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Exhibit 10.1
AMENDMENT TO THE CREDIT AGREEMENT DATED FEBRUARY 26, 1996 BY AND
BETWEEN CS FIRST BOSTON MORTGAGE CAPITAL CORP. AND CAPTEC NET
LEASE REALTY, INC.
This Amendment (this "Amendment") dated as of December 1, 1996 by and
between CS FIRST BOSTON MORTGAGE CAPITAL CORP., a Delaware corporation
("Lender"), whose address is 55 East 52nd Street, New York, New York 10055, and
CAPTEC NET LEASE REALTY, INC., a Michigan corporation ("Borrower"), whose
address is 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, P.O. Box 544, Ann
Arbor, Michigan 48106-0544 (hereinafter the "Agreement").
WITNESSETH
WHEREAS, Lender and Borrower have entered into a certain Credit
Agreement (the "Credit Agreement") in the principal amount of up to
$100,000,000; and
WHEREAS, the Borrower has requested to use a portion of the proceeds of
the funding under the Credit Agreement be used for the purpose of financing
Improvements to the Properties; and
WHEREAS, Lender is willing to modify the terms of the Credit Agreement
under this Amendment on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the benefits
accruing to Borrower and for other good and valuable consideration, the receipt
and sufficiency of which Borrower hereby acknowledges, Borrower hereby makes the
following representations and warranties to Lender and covenants and agrees with
Lender as follows, and the Lender is willing to make available to Borrower the
credit facilities provided for herein as follows:
1. RECITALS; CAPITALIZED TERMS. The foregoing recitals are
incorporated herein by reference. Capitalized terms not defined herein shall
have the same meaning as same are defined in the Credit Agreement.
2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) Section 1(e) (i) of the Credit Agreement is hereby amended as
follows:
"Borrower agrees to pay interest in respect of the unpaid
principal amount of each Revolving Loan from the date the
proceeds thereof are made available to Borrower until the
maturity thereof (whether by acceleration or otherwise) at a
rate
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per annum which shall be the Revolving Loan Rate in effect
from time to time. In the event that the Loan proceeds are
used to finance any and all construction, resurfacing or
refacing of Improvements (the "Improvements") then the
Revolving Loan Rate with respect to the Revolving Loan
related to such Improvements shall be increased by 50 Basis
Points over the rate otherwise charged for the Revolving
Loans (the "Improvement Loans")."
(b) Section 1(f) of the Credit Agreement is hereby amended as
follows:
"The proceeds of the Revolving Loans shall be used by
Borrower exclusively to finance the acquisition or lease by
Borrower, and for no other purpose whatsoever. The proceeds
of the Improvement Loans shall be used for the construction,
resurfacing or refacing of such Improvements of such
Properties, and for no other purpose whatsoever."
(c) Section 3(e) (ii) of the Credit Agreement is hereby amended as
follows:
"(A) The amount of each Revolving Loan shall not exceed the
sum of seventy-five (75%) percent of the Appraised Value of
each of the Properties being financed with such Revolving
Loan, (B) the principal amount outstanding of all Revolving
Loans, which shall not include Improvement Loans, shall not
exceed seventy-five (75%) percent of the Appraised Value of
all Properties financed with the Loans (the "Loan to Value
Requirement"), (C) the amount of each Improvement Loan
advanced for the purpose of constructing, resurfacing or
refacing of such Improvements upon each such Property shall
not exceed the sum of fifty-six (56%) percent of the
Appraised Value of each such Property together with said
Improvements thereon, and (D) Improvement Loans advanced
under the Amendment for each such Property shall not exceed
twenty (20%) percent of the total funds available under the
Credit Agreement at any given time.
3. CONDITIONS PRECEDENT TO LENDER'S OBLIGATIONS TO MAKE
ADVANCES UNDER THIS AMENDMENT.
In addition to Section 4 and Section 11 of the Credit Agreement,
Lender's obligation to make Loan advances pursuant to
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this Amendment shall be subject to the satisfaction of the following
conditions:
(a) All conditions of the Amendment hereunder shall have
been and remain satisfied as of the date of such advances;
(b) The representations and warranties made in this
Amendment shall be true and correct on and as of the date of the
advance with the same effect as if made on such date;
(c) Borrower shall not advance any draw for Improvements
unless (i) the Tenant has executed a valid, legal and binding lease
agreement and (ii) the franchisor has executed and the Lender has
received a short form franchisor estoppel certificate attached hereto
as Exhibit A;
(d) Upon completion of the Improvements, the Borrower may
request that the Improvement Loans be converted to a Revolving Loan
Rate, PROVIDED HOWEVER, that all requirements regarding both the
Credit Agreement and this Amendment are performed and completed,
which shall be determined solely by the Lender in its sole and
absolute discretion, and among other things that the Lender receive
either a fully executed Franchise Agreement or a long form franchisor
estoppel certificate attached hereto as Exhibit B;
(e) Borrower's first draw regarding the funds advanced by
Lender under this Amendment must include the purchase of the
Property, such that title transfers to Borrower simultaneously, a
copy of such title shall be forwarded to Lender; and
(f) Borrower's Tenant shall be obligated, under the lease,
to Borrower for all rental payments due under the lease agreement for
the entire term of the lease which duration shall not be less than
ten (10) years.
Lender shall also have received each such item listed below upon the
completion of the Improvements:
(a) Evidence that construction, resurfacing or refacing of
the Improvements have been completed and that Borrower has received
satisfactory evidence of the approval by all relevant governmental
authorities including but not limited to the United States, the state
in which each such Property is located and any political subdivision,
agency, department, commission, board, bureau or instrumentality of
either of them, including any local authorities, which exercises
jurisdiction over each such Property or the Improvements thereon
(hereinafter the "Governmental
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Authorities") of the Improvements in their entirety for permanent
occupancy, and of the contemplated uses thereof, to the extent any
such approval is a condition of the lawful use and occupancy thereof;
(b) A final survey of each such Property, certified to
Lender and the Title Insurer, showing the completed Improvements;
(c) Evidence that Borrower has filed the notice, if any, of
completion of the Improvements necessary to establish commencement
of the shortest statutory period for the filing of mechanics' and
materialmen's liens; and
(d) Certificates of Occupancy and Zoning Letters from the
city stating that each such Property complies with all regulations
and codes of each such Governmental Authority.
4. BORROWER REPRESENTS, WARRANTS AND COVENANTS
Borrower represents and warrants that:
(a) The plans for such construction, resurfacing or refacing
of such Improvements have been reviewed and approved by the tenants
under any Leases which require approval of the plans and, to the
extent required by applicable law or any effective restrictive
covenant, by all Governmental Authorities. The planned use of the
Improvements complies with applicable zoning ordinances, regulations
and restrictive covenants affecting each such Property as well as all
environmental, ecological, landmark, and other applicable laws and
regulations; and all requirements for such use have been satisfied;
(b) The Leases are unmodified and in full force and effect,
there are no defaults under any thereof and all conditions to the
effectiveness and continuing effectiveness thereof required to be
satisfied as of the date hereof have been satisfied;
Borrower shall also:
(a) Promptly comply with all laws, ordinances, orders,
rules, statutes and regulations of Governmental Authorities and
promptly furnish Lender with reports of any official searches made by
Governmental Authorities and any claims of violations thereof with
regard to the Improvements;
(b) Pay all Costs and expenses required for completion of
the Improvements and the satisfaction of the conditions of this
Agreement, including, without limitation:
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(i) all document and stamp taxes, recording and
filing expenses and fees and commissions lawfully due to
brokers in connection with the transactions contemplated
hereby,
(ii) the fees and expenses in connection with the
preparation for and consummation of the transactions
contemplated hereby, and for any services of such parties
which may be required in addition to those normally and
reasonably contemplated hereby,
(iii) any taxes, insurance premiums, liens,
security interests or other claims or charges against each
such Property or the Improvements thereon, and
(iv) all costs of completion of the work to be
performed by Borrower regarding the Improvements, (including
public space) to permit the lawful occupancy thereof for the
purposes contemplated by actual or prospective lessees of
such space as set forth in the individual leases to the
level of building standard in accordance with industry
practices;
(c) Commence construction of the Improvements no later than
thirty (30) days from the date of advancement of the funds under this
Amendment; cause construction thus begun to be prosecuted with
diligence and continuity in a good and workmanlike manner and
complete construction of the Improvements, in accordance with the
plans, free and clear of defects and liens or claims for liens for
material supplied or labor or services performed in connection with
the construction, resurfacing or refacing of the Improvements; time
being of the essence as to this paragraph (c); and
(d) Indemnify Lender against claims of brokers arising by
reason of the execution hereof or the consummation of the
transactions contemplated hereby.
5. Providing that the Borrower is in full compliance with this
Amendment, which shall be decided at the sole and absolute discretion
of the Lender, and each such Property meets the criteria for
receiving the lower interest rate provided to the Revolving Loan
amounts under the Credit Agreement (which shall include that the
Improvements have been completed and certificates of occupancy shall
have been issued therefore and the tenants under the Lease shall have
accepted the Improvements, have taken possession thereof and are
paying base rent), the Borrower shall request from the Lender that
the Improvement Loan be converted to a Revolving Loan under the
Credit Agreement for each such Property
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pursuant to the same terms and conditions as provided for under the
Credit Agreement.
6. All terms and provisions of the Credit Agreement remain in full
force and effect except as expressly set forth herein and the Credit
Agreement shall not be further modified or amended except at the sole
and absolute discretion of the Lender.
7. This Amendment shall be governed by the laws of the State of New
York and shall be binding upon and enuring to the benefit of its
successors and/or assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
CAPTEC NET LEASE REALTY, INC.
Witnesses:
/s/ Margaret K. Rivera
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Margaret K. Rivera By /s/ Gary A. Bruder
---------------------------------
Name: Gary A. Bruder
/s/ David A. Ebys Its: Vice President
- ---------------------------------
David A. Ebys
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
Witnesses:
/s/ Chris LaVallee
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Chris LaVallee By /s/ Emily Yassauf
---------------------------------
Name:
Its:
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EXHIBIT A
MASTER FORM: 11/12/96
(CONSTRUCTION LOAN)
Date :______________, 199___
Captec Financial Group Funding Corporation
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
P.O. Box 544
Ann Arbor, Michigan 48106-0544
RE: ________________________
Ladies and Gentlemen:
The undersigned certifies to Captec Financial Group Funding
Corporation, a Michigan corporation (together with it successors, assigns and
transferees, "Lender") as follows:
1. As of the date hereof, ______________(the "Franchisee") is a
licensed franchisee of _____________, a ______________________ (the
"Franchisor"), and is in good standing with said Franchisor.
2. Franchisor has approved, for development as a [TYPE OF
FRANCHISE] restaurant site, the real property located at [ADDRESS OF PREMISES]
(the "Premises"), and has approved Franchisee to operate the [TYPE OF
FRANCHISE] restaurant to be constructed on the Premises upon the completion of
construction.
3. Upon the completion of construction of the [TYPE OF FRANCHISE]
restaurant on the Premises, Franchisor shall confirm that Franchisor has
selected and approved Franchisee to operate the [TYPE OF FRANCHISE] restaurant
on the Premises and shall certify to Lender that Franchisor and Franchisee have
entered into a written Franchise Agreement with respect to same.
The provisions of this certificate shall be binding upon and insure to
the benefit of the Franchisor, Franchisee, Lender, and their respective
successors and assigns.
___________________________________________
By_________________________________________
Its_______________________________________
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STATE OF ______________________ )
) ss
COUNTY OF _____________________ )
The foregoing instrument was acknowledged before me this ____ day of
____________, 199___, by ___________________, the ______________________ of
______________________________, a __________________________, on behalf of the
_______________________.
____________________________________
Notary Public
_______________County,______________
My Commission Expires:______________
[Notary Public's Seal]
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EXHIBIT B
MASTER FORM (LOAN): 10/3/96
Date: ___________, 199___
Captec Financial Group Funding Corporation
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
P.O. Box 544
Ann Arbor, Michigan 48106-0544
RE: __________________________
Ladies and Gentlemen:
The undersigned certifies to Captec Financial Group Funding
Corporation, a Michigan corporation (together with it successors, assigns and
transferees, "Lender") as follows:
1. _________________________, a ________________________
("Franchisee"), and _______________________, a ___________________________
("Franchisor"), entered into a [Franchise Agreement], dated __________________,
[as amended on ________________________________] ("Franchise Agreement") in
which Franchisor granted to Franchisee a license to use ____________________
(as defined in the Franchise Agreement) at __________________________________
("Premises").
2. Franchisor has approved the Premises for development as a
__________________ restaurant. The Premises is open and oeprating as a
_______________________ restaurant in accordance with the terms of the
Franchise Agreements.
3. The Franchise Agreement constitutes the only agreement between
Franchisor and Franchisee with respect to the Premises and a true copy of the
Franchise Agreement is attached hereto as Exhibit A.
4. The Franchise Agreement is in full force and effect; Franchisee
is currently operating under the Franchise Agreement and is paying all sums due
and owing to Franchisor under the Franchise Agreement.
5. As of the date hereof, Franchisee is not in default in the
performance of any of its duties and obligations under the Franchise Agreement,
Franchisee has not committed any breach of the Franchise Agreement, Franchisor
has not waived any breach of the Franchise Agreement by Franchisee, and no
notice of default has been given to Franchisee.
6. Franchisee commenced operations under the Franchise Agreement
on ________________ and the Franchise Agreement terminates (excluding renewal
periods) on ______________________. [There are ____________ renewal periods of
_____________ years each for the Franchise Agreement.]
The provisions of this certificate shall be binding upon and insure to
the benefit of the Franchisor, Franchisee, Lender, and their respective
successors and assigns.
___________________________
By_________________________
Its_______________________
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STATE OF ______________________ )
) ss
COUNTY OF _____________________ )
The foregoing instrument was acknowledged before me this ____ day of
____________, 199___, by ___________________, the ______________________ of
______________________________, a __________________________, on behalf of the
_______________________.
____________________________________
Notary Public
_______________County,______________
My Commission Expires:______________
[Notary Public's Seal]
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AMENDMENT
to
CREDIT AGREEMENT
between
CAPTEC NET LEASE REALTY, INC.
a Michigan corporation, as borrower
and
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
a Delaware limited liability company
(as successor to CS First Boston Mortgage Capital Corp.,
its successors and assigns),
as lender
JUNE __, 1997
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AMENDMENT TO CREDIT AGREEMENT
-----------------------------
This Amendment ("Amendment") to that certain Credit Agreement dated
February 26, 1996, as previously amended (the "Credit Agreement"), by and
between Captec Net Lease Realty, Inc., a Michigan corporation, as borrower
("Borrower") and Credit Suisse First Boston Mortgage Capital LLC, a Delaware
limited liability company (successor to CS First Boston Mortgage Capital
Corp., a Delaware corporation), its successors and assigns, as lender
("Lender") is entered into as of the ___ day of June, 1997. Capitalized terms
used and not defined herein shall have the meanings attributed to them in the
Credit Agreement.
This Amendment is being entered into for good and valuable
consideration, the sufficiency and receipt of which are hereby acknowledged,
and subject to the following conditions and limitations, the parties hereto
hereby agree to amend the Credit Agreement as follows:
1. The defined term "Credit Facility Amount" is hereby amended as
follows:
"CREDIT FACILITY AMOUNT" shall mean $100,000,000, as such amount
may be increased from time to time by a Notice of Borrowing, in
increments of not less than $10,000,000 (each increment
referred to herein as "CFA Increase"), and up to a maximum
aggregate amount of $150,000,000. In such notice, Borrower shall
certify that no Default has occurred and is continuing.
2. SECTION 1 The second and third sentences of Section 1(a) are
hereby amended as follows:
Not more than one Revolving Loan may be incurred within
any seven (7) day period. The principal amount of such
Revolving Loan shall not be less than $250,000.
SECTION 1 Section 1(a) is hereby further amended by inserting at
the end thereof the following:
; PROVIDED, HOWEVER, upon the conversion of the Revolving Loan
Rate to the "Adjusted Revolving Loan Rate", as defined in Section
1(e)(i), below, the Expiry Date shall, upon request in writing
by Borrower to Lender, be extended to the second anniversary of
the effective date of the Adjusted Revolving
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Rate, unless such date shall be extended in accordance with the
provisions of Section 12(b) hereof. In such notice, Borrower
shall certify that no Default has occurred and is continuing.
For purposes of this Section 1(a) the effective date of the
Adjusted Revolving Rate shall be the date upon which the
Adjusted Revolving Rate is first payable pursuant to the Credit
Facility Documents.
3. SECTION 1 The last sentence of Section 1(b) is hereby amended as
follows: the phrase "fourteen (14) days" is deleted and the
phrase "seven (7) days" is substituted therefor.
4. SECTION 1 Section 1(e)(i) is hereby amended by inserting at the
end thereof the following:
PROVIDED, HOWEVER, upon (i) the completion by Borrower of a
S.E.C.-registered public offering of common stock representing
100% ownership interest in Borrower (in accordance with
applicable provisions of the Credit Facility Documents) and (ii)
written certification of same by Borrower to Lender, the
Revolving Loan Rate shall be reduced to a rate per annum equal
to the LIBOR Rate plus 1.750% (the "Adjusted Revolving Loan
Rate").
5. SECTION 3(e)(ii) Section 3(e)(ii) is hereby amended as follows:
(ii) (A) The principal amount outstanding of all Revolving Loans
and Improvement Loans shall not exceed 71.5% of the Eligible
Borrowing Base (the "Loan to Value Requirement").
6. The Credit Agreement is amended to add the following
definitions:
(a) ELIGIBLE BORROWING BASE shall mean an amount (excluding
Exempted Loan Investments) equal to the sum of the following
loan asset ("Loan Asset") values: (i) the Appraised Value of all
of Borrower's Properties not subject to current Improvements;
(ii) seventy-five (75%) percent of the Appraised Value of all
of Borrower's Properties subject to Improvement Loans which, as
a fraction of Revolving Loans shall not exceed twenty (20%)
percent thereof in the aggregate; (ili) the outstanding
principal amount of all Loan Investments held by the Borrower as
a fraction of Revolving Loans
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which shall not exceed 25% in the aggregate, provided however,
in no event shall the value of each Loan Asset in (i) through
(vi) of this Section 6(a) includible in the Eligible Borrowing
Base exceed the specific limitation for each such Loan Asset
Category, as defined below, contained therein; (iv) seventy-five
(75%) percent of the outstanding principal amount of Secondary
Loan Investments held by the Borrower which shall not exceed
Five Million ($5,000,000) Dollars in the aggregate; (v)
seventy-five (75%) percent of the outstanding principal amount
of Subordinated Loan Investments held by the Borrower and which
shall not exceed Three Million ($3,000,000) Dollars in the
aggregate; and (vi) Borrower's net investment (as defined in the
Borrower's annual financial statements) in all Financing Leases
held by Borrower as a fraction of Revolving Loans which shall
not exceed 15% thereof in the aggregate, LESS the Appraised
Value of any Property which is either (A) encumbered by a
superior mortgage or deed of trust in favor of a party other
than Lender or (B) for which a payment is overdue by a period of
sixty (60) days pursuant to a loan held by Borrower or for which
a payment is overdue by a period of sixty (60) days pursuant to
a Lease between Borrower, as Lessor, and Lessee (each of (i)
through (vi) referred to as a "Loan Asset Category" and
collectively as "Loan Asset Categories"); PROVIDED, HOWEVER,
such Eligible Borrowing Base shall remain in effect subject to
receipt by Lender of (i) a Monthly Loan Asset Performance
Information Report, as defined below; and (ii) a Notice of
Borrowing which shall be accompanied by (A) a Transactional Loan
Asset Performance Information Report, as defined below; and (B) a
certificate, executed by Borrower, in which Borrower (a)
represents and warrants that the creditworthiness of the Loan
Asset is consistent with the Borrower's Underwriting Guidelines
pursuant to Exhibit Q of the Credit Facility; (b) represents and
warrants that no event of default has occurred and is still
occurring with respect to any obligor of Borrower with respect
to any Loan Asset Category except payment defaults by any
obligor of Borrower and which payment defaults are for a period
of less than sixty (60) days and (c) certifies the accurateness
and completeness in all material respects of the information
provided.
(b) LOAN INVESTMENT shall mean any loan held by Borrower and
secured by a mortgage or leasehold mortgage held by Borrower or
any Business Value Loan which shall be assessed at the lesser of
either (A) the purchase price; or (B) 100% of the real estate
valuation (as determined by Deloitte & Touche LLP or such other
valuation expert satisfactory to Borrower and Lender) in the
case of a loan secured by a fee mortgage or seventy (70%) of the
combined real estate and business valuations (as determined by
Deloitte & Touche LLP or such other
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EXHIBIT H-1
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QUARTERLY COMPLIANCE CERTIFICATE
The undersigned, the Chief Financial Officer of Captec Net Lease Realty,
Inc., a Michigan corporation, ("Captec"), pursuant to Section 4(c)(ii) of the
Credit Agreement ("Agreement"), dated February 26, 1996, by and between Captec,
as borrower, and CS First Boston Mortgage Capital Corp., a Delaware corporation,
its successors and assigns, as lender ("Lender"), hereby certifies to Lender as
follows:
(i) all representations and warranties made by Captec in the Agreement
are true and accurate in all material respects as if made on the date hereof;
and
(ii) attached hereto as Exhibit A are quarterly financial statements of
Captec, which statements fairly present in all material respects Captec's
financial condition and results of operations for the quarterly period as
indicated thereon and which are prepared in accordance with GAAP applied on a
consistent basis.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate the day of ____________ 199__.
CAPTEC NET LEASE REALTY, INC.
By:
----------------------------------
Name:
Title: Chief Financial Officer
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EXHIBIT H-2
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ANNUAL COMPLIANCE CERTifICATE
The undersigned, the Chief Financial Officer of Captec Net Lease Realty,
Inc., a Michigan corporation, ("Captec"), pursuant to Section 4(c)(ii) of the
Credit Agreement ("Agreement"), dated February 26, 1996, by and between Captec,
as borrower, and CS First Boston Mortgage Capital Corp., a Delaware corporation,
its successors and assigns, as lender ("Lender"), hereby certifies to Lender as
follows:
(i) all representations and warranties made by Captec in the Agreement
are true and accurate in all material respects as if made on the date hereof;
and
(ii) attached hereto as Exhibit A are the audited financial statements
of Captec for the fiscal year indicated thereon, which are prepared in
accordance with GAAP applied on a consistent basis together with the report
thereon by Captec's Independent Accountants.
IN WITNESS WHEREOF, the undersigned has executed this Certificate the __
day of ____________ 199__.
CAPTEC NET LEASE REALTY, INC.
By:
---------------------------
Name:
Title: Chief Financial Officer
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EXHIBIT I
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SERVICING PROVISIONS
1. The Borrower shall take any and all actions, or refrain from taking
any such actions, and do any and all things in connection with the servicing and
administration of the Properties and the Leases which it may deem necessary or
desirable, provided, however, that (i) its servicing of the Leases shall be
carried out as provided in the Operations Policy Manual and the Management
Agreement in accordance with the procedures which the Borrower uses in
connection with Leases which are owned by it and not pledged or collateralized,
and (ii) to the extent more exacting, in accordance with prudent, customary and
usual procedures of financial institutions which service leases similar to the
Leases .
2. The Borrower shall calculate and compile such information as is
required to enable it to provide the information in connection with the reports
in the forms attached hereto, and shall deliver such reports to the lender no
later than the tenth day of each month.
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CAPTEC NET LEASE REALTY, INC.
SERVICING REPORTS TO BE PROVIDED UNDER THE CREDIT AGREEMENT
Within 20 days of the end of each month, the Company shall deliver to the Lender
the following servicing reports (the "Servicing Reports"), certified to the
Lender by the President or any Vice President of the Company:
1. a Lockbox Compliance Certificate for the preceding month, indicating the
total number of payments of Rents received, the number and percentage of
such payments received directly in the Lockbox Account, and the number and
percentage of such payments not received directly in the Lockbox Account.
2. a Liquid Assets Compliance Certificate for the preceding month, indicating
the total Liquid Assets held by the Company as of the the last day of the
preceding month and certifying that the Company is in compliance with the
Liquid Assets covenant described in Section 4(c)(xxii) of the Agreement.
3. a copy of the Lockbox Account bank: statements and bank reconciliations for
the preceding month.
4. a Net Investment Trial Balance for the Leases, as of the last day of the
preceding month, which report shall indicate the gross balance and net
balance due under each Lease and the gross balance and net balance due
under all Leases in aggregate, as of the date of the report.
5. a Summary Past Due Report for the Leases, as of the last day of the
preceding month, which report shall indicate the amount delinquent and the
gross balance due under each and every Lease which is delinquent for more
than five days, as of the date of the report, and shall indicate totals for
the gross balances for all such delinquent Leases, sorted by the following
delinquency categories: 5-30 days delinquent; 31-60 days delinquent; 61-90
days delinquent; and over 90 days delinquent.
6. a Portfolio Activity Report setting forth the details of the occurrence
during the preceding month of any of the following activities: (A) any
amendment to a Lease or the Collateral; (B) any insurance claims made with
respect to any Collateral; (C) any insurance proceeds received with respect
to any Collateral; (D) any proceeds received from the sale of Leases and/or
the related Collateral; (E) any prepayments of a Lease by a Lessee; (F) any
voluntary prepayments made by the Company in accordance with Section 2(a)
of the Agreement; (G) any mandatory prepayments made by the Company in
accordance with Section 2(b) of the Agreement; and (11) any purchase of a
Lease by the Company.
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EXHIBIT J
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valuation expert satisfactory to Borrower and Lender) in the
case of a loan secured by a leasehold mortgage or in the case of
a Business Value Loan, and (ii) which is currently neither a
Revolving Loan nor an Improvement Loan under the Credit
Facility.
(c) SECOND LOAN INVESTMENT shall mean loan(s) to an Affiliate of
Borrower which is/are collateralized by a pledge of an
underlying mortgage loan, leasehold mortgage loan or a Business
Value Loan held by an Affiliate of Borrower.
(d) SUBORDINATED LOAN INVESTMENT(S) shall mean subordinated
loan(s) held by Borrower, issued by unaffiliated third parties.
(e) FINANCING LEASE(S) shall mean lease(s) of equipment, held by
Borrower, which lease is defined as a financing lease pursuant to
Generally Accepted Accounting Principles ("GAAP").
(f) BUSINESS VALUE LOAN(S) shall mean loan(s) held by Borrower
and secured by the income stream and certain tangible personal
property from properties encumbered by either a superior
mortgage or leasehold mortgage whether held by Borrower or an
Affiliate thereof or a third party and shall not exceed seventy
(70%) percent of the combined real estate and business valuation
of such property (as determined by Deloitte & Touche LLP or such
other valuation expert satisfactory to Borrower and Lender).
(g) EXEMPTED LOAN INVESTMENT(S) shall mean loan(s) incurred by
the Borrower prior to the date hereinabove that are listed on
Exhibit C annexed hereto.
(h) MONTHLY LOAN ASSET PEIFONNANCE INFORMATION REPORT shall mean
a report submitted by Borrower, both on hardcopy and on a
computer diskette in spreadsheet format, no later than the
fifteenth (15th) day of each month (the "Report Date") from and
after the date of this Amendment for the duration of the term of
the Revolving Loan, setting forth each Loan Asset (including
Exempted Loan Investments) by Loan Asset Category, together with
the following information:
(i) type of Loan Asset (i.e. Revolving Loan, Improvement
Loan, Loan Investment, Secondary Loan Investment,
Subordinated Loan Investment, Financing Leases and
Exempted Loan Investment);
4
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(ii) type of property comprising the Loan Asset (i.e.
mortgage, leasehold mortgage, Business Value Loan, Lease
of Equipment);
(iii) Current Payment of Delinquency Status (i.e. thirty
(30) days delinquent, sixty (60) days delinquent, ninety
(90) days delinquent, one hundred twenty (120) days
delinquent, one hundred eighty (180) days delinquent,
etc.) of the Lease or Loan Payment; and
(iv) Borrower's calculation of the Eligible Borrowing
Base, in detail as of the last day of the month prior to
the Report Date, together with a representation and
warranty by Borrower that the calculation complies with
the Eligible Borrow Base definition set forth in Section
5(a).
7. TRANSACTIONAL LOAN ASSET PERFORMANCE INFORMATION REPORT. A
report submitted by Borrower with every Notice of Borrowing and
the Required Due Diligence Materials pursuant to Exhibit B of
the Credit Facility, which lists each new Revolving Loan or
Improvement Loans by Loan Asset Category (including Exempted
Loan Investments) together with the following information: (i) a
representation and warranty by Borrower that the Eligible
Borrowing Base calculation as of date of the funding of the
current Revolving Loan under any Asset Loan Category complies
with the Eligible Borrowing Base definition set forth in Section
5(a) and (ii) no event of default has occurred and is continuing
with respect to the Credit Facility as amended.
8. RIGHT OF INSPECTION. Lender shall have the right to receive and
inspect the Required Due Diligence Materials as well as any
other documents that the Lender deems necessary pursuant to its
review, in its sole and absolute discretion, pertaning to the
asset from any Category of Loan, listed above, which is being
considered as a candidate for funding under the Credit Facility.
9. UCC-1 FINANCING STATEMENTS. Borrower shall prepare and file
simultaneously with the recording of the Loan Documents, at its
own cost and expense, for each Property or Lease of Equipment to
be financed under the Credit Facility a UCC-1 Financing Statement
at the Office of the Secretary of State, if applicable, and the
County where the property or the equipment is located, if
applicable.
5
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10. SCHEDULE B. SCHEDULE B is hereby amended by inserting at the end
thereof the following:
STRUCTURING ADVISORY FEE UPON CFA INCREASE. As a condition
precedent to each CFA Increase, Borrower shall (i) execute and
deliver to Lender a Structuring Advisory Fee Agreement in the
form of Exhibit A hereto, confirming the structuring advisory
fee payable by Borrower to Lender pursuant to (ii), below, and
(ii) pay to Lender a structuring advisory fee equal to 0.5% of
each CFA Increase, which structuring advisory fee shall be
payable and non-refundable on the date Borrower provides a
Notice of Borrowing to Lender in connection therewith.
STRUCTURING ADVISORY FEE UPON EXPIRY DATE EXTENSION. As a
condition precedent to the extension of the Expiry Date in
accordance with Section 1(a) hereof, Borrower shall (i)
execute and deliver to Lender a Structuring Advisory Fee
Agreement in the form of Exhibit A hereto, confirming the
structuring advisory fee payable by Borrower to Lender pursuant
to (ii), below, and (ii) pay to Lender a structuring advisory
fee equal to 0.5% of the Credit Facility Amount, which
structuring advisory fee shall be payable and non-refundable on
the date Borrower provides notice to extend the Expiry Date
pursuant to Section 1(a) hereof.
11. REPRESENTATIONS. Borrower represents and warrants as follows:
(i) this Amendment has been duly anthorized, executed and
delivered by Borrower and the Credit Agreement, as
amended hereby, constitutes the legal, valid and binding
obligation of Borrower enforceable in accordance with its
terms;
(ii) the representations and warranties contained in Section 4
of the Credit Agreement are true and correct in all
material respects as of the date hereof as if made on the
date hereof.
12. CREDIT AGREEMENT IN FULL FORCE AND EFFECT; NO NOVATION. This
Amendment is expressly made supplemental to and a part of the
Credit Agreement and the Credit Agreement is in all respects
ratified and confirmed, and all of the terms, conditions and
provisions thereof, as amended hereby, are and shall continue to
be and remain in full force and effect. The modifications of the
terms of the Credit Agreement and the execution and delivery of
6
25
this Amendment are not intended to constitute, and shall not be
deemed to be, a novation.
13. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which, when executed, are and shall
continue to be an original, but all of which together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
LENDER BORROWER
CREDIT SUISSE FIRST BOSTON CAPTEC NET LEASE REALTY, INC.,
MORTGAGE CAPITAL LLC (as a Michigan corporation
successor to CS First Boston
Mortgage Capital Corp.), a
Delaware limited liability company
By: /s/ Emily Yassouf By: /s/ W. Ross Martin
----------------------- -----------------------
Name: Emily Yassouf Name: W. Ross Martin
Title: Vice President Title: Vice President
8
27
CREDIT AGREEMENT
between
CAPTEC NET LEASE REALTY, INC.
a Michigan corporation, as borrower
and
CS FIRST BOSTON MORTGAGE CAPITAL CORP.,
a Delaware corporation, its successors and assigns,
as lender
FEBRUARY 26, 1996
28
TABLE OF CONTENTS
Page
----
Preliminary Statement .................................................. 1
1. AMOUNT AND TERMS OF CREDIT ........................................ 1
(a) The Revolving Loans .................................... 1
(b) Notice of Borrowing .................................... 2
(c) Disbursement of funds .................................. 2
(d) Revolving Note ......................................... 2
(e) Interest ............................................... 3
(f) Use of Proceeds ........................................ 3
2. PREPAYMENTS; PAYMENTS .......................................... 3
(a) Voluntary Prepayments .................................. 3
(b) Mandatory Prepayments .................................. 4
(c) Net Payments ........................................... 4
3. CONDITIONS PRECEDENT ........................................... 4
(a) Revolving Note ......................................... 4
(b) Representations and Warranties ......................... 4
(c) No Default ............................................. 5
(d) Corporate Proceedings .................................. 5
(e) Collateral ............................................. 5
(f) Capitalization of Borrower ............................. 6
(g) Opinions ............................................... 6
(h) No Material Adverse Change ............................. 6
(i) Fees ................................................... 6
4. REPRESENTATIONS, WARRANTIES AND COVENANTS ...................... 6
(a) REPRESENTATIONS AND WARRANTIES REGARDING BORROWER ...... 6
(i) Borrower's Name ................................ 6
(ii) Location of Borrower ........................... 7
(iii) Organization, Chief Executive Office or
Residence ...................................... 7
(iv) Power and Authority ............................ 7
(v) Due Execution and Delivery, Enforceability ..... 7
(vi) Indebtedness; No Liens, Claims or
Encumbrances ................................... 8
(vii) Financing Statements; Perfected Security
Interest ....................................... 8
(viii) No Conflict; No Default ........................ 8
(ix) No Consent Required ............................ 9
(x) Purpose for Revolving Loans .................... 10
(xi) Financial Statements ........................... 10
(xii) Accuracy of Information ........................ 10
(xiii) ERISA Compliance ............................... 11
(xiv) Borrower Status ................................ 11
(xv) No Brokers ..................................... 11
(xvi) No Usury ....................................... 12
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Page
----
(xvii) Compliance with Laws; No Violation;
Indemnity ...................................... 12
(xviii) Subsidiaries ................................... 13
(xix) Tax Returns .................................... 13
(xx) Litigation ..................................... 13
(xxi) Capitalization ................................. 14
(b) REPRESENTATIONS AND WARRANTIES REGARDING THE
PROPERTIES AND THE LEASES .............................. 14
(c) PARTICULAR COVENANTS OF BORROWER ....................... 20
(i) Maintenance of Collateral and Business . ....... 20
(ii) Compliance Certificates; Reports;
Communications ................................. 20
(iii) Encumbrances ................................... 20
(iv) Distributions .................................. 21
(v) Insurance ...................................... 22
(vi) Maintenance of Existence; Prior Notice of
Change in Name or Location ..................... 22
(vii) Notice of Material Adverse Changes ............. 22
(viii) Sale of Assets, Consolidation, Merger,
Dissolution, Etc ............................... 23
(ix) Transactions with Affiliates ................... 23
(x) Costs and Expenses ............................. 24
(xi) Access to Premises ............................. 24
(xii) Origination and Servicing Leases ............... 25
(xiii) Loan to Value Requirement ...................... 25
(xiv) Updated Appraisals ............................. 25
(xv) Sale of Revolving Loans ........................ 26
(xvi) Management ..................................... 26
(xvii) Ineligible Leases; Substitution ................ 26
(xviii) Refinancing .................................... 27
(xix) Underwriting Guidelines; Operations Policy
Manual ......................................... 27
(xx) Notification of Defaulted Leases ............... 27
(xxi) Payment of Fees ................................ 27
(xxii) Liquid Assets .................................. 28
5. LOCKBOX ACCOUNT ................................................ 28
6. EVENTS OF DEFAULT .............................................. 29
(a) Nonpayment, default, breach, etc ....................... 29
(b) Other defaults of Borrower and other liable
parties ................................................ 29
7. REMEDIES ....................................................... 30
(a) Cumulative Rights and Remedies ......................... 30
(b) Acceleration of Obligations ............................ 30
8. INDEMNIFICATION ................................................ 31
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Page
----
9. OBLIGATIONS ABSOLUTE ........................................... 32
10. ASSIGNMENT ..................................................... 32
11. FURTHER ASSURANCES ............................................. 33
12. TERM ........................................................... 33
13. MISCELLANEOUS .................................................. 34
(a) Final Agreement; Amendments, Consents,
Authorizations ......................................... 34
(b) Notices ................................................ 34
(c) Reasonableness ......................................... 35
(d) Recovery of Sums Required To Be Paid ................... 36
(e) Waivers ................................................ 36
(f) Waiver of Trial by Jury ................................ 36
(g) Waiver of Notices ...................................... 36
(h) Relationship ........................................... 37
(i) Waiver of Counterclaims ................................ 37
(j) Time is of the Essence ................................. 37
(k) Limitation on Interest ................................. 37
(l) Governing Law; Binding Effect .......................... 38
(m) Severability ........................................... 39
(n) Captions; Construction ................................. 39
-iii-
31
CREDIT AGREEMENT
CREDIT AGREEMENT ("Agreement"), dated February 26, 1996, by and between
CAPTEC NET LEASE REALTY, INC., a Michigan corporation, as borrower
("Borrower"), and CS FIRST BOSTON MORTGAGE CAPITAL CORP., a Delaware
corporation, its successors and assigns, as lender ("Lender").
Preliminary Statement
---------------------
Borrower is a Michigan corporation formed for the purpose of acquiring
or leasing Properties (as hereinafter defined) and leasing or subleasing such
Properties to Eligible Tenants (as hereinafter defined) for use by such
Eligible Tenants in the operation of specialty retail businesses or businesses
under one or more of the franchise and restaurant concepts listed on Schedule
A hereto (each a "Franchise System") or such other specialty retail businesses
or franchise concepts as Borrower and Lender shall mutually agree upon in
writing from time to time. Capitalized terms used herein have the meanings
accorded such terms in the text hereof and in Appendix A hereto, and, to the
extent not inconsistent therewith, the UCC.
