more Assets through co-tenancy
arrangements, joint ventures or general partnerships except on
substantially the same terms and conditions (although not
necessarily the same percentage interest) as such unaffiliated
parties; provided, however, that no such investment shall be
entered into by the Partnership (i) if it involves the payment of
duplicative property management or other fees which would have the
effect of circumventing any of the restrictions on and prohibited
transactions involving conflicts of interest contained in this
Partnership Agreement, and (ii) unless the Partnership acquires a
controlling interest in such joint venture or partnership.
15. RIGHTS AND POWERS OF THE LIMITED PARTNERS
The last sentence of Section 15.3 has been revised so as to remove the
General Partners' right to vote the Units of those Limited Partners that do not
submit a vote within a certain time period, and Section 15.3 reads in its
entirety as follows:
15.3 Consent Without a Meeting. The Managing General Partner may
and, upon receipt of a request in writing signed by ten percent
(10%) or more in interest of the Limited Partners, the Managing
General Partner shall, submit any matter upon which the Limited
Partners are entitled to act, to the Limited Partners for a vote
by written consent without a meeting. For purposes of obtaining a
written vote under this Partnership Agreement, the Managing
General Partner may require a written response within a specified
time, but not less than fifteen (15) days and no more than sixty
(60) days from receipt of said request.
PROPOSED ASSIGNMENT OF GENERAL PARTNERSHIP INTERESTS
In a recently filed registration statement with the Commission for its
initial public offering, Captec Net Lease Realty, Inc., an Affiliate of the
General Partners, stated that it will become the sole general partner of the
Partnership by acquiring the general partnership interests in the Partnership
held by the General Partners. However, the transfer of such general
partnership interests is subject to the approval of the Limited Partners by
Majority Vote, and the Limited Partners will receive notice of and an
opportunity to approve any transfer of the general partnership interests.
S-11
12
FINANCIAL STATEMENTS
The financial statements of the Partnership and Managing Partner set forth
on pages F-1 to F-7 of the Prospectus are replaced in their entirety by the
financial statements on the following pages.
S-12
13
INDEX TO FINANCIAL STATEMENTS
Page
Captec Franchise Capital Partners L.P. IV
Report of Independent Accountants F-2
Balance Sheet F-3
Notes to Financial Statements F-4
Captec Franchise Capital Corporation IV
Report of Independent Accountants F-5
Balance Sheet F-6
Statement of Cash Flows F-7
Notes to Financial Statements F-8
F-1
14
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 30, 1996 TO DECEMBER 31, 1996
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Captec Franchise Capital Corporation IV
Managing General Partner of
Captec Franchise Capital Partners L.P. IV:
We have audited the accompanying balance sheet of Captec Franchise Capital
Partners L.P. IV as of December 31, 1996 and July 30, 1996. This financial
statement is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this financial statement based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statement is free from
material misstatement. An audit includes examining, on a test basis, evidence
supporting financial statement amounts and disclosures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Captec Franchise Capital
Partners L.P. IV as of December 31, 1996 and July 30, 1996, in conformity with
generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Detroit, Michigan
March 14, 1997
F-2
15
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
BALANCE SHEET
December 31, 1996 and July 30, 1996
DECEMBER JULY
ASSETS 1996 1996
Cash $ - $ 300
Prepaid expenses 339 -
----- -----
Total assets $ 339 $ 300
===== =====
LIABILITIES & PARTNERS' CAPITAL
Liabilities:
Total liabilities, overdraft $ 39 $ -
----- -----
Partners' Capital:
Limited partners' capital accounts 100 100
General partners' capital account 200 200
----- -----
Total partners' capital 300 300
----- -----
Total liabilities & partners' capital $ 339 $ 300
===== =====
The accompanying notes are an integral part of the balance sheet.
F-3
16
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. IV
NOTES TO BALANCE SHEET
1. THE PARTNERSHIP:
Captec Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
limited partnership, was organized on July 23, 1996 for the purpose of
acquiring income-producing commercial real properties and equipment
leased on a "triple net" or "double net" basis, primarily to operators of
national and regional franchised businesses, principally restaurants, as
well as national and regional retail chains. The Partnership has not
commenced operations.