To enable Borrower to fund the acquisition and or leasing of the
Properties, Borrower has requested that Lender extend, and Lender is willing
to extend, to Borrower a credit facility on the terms and conditions set forth
herein.
As a condition to extending credit hereunder, Lender has requested and
Borrower has agreed to execute and deliver to Lender the Collateral Documents
for the purpose of, among other things, providing security for the Revolving
Loans.
NOW, THEREFORE, in consideration of the foregoing, the benefits
accruing to Borrower and for other good and valuable consideration, the
receipt and sufficiency of which Borrower hereby acknowledges, Borrower hereby
makes the following representations and warranties to Lender and covenants and
agrees with Lender as follows, and Lender is willing to make available to
Borrower the credit facilities provided for herein as follows:
1. AMOUNT AND TERMS OF CREDIT.
---------------------------
(a) THE REVOLVING LOANS. Subject to and upon the terms and conditions
set forth herein, Lender agrees to make, at any time and from time to time, on
and after the Effective Date and prior to the Expiry Date, one or more loans
(each a "Revolving Loan" and collectively, the "Revolving Loans") to Borrower,
which Revolving Loans may be prepaid and reborrowed in accordance with the
provisions hereof, PROVIDED, HOWEVER, that the aggregate principal
32
amount of Revolving Loans outstanding at any time shall not exceed the Credit
Facility Amount at such time. Not more than one Revolving Loan may be incurred
within any fifteen (15) day period. The principal amount of each Revolving
Loan shall not be less than $1,000,000. Lender shall have no obligation to
make any Revolving Loans on or after the Expiry Date. All Revolving Loans
shall mature on the Expiry Date.
(b) NOTICE OF BORROWING. Whenever Borrower desires to incur a Revolving
Loan, it shall give Lender at least two (2) Business Days' prior written
notice of such Revolving Loan to be made hereunder (each a "Notice of
Borrowing"), provided that any such Notice of Borrowing shall be deemed to
have been given only if given before 12:00 Noon (New York time) on such day.
Each Notice of Borrowing shall be in the form of Exhibit A hereto,
appropriately completed to specify the principal amount of the Revolving Loan
to be made, the date of such Revolving Loan (which shall be a Business Day),
the purposes for which such Revolving Loan is requested (which purposes shall
be limited to the permitted purposes set forth in paragraph (f) of this
Section 1), and shall identify the Properties and Leases to be financed with
the proceeds of the Revolving Loan. Borrower shall deliver to the Custodian
the Collateral Schedule and the Required Due Diligence Materials (in
accordance with the requirements set forth in Exhibit B and this Agreement)
relating to the Properties and Leases to be financed with the proceeds of a
Revolving Loan as soon as practicable after completion thereof but in no event
less than fourteen (14) days prior to the date specified in the Notice of
Borrowing for the funding of such Revolving Loan.
(c) DISBURSEMENT OF FUNDS. Subject to the satisfaction of all
conditions precedent contained herein, no later than 12:00 Noon (New York
time) on the date specified in each Notice of Borrowing, Lender will make
available to Borrower the amount of the Revolving Loan requested to be made on
such date in immediately available funds. Such funds will be made available to
Borrower by wire transfer if Borrower has provided written wire transfer
instructions to Lender in the related Notice of Borrowing.
(d) REVOLVING NOTE. (i) Borrower's obligation to pay the principal of,
and interest on, all the Revolving Loans made by Lender hereunder shall be
evidenced by a promissory note duly executed and delivered by Borrower
substantially in the form of Exhibit C hereto, with blanks appropriately
completed in conformity herewith (the "Revolving Note").
(ii) The Revolving Note issued to Lender shall (A) be payable to the
order of Lender and be dated the Initial Borrowing Date, (B) be in a stated
amount equal to the Credit Facility Amount and be payable in the principal
amount of the Revolving Loans evidenced thereby, (C) mature, with respect to
each Revolving Loan evidenced thereby, on the Expiry Date, (D) bear
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interest as provided in paragraph (e) of this Section 1, (E) be entitled to
the benefits of this Agreement and the other Credit Facility Documents and (F)
be secured by the Collateral.
(e) INTEREST. (i) Borrower agrees to pay interest in respect of the
unpaid principal amount of each Revolving Loan from the date the proceeds
thereof are made available to Borrower until the maturity thereof (whether by
acceleration or otherwise) at a rate per annum which shall be the Revolving
Loan Rate in effect from time to time.
(ii) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Revolving Loan and any other overdue amount
payable by Borrower hereunder shall bear interest at a rate equal to 2% in
excess of the Revolving Loan Rate in effect from time to time (the "Default
Rate"); PROVIDED, HOWEVER, that no Revolving Loan shall bear interest after
maturity at a rate per annum less than 2% in excess of the rate of interest
applicable thereto at maturity.
(iii) Accrued (and theretofore unpaid) interest shall be payable in
respect of each Revolving Loan, (A) on the 15th day of each month in an amount
equal to all interest accrued in the preceding Monthly Interest Period, and
(B) on any prepayment (on the amount prepaid) on the date prepaid, at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand. On
or before the 10th day of each month, Lender shall deliver to Borrower an
invoice setting forth the interest due and payable by Borrower in respect of
the preceding Monthly Interest Period.
(f) USE OF PROCEEDS. The proceeds of the Revolving Loans shall be used
by Borrower exclusively to finance the acquisition or lease by Borrower of
Properties, and for no other purpose whatsoever .
2. PREPAYMENTS; PAYMENTS.
----------------------
(a) VOLUNTARY PREPAYMENTS. Borrower shall have the right to prepay the
Revolving Loans without premium or penalty, in whole or in part from time to
time on the following terms and conditions: (i) Borrower shall give Lender at
least three (3) Business Days' prior written notice of its intent to prepay
the Revolving Loans and the amount of such prepayment and (ii) each prepayment
shall be in an aggregate principal amount of at least $500,000. In addition,
Borrower shall have the right to prepay the Revolving Loans in part without
premium or penalty from time to time for the purpose of reducing Accrued
Margin. Any such prepayment shall be upon one (1) Business Day's prior notice.
Any notice of prepayment by Borrower shall be irrevocable.
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34
(b) MANDATORY PREPAYMENTS. Borrower shall be required to repay the
Revolving Loans at such times and in such amounts as shall be required
pursuant to Sections 4(c)(xiii) and 4(c)(xvii) hereof.
(c) NET PAYMENTS. All payments made by Borrower hereunder or under the
Revolving Note will be made without setoff, counterclaim, or other defense.
All such payments will be made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees,
assessments, or other charges of whatever nature now or hereafter imposed by
any jurisdiction or by any political subdivision or taxing authority thereof
or therein (but excluding, except as provided below, any tax imposed on or
measured by the net income of Lender pursuant to the laws of the jurisdiction
(or any political subdivision or taxing authority thereof or therein) in which
the principal executive office of Lender is located) and all interest,
penalties or similar liabilities with respect thereto (collectively, "Taxes").
Borrower shall also reimburse Lender, upon the written request of Lender, for
taxes imposed on or measured by the net income of Lender pursuant to the laws
of the jurisdiction (or any political subdivision or taxing authority thereof
or therein) in which the principal executive office of Lender is located as
Lender shall determine are payable by Lender in respect of amounts paid to or
on behalf of Lender pursuant to the preceding sentence. If any Taxes are so
levied or imposed, Borrower agrees to pay the full amount of such Taxes and
such additional amounts as may be necessary so that every payment of all
amounts due hereunder or under the Revolving Note, after withholding or
deduction for or on account of any taxes, will not be less than the amount
provided for herein or in such Revolving Note. Borrower will furnish to Lender
within 45 days after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts evidencing such payment by
Borrower. Borrower will indemnify and hold harmless Lender, and reimburse
Lender upon its written request, for the amount of any Taxes so levied or
imposed and paid by Lender.
3. CONDITIONS PRECEDENT. The obligation of Lender to make any Revolving
Loan is subject, at the time of each Credit Event (except as hereinafter
indicated), to the satisfaction of the following conditions:
(a) REVOLVING NOTE. On the Initial Borrowing Date, there shall have
been delivered to Lender the Revolving Note executed by Borrower in the
amount, with the maturity, and as otherwise provided herein.
(b) REPRESENTATIONS AND WARRANTIES. At the time of each Credit Event
and also after giving effect thereto, all representations and warranties
contained herein and in the other
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35
Credit Facility Documents shall be true and correct in all material respects
as though such representations and warranties had been made on and as of the
date of such Credit Event.
(c) NO DEFAULT. At the time of each Credit Event and also after giving
effect thereto, no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing.
(d) CORPORATE PROCEEDINGS. (i) On the Initial Borrowing Date, Lender
shall have received a certificate, dated the Initial Borrowing Date, signed by
the President or any Vice President of Borrower, and attested to by the
Secretary or any Assistant Secretary of Borrower, together with the
certificate of incorporation and By-Laws of Borrower and the resolutions of
the board of directors of Borrower authorizing the execution and delivery of
this Agreement and the other Credit Facility Documents by Borrower and
consummation by Borrower of the transactions contemplated by this Agreement
and the other Credit Facility Documents.
(ii) On the Initial Borrowing Date, all requisite action and
proceedings (including all requisite corporate action and proceedings) in
connection with this Agreement and the other Credit Facility Documents shall
be satisfactory in form and substance to Lender, and Lender shall have
received all information and copies of all documents, including, without
limitation, records of requisite corporate action and proceedings required (or
which Lender may have reasonably requested) in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(e) COLLATERAL. (i) Lender or the Custodian shall have received (A) a
Notice of Borrowing and a complete Collateral Schedule relating to the
Properties and Leases to be financed with the proceeds of the Revolving Loan
in accordance with Section 1(b) hereof, (B) with respect to each Property to
be financed with the proceeds of the Revolving Loan, (i) Lender shall have
received the Required Due Diligence Materials set forth on Exhibit B on or
before the date required under Section 1(b) of this Agreement, (ii) the
Revolving Loan Conditions set forth on Exhibit D hereto shall have been
satisfied and (iii) the Lender or the Custodian shall have received the
Closing Documents set forth on Exhibit E and such other documents and
instruments as Lender shall reasonably request, each in form and substance
satisfactory to Lender; and
(ii) (A) The amount of each Revolving Loan shall not exceed the sum
of 75% of the Appraised Value of each of the Properties being financed with
such Revolving Loan and (B) the principal amount outstanding of all Revolving
Loans shall not
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exceed 75% of the Appraised Value of all Properties financed with the Loans
(the "Loan to Value Requirement").
(f) CAPITALIZATION OF BORROWER. Lender shall have received evidence, in
form and substance satisfactory to Lender, of satisfaction of the
capitalization requirements of Borrower which Lender may have requested in
connection herewith, including the capital contribution to Borrower in the
amount of not less than $50,000,000.
(g) OPINIONS. On the Initial Borrowing Date, Lender shall have received
from Miller, Canfield, Paddock and Stone, P.L.C., counsel to Borrower, an
opinion addressed to Lender and dated the Initial Borrowing Date in form and
substance satisfactory to Lender and its counsel.
(h) NO MATERIAL ADVERSE CHANGE. No material adverse change shall have
occurred in the assets, business or prospects of Borrower since the date
hereof and in the determination of Lender no change or event shall have
occurred which could materially impair the ability of Borrower to perform its
obligations hereunder or under any of the other Credit Facility Documents to
which it is a party or of Lender to enforce the Obligations or realize upon
the Collateral ("Material Adverse Change").
(i) FEES. Lender shall have received from Borrower all fees specified
on Schedule B hereto which are then due and payable.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS. In order to induce Lender
to enter into this Agreement and to make Revolving Loans hereunder, Borrower
makes the following representations, warranties and covenants to Lender.
Lender shall be under no obligation to make any investigation of the matters
covered by the representations and warranties contained in this Section 4. All
representations and warranties contained in this Agreement or any of the other
Credit Facility Documents shall survive the execution and delivery of this
Agreement, shall be deemed to have been made again to Lender on the date of
each Credit Event hereunder and shall continue and be continuing thereafter
and shall be conclusively presumed to have been relied on by Lender regardless
of any investigation made or information possessed by Lender. The
representations and warranties set forth herein shall be cumulative and in
addition to any other representations or warranties which Borrower shall now
or hereafter give, or cause to be given, to Lender.
(a) REPRESENTATIONS AND WARRANTIES REGARDING BORROWER.
(i) BORROWER'S NAME. Each of Borrower's legal name, federal taxpayer
identification number, and mailing address is accurately set forth on Exhibit
F hereto (the "Information
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37
Certificate"). Borrower has not merged, consolidated, acquired all or
substantially all of the assets of any Person, or except as disclosed on the
Information Certificate, used any other name (whether in connection with the
Properties, the Leases, the Lease Documents, the Collateral or for business,
obtaining credit or financing or otherwise) in the last twelve years.
(ii) LOCATION OF BORROWER. Under its legal name, Borrower conducts
its business solely at the addresses set forth on the Information Certificate.
All personal property of Borrower owned, acquired, held, used, sold or
consumed in its business including General Intangibles, Accounts, chattel
paper, instruments, documents, certificates of title, fixtures, securities and
money, and all writings relating thereto and records thereof, books of record
or account, employees, business, offices and operations are located at and
conducted out of such addresses or at its chief executive office.
(iii) ORGANIZATION, CHIEF EXECUTIVE OFFICE OR RESIDENCE. Borrower is
and will continue to be a duly organized and validly existing corporation in
good standing in the State of Michigan. Borrower is and will continue to be
duly qualified to do business and is and will be in good standing in each
jurisdiction where it conducts its business. Borrower has not and shall not
fail to qualify to do business and be and remain in good standing in any
jurisdiction where such qualification or standing is necessary, required or
proper in connection with Borrower's origination, ownership or servicing of
Properties or the Leases or the conduct of its business. Borrower shall not
take any action or permit any action to be taken in breach of any such
requirements, and Borrower shall not fail to take or permit others to fail to
take any action required to be taken pursuant to such requirements. Borrower's
chief executive office address is accurately set forth on the Information
Certificate.
(iv) POWER AND AUTHORITY. Borrower has full power, authority and the
legal right and all necessary permits, consents, licenses and authorizations
to own its property and assets, including the Properties, the Leases, and the
Lease Documents and to conduct the business in which it is engaged, including
the origination and servicing of the Loans. Borrower has full power, authority
and the legal right and all necessary permits, consents, licenses and
authorizations to execute, deliver and perform its obligations under this
Agreement, the Revolving Note and the other Credit Facility Documents.
(v) DUE EXECUTION AND DELIVERY, ENFORCEABILITY. This Agreement, the
Revolving Note and the other Credit Facility Documents have been duly and
validly executed and delivered by Borrower. Each of this Agreement, the
Revolving Note and other Credit Facility Documents constitutes a legal, valid
and binding obligation of Borrower, enforceable against Borrower in accordance
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with its terms (except as such enforceability may be limited by bankruptcy law
and by general principles of equity, regardless of whether such enforceability
shall be considered in a proceeding in equity or at law).
(vi) INDEBTEDNESS; NO LIENS, CLAIMS OR ENCUMBRANCES. As reflected on
the UCC Search attached hereto as Exhibit G, there is no financing statement
(or similar statement, agreement, pledge, mortgage, notice or registration),
lien (including any federal or state tax lien), suit (including any action,
proceeding, or other litigation pending, or to Borrower's knowledge,
threatened) or judgment (including any award, injunction, order) filed with,
registered, indexed or recorded in any public office, court, arbitration
panel, administrative agency or regulatory authority (or intended so to be),
directly or indirectly, identifying or encumbering or covering or involving
the Properties, the Leases, the Lease Documents or the Collateral or which
could materially affect Borrower, its business, or its ability to perform its
Obligations.
(vii) FINANCING STATEMENTS; PERFECTED SECURITY INTEREST. To secure
the Obligations, Borrower hereby grants, pledges and assigns unto Lender a
security interest in all of its rights, titles and interests in and to the
Collateral, whether now owned or hereafter acquired. The execution and filing
of the Financing Statements has been duly authorized by all appropriate action
on the part of Borrower and Borrower has duly executed the Financing
Statements. The execution and delivery of this Agreement and the grant and
transfer of the Collateral hereunder and the Collateral Documents creates a
valid security interest in the Collateral which has attached and is
enforceable. The filing offices set forth on Schedule C hereto ("Filing
Offices") and made a part hereof are the only offices where financing
statements are required to be filed in order to perfect such security interest
in the Collateral to the extent such Collateral constitutes General
Intangibles, Accounts, fixtures and chattel paper ("Filing Collateral").
Lender's security interest in all Filing Collateral is a first priority
security interest in all Filing Collateral. The jurisdictions set forth on
Schedule D hereto ("Recording Jurisdictions") and made a part hereof are the
only jurisdictions where Mortgages are required to be recorded in order to
perfect a valid lien on any Property included in the Collateral. Lender's lien
in all Properties is a first lien. Upon (i) filing of the Financing
Statements, (ii) recordation of the Mortgages and (iii) delivery into Lender's
possession of any Collateral other than Filing Collateral and the Properties,
Lender's security interest in all Collateral will be a perfected first
priority security interest or lien subject to no other security interest,
liens or encumbrances.
(viii) NO CONFLICT; NO DEFAULT. (A) Borrower's execution, delivery
and performance by Borrower of this Agreement,
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39
the Revolving Note and other Credit Facility Documents do not and will not
(with the passage of time or otherwise) (1) conflict with, violate, breach or
constitute a default under any law, rule, regulation, order, writ, judgment,
decree, contract, agreement, note, mortgage, bond, indenture, lease, license,
organizational documents, or obligation of or applicable to Borrower or its
business, properties or assets (including the Properties, the Leases, the
Lease Documents and the Collateral) or (2) grant, create or result in any
lien, claim, encumbrance or right in favor of any Person (other than Lender as
contemplated hereby) on or to Borrower, or its business, property or assets
(including the Properties, the Leases, the Lease Documents and the Collateral).
(B) Borrower is not in default in any respect under or in respect of
any contract, agreement or other instrument to which it is a party or by which
it or its property or assets may be bound, except in cases where such default
has no materially adverse effect on the Properties, the Leases, the Lease
Documents or the Collateral or on the business, assets, operations, property
or financial or other condition of Borrower. No Event of Default has occurred
and is continuing and no event has occurred which but for notice, lapse of
time, or both, would constitute an Event of Default. Borrower is not in
default under any order, judgment, award or decree of any court, arbitrator or
other governmental authority binding upon or affecting it or by which any of
its property or assets may be bound or affected, except in cases where such
default has no materially adverse effect on the Properties, the Leases, the
Lease Documents or the Collateral or on the business, assets, operations,
property or financial or other condition of Borrower, and no such order,
judgment, award or decree materially adversely affects the ability of Borrower
to carry on its business as now conducted or the ability of Borrower to
perform its respective obligations under this Agreement, the Revolving Note
and the other Credit Facility Documents.
(C) The origination and servicing of the Leases and financing of the
acquisition of the Properties hereunder and pursuant to the Credit Facility
Documents are in the ordinary course of business for Borrower and are not
subject to the bulk transfer or any other similar statutory provisions in
effect in any jurisdiction.
(ix) NO CONSENT REQUIRED. Except for the filing of the Financing
Statements with the Filing Offices and the recording of the Mortgages, no
consent, authorization, approval, license, permit, registration, exemption,
filing, notice or declaration of, from, with or to any other party or any
court, government, agency or regulatory authority is required prior to or
otherwise in connection with Borrower's execution, delivery and performance of
this Agreement, the Revolving Note and other Credit Facility Documents.
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40
(x) PURPOSE FOR REVOLVING LOANS. Borrower does not intend to (and
will not) use all or any portion of the Revolving Loans to purchase or carry
any securities, including, without limitation, Margin Stock. None of the
proceeds of the Revolving Loans will be used, directly or indirectly, for the
purposes of reducing or retiring any indebtedness which was originally
incurred to purchase or carry any Margin Stock or other security or for any
other purpose which might cause any of the Revolving Loans to be considered a
"purpose credit" within the meaning of Regulations G, U, T or X of the Board
of Governors of the Federal Reserve System, as amended. Borrower intends to
and agrees to use the proceeds of the Revolving Loans solely for lawful,
proper business or commercial purposes. Borrower shall use the proceeds of the
Revolving Loans provided by Lender to Borrower for the purposes set forth in
Section 1(f) hereof and for no other purpose whatsoever.
(xi) FINANCIAL STATEMENTS. (A) The audited consolidated financial
statements of CAPTEC Financial Group, Inc., a Michigan corporation ("Captec"),
dated March 31, 1995 and previously delivered by Borrower to Lender are
correct in all material respects and fairly set forth the financial condition
of Captec as of March 31, 1995 and 1994, and the results of Captec's
operations and changes in Captec's financial position for the periods then
ended, all in accordance with GAAP. Since March 31, 1995, there has not
occurred any material adverse change in the business, assets, operations,
property or financial or other condition of Captec.
(B) All quarterly consolidated and consolidating unaudited financial
statements for the calendar quarter ending June 30, 1995 and September 30,
1995 of Borrower previously delivered by Borrower to Lender are correct in all
material respects and fairly set forth the financial condition of Borrower as
of the dates set forth therein, and the results of Borrower's operations and
changes in Borrower's financial position for the period then ended, all in
accordance with GAAP. Since the date of such statements delivered by Borrower
to Lender, there has not occurred any Material Adverse Change in the business,
assets, operations, property or financial or other condition of Borrower.
(xii) ACCURACY OF INFORMATION. All information contained in this
Agreement (including the Schedules hereto), all the other Credit Facility
Documents and all information, reports, notices, statements and financial and
other data furnished (or hereafter furnished) by Borrower or its Affiliates,
agents or representatives to Lender, its agents or representatives hereunder
or in connection with the Properties, the Leases, the Lease Documents, the
Revolving Loans, the Collateral and the Obligations, are (and shall be on the
date so furnished) true, complete and correct in all material respects, and do
not and will not contain any untrue statement of material fact or omit to
state any fact necessary in order to make the statements contained therein not
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materially misleading in light of the circumstances under which such
statements are made. All financial projections that have been or are hereafter
prepared by or on behalf of Borrower, Captec, their respective Affiliates or
their respective agents or representatives have been and shall be prepared in
good faith and based upon reasonable assumptions. Borrower shall endeavor
promptly to advise Lender, from time to time, when any assumptions made in
connection with any projections previously provided to Lender prove to be
incorrect or untrue in any material respect. To Borrower's knowledge, no event
or circumstance has occurred which has had or could reasonably be expected to
have a material adverse effect on the business, assets or prospects of
Borrower, Captec or their respective Affiliates, which has not been fully and
accurately disclosed to Lender in writing.
(xiii) ERISA COMPLIANCE. Borrower has not taken any action which
would cause it to become an "employee benefit plan" as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended from time
to time ("ERISA"), or a "governmental plan" as defined in Section 3(32) of
ERISA, or a "plan" as defined in Section 4975(e)(1) of the Internal Revenue
Code, or which would cause its assets to become "plan assets" as defined in 29
C.F.R. Section 2510.3-101.
(xiv) BORROWER STATUS. (A) Borrower is not, and will by such acts as
may be necessary, continue not to be, an investment company within the meaning
of the Investment Company Act of 1940.
(B) Borrower is not a "holding company" or a "subsidiary company" of
a "holding company," or an "affiliate" of a "holding company," or of a
"subsidiary company" of a "holding company," within the definitions of the
Public Utility Holding Company Act of 1935, as amended.
(C) Borrower is not a "foreign person" within the meaning of Section
1445 or 7701 of the Internal Revenue Code.
(xv) NO BROKERS. Borrower has not dealt with any brokers in
connection with this Agreement and the credit facility contained herein, and
no brokerage fees or commissions are payable by or to any Person in connection
with this Agreement or such credit facility. Lender shall not be responsible
for the payment of any fees or commissions to any broker and Borrower shall
indemnify, defend and hold Lender harmless from and against any claims,
liabilities, obligations, damages, costs and expenses (including reasonable
attorneys' fees and disbursements) made against or incurred by Lender as a
result of claims made or actions instituted by any broker or Person claiming
by, through or under Borrower in connection with this Agreement and the credit
facility contained herein.
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(xvi) NO USURY. No aspect of any of the transactions contemplated
herein violate or will violate any usury laws or laws regarding the validity
of agreements to pay interest in effect on the date hereof.
(xvii) COMPLIANCE WITH LAWS; NO VIOLATION; INDEMNITY. Borrower is and
shall continue to be in compliance in all material respects with the
requirements of all applicable laws, rules, regulations, licenses, permits,
approvals and order of any governmental authority relating to its business,
including, without limitation, those set forth in or promulgated pursuant to
the Occupational Safety and Health Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, the Internal Revenue Code of 1986, as
amended, and the rules and regulations thereunder, all federal, state and
local statutes, regulations, rules and orders relating to consumer credit, all
federal, state and local statutes, regulations, rules and orders pertaining to
sales of consumer goods (including, without limitation, the Consumer Products
Safety Act of 1972, as amended, and the Federal Trade Commission Act of 1914,
as amended and all regulations, rules and orders promulgated thereunder).
Borrower has obtained all material permits, licenses, approvals, consents,
certificates, orders or authorizations of any governmental agency required for
the lawful conduct of its business and is in compliance in all material
respects with the requirements of all applicable laws, rules, regulations,
orders, permits, approvals and stipulations of any governmental agency
(including, but not limited to, the Department of State, the Department of
Commerce, the Bureau of Alcohol, Tobacco and Firearms, and the Environmental
Protection Agency) relating to its business (including, without limitation,
those set forth in or promulgated pursuant to ERISA and those related to
environmental pollution and employee health and safety (including the
Occupational Safety and Health Act of 1970, as amended, the Fair Labor
Standards Act of 1938, as amended, the Code, and the Environmental Laws).
Borrower has not and shall not acquire, obtain, make, manufacture, produce,
operate, hold, possess, maintain, use, sell, transfer, grant, pledge, or
dispose of (for purposes of this Section, collectively "Borrower's use") any
of its business, securities, property or assets (including any proceeds of the
Revolving Loans, any Collateral, the Properties, the Leases and the Lease
Documents) in violation of any statute, law, rule, ordinance, regulation,
policy, procedure, injunction, award, decree, judgment, contract, agreement,
understanding, or right or interest of any other Person (for purposes of this
Section collectively "violation"), and to Borrower's knowledge no such
violation has been made by any other Person and no basis for a claim of any
such violation exists. Borrower shall indemnify and hold Lender harmless from
and against any such violation, and any other loss, liability, damage, cost or
expense whatsoever (including attorneys fees and disbursements) arising out of
or in connection with Borrower's use of any of its business, securities,
property or assets (including any proceeds of the Revolving Loans, any
Collateral, the Properties, the Leases
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and the Lease Documents). The indemnification provisions of this Section
shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement until the expiration of the applicable Statute
of Limitations relating to the claim giving rise to indemnification under this
Section.
(xviii) SUBSIDIARIES. Borrower does not have any subsidiaries on the
date hereof and shall not, during the term hereof, have any subsidiaries
without prior notice to and written consent of Lender.
(xix) TAX RETURNS. Borrower has filed, or caused to be filed, and
will continue to file in a timely manner all tax returns, reports and
declarations which are required to be filed by it (without requests for
extension). All information in such tax returns, reports and declarations is
complete and accurate in all material respects. Borrower has paid or caused to
be paid all taxes due and payable or claimed due and payable in any assessment
received by it, and has collected, deposited and remitted in accordance with
all applicable laws all sales and/or use taxes applicable to the conduct of
its business, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
and with respect to which adequate reserves have been set aside on its books.
Adequate provision has been made for the payment of all accrued and unpaid
Federal, State, county, local, foreign and other taxes whether or not yet due
and payable and whether or not disputed. Borrower has remitted to the
appropriate tax authority all sales and/or use taxes applicable to its
business required to be collected under the laws of the United States and each
possession or territory thereof, and each State or political subdivision
thereof, including any State in which Borrower owns any Inventory or owns or
leases any other property. Borrower shall be liable for any tax or penalties
imposed on Lender as a result of the financing arrangements provided for
herein and Borrower agrees to indemnify and hold Lender harmless with respect
to the foregoing, and to repay to Lender on demand the amount thereof, and
until paid by Borrower such amount shall be added and deemed part of the
Revolving Loans. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
(xx) LITIGATION. There is no present investigation by any
governmental agency pending, or to the best of Borrower's knowledge
threatened, against or affecting Borrower or its properties, assets or
business and there is no action, suit, proceeding or claim by any Person
pending before any court or governmental agency or regulatory authority, or to
the best of Borrower's knowledge, threatened, against Borrower or its
properties, assets or business, or against or affecting any transactions
contemplated by this Agreement.
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(xxi) CAPITALIZATION. (A) Borrower has, and as of the Initial
Borrowing Date will have, a capitalization of not less than $50,000,000. From
and after the Initial Borrowing Date, Borrower will maintain a capitalization
of not less than $40,000,000.
(B) Schedule E sets forth the direct and beneficial owners of all of
the issued and outstanding stock of Borrower.
(C) Borrower (and each Affiliate executing any Credit Facility
Document) is solvent and will continue to be solvent after giving effect to
the Obligations, the security interests of Lender and the other transactions
contemplated hereunder, is able to pay its debts as they mature and has (and
has reason to believe it will continue to have) sufficient capital (and not
unreasonably small capital) to carry on its business and all businesses in
which it is about to engage. The assets and properties of Borrower at a fair
valuation and at their present fair salable value are, and will be, greater
than the indebtedness of Borrower, and including any subordinated and
contingent liabilities computed at the amount which, to the best of Borrower's
knowledge, represents an amount which can reasonably be expected to become an
actual or matured liability.
(b) REPRESENTATIONS AND WARRANTIES REGARDING THE PROPERTIES AND THE
LEASES.
(i) The information pertaining to the Properties and the Leases set
forth on Collateral Schedule is true and correct in all material respects at
the date or dates respecting which such information was furnished.
(ii) The Borrower owns fee title to all of the Properties (other than
the Properties with respect to which Borrower's interest is a leasehold
estate) and all other Collateral free and clear of all liens, claims,
participations or ownership interests, encumbrances or rights of others (other
than the interests of Lender hereunder and pursuant to the Credit Facility
Documents). The fee title to and leasehold estates in the Properties are and
will continue to be owned and held by the Borrower free and clear of all liens
and monetary encumbrances of any nature whatsoever (except for the Permitted
Title Exceptions). For those parcels constituting part of the Properties with
respect to which the Borrower holds leasehold estates, true, correct and
complete copies of the ground leases (and any amendments or modifications
thereof) have been delivered to Lender, the ground leases are in full force
and effect and no event has occurred, which but for the passage of time or
notice, or both, would constitute a default under any ground lease, and no
action has commenced and no notice has been given or received for the purposes
of terminating any ground lease. All non-monetary encumbrances affecting the
Properties will either benefit the Properties or will
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enhance the integrated use, operation and management of the Properties or will
not otherwise have a materially adverse affect on the title, ownership, value,
use or operation of any of the Properties.
(iii) Each of the Properties and their use comply and will continue
to comply in all material respects with all applicable zoning resolutions,
building codes, fire safety, Environmental Laws, subdivision and other
applicable laws, rules and regulations including, without limitation, the
Americans with Disabilities Act;
(iv) No portion of any Property nor any improvements located on any
premises which are material to the operation, use or value of a Property are
damaged or injured in any material respect as a result of any fire, explosion,
accident, flood or other casualty;
(v) No condemnation or eminent domain proceeding has been commenced
or to the knowledge of Borrower is threatened against any Property.
(vi) Each Mortgage has been duly filed to be recorded with all
appropriate governmental authorities in all jurisdictions in which such
Mortgage is required to be filed and recorded to create a valid, binding and
enforceable lien on the related Property, and each Mortgage creates a valid,
binding and enforceable first lien on the related Property (except as such
enforceability may be limited by bankruptcy law and by general principles of
equity, regardless of whether such enforceability shall be considered in a
proceeding in equity or at law).
(vii) All federal, state and local laws, rules and regulations,
including, without limitation, those relating to usury, truth-in-lending, real
estate settlement procedure, land sales, the offer and sale of securities,
consumer credit protection and equal credit opportunity or disclosure,
applicable to Borrower with respect to each Lease have been complied with in
all material respects.
(viii) Borrower has and will maintain full legal, equitable and
marketable title to each Lease, the Lease Documents and all other Collateral,
free and clear of all liens, claims, participation or ownership interests,
encumbrances or rights of others (other than the security interest granted to
Lender hereunder and the Credit Facility Documents).
(ix) Each Lease Document relating to each Lease is genuine, has not
been impaired, altered or modified in any respect and is the legal, valid and
binding obligation of the Lessee thereunder, enforceable in accordance with
its terms (except as such enforceability may be limited by bankruptcy law and
by general
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principles of equity, regardless of whether such enforceability shall be
considered in a proceeding in equity or at law), and is not subject to any
dispute, right of setoff, counterclaim or defense of any kind.
(x) All parties to each Lease Document relating to each Lease had
the legal capacity to enter into such Lease and to execute and deliver such
Lease Documents, and such Lease Documents have been duly and properly executed
by such parties. Each Lessee is an Eligible Tenant.
(xi) Each Lease Document contains customary and enforceable
provisions so as to render the rights and remedies of the holder thereof
adequate for the practical realization against the Lessee thereunder. There is
no exemption under existing law available to the related Lessee which would
interfere with Borrower's or Lender's right to enforce any such Lease Document
other than which may be available under applicable bankruptcy law or debt
relief.
(xii) Borrower has not taken (or omitted to take), and has no notice
that the related Lessee has taken (or omitted to take), any action that would
impair or invalidate the coverage provided by any existing Insurance Policy
relating to any Property or Lease.
(xiii) All applicable intangible taxes, documentary stamp taxes and
occupancy or similar taxes were paid and are being paid under each Lease
Document.
(xiv) Each Lease gives the lessor the right to receive and direct the
application of Insurance Proceeds and Condemnation Proceeds received in
respect of the related Property.
(xv) There are no delinquent taxes, ground rents, water charges,
sewer rents or assessments outstanding with respect to any Property or Lease
other than those which are being contested in good faith and which have been
consented to by Lender.
(xvi) The Property for each Lease is free of material damage and
waste and there is no proceeding pending or, to the best knowledge of
Borrower, threatened for the total or partial condemnation or taking of any of
the Property by eminent domain.
(xvii) Each Lease is a Lease originated by Borrower pursuant to and
in conformity with the qualitative and quantitative underwriting standards
contained in the Underwriting Guidelines and on the terms identified on the
Schedule of Collateral. The Lease Documents for each Lease are in
substantially the form attached hereto as the Standard Form Documents with no
material exceptions.
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(xviii) At the time each Lease was originated, the related Business
FCCR was in compliance with the Underwriting Guidelines.
(xix) No Lessee or ground lessor or any officer, director, employee,
shareholder, partner or Affiliate thereof is an officer, director, employee,
shareholder, partner or Affiliate of Borrower.
(xx) No instrument of release or waiver has been executed in
connection with any Lease or ground lease, and no Lessee or ground lessor has
been released in whole or in part.
(xxi) No Lease is a Defaulted Lease.
(xxii) Each material Lease Document for each Lease has been delivered
to Lender or the Custodian.
(xxiii) Each Lease has a remaining term of no longer than the term of
the related Franchise Agreement. On the date of origination of the Lease, and,
to the best knowledge of Borrower, on the date of each Credit Event, the
Lessee is current on all franchise payments. Additionally, on the date of
origination of the Lease, Borrower received an affidavit from the related
franchisee certifying, and, to the best knowledge of Borrower on the date of
each Credit Event: (i) the Lessee is in full compliance with the terms of the
Franchise Agreement and (ii) the Lessee is in good standing with the
franchisor.
(xxiv) Borrower has notified each Lessee, and each Lessee is
required, to remit payments in respect to the Leases to the Lockbox Account.
(xxv) Borrower has caused all of its records to be marked to
indicate that the Leases and Lease Documents have been pledged by Borrower to
Lender.
(xxvi) To Borrower's knowledge, except as otherwise disclosed in any
environmental site assessment obtained by Borrower with respect to any
Property and which environmental site assessment has been delivered to and
accepted and approved by Lender, each Property subject to a Mortgage is free
from any and all Hazardous Substances and there exists no violation of
Environmental Laws with respect to such Property. For this purpose, the term
"Hazardous Substance" shall have the meaning specified in the Mortgages.
(xxvii) No Lease contains any landlord obligation to (A) fund or
perform any tenant improvements or to incur or reimburse Lessee for any other
expenditures, or (B) indemnify any Lessee for any liabilities, including,
without limitation, liabilities incurred in connection with environmental
matters.
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(xxviii) With respect to any Revolving Loan which is primarily
secured by Borrower' s interest as lessee under a ground lease (a "Ground
Lease"), which Ground Lease shall be in form and substance acceptable to
Lender:
(A) The Ground Lease or a memorandum thereof has been recorded and
the Ground Lease does not prohibit the leasehold estate to be mortgaged and
does not restrict the use of the Property by Borrower, its successors or
assigns in a manner that would materially adversely affect the security
provided by the related Mortgage; the lessee's interest in the Ground Lease
may be assigned at foreclosure or by Lender subsequent to foreclosure and may
be assigned by the lessee in other instances; and there has been no material
change in the terms of such Ground Lease since its recordation, except by
written instruments all of which have been recorded, and copies of which have
been delivered to Lender;
(B) The lessor under such Ground Lease has agreed in such Ground
Lease or in another writing delivered to Lender and its successors and
assigns that such Ground Lease may not be amended, modified, surrendered,
cancelled or terminated in any manner that would be materially adverse to the
Lender without the prior written consent of Lender, and that any such action
without such consent is not binding on Lender, its successors or assigns;
(C) Each Revolving Loan secured by a leasehold estate pursuant to a
Ground Lease provides for an amortization schedule which, were the loan to be
fully amortized from scheduled payments made in accordance with such
amortization schedule regardless of the stated maturity date, provides for
full repayment of such Revolving Loan within no more than 75% of the original
term of the related ground lease (plus all consecutive renewal terms which may
be exercised, and which under all circumstances would be enforceable, by
Lender); further, the original term of the related Ground Lease (plus all
consecutive renewal terms which may be exercised, and which under all
circumstances would be enforceable, by Lender) extends for at least ten years
beyond the stated maturity date for such Revolving Loan, it being agreed and
understood that Borrower shall exercise all renewal rights under the Ground
Lease at least ninety (90) days prior to the expiration thereof, it being
further agreed and understood that if Borrower fails to duly exercise its
renewal rights as required hereby, Lender shall be entitled to exercise such
rights as Borrower's attorney in fact, which power of attorney shall be
irrevocable and deemed coupled with an interest;
(D) Such Ground Lease is and shall remain prior to any mortgage or
other lien upon the fee interest of the ground lessor;
(E) Such Ground Lease does not permit any increase in the amount of
rent payable by the lessee thereunder or any
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assignee thereof other than an increase which was considered in the appraisal
made in connection with the related Property;
(F) Such Ground Lease requires the lessor thereunder to give notice
of any default by the lessee to Lender;
(G) Lender is permitted a reasonable opportunity (including, where
necessary, sufficient time to gain possession of the interest of the lessee
under such Ground Lease through legal proceedings or to take other action so
long as Lender is proceeding diligently) to cure any default under such Ground
Lease which is curable after the receipt of notice of any such default before
the lessor thereunder may terminate such Ground Lease; all rights of the
lessee under such Ground Lease and the related Mortgage (insofar as it relates
to the Ground Lease) may be exercised by or on behalf of Lender; and in the
event of the bankruptcy or insolvency of the lessee under such Ground Lease,
or other default which is not reasonably susceptible to cure by Lender, such
default is deemed cured or waived as to Lender and its successors and assigns,
or Lender has the right, following termination of the existing Ground Lease or
rejection thereof by a bankruptcy trustee or otherwise, to enter into a new
Ground Lease with the lessor on identical financial terms and substantially
identical other terms and with the same priority as the existing Ground Lease.
(H) Under the terms of the Ground Lease and the related Mortgage,
taken together, any related insurance proceeds or condemnation award (other
than in respect of a total or substantially total loss or taking) will be
applied (1) to the repair or restoration of all or part of the related
Property, with Lender or a trustee appointed by it having the right to hold
and disburse such proceeds as repair or restoration progresses (except in
cases where a provision entitling another party to hold and disburse such
proceeds would not be viewed as commercially unreasonable by an institutional
investor), with any balance of such insurance proceeds payable to Borrower or
the ground lessor and any balance of such condemnation award payable in the
manner described in subparagraph (I) below; or (2) to the payment of the
outstanding principal balance of the Revolving Loan, together with any accrued
interest thereon; or (3) with respect to any total loss, in the manner
described in subparagraph (I) below; and
(I) Under the terms of such Ground Lease and the related Mortgage,
taken together, any related insurance proceeds or condemnation award in
respect of a total or substantially total loss or taking of the related
Property will be applied first to the payment of the outstanding principal
balance of the Revolving Loan, together with any accrued interest thereon; and
until such principal balance and accrued interest are paid in full, neither
the lessee nor the lessor under such Ground Lease will have the right to
terminate or modify such Ground Lease without the prior
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written consent of Lender as a result of any casualty or partial condemnation,
except to provide for an abatement of the rent.
(xxix) No Lessee is obligated to Borrower under any Lease(s) having
aggregate cost to Borrower, less Borrower's accumulated depreciation thereon,
in excess of $15,000,000.
(c) PARTICULAR COVENANTS OF BORROWER. In addition to the
representations, warranties and covenants contained in paragraphs (a) and (b)
of this Section 4, Borrower hereby makes the following particular covenants to
Lender:
(i) MAINTENANCE OF COLLATERAL AND BUSINESS. At Borrower's sole
cost and expense, Borrower shall (A) service the Collateral in accordance with
this Agreement and all applicable laws, rules and regulations and (B) not do
or suffer to be done any act whereby the value of the Collateral or any part
or interest therein may be lessened in any material respect. Borrower shall
notify Lender promptly of any material change or impairment in the value of
any of the Collateral.
(ii) COMPLIANCE CERTIFICATES; REPORTS; COMMUNICATIONS. Borrower
agrees to provide to Lender: (A) within 45 days of March 31, June 30 and
September 30 of each calendar year during the term of this Agreement, a
compliance certificate (in the form attached hereto as Exhibit H-l) and
quarterly financial statements of Borrower certified by Borrower's chief
financial officer to fairly present in all material respects Borrower's
financial condition and results of operations for such period; and (B) within
90 days of December 31 of each calendar year during the term of this
Agreement, a compliance certificate (in the form attached hereto as Exhibit
H-2) and audited financial statements of Borrower together with the report
thereon by Borrower's Independent Accountants. Borrower further agrees to
provide to Lender (A) promptly following receipt by Borrower, complete copies
of any communications that are or may be materially adverse to, or which
reflect information which is or may be materially adverse to Borrower, its
business or the Collateral, and (B) copies of such other reports and
information as Lender may from time to time reasonably request promptly
following any such request. The financial statements furnished to Lender
hereunder shall be prepared in accordance with GAAP applied on a consistent
basis and shall be sufficiently detailed to allow Lender to calculate Borrower
FCCR and determine compliance with other financial covenants.
(iii) ENCUMBRANCES. Borrower shall not create, incur, assume or
suffer to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on the Properties, the Leases, the Ground
Leases or any other Collateral, EXCEPT the following permitted encumbrances
("Permitted Encumbrances"):
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(A) liens and security interests of Lender;
(B) liens securing the payment of taxes, either not yet overdue
or the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower and with respect to
which adequate reserves have been set aside on its books;
(C) non-consensual statutory liens (other than liens securing
the payment of taxes) arising in the ordinary course of Borrower's business to
the extent: (1) such liens secure indebtedness which is not overdue or (2)
such liens secure indebtedness relating to claims or liabilities which are
fully insured and being defended at the sole cost and expense and at the sole
risk of the insurer or being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower, in each case prior
to the commencement of foreclosure or other similar proceedings and with
respect to which adequate reserves have been set aside on its books;
(D) deposits of cash with the owner or lessor of premises leased
and operated by Borrower in the ordinary course of the business of Borrower to
secure the performance by Borrower of its obligations under the terms of the
lease for such premises;
(E) liens in favor of lessors that are expressly subordinate to
the security interest of Lender; and
(F) those matters set forth in the title insurance policies
insuring the respective liens of the Mortgages which are approved by Lender in
its sole discretion ("Permitted Title Exceptions").
(iv) DISTRIBUTIONS AND REDEMPTIONS. Borrower shall not, directly
or indirectly, declare, or pay or make any distributions on account of any of
its stock now or hereafter outstanding, or set aside or otherwise deposit or
invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any membership interests (or set aside or otherwise deposit
or invest any sums for such purpose) for any consideration or apply or set
apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the foregoing,
either (A) following the occurrence of and during the continuation of an Event
of Default or an event which with the passage of time or giving of notice or
both would be or result in an Event of Default, (B) following the occurrence
of and during the continuation of any event of default or an event which with
the passage of time or giving of notice or both would be or result in an event
of default, under any agreement, instrument or document to which any Affiliate
of Borrower and Lender are parties or (C) if an Event of Default, or an event
which with the passage of time or giving of notice or both would be or result
in an Event
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of Default would exist after giving effect to such distribution.
Notwithstanding anything herein to the contrary, Borrower shall not be
restricted in the payment of the dividends it is required to pay to the
holders of the redeemable preferred stock of the Borrower in existence on the
date hereof as provided in the Borrower's certificate of incorporation.
(v) INSURANCE. At Borrower's sole cost and expense, Borrower
shall:
(A) (1) maintain liability insurance of not less than an amount
reasonably satisfactory to Lender, (2) maintain, independently or in a group
plan with Captec, errors and omissions insurance of not less than an amount
reasonably satisfactory to Lender and (3) maintain such other insurance
(including certain minimum levels of acceptable workers' compensation,
property damage, general public liability insurance) as may be reasonably
required by Lender, in each case maintained by providers either (x) having
ratings of not less than A- from A.M. Best Company Inc. (or comparable ratings
from a comparable rating agency) or (y) who, if not so rated, have been
approved by Lender;
(B) timely pay all premiums, fees and charges required in
connection with all of its insurance policies and otherwise continue to
maintain such policies in full force and effect; and
(C) promptly deliver the insurance policies, certificates (and
renewals) thereof or other evidence of compliance herewith to Lender.
(vi) MAINTENANCE OF EXISTENCE; PRIOR NOTICE OF CHANGE IN NAME OR
LOCATION. (A) Borrower shall at all times preserve, renew and keep in full
force and effect its existence and rights and franchises with respect thereto
and maintain in full force and effect all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on the Borrower's business as presently or proposed to be conducted.
(B) Borrower will neither change its name, federal taxpayer
identification number, nor assume a different name, nor conduct its business
or affairs under any other name, nor merge, consolidate, or change its
structure (whether by equity sale, issuance, purchase or otherwise) during the
term hereof. Borrower may move its chief executive office to another location
provided that it provides Lender with forty-five (45) days prior written
notice.
(vii) NOTICE OF MATERIAL ADVERSE CHANGES. Borrower shall
promptly notify Lender in writing of the details of (A) any material loss,
damage, investigation, action, suit, proceeding or
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claim relating to the Properties, the Leases, the Lease Documents or the
Collateral or any other property which is security for the Obligations or
which would result in any Material Adverse Change in Borrower's business,
properties, assets (including goodwill) or condition, financial or otherwise
and (B) the occurrence of any Event of Default or act, condition or event
which, with the passage of time or giving of notice or both, would constitute
an Event of Default. Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Properties, the Leases, the Lease Documents and the Collateral and the
business of Borrower, as Lender may, from time to time, reasonably request.
Lender is hereby authorized to deliver a copy of any financial statement or
any other information relating to the business of Borrower to any court or
other government agency or to any participant or assignee or prospective
participant or assignee. Borrower hereby agrees to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by its accountants or auditors on
behalf of Borrower. Any documents, schedules, invoices or other papers
delivered to Lender may be destroyed or otherwise disposed of by Lender one
(1) year after the same are delivered to Lender, except as otherwise
designated by Borrower to Lender in writing.
(viii) SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC.
Borrower shall not, directly or indirectly, without the prior written consent
of the Lender, which consent shall not be unreasonably withheld:
(A) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it, or
(B) sell, assign, lease, transfer, abandon or otherwise dispose
of any Properties, Leases or other Collateral to any other Person;
(C) wind up, liquidate or dissolve; or
(D) agree to do any of the foregoing.
(ix) TRANSACTIONS WITH AFFILIATES. Borrower shall not directly
or indirectly, with respect to the Properties, the Leases or the other
Collateral (i) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any Affiliate or any officer, employee, member,
manager, director, or agent of any Affiliate or Borrower or (ii) make any
payments of management, consulting or other fees for management or similar
services, or of any indebtedness owing to any Affiliate or any officer,
employee, member, manager, director, agent or any Affiliate or Borrower, or
any other Payments to Affiliates; provided, however, that no Event of Default
shall exist, Borrower
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may (i) pay fees to Captec Net Lease Realty Advisors, Inc. in consideration
for servicing of the Leases and reimburse Captec Net Lease Realty Advisors,
Inc. for all reasonable direct out-of-pocket expenses incurred by Captec Net
Lease Realty Advisors, Inc. in servicing the Leases and (ii) extend credit to
Captec provided that the aggregate principal amount of all such indebtedness
shall not at any time exceed $15,000,000 and the terms of such indebtedness
shall be fair and reasonable and on the same terms as would have been obtained
in an arm's length transaction between unrelated parties.
(x) COSTS AND EXPENSES. Borrower shall pay to Lender on demand
all reasonable costs, expenses, filing fees and taxes (other than income and
franchise taxes of Lender) paid or payable in connection with the preparation,
negotiation, execution, delivery, recording, administration, collection,
liquidation, enforcement and defense of the Obligations, Lender's rights in
the Collateral, this Agreement, the other Credit Facility Documents and all
other documents related hereto or thereto, including any amendments,
supplements, restatements or consents which may hereafter be contemplated
(whether or not executed) or entered into in respect hereof and thereof,
including, but not limited to: (A) all costs and expenses of filing or
recording (including UCC financing statement filing taxes and fees,
documentary taxes, intangibles taxes and mortgage recording taxes and fees, if
applicable); (B) all title insurance and other insurance premiums, appraisal
fees and search fees; (C) costs and expenses of remitting loan proceeds,
collecting checks and other items of payment, together with customary charges
and fees with respect thereto; (D) costs and expenses of preserving and
protecting the Collateral; (E) costs and expenses paid or incurred in
connection with obtaining payment of the Obligations, enforcing the security
interests and liens of Lender, selling or otherwise realizing upon the
Collateral, and otherwise enforcing the provisions of this Agreement and the
other Credit Facility Documents or defending any claims made or threatened
against Lender arising out of the transactions contemplated hereby and thereby
(including, without limitation, preparations for and consultations concerning
any such matters); (F) all out-of-pocket expenses and costs heretofore and
from time to time hereafter incurred by Lender during the course of periodic
field examinations of the Collateral and Borrower's operations, plus a
customary per diem charge at the rate of $60 per person per day for Lender's
examiners in the field and office; and (G) the actual and reasonable fees and
disbursements of counsel (including legal assistants) to Lender in connection
with any of the foregoing.
(xi) ACCESS TO PREMISES. From time to time as reasonably
requested by Lender, at the cost and expense of Borrower:
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(A) Borrower shall allow Lender, its agents and representatives,
from time to time, to inspect during normal business hours the Borrower's
books and records pertaining to the Collateral, the Properties, the Leases,
the Lease Documents, the Collateral or otherwise to Borrower's business, and
Borrower will assist (and permit abstracts and photocopies of Borrower's books
and records to be taken and retained by) Lender, its agents and
representatives in making any such inspection;
(B) Borrower shall promptly furnish to Lender such copies of
such books and records or extracts therefrom as Lender may request in good
faith; and
(C) Lender or its designee shall have use during normal
business hours of such of Borrower's personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing, provided that such
use does not materially interfere with Borrower's ordinary business
operations, and, if an Event of Default exists or has occurred and is
continuing, for the collection of and realization of the Collateral.
(xii) ORIGINATION AND SERVICING LEASES. Borrower shall not enter
into any Lease with any Person other than an Eligible Tenant. Each Lease shall
be originated by Borrower pursuant to and in conformity with the quantitative
and qualitative underwriting standards contained in the Underwriting
Guidelines. Borrower or Captec shall at all times service the Leases in
conformity with the provisions of Borrower's Operations Policy Manual. In
addition, Borrower (or an Affiliate of Borrower) shall service the Leases in
conformity with the Servicing Provisions set forth in Exhibit I hereto.
(xiii) LOAN TO VALUE REQUIREMENT. Borrower shall at all times
satisfy the Loan to Value Requirement. If at any time the Loan to Value
Requirement shall, in the determination of Lender, cease to be satisfied,
Borrower shall within five (5) business days either (ii) prepay the
outstanding principal balance of the Revolving Loans by an amount sufficient
to restore compliance with the Loan to Value Requirement, or (ii) deliver to
Lender additional collateral for the Revolving Loans, including, without
limitation, cash or any cash equivalent which is satisfactory in all respects
to Lender and sufficient in the opinion of Lender to restore compliance with
the Loan to Value Requirement.
(xiv) UPDATED APPRAISALS. Lender shall have the right in its
discretion to commission updated Appraisals with respect to any Property
constituting Collateral (i) with respect to any particular Property, if
Lender, in the exercise of its sole and absolute discretion, believes that
there has been a reduction in the value of such Property (including, without
limitation, by reason of fire or other casualty or by reason of condemnation)
and
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(ii) upon the occurrence of an Event of Default. All costs incurred in
connection with any updated appraisal required under this paragraph shall be
borne by Borrower, shall be paid by Borrower within ten (10) days after
request by Lender, and shall constitute part of the Obligations. The
obligation of Borrower to pay the aforementioned appraisal costs pursuant to
this paragraph shall be secured by the Credit Facility Documents.
(xv) SALE OF REVOLVING LOANS. Borrower will cooperate with
Lender in connection with any sale or other disposition of the Revolving Loans
by Lender. In this regard, Borrower hereby covenants and agrees to execute and
deliver in connection with the sale or other disposition of the Revolving
Loans, or any interest therein, at such time and from time to time, as
required by Lender, such agreements, documents or instruments as Lender may,
from time to time, reasonably request, in connection with any such disposition
including certificates reaffirming the representations and covenants of
Borrower hereunder as if made on the date of any such reaffirmation. Borrower
hereby consents to the distribution of disclosure information concerning
Borrower in connection with the foregoing, provided, that Lender provides
Borrower with a copy of the disclosure and an opportunity to comment thereon
prior to the distribution of such disclosure information.
(xvi) MANAGEMENT. At least two (2) of the following persons
shall at all times be members of the management and/or the credit committee
of, Borrower: Patrick L. Beach, W. Ross Martin, H. Reid Sherard and Gary
Bruder.
(xvii) INELIGIBLE LEASES; SUBSTITUTION: In the event that any of
the foregoing representations and warranties of Borrower contained in
paragraph (b) of this Section 4 shall prove to have been untrue in any
material and adverse respect on and as of the date made (a "Breached
Representation") with respect to any Lease or any Ground Lease, or any Lease
shall become a Defaulted Lease or any default under any Ground Lease shall
occur and be continuing after any applicable grace period (each, an
"Ineligible Lease"), Borrower shall, within five (5) Business Days of the date
a Lease or Ground Lease becomes an Ineligible Lease, either (i) prepay the
Revolving Loans in an amount equal to 75% of the Appraised Value of the
Property relating to such Ineligible Lease at the time of the funding of the
Revolving Loan pursuant to which such Ineligible Lease was financed, or (ii)
deliver to Lender additional collateral for the Revolving Loans, including,
without limitation, cash or any cash equivalent plus all accrued and unpaid
interest thereon, which is satisfactory in all respects to Lender and having a
value, in the opinion of Lender, at least equal to the Appraised Value of the
Property relating to such Ineligible Lease and in all other respects
satisfactory to Lender. Upon the payment by Borrower of the repurchase price
for an Ineligible Lease, Lender shall (or shall cause the Custodian to)
execute and deliver to
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Borrower such endorsements or releases necessary to release Lender's lien on
and interest in such Ineligible Lease and related Facility Collateral and
shall (or shall cause the Custodian to) deliver to Borrower the Lease
Documents relating to such Ineligible Lease.
(xviii) REFINANCING. (A) Borrower hereby undertakes to use its
best efforts to refinance the credit facility provided herein on or before the
Expiry Date. Lender shall assist Borrower in arranging such refinancing to the
extent such refinancing involves (i) the sale, pledge, grant of a security
interest, collateral assignment, transfer and delivery or other encumbrance or
disposition by Borrower of all or a portion of the Properties or the Leases,
from time to time, to one or more of its Affiliates or to other Persons,
whereby such Person or Affiliate will issue debt instruments or equity
certificates backed by the Properties or Leases and the servicing of the
Properties or the Leases by a Person appointed as servicer in connection
therewith (a "Securitization") or (ii) an initial public offering of equity
securities of Borrower or an Affiliate of Borrower (an "IPO"), the proceeds of
either of which are used to repay the Revolving Loans. In the event that
Borrower is unable to complete a Securitization or and IPO prior to the Expiry
Date, Lender agrees to negotiate with Borrower for the conversion of all then
outstanding Revolving Loans to a fixed rate term loan. Any such term loan
shall be on commercially reasonable terms acceptable to Lender in its sole
discretion, including the rate of interest (which would be then prevailing
market rates as determined by Lender). Any such term loan will have a term of
ten (10) years and will provide for amortization at the lesser of fifteen (15)
years or the weighted average term of the Leases.
(B) Borrower shall pay the Exit Fee to Lender at the times and
upon the terms provided in Schedule B hereto.
(xix) UNDERWRITING GUIDELINES; OPERATIONS POLICY MANUAL.
Borrower shall not modify, revise, amend or alter the Underwriting Guidelines
or the Operations Policy Manual, or originate and Lease that would have the
effect of doing so, without the written consent of Lender.
(xx) NOTIFICATION OF DEFAULTED LEASES. Borrower shall notify
Lender in writing within two (2) Business Days of any Lease that becomes a
Defaulted Lease or any Ground Lease under which there is a default. In
addition, Borrower shall deliver to Lender copies of all written
communications with the Lessees or ground lessor concerning any default,
breach, violation or event of acceleration under any related Lease Documents
(by Borrower or Lessee) or the Ground Lease or any waiver thereof.
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(xxi) PAYMENT OF FEES. Borrower shall pay to Lender the
Structuring Fee, the Extension Fee and the Exit Fee in the amounts and at the
times specified on Schedule B hereto.
(xxii) LIQUID ASSETS. Borrower shall at all times maintain
Liquid Assets equal to the greater of (a) $2,000,000 and (b) five percent (5%)
of the then outstanding principal balance of the Revolving Loans.
5. LOCKBOX ACCOUNT:
----------------
(i) On or prior to the Initial Borrowing Date, Borrower shall
establish and thereafter maintain with the Custodian a segregated trust
account under the sole control of Lender pursuant to the Lockbox Agreement,
which shall be entitled "Captec Net Lease Realty, Inc.--Lockbox Account" and
referred to herein as the "Lockbox Account." Amounts on deposit in the Lockbox
Account shall be invested, disbursed, and otherwise maintained pursuant to the
Lockbox Agreement.
(ii) Borrower shall cause all payments by Lessees in respect of
the Leases to be paid directly to the Lockbox Account. On each Business Day,
Borrower shall deposit into the Lockbox Account any funds received by Borrower
on such Business Day from any Lessee.
(iii) On the fifteenth day of each month during the term of the
Revolving Loans, Lender shall be paid from the Lockbox Account a sum
sufficient to pay all amounts due and owing to Lender hereunder and pursuant
to the Credit Facility Documents. To the extent that funds then on deposit in
the Lockbox Account are insufficient to cover all such due and owing amounts,
Borrower shall immediately pay to Lender the difference between the amounts
due and owing to Lender and the amounts then on deposit in the Lockbox
Account. To the extent funds remain on deposit in the Lockbox Account on the
fifteenth day of any month after payment to Lender of all amounts then due and
owing to Lender hereunder and pursuant to the Credit Facility Documents
(including, without limitation, all mandatory prepayments required by Section
2(b) hereof), such remaining amounts shall be applied as follows: (i) in the
event no Event of Default then exists and is continuing, all remaining
accounts shall be distributed to Borrower and (ii) in the event an Event of
Default then exists and is continuing, all remaining amounts shall be retained
in the Lockbox Account. No payment shall be made to Borrower pursuant to this
Section if Lender has delivered a Demand Letter (as defined in the Lockbox
Agreement) to the Custodian pursuant to the Lockbox Agreement.
(iv) The Custodian shall promptly pay to Borrower all amounts
deposited into the Lockbox Account which do not
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constitute payments of rent by Lessees in respect of the Leases upon delivery
of a certificate in the form of Exhibit J hereto.
(v) In the event that Accrued Margin at any time during any
Monthly Interest Period shall exceed $500,000 in the aggregate (as evidenced
by a certificate delivered by Lender to the Custodian and the Borrower), the
Custodian shall, on the date it receives any such Certificate from Lender,
withdraw an amount equal to such Accrued Margin from the Lockbox Account and
pay such amount to the Lender. Any such payments made to the Lender shall be
credited against payments to be made to the Lender pursuant to paragraph (iii)
of this Section 5.
6. EVENTS OF DEFAULT: The happening of any one or more of the
following events shall constitute an "Event of Default" hereunder:
(a) Nonpayment, default, breach, etc.
---------------------------------
(i) BORROWER DEFAULT: (A) Borrower's failure to make any
payment when due under this Agreement, the Revolving Note or any Credit
Facility Document, which failure continues for one (1) Business Day, or
Borrower's disclaimer of liability under or enforceability of any Credit
Facility Document; (B) Borrower's default under, failure to perform or observe
any covenant or condition of or agreement in, or breach of, or the material
inaccuracy of or omission from, any representation or warranty under or in,
this Agreement, the Revolving Note, any other Credit Facility Document, any
financial or other statement delivered to Lender, and such default, failure,
breach, inaccuracy or omission shall continue unremedied for the earliest of
(x) fifteen (15) days following the date that notice of such default, failure,
breach, inaccuracy or omission is given to Borrower by Lender or (y) fifteen
(15) days following the date ("Discovery Date") that Borrower first obtains
knowledge of such default, failure, breach, inaccuracy or omission; PROVIDED,
THAT, no such fifteen (15) day period shall apply in the case of: (A) any
failure to observe any such term, covenant, condition or provision which is
not capable of being cured at all or within such fifteen (15) day period or
which has been the subject of a prior failure within a three (3) month period
or (B) an intentional breach by Borrower of any such term, covenant, condition
or provision, or (C) the failure to observe or perform any of the covenants or
provisions contained in Sections 4(c)(i), (iii)-(vi), (x) and (xxii) of this
Agreement; or
(b) OTHER DEFAULTS OF BORROWER AND OTHER LIABLE PARTIES: If
Borrower or any of Borrower's Affiliates who is a maker, drawer, acceptor,
endorser, guarantor, surety, accommodation party or otherwise liable for any
of the Obligations or Collateral (each hereinafter called an "other liable
party") shall die, dissolve, merge or consolidate, suspend the transaction of
business or incur
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any material adverse change in its financial condition or prospects; or any
proceeding, procedure or remedy supplementary to or in enforcement of judgment
(involving an amount in excess of $100,000 in the aggregate) shall be resorted
to or commenced against, or with respect to any property of, Borrower or any
other liable party; or if Borrower or any other liable party shall make an
assignment for the benefit of, or composition with, creditors, or shall be or
become insolvent or unable, or generally fail, to pay its debts when due, or
shall be or become a party or subject to any bankruptcy, reorganization,
insolvency or other similar proceeding, or a receiver or liquidator, custodian
or trustee shall be appointed for Borrower or any other liable party, or a
substantial portion of any of Borrower's or their respective assets and, if
any of the foregoing shall occur involuntarily as to Borrower and any other
liable party, it shall not be dismissed with prejudice, stayed or discharged
within 60 days; or if Borrower or any other liable party shall take any action
to effect, or which indicates its acquiescence in, any of the foregoing.
7. REMEDIES.
(a) CUMULATIVE RIGHTS AND REMEDIES. Upon the occurrence of
an Event of Default, Lender shall have the rights, powers and remedies (i)
granted to secured parties under the UCC or other applicable Uniform
Commercial Code; (ii) granted to Lender under any other applicable statute,
law, rule or regulation; and (iii) granted to Lender under this Agreement, the
Revolving Note or any other Credit Facility Document or any other agreement
between Borrower and Lender. In addition, all such rights, powers and remedies
shall be cumulative and not alternative and enforceable, in Lender's
discretion, alternatively, successively, or concurrently on any one or more
occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Credit Facility Documents. Any
single or partial exercise of, or forbearance, failure or delay in exercising
any right, power or remedy shall not be, nor shall any such single or partial
exercise of, or forbearance, failure or delay be deemed to be a limitation,
modification or waiver of any right, power or remedy and shall not preclude
the further exercise thereof; and every right, power and remedy of Lender
shall continue in full force and effect until such right, power and remedy is
specifically waived by an instrument in writing executed and delivered with
respect to each such waiver by Lender.
(b) ACCELERATION OF OBLIGATIONS. Upon the occurrence of an
Event of Default, and at any time thereafter if any Event of Default shall
then be continuing, Lender may, from time to time in its discretion, by
written notice to Borrower declare the Revolving Note and any other
Obligations to be immediately due and payable whereupon (and, ipso facto,
without the need for any notice or
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other action by any Person, upon the occurrence of any Event of Default of the
type referred to in Section 6(c) hereof) such principal, interest and other
Obligations shall be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
Borrower to the maximum extent permitted by law and thereafter shall bear
interest until paid at the Default Rate.
8. INDEMNIFICATION: Borrower hereby saves, indemnifies and
holds Lender harmless from and against all expense, cost, liability, loss or
damage, including attorney's fees and expenses, suffered or incurred by Lender
arising out of or in connection with this Agreement, the Credit Facility
Documents or the transactions contemplated hereby or thereby. Without limiting
the foregoing, Borrower will pay to Lender all reasonable expenses (including
reasonable expenses for legal services of every kind) of, or incidental to,
the negotiation of, entering into and enforcement of any of the provisions
hereof and of any of the Obligations, and any actual or attempted sale, lease
or other disposition of, and any exchange, enforcement, collection, compromise
or settlement of any of the Collateral and receipt of the proceeds thereof,
and for the care of the Collateral and defending or asserting the rights and
claims of Lender in respect thereof, by litigation or otherwise, including
expense of insurance, and all such expenses shall be Borrower's Obligations.
Borrower shall indemnify and hold Lender, and its directors, agents, employees
and counsel, harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses imposed on, incurred by or asserted against any
of them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Credit Facility Documents, or any undertaking or proceeding related to
any of the transactions contemplated hereby or any act, omission, event or
transaction related or attendant thereto, including, without limitation,
amounts paid in settlement, court costs, and the reasonable fees and expenses
of counsel, but excluding any such losses, claims, damages, liabilities, costs
and expenses directly caused to be incurred by reason of the gross negligence
or willful misconduct of the person otherwise to be indemnified and held
harmless under this Section, as determined by a final, non-appealable judgment
of a court of competent jurisdiction. To the extent that the undertaking to
indemnify, pay and hold harmless set forth in this Section may be
unenforceable because it violates any law or public policy, Borrower shall pay
the maximum portion which it is permitted to pay under applicable law to
Lender in satisfaction of indemnified matters under this Section. The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement until the expiration of the
applicable statute of limitations relating to the claims giving rise to
indemnification under this Section.
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9. OBLIGATIONS ABSOLUTE: Borrower's Obligations will be
absolute, unconditional and irrevocable and will be paid or satisfied strictly
in accordance with their respective terms under all circumstances whatsoever,
including: (i) the invalidity or unenforceability of all or any of, or any
part of, this Agreement, the Revolving Note or any other Credit Facility
Document, or any consent, waiver, amendment or modification thereof; (ii) the
existence of any claim, setoff, defense or other right which Borrower may have
at any time against Lender, or any other Person, whether in connection with
this Agreement, any other Credit Facility Documents, the transactions
contemplated hereby, thereby or otherwise all of which Borrower hereby waives
to the maximum extent permitted by law; or (iii) the loss, theft, damage,
destruction or unavailability of the Collateral to Borrower for any reason
whatsoever, it being understood and agreed that Borrower retains all liability
and responsibility with respect to the Collateral.
10. ASSIGNMENT: This Agreement (and each other Credit
Facility Document) is freely assignable, in whole or in part, by Lender to any
Affiliate of Lender (provided that Lender certifies to Borrower that such
Affiliate has adequate assets to enable it to comply with the funding
obligations of Lender hereunder) and, to the extent of any such assignment,
Lender shall be fully discharged from all responsibility. This Agreement (and
each other Credit Facility Document) shall not be assignable to any other
Person without the prior consent of Borrower, unless an Event of Default shall
then be existing and continuing, in which case no such consent shall be
required. Lender's assignee shall, to the extent of the assignment, be vested
with all the powers and rights of Lender hereunder, and to the extent of such
assignment the assignee may fully enforce such rights and powers as secured
party and all references to Lender shall mean and refer to such assignee. In
addition to the foregoing, Lender may assign, by bookkeeping entry on Lender's
records or otherwise, all or any part of, or any interest in, Lender's rights
and benefits under the Revolving Note, including, without limitation, its
rights to payments of principal and interest thereunder, for the purpose of
financing Lender's provision of credit hereunder, provided that no such
assignment shall terminate or diminish Lender's obligations hereunder. To the
extent of such assignment, such assignee shall have the same rights and
benefits against Borrower under the Revolving Note as it would have had if it
were Lender thereunder. Lender shall retain all rights and powers hereby given
not so assigned, transferred and/or delivered. Without limiting the foregoing,
Borrower understands and agrees that Lender may, from time to time, sell,
pledge, grant a security interest in and collaterally assign, transfer and
deliver or otherwise encumber or dispose of the Revolving Note, this Agreement
and the other Credit Facility Documents and its rights and powers hereunder
and thereunder, in whole or in part, in
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connection with the a securitization or any other assignment or other
disposition of the Revolving Note and the Loans. Borrower may not, in whole or
in part, directly or indirectly, assign this Agreement or any Credit Facility
Document or its rights hereunder or thereunder or delegate its duties
hereunder or thereunder without, in each instance, the specific prior written
consent of Lender, which consent may be withheld or delayed in Lender's sole
discretion. For purposes of this Agreement, a change in control (whether by
stock sale, issuance or otherwise) shall constitute an assignment hereof.
11. FURTHER ASSURANCES: Borrower agrees at any time and from
time to time, at Borrower's sole cost and expense, to obtain, procure, execute
and deliver, file and affix or cause to be obtained, procured, executed,
delivered, filed and affixed such further agreements, bills of sale and
assignments, instruments, documents, warehouse receipts, bills of lading,
vouchers, invoices, notices, statements, writings (including financing
statements, and writings to correct any error or ambiguity in any Credit
Facility Document), powers (including stock and bond powers, and powers of
attorney), tax stamps and information, and to do or cause to be done all such
further acts and things (including the execution, delivery and filing of
financing statements, payment of filing fees and transfer, gains and recording
taxes) and do and cause to be done all such other acts as Lender may
reasonably request, from time to time, in its discretion. Without limiting the
foregoing, Borrower authorizes Lender to the extent permitted under the UCC to
execute and file, or file without Borrower's signature, any and all financing
statements, amendments thereto and continuations thereof as Lender deems
necessary or appropriate and Borrower shall pay and indemnify Lender for and
hold Lender harmless from any and all costs and expenses in connection
therewith. Borrower further agrees that it will promptly notify Lender of, and
agrees to correct, any defect, error or omission in the contents of any of the
Credit Facility Documents or in the execution, delivery or acknowledgement
thereof.
12. TERM: (a) This Agreement shall be binding upon and
enforceable against Borrower and Lender when executed by both such parties.
Upon indefeasible payment in full of the Obligations in accordance with the
terms thereof, this Agreement shall terminate and Lender, at Borrower's
expense, will transfer (without recourse, representation or warranty) such
Collateral as may be in Lender's possession, and not to be retained, sold, or
otherwise applied or released pursuant to this Agreement or any other Credit
Facility Document, to Borrower, except that the indemnification provisions of
Sections 2(c), 4(a)(xv) and 4(a)(xix) and the provisions of Sections 4(c)(x)
and 4(c)(xxi) shall survive indefinitely and the indemnification provisions of
Section 4(a)(xvii) and the provisions of Section 8 shall survive for the
periods specified therein. No
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termination of this Agreement or any other Credit Facility Document shall
relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or any other Credit Facility Documents until
all Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Credit Facility Documents and applicable
law, shall remain in effect until all such Obligations have been fully and
finally discharged and paid.
(b) Not later than 45 days prior to the Expiry Date,
Borrower, at its option, may notify Lender in writing that Borrower desires to
extend the Expiry Date for a period of 12 months from the original Expiry
Date. In such notice, Borrower shall certify that no Default has occurred and
is continuing. The Expiry Date shall be extended pursuant to Borrower's
request provided (i) Lender shall have received the Extension Fee on or before
the date Borrower notifies Lender of its desire to extend the Expiry Date,
(ii) no Material Adverse Change or any event which is reasonably likely to
result in a Material Adverse Change shall have occurred and (iii) no Event of
Default shall have occurred and be continuing.
13. MISCELLANEOUS.
(a) FINAL AGREEMENT; AMENDMENTS, CONSENTS, AUTHORIZATIONS. THIS
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN BORROWER AND LENDER AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF BORROWER AND LENDER. BORROWER UNDERSTANDS AND AGREES THAT ORAL
AGREEMENTS AND ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR
FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE. BORROWER ACKNOWLEDGES
AND AGREES THERE ARE NO ORAL AGREEMENTS BETWEEN BORROWER AND LENDER. This
Agreement and the Credit Facility Documents represent the entire understanding
of Lender and Borrower with respect to the transactions contemplated hereby
and thereby. None of the terms or provisions of this Agreement or any other
Credit Facility Document may be waived, altered, modified, or amended except
in each instance by a specific written instrument duly executed by Lender. Any
such waiver shall be enforceable only to the extent specifically set forth
therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise. Without limiting the foregoing, no
action or omission to act shall be deemed to be a consent, authorization,
representation or agreement of Lender, under the UCC or otherwise, unless, in
each instance, the same is in a specific writing signed by Lender.
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6 (b) NOTICES. All notices and other communications given
pursuant to or in connection with this Agreement shall be in duly executed
writing delivered to the parties at the addresses set forth below (or such
other address as may be provided by one party in a notice to the other):
If to Lender:
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
55 East 52nd Street
New York, New York 10055
Attention: Laura Goldberg
(with a copy of each legal notice to:
Walter Fekula, Credit Department)
with a copy to:
BATTLE FOWLER LLP
75 East 55th Street
New York, New York 10022
Attn: Charles J. Hamilton, Jr., Esq.
If to Borrower, to Borrower's chief executive office (or
residence),
as represented to by Borrower herein:
Captec Net Lease Realty, Inc.
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
Ann Arbor, Michigan 48106-0544
Attention: W. Ross Martin
Notice delivered in accordance with the foregoing shall be effective (i) when
delivered, if delivered personally or by receipted-for telex, telecopier, or
facsimile transmission, (ii) two days after being delivered in the United
States (properly addressed and all fees paid) for overnight delivery service
to a courier (such as Federal Express) which regularly provides such service
and regularly obtains executed receipts evidencing delivery or (iii) five days
after being deposited (properly addressed and stamped for first-class
delivery) in a daily serviced United States mail box.