The General Partners of the Partnership are Captec Franchise Capital
Corporation IV (the "Corporation"), a wholly owned subsidiary of Captec
Financial Group, Inc. ("Captec"), and Patrick L. Beach, an individual,
hereinafter collectively referred to as the Sponsors. Patrick L. Beach
is also the Chairman of the Board of Directors, President and Chief
Executive Officer of the Corporation and Captec. The General Partners
have each contributed $100 in cash to the Partnership as a capital
contribution.
The Partnership has undertaken a public offering of limited partnership
interests ("Units") in 1996. A minimum of 2,000 Units and a maximum of
30,000 Units, priced at $1,000 per Unit, will be offered on a "best
efforts, part or none" basis. As of December 31, 1996, the Partnership
had not issued any Units.
The initial Limited Partner of the Partnership is Patrick L. Beach. Mr.
Beach has contributed $100 to the capital of the Partnership and has
received 0.1 Unit. Upon admission to the Partnership of any other
Limited Partner, the initial Limited Partner may withdraw from the
Partnership, in which case his 0.1 Unit shall be redeemed for $100.
2. ORGANIZATION AND OFFERING EXPENSES:
Organization and offering expenses, excluding selling commissions, will
be paid initially by the Sponsors and/or their affiliates and reimbursed
by the Partnership in an amount equal to up to three percent (3%) of the
gross proceeds of the offering (less any amounts paid directly by the
Partnership). The Sponsors are liable for all expenses of the offering
and for the general obligations of the Partnership if no Units are sold
(i.e., if subscriptions are not received for the minimum number of
Units). In addition, the Sponsors and/or their affiliates will be paid a
non-accountable expense allowance by the Partnership in an amount equal
to two percent (2%) of the gross proceeds of the offering.
The Sponsors have also guaranteed payment of organization and offering
expenses which exceed 13% of the gross proceeds of the offering.
3. OMISSION OF INAPPLICABLE FINANCIAL STATEMENTS:
The Partnership was organized in July 1996, but has not commenced
operations. As no revenues or expenses have been incurred, no Statement
of Operations, Statement of Partners' Capital or Statement of Cash Flows
are included for the Partnership.
4. SUBSEQUENT EVENT:
On March 5, 1997, the Partnership accepted subscriptions for 2,015.5
Units, at which time $2,015,500 of proceeds from the sale of such Units
were released from escrow and the Partnership immediately commenced
operations.
F-4
17
CAPTEC FRANCHISE CAPITAL CORPORATION IV
REPORT ON AUDITS OF FINANCIAL STATEMENTS
FOR THE PERIOD FROM JULY 30, 1996 TO DECEMBER 31, 1996
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Captec Franchise Capital Corporation IV:
We have audited the accompanying balance sheet of Captec Franchise Capital
Corporation IV as of December 31, 1996 and July 30, 1996, and the related
statements of cash flows for the period from July 30, 1996 to December 31,
1996. These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence support financial statement amounts and disclosures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Captec Franchise Capital
Corporation IV as of December 31, 1996 and July 30, 1996, and its cash flows
for the period from July 30, 1996 to December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Detroit, Michigan
March 14, 1997
F-5
18
CAPTEC FRANCHISE CAPITAL CORPORATION IV
BALANCE SHEET
December 31, 1996 and July 30, 1996
DECEMBER JULY
ASSETS 1996 1996
Cash $ 1,407 $ 900
Investment in partnership 100 100
Reimbursable organizational & offering expenses 505,108 -
Receivable from affiliate 1,697 -
Other assets 16,038 -
-------- ------
Total assets $524,350 $1,000
======== ======
LIABILITIES & STOCKHOLDERS' EQUITY
Total liabilities:
Accounts payable $ 37,022 $ -
Payable to affiliates 486,328 -
-------- ------
Total liabilities 523,350 -
-------- ------
Stockholders' equity:
Common stock, no par value; 60,000 shares
authorized, 1,000 shares issued and outstanding 1,000 1,000
Retained earnings (accumulated deficit) - -
-------- ------
Total stockholders' equity 1,000 1,000
-------- ------
Total liabilities & stockholders' equity $524,350 $1,000
======== ======
The accompanying notes are an integral part of the financial statements.