(c) REASONABLENESS. If at any time Borrower believes that Lender
has not acted reasonably in granting or withholding any approval or consent
under the Revolving Note, this Agreement, or any other Credit Facility
Document or otherwise with respect to the Obligations, as to which approval or
consent either Lender has expressly agreed to act reasonably, or absent such
agreement, a court of law having jurisdiction over the subject matter would
require Lender to act reasonably, then Borrower's sole remedy shall be to seek
injunctive relief or specific performance and no action
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for monetary damages or punitive damages shall in any event or under any
circumstance be maintained by Borrower against Lender. Lender shall not have
any liability to Borrower (whether in tort, contract, equity or otherwise) for
losses suffered by Borrower in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement,
or any act, omission or event occurring in connection herewith, unless and
only to the extent that it is determined by a final and non-appealable
judgment or court order binding on Lender, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct. In any
such litigation, Lender shall be entitled to the benefit of the rebuttable
presumption that it acted in good faith and with the exercise of ordinary care
in the performance by it of the terms of this Agreement.
(d) RECOVERY OF SUMS REQUIRED TO BE PAID. Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Obligations as the same become due, without regard to
whether or not the balance of the Obligations shall be due, and without
prejudice to the right of Lender thereafter to bring an action of foreclosure,
or any other action, for a default or defaults by Borrower existing at the
time such earlier action was commenced.
(e) WAIVERS. BORROWER HEREBY MAKES AND ACKNOWLEDGES THAT IT
MAKES ALL OF THE WAIVERS SET FORTH IN THIS AGREEMENT, THE Revolving Note AND
THE OTHER CREDIT FACILITY DOCUMENTS KNOWINGLY, INTENTIONALLY, VOLUNTARILY,
WITHOUT DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF
SUCH WAIVERS WITH ITS ATTORNEY; BORROWER FURTHER ACKNOWLEDGES THAT SUCH
WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER TO MAKE THE LOAN TO BORROWER AND
THAT LENDER WOULD NOT HAVE MADE THE LOAN WITHOUT SUCH WAIVERS; AND BORROWER
HEREBY MAKES AND ACKNOWLEDGES THAT IT MAKES SUCH WAIVERS WITH RESPECT TO EACH
OTHER CREDIT FACILITY DOCUMENT.
(f) WAIVER OF TRIAL BY JURY. BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, AND LENDER BY ITS ACCEPTANCE OF THE Revolving Note AND
THIS AGREEMENT AND OTHER CREDIT FACILITY DOCUMENTS IRREVOCABLY AND
UNCONDITIONALLY WAIVES, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE RELATING
TO THE Revolving Note, THIS AGREEMENT, OR ANY OTHER CREDIT FACILITY DOCUMENT
OR THE OBLIGATIONS.
(g) WAIVER OF NOTICES. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and
notices of any kind or nature whatsoever with respect to the Obligations, the
Collateral and this Agreement and any Credit Facility Documents, except such
as are expressly provided for herein. No notice to or
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demand on Borrower which Lender may elect to give shall entitle Borrower to
any other or further notice or demand in the same, similar or other
circumstances. Without limiting the generality of the foregoing, Borrower
waives (A) notice prior to Lender's taking possession or control of any of the
Collateral or any bond or security which might be required by any court prior
to allowing Lender to exercise any of Lender's remedies, including the
issuance of an immediate writ of possession and (B) the benefit of all
valuation, appraisement and exemption laws.
(h) RELATIONSHIP. The relationship of Lender to Borrower hereunder is
strictly and solely that of secured commercial lender on the one hand and
commercial borrower on the other in a commercial transaction and nothing
contained in the Revolving Note, this Agreement or any other Credit Facility
Document or otherwise in connection with the Obligations is intended to
create, or shall in any event or under any circumstance be construed as
creating, a partnership, joint venture, tenancy-in-common, joint tenancy or
other relationship of any nature whatsoever between Lender and Borrower other
than as secured commercial lender on the one hand and commercial borrower and
guarantor on the other in a commercial transaction.
(i) WAIVER OF COUNTERCLAIMS. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding brought by Lender with
respect to the Revolving Note, this Agreement, any Credit Facility Documents,
the Obligations, the Collateral or any matter arising therefrom or relating
hereto or thereto.
(j) TIME IS OF THE ESSENCE. For all payments to be made and all
obligations to be performed under the Revolving Note, this Agreement and the
other Credit Facility Documents, time is of the essence.
(k) LIMITATION ON INTEREST. (1) NOTWITHSTANDING ANY OTHER PROVISION
HEREOF, IN NO EVENT SHALL THE AMOUNT OR RATE OF INTEREST (INCLUDING TO THE
EXTENT APPLICABLE ANY DEFAULT RATE INTEREST OR LATE PAYMENT CHARGE) PAYABLE,
CONTRACTED FOR, CHARGED OR RECEIVED UNDER OR IN CONNECTION WITH THE REVOLVING
NOTE OR ANY OTHER CREDIT FACILITY DOCUMENT, FROM TIME TO TIME OR FOR WHATEVER
REASON, EXCEED THE MAXIMUM RATE OR AMOUNT, IF ANY, SPECIFIED BY APPLICABLE LAW
("MAXIMUM INTEREST RATE"). In the event any interest is charged or received in
excess of the Maximum Interest Rate ("Excess"), Borrower acknowledges and
stipulates that any such charge or receipt shall be the result of an accident
and BONA FIDE error, and that any Excess received by Lender shall be applied,
first, to the payment of the then outstanding and unpaid principal hereunder;
second to the payment of the other Obligations then outstanding and unpaid;
and third, returned to Borrower, it being the intent of the parties hereto not
to enter into a usurious or
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otherwise illegal relationship. Borrower recognizes that such an unintentional
result could inadvertently occur. All monies paid to Lender under the
Revolving Note, hereunder or under any of the other Credit Facility Documents,
whether at maturity or by prepayment, shall be subject to any rebate of
unearned interest as and to the extent required by applicable law.
(2) By the execution of this Agreement, Borrower agrees that (i)
the credit or return of any Excess shall constitute the acceptance by Borrower
of such Excess, and (ii) Borrower shall not seek or pursue any other remedy,
legal or equitable, against Lender, based in whole or in part upon contracting
for, charging or receiving any interest or such amounts which are deemed to
constitute interest in excess of the Maximum Interest Rate. For the purpose of
determining whether or not any Excess has been contracted for, charged or
received by Lender, all interest at any time contracted for, charged or
received from Borrower in connection with the Revolving Note, this Agreement
or any of the other Credit Facility Documents shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread during the
entire term of this Agreement in accordance with the amounts outstanding from
time to time hereunder and the Maximum Interest Rate from time to time in
effect in order to lawfully charge the maximum amount of interest permitted
under applicable laws.
(3) The provisions of this Section 13(k) shall be deemed to be
incorporated into each of the other Credit Facility Documents (whether or not
any provision of this Section is referred to therein). Each of the Credit
Facility Documents and communications relating to any interest owed by
Borrower and all figures set forth therein shall, for the sole purpose of
computing the extent of the Obligations, be automatically recomputed by
Borrower, and by any court considering the same, to give effect to the
adjustments or credits required by this Section.
(1) GOVERNING LAW; BINDING EFFECT. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York;
provided, however, the parties agree that the states listed on Schedule C are
the proper places to file financing statements with respect to the Collateral
and the laws of such states governing perfection and effect of perfection or
non-perfection of security interests in all collateral in which a security
interest is perfected by filing a financial statement under the UCC. This
Agreement shall be binding upon Borrower, and the heirs, devisees,
administrators, executives, personal representatives, successors, receivers,
trustees, and (without limiting Section 9 hereof) assigns, including all
successors in interest of Borrower in and to all or any part of the
Collateral, and shall inure to the benefit of Lender, and the successors and
assigns of Lender. Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Supreme Court for New York County, New York
and the United States District Court for
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the Southern District of New York and waive any objection based on venue or
forum non conveniens with respect to any action instituted therein arising
under the Revolving Note, this Agreement or any of the other Credit Facility
Documents or in any way connected with or related or incidental to the
dealings of the parties hereto in respect of this Agreement or any of the
other Credit Facility Documents or the transactions related hereto or thereto,
in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect
to any such matters shall be heard only in the courts described above (except
that Lender shall have the right to bring any action or proceeding against
Borrower or its property in the courts of any other jurisdiction which Lender
deems necessary or appropriate in order to realize on the Collateral or to
otherwise enforce its rights against Borrower or its property) . Borrower
hereby waives personal service of any and all process upon it and consents
that all such service of process may be made by certified mail (return receipt
requested) directed to its address set forth on the signature pages hereof and
service so made shall be deemed to be completed five (5) days after the same
shall have been so deposited in the U.S. mails, properly addressed and postage
prepaid, or, at Lender's option, by service upon Borrower in any other manner
provided under the rules of any such courts. Within thirty (30) days after
such service, Borrower shall appear in answer to such process, failing which
Borrower shall be deemed in default and judgment may be entered by Lender
against Borrower for the amount of the claim and other relief requested.
(m) SEVERABILITY. Whenever possible this Agreement, the Revolving
Note and each Credit Facility Document and each provision hereof and thereof
shall be interpreted in such manner as to be effective, valid and enforceable
under applicable law. If and to the extent that any such provision shall be
held invalid and unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provisions
hereof or thereof, and any determination that the application of any provision
hereof or thereof to any person or under any circumstance is illegal and
unenforceable shall not affect the legality, validity and enforceability of
such provision as it may be applied to any other person or in any other
circumstance.
(n) CAPTIONS; CONSTRUCTION. The headings, titles and captions used
herein are for convenience only and shall not affect the construction of this
Agreement or any term or provision hereof. The inclusion of an example by way
of illustration such as a parenthetical ("including . . .") shall not be
construed as or deemed a limitation on the generality of the general text to
which it refers. The terms Borrower and Lender shall include heirs, devisees,
executors, administrators, personal representatives,
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successors, receivers, trustees and assigns. The term Borrower as used in
Section 4 hereof shall refer to Borrower and its Affiliates.
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IN WITNESS WHEREOF, Lender and Borrower have caused these
presents to be duly executed as of the day and year first above
written.
Lender BORROWER
- ------ --------
CS FIRST BOSTON MORTGAGE CAPTEC NET LEASE
CAPITAL CORP. REALTY, INC.
By: /s/ Joy Margolies By:
----------------------- -----------------------
Name: Joy Margolies Name:
Title: Vice President Title:
Address: Chief Executive Office:
-------- -----------------------
55 East 52nd Street 24 Frank Lloyd Wright Drive
New York, New York 10055 Lobby L, 4th Floor
Ann Arbor, Michigan 48106
72
IN WITNESS WHEREOF, Lender and Borrower have caused these
presents to be duly executed as of the day and year first above
written.
Lender BORROWER
- ------ --------
CS FIRST BOSTON MORTGAGE CAPTEC NET LEASE
CAPITAL CORP. REALTY, INC.
By: By: /s/ W. Ross Martin
----------------------- -----------------------
Name: Name: W. Ross Martin
Title: Title: Vice President
Address: Chief Executive Office:
- -------- -----------------------
55 East 52nd Street 24 Frank Lloyd Wright Drive
New York, New York 10055 Lobby L, 4th Floor
Ann Arbor, Michigan 48106
73
APPENDIX A
DEFINED TERMS
-------------
"ACCOUNTS" shall have the meaning accorded to such term in the UCC
and shall include all present and future rights of Borrower in respect of the
Properties and the Leases to payment for goods sold or leased or for services
rendered, which are not evidenced by instruments or chattel paper, and whether
or not earned by performance.
"ACCRUED MARGIN" shall mean for any period the amount of accrued and
unpaid interest on the Revolving Loans equal to the positive difference, if
any, of (i) the aggregate unpaid interest on the Revolving Loans accrued
during such period at the Revolving Loan Rate, less (ii) the aggregate
scheduled Lease payments due in respect of the Leases during such period.
"AFFILIATE" means when used with any specified Person, (i) any Person
who controls, is controlled by, or is under common control with such Person,
(ii) any Person who is a director or officer of, partner in, trustee of, or
blood or legal relative, guardian or representative of the specified Person,
or any Person who acts or serves in a similar capacity with respect to the
specified Person, (iii) any Person of which or whom the specified Person is a
director or officer, partner, trustee, or blood or legal relative, guardian or
representative, or with respect to which or whom, the specified Person acts or
serves in a similar capacity; (iv) any Person, who, directly or indirectly, is
the legal or beneficial owner of or controls 5% or more of any class of equity
securities of the specified Person, and (v) any Person who is an Affiliate as
defined in clauses (i), (ii) , (iii) or (iv) of an Affiliate of the specified
Person.
"APPRAISAL" shall mean, with respect to a Property, an appraisal of
such Property prepared by the Appraisers.
"APPRAISED VALUE" shall mean, with respect to a Property, the value
of such Property as set forth in the Appraisal.
"APPRAISERS" shall mean any MAI certified appraiser approved by
Lender, which consent shall not be unreasonably withheld.
"ASSIGNMENT OF LEASES AND RENTS" means the Assignment of Leases and
Rents to be executed by Borrower and delivered to Lender as security for the
payment of the Obligations and constituting a first lien on all of Borrower's
right, title and interest now owned or hereafter acquired in and to all Leases
and all Rents, receipts, revenues and accounts pertaining to or derived from
the Properties, the form of which is attached hereto as Exhibit K.
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"BORROWER" means Captec Net Lease Realty, Inc., a Michigan
corporation.
"BUSINESS DAY" means any day except any Saturday, Sunday or any day
which shall be a legal holiday in New York City or a day on which banking
institutions in New York City are authorized or required by law or other
governmental action to close.
"BUSINESS FCCR" means, with respect to a Lessee, as of the date of
determination for any period, the quotient of (x) the Lessee's Cash Flow for
such period divided by (y) the sum of the Lessee's Indebtedness plus the
Lessee's Lease Obligations for such period. As used herein:
(i) "Lessee's Cash Flow" shall mean for any period an amount
equal to the difference of (1) the sum of (a) net income, plus (b)
depreciation, plus (c) amortization, plus (d) interest expense, plus
(e) Non-Recurring Expenses, minus (2) Non-Recurring Income, all as
reflected on the financial statement for the Lessee;
(ii) "Non-Recurring Expenses" and "Non-Recurring Income"
shall mean for any period expenses or income, as the case may be,
that is extraordinary and generally not reflected in any prior period
or reasonably anticipated to be incurred or received in any
subsequent period; and
(iii) "Lessee's Indebtedness" shall mean for any period the
payments of Indebtedness of the Lessee.
"CAPTEC" shall mean CAPTEC Financial Group, Inc., a Michigan
corporation.
"CLOSING DOCUMENTS" shall mean those documents set forth on Exhibit E
attached hereto and made a part hereof.
"COLLATERAL" means all of the now existing or hereafter acquired
right, title and interest of Borrower in and to (a) the Properties, (b) the
Leases, Lease Documents and Franchise Agreements, (c) all Rents, revenues,
receivables, other leases, easements, options, personal property and other
rights or property related to Borrower's ownership or operation of the
Properties and all other collateral pledged pursuant to any Collateral
Documents, (d) all General Intangibles, Accounts, certificates of title,
fixtures, money, instruments, securities, documents, chattel paper, credit
balances, deposits, deposit accounts, letters of credit, bankers' acceptances,
guaranties, credits, claims, choses in action, demands, and all present and
future liens, security interests, rights, insurance, remedies, title and
interest in, to and in respect of the property described in clauses (a), (b)
and (c) above, and all other personal property, now or hereafter owned,
acquired, held, used, sold or consumed in connection with the
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property described in clauses (a), (b) and (c) above, and any other property,
rights and interests of Borrower which at any time relate to, arise out of or
in connection with the property described in clauses (a), (b) and (c) above or
which shall come into the possession or custody or under the control of Lender
or any of its agents, representatives, associates or correspondents, for any
purpose; all additions thereto, substitutions therefor and replacements
thereof, all interest, income, dividends, distributions and earnings thereon
or other monies or revenues derived from the property described in clauses
(a), (b) and (c) above, including any such property received in connection
with any disposition thereof and all moneys which may become payable under any
policy insuring the Collateral or otherwise required to be maintained
hereunder (including return of unearned premium) ("Collateral Revenues"); and
all products and proceeds of the foregoing.
"COLLATERAL DOCUMENTS" shall mean the Closing Documents, the
Custodial Agreement, the Lockbox Agreement, and any other mortgage, deed of
trust, assignment of lease or other instrument, agreement, guaranty document,
certificate or other writing, now or hereafter executed and delivered to
secure the Obligations, as the same may be modified, amended, consolidated,
continued or extended, from time to time.
"COLLATERAL REVENUES" shall have the meaning ascribed to such term in
the definition of Collateral.
"COLLATERAL SCHEDULE" shall mean a schedule prepared by Borrower
listing all of the Properties and Leases constituting a part of the
Collateral, which schedule shall set forth or include for each Property listed
thereon the location and appraised value of the Property and for each Lease
listed thereon (i) the name of the Lessee and any guarantor under such Lease,
(ii) the original and remaining term of the Lease, (iii) a list of the Lease
Documents relating to such Lease and any amendments or modifications thereto.
"CONDEMNATION PROCEEDS" shall mean all compensation, awards, proceeds
received by the Borrower or on behalf of any Person as a result of
condemnation (which term shall include any damage or taking by any
governmental or quasi-governmental authority and any transfer by private sale
in lieu thereof), net of direct fees, costs (exclusive of overhead) and
disbursements incurred in connection with the collection thereof.
"COUNTY" means the county, parish, city or recording district where
financing statements are filed under the UCC with respect to security
interests in personal property (including fixtures).
A-3
76
"Credit Event" shall mean the making of each Revolving Loan.
"CREDIT FACILITY AMOUNT" shall mean $100,000,000.
"CREDIT FACILITY DOCUMENTS" means the Revolving Note, this Agreement,
the Collateral Documents and any other instrument, agreement, guaranty
document, certificate or other writing, now or hereafter executed and
delivered in connection with the Obligations, as the same may be modified,
amended, consolidated, continued or extended, from time to time.
"CUSTODIAL AGREEMENT" shall mean the Custodial Agreement, dated as of
February 26, 1996, between Lender and the Custodian.
"CUSTODIAN" means Bankers Trust Company acting as Custodian and
Collateral Agent for Lender pursuant to the Custodial Agreement.
"DEFAULT RATE" shall have the meaning ascribed to such term in
Section 1(e) (iii) hereof.
"DEFAULTED LEASE" shall mean a Lease (a) as to which Borrower has
determined that eventual payment of amounts due thereunder is unlikely or (b)
which is a Delinquent Lease for which any amount due thereunder is overdue
(without taking into account any extension of the due date) for a period of
more than sixty (60) consecutive days.
"DISCOVERY DATE" shall have the meaning ascribed to such term in
Section 6(a) (i) hereof.
"EFFECTIVE DATE" shall mean the date on which each of Borrower and
Lender shall have executed and delivered this Agreement .
"ELIGIBLE TENANT" shall mean a Person operating under the tradename
of a Franchise System meeting the standards for a lease applicant set forth in
the Underwriting Guidelines.
"ENVIRONMENTAL LAWS" shall mean all federal, state, district, local
and foreign laws, rules, regulations, ordinances, and consent decrees relating
to health, safety, hazardous substances, pollution and environmental matters,
as now or at any time hereafter in effect, applicable to Borrower's business
and facilities (whether or not owned by it), including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contamination, chemicals, or hazardous, toxic or dangerous substances,
materials or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface strata)
or otherwise relating to the generation, manufacture, processing,
distribution, use,
A-4
77
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals, or hazardous, toxic or dangerous substances,
materials or wastes.
"ERISA" shall have the meaning ascribed to such term in Section 4(a)
(xiii) hereof.
"EVENT OF DEFAULT" shall have the meaning ascribed to such term in
Section 6 hereof.
"EXCESS" shall have the meaning ascribed to such term in Section
13(k) hereof.
"EXIT FEE" shall have the meaning ascribed to such term on Schedule B
hereto.
"EXPIRY DATE" shall mean the second anniversary of the date of this
Agreement, unless such date shall be extended in accordance with the
provisions of Section 12(b) hereof.
"EXTENSION FEE" shall have the meaning ascribed to such term on
Schedule B hereof.
"FILING COLLATERAL" shall have the meaning ascribed to such term in
Section 4(a) (vii) hereof.
"FILING OFFICES" shall have the meaning ascribed to such term in
Section 4(a) (vii) hereof.
"FINANCING STATEMENTS" mean the financing statements on Form UCC-1
copies of which are attached hereto as Exhibit H.
"FRANCHISE AGREEMENT" means a Franchise Agreement between an Eligible
Tenant and a Franchise System.
"FRANCHISE SYSTEM" shall have the meaning ascribed to such term in
the Preliminary Statement.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Boards which are
applicable to the circumstances as of the date of determination consistently
applied on and after the date hereof.
"GENERAL INTANGIBLES" shall have the meaning accorded to such term in
the UCC and with respect to the Borrower shall be limited to the property
described in clauses (a), (b) and (c) of the definition of Collateral and
shall include Borrower's interest in any agreements, contracts, writings,
memoranda, confirmations, passbooks, signature cards, acknowledgements,
understandings,
A-5
78
contract rights, licenses, leases, permits, filings, consents, and approvals,
and all puts, calls, options, warrants, and securities, and all tax and duty
refunds, and all security interests, patents, inventions, processes, lists
(including customer and suppliers lists), methods, l and information
(including proprietary information, member lists and information concerning
members, sales, business, financial, accounting, forecasts, projections,
media, and other information), know how, software, programs, plans, data,
blueprints, designs, drawings, surveys, notices, copyrights, trademarks, trade
names, trade secrets, service marks, service names, logos and goodwill, going
concern value, and market share value and all recordings and registrations
thereof, applications for recording or registration, renewals, modifications,
supplements, reissues, continuations, extensions, divisions thereof and rights
corresponding thereto, and all manuals, standards, practices, mail,
advertisements, files, reports, books, catalogs, records, journals, invoices,
and bills, and all rights (including voting rights, rights to receive notice
or to consent, rights to payment, interest, dividends, distributions or
earnings, rights to sue and enforce), powers (including powers of attorney),
privileges, benefits, and remedies relating thereto or arising in connection
with the property described above.
"HAZARDOUS MATERIAL INDEMNIFICATION" shall mean the hazardous
material indemnification agreement to be executed and delivered by Borrower,
the form of which is attached hereto as Exhibit L.
"INDEBTEDNESS" means all indebtedness (including reimbursement,
subrogation, or contribution obligations and any other indebtedness assumed or
guaranteed) in respect of money borrowed, whether evidenced by a note
(including the Revolving Note) or other like written obligation to pay money,
or deferred purchase price or constituting an capitalized lease obligation or
otherwise and will include all obligations and accruals to the extent due and
payable or incurred outside the ordinary course of business)
"INDEPENDENT ACCOUNTANT" shall mean Coopers & Lybrand or such other
firm of independent accountants approved by Lender.
"INFORMATION CERTIFICATE" shall mean the Information Certificate of
Borrower constituting Exhibit F hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and
the other Credit Facility Documents and the financing arrangements provided
for herein.
"INITIAL BORROWING DATE" means the date on which the initial
Revolving Loan is made.
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79
"INSURANCE PROCEEDS" shall mean any amounts received upon settlement
of a claim filed with an Insurance Policy (including proceeds of title
insurance), net of direct fees, costs (inclusive of overhead) and
disbursements incurred in connection with the collection thereof.
"LEASE" means a lease between Borrower and a Lessee for leasing of a
Property.
"LEASE DOCUMENTS" shall mean with respect to a Lease, the Lease and
those other instruments, agreements, guarantys, documents, certificates or
other writings, now or hereafter executed and delivered by a Lessee in respect
of such Lease, as the same may be modified, amended, consolidated, continued
or extended from time to time.
"LENDER" shall mean CS First Boston Mortgage Capital Corp., a
Delaware corporation, its successors and assigns.
"LESSEE" shall mean an Eligible Tenant under a Lease, and its
successors and assigns.
"LIBOR RATE" means, at any time, a rate per annum equal to the rate
for U.S. dollar deposits with 30-day maturities which appears on Telerate Page
5 as of the last Business Day of the preceding month. The term "Telerate Page
5" means the display designated as "Page 5" on the Associated Press-Dow Jones
Telerate Service (or such other page as may replace Page 5 on the Associated
Press-Dow Jones Telerate Service or such other service as may be nominated by
the British Bankers' Association as the information vendor for the purpose of
displaying British Bankers' Association interest settlement rates for U.S.
dollar deposits). Any LIBOR Rate determined on the basis of the rate displayed
on Telerate Page 5 in accordance with the foregoing provisions of this
subparagraph shall be subject to corrections, if any, made in such rate and
displayed by the Associated Press-Dow Jones Telerate Service within one hour
of the time when such rate is first displayed by such Service. Each
determination of the LIBOR Rate made by Lender shall be conclusive and binding
upon Borrower absent manifest error. Interest at the applicable LIBOR Rate
from time to time shall be calculated for the actual number of days elapsed on
the basis of a 360-day year.
"LIQUID ASSETS" shall mean (i) cash or (ii) negotiable securities or
trade receivables having a maturity of not greater than 90 days.
"LOAN" shall mean and include each Revolving Loan and the Term Loan.
"LOAN TO VALUE REQUIREMENT" shall have the meaning ascribed to such
term in Section 3(e) (ii) hereof.
A-7
80
"LOCKBOX ACCOUNT" shall mean the account by that name created,
maintained and disbursed, from time to time, in accordance with Section 5
hereof.
"LOCKBOX AGREEMENT" shall mean the Lockbox Agreement, dated as of the
date hereof, between Borrower, Lender and the Custodian.
"MANAGEMENT AGREEMENT" shall mean the Management Agreement, dated
October 10, 1994, by and between Borrower and Captec Net Lease Realty
Advisors, Inc.
"MARGIN STOCK" shall have the meaning accorded to such term in
Regulation U, T or X of the Federal Reserve Board.
"MATERIAL ADVERSE CHANGE" shall have the meaning ascribed to such
term in Section 3(i) hereof.
"MAXIMUM INTEREST RATE" shall have the meaning ascribed to such term
in Section 13(k) hereof.
"MONTHLY INTEREST PERIOD" shall mean for each month the period
commencing on the first day of such month and ending on the last day of such
month.
"MORTGAGES" shall mean the fully cross defaulted and cross
collateralized blanket mortgages and deeds of trust constituting a first lien
on the fee and leasehold estates of Borrower in all Properties to be executed
and delivered by Borrower from time to time to or for the benefit of Lender as
security for the payment of the Obligations, the form of which is attached
hereto as Exhibit M.
"NOTICE OF BORROWING" shall have the meaning ascribed to such term in
Section 1(b) hereof.
"OBLIGATIONS" mean all of Borrower's Indebtedness, obligations and
liabilities of every kind, nature and description now or hereafter owing by
Borrower to Lender, including those evidenced by, arising under or in
connection with the Revolving Note (including indebtedness, obligations and
liabilities in respect of principal, interest, this Agreement, or any other
Credit Facility Document, and any future advances thereon, renewals,
extensions, modifications, amendments, substitutions and consolidations
thereof, or any other agreement with Lender, including Borrower's obligations
to pay (or reimburse Lender for) all costs and expenses (including attorneys
fees and disbursements) incurred by Lender in obtaining, maintaining,
protecting and preserving its interest in the Collateral or its security
interest therein, foreclosing, retaking, holding, preparing for sale or lease,
selling or otherwise disposing or realizing on the Collateral or in exercising
its rights hereunder or as secured
A-8
81
party under the UCC, any other applicable law, regulation or rule or this
Agreement and all other indebtedness, obligations and liabilities of any kind
of Borrower to Lender, now or hereafter existing (including future advances
whether or not pursuant to commitment), arising directly between Borrower and
Lender or acquired outright, conditionally or as collateral security from
another, absolute or contingent, joint and/or several, secured, due or not
due, contractual or tortious, liquidated or unliquidated, arising by operation
of law or otherwise, or direct or indirect, including Borrower's liabilities
to Lender as a member of any partnership, syndicate, association or other
group, and whether incurred by Borrower as principal, surety, indorser,
guarantor, accommodation party or otherwise.
"OPERATIONS POLICY MANUAL" means Borrower's policies for servicing
leases and loans attached hereto as Exhibit N, as the same may be modified
from time to time with the approval of Lender.
"PAYMENTS TO AFFILIATES" shall mean all all salaries, fees and other
compensation, and all reimbursement or indemnification, directly or
indirectly, paid or payable to (or for the benefit of) any Affiliate of
Borrower, other than a Person who is an officer of Borrower and is not
otherwise an Affiliate of Borrower. Payments to Affiliates shall include any
payment or reimbursement of travel and entertainment expenses, automobiles
expenses, and premiums or expenses associated with any insurance policy other
than those expressly required to be maintained hereby. Payments to Affiliates
shall exclude payments to Captec Net Lease Realty Advisors, Inc. pursuant to
the Management Agreement.
"PERMITTED ENCUMBRANCES" has the meaning ascribed to such term in
Section 4(c) (iii) hereof.
"PERMITTED TITLE EXCEPTIONS" shall have the meaning ascribed to such
term in Section 4(c) (iii) hereof.
"PERSON" shall mean any natural person, corporation, partnership,
association, firm, trust, limited liability company, or other entity or any
government, governmental agency or regulatory authority or instrumentality or
any subdivision thereof.
"PRELIMINARY STATEMENT" shall mean the paragraphs of this Agreement
preceding Section 1 hereof and captioned "Preliminary Statement."
"PROPERTY" shall mean all now owned and hereafter acquired real
property of Borrower which Borrower encumbers with a Mortgage in favor of
Lender pursuant to this Agreement, including leasehold interests, together
with all buildings, structures, and other improvements located thereon and all
licenses, easements, appurtenances and related assets relating thereto.
A-9
82
"RENTS" shall mean, with respect to a Property, all rents, income and
profits arising from the related Lease and renewals thereof and together with
all rents, income and profits for the use and occupation of the Property.
"REQUIRED DUE DILIGENCE MATERIALS" shall mean, with respect to a
Property, all materials specified on Exhibit B hereto.
"REVOLVING LOAN" shall have the meaning ascribed to such term in
Section 1(a) hereof.
"REVOLVING LOAN RATE" means an rate per annum equal to the LIBOR Rate
plus 2.318%.
"REVOLVING NOTE" shall have the meaning ascribed to such term in
Section 1(d) (i) hereof.
"SECURITIZATION" shall have the meaning ascribed to such term in
Section 4(c) (xviii) hereof.
"STANDARD FORM DOCUMENTS" shall mean the standard form of Lease and
other Lease Documents used by Borrower when originating Leases and attached
hereto as Exhibit O.
"STATE" shall mean each state from which Borrower operates its
business.
"STRUCTURING FEE" shall have the meaning ascribed to such term on
Schedule B hereto.
"SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT" shall mean,
with respect to each Lease, a Subordination, Non-Disturbance and Attornment
Agreement, executed and delivered by the Borrower and the Lessee for the
benefit of Lender in substantially the form attached hereto as Exhibit P.
"UCC" means the Uniform Commercial Code of the State.
"UCC SEARCH" means the security interest, tax lien, suit and judgment
search of Borrower conducted in the State and the County.
"UNDERWRITING GUIDELINES" means the Borrower's guidelines for
originating leases and loans attached hereto as Exhibit Q, as the same may be
modified from time to time with the approval of Lender.
A-10
83
LIST OF SCHEDULES
-----------------
Schedule A - List of Franchise Systems
Schedule B - Fees
Schedule C - List of Filing Offices
Schedule D - Recording Jurisdictions
Schedule E - Capitalization of Borrower
Schedule F - List of Borrower Affiliates
84
SCHEDULE A
LIST OF FRANCHISE SYSTEMS
-------------------------
Tier I Tier II
------ -------
Applebee's Carl's Jr.
Arby's Carrow's
Boston Market Church's
Burger King Coco's
Chili's Eastside Mario's
Denny's Golden Corral
Hardees Houlihan's
Jack In The Box Kenny Rogers Roasters
KFC Parkins
Pizza Hut Popeye's
Red Robin Shoney's
Taco Bell Sonic
TGI Friday's Taco Cabana
Wendy's
In addition to the concepts named above, as amended from time to time,
Eligible Tenants may fall outside of the named concepts in an amount in
aggregate equal to up to 10% of the Credit Facility Amount.
85
SCHEDULE A (Continued)
LIST OF SPECIALTY RETAIL AND NON-FRANCHISED RESTAURANT
------------------------------------------------------
CONCEPTS
--------
Specialty Retail Non-Franchised Restaurant
- ---------------- -------------------------
Aaron Rents Roadhouse Grill
Barnes & Noble Stanford's
Best Buy
Blockbuster Video
Borders Group, mc
Circuit City
CompUSA
Hastings Bookstores
Hollywood Video
Just For Feet
Michael's Crafts
Office Depot
OfficeMax
Pier 1 Imports
Rite Aid/Revco
7-Eleven
Sports Authority
Staples, Inc.
Walgreens
Winn Dixie
In addition to the concepts named above, as amended from time to time,
Eligible Tenants may fall outside of the named concepts in an amount in
aggregate equal to up to 10% of the Credit Facility Amount.
86
SCHEDULE B
FEES
----
STRUCTURING FEE. In consideration of Lender structuring and
originating the financing effected by Borrower pursuant to this Agreement,
Borrower shall pay to Lender a non-refundable structuring fee (the
"Structuring Fee") equal to 1% of the Credit Facility Amount, less any good
faith deposit delivered by Borrower to Lender. The Structuring Fee shall be
payable and non-refundable on the Effective Date.
EXTENSION FEE. Borrower shall pay to Lender, as a condition precedent
to any extension of the Expiry Date in accordance with Section 12(b) hereof, a
fee (the "Extension Fee") equal to 0.5% of the Credit Facility Amount, which
Extension Fee shall be payable and non-refundable on each date Borrower
provides notice to extend the Expiry Date pursuant to Section 12(b) hereof.
EXIT FEE. On the date on which Borrower or any of its Affiliates
completes an initial public offering (the assets of which company includes any
Properties or Leases) or any refinancing, Securitization or other disposition
of the Properties or the Leases, including the assignment of the Properties or
the Leases to any Affiliate upon prepayment of the Revolving Loans (any of the
foregoing a "Refinancing"), in which Borrower does not utilize Lender or an
Affiliate of Lender as the lead or managing underwriter or investment banker
(other than after a Refinancing structured and marketed by Lender or any of
its Affiliates and which Refinancing has failed to close due to the inability
of Lender or an Affiliate of Lender to complete such Refinancing), Borrower
shall pay to Lender a fee (the "Exit Fee") equal to 1.4% of the Credit
Facility Amount.
-1-
87
SCHEDULE C
----------
FILING OFFICES
Michigan Secretary of State's Office
Michigan Department of State
UCC Unit
P.O. Box 30197
Lansing, MI 48909-7697
For overnight delivery:
Michigan Department of State
Secondary Complex
7064 Crowner Dr.
Dimondale, MI 48821
517/322-1144
517/322-5434 - Fax
Washtenaw County, Michigan - County Clerk's Office
County Courthouse
P.O. Box 8645
Ann Arbor, MI 48107-8645
313/994-2506
313/994-2592 - Fax
88
SCHEDULE D
----------
RECORDING JURISDICTIONS
[TO BE DETERMINED]
89
SCHEDULE E
----------
BORROWER'S SHAREHOLDERS
Common Stock (Voting)
- ---------------------
Captec Financial Group, Inc.
Patrick L. Beach
W. Ross Martin
George R. Beach
Michigan Corp.
Redeemable Preferred Stock (Non-Voting Stock)
- ---------------------------------------------
The Public Institution for Social Security
90
SCHEDULE F
----------
AFFILIATES
Captec Financial Group, Inc.
91
LIST OF EXHIBITS
----------------
Exhibit A - Notice of Borrowing
Exhibit B - Required Due Diligence Materials
Exhibit C - Form of Revolving Note
Exhibit D - Revolving Loan Conditions
Exhibit E - Closing Documents
Exhibit F - Information Certificate
Exhibit G - UCC Searches
Exhibit H-1 - Form of Quarterly Compliance Certificate
Exhibit H-2 - Form of Annual Compliance Certificate
Exhibit I - Servicing Provisions
Exhibit J - Release Certificate
Exhibit K - Form of Assignment of Leases and Rents
Exhibit L - Form of Hazardous Material Indemnification
Exhibit M - Form of Mortgages
Exhibit N - Operations Policy Manual
Exhibit O - Standard Form Documents
Exhibit P - Form of Subordination, Non-Disturbance and
Attornment Agreement
Exhibit Q - Underwriting Guidelines
92
EXHIBIT A
---------
NOTICE OF BORROWING
CS First Boston Mortgage Capital Corp.
55 East 52nd Street, 6th Floor
New York, New York 10055
___________, 199_
Ladies and Gentlemen:
The undersigned, Captec Net Lease Realty, Inc., a Michigan corporation
(the "Borrower") refers to the Credit Agreement (the "Credit Agreement"), dated
as of February 26, 1996, between the Borrower and CS First Boston Mortgage
Capital Corp. ("Lender") and hereby gives you notice pursuant to Section 1(b) of
the Credit Agreement that the undersigned hereby requests a loan under the
Credit Agreement, and in that connection sets forth below the information
relating to such Loan (the "Revolving Loan") as required by Section 1(b) of the
Credit Agreement. Capitalized terms used but not defined herein shall have the
definitions attributed to such terms in the Credit Agreement.
(i) The funding date of the Revolving Loan is _______________ __,
19__.
(ii) The aggregate principal amount of the Revolving Loan is $________.
(iii) The proceeds of the Revolving Loan are to be advanced to the
undersigned in connection with the origination by Borrower of the following
Leases:
Lessee Amount
------ ------
93
The undersigned hereby certifies that the representations and warranties
contained in Sections 4(a) and (b) of the Credit Agreement and in the other
Credit Facility Documents, certificates or other writings delivered to Lender
pursuant thereto are correct in all material respects and no Event of Default or
event which with the giving of notice or lapse of time or both, would constitute
an Event of Default has occurred or is continuing as of the date first written
above.
The proceeds of the Revolving Loan shall be wire transferred to Borrower
in accordance with the following instructions:
Michigan National Bank
395 Briarwood Circle
Ann Arbor, Michigan 48108
ABA# 072000805
Captec Net Lease Realty, Inc.
Account# 4825-17708-4
Very truly yours,
CAPTEC NET LEASE REALTY, INC.
By:
-----------------------
Name:
Title:
94
EXHIBIT B*
----------
(REQUIRED DUE DILIGENCE MATERIALS)
1. Certified copy of the tease.
2. *** [Certified copy of the Ground Lease]***1
3. ***[Certified copy of sublease under the Ground Lease (the "Sublease")]
***1
4. Any Guaranty in respect to the Lease or Ground Lease.
5. ***[Certified copy of the Franchise Agmeement]***1
6. Estoppel Certificate from Lessee ***[ground lessor under the Ground
Lease; sublessee under the Sublease]***1 to Lender.
7. Phase I environmental audit.
8. ***[Phase II environmental audit and remediation plan.] ***1
9. Evidence of compliance with zoning and other land use requirements,
ordinances, rules, regulations and restrictions.
10. Permanent or temporary certificate(s) of occupancy and all other
licenses, permits and approvals required for the use and operation of
the Property.
11. ***[Report of independent inspecting engineer with respect to the
building.]***1
12. The Survey.
13. The Appraisal.
14. Commitment for a Title Policy (as defined hereafter) issued by Title
Companies (as defined hereafter) to Lender, together with copies of all
exceptions to title and all required endorsements.
- -----------------
* All terms used in this Exhibit but not defined in this Exhibit have the
meaning given to them in the Agreement.
1 If applicable.
B-1
95
15. Form of certificates of property and liability insurance showing Lender
as "additional insured" or "loss payee" in connection with the
Property.
16. Evidence satisfactory to Lender that the Property is not located in a
federally designated special flood hazard area (i.e., certificate in
satisfactory form from a licensed surveyor, appraiser, professional
engineer or other qualified person or party) or in the alternative an
acceptable flood insurance policy.
17. UCC-l Financing Statement Searches.
18. Satisfaction and termination of existing lien and encumbrances on the
Property, including UCC-3 Termination Statements, as applicable.
19. Form of opinion letter of Borrower's in-house counsel to Lender.
20. Form of opinion letter of local counsel for Borrower to Lender.
21. Material agreements, instruments, documents, certificates or other
items relating to the Lease or the Property.
B-2
96
EXHIBIT C
---------
97
REVOLVING NOTE
--------------
$100,00,00 February 26, 1996
New York, New York
FOR VALUE RECEIVED, CAPTEC NET LEASE REALTY, INC., a Michigan
corporation, having an address and principal place of business located at 24
Frank Lloyd Wright Dr., Lobby L, 4th Floor, Ann Arbor, Michigan 48106-0544
("Borrower") promises to pay to the order of CS FIRST BOSTON MORTGAGE CAPITAL
CORP., a Delaware corporation having an address and principal place of business
located at 55 East 52nd Street, 6th Floor, New York, NY 10055, its successors
and assigns, ("Lender"), at such address or at such other place as may be
designated in writing by the holder of this Revolving Note, the principal sum of
ONE HUNDRED MILLION and xx/100 ($100,000,000.00) DOLLARS, or so much thereof as
shall be advanced from time to time pursuant to that certain Credit Agreement
(the "CREDIT AGREEMENT") between Borrower and Lender dated as of the date hereof
(the "PRINCIPAL AMOUNT"), which sum shall be payable in lawful money of the
United States of America, as hereinafter set forth, and to pay to Lender all
other Obligations when and as due pursuant to the Credit Facility Documents. All
terms used herein and not otherwise defined shall have the meaning accorded to
such terms in the Credit Agreement. This Revolving Note is entitled to the
benefits of and is secured by the pledge, liens, security, title, rights and
security interests in the Collateral as granted under the other Credit Facility
Documents, as the same may be amended, supplemented or renewed, from time to
time.
I. PAYMENTS OF PRINCIPAL AND INTEREST. A. PRINCIPAL PAYMENTS.
Borrower shall pay to Lender the entire amount of indebtedness evidenced by this
Revolving Note on the Expiry Date.
B. INTEREST PAYMENTS. Borrower shall pay to Lender interest on the
aggregate Principal Amount outstanding from time to time hereunder computed at
the Revolving Loan Rate. Such interest shall be calculated on the basis of the
actual number of days elapsed over a year of 360 days and shall be paid, for as
long as any amount is outstanding hereunder, (i) on the fifteenth day of each
calendar month (or, if such day is not a Business Day, the next succeeding
Business Day) commencing March 15, 1996 in an amount equal to all interest
accrued in the preceding Monthly Interest Period and (ii) on any prepayment
hereof (on the amount prepaid), at maturity (whether on the Expiry Date, by
acceleration or otherwise) and, after such maturity, on demand. Immediately upon
and during the continuation of an Event of Default, interest will accrue on the
unpaid Principal Amount outstanding hereunder at a rate of 2% in excess of the
Revolving Loan Rate (the "DEFAULT
98
RATE"), but in no event shall Borrower's interest payment obligations exceed the
limitations set forth in paragraph 7 below.
C. TIMING OF PAYMENTS. Whenever a payment to be made under this
Revolving Note becomes due and payable on a day which is not a Business Day such
payment shall be made on the next succeeding Business Day, with such extension
of time being included in the computation and payment of interest with respect
to such date.
D. LATE PAYMENT CHARGE. If Lender has not received within ten (10) days
of any Payment Date or the Expiry Date, or on any other date on which any
payment is due (whether be acceleration or otherwise) the full amount due on
such Payment Date, Expiry Date or other date, as the case may be, Borrower shall
pay to the order of Lender, promptly on demand, a late payment charge in the
amount of the product of (x) the difference between the (1) the amount due on
any such due date and (2) the amount actually received on such due date
multiplied by (y) 0.02.
E. PREPAYMENT. Borrower shall have the right to prepay all or a portion
of the principal indebtedness in accordance with the terms and provisions of
Section 2(a) of the Credit Agreement and shall be required to prepay principal
indebtedness in accordance with the terms and provisions of Sections 4(c)(xiii)
and 4(c)(xvii) of the Credit Agreement.
F. APPLICATION OF PAYMENTS. Payments made under this Revolving Note
shall be applied in the following order: (i) to accrued and unpaid interest,
(ii) to the unpaid and outstanding Principal Amount.
II. FEES. Borrower acknowledges and confirms that certain fees,
including, but not limited to, a Structuring Fee, an Extension Fee and an Exit
Fee, are (or may be) owing and are (or may become) payable in accordance with
the Credit Agreement. Borrower hereby acknowledges and agrees to pay,
immediately, with or without demand, all such fees (as the same may be increased
or decreased from time to time), and any additional fees of a similar type or
nature which may be imposed by Lender from time to time, upon the occurrence of
any event which entitles Lender to any such fees.
III. SECURED NOTE. This Revolving Note is secured by the Credit
Facility Documents and the Collateral.
IV. TRANSFER. This Revolving Note is assignable by Lender subject
to the terms set forth in Section 10 of the Credit Agreement. Upon the
assignment of this Revolving Note, Lender may deliver all the collateral
security therefor, or any part thereof, to the transferee who shall thereupon
become vested with all the rights herein or under applicable law given to Lender
with respect thereto, and Lender shall thereafter forever be relieved and fully
discharged from any liability or responsibility in the matter; but Lender shall
retain all fights hereby given to it with respect to any Obligations and such
collateral not so transferred.
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V. LIMITATION ON INTEREST. NOTWITHSTANDING ANY OTHER PROVISION
HEREOF, IN NO EVENT SHALL THE AMOUNT OR RATE OF INTEREST (INCLUDING TO THE
EXTENT APPLICABLE ANY DEFAULT RATE INTEREST OR LATE PAYMENT CHARGE) PAYABLE,
CONTRACTED FOR, CHARGED OR RECEIVED UNDER OR IN CONNECTION WITH THIS REVOLVING
NOTE, FROM TIME TO TIME OR FOR WHATEVER REASON, EXCEED THE MAXIMUM RATE OR
AMOUNT, IF ANY, SPECIFIED BY APPLICABLE LAW. If from any circumstance whatsoever
fulfillment of any provision hereof or of such other Credit Facility Documents
or other documents or Obligations at the time performance of such provision
shall be due, shall involve transcending the limit of such validity, and if from
any such circumstance Lender shall ever receive an amount deemed interest by
applicable law which shall exceed the highest lawful rate, such amount which
would be excessive interest shall be applied to the reduction of the Principal
Amount owing hereunder or on account of any other principal indebtedness of the
undersigned to Lender, and not to payment of interest or if such excessive
interest exceeds the unpaid balance of principal hereof and such other
indebtedness, the excess shall be refunded to Borrower. All sums paid or agreed
to be paid by the Borrower for the use, forbearance or detention of the
indebtedness of the Borrower to Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such indebtedness until payment in full so that the actual rate of
interest on account of such indebtedness is uniform through the term hereof. The
terms and provisions of this paragraph shall control and supersede every other
provision of all agreements between the Borrower and Lender and all Obligations
of Borrower to Lender.
VI. SET OFF. In addition to any right available to Lender under
applicable law or any other agreement, Borrower hereby gives to Lender a lien
on, security interest in and right of set-off of all moneys, securities and
other property of Borrower and the proceeds thereof, now or hereafter delivered
to remain with or in transit in any manner to Lender, its correspondents or its
agents from or for Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise or coming into possession of Lender in any
way, and also, any balance of any deposit account and credits of Borrower with,
and any and all claims of Borrower against, Lender at any time existing, as
collateral security for the payment of this Revolving Note and of all
Obligations now or hereafter owed by Borrower to Lender in connection therewith,
including fees contracted with or acquired by Lender, whether joint, several,
direct, indirect, absolute, contingent, secured, matured or unmatured (all of
which are hereafter collectively called "LIABILITIES"), hereby authorizing
Lender at any time or times, without prior notice, to apply such balances,
credits or claims, or any part thereof, to such Liabilities in such amounts as
it may select, whether contingent, unmatured or otherwise and whether any
collateral security therefore is deemed adequate or not. The collateral security
described herein shall be in addition to any collateral security described in
any separate agreement executed by Borrower. Lender, in addition to any right
available to it under applicable law or any other agreement, shall have the
right, at its option, to immediately set off against this Revolving Note and/or
any Liabilities all monies owed by Lender in any capacity to Borrower, whether
or not due, and Lender shall, at its option, be deemed to have exercised such
right to set off and to have made a charge against any such
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money immediately upon the occurrence of any events of default set
forth below, even though such charge is made or entered on the books of Lender
subsequent to those events.
VII. WAIVERS AND SPECIAL AGREEMENTS: BORROWER HEREBY MAKES AND
ACKNOWLEDGES THAT IT MAKES ALL OF THE WAIVERS AND SPECIAL AGREEMENTS ("WAIVERS")
SET FORTH IN THIS REVOLVING NOTE KNOWINGLY, INTENTIONALLY, VOLUNTARILY, WITHOUT
DURESS, AND ONLY AFTER EXTENSIVE CONSIDERATION OF THE RAMIFICATIONS OF SUCH
WAIVERS WITH ITS ATTORNEY; BORROWER FURTHER ACKNOWLEDGES THAT BORROWER
UNDERSTANDS THE RIGHTS BEING WAIVED AND THAT THE WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER TO MAKE THE LOAN TO BORROWER; THAT THE TERMS OF THE LOAN
ARE FAVORABLE TO BORROWER AND THAT LENDER WOULD NOT HAVE MADE THE LOAN ON SUCH
TERMS WITHOUT SUCH WAIVERS. Borrower and any and all obligors, sureties,
guarantors and endorsers of this Revolving Note and all other parties now or
hereafter liable hereon jointly and severally, with respect to this Revolving
Note and all other Credit Facility Documents (i) acknowledge that the
transaction of which this Revolving Note is a part is part of a commercial
transaction, (ii) waive any and all (from time to time) (a) rights to notice and
hearing under any state or federal law with respect to any prejudgment remedy
which the desire to use, from time to time, and (b) grace, diligence, demand,
presentment for payment, protest, notice of any kind (including, notice to
sureties, disclosure of facts which materially increase risks, notice of
protest, acceptance, liability, suit, demand, or action, dishonor, payment or
nonpayment, protest, intention to accelerate or acceleration, extension or
renewal) except as otherwise expressly required in the Credit Facility
Documents, surety defenses of any kind (including defenses relating to
impairment of recourse, release or modification of underlying obligation,
extension of time, impairment of collateral, nondisclosure), rights of appraisal
of any security or collateral for any Obligation or guaranteed obligation and
diligence in collecting and bringing suit against any party; and (iii) agree (a)
to all extensions of any Obligation or guaranteed obligations (including
rescheduling and recalculation of amortization), in whole or in part, from time
to time, or any partial payments, with or without notice, before or after
maturity, (b) to any one or more substitutions, exchanges or releases of any or
all security, now or hereafter given for any Obligation, (c) to any and all
releases, from time to time, of any and all parties primarily, secondarily or
otherwise liable for any Obligation or guaranteed obligation, (d) that it is not
(and at no time will be) necessary for Lender, or any other holder, transferee,
obligee or beneficiary of any note or Obligation or guaranteed obligation (or
any interest therein) (collectively, "OBLIGEE"), in order to enforce such note
or Obligation, to first institute or exhaust such Person's remedies against any
borrower or other Person or against any collateral or other security for such
note or Obligation, and (e) any delay in exercising, failure to exercise, or
non-exercise (or partial exercise), from time to time, by Lender or any Obligee
of any Obligation or guaranteed obligation of any rights or remedies (or to
insist upon strict performance) in any one or more instances shall not
constitute a waiver thereof (or preclude full exercise or insistence upon strict
performance thereof) in that or any other
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instance, and any single exercise of any such Person's right or remedies in any
one or more instances shall not preclude full exercise in any other instance.
VIII. AUTHORITY. Borrower represents that Borrower has full
power, authority and legal right to execute and deliver this Revolving Note and
that the Loan constitutes a valid and binding obligation of Borrower.
IX.. CALCULATIONS OF AMOUNTS DUE. All calculations of amounts due
on any date, whether by acceleration or otherwise, will be made by Lender (or
its agent or representative) and Borrower agrees that all such calculations will
be conclusive and binding absent manifest error.
X. MISCELLANEOUS. This Revolving Note is assignable by Lender as
provided in the Credit Agreement. Without limiting the foregoing, Lender may
assign, by bookkeeping entry on Lender's records or otherwise, all or part of,
or any interest in, Lender's rights and benefits under this Revolving Note,
including, without limitation, its right to payments of principal and interest
hereunder, for the purpose of financing Lender's provision of credit pursuant to
the Credit Agreement, provided no such assignment shall terminate or diminish
Lender's obligations under the Credit Agreement. To the extent of such
assignment, such assignee shall have the same rights and benefits against
Borrower under this Revolving Note as it would have had if it were the initial
Lender hereunder. This Revolving Note and the rights and Obligations under this
Revolving Note are not assignable or delegatable, directly or indirectly, in
whole or in part, by Borrower. This Revolving Note shall be binding upon
Borrower, its successors and assigns. For all payments to be made and
obligations to be performed under this Revolving Note, time is of the essence.
Whenever possible this Revolving Note and each provision hereof shall be
interpreted in such manner as to be effective, valid and enforceable under
applicable law. If and to the extent that any such provision shall be held
invalid and unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provisions hereof, and
any determination that the application of any provision hereof to any person or
under any circumstance is illegal and unenforceable shall not affect the
legality, validity and enforceability of such provision as it may be applied to
any other person or in any other circumstance. All rights and remedies provided
in this Revolving Note, any Credit Facility Document or any law shall be
available to Lender and shall be cumulative.
XI. ENFORCEABILITY. Borrower acknowledges that this Revolving
Note and Borrower's Obligations under this Revolving Note are and shall at all
times continue to be absolute and unconditional in all respects, and shall at
all times be valid and enforceable irrespective of any other agreements or
circumstances of any nature whatsoever which might otherwise constitute a
defense to this Revolving Note and the Obligations of Borrower under this
Revolving Note or the obligations of any other person or party relating to this
Revolving Note or the Obligations of Borrower hereunder or otherwise with
respect to the Revolving Loans. This Revolving Note sets forth the entire
agreement and understanding of Lender and Borrower, and Borrower absolutely,
unconditionally and irrevocably waives any and all right
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to assert any setoff, counterclaim or crossclaim of any nature whatsoever with
respect to this Revolving Note or the Obligations of Borrower under this
Revolving Note or the obligations of any other person or party relating to this
Revolving Note or the Obligations of Borrower hereunder or otherwise with
respect to the Revolving Loans, in any action or proceeding brought by Lender to
collect the Revolving Loans, or any portion thereof or to enforce, foreclose and
realize upon the liens and security interests of Lender in any Collateral
therefor created by the Credit Facility Documents; provided, however, that the
foregoing shall not be deemed a waiver of Borrower's right to assert any
compulsory counterclaim maintained in a court of the United States, or of the
State of New York if such counterclaim is compelled under local law or rule of
procedure, nor shall the foregoing be deemed a waiver of Borrower's right to
assert any claim which would constitute a defense, setoff, counterclaim or
crossclaim of any nature whatsoever against Lender in any separate action or
proceeding. Borrower acknowledges that no oral or other agreements, conditions,
promises, understandings, representations or warranties exist with respect to
this Revolving Note or with respect to the Obligations of Borrower under this
Revolving Note, except those specifically set forth in this Revolving Note.
XII. AMENDMENTS. This Revolving Note may not be modified,
amended, changed or terminated orally, but only by an agreement in writing
signed by Borrower and Lender. No waiver of any term, covenant or provision of
this Revolving Note shall be effective unless given in writing by Lender and, if
so given by Lender, shall only be effective in the specific instance in which
given.
XIII. GOVERNING LAW. This Revolving Note is and shall be deemed
entered into in the State of New York and shall be governed by and construed in
accordance with the laws of the State of New York and no defense given or
allowed by the laws of any state or country shall be interposed in any action or
proceeding hereon unless such defense is either given or allowed by the laws of
the State of New York. Borrower acknowledges and agrees that this Revolving Note
is, and is intended to be, an instrument for the payment of money only, as such
phrase is used in Section 3213 of the Civil Practice Law and Rules of the State
of New York, and Borrower has been fully advised by its counsel of Lender's
rights and remedies pursuant to said Section 3213.
XIV. VENUE AND JURISDICTION. Borrower agrees to submit to
personal jurisdiction in the State of New York in any action or proceeding
arising out of this Revolving Note. In furtherance of such agreement, Borrower
hereby agrees and consents that without limiting other methods of obtaining
jurisdiction, personal jurisdiction over Borrower in any such action or
proceeding may be obtained within or without the jurisdiction of any court
located in New York and that any process or notice of motion or other
application to any such court in connection with any such action or proceeding
may be served upon Borrower by registered or certified mail to, or by personal
service at, the last known address of Borrower, whether such address be within
or without the jurisdiction of any such court. Borrower hereby agrees that the
venue of any litigation arising in connection with the
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indebtedness, or in respect of any of the Obligations of Borrower under this
Revolving Note, shall to the extent permitted by law, be in New York County.
XV. INDEMNITY. Anything in this Revolving Note or any other Credit
Facility Document to the contrary notwithstanding, Borrower shall indemnify and
hold Lender harmless and defend Lender at Borrower's sole cost and expense
against any loss or liability, cost or expense (including, without limitation,
reasonable attorneys' fees and disbursements of Lender's counsel, whether
in-house staff, retained firms or otherwise), and all claims, actions,
procedures and suits arising out of or in connection with (i) any ongoing
matters arising out of this Revolving Note, any other Credit Facility Document
or the transaction contemplated hereby, including, but not limited to, all costs
of appraisal or reappraisal of all or any portion of any collateral for the
Revolving Loans, (ii) any amendment to, or restructuring of, the Revolving
Loans, this Revolving Note or any other Credit Facility Document, and (iii) any
and all lawful action that may be taken by Lender in connection with the
enforcement of the provisions of this Revolving Note or any other Credit
Facility Document, whether or not suit is filed in connection with the same, or
in connection with Borrower, any guarantor of the Revolving Loans and/or any
partner, joint venturer or shareholder thereof becoming a party to a voluntary
or involuntary federal or state bankruptcy, insolvency or similar proceeding,
but excluding any such losses, claims, damages, liabilities, costs and expenses
directly caused to be incurred by reason of the gross negligence or willful
misconduct of the person otherwise to be indemnified and held harmless under
this Section. All sums expended by Lender shall be payable on demand, and until
reimbursed by Borrower pursuant hereto, shall be deemed additional principal
evidenced hereby and shall bear interest at the default interest rate
hereinabove set forth.
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XVI. WAIVER OF TRIAL BY JURY. BORROWER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, AND LENDER, BY ITS ACCEPTANCE OF THIS REVOLVING NOTE,
IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LITIGATION WHATSOEVER ARISING OUT OF OR IN CONNECTION WITH THE REVOLVING
LOANS, THIS REVOLVING NOTE, ALL OTHER CREDIT FACILITY DOCUMENTS AND ANY
OBLIGATIONS RELATED THERETO.
IN WITNESS WHEREOF, Borrower has duly executed this Revolving
Note the day and year first above written.
CAPTEC NET LEASE REALTY, INC.
By: _______________________
Name: W. Ross Martin
Title: Vice President
Attest: ___________________
Name: Gary A. Bruder
Title: Assistant Secretary
105
Corporate Acknowledgement
-------------------------
STATE OF MICHIGAN )
:ss.:
COUNTY OF WASHTENAW )
On the 26th day of February, 1996, before me personally came W. Ross
Martin, to me known, who, being by me duly sworn, did depose and say that he
resides at Ann Arbor, Michigan; that he is Vice President of CAPTEC NET LEASE
REALTY, INC., the corporation described in and which executed the above
instrument; and that he signed his name thereto by authority of the Board of
Directors of said corporation.
Notary Public
106
EXHIBIT D *
-----------
(REVOLVING LOAN CONDITIONS)
All of the following shall be delivered to Lender and shall be
satisfactory in all respects to Lender in Lender's sole and absolute discretion:
1. An as-built survey (the "Survey") of the Property satisfactory to
Lender and its counsel, which survey shall be certified to the Title
Companies. The Survey shall show dimensions and locations of any
improvements, easements, rights of way, encroachments and the extent
thereof, established building lines and street lines, the distance to, and
names of the nearest intersecting streets and such other details as Lender
may request. The surveyors shall provide a surveyors' certification in form
and substance satisfactory in all respects to Lender, its counsel and the
Title Companies.
2. The Appraisal.
3. The Lease Documents.
4. Valid and effective policies of mortgage title insurance (the
"Title Policies") insuring the lien of the Mortgage as a first lien subject
only to the Permitted Title Exceptions, and with affirmative insurance on
such matters as Lender or its counsel may require (it being agreed and
understood that Borrower shall be obligated as a condition precedent to
each Credit Event to deliver to Lender such continuations of title and
endorsement to the Title Policies insuring the respective liens of the
Mortgages as may be required by Lender, it being further agreed and
understood that Lender shall not require any continuations of title if the
Title Companies issue a "clean" revolving credit endorsement). The Title
Policies shall be issued by a company or companies (the "Title Companies")
designated by Lender and shall be in amounts specified by Lender, shall
contain such terms and coverage as Lender and its counsel shall deem
acceptable, and shall name Lender as the insured party. If required by
Lender, Borrower shall cause to be delivered to Lender facultative
reinsurance agreements with direct access in amounts and issued by
companies satisfactory to Lender and otherwise in form and substance
satisfactory in all respects to Lender and its counsel.
- -------------------
* All terms used in this Exhibit but not defined in this Exhibit have the
meaning given to them in the Agreement.
D-l
107
5. Executed copies of all material agreements, instruments, documents,
certificates or items of any nature whatsoever affecting or relating to the
use or operation of the Property which shall be satisfactory in all
respects to Lender and its counsel.
6. All releases, terminations and such other documents as Lender may
reasonably request to evidence and effectuate the termination by each and
every other Person of all financing and guarantee arrangements, if any,
with Borrower and the termination and release by each and every other
Person of any interest in and to any of the Collateral except to the extent
of the Permitted Title Exceptions or Permitted Encumbrances, including, but
not limited to, (i) UCC termination statements for all UCC financing
statements previously filed by any such Person or its predecessors, as
secured party and Borrower or its predecessors, as debtor, and including
all or any of the Collateral as collateral and (ii) satisfactions and
discharges of any mortgages, deeds of trust or deeds to secure debt by
Borrower or with respect to any of the Properties, in form acceptable for
recording in the appropriate governmental office.
7. Evidence of compliance with all zoning and land use requirements,
ordinances, rules, regulations and restrictions affecting the Property.
8. Permanent certificate of occupancy (or temporary certificate of
occupancy provided that no material condition remains to be satisfied
before issuance of a permanent certificate of occupancy) and all other
licenses, permits and approvals required for the use and operation of the
Property.
9. All consents, waivers, acknowledgments and other agreements from
third persons which Lender may deem necessary or desirable in order to
permit, protect and perfect its security interests in and liens upon the
Collateral or to effectuate the provisions or purposes of this Agreement
and the other Credit Facility Documents.
10. Property and liability insurance acceptable in all respects to
Lender and in an amount equal to 100% of the replacement value of the
Property, excluding land, foundations and footings, naming Lender as a
"loss payee" or "additional insured", as appropriate, it being agreed and
understood that the aggregate of all property insurance on all of the
Properties shall be in an amount equal to or greater than the outstanding
Indebtedness. Blanket insurance policies shall not be acceptable unless
otherwise agreed to by Lender in its sole and absolute discretion. If the
Property or any portion thereof, are located in a federally designated
"special flood hazard area", a flood insurance policy shall be delivered to
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108
Lender. If any of the Properties are not located in a federally designated
"special flood hazard area" such fact shall be substantiated by a
certificate in form satisfactory to Lender from licensed surveyors,
appraisers or professional engineers or other qualified persons, parties or
entities.
11. With respect to any ground lease financings, the ground lease
shall contain terms which shall cause such ground lease to be "financable"
as determined by Lender in its sole and absolute discretion such that all
representations and warranties made by Borrower with respect to the Ground
Lease are true, current and complete in all material respects, it being
agreed and understood, however, that in all events shall the remaining term
of the Ground Lease be for a period acceptable to Lender.
12. Estoppel certificates from any and all tenants and ground lessors,
as applicable, that state (i) that the respective Leases are currently in
full force and effect, (ii) that no defaults exist under such Leases, (iii)
the expiration dates of such Leases (iv) that all rent, however
denominated, payable under the Leases, has been paid, (v) any renewal
rights and/or cancellation rights of Lessees, (vi) any free rent period, or
other tenant concessions and (vii) all landlord's construction or
reimbursement obligations thereunder.
13. Environmental reports and assessments with respect to each
Property and such other information with respect to matters concerning
compliance with Environmental Laws as Lender shall require.
14. Opinion of local counsel to Borrower regarding the enforceability
of the Mortgage, Assignment of Leases and Rents, Hazardous Material
Indemnification and Subordination, Non-Disturbance and Attornment Agreement
executed in connection with the Property, that the Mortgage create a valid
lien on the Property and are legal, valid and binding and that the
Mortgage, Assignment of Leases and Rents and Subordination, Non-Disturbance
and Attornment Agreement are in recordable form.
15. Opinion from in-house counsel of Borrower as to organizational
matters regarding Borrower and due execution and delivery by Borrower of
the Mortgage, Assignment of Leases and Rents, Hazardous Material
Indemnification and Subordination, Non-Disturbance and Attornment
Agreement.
16. Report of independent inspecting engineer, satisfactory in all
respects to Lender with request for the structural integrity and soundness
of the building located on
D-3
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the Property, the roof and all building systems, if the same has been
previously obtained by Borrower.
17. Such other documents, instruments, certificates, opinions,
assurances, consents, or approvals as Lender or its counsel may require.
D-4
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EXHIBIT E *
-----------
(CLOSING DOCUMENTS)
1. Duly executed and acknowledged Mortgage.
2. Duly executed and acknowledged Assignment of Leases and Rents.
3. Duly executed and acknowledged Hazardous Material Indemnification
Agreement.
4. Duly executed and acknowledged Subordination, Non-Disturbance and
Attornment Agreement.
5. Certified copy of the Lease.
6. ***[Certified copy of the Ground Lease]***(1)
7. ***[Certified copy of sublease under the Ground Lease (the
"Sublease")]***(1)
8. Any Guaranty in respect to the Lease or Ground Lease.
9. ***[Certified copy of the Franchise Agreement]***(1)
10. Estoppel Certificate from Lessee ***[ground lessor under the Ground
Lease; sublessee under the Sublease]***(1) to Lender.
11. Phase I environmental audit.
12. ***[Phase II environmental audit and remediation plan.] ***{1)
13. Evidence of compliance with zoning and other land use requirements,
ordinances, rules, regulations and restrictions.
14. Permanent or temporary certificate(s) of occupancy and all other
licenses, permits and approvals required for the use and operation of
the Property.
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* All terms used in this Exhibit but not defined in this Exhibit have the
meaning given to them in the Agreement.
l If applicable.
E-l
111
15. ***[Report of independent inspecting engineer with respect to the
building.]***(1)
16. The Survey.
17. The Appraisal.
18. Title Policy issued by Title Companies to Lender, together with copies
of all exceptions to title and all required endorsements.
19. Certificates of property and liability insurance showing Lender as
"additional insured" or "loss payee" in connection with the Property.
20. Evidence satisfactory to Lender that the Property is not located in a
federally designated special flood hazard area (i.e., certificate in
satisfactory form from a licensed surveyor, appraiser, professional
engineer or other qualified person or party) OR IN THE ALTERNATIVE an
acceptable flood insurance policy.
21. Satisfaction and termination of existing liens and encumbrances,
including UCC-3 Termination Statements, as applicable on the Property.
22. Opinion Letter of Borrower's in-house counsel to Lender.
23. Opinion of local counsel for Borrower to Lender.
24. Material agreements, instruments, documents, certificates or other
items relating to the Lease or the Property.
E-2
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EXHIBIT F
113
INFORMATION CERTIFICATE
OF
CAPTEC NET LEASE REALTY, INC.
Dated: February 22, 1996
CS First Boston Mortgage Capital Corp.
55 East 52nd St., 6th Floor
New York, NY 10055
In order to assist you in the continuing evaluation of the financing you are
considering of Captec Net Lease Realty, Inc. (the "Corporation") and to expedite
the preparation of any documentation which may be required and to induce you to
provide such financing to the Corporation, we represent and warrant to you the
following information about the Corporation, its organizational structure, the
assets being purchased by the Corporation and other matters of interest to you:
1. The full and exact name of the Corporation as set forth in its
Certificate of Incorporation is:
Captec Net Lease Realty, Inc.
2. The Corporation uses and owns the following trade name(s) in the
operation of its business (e.g. billing, advertising, etc.; note: Do not include
names which are product names only):
Same as Section 1 above
In the event any trade name appears on an invoice, a sample copy of such
invoice is annexed.
3. The date of incorporation of the Corporation was October 18, 1994,
under the laws of the State of Michigan, and the Corporation is in good
standing under those laws.
4. The Corporation is duly qualified and authorized to transact business as
a foreign corporation in the following states and is in good standing in such
states:
New York
5. Since the date of incorporation, the name of the Corporation has been
changed as follows:
Date Prior Name
---- ----------
No changes
114
6. Since the date of incorporation, the Corporation has made or entered
into the following mergers or acquisitions:
None
7. The chief executive office of the Corporation is located at:
24 Frank Lloyd Wright Dr.
Lobby L, 4th Floor
Ann Arbor, MI Washtenaw County
8. The books and records of the Corporation pertaining to accounts,
contract rights, inventory, etc. are located at (if other than the chief
executive office referred to in Section 7 above):
Same as Section 7 above.
9. The premises listed below are leased or sub-leased by the Corporation
(state name and address of lessor and record owner if other than lessor),
monthly lease payment and term of lease, including renewal options:
Location Monthly Lease Payment Lease Term
-------- --------------------- ----------
None
10. The places of business or other locations of any assets used by the
Corporation during the last four (4) months other than those listed above are as
follows:
None, except for the Properties which are located throughout the United
States.
11. The Federal Employer Identification Number of the Corporation is as
follows:
38-3206305
12. There is no provision in the Certificate of Incorporation or By-Laws of
the Corporation or in the laws of the State of its organization requiring any
vote or consent of stockholders to borrow or to authorize the mortgage or pledge
of or creation of a security interest in any assets of the Corporation or any
subsidiary. Such power is vested exclusively in its board of directors and, as
delegated thereby, its officers.
115
13. The Corporation is affiliated with, or has ownership in, the following
entities (including subsidiaries):
Chief Executive Jurisdiction of Ownership Percentage
Name Office Organization or Relationship
---- ------ ------------ ---------------
Captec Same Michigan 15% of the voting stock
Financial (common stock) of the
Group, Inc. Corporation is owned
by this affiliate
14. The officers and directors of the Corporation and their respective
titles are as follows:
Title Name
----- ----
President and Director Patrick L. Beach
Vice President, Treasurer and Director W. Ross Martin
Secretary and Director George R. Beach
Assistant Secretary Gary A. Bruder
Director Taleb A. Ali
Director Abbas Al-Qattan
The following will have signatory powers as to all of your transactions
with the Corporation:
Patrick L. Beach, W. Ross Martin, George R. Beach, Gary A. Bruder
15. With respect to the officers noted above, such officers are affiliated
with or have ownership in the following entities (indicate name and address of
affiliated companies, type of operations, ownership percentage or other
relationship):
See attached Exhibit A
16. The names of the stockholders of the Corporation and their share
holdings are as follows:
Name No. of Shares Ownership Percentage
---- ------------- --------------------
See attached Exhibit B
17. Neither the Corporation nor any of its affiliates, officers, directors
or stockholders has ever been involved in a bankruptcy or reorganization except:
(explain)
None
116
18. There are no judgments and there is no litigation, arbitration or
mediation procedure or investigation pending or threatened by or against the
Corporation, any of its properties, assets, subsidiaries and/or affiliates or
any of its officers, directors or stockholders, except as follows:
None
19. At the present time, there are no delinquent taxes owing by the
Corporation (including, but not limited to, all payroll taxes, personal property
taxes, real estate taxes or income taxes) except as follows:
None
20. The Corporation's assets are owned and held free and clear of any
security interests, liens or attachments, except as follows:
Lienholder Assets Amount of Debt Secured
---------- ------ ----------------------
Heller Financial, Inc. Lease #5656 and $1,587,623 as of 12/31/95
related property
and collateral
21. The Corporation has not guaranteed and is not otherwise liable for the
obligations of others, except as follows:
Debtor Creditor Amount of Obligation
------ -------- --------------------
None
22. The Corporation does not own or license any trademarks, patents,
copyrights or other intellectual property, except as follows (indicate type of
intellectual property and whether owned or licensed, registration number, date
of registration, and, if licensed, the name and address of the licensor):
None
- ----------------
l. The term "affiliate" means a person or entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, the Corporation.
117
23. The Corporation's fiscal year ends:
December 31
24. With regard to any pension or profit sharing plan: N/A
(a) A determination as to qualification has been issued.
(b) Funding is on a current basis and in compliance with established
requirements.
25. Certified Public Accountants for the Corporation is the firm of:
Coopers & Lybrand
400 Renaissance Center
Detroit, MI 48243-1507
Gary Stein - Partner Handling Relationship
There was an uncertified statement for fiscal year 1994.
26. The following documents are attached hereto and incorporated herein in
their entirety: (i) Exhibit C - Statements of Personal Information with respect
to certain of the officers of the Corporation.
27. Prompt written notice will be given you of any change or amendment with
respect to any of the foregoing. Until such notice is received by you, you shall
be entitled to rely upon the foregoing in all respects.
Very truly yours,
[SEAL] CAPTEC NET LEASE
REALTY, INC.
By: /s/ W. Ross Martin
-----------------------
Name: W. Ross Martin
Title: Vice President
118
EXHIBIT A
TO
INFORMATION CERTIFICATE OF CAPTEC NET LEASE REALTY, INC.
1. Captec Financial Group, Inc. commercial finance business
24 Frank Lloyd Wright Dr.
Lobby L, 4th Floor
Ann Arbor, Michigan 48106-0544
Patrick L. Beach 61.32% of voting stock (12,150 common shs) *
W. Ross Martin 7.70% of voting stock (1,525 common shs) **
George R. Beach 18.32% of voting stock (3,630 common shs) ***
* - Patrick L. Beach also holds options for the issuance of 2,250
additional shares.
** - W. Ross Martin also holds options for the issuance of 2,025
additional shares.
*** - George R. Beach also holds options for the issuance of 100
additional shares.
2. Captec Net Lease Realty Advisors, Inc. commercial fmance business
24 Frank Lloyd Wright Dr.
Lobby L, 4th Floor
Ann Arbor, Michigan 48106-0544
Patrick L. Beach 58% of voting stock (31,320 common shs)
W. Ross Martin 25% of voting stock (13,500 common shs)
Gary A. Bruder 2% of voting stock (1,080 common shs)
3. Captec Acceptance Leasing Corporation commercial finance business
24 Frank Lloyd Wright Dr.
Lobby L, 4th Floor
Ann Arbor, Michigan 48106-0544
Patrick L. Beach 67.8% of voting stock (5,100 common shs)
W. Ross Martin 13.0% of voting stock (978 common shs)
George R. Beach 19.2% of voting stock (1,444 common shs)
4. Captec Merchant Capital Corporation merchant banking business
24 Frank Lloyd Wright Dr.
Lobby L, 4th Floor
Ann Arbor, Michigan 48106-0544
Patrick L. Beach 20% of voting stock (10,000 common shs)
W. Ross Martin 10% of voting stock (5,000 common shs)
119
EXHIBIT B
TO
INFORMATION CERTIFICATE OF CAPTEC NET LEASE REALTY, INC.
1. Common Shares (Voting Stock):
Patrick L. Beach 24.0% of voting stock (240 common shs)
W. Ross Martin 14.0% of voting stock (140 common shs)
George R. Beach 2.0% of voting stock (20 common shs)
Michigan Corp. 45.0% of voting stock (450 common shs)
Captec Financial Group, Inc. 15.0% of voting stock (150 common shs)
2. Redeemable Preferred Stock (Non-Voting Stock):
The Public Institution for Social Security holds 50,000 Redeemable
Preferred Shares, which shares represent 100% of the issued and outstanding
shares of this class of stock.