F-6
19
CAPTEC FRANCHISE CAPITAL CORPORATION IV
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 30, 1996 TO DECEMBER 31, 1996
Cash flows from operating activities:
Net income $ -
Adjustments to net income:
Other assets (16,038)
Accounts payable 37,022
--------
Net cash provided by operating activities 20,984
--------
Cash flows from investing activities:
Investment in partnership (100)
--------
Net cash used in investing activities (100)
--------
Cash flows from financing activities: -
--------
Issuance of common stock 1,000
Proceeds from borrowings from affiliates 486,328
Payment of reimbursable offering expenses (506,805)
--------
Net cash provided by financing activities (19,477)
--------
Net increase (decrease) in cash 1,407
Cash, beginning of year -
--------
Cash, end of period $ 1,407
--------
The accompanying notes are an integral part of the financial statements.
F-7
20
CAPTEC FRANCHISE CAPITAL CORPORATION IV
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION:
Captec Franchise Capital Corporation IV (the "Corporation") is a Michigan
corporation organized on July 22, 1996. The Corporation was formed for
the purpose of serving as the managing general partner of Captec
Franchise Capital Partners L.P. IV (the "Partnership"), a Delaware
limited partnership.
The Corporation is a wholly owned subsidiary of Captec Financial Group,
Inc. ("Captec"). Captec has paid $1,000 in cash to the Corporation for
the purchase of 1,000 shares of common stock of the Corporation. As a
general partner of the Partnership, the Corporation has contributed $100
to the capital of the Partnership, Patrick L. Beach is also a general
partner of the Partnership and is the Chairman of the Board of Directors,
President and Chief Executive Officer of the Corporation and Captec.
Each general partner has a 0.5 percent share in the Partnership's net
income or loss.
The Partnership anticipates undertaking a public offering of limited
partnership interests ("Units") in 1996. A minimum of 2,000 Units and a
maximum of 30,000 Units, priced at $1,000 per Unit, will be offered on a
"best efforts, part or none" basis. As of December 31, 1996, the
Partnership had not issued any Units.
Affiliates of the Corporation are expected to provide various services to
the Partnership and will be paid certain fees for such services as
specified in the Partnership Agreement.
Following is a summary of the Corporation's significant accounting
principles:
a. INCOME TAXES: The Corporation reports its income for federal
income tax purposes in the consolidated tax return of Captec.
Income taxes are allocated by Captec to the Corporation on the
separate return basis. The Corporation's income tax expense
reflected in the statement of operations and that computed by
applying the statutory federal income tax rate are approximately
equal. Deferred income taxes, for financial reporting purposes, are
not material.
b. ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
2. OMISSION OF INAPPLICABLE FINANCIAL STATEMENTS:
For the period from July 30, 1996 to December 31, 1996, the Corporation
had no sources of revenue or expense, since operations of the Partnership
had not commenced. As no revenues or expenses had been incurred, no
Statement of Operations or Statement of Partners' Capital are included
for the Corporation.
3. RELATED PARTY TRANSACTIONS:
Organization and offering expenses related to the offering of Units are
prepaid by the Corporation and reimbursed by the Partnership in an amount
equal to up to three percent (3%) of the gross proceeds of the offering
(less any amounts paid directly by the Partnership). The Corporation is
also reimbursed by the Partnership for a non-accountable expense
allowance in an amount equal to two percent (2%) of the gross proceeds of
the offering. The Corporation did not receive reimbursements from the
Partnership in 1996 because the Partnership had not commenced operations.
The Corporation receives advances from Captec in order to have sufficient
funds for the prepayment of organization and offering and non-accountable
expenses made on behalf of the Partnership. As the Corporation receives
reimbursements of such prepaid expenses, the advances to Captec are
repaid.
4. SUBSEQUENT EVENT:
On March 5, 1997, the Partnership accepted subscriptions for 2,015.5
Units, at which time $2,015,500 of proceeds from the sale of such Units
were released from escrow and the Partnership immediately commenced
operations.
F-8