120
EXHIBIT C
TO
INFORMATION CERTIFICATE OF CAPTEC NET LEASE REALTY, INC.
STATEMENTS OF PERSONAL INFORMATION
WITH RESPECT TO
CERTAIN OFFICERS OF
CAPTEC NET LEASE REALTY, INC.
121
I. STATEMENT OF PERSONAL INFORMATION
---------------------------------
1. Identification
--------------
* (a) State your name, address (residence and business) and social
security number.
Patrick L. Beach Captec Financial Group, Inc.
440 High Orchard Dr. 24 Frank Lloyd Wright Dr.
Ann Arbor, MI 48105 Lobby L, 4th Floor
Ann Arbor, MI 48106
###-##-####
(b) State your date of birth.
April 26, 1956
(c) Have you been elected as a director and/or executive officer
pursuant to any arrangement or understanding between you and any other person?
No X Yes
--- ---
If yes, please name the person and describe the arrangement or understanding.
Describe any arrangement which may result in a change in your status as an
executive officer or director.
Captec Financial Group, Inc. - Director and Executive Officer
Captec Net Lease Realty, Inc. - Director and Executive Officer
Captec Net Lease Realty Advisors, Inc. - Director and Executive Officer
Captec Receivables Financing Corporation I - Director and Executive Officer
Captec Financial Group Funding Corporation - Director and Executive Officer
Captec Franchise Capital Corporation II - Director and Executive Officer
Captec Franchise Capital Corporation III - Director and Executive Officer
Captec Acceptance Leasing Corporation - Director and Executive Officer
122
2. Business Experience
-------------------
State your principal occupation or employment, the name of the
company or other organization, if any, in which your occupation or employment is
carried on, and the principal business of that corporation or other
organization. In addition, please list all positions and offices held by you
with the company, and all of your principal occupations and employments with any
other corporation or organization during the past FIFTEEN years beginning with
all of your present positions and offices. Include the name and principal
business of any other corporation or organization in which your prior
occupations and employment were carried on. If you are a director or appointee
to the Board of Directors of the Company, please specify the term of your
position.
Dates of Employment
or Terms of Office Name and Address Principal Nature Position
Mo./Yr. to Mo./Yr. of Business of Business Held
- ------------------ ---------------- ---------------- --------
Captec Financial
2/81 to Present Group, Inc. Finance Chairman & CEO
- ------------------ ---------------- ---------------- --------------
Wendy's of
8/86 to 1/90 (?) San Diego Restaurants Chairman
- ------------------ ---------------- ---------------- --------------
12/89 to 7/91 Illiana Printing Printing Franchise Chairman
- ------------------ ---------------- ---------------- --------------
- ------------------ ---------------- ---------------- --------------
-2-
123
3. Other Directorships
-------------------
(a) Are you a director of any company?
No X Yes
--- ---
If yes, please describe.
4. Legal Proceedings
-----------------
(a) Are you or have you been in [or is any associate (see Note E
attached herto) of yours or has any associate of yours been] at any time in the
last FIFTEEN years a defendant in a legal proceeding?
No Yes X
--- ---
If yes, please list the name of the court or agency in which the proceeding is
pending or was adjudicated, the date instituted, the principal parties, a
description of the factual basis alleged to underlie the proceeding, the relief
sought and the disposition, if any.
Comerica V. Beach V. Comerica
Goldrath, et al v. Beach
(b) During the past FIFTEEN years, have you been convicted in any
criminal proceeding or been the named subject of a pending criminal proceeding?
No X Yes
--- ---
If yes, state the court in which you were tried, the offense for which
you were convicted, and the date of conviction or, as the case may be, state
the court, cause of action, status of the case and the date that the complaint
was filed.
(c) During the past FIFTEEN years, has a petition under United States
federal bankruptcy laws or any state insolvency law been filed by or against you
or any business or property of yours, any partnership of which you were a
general partner at or within two years before the time of the appointment or
filing, or any corporation or business association of which you were an
executive officer at or within two years before the time of the appointment or
filing?
No X Yes
--- ---
If yes, state the nature of the petition or appointment, the date it was issued,
the name and address of the person or entity against whom the petition was filed
and the position you held and your length of service with the entity.
Language indicated as being shown by strikeout in the typset document is
enclosed in bracket "[" and "]" in the electronic format.
-3-
124
(d) During the past FIFTEEN years, have you been the subject of any
order, judgment or decree, not subsequently reversed, suspended or vacated, of
any court of competent jurisdiction or any federal, state or local authority,
permanently or temporarily enjoining you from, or otherwise limiting your
participation in any type of business activity or practice
No
If yes, state the court, federal, state or local authority, the nature of the
order, judgment or decree, the date thereof and, if appropriate, the activities
covered thereby and the name(s) of the person(s) engaged in the activity.
(f) During the past FIFTEEN years, have you been found by a court of
competent jurisdiction in a civil action or by the SEC to have violated any
federal or state securities law, where the judgment in the civil action or
finding by the SEC has not been subsequently reversed, suspended or vacated?
No X Yes
--- ---
If yes, state the civil action or finding by the SEC, the date thereof and the
judgment rendered.
-4-
125
THE FOREGOING RESPONSES ARE TRUE AND ACCURATE TO THE BEST OF MY
INFORMATION AND BELIEF, AND I WILL NOTIFY THE FIRST BOSTON CORPORATION AND ITS
COUNSEL PROMPTLY OF ANY CHANGES IN THE FOREGOING RESPONSES.
Patrick L. Beach
----------------------------------
(Print Name)
/s/ Patrick L. Beach
----------------------------------
(Signature)
Address: 440 High Orchard Dr.
----------------------------------
Ann Arbor, MI 48105
----------------------------------
----------------------------------
Dated: 2/20 , 1996
----------
-5-
126
Exhibit A
NOTES TO QUESTIONNAIRE
A. If, while responding to the questionnaire, you feel that additional
information may be required to clarify an answer, please include all facts
you may consider relevant. If insufficient space is provided, you may
attach additional pages, as necessary.
B. "Beneficial Ownership" is interpreted in its broadest sense. You should
consider yourself to be the beneficial owner of securities held
beneficially by your spouse or minor children or any other relative who
shares the same home as you or securities held in the name of another
person if by reason of any contract, understanding, relationship, agreement
or other arrangement you obtain therefrom benefits substantially equivalent
to those of ownership.
You should consider yourself to "beneficially own" a security if you,
directly or indirectly, have or share voting power (i.e., the power to vote
or to direct the voting) or investment power (i.e., the power to dispose or
to direct disposition) of the security, whether through any contract,
arrangement, understanding, relationship, or otherwise and if you have the
right to acquire beneficial ownership at any time within 60 days through
the exercise of any option or right, or pursuant to the power to revoke, or
on termination of, a trust, discretionary account or similar arrangement.
Please note that for this purpose, the same security may be "beneficially
owned" by more than one person. For example, several co-trustees may share
the power to vote or dispose of shares. In any applicable question, please
furnish sufficient details to cross-reference any over-lapping beneficial
ownership by you and another director or officer.
Also, where applicable, if you do not have sole voting and investment power
over all shares beneficially owned by you, indicate the shares over which
you have shared voting power and/or shared investment power.
C. Include any beneficial interest in securities through partnerships, joint
accounts, trusts, or controlled corporations and any securities held in the
name of any person if the power to re-vest title to the securities in
yourself exists now or in the future.
Include all securities entirely owned, including shares held by brokers or
banks in custodian accounts or by other nominees.
D. For purposes of this questionnaire, your "immediate family" shall include
your spouse, parents, siblings, mothers and fathers-in-law, sons and
daughters-in-law and brothers and sisters-in-law.
E. The term "associates" means (i) any member of your immediate family, (ii)
any corporation or organization (other than the Company) of which you or
any member of your immediate family is an executive officer or partner or
is, directly or indirectly, the beneficial owner of 1O% or more of any
class of equity securities
-1-
127
and any trust or other estate in which you or any member of your immediate
family has a substantial beneficial interest or as to which you serve as
trustee or in a similar fiduciary capacity.
F. (i) The terms "affiliate" or "affiliated with" mean a person that directly
or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
(ii) The term "parent" means an affiliate controlling that person directly
or indirectly through one or more intermediaries.
-2-
128
I. STATEMENT OF PERSONAL INFORMATION
---------------------------------
1. Identification
--------------
* (a) State your name, address (residence and business) and social
security number.
W. Ross Martin Captec Financial Group, Inc.
6399 Huron Creek Ct. 24 Frank Lloyd Wright Dr.
Dexter, MI 48130 Lobby L, 4th Floor
Ann Arbor, MI 48106
###-##-####
(b) State your date of birth.
September 8, 1960
(c) Have you been elected as a director and/or executive officer
pursuant to any arrangement or understanding between you and any other person?
No X Yes
--- ---
If yes, please name the person and describe the arrangement or understanding.
Describe any arrangement which may result in a change in your status as an
executive officer or director.
Captec Financial Group, Inc. - Director and Executive Officer
Captec Net Lease Realty, Inc. - Director and Executive Officer
Captec Net Lease Realty Advisors, Inc. - Director and Executive Officer
Captec Receivables Financing Corporation I - Director and Executive Officer
Captec Financial Group Funding Corporation - Director and Executive Officer
Captec Franchise Capital Corporation II - Director and Executive Officer
Captec Franchise Capital Corporation III - Director and Executive Officer
Captec Acceptance Leasing Corporation - Director and Executive Officer
129
2. Business Experience
-------------------
State your principal occupation or employment, the name of the
company or other organization, if any, in which your occupation or employment is
carried on, and the principal business of that corporation or other
organization. In addition, please list all positions and offices held by you
with the Company, and all of your principal occupations and employments with any
other corporation or organization during the past FIFTEEN years beginning with
all of your present positions and offices. Include the name and principal
business of any other corporation or organization in which your prior
occupations and employment were carried on. If you are a director or appointee
to the Board of Directors of the Company, please specify the term of your
position.
Dates of Employment
or Terms of Office Name and Address Principal Nature Position
Mo./Yr. to Mo./Yr. of Business of Business Held
- ------------------ ------------------- ------------------ --------------
Captec Financial Director, Vice
10/85 to Present Group, Inc. Commercial Finance President and CFO
- ------------------ ------------------- ------------------ --------------
Deloitte Haskins
& Sells
5/82 - 10/85 Detroit, MI Accountants Senior Consultant
- ------------------ ------------------- ------------------ --------------
- ------------------ ------------------- ------------------ --------------
-2-
130
3. Other Directorships
-------------------
(a) Are you a director of any company?
[ ] No [X] Yes
If yes, please describe.
As disclosed in item 1 above.
4. Legal Proceedings
-----------------
(a) Are you or have you been in [or is any associate (see Note E
attached hereto) of yours or has any associate of yours been] at any time in the
last FIFTEEN years a defendant in a legal proceeding?
[X] No [] Yes
If yes, please list the name of the court or agency in which the proceeding is
pending or was adjudicated, the date instituted, the principal parties, a
description of the factual basis alleged to underlie the proceeding, the relief
sought and the disposition, if any.
(b) During the past FIFTEEN years, have you been convicted in any
criminal proceeding or been the named subject of a pending criminal proceeding?
[X] No [X] Yes
If yes, state the court in which you were tried, the offense for which you were
convicted, and the date of conviction or, as the case may be, state the court,
cause of action, status of the case and the date that the complaint was filed.
(c) During the past FIFTEEN years, has a petition under United States
federal bankruptcy laws or any state insolvency law been filed by or against you
or any business or property of yours, any partnership of which you were a
general partner at or within two years before the time of the appointment or
filing, or any corporation or business association of which you were an
executive officer at or within two years before the time of the appointment or
filing?
[X] No [ ] Yes
If yes, state the nature of the petition or appointment, the date it was issued,
the name and address of the person or entity against whom the petition was filed
and the position you held and your length of service with the entity.
Language indicated as being shown by strikeout in the typset document is
enclosed in bracket "[" and "]" in the electronic format.
-3-
131
(d) During the past FIFTEEN years, have you been the subject of any
order, judgment or decree, not subsequently reversed, suspended or vacated, of
any court of competent jurisdiction or any federal, state or local authority,
permanently or temporarily enjoining you from, or otherwise limiting your
participation in any type of business activity or practice?
No
If yes, state the court, federal, state or local authority, the nature of the
order, judgment or decree, the date thereof and, if appropriate, the activities
covered thereby and the name(s) of the person(s) engaged in the activity.
(f) During the past FIFTEEN years, have you been found by a court of
competent jurisdiction in a civil action or by the SEC to have violated any
federal or state securities law, where the judgment in the civil action or
finding by the SEC has not been subsequently reversed, suspended or vacated?
[X] No [ ] Yes
If yes, state the civil action or finding by the SEC, the date thereof and the
judgment rendered.
-4-
132
THE FOREGOING RESPONSES ARE TRUE AND ACCURATE TO THE BEST OF MY
INFORMATION AND BELIEF, AND I WILL NOTIFY THE FIRST BOSTON CORPORATION AND ITS
COUNSEL PROMPTLY OF ANY CHANGES IN THE FOREGOING RESPONSES.
W. Ross Martin
----------------------------------
(Print Name)
/s/ W. Ross Martin
----------------------------------
(Signature)
Address: 6399 Huron Creek Ct.
--------------------------
Dexter, MI 48106
----------------------------------
----------------------------------
Dated: 2/20 , 1996
----------
-5-
133
Exhibit A
---------
NOTES TO QUESTIONNAIRE
A. If, while responding to the questionnaire, you feel that additional
information may be required to clarify an answer, please include all facts
you may consider relevant. If insufficient space is provided, you may
attach additional pages, as necessary.
B. "Beneficial Ownership" is interpreted in its broadest sense. You should
consider yourself to be the beneficial owner of securities held
beneficially by your spouse or minor children or any other relative who
shares the same home as you or securities held in the name of another
person if by reason of any contract, understanding, relationship, agreement
or other arrangement you obtain therefrom benefits substantially equivalent
to those of ownership.
You should consider yourself to "beneficially own" a security if you,
directly or indirectly, have or share voting power (i.e., the power to vote
or to direct the voting) or investment power (i.e., the power to dispose or
to direct disposition) of the security, whether through any contract,
arrangement, understanding, relationship, or otherwise and if you have the
right to acquire beneficial ownership at any time within 60 days through
the exercise of any option or right, or pursuant to the power to revoke, or
on termination of, a trust, discretionary account or similar arrangement.
Please note that for this purpose, the same security may be "beneficially
owned" by more than one person. For example, several co-trustees may share
the power to vote or dispose of shares. In any applicable question, please
furnish sufficient details to cross-reference any over-lapping beneficial
ownership by you and another director or officer.
Also, where applicable, if you do not have sole voting and investment power
over all shares beneficially owned by you, indicate the shares over which
you have shared voting power and/or shared investment power.
C. Include any beneficial interest in securities through partnerships, joint
accounts, trusts, or controlled corporations and any securities held in the
name of any person if the power to re-vest title to the securities in
yourself exists now or in the future.
Include all securities entirely owned, including shares held by brokers or
banks in custodian accounts or by other nominees.
D. For purposes of this questionnaire, your "immediate family" shall include
your spouse, parents, siblings, mothers and fathers-in-law, sons and
daughters-in-law and brothers and sisters-in-law.
E. The term "associates" means (i) any member of your immediate family, (ii)
any corporation or organization (other than the Company) of which you or
any member of your immediate family is an executive officer or partner or
is, directly or indirectly, the beneficial owner of 10% or more of any
class of equity securities
-1-
134
and any trust or other estate in which you or any member of your immediate
family has a substantial beneficial interest or as to which you serve as
trustee or in a similar fiduciary capacity.
F. (i) The terms "affiliate" or "affiliated with" mean a person that directly
or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
(ii) The term "parent" means an affiliate controlling that person directly
or indirectly through one or more intermediaries.
-2-
135
I. STATEMENT OF PERSONAL INFORMATION
------------------------------------
1. Identification
--------------
* (a) State your name, address (residence and business)
and social security number.
Hamilton Reid Sherard Captec Financial Group, Inc.
870 Arlington Blvd. 24 Frank Lloyd Wright Dr.
Ann Arbor, MI 48104-2730 Lobby L, 4th Floor
Ann Arbor, MI 48106
###-##-####
(b) State your date of birth.
3/26/48
(c) Have you been elected as a director and/or executive
officer pursuant to any arrangement or understanding between you and any other
person?
[X] No [ ] Yes
If yes, please name the person and describe the arrangement or understanding.
Describe any arrangement which may result in a change in your status as an
executive officer or director.
136
2. Business Experience
-------------------
State your principal occupation or employment, the name of the
company or other organization, if any, in which your occupation or employment is
carried on, and the principal business of that corporation or other
organization. In addition, please list all positions and offices held by you
with the Company, and all of your principal occupations and employments with any
other corporation or organization during the past FIFTEEN years beginning with
all of your present positions and offices. Include the name and principal
business of any other corporation or organization in which your prior
occupations and employment were carried on. If you are a director or appointee
to the Board of Directors of the Company, please specify the term of your
position.
Dates of Employment
or Terms of Office Name and Address Principal Nature Position
Mo./Yr. to Mo./Yr. of Business of Business Held
- ------------------ ----------------------- ---------------- --------------------
Captec Financial Group, Senior Vice President,
7/94 to Present Inc. Finance Sales
- ------------------ ----------------------- ---------------- --------------------
1/86 to 6/94 FFCA (1) Finance Vice President,
Acquisitions
- ------------------ ----------------------- ---------------- --------------------
6/82 to 12/85 National Bank of Georgia(2)National Bank Vice President,
Regional Manager
- ------------------ ----------------------- ---------------- --------------------
South Carolina Vice President,
1974 to 5/82 National Bank (3) National Bank Business Development
- ------------------ ----------------------- ---------------- --------------------
(1) 17207 N. Perimeter Dr., Scottsdale, AZ 85254
(2) Atlanta, GA
(3) Greenville, SC
-2-
137
3. Other Directorships
-------------------
(a) Are you a director of any company?
[ ] No [X] Yes
If yes, please describe.
Director - Captec Financial Group, Inc.
4. Legal Proceedings
-----------------
(a) Are you or have you been in [or is any associate (see Note E
attached herto) of yours or has any associate of yours been] at any time in the
last FIFTEEN years a defendant in a legal proceeding?
[X] No [ ] Yes
If yes, please list the name of the court or agency in which the proceeding is
pending or was adjudicated, the date instituted, the principal parties, a
description of the factual basis alleged to underlie the proceeding, the relief
sought and the disposition, if any.
(b) During the past FIFTEEN years, have you been convicted in any
criminal proceeding or been the named subject of a pending criminal proceeding?
[X] No [ ] Yes
If yes, state the court in which you were tried, the offense for which you were
convicted, and the date of conviction or, as the case may be, state the court,
cause of action, status of the case and the date that the complaint was filed.
(c) During the past FIFTEEN years, has a petition under United States
federal bankruptcy laws or any state insolvency law been filed by or against you
or any business or property of yours, any partnership of which you were a
general partner at or within two years before the time of the appointment or
filing, or any corporation or business association of which you were an
executive officer at or within two years before the time of the appointment or
filing?
[X] No [ ] Yes
If yes, state the nature of the petition or appointment, the date it was issued,
the name and address of the person or entity against whom the petition was filed
and the position you held and your length of service with the entity.
Language indicated as being shown by strikeout in the typset document is
enclosed in bracket "[" and "]" in the electronic format.
-3-
138
(d) During the past FIFTEEN years, have you been the subject of any
order, judgment or decree, not subsequently reversed, suspended or vacated, of
any court of competent jurisdiction or any federal, state or local authority,
permanently or temporarily enjoining you from, or otherwise limiting your
participation in any type of business activity or practice
No
If yes, state the court, federal, state or local authority, the nature of the
order, judgment or decree, the date thereof and, if appropriate, the activities
covered thereby and the name(s) of the person(s) engaged in the activity.
(f) During the past FIFTEEN years, have you been found by a court of
competent jurisdiction in a civil action or by the SEC to have violated any
federal or state securities law, where the judgment in the civil action or
finding by the SEC has not been subsequently reversed, suspended or vacated?
[X] No [ ] Yes
If yes, state the civil action or finding by the SEC, the date thereof and the
judgment rendered.
-4-
139
THE FOREGOING RESPONSES ARE TRUE AND ACCURATE TO THE BEST OF MY
INFORMATION AND BELIEF, AND I WILL NOTIFY THE FIRST BOSTON CORPORATION AND ITS
COUNSEL PROMPTLY OF ANY CHANGES IN THE FOREGOING RESPONSES.
Hamilton Reid Sherard
--------------------------------------------
(Print Name)
--------------------------------------------
(Signature)
Address: Captec Financial Group, Inc.
--------------------------------------------
24 Frank Lloyd Wright Dr., Lobby L, 4th Floor
--------------------------------------------
Ann Arbor, MI 48106
--------------------------------------------
Dated: 2/20 , 1996
------------
-5-
140
Exhibit A
---------
NOTES TO QUESTIONNAIRE
A. If, while responding to the questionnaire, you feel that additional
information may be required to clarify an answer, please include all
facts you may consider relevant. If insufficient space is provided, you
may attach additional pages, as necessary.
B. "Beneficial Ownership" is interpreted in its broadest sense. You should
consider yourself to be the beneficial owner of securities held
beneficially by your spouse or minor children or any other relative who
shares the same home as you or securities held in the name of another
person if by reason of any contract, understanding, relationship,
agreement or other arrangement you obtain therefrom benefits
substantially equivalent to those of ownership.
You should consider yourself to "beneficially own" a security if you,
directly or indirectly, have or share voting power (i.e., the power to
vote or to direct the voting) or investment power (i.e., the power to
dispose or to direct disposition) of the security, whether through any
contract, arrangement, understanding, relationship, or otherwise and if
you have the right to acquire beneficial ownership at any time within 60
days through the exercise of any option or right, or pursuant to the
power to revoke, or on termination of, a trust, discretionary account or
similar arrangement.
Please note that for this purpose, the same security may be "beneficially
owned" by more than one person. For example, several co-trustees may
share the power to vote or dispose of shares. In any applicable question,
please furnish sufficient details to cross-reference any over-lapping
beneficial ownership by you and another director or officer.
Also, where applicable, if you do not have sole voting and investment
power over all shares beneficially owned by you, indicate the shares over
which you have shared voting power and/or shared investment power.
C. Include any beneficial interest in securities through partnerships, joint
accounts, trusts, or controlled corporations and any securities held in
the name of any person if the power to re-vest title to the securities in
yourself exists now or in the future.
Include all securities entirely owned, including shares held by brokers
or banks in custodian accounts or by other nominees.
D. For purposes of this questionnaire, your "immediate family" shall include
your spouse, parents, siblings, mothers and fathers-in-law, sons and
daughters-in-law and brothers and sisters-in-law.
E. The term "associates" means (i) any member of your immediate family, (ii)
any corporation or organization (other than the Company) of which you or
any member of your immediate family is an executive officer or partner or
is, directly or indirectly, the beneficial owner of l0% or more of any
class of equity securities
-1-
141
and any trust or other estate in which you or any member of your
immediate family has a substantial beneficial interest or as to which you
serve as trustee or in a similar fiduciary capacity.
F. (i) The terms "affiliate" or "affiliated with" mean a person that
directly or indirectly, through one or more intermediaries, controls or
is controlled by, or is under common control with, the person specified.
(ii) The term "parent" means an affiliate controlling that person
directly or indirectly through one or more intermediaries.
-2-
142
I. STATEMENT OF PERSONAL INFORMATION
---------------------------------
1. Identification
--------------
* (a) State your name, address (residence and business) and social
security number.
Gary A. Bruder Captec Financial Group, Inc.
3945 Loch Alpine Dr. East 24 Frank Lloyd Wright Dr.
Ann Arbor, MI 48103 Lobby L, 4th Floor
Ann Arbor, MI 48106
###-##-####
(b) State your date of birth.
3/3/54
(c) Have you been elected as a director and/or executive officer
pursuant to any arrangement or understanding between you and any other person?
[X] No [ ] Yes
If yes, please name the person and describe the arrangement or understanding.
Describe any arrangement which may result in a change in your status as an
executive officer or director.
143
2. Business Experience
-------------------
State your principal occupation or employment, the name of the company
or other organization, if any, in which your occupation or employment is carried
on, and the principal business of that corporation or other organization. In
addition, please list all positions and offices held by you with the Company,
and all of your principal occupations and employments with any other corporation
or organization during the past FIFTEEN years beginning with all of your present
positions and offices. Include the name and principal business of any other
corporation or organization in which your prior occupations and employment were
carried on. If you are a director or appointee to the Board of Directors of the
Company, please specify the term of your position.
Dates of Employment
or Terms of Office Name and Address Principal Nature Position
Mo./Yr. to Mo./Yr. of Business of Business Held
- ------------------- --------------------- ------------------ ---------------
Captec Financial Group, Inc. Senior Vice
5/95 to Present (See above) Financial Services President
- ------------------- --------------------- ------------------ ---------------
Miller, Canfield, Senior
6/80 to 4/95 Paddock, and Stone * Law Firm Principal
- ------------------- --------------------- ------------------ ---------------
- ------------------- --------------------- ------------------ ---------------
- ------------------- --------------------- ------------------ ---------------
* 101 N. Main St., 7th Floor, Ann Arbor, MI 48104
-2-
144
3. Other Directorships
-------------------
(a) Are you a director of any company?
[ ] No [X] Yes
If yes, please describe.
Captec Financial Group, Inc.
Food Gatherers (Non-Profit Organization)
4. Legal Proceedings
-------------------
(a) Are you or have you been in [or is any associate (see Note E
attached hereto) of yours or has any associate of yours been] at any time in the
last FIFTEEN years a defendant in a legal proceeding?
[X] No [ ] Yes
If yes, please list the name of the court or agency in which the proceeding is
pending or was adjudicated, the date instituted, the principal parties, a
description of the factual basis alleged to underlie the proceeding, the relief
sought and the disposition, if any.
(b) During the past FIFTEEN years, have you been convicted in any
criminal proceeding or been the named subject of a pending criminal proceeding?
[X] No [ ] Yes
If yes, state the court in which you were tried, the offense for which
you were convicted, and the date of conviction or, as the case may be, state the
court, cause of action, status of the case and the date that the complaint was
filed.
(c) During the past FIFTEEN years, has a petition under United States
federal bankruptcy laws or any state insolvency law been filed by or against you
or any business or property of yours, any partnership of which you were a
general partner at or within two years before the time of the appointment or
filing, or any corporation or business association of which you were an
executive officer at or within two years before the time of the appointment or
filing?
[X] No [ ] Yes
If yes, state the nature of the petition or appointment, the date it was issued,
the name and address of the person or entity against whom the petition was filed
and the position you held and your length of service with the entity.
Language indicated as being shown by strikeout in the typset document is
enclosed in brackets "[" and "]" in the electronic format.
-3-
145
(d) During the past FIFTEEN years, have you been the subject of any
order, judgment or decree, not subsequently reversed, suspended or vacated, of
any court of competent jurisdiction or any federal, state or local authority,
permanently or temporarily enjoining you from, or otherwise limiting your
participation in any type of business activity or practice
No
If yes, state the court, federal, state or local authority, the nature of the
order, judgment or decree, the date thereof and, if appropriate, the activities
covered thereby and the name(s) of the person(s) engaged in the activity.
(f) During the past FIFTEEN years, have you been found by a court of
competent jurisdiction in a civil action or by the SEC to have violated any
federal or state securities law, where the judgment in the civil action or
finding by the SEC has not been subsequently reversed, suspended or vacated?
[X] No [ ] Yes
If yes, state the civil action or finding by the SEC, the date thereof and the
judgment rendered.
-4-
146
THE FOREGOING RESPONSES ARE TRUE AND ACCURATE TO THE BEST OF MY
INFORMATION AND BELIEF, AND I WILL NOTIFY THE FIRST BOSTON CORPORATION AND ITS
COUNSEL PROMPTLY OF ANY CHANGES IN THE FOREGOING RESPONSES.
Gary A. Bruder
---------------------------------------------
(Print Name)
/s/ Gary A. Bruder
---------------------------------------------
(Signature)
Address: 3945 Loch Alpine Drive East
---------------------------------------------
Ann Arbor, MI 48103
---------------------------------------------
---------------------------------------------
Dated: 2/20 , 1996
-------------------
-5-
147
Exhibit A
NOTES TO QUESTIONNAIRE
A. If, while responding to the questionnaire, you feel that additional
information may be required to clarify an answer, please include all
facts you may consider relevant. If insufficient space is provided,
you may attach additional pages, as necessary.
B. "Beneficial Ownership" is interpreted in its broadest sense. You
should consider yourself to be the beneficial owner of securities held
beneficially by your spouse or minor children or any other relative
who shares the same home as you or securities held in the name of
another person if by reason of any contract, understanding,
relationship, agreement or other arrangement you obtain therefrom
benefits substantially equivalent to those of ownership.
You should consider yourself to "beneficially own" a security if you,
directly or indirectly, have or share voting power (i.e., the power to
vote or to direct the voting) or investment power (i.e., the power to
dispose or to direct disposition) of the security, whether through any
contract, arrangement, understanding, relationship, or otherwise and
if you have the right to acquire beneficial ownership at any time
within 60 days through the exercise of any option or right, or
pursuant to the power to revoke, or on termination of, a trust,
discretionary account or similar arrangement.
Please note that for this purpose, the same security may be
"beneficially owned" by more than one person. For example, several
co-trustees may share the power to vote or dispose of shares. In any
applicable question, please furnish sufficient details to
cross-reference any over-lapping beneficial ownership by you and
another director or officer.
Also, where applicable, if you do not have sole voting and investment
power over all shares beneficially owned by you, indicate the shares
over which you have shared voting power and/or shared investment
power.
C. Include any beneficial interest in securities through partnerships,
joint accounts, trusts, or controlled corporations and any securities
held in the name of any person if the power to re-vest title to the
securities in yourself exists now or in the future.
Include all securities entirely owned, including shares held by
brokers or banks in custodian accounts or by other nominees.
D. For purposes of this questionnaire, your "immediate family" shall
include your spouse, parents, siblings, mothers and fathers-in-law,
sons and daughters-in-law and brothers and sisters-in-law.
E. The term "associates" means (i) any member of your immediate family,
(ii) any corporation or organization (other than the Company) of which
you or any member of your immediate family is an executive officer or
partner or is, directly or indirectly, the beneficial owner of l0% or
more of any class of equity securities
-1-
148
and any trust or other estate in which you or any member of your
immediate family has a substantial beneficial interest or as to which
you serve as trustee or in a similar fiduciary capacity.
F. (i) The terms "affiliate" or "affiliated with" mean a person that
directly or indirectly, through one or more intermediaries, controls
or is controlled by, or is under common control with, the person
specified.
(ii) The term "parent" means an affiliate controlling that person
directly or indirectly through one or more intermediaries.
-2-
149
EXPEDITED SERVICE REQUESTED Form UCC-11
FOR STATE OFFICE INFORMATION
EXHIBIT G
---------
SUBMIT THIS FORM IN DUPLICATE AND MAIL TO: STATE OF MICHIGAN
- ------------------------------------------
Uniform Commercial Code
Michigan Department of State State
Lansing, Michigan 48918 INFORMATION OR COPY REQUEST Billing
Account No. NA
-------------------
==========================================================================================================================
DEBTORS REQUESTING PARTY
==========================================================================================================================
Name Soc. Sec. No. - Tax I.D. No. Name
CAPTEC NET LEASE REALTY, INC. #38-3206305 CAPTEC FINANCIAL GROUP, INC.
- --------------------------------------------------------------------------------------------------------------------------
Address Attn.:
24 FRANK LLOYD WRIGHT DR, ANN ARBOR MI 48106 MARGARET RIVERA
- --------------------------------------------------------------------------------------------------------------------------
Name Soc. Sec. No. - Tax I.D. No. Street Address
24 FRANK LLOYD WRIGHT DR LOBBY L 4TH FL
- --------------------------------------------------------------------------------------------------------------------------
Address City State Zip Code
ANN ARBOR MI 48106-0544
==========================================================================================================================
Requesting Party Telephone: (313 ) 994-5505
Area -----------
CHECK ONE BELOW: INFORMATION GIVEN IS EXACTLY AS REQUESTED
----------------
INFORMATION Furnish certificate showing whether there is on file as of the date shown below, any
REQUEST presently effective financing statement and tax lien naming the above debtors and any
[X] assignment thereof. Provide information on each statement filed. The undersigned agrees to
pay the sum of $3.00 for each name requested.
Furnish copies of each page of financing statements, tax liens and assignments. The
COPY undersigned agrees to pay $1.00 for each page furnished ($3.00 for Federal Tax Liens) in
REQUEST [X] addition to the sum of $3.00 for each name requested.
- --------------------------------------------------------------------------------------------------------------------------
CHECK ( ) FURNISH FILING INFORMATION DATED: From to
ONE BOX --------------------------- -------------------------------
ONLY (X ) PROVIDE FULL SEARCH Beginning Date Ending Date
- --------------------------------------------------------------------------------------------------------------------------
Date of Request 2/20/96 Signature of Requesting Party /s/ Margaret Rivera
----------- ------------------------------
==========================================================================================================================
FILE NO. DATE AND HOUR FILED NAME AND ADDRESS OF SECURED PARTIES
==========================================================================================================================
NO DOCUMENTS ON FILE
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
==========================================================================================================================
==========================================================FOR OFFICE USE ONLY ============================================
FEES
For Filing Officer Use Only CERTIFICATE
Special 25.00 The Undersigned Filing Officer Certifies that the above is a record of
-------------------------- all presently effective financing statements, tax liens and assignments
which name the above debtors and which are on file as of: 5 pm 2-8-96 19 .
Form ----------------- ---
--------------------------
Regular 3.00 The attached photo copies are true copies of the requested financing statements,
tax liens and assignments on file.
--------------------------
Total 28.00
-------------------------- 2-21-96 ml [ILLEGIBLE SIGNATURE]
------------------- ---------------------------------------------------------
Amt. Paid 28.00 0212001 Typing Date Signature of Filing Officer
--------------------------
UCC-11
(1) Filing Officer Copy (Filing Officer keep this page and file
Rev. 12-86 numerically or chronologically in Information File)
FORM UCC-11-UNIFORM COMMERCIAL CODE
150
WASHTENAW COUNTY REGISTER OF DEEDS Form UCC-11
FOR STATE OFFICE INFORMATION
SUBMIT THIS FORM IN DUPLICATE AND MAIL TO: STATE OF MICHIGAN
- ------------------------------------------
Uniform Commercial Code
Michigan Department of State State
Lansing, Michigan 48918 INFORMATION OR COPY REQUEST Billing
Account No.
-------------------
==========================================================================================================================
DEBTORS REQUESTING PARTY
==========================================================================================================================
Name Soc. Sec. No. - Tax I.D. No. Name
CAPTEC NET LEASE REALTY, INC. #38-3206305 CAPTEC FINANCIAL GROUP, INC.
- --------------------------------------------------------------------------------------------------------------------------
Address Attn.:
24 FRANK LLOYD WRIGHT DRIVE ANN ARBOR MI 48106 MARGARET RIVERA
- --------------------------------------------------------------------------------------------------------------------------
Name Soc. Sec. No. - Tax I.D. No. Street Address
24 FRANK LLOYD WRIGHT DRIVE LOBBY L 4TH FL
- --------------------------------------------------------------------------------------------------------------------------
Address City State Zip Code
ANN ARBOR MI 48106-0544
==========================================================================================================================
Requesting Party Telephone: (313 ) 994-5505
Area -----------
CHECK ONE BELOW: INFORMATION GIVEN IS EXACTLY AS REQUESTED
---------------- UCC ONLY
INFORMATION Furnish certificate showing whether there is on file as of the date shown below, any
REQUEST presently effective financing statement and naming the above debtors and any
[X] assignment thereof. Provide information on each statement filed. The undersigned agrees to
pay the sum of $3.00 for each name requested.
Furnish copies of each page of financing statements, tax liens and assignments. The
COPY undersigned agrees to pay $1.00 for each page furnished ($3.00 for Federal Tax Liens) in
REQUEST [X] addition to the sum of $3.00 for each name requested.
- --------------------------------------------------------------------------------------------------------------------------
CHECK ( ) FURNISH FILING INFORMATION DATED: From to
ONE BOX --------------------------- -------------------------------
ONLY (X ) PROVIDE FULL SEARCH Beginning Date Ending Date
- --------------------------------------------------------------------------------------------------------------------------
Date of Request 2/20/96 Signature of Requesting Party /s/ Margaret Rivera
----------- ------------------------------
==========================================================================================================================
FILE NO. DATE AND HOUR FILED NAME AND ADDRESS OF SECURED PARTIES
==========================================================================================================================
NONE NONE NONE
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
==========================================================================================================================
========================================================= FOR OFFICE USE ONLY ============================================
FEES
For Filing Officer Use Only CERTIFICATE
Special The Undersigned Filing Officer Certifies that the above is a record of
-------------------------- all presently effective financing statements, tax liens and assignments
which name the above debtors and which are on file as of: February 21, 1996 .
Form ----------------- ---
--------------------------
Regular The attached photo copies are true copies of the requested financing statements,
-------------------------- tax liens and assignments on file.
Total Peggy M. Haines, County Clerk/Register
-------------------------- February 22, 1996 By: /s/ Peggy M. Haines
------------------- ---------------------------------------------------------
Amt. Paid Typing Date Deputy Signature of Filing Officer
--------------------------
UCC-11 (1) Filing Officer Copy (Filing Officer keep this page and file
Rev. 12-86 numerically or chronologically in Information File)
FORM UCC-11-UNIFORM COMMERCIAL CODE
151
EXHIBIT H-1
-----------
152
QUARTERLY COMPLIANCE CERTIFICATE
The undersigned, the Chief Financial Officer of Captec Net Lease Realty,
Inc., a Michigan corporation, ("Captec"), pursuant to Section 4(c)(ii) of the
Credit Agreement ("Agreement"), dated February 26, 1996, by and between Captec,
as borrower, and CS First Boston Mortgage Capital Corp., a Delaware corporation,
its successors and assigns, as lender ("Lender"), hereby certifies to Lender as
follows:
(i) all representations and warranties made by Captec in the Agreement
are true and accurate in all material respects as if made on the date hereof;
and
(ii) attached hereto as Exhibit A are quarterly financial statements of
Captec, which statements fairly present in all material respects Captec's
financial condition and results of operations for the quarterly period as
indicated thereon and which are prepared in accordance with GAAP applied on a
consistent basis.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate the _______ day of ____________ 199__.
CAPTEC NET LEASE REALTY, INC.
By:
----------------------------------
Name:
Title: Chief Financial Officer
153
EXHIBIT H-2
-----------
154
ANNUAL COMPLIANCE CERTIFICATE
The undersigned, the Chief Financial Officer of Captec Net Lease Realty,
Inc., a Michigan corporation, ("Captec"), pursuant to Section 4(c)(ii) of the
Credit Agreement ("Agreement"), dated February 26, 1996, by and between Captec,
as borrower, and CS First Boston Mortgage Capital Corp., a Delaware corporation,
its successors and assigns, as lender ("Lender"), hereby certifies to Lender as
follows:
(i) all representations and warranties made by Captec in the Agreement
are true and accurate in all material respects as if made on the date hereof;
and
(ii) attached hereto as Exhibit A are the audited financial statements
of Captec for the fiscal year indicated thereon, which are prepared in
accordance with GAAP applied on a consistent basis together with the report
thereon by Captec's Independent Accountants.
IN WITNESS WHEREOF, the undersigned has executed this Certificate the __
day of ____________ 199__.
CAPTEC NET LEASE REALTY, INC.
By:
---------------------------
Name:
Title: Chief Financial Officer
155
EXHIBIT I
---------
SERVICING PROVISIONS
1. The Borrower shall take any and all actions, or refrain from taking
any such actions, and do any and all things in connection with the servicing and
administration of the Properties and the Leases which it may deem necessary or
desirable, provided, however, that (i) its servicing of the Leases shall be
carried out as provided in the Operations Policy Manual and the Management
Agreement in accordance with the procedures which the Borrower uses in
connection with Leases which are owned by it and not pledged or collateralized,
and (ii) to the extent more exacting, in accordance with prudent, customary and
usual procedures of financial institutions which service leases similar to the
Leases.
2. The Borrower shall calculate and compile such information as is
required to enable it to provide the information in connection with the reports
in the forms attached hereto, and shall deliver such reports to the lender no
later than the tenth day of each month.
156
CAPTEC NET LEASE REALTY, INC.
SERVICING REPORTS TO BE PROVIDED UNDER THE CREDIT AGREEMENT
Within 20 days of the end of each month, the Company shall deliver to the Lender
the following servicing reports (the "Servicing Reports"), certified to the
Lender by the President or any Vice President of the Company:
1. a Lockbox Compliance Certificate for the preceding month, indicating the
total number of payments of Rents received, the number and percentage of
such payments received directly in the Lockbox Account, and the number and
percentage of such payments not received directly in the Lockbox Account.
2. a Liquid Assets Compliance Certificate for the preceding month, indicating
the total Liquid Assets held by the Company as of the the last day of the
preceding month and certifying that the Company is in compliance with the
Liquid Assets covenant described in Section 4(c)(xxii) of the Agreement.
3. a copy of the Lockbox Account bank statements and bank reconciliations for
the preceding month.
4. a Net Investment Trial Balance for the Leases, as of the last day of the
preceding month, which report shall indicate the gross balance and net
balance due under each Lease and the gross balance and net balance due
under all Leases in aggregate, as of the date of the report.
5. a Summary Past Due Report for the Leases, as of the last day of the
preceding month, which report shall indicate the amount delinquent and the
gross balance due under each and every Lease which is delinquent for more
than five days, as of the date of the report, and shall indicate totals for
the gross balances for all such delinquent Leases, sorted by the following
delinquency categories: 5-30 days delinquent; 31-60 days delinquent; 61-90
days delinquent; and over 90 days delinquent.
6. a Portfolio Activity Report setting forth the details of the occurrence
during the preceding month of any of the following activities: (A) any
amendment to a Lease or the Collateral; (B) any insurance claims made with
respect to any Collateral; (C) any insurance proceeds received with respect
to any Collateral; (D) any proceeds received from the sale of Leases and/or
the related Collateral; (E) any prepayments of a Lease by a Lessee; (F) any
voluntary prepayments made by the Company in accordance with Section 2(a)
of the Agreement; (G) any mandatory prepayments made by the Company in
accordance with Section 2(b) of the Agreement; and (H) any purchase of a
Lease by the Company.
157
EXHIBIT J
---------
158
CERTIFICATE
The undersigned, the Chief Financial Officer of Captec Net Lease Realty,
Inc., a Michigan corporation, ("Captec"), pursuant to Section 5(iv) of the
Credit Agreement ("Credit Agreement"), dated February 26, 1996, by and between
Captec, as borrower, and CS First Boston Mortgage Capital Corp., a Delaware
corporation, its successors and assigns, as lender, hereby certifies to Bankers
Trust Company, in its capacity as Custodian (the "Custodian") with respect to
the Lockbox Account established pursuant to a Lockbox Agreement between Captec
and the Custodian, as required under the Credit Agreement, as follows:
The Borrower hereby requests payment in the amount of $ , which
amount was deposited into the Lockbox Account and which does not constitute a
payment of rent by Lessees in respect of the Leases (each as defined in the
Credit Agreement).
The funds payable to Borrower hereunder shall be wire transferred to
Borrower in accordance with the following instructions:
Michigan National Bank
395 Briarwood Circle
Ann Arbor, Michigan 48108
ABA# 072000805
Captec Net Lease Realty, Inc.
Account# 4825-17708-4
IN WITNESS WHEREOF, the undersigned has executed this Certificate the __
day of ____________ 199__.
CAPTEC NET LEASE REALTY, INC.
By: _______________________
Name:
Title: Chief Financial Officer
159
EXHIBIT K
---------
160
================================================================================
CAPTEC NET LEASE REALTY, INC.
AND
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
------------------------------------------------------
ASSIGNMENT
OF LEASES AND RENTS
------------------------------------------------------
Dated:
Location:
RECORD AND RETURN TO:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Charles J. Hamilton, Jr., Esq.
The premises described within this instrument are also known as Section
____ Block ___ and Lot ___ on the Official Tax Map of __________ County.
================================================================================
161
ASSIGNMENT OF LEASES AND RENTS
------------------------------
THIS ASSIGNMENT made the ______ day of ___________________, 199___,
between CAPTEC NET LEASE REALTY, INC., a Michigan corporation, having an office
and principal place of business located at 24 Frank Lloyd Wright Drive, Lobby L,
Fourth Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544 ("Assignor") and CS
FIRST BOSTON MORTGAGE CAPITAL CORP., a Delaware corporation having an office and
principal place of business located at 55 East 52nd Street, 6th Floor, New York,
NY 10055 ("Assignee") .
Preliminary Statement
---------------------
Assignor for good and valuable consideration, the receipt and
sufficiency whereof is hereby acknowledged, hereby absolutely and
unconditionally grants, transfers and assigns to Assignee the entire landlord's
right, title and interest in and to all existing leases covering or affecting
all or any part of that certain lot or piece or parcel of land and building(s),
more particularly described in EXHIBIT A annexed hereto and made a part hereof
(the said premises, together with the buildings and improvements now or
hereafter erected thereon, being hereinafter collectively referred to as the
"Real Estate"), but not any of the obligations or liabilities of Borrower
thereunder.
TOGETHER WITH all leases, tenancies and occupancy agreements hereafter
made (including modifications, extensions and guaranties of existing leases,
tenancies and occupancy agreements) covering the Real Estate or any portion
thereof; this assignment of present and future leases, tenancies and occupancy
agreements being effective without any further or supplemental assignment of any
nature whatsoever (all present and future leases, tenancies and occupancy
agreements are hereinafter collectively referred to as the "Leases") .
TOGETHER WITH all rents, income and profits arising from the Leases and
renewals thereof and together with all rents, income and profits for the use and
occupation of the Real Estate ("Rents") .
THIS Assignment is made for the purposes of securing:
A. The payment of the principal sum, interest and other indebtedness
evidenced by a certain note dated as of February 26, 1996 and secured by a
certain mortgage encumbering the Real Estate dated as of the date hereof,
including all modifications, extensions, increases, renewals and guaranties
thereof (said mortgage and note are hereinafter collectively referred to as the
"Mortgage") .
-1-
162
B. Payment of all other sums with interest thereon becoming due and
payable to Assignee under the provisions of this Assignment or of the Mortgage
or of any other instrument related thereto (All sums payable under Paragraph A
and Paragraph B, collectively, the "Indebtedness") .
C. The performance and discharge of each and every obligation, covenant
and agreement of Assignor contained herein or in the Mortgage and all documents
relating thereto.
1. ASSIGNOR'S WARRANTIES AND REPRESENTATIONS. Assignor warrants and
represents to Assignee, in order to induce Assignee to make the loan secured by
the Mortgage and to accept this Assignment and knowing that Assignee will rely
hereon, that: (a) Assignor is the sole owner of the entire landlord's interest
in the Leases, (b) the Leases are valid and enforceable and in full force and
effect and have not been altered, modified or amended in any manner whatsoever
except as herein set forth, (c) no rent reserved in the Leases has been
assigned, pledged or in any manner transferred or hypothecated, except pursuant
to this Assignment, and (d) no rent for any period more than thirty (30) days
subsequent to the date of this Assignment has been collected in advance of the
time when the same became due under the terms of the Leases.
2. ASSIGNOR'S COVENANTS. Assignor covenants with Assignee to observe and
perform all the obligations imposed upon the landlord under the Leases and not
to do or permit to be done anything to impair the security thereof; to promptly
send to Assignee copies of all notices of default which Assignor shall send or
receive under the Leases; to enforce, short of termination of the Leases, the
performance or observance of the provisions thereof by the tenants thereunder;
not to collect any of the Rents; not to subordinate the Leases to any mortgage
(other than the Mortgage) or other encumbrance or permit, consent, or agree to
such subordination without the prior written consent of Assignee; not to alter,
modify or change the material terms of the Leases nor give any consent to
exercise any option or renewal not already permitted by the Lease, nor cancel or
terminate the Leases or accept a surrender thereof, nor convey or transfer, nor
suffer or permit a conveyance or transfer of, the Real Estate, or of any
interest therein, so as to effect directly or indirectly, approximately or
remotely, a merger of the estates and rights of, or a termination or diminution
of the obligations of the tenant thereunder; not to alter, modify or change the
terms of any guaranty of the Leases nor cancel or terminate such guaranty,
without the prior written consent of Assignee; except as otherwise permitted
under the terms of the Leases, not to consent to any assignment of, or
subletting under, the Leases without the prior written consent of Assignee;
except for the existing Leases, not make, or suffer to be made, any Lease of all
or any portion of the Real Estate, nor otherwise let all or any portion of the
Real Estate, without the prior written consent of
-2-
163
Assignee; at Assignee's request, to execute any documentation confirming the
assignment and transfer to Assignee of any and all subsequent Leases upon all or
any part of the Real Estate, and to execute and deliver at the request of
Assignee all other further assurances, confirmations and assignments in the Real
Estate as Assignee shall, from time to time, reasonably require in connection
herewith.
3. PRESENT POSSESSORY INTEREST. Borrower acknowledges and confirms that
Lender has a present, possessory and "choate" interest in and to the Rents.
4. EVENTS OF DEFAULT. Upon, or at any time after, the occurrence of any
Event of Default under the Mortgage, or of any default with respect to any
obligation contained herein and/or in the Leases on the part of Assignor to be
performed or to cause to be performed beyond any applicable notice and grace
periods, Assignee, without in any way waiving such default or Event of Default
or releasing Assignor from any obligation hereunder, at its option, without
notice and without regard to the adequacy of the indebtedness secured hereby and
by the Mortgage, and irrespective of whether Assignee shall have commenced a
foreclosure of the Mortgage, may, either in person or by agent, with or without
bringing any action or proceeding, or by a receiver appointed by a court, take
possession of the Real Estate and have, hold, manage, lease and operate the same
on such terms and for such period of time as Assignee may in its sole discretion
deem proper and either with or without taking possession of the Real Estate in
its own name: (a) make any payment and/or perform any act which Assignor has
failed to make or perform, in such manner and to such extent as Assignee may
deem necessary to protect the security hereof, or otherwise, including without
limitation, the right to appear in and defend any action or proceeding
purporting to affect the security hereof, or the rights or powers of Assignee;
(b) let the Real Estate or any portion thereof in such manner and for such Rents
as Assignee shall determine in its sole and absolute discretion, exercise all
rights and remedies under the Leases and otherwise deal with tenants under the
Leases as Lender shall in its sole and absolute discretion determine; and/or (c)
demand, sue for, or otherwise collect and receive from all persons (including
Assignor, as provided in the Mortgage) all Rents, including those past due and
unpaid, with full power to make from time to time all alterations, renovations,
repairs or replacements thereto or thereof as may seem proper to Assignee and to
apply the Rents to the payment of: (i) all reasonable expenses of managing the
Real Estate, including, without limitation, the salaries, fees and wages of a
managing agent and such other employees as Assignee may deem necessary or
desirable, (ii) all taxes, charges, claims, assessments, water rents, sewer
rents, and any other liens, and premiums for all insurance which Assignee may
deem necessary or desirable, and the cost of all alterations, renovations,
repairs, or replacements, and all expenses incidental to taking and
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retaining possession of the Real Estate, and (iii) all or any portion of the
Indebtedness, together with (iv) all reasonable costs and attorneys' fees, in
such order of priority as to any of the items mentioned in this clause 4(c), as
Assignee, in its sole discretion, may determine, any statute, law, custom or use
to the contrary notwithstanding. The exercise by Assignee of any rights or
powers under this Paragraph 4 shall not be considered a waiver by Assignee of
any default by Assignor under the Mortgage or the Leases or this Assignment, any
statute, law, custom or use to the contrary notwithstanding .
5. NO LIABILITY TO ASSIGNEE. Assignee shall not be liable for any loss
sustained by Assignor resulting from Assignee's failure to let the Real Estate
after default or from any other act or omission of Assignee in managing the Real
Estate after default, unless such loss is caused by the gross negligence,
willful misconduct or bad faith of Assignee. Nor shall Assignee be obligated to
perform or discharge, nor does Assignee hereby undertake to perform or
discharge, any obligation, duty or liability under the Leases or under or by
reason of this Assignment, and Assignor shall, and does hereby agree, to
indemnify Assignee for, and to hold Assignee harmless from, any and all
liability, loss or damage which may or might be incurred under the Leases or
under or by reason of this Assignment and from any and all claims and demands
whatsoever which may be asserted against Assignee by reason of any alleged
obligations and undertakings on its part to perform or discharge any of the
terms, covenants or agreements contained in the Leases, unless resulting from
the gross negligence, willful misconduct or bad faith of Assignee. Should
Assignee incur any such liability under the Leases or under or by reason of this
Assignment or in defense of any such claims or demands, the amount thereof,
including costs, expenses and attorneys ' fees shall be secured hereby and
Assignor shall reimburse Assignee therefor immediately upon demand and, upon the
failure of Assignor so to do, Assignee may, at its option, declare all sums
secured hereby and by the Mortgage immediately due and payable. It is further
understood that this Assignment shall not operate to place responsibility for
the control, care, management or repair of the Real Estate upon Assignee, nor
for the carrying out of any of the terms and conditions of the Leases; nor shall
it operate to make Assignee responsible or liable for any waste committed on the
Real Estate by the tenants or any other parties, nor for any dangerous or
defective condition of the Real Estate, nor for any negligence in the
management, upkeep, repair or control of the Real Estate resulting in loss,
injury or death to any tenant, licensee, employee or stranger, unless resulting
from the gross negligence, willful misconduct or bad faith of Assignee. Assignee
shall assume the obligations of Assignor under a Lease to a tenant thereunder
from and after the date that Assignee succeeds to ownership of the Real Estate,
provided that such Lease remains in full force and effect and Assignee is not
otherwise entitled to terminate such Lease.
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6. TERMINATION. Upon payment in full by Assignor of the Indebtedness or
upon satisfaction of all terms and conditions of Section 2 of the Credit
Agreement in connection with the portion of the Indebtedness allocated to the
Real Estate, this Assignment shall become and be void and of no effect, but the
affidavit, certificate, letter or statement of any officer, agent or attorney of
Assignee showing any part of the Indebtedness to remain unpaid shall be and
constitute presumptive evidence of the validity, effectiveness and continuing
force of this Assignment and any person may, and is hereby authorized to, rely
thereon. Assignor hereby authorizes and directs the tenants named in the Leases
or any other tenants or future tenants or occupants of all or any portion of the
Real Estate, upon receipt from Assignee of written notice to the effect that
Assignee is then the holder of the Mortgage and that a default exists thereunder
or under this Assignment, which default remains uncured beyond any applicable
notice and grace periods, to pay over to Assignee all rents, income and profits
arising or accruing under the Leases or from the Real Estate and to continue so
to do until otherwise notified by Assignee.
7. RELEASE OF OTHER SECURITY. Assignee may take or release other
security for the payment of the Indebtedness, may release any party primarily or
secondarily liable therefor and may apply any other security held by it to the
satisfaction of the Indebtedness without prejudice to any of its rights under
this Assignment.
8. INDEMNIFICATION. Anything in this Assignment, the Mortgage or any
other Credit Facility Document (as defined in Paragraph 16 below) to the
contrary notwithstanding, Assignor shall, except to the extent such loss is
caused by the gross negligence, willful misconduct or bad faith of Assignee or
its agents or employees, indemnify and hold Assignee harmless and defend
Assignee at Assignor's sole cost and expense against any loss or liability, cost
or expense (including, without limitation, reasonable attorneys' fees and
disbursements of Assignee's counsel, whether in-house staff, retained firms or
otherwise) , and all claims, actions, procedures and suits arising out of or in
connection with (i) any ongoing matters arising out of the transaction
contemplated hereby, the Indebtedness, this Assignment, the Mortgage, any other
Credit Facility Document or the Leases, including, but not limited to, all costs
of reappraisal of the Leases, whether required by law, regulation, Assignee or
any governmental or quasi-governmental authority, (ii) any amendment to, or
restructuring of, the Indebtedness and this Assignment, the Mortgage, any other
Credit Facility Document or the Leases, and (iii) any and all lawful action that
may be taken by Assignee in connection with the enforcement of the provisions of
this Assignment, the Mortgage, any other Credit Facility Document or the Leases,
whether or not suit is filed in connection with the same, or in connection with
Assignor, any guarantor of the Indebtedness or any tenant and/or any partner,
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joint venturer or shareholder thereof becoming a party to a voluntary or
involuntary federal or state bankruptcy, insolvency or similar proceeding. All
reasonable sums expended by Assignee shall be payable on demand and, until
reimbursed by Assignor pursuant hereto, shall be deemed additional principal of
the Indebtedness and secured hereby and shall bear interest at the Default Rate
(as such term is defined in that certain Credit Agreement dated as of February
26, 1996 between Assignor and Assignee), as said term is defined in the
Mortgage. The obligations of Assignor under this paragraph shall,
notwithstanding any exculpatory or other provisions of any nature whatsoever set
forth in this Assignment, the Mortgage or any other Credit Facility Document,
constitute the personal recourse undertakings, obligations and liabilities of
Assignor.
9. NO WAIVER. Nothing herein contained, and no act done or omitted by
Assignee pursuant to the powers and rights granted to it hereunder, shall be
deemed to be a waiver by Assignee of its rights and remedies under the Mortgage,
and this Assignment is made and accepted without prejudice to any of the rights
and remedies possessed by Assignee under the terms thereof. The rights of
Assignee to collect the Indebtedness, and to enforce any other security therefor
held by it, may be exercised by Assignee either prior to, simultaneously with,
or subsequent to any action taken by it hereunder. Assignor hereby absolutely,
unconditionally and irrevocably waives any and all right to assert any setoff,
counterclaim or crossclaim of any nature whatsoever with respect to the
obligations of Assignor under this Assignment, the Mortgage, any other Credit
Facility Document or otherwise with respect to the loan secured hereby in any
action or proceeding brought by Assignee to collect same, or any portion
thereof, or to enforce, foreclose and realize upon the lien and security
interest created by this Assignment or any other Credit Facility Document
securing repayment of same, in whole or in part (provided, however, that the
foregoing shall not be deemed a waiver of Assignor's right to assert any
compulsory counterclaim maintained in a court of the United States, or of the
State of New York if such counterclaim is compelled under local law or rule of
procedure, nor shall the foregoing be deemed a waiver of Assignor's right to
assert any claim which would constitute a defense, setoff, counterclaim or
crossclaim of any nature whatsoever against Assignee in any separate action or
proceeding)
10. ASSIGNEE NOT MORTGAGEE IN POSSESSION. Nothing herein contained shall
be construed as constituting Assignee a "mortgagee in possession" in the absence
of the taking of actual possession of the Real Estate by Assignee pursuant to
the provisions herein contained. In the exercise of the powers herein granted to
Assignee, no liability shall be asserted or enforced against Assignee, all such
liability being expressly waived and released by Assignor.
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11. INCONSISTENT TERMS. In case of any inconsistency or conflict between
the terms of this Assignment and the terms of the Mortgage, the terms of this
Assignment shall in all cases govern and control.
12. FURTHER ACTS. Assignor will, at the cost of Assignor, and without
expense to Assignee, do, execute, acknowledge and deliver all and every such
further acts, conveyances, assignments, notices of assignments, transfers and
assurances as Assignee shall, from time to time, reasonably require for the
better assuring, conveying, assigning, transferring and confirming unto Assignee
the property and rights hereby assigned or intended now or hereafter so to be,
or which Assignor may be or may hereafter become bound to convey or assign to
Assignee, or for carrying out the intention or facilitating the performance of
the terms of this Assignment or for filing, registering or recording this
Assignment and, on demand, will execute and deliver and hereby authorizes
Assignee to execute in the name of Assignor to the extent Assignee may lawfully
do so, one or more financing statements, chattel mortgages or comparable
security instruments, to evidence more effectively the lien hereof upon the
Leases.
***[13. NEW YORK LAW. This Assignment is made pursuant to the provisions
of Section 291-f of the Real Property Law of the State of New York.]***
14. NOTICES. All notices given pursuant hereto shall be given (and
deemed received) in the manner set forth in the Mortgage.
15. SUCCESSORS AND ASSIGNS. This Assignment, together with the
covenants, representations and warranties herein contained, shall inure to the
benefit of Assignee and any subsequent holder of the Mortgage and shall be
binding upon Assignor, and its successors and assigns and any subsequent owner
of the Real Estate.
16. AMENDMENTS. This Assignment may only be modified, amended or changed
by an agreement in writing signed by Assignor and Assignee, and may only be
released, discharged or satisfied of record by an agreement in writing signed by
Assignee. No waiver of any term, covenant or provision of this Assignment shall
be effective unless given in writing by Assignee and if so given by Assignee
shall only be effective in the specific instance in which given. Whenever
possible, each provision of this Assignment shall be interpreted in such a
manner as to be effective and valid under applicable law, but if any provision
of this Assignment shall be unenforceable or prohibited by, or invalid under,
applicable law, such provision shall be ineffective to the extent of such
unenforceability, prohibition or invalidity, without invalidating the remaining
provisions of this Assignment. Assignor acknowledges that the Mortgage, this
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Assignment and the other documents and instruments executed and delivered in
connection therewith or otherwise in connection with the loan secured hereby
(the "Credit Facility Documents") set forth the entire agreement and
understanding of Assignor and Assignee with respect to the loan secured hereby
and that no oral or other agreement, understanding, representation or warranty
exists with respect to the loan secured hereby other than those set forth in the
Mortgage, this Assignment and the other Credit Facility Documents.
17. WAIVER OF JURY TRIAL. ASSIGNOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, AND ASSIGNEE BY ITS ACCEPTANCE OF THE MORTGAGE AND THIS
ASSIGNMENT IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY AND ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION WITH, OUT OF
OR OTHERWISE RELATING TO THE MORTGAGE, THIS ASSIGNMENT AND ANY OTHER CREDIT
FACILITY DOCUMENT HERETOFORE, NOW OR HEREAFTER EXECUTED AND/OR DELIVERED IN
CONNECTION THEREWITH, THE LOAN SECURED HEREBY OR IN ANY WAY RELATED TO THIS
TRANSACTION OR OTHERWISE WITH RESPECT TO THE REAL ESTATE OR THE LEASES.
IN WITNESS WHEREOF, this Assignment has been executed by Assignor the
day and year first above written.
CAPTEC NET LEASE REALTY, INC.
By:
---------------------------------------
Name:
Title:
In the presence of:
- ----------------------------
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Corporate Acknowledgement
-------------------------
STATE OF MICHIGAN )
:ss.:
COUNTY OF WASHTENAW )
On the ______ day of [Month], 199____, before me personally came [Name],
to me known, who, being by me duly sworn, did depose and say that [HE/SHE]
resides at _________________________________________________; that [HE/SHE] is
[Title] of CAPTEC NET LEASE REALTY, INC., the corporation described in and which
executed the above instrument; and that [HE/SHE] signed [HIS/HER] name thereto
by authority of the Board of Directors of said corporation.
------------------------------
Notary Public
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EXHIBIT A
---------
(Description of Real Estate)
The aforesaid premises being commonly known as [Address of Real Estate] ; and
being also known as Section ____, Block ____, Lot ___ on the Official Tax Map of
[County] County.
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EXHIBIT L
---------
172
================================================================================
CAPTEC NET LEASE REALTY, INC.
IN FAVOR OF
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
--------------------------------------
HAZARDOUS MATERIAL
INDEMNIFICATION AGREEMENT
--------------------------------------
Dated:
Location:
================================================================================
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HAZARDOUS MATERIAL
INDEMNIFICATION AGREEMENT
-------------------------
New York, New York
_____________________________, 199_____
Preliminary Statement
---------------------
WHEREAS, CS FIRST BOSTON MORTGAGE CAPITAL CORP., a Delaware corporation
("Lender") has agreed to make a loan to CAPTEC NET LEASE REALTY, INC., a
Michigan corporation ("Borrower") in the principal sum of up to $100,000,000
(the "Loan"), which Loan will be (a) evidenced by and payable in accordance with
the provisions of the Note, (b) secured by the Mortgage, and (c) advanced
pursuant to the provisions of the Credit Agreement, all as defined in Exhibit A;
and
WHEREAS, Lender is willing to make the Loan only if the undersigned
executes and delivers this Hazardous Material Indemnification Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, and in order to induce Lender to make the Loan, the undersigned
hereby acknowledges, agrees and confirms that all of the above recitals are
true, correct and complete and hereby covenants and agrees with Lender as
follows:
1. DEFINITIONS. For the purposes of this Hazardous Material
Indemnification Agreement the following terms shall have the following meanings:
(a) the term "Hazardous Material" shall mean any material or substance
that, whether by its nature or use, is now or hereafter defined as hazardous
waste, hazardous substance, pollutant or contaminant under any Environmental
Requirement (as hereinafter defined), or which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous and which is now or hereafter regulated under any Environmental
Requirement, or which is or contains petroleum, gasoline, diesel fuel or another
petroleum hydrocarbon product;
174
(b) the term "Environmental Requirements" shall collectively mean all
present and future laws, statutes, ordinances, rules, regulations, orders,
codes, licenses, permits, decrees, judgments, directives or the equivalent of or
by any Governmental Authority and relating to or addressing the protection of
the environment or human health;
(c) the term "Governmental Authority" shall mean the Federal government,
or any state or other political subdivision thereof, or any agency, court or
body of the Federal government, any state or other political subdivision
thereof, exercising executive, legislative, judicial, regulatory or
administrative functions;
(d) the term "Mortgaged Property" shall have the meaning given to such
term in the Credit Agreement; and
(e) the term "Indebtedness" shall have the meaning given to such term in
the Credit Agreement.
2. REPRESENTATIONS AND WARRANTIES. The undersigned hereby represents
and warrants to Lender that, except as otherwise disclosed in any environmental
site assessment obtained by Borrower with respect to any Mortgaged Property and
which environmental site assessment has been delivered to and accepted and
approved by Lender, to the best of the undersigned's knowledge after diligent
inquiry:
(a) no Hazardous Material is currently located at, on, in, under or
about the Mortgaged Property;
(c) no releasing, emitting, discharging, leaching, dumping or disposing
of any Hazardous Material from the Mortgaged Property onto or into any other
property or from any other property onto or into the Mortgaged Property has
occurred or is occurring in violation of any Environmental Requirement;
(d) no notice of violation, lien, complaint, suit, order or other notice
with respect to the Mortgaged Property is presently outstanding under any
Environmental Requirement; and
(e) the Mortgaged Property and the operation thereof are in full
compliance with all Environmental Requirements.
3. INDEMNIFICATION. The undersigned will defend, indemnify, and hold
harmless Lender, its employees, agents, officers, and directors, from and
against any and all claims, demands, penalties, causes of action, fines,
liabilities, settlements, damages, costs, or expenses of whatever kind or
nature, known or unknown, foreseen or unforeseen, contingent or otherwise
(including, without limitation, counsel and consultant fees and expenses,
investigation and laboratory fees and
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expenses, court costs, and litigation expenses) arising out of, or in any way
related to:
(a) any breach by Borrower of any of the provisions of Section 1(p) of
the Mortgage or paragraph 4(b) (xxvi) of the Credit Agreement;
(b) the presence, disposal, spillage, discharge, emission, leakage,
release, or threatened release of any Hazardous Material which is at, in, on,
under, about, from or affecting the Mortgaged Property, including, without
limitation, any damage or injury resulting from any such Hazardous Material to
or affecting the Mortgaged Property or the soil, water, air, vegetation,
buildings, personal property, persons or animals located on the Mortgaged
Property or on any other property or otherwise;
(c) any personal injury (including wrongful death) or property damage
(real or personal) arising out of or related to any such Hazardous Material;
(d) any lawsuit brought or threatened, settlement reached, or order or
directive of or by any Governmental Authority relating to such Hazardous
Material; or
(e) any violation of any Environmental Requirement.
The indemnification provided herein shall not extend to any gross
negligence or willful misconduct on the part of Lender with respect to the
Mortgaged Property occurring after such time as Lender or its nominee owns the
Mortgaged Property or takes possession thereof directly (and not by a receiver
or other equivalent third party).
4. LEGAL EXPENSES. The undersigned hereby indemnifies and shall hold
harmless and defend Lender at the undersigned's sole cost and expense against
any loss or liability, cost or expense (including, but not limited to,
reasonable attorneys , fees and disbursements of Lender's counsel, whether
in-house staff, retained firms or otherwise), and all claims, actions,
procedures and suits arising out of or in connection with:
(a) any ongoing matters arising out of this Hazardous Material
Indemnification Agreement and any document or instrument now or hereafter
executed and/or delivered in connection herewith (the "Indemnity Documents");
(b) any amendment to, or restructuring of the obligations of the
undersigned hereunder; and
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(c) any and all lawful action that may be taken by Lender in connection
with the enforcement of the provisions of this Hazardous Material
Indemnification Agreement or any of the other Indemnity Documents and the
obligations of the undersigned thereunder, whether or not suit is filed in
connection with the same, or in connection with Borrower, the undersigned and/or
any partner, joint venturer or shareholder thereof becoming a party to a
voluntary or involuntary federal or state bankruptcy, insolvency or similar
proceeding.
All sums expended by Lender shall be payable on demand and, until reimbursed by
the undersigned pursuant hereto, shall bear interest at the Default Rate (as
such term is defined in the Credit Agreement).
5. SURVIVAL OF OBLIGATIONS AND LIABILITIES. The obligations and
liabilities of the undersigned under this Hazardous Material Indemnification
Agreement shall survive and continue in full force and effect and shall not be
terminated, discharged or released, in whole or in part, irrespective of whether
the Indebtedness has been paid in full and irrespective of any foreclosure of
the Mortgage, sale of the Mortgaged Property pursuant to the provisions of the
Mortgage or acceptance by Lender, its nominee or wholly owned subsidiary of a
deed or assignment in lieu of foreclosure or sale and irrespective of any other
fact or circumstance of any nature whatsoever, subject only to any applicable
statute of limitations.
6. FURTHER ACTS. The undersigned hereby expressly agrees that this
Hazardous Material Indemnification Agreement is independent of, and in addition
to, all collateral granted, pledged or assigned under the Credit Facility
Documents (as such term is defined in the Credit Agreement) , and the
undersigned hereby consents that from time to time, before or after any default
by Borrower, with or without further notice to or assent from any of the
undersigned:
(a) any security at any time held by or available to Lender for any
obligation of Borrower, or any security at any time held by or available to
Lender for any obligation of any other person or party primarily, secondarily or
otherwise liable for all or any portion of the Indebtedness, the Liabilities
and/or any other obligations of Borrower or any other person or party, other
than Lender, under any of the Credit Facility Documents ("Other Obligations") ,
including any guarantor of the Indebtedness, the Liabilities and/or of any of
such Other Obligations, may be accelerated, settled, exchanged, surrendered or
released and Lender may fail to set off and may release, in whole or in part,
any balance of any deposit account or credit on its books in favor of Borrower,
or any such other person or party;
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(b) any obligation of Borrower, or of any such other person or party,
may be changed, altered, renewed, extended, continued, accelerated, surrendered,
compromised, settled, waived or released in whole or in part, or any default
with respect thereto waived; and
(c) Lender may extend further credit in any manner whatsoever to
Borrower, and generally deal with Borrower or any of the above-mentioned
security, deposit account, credit on its books or other person or party as
Lender may see fit;
and the undersigned shall remain bound under this Hazardous Material
Indemnification Agreement, without any loss of rights by Lender and without
affecting the liability of the undersigned, notwithstanding any such exchange,
surrender, release, change, alteration, renewal, extension, continuance,
compromise, waiver, inaction, extension of further credit or other dealing. In
addition, all moneys available to Lender for application in payment or reduction
of the Indebtedness, the Liabilities and/or any Other Obligations may be applied
by Lender in such manner and in such amounts and at such time or times and in
such order, priority and proportions as Lender may see fit.
7. WAIVERS. The undersigned hereby waives:
(a) notice of acceptance of this Hazardous Material Indemnification
Agreement;
(b) protest and notice of dishonor or default to the undersigned or to
any other person or party with respect to any obligations hereby guaranteed;
(c) all other notices to which the undersigned might otherwise be
entitled; and
(d) any demand under this Hazardous Material Indemnification Agreement.
8. DEFAULTS. If any of the following events should occur:
(a) the undersigned violates any provision of this Hazardous Material
Indemnification Agreement;
(b) the undersigned commences any case, proceeding or other action under
any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeks to have an
order for relief entered with respect to it, or seeks to be adjudicated a
bankrupt or insolvent, or seeks reorganization, arrangement, adjustment,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or seeks the
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appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of their property;
(c) the undersigned makes a general assignment for the benefit of
creditors;
(d) there is commenced against the undersigned, any case, proceeding or
other action of a nature referred to in subparagraph (c) above or seeking the
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of their property, which case, proceeding or
other action results in the entry of an order for relief or remains undismissed,
undischarged or unbonded for a period of 60 days;
(e) the undersigned takes any action indicating their consent to,
approval of, or acquiescence in, or in furtherance of, any of the acts set forth
in subparagraphs (c) and (e) above;
(f) the undersigned admits in writing its inability to pay its debts as
they mature; or
(g) the undersigned terminates or dissolves or suspends their usual
business activities or conveys, sells, leases, transfers or otherwise disposes
of all or a substantial part of their property, business or assets other than in
the ordinary course of business;
then, and in such event, Lender may declare the Liabilities to be, and the same
shall become, immediately due and payable and/or may exercise any or all of its
remedies as set forth herein or at law or in equity.
9. SUCCESSORS AND ASSIGNS. Each reference herein to Lender shall be
deemed to include its successors and assigns, in whose favor the provisions of
this Hazardous Material Indemnification Agreement shall also inure. Each
reference herein to the undersigned shall be deemed to include the heirs,
executors, administrators, legal representatives, successors and assigns of the
undersigned, all of whom shall be bound by the provisions of this Hazardous
Material Indemnification Agreement, provided, however, that the undersigned
shall in no event nor under any circumstance have the right, without obtaining
the prior written consent of Lender, to assign or transfer the undersigned's
obligations and liabilities under this Hazardous Material Indemnification
Agreement, in whole or in part, to any other person, party or entity.
10. JOINT AND SEVERAL OBLIGATIONS; SURVIVAL OF AGREEMENT. The term
"undersigned" as used herein shall, if this
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Hazardous Material Indemnification Agreement is signed by more than one party,
unless otherwise stated herein, mean the "undersigned and each of them" and each
undertaking herein contained shall be their joint and several undertaking.
Lender may proceed against none, one or more of the undersigned at one time or
from time to time as it sees fit in its sole and absolute discretion. If any
party hereto shall be a partnership, the agreements and obligations on the part
of the undersigned herein contained shall remain in force and application
notwithstanding any changes in the individuals composing the partnership and the
term "undersigned" shall include any altered or successive partnerships but the
predecessor partnerships and their partners shall not thereby be released from
any obligations or liability hereunder. If any party hereto shall be a
corporation, the agreements and obligations on the part of the undersigned
herein contained shall remain in force and application notwithstanding the
merger, consolidation, reorganization or absorption thereof, and the term
"undersigned" shall include such new entity, but the old entity shall not
thereby be released from any obligations or liabilities hereunder. Borrower is
executing this Hazardous Material Indemnification Agreement as a further
assurance that its obligations set forth herein will remain in full force and
effect, notwithstanding the assignment or discharge of record of the Mortgage or
any other fact or circumstances whatsoever.
11. NO WAIVER BY LENDER. No delay on the part of Lender in exercising
any right or remedy under this Hazardous Material Indemnification Agreement or
failure to exercise the same shall operate as a waiver in whole or in part of
any such right or remedy. No notice to or demand on the undersigned shall be
deemed to be a waiver of the obligation of the undersigned or of the right of
Lender to take further action without notice or demand as provided in this
Hazardous Material Indemnification Agreement. No course of dealing between the
undersigned and Lender shall change, modify or discharge, in whole or in part,
this Hazardous Material Indemnification Agreement or any obligations of the
undersigned hereunder.
12. AMENDMENTS. This Hazardous Material Indemnification Agreement may
only be modified, amended, changed or terminated by an agreement in writing
signed by Lender and the undersigned. No waiver of any term, covenant or
provision of this Hazardous Material Indemnification Agreement shall be
effective unless given in writing by Lender and if so given by Lender shall only
be effective in the specific instance in which given. The execution and delivery
hereafter to Lender by the undersigned of a new instrument of guaranty or any
reaffirmation of guaranty, of whatever nature, shall not terminate, supersede or
cancel this instrument, unless expressly SQ provided therein, and all rights and
remedies of Lender hereunder or under any instrument of guaranty hereafter
executed and delivered to Lender
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by the undersigned shall be cumulative and may be exercised singly or
concurrently.
13. ENFORCEABILITY; MERGER CLAUSE. The undersigned acknowledges that
this Hazardous Material Indemnification Agreement and the undersigned's
obligations under this Hazardous Material Indemnification Agreement are and
shall at all times continue to be absolute, irrevocable and unconditional in all
respects, and shall at all times be valid and enforceable irrespective of any
other agreements or circumstances of any nature whatsoever which might otherwise
constitute a defense to this Hazardous Material Indemnification Agreement and
the obligations of the undersigned under this Hazardous Material Indemnification
Agreement or the obligations of any other person or party (including, without
limitation, Borrower) relating to this Hazardous Material Indemnification
Agreement or the obligations of the undersigned hereunder or otherwise with
respect to the Indebtedness, including, but not limited to, a foreclosure of the
Mortgage or the realization upon any other collateral given, pledged or assigned
as security for all or any portion of the Indebtedness, or the filing of a
petition under Title 11 of the United States Code with regard to Borrower or the
undersigned, or the commencement of an action or proceeding for the benefit of
the creditors of Borrower or the undersigned, or the obtaining by Lender of
title to, respectively, the Mortgaged Property or to any collateral given,
pledged or assigned as security for the Indebtedness by reason of the
foreclosure or enforcement of the Mortgage or any other pledge or security
agreement, the acceptance of a deed or assignment in lieu of foreclosure or
sale, or otherwise. This Hazardous Material Indemnification Agreement sets forth
the entire agreement and understanding of Lender and the undersigned with
respect to the matters covered by this Hazardous Material Indemnification
Agreement, and the undersigned acknowledges that no oral or other agreements,
understandings, representations or warranties exist with respect to this
Hazardous Material Indemnification Agreement or with respect to the obligations
of the undersigned under this Hazardous Material Indemnification Agreement,
except those specifically set forth in this Hazardous Material Indemnification
Agreement.
14. DUE EXECUTION. This Hazardous Material Indemnification Agreement has
been validly authorized, executed and delivered by the undersigned. The
undersigned represents and warrants to Lender that it has the [corporate] power
to do so and to perform its obligations under this Hazardous Material
Indemnification Agreement and this Hazardous Material Indemnification Agreement
constitutes the legally binding obligation of the undersigned fully enforceable
against the undersigned in accordance with the terms hereof. The undersigned
further represents and warrants to Lender that:
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(a) neither the execution and delivery of this Hazardous Material
Indemnification Agreement nor the consummation of the transactions contemplated
hereby nor compliance with the terms and provisions hereof will violate any
applicable provision of law or any applicable regulation or other manifestation
of governmental action; and
(b) all necessary approvals, consents, licenses, registrations and
validations of any governmental regulatory body, including, without limitation,
approvals required to permit the undersigned to execute and carry out the
provisions of this Hazardous Material Indemnification Agreement, for the
validity of the obligations of the undersigned hereunder and for the making of
any payment or remittance of any funds required to be made by the undersigned
under this Hazardous Material Indemnification Agreement, have been obtained and
are in full force and effect.
15. NOTICES. Any notice, request or demand given or made under this
Hazardous Material Indemnification Agreement shall be in writing and shall be
hand delivered or sent by Federal Express or other reputable courier service or
by postage prepaid registered or certified mail, return receipt requested, and
shall be deemed given shall be deemed delivered on receipt if delivered by hand
or wire transmission, on the next business day after mailing or deposit with the
postal service or an overnight courier service if delivered by express mail or
overnight courier, or on the third business day after mailing if mailed by
registered or certified mail, return receipt requested, as follows:
If to Lender:
CS First Boston Mortgage Capital Corp.
55 E. 52nd Street
6th Floor
New York, New York 10055
Attention: Laura Goldberg
With a copy to:
Battle Fowler LLP
75 E. 55th Street
New York, New York 10022
Attention: Charles J. Hamilton, Jr., Esq.
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If to the undersigned:
Captec Net Lease Realty, Inc.
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
Ann Arbor, Michigan 48106
Attention: W. Ross Martin
it being understood and agreed that each party will use reasonable efforts to
send copies of any notices to the addresses marked "With a copy to" hereinabove
set forth; provided, however, that failure to deliver such copy or copies shall
have no consequence whatsoever to the effectiveness of any notice made to the
undersigned or Lender. Each party to this Hazardous Material Indemnification
Agreement may designate a change of address by notice given, as herein provided,
to the other party fifteen (15) days prior to the date such change of address is
to become effective.
16. GOVERNING LAW. This Hazardous Material Indemnification Agreement is,
and shall be deemed to be, a contract entered into under and pursuant to the
laws of the State of New York and shall be in all respects governed, construed,
applied and enforced in accordance with the laws of the State of New York
without regard to principles of conflicts of laws. The undersigned acknowledges
and agrees that this Hazardous Material Indemnification Agreement is, and is
intended to be, an instrument for the payment of money only, as such phrase is
used in section 3213 of the Civil Practice Law and Rules of the State of New
York, and the undersigned has been fully advised by its counsel of Lender's
rights and remedies pursuant to said section 3213. Nevertheless, Lender is
hereby given the right to elect, in its sole and absolute discretion, that this
Hazardous Material Indemnification Agreement be governed by the laws of the
state in which the Mortgaged Property is situate.
17. VENUE AND JURISDICTION. The undersigned agrees to submit to personal
jurisdiction in the State of New York in any action or proceeding arising out of
this Hazardous Material Indemnification Agreement. In furtherance of such
agreement, the undersigned hereby agrees and consents that without limiting
other methods of obtaining jurisdiction, personal jurisdiction over the
undersigned in any such action or proceeding may be obtained within or without
the jurisdiction of any court located in New York and that any process or notice
of motion or other application to any such court in connection with any such
action or proceeding may be served upon the undersigned by registered or
certified mail to, or by personal service at, the last known address of the
undersigned, whether such address be within or without the jurisdiction of any
such court. The undersigned hereby further agrees that the venue of any
litigation arising in
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connection with the Indebtedness or in respect of any of the obligations of the
undersigned under this Hazardous Material Indemnification Agreement, shall, to
the extent permitted by law, be in New York County.
18. NO SETOFF OR COUNTERCLAIM. The undersigned absolutely,
unconditionally and irrevocably waives any and all right to assert or interpose
any defense, setoff, counterclaim or crossclaim of any nature whatsoever with
respect to this Hazardous Material Indemnification Agreement or the obligations
of the undersigned under this Hazardous Material Indemnification Agreement or
the obligations of any other person or party (including, without limitation,
Borrower) relating to this Hazardous Material Indemnification Agreement or the
obligations of the undersigned hereunder or otherwise with respect to the Loan
in any action or proceeding brought by Lender to collect the Indebtedness, or
any portion thereof, or to enforce the obligations of the undersigned under this
Hazardous Material Indemnification Agreement (provided, however, that the
foregoing shall not be deemed a waiver of the right of the undersigned to assert
any compulsory counterclaim maintained in a court of the United States, or of
the State of New York if such counterclaim is compelled under local law or rule
of procedure, nor shall the foregoing be deemed a waiver of the right of the
undersigned to assert any claim which would constitute a defense, setoff,
counterclaim or crossclaim of any nature whatsoever against Lender in any
separate action or proceeding).
19. NO EXCULPATION. No exculpatory provisions which may be contained in
any Credit Facility Document shall in any event or under any circumstances be
deemed or construed to modify, qualify, or affect in any manner whatsoever the
obligations and liabilities of the undersigned under this Hazardous Material
Indemnification Agreement.
20. WAIVER OF JURY TRIAL. THE UNDERSIGNED HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, AND LENDER BY ITS ACCEPTANCE OF THIS HAZARDOUS MATERIAL
INDEMNIFICATION AGREEMENT IRREVOCABLY AND UNCONDITIONALLY WAIVES, ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM ARISING IN CONNECTION
WITH, OUT OF OR OTHERWISE RELATING TO THIS HAZARDOUS MATERIAL INDEMNIFICATION
AGREEMENT.
IN WITNESS WHEREOF, the undersigned has duly executed this Hazardous
Material Indemnification Agreement the day and year first above set forth.
WITNESSES: BORROWER:
CAPTEC NET LEASE REALTY, INC.
- --------------------------
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- --------------------------
By:
----------------------------------
Name:
Title:
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STATE OF MICHIGAN )
: ss.:
COUNTY OF WASHTENAW )
The foregoing Hazardous Material Indemnification Agreement was
acknowledged before me the ____ day of _________________, 199_, by (NAME OF
SIGNING INDIVIDUAL), a/the [OFFICIAL TITLE OF SIGNING INDIVIDUAL] of CAPTEC NET
LEASE REALTY, INC. a Michigan corporation on such corporation's behalf.
Notary
Public
County, ---------
My
Commission Expires:
[Notary Public's Seal]
186
EXHIBIT A
---------
NOTE: The term "Note" as used in this Hazardous Material Indemnification
Agreement shall mean a certain Revolving Note dated February 26, 1996, in the
principal sum of up to $100,000,000 given by Borrower to Lender.
MORTGAGE: The term "Mortgage" as used in this Hazardous Material
Indemnification Agreement shall mean a certain Mortgage, Security Agreement and
Assignment of Leases and Rents dated as of the date hereof in the principal sum
of $100,000,000 to be given by Borrower to Lender constituting a
_________________ lien on the ____________________ estate of Borrower in certain
premises located in _______________________________ County, as more particularly
described therein, and intended to be duly recorded in ________________________
County,
CREDIT AGREEMENT: The term "Credit Agreement" as used in this Hazardous
Material Indemnification Agreement shall mean a certain Credit Agreement dated
February 26, 1996, between Lender and Borrower.
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EXHIBIT M
---------
188
================================================================================
CAPTEC NET LEASE REALTY, INC.
AND
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
--------------------------------------
MORTGAGE, SECURITY AGREEMENT AND
ASSIGNMENT OF LEASES AND RENTS
--------------------------------------
Dated:
Location:
RECORD AND RETURN TO:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Charles J. Hamilton, Jr., Esq.
The premises described within this instrument are also known as Section
____ Block ___ and Lot ___ on the Official Tax Map of _________ County.
================================================================================
189
Prepared By And when Recorded
Return To:
Battle Fowler LLP
75 E. 55th Street
New York, New York 10022
Attention: Charles J. Hamilton, Jr., Esq.
Loan Number: __________
MORTGAGE, SECURITY AGREEMENT AND
--------------------------------
ASSIGNMENT OF LEASES AND RENTS
------------------------------
THIS MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS
("Mortgage") is made this [DAY] day of [MONTH], 199_, by CAPTEC NET LEASE
REALTY, INC., a Michigan corporation, whose address is 24 Frank Lloyd wright
Drive, Lobby L, 4th Floor, P.O. Box 544, Ann Arbor, Michigan 48106-0544
("Borrower"), in favor of CS FIRST BOSTON MORTGAGE CAPITAL CORP., a Delaware
corporation whose address is 55 E. 52nd Street, 6th Floor, New York, New York
10055 ("Lender").
Preliminary Statement
---------------------
Borrower is the owner of a fee estate in the premises described in
Schedule A attached hereto (the "Real Estate");
***[Borrower is the owner of a leasehold estate in the premises
described in Schedule A attached hereto (the "Real Estate") under and pursuant
to the provisions of the lease described in Schedule A-i attached hereto (the
"Ground Lease") ;]***
This Mortgage is made to secure all of the following (individually and
collectively the "Obligations"):
A. Payment in the sum of One Hundred Million and 00/100 Dollars
($100,000,000), together with interest, costs and all other sums on that amount,
to be paid according to that certain Revolving Note dated as of February 26,
1996 made by Borrower in favor of Lender ("Note") of guaranties or other
evidence(s) of indebtedness to Lender made as of the date of this Mortgage by
Borrower; and any and all extensions, renewals, modifications, substitutions or
replacements thereof. This reference to a particular dollar amount does not in
any way limit the dollar amount secured by this Mortgage.
190
B. The performance of the covenants and obligations due or to become due
to Lender, including, without limit, those due under this Mortgage and all other
Credit Facility Documents, and the repayment of all sums expended by Lender in
connection with performance of those covenants and obligations.
Granting Clause
---------------
To secure the Obligations and as security for the purposes stated
elsewhere in this Mortgage, Borrower has mortgaged, given, granted, bargained,
sold, aliened, enfeoffed, conveyed, confirmed and assigned, and by these
presents does mortgage, give, grant, bargain, sell, alien, enfeoff, convey,
confirm, warrant and assign unto Lender, its successors and assigns, forever all
right, title and interest of Borrower now owned, or hereafter acquired, in and
to the following property, rights, interests and privileges (such property,
rights and interests being hereinafter collectively referred to as the
"Mortgaged Property"):
A. The Real Estate
B. All buildings, structures and improvements now located, or
subsequently constructed or placed upon the Real Estate, including, without
limit, all building materials and building equipment located on the Real Estate
(collectively, the "Improvements");
***[ C. The Ground Lease and the leasehold estate created thereunder;]
***
***[ D. All modifications, extensions and renewals of the Ground Lease
and all credits, deposits, options, purchase options, privileges and rights of
Borrower under the Ground Lease, including, but not limited to, the right, if
any, to renew or extend the Ground Lease for a succeeding term or terms or to
acquire fee title to or other interest in all or any portion of the Real Estate
or the Improvements;]***
E. All of the estate, right, title, claim or demand of any nature
whatsoever of Borrower, either in law or in equity, in possession or expectancy,
in and to the Mortgaged Property or any part thereof;
F. All easements, rights-of-way, gores of land, streets, ways, alleys,
passages, sewer rights, waters, water courses, water rights and powers, and all
estates, rights, titles, interests, privileges, liberties, tenements,
hereditaments, and appurtenances of any nature whatsoever, in any way belonging,
relating or pertaining to the Mortgaged Property (including, without limitation,
any and all development rights,
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air rights or similar or comparable rights of any nature whatsoever now or
hereafter appurtenant to the Real Estate or now or hereafter transferred to the
Real Estate) and all land lying in the bed of any street, road or avenue, opened
or proposed, in front of or adjoining the Real Estate to the center line
thereof;
G. All machinery, apparatus, equipment, goods, fittings, fixtures and
articles of personal property of every kind and nature owned by Borrower, or in
which Borrower has or shall have an interest, now or hereafter located upon the
Real Estate, or appurtenances thereto, or usable in connection with the present
or future operation and occupancy of the Mortgaged Property and all building
equipment, materials and supplies of any nature whatsoever owned by Borrower, or
in which Borrower has or shall have an interest, now or hereafter located upon
the Mortgaged Property (individually and collectively, "Equipment"), and all of
the right, title and interest of Borrower in and to any Equipment which may be
subjected to any title retention or security agreement superior in lien to the
lien of this Mortgage. It is agreed that all Equipment is part and parcel of the
Mortgaged Property and appropriated to the use of the Real Estate and, whether
affixed or not, unless Lender shall otherwise elect, be deemed to be real estate
and granted under this Mortgage;
H. All leases, tenancies and occupancy agreements hereafter made
(including modifications, extensions and guaranties of existing leases,
tenancies and occupancy agreements) ***[(other than the Ground Lease)]***
covering the Premises or any portion thereof (all present and future leases,
tenancies and occupancy agreements are hereinafter collectively referred to as
the "Leases") and the right to receive and apply the rents, income and profits
arising from the Leases and/or the Real Estate (the "Rents") to the payment of
the Obligations;
I. All rents, issues, profits, revenues, proceeds, accounts and general
intangibles arising from the Real Estate or relating to any business conducted
by Borrower on the Real Estate, under present or future leases, reservation
and/or purchase agreements, licenses or otherwise, which are specifically
assigned and transferred to Lender;
J. All right, title and interest of Borrower in and to the land lying in
the bed of any street, road, avenue, alley or walkway, opened or proposed or
vacated, adjoining the Real Estate ;
K. Any and all awards or payments, including, without limit, interest on
any awards or payments, and the right to. receive them, which may be made with
respect to the Mortgaged Property as a result of: (a) the exercise of the right
of eminent domain (including any transfer made in lieu of the exercise of said
right), (b) the alteration of the grade of any
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street, (c) any loss of or damage to any building or other improvement on the
Real Estate, (d) any other injury to or decrease in the value of the Mortgaged
Property, (e) any refund due on account of the payment of real estate taxes,
assessments or other charges levied against or imposed upon the Mortgaged
Property, or (f) any refund of utility deposits or right to any tenant deposit;
L. All proceeds of and any unearned premiums on any insurance policies
covering the Mortgaged Property, including, without limitation, the right to
receive and apply the proceeds of any insurance, judgments, or settlements made
in lieu thereof, for damage to the Mortgaged Property;
M. The right, in the name and on behalf of Borrower, to appear in and
defend any action or proceeding brought with respect to the Mortgaged Property
and to commence any action or proceeding to protect the interest of Lender in
the Mortgaged Property; and
N. All proceeds of each of the foregoing.
1. COVENANTS AND WARRANTIES. Borrower covenants, represents and warrants
to Lender as follows:
(a) AUTHORITY; NO CONFLICT. Borrower has the power and authority to
execute, deliver and perform its obligations under this Mortgage. The execution,
delivery and performance of this Mortgage by Borrower does not, and will not
violate or conflict with any provision of its organizational or charter
documents or any agreement, court order or consent decree to which Borrower is a
party or by which Borrower may be bound.
(b) WARRANTY OF TITLE. Borrower is the owner and is lawfully seized and
possessed of the Mortgaged Property. Borrower has good right, full power and
authority to mortgage the Mortgaged Property in accordance with the terms of
this Mortgage. Subject only to the Permitted Encumbrances (as such term is
defined in that certain Credit Agreement dated as of February 26, 1996 between
Borrower and Lender (the "Credit Agreement")), Borrower warrants the title to
the Real Estate, the Improvements, the Equipment ***[, the Ground Lease]*** and
the balance of the Mortgaged Property. ***[In addition, Borrower represents and
warrants that (i) the Ground Lease is in full force and effect and has not been
modified in any manner whatsoever, (ii) there are no defaults under the Ground
Lease and no event has occurred, which but for the passage of time, or notice,
or both, would constitute a default under the Ground Lease, (iii) all rents,
additional rents and other sums due and payable under the Ground Lease have been
paid in full, and (iv) no action has commenced and no notice has been given or
received for the purpose of terminating the Ground Lease.]*** Borrower also
represents and
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warrants that (i) Borrower is now, and after giving effect to this Mortgage will
be in, a solvent condition, (ii) the execution and delivery of this Mortgage by
Borrower does not constitute a "fraudulent conveyance" within the meaning of
Title 11 of the Bankruptcy Code as now constituted or under any other applicable
statute, and (iii) no bankruptcy or insolvency proceedings are pending or
contemplated by or against Borrower, (iii) .
(c) LEASES. (i) Borrower is the sole owner of the entire landlord's
interest in the Leases (as such term is defined in that certain Assignment of
Leases and Rents (the "Assignment of Leases") dated as of the date hereof made
by Borrower in favor of Lender), (ii) the Leases are valid and enforceable and
in full force and effect and have not been altered, modified or amended in any
manner whatsoever except as herein set forth, (iii) no rent reserved in the
Leases has been assigned, pledged or in any manner transferred or hypothecated,
except pursuant to this Mortgage or the Assignment of Leases, and (iv) no rent
for any period more than thirty (30) days subsequent to the date of this
Mortgage has been collected in advance of the time when the same became due
under the terms of the Leases.
(d) PAYMENT OF OBLIGATIONS. Borrower will pay and perform the
Obligations at the time and in the manner provided for its payment in the Note
and in the other Credit Facility Documents (as such term is defined in the
Credit Agreement) .
(e) MAINTENANCE OF MORTGAGED PROPERTY; WASTE. Borrower shall preserve
and maintain the Mortgaged Property in good repair, working order and condition,
excepting ordinary wear and tear, and shall not commit or permit the commission
of waste . against the Mortgaged Property. The Improvements and the Equipment
shall not be removed, demolished or materially altered (except for normal
replacement of the Equipment), without the consent of Lender. Failure, refusal
or neglect of Borrower to pay any taxes or assessment or any utility rates
levied, assessed or imposed upon the Mortgaged Property, and/or nonpayment of
any premiums for insurance, shall constitute waste, and shall entitle Lender to
exercise the remedies provided in this Mortgage, as well as those afforded by
law. Borrower will not, without obtaining the prior consent of Lender, initiate,
join in or consent to any private restrictive covenant, zoning ordinance, or
other public or private restrictions, limiting or affecting the uses which may
be made of the Mortgaged Property or any part thereof .
(f) PAYMENT OF TAXES; DISCHARGE OF LIENS.
(i) Borrower shall pay when due, and before any interest, collection
fees or penalties accrue, all taxes, assessments, encumbrances, liens,
mortgages, deeds of trust, water or sewer charges and other charges and
impositions,
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including vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Real Estate, now or hereafter levied, assessed or
existing with respect to the Mortgaged Property, or any part of it (the
"Impositions"), prior to the date upon which any fine, penalty, interest or cost
may be added thereto or imposed by law for the nonpayment thereof and Borrower
will deliver to Lender receipts showing payment of the Impositions prior to the
date upon which any fine, penalty, interest or cost may be added thereto or
imposed by law for the nonpayment thereof. If Borrower fails to pay any of the
Impositions, Lender, at its option, may pay such Impositions and the monies paid
shall be a lien upon the Mortgaged Property, added to the amount secured by this
Mortgage, and payable immediately by Borrower to Lender with interest at the
higher of (A) the interest rate, if any, charged by the particular entity
levying or assessing the Impositions, or (B) the highest rate charged by Lender
on any of the Obligations (but in either case not to exceed the maximum interest
rate permitted by law) .
(ii) Upon the occurrence of a default under this Mortgage or any other
Credit Facility Document, at the option of Lender, Borrower shall pay to Lender,
in advance on the fifteenth day of each month, a pro rata portion (as determined
by Lender) of all Impositions levied, assessed or existing on the Mortgaged
Property. In the event that sufficient funds have been deposited with Lender to
cover the amount of the Impositions when they become due and payable, Lender
shall, in its discretion, (A) return any excess to Borrower, or (B) credit such
excess against future payments to be made to such escrow fund. In the event that
sufficient funds have not been deposited to cover the amount of the Impositions
at least thirty (30) days prior to the time when they become due and payable,
Borrower shall immediately pay the amount of the deficiency to Lender. Lender
shall not be required to keep a separate account or to pay Borrower any interest
on the funds held by Lender for the payment of the Impositions pursuant to this
Section 1(f) (ii) or for the payment of insurance premiums under Section 1(h)
(v) below, or on any other funds deposited with Lender in connection with this
Mortgage. The funds on deposit with Lender are further security for the
Obligations and if an Event of Default occurs under this Mortgage, any funds
remaining on deposit with Lender may be applied against the Obligations at any
time after the Event of Default occurs, and without notice to Borrower.
(g) TRANSFER OR ENCUMBRANCE OF MORTGAGED PROPERTY. Except as set forth
in the Credit Agreement, no part of the Mortgaged Property nor any interest of
any nature whatsoever therein nor any interest of any nature whatsoever in
Borrower (whether partnership, stock, equity, beneficial, profit, loss or
otherwise) shall in any manner be further encumbered, sold, transferred,
assigned or conveyed, or permitted to be further encumbered, sold, transferred,
assigned or conveyed without the
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prior consent of Lender, which consent in any and all circumstances may be
withheld in the sole and absolute discretion of Lender. The provisions of the
foregoing sentence of this paragraph shall apply to each and every such further
encumbrance, sale, transfer, assignment or conveyance, regardless of whether or
not Lender has consented to, or waived by its action or inaction its rights
hereunder with respect to, any such previous further encumbrance, sale,
transfer, assignment or conveyance, and irrespective of whether such further
encumbrance, sale, transfer, assignment or conveyance is voluntary, by reason of
operation of law or is otherwise made. In the event ownership of the Mortgaged
Property, or any part, becomes vested in any person(s) other than Borrower,
Lender may deal with and may enter into any contract or agreement with the
successor(s) in interest with reference to this Mortgage in the same manner as
with the Borrower, without discharging or otherwise affecting the lien of this
Mortgage or Borrower's obligations under this Mortgage.
(h) INSURANCE. (i) Borrower shall keep the Improvements and Equipment
insured for the benefit of Lender against fire, standard extended coverage
perils and other hazards and risks, including, without limit, vandalism and
malicious mischief, as Lender may from time to time require and shall further
provide flood insurance (if the Mortgaged Property is situated in an area which
is considered a flood risk area by the United States Department of Housing and
Urban Development, and for which flood insurance is available under the National
Flood Insurance Act of 1968, as amended) or a certification in form satisfactory
to Lender from a licensed surveyor, appraiser or professional engineer or other
qualified person that no portion of the Real Estate is located in a federally
designated "special flood hazard area", loss of rents insurance, general
liability and product liability insurance and any other insurance as Lender may
reasonably require from time to time. All insurance shall be in amounts and in
forms and with companies as is required under the terms of the Credit Agreement.
(ii) Borrower shall deliver to Lender the policies evidencing the
required insurance with premiums fully paid for one year in advance, and with
standard mortgagee clauses (making all losses payable to Lender) . Renewals of
the required insurance (together with evidence of premium prepayment for one (1)
year in advance) shall be delivered to Lender at least thirty (30) days before
the expiration of any existing policies. All policies and renewals shall provide
that they may not be canceled or amended without giving Lender thirty (30) days
prior written notice of cancellation or amendment. Should Borrower fail to
insure or fail to pay the premiums on any required insurance or fail to deliver
the policies or renewals as provided above, Lender may have the insurance issued
or renewed (and pay the premiums on it for the account of Borrower) in amounts
and with companies and at premiums as Lender deems appropriate. If Lender
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elects to have insurance issued or renewed to insure Lender's interest, Lender
shall have no duty or obligation of any kind to also insure Borrower's interest
or to notify Borrower of Lender's actions. Any sums paid by Lender for
insurance, as provided above, shall be a lien upon the Mortgaged Property, added
to the amount secured by this Mortgage, and payable immediately by Borrower to
Lender, as the case may be, with interest on those sums at the highest rate
charged by Lender on any of the Obligations (but not to exceed the maximum
interest rate permitted by law) .
(iii) In the event of loss or damage, the proceeds of all required
insurance shall be paid to Lender. No loss or damage shall itself reduce the
Obligations. Lender or any of its employees is each irrevocably appointed
attorney-in-fact for Borrower and is authorized to adjust and compromise each
loss without the consent of Borrower, to collect, receive and receipt for the
insurance proceeds in the name of Lender and Borrower and to endorse Borrower's
name upon any check in payment of the loss. The proceeds shall be applied first
toward reimbursement of all costs and expenses of Lender in collecting the
proceeds (including, without limit, court costs and reasonable attorneys' fees),
and then toward payment of the Obligations or any portion of it, whether or not
then due or payable and in whatever order of maturity as Lender may elect, or
Lender, at its option, may apply the insurance proceeds, or any part of them, to
the repair or rebuilding of the Mortgaged Property. If Lender elects to restore
or repair the Mortgaged Property, Borrower and Lender shall enter into a written
agreement satisfactory to Lender providing for the terms under which the
insurance proceeds shall be released. Application of proceeds by Lender toward
later maturing installments of the Obligations shall not excuse Borrower from
making the regularly scheduled installment payments nor shall such application
extend or reduce the amount of any of these payments.
(iv) In the event of a foreclosure of this Mortgage, or the giving of a
deed in lieu of foreclosure, the purchaser or grantee of the Mortgaged Property
shall succeed to all of the rights of Borrower under the insurance policies
including, without limit, any right to unearned premiums and to receive the
proceeds.
(v) Upon the occurrence of a default under this Mortgage or any other
Credit Facility Document, at the option of Lender, Borrower shall pay to Lender,
in advance on the first day of each month, a pro rata portion of the annual
premiums due (as estimated by Lender) on the required insurance. In the event
that sufficient funds have been deposited with Lender to cover the amount of the
insurance premiums when the premiums become due and payable, Lender shall pay
the premiums. In the event that sufficient funds have not been deposited with
Lender to pay the
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insurance premiums at least thirty (30) days prior to the time when they become
due and payable, Borrower shall immediately pay the amount of the deficiency to
Lender.
***[(vi) The provisions of subsection 4 of Section 254 of the Real
Property Law of New York covering the insurance of buildings against loss
by fire shall not apply to this Mortgage .]***
(i) COMPLIANCE WITH LAW AND OTHER MATTERS. Borrower will comply with all
federal, state and local laws, ordinances, rules, regulations and restrictions
relating to the ownership, use, occupancy and operation of the Mortgaged
Property. Borrower shall be solely responsible to apply for and secure any
building permit or permission of any duly constituted authority for the purpose
of doing any of the things which Borrower is required or permitted to do under
the provisions of this Mortgage. Further, Borrower will comply with, perform
Borrower's obligations under, and enforce the obligation of all other parties to
all building and use restrictions, ground leases, leases, reservation and/or
purchase agreements, condominium documents and/or other instruments affecting or
relating to the use and/or occupancy of the Mortgaged Property.
(j) ALTERATION OF IMPROVEMENTS. (i) Without the prior written consent of
Lender, Borrower will not remove any building, structure or other improvement
forming part of the Mortgaged Property .
(ii) Borrower may from time to time make alterations, replacements,
additions, changes, and improvements (collectively, "Alterations") in and to the
Mortgaged Property as Borrower may find necessary or convenient for its
purposes; provided, however, that no such Alterations shall decrease the value
of the Mortgaged Property. All work with respect to any Alteration shall be done
in a good and workmanlike manner by properly qualified and licensed personnel,
and such work shall be diligently prosecuted to completion.
(iii) Borrower shall pay the costs of any Alterations done on the
Mortgaged Property, and shall keep the Mortgaged Property free and clear of
liens of any kind. Borrower shall indemnify and defend Lender from and against
any liability, loss, damage, costs, attorneys' fees, and any other expense
incurred as a result of claims of lien by any person performing work or
furnishing materials or supplies for Borrower or any person claiming under
Borrower.
(iv) No Alteration shall be undertaken until Borrower shall have
procured and paid for all required permits and authorizations of all municipal
departments and governmental subdivisions having jurisdiction. Any Alteration
involving an
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estimated cost of more than Twenty-Five Thousand and 00/100 Dollars
($25,000.00) shall be conducted under the supervision of a licensed architect
or engineer selected by Borrower and satisfactory to Lender and shall be made
in accordance with detailed plans and specifications ("Plans and
Specifications") and cost estimates prepared by such architect or engineer and
approved in writing in advance by Lender. Any Alteration shall be made
promptly and in a good workmanlike manner and in compliance with all
applicable permits and authorizations and building and zoning laws and all
laws and in accordance with the orders, rules and regulations of the Board of
Fire Insurance Underwriters and any other body hereafter exercising similar
functions having or asserting jurisdiction over the Mortgaged Property.
(v) In connection with any Alteration involving an estimated
cost in excess of Twenty-Five Thousand and 00/100 Dollars ($25,000.00), Lender
shall have the right to require Borrower to post a bond or other security
reasonably satisfactory to Lender to insure the completion of such Alteration.
(k) OBLIGATION TO REBUILD. (i) If any portion of the Mortgaged
Property is damaged or destroyed by fire or other casualty, Lender shall
forthwith give notice thereof to Lender. Borrower shall, at its sole cost and
expense, forthwith repair, restore, rebuild or replace the damaged or
destroyed improvements, fixtures or equipment, and complete the same as soon
as reasonably possible, to the condition they were in prior to such damage or
destruction, except for such changes in design or materials as may then be
required by law or are approved by Lender in Lender's reasonable discretion.
Lender, in such event, shall, to the extent the proceeds of the insurance are
made available to Lender, reimburse Borrower for the costs of making such
repairs, restoration, rebuilding and replacements on such terms as Lender may
reasonably require. To the extent, if any, that the proceeds of insurance made
available as aforesaid are insufficient to pay the entire cost of making such
repairs, restoration, rebuilding and replacements, Borrower shall pay the
amount by which such costs exceed the insurance proceeds made available as
aforesaid.
(ii) Notwithstanding the foregoing, in the event that Borrower fails
to commence the repair or restoration of the Mortgaged Property pursuant to
this Section 1(k) within sixty (60) days after the casualty, or if Borrower
abandons or fails to diligently pursue completion of such repair or
restoration (as determined in Lender's reasonable judgment), then Lender shall
be entitled to apply the insurance proceeds first towards reimbursement of all
costs and expenses of Lender in collecting the proceeds (including, without
limit, court costs and reasonable attorneys' fees), and then toward any
payment of the Obligations or any portion of it, whether or not then due or
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payable and in whatever order of maturity as Lender may elect. Application of
proceeds by Lender toward later maturing installments of the Obligations shall
not excuse Borrower from making the regularly scheduled installment payments
nor shall such application extend or reduce the amount of any of these
payments.
(1) RECORDING. Borrower will cause this Mortgage, any supplemental or
restated mortgage and any financing and continuation statements required by
the applicable Uniform Commercial Code to be recorded and filed at Borrower's
expense in such manner and in such place as may, in Lender's opinion, be
necessary or proper.
(m) ADDITIONAL ASSURANCES. Borrower will execute and deliver
additional instruments and take additional actions as Lender may reasonably
request to carry out the terms and conditions of this Mortgage.
(n) BOOKS AND RECORDS; INSPECTION RIGHTS. Borrower will at all times
maintain accurate and complete books and records and copies of all building
and use restrictions, ground leases, leases, reservation and/or purchase
agreements, condominium documents, contracts and/or other instruments with
respect to the Mortgaged Property. Lender may inspect and make copies of those
books and records and any other data relating to the Mortgaged Property.
Lender may inspect the Mortgaged Property at such reasonable times as Lender
shall determine. Borrower will promptly provide to Lender reports concerning
the income, expenses and financial and other conditions of the Mortgaged
Property as may be required from time to time by Lender.
(o) RIGHT OF ENTRY. Lender and its agents shall have the right to
enter and inspect the Mortgaged Property at all reasonable times subject to
the rights, duties and obligations under that certain lease (the "Lease")
dated as of _______________, 19 between Borrower and ___________________
("Tenant") .
(p) ENVIRONMENTAL PROVISIONS. For the purposes of this paragraph the
following terms shall have the following meanings: (i) the term "Hazardous
Material" shall mean any material or substance that, whether by its nature or
use, is subject to regulation under any Environmental Requirement, (ii) the
term "Environmental Requirements" shall collectively mean the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
Section 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
Section 1801.et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Toxic Substances Control Act (15 U.S.C. Section
2601 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.) and the
Federal Water
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Pollution Control Act (33 U.S.C. Section 1251 et seq.), all as presently in
effect and as the same may hereafter be amended, any regulation pursuant
thereto, or any other present or future law, ordinance, rule, regulation,
order or directive addressing environmental, health or safety issues of or by
any Governmental Authority, (iii) the term "Governmental Authority" shall mean
the Federal government, or any state or other political subdivision thereof, or
any agency, court or body of the Federal government, any state or other
political subdivision thereof, exercising executive, legislative, judicial,
regulatory or administrative functions, and (iv) the term "diligent inquiry"
shall mean a level of inquiry at least equal to any environmental site
assessment of the Mortgaged Property conducted in accordance with Lender's
environmental policies and procedures. Borrower hereby represents and warrants
to Lender that to the best of Borrower's knowledge after diligent inquiry (i)
no Hazardous Material is currently located at, on, in, under or about the
Mortgaged Property, ***[except as specifically set forth in _____________,]***
(ii) no Hazardous Material has been or is currently located at, in, on, under
or about the Mortgaged Property in a manner which violates any Environmental
Requirement, or which requires cleanup or corrective action of any kind under
any Environmental Requirement, (iii) no releasing, emitting, discharging,
leaching, dumping or disposing of any Hazardous Material from the Mortgaged
Property onto or into any other property or from any other property
onto or into the Mortgaged Property has occurred or is occurring in violation
of any Environmental Requirement, and (iv) no notice of violation, lien,
complaint, suit, order or other notice with respect to the environmental
condition of the Mortgaged Property is outstanding, nor has any such notice
been issued which has not been fully satisfied and complied with in a timely
fashion so as to bring the Mortgaged Property into full compliance with all
Environmental Requirements. Borrower shall comply, and shall cause all tenants
or other occupants of the Mortgaged Property to comply, in all respects with
all Environmental Requirements, and will not generate, store, handle, process,
dispose of or otherwise use, and will not permit any tenant or other occupant
of the Mortgaged Property to generate, store, handle, process, dispose of or
otherwise use, Hazardous Materials at, in, on, under or about the Mortgaged
Property in a manner that could lead or potentially lead to the imposition on
Borrower, Lender or the Mortgaged Property of any liability or lien of any
nature whatsoever under any Environmental Requirement. Borrower shall notify
Lender promptly in the event of any spill or other release of any Hazardous
Material at, in, on, under or about the Mortgaged Property which is required to
be reported to a Governmental Authority under any Environmental Requirement,
will promptly forward to Lender copies of any notices received by Borrower
relating to alleged violations of any Environmental Requirement and will
promptly pay when due any fine or assessment against Lender, Borrower or the
Mortgaged Property relating to
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any Environmental Requirement. If at any time it is determined that the
operation or use of the Mortgaged Property violates any applicable Environmental
Requirement or that there are Hazardous Materials located at, in, on, under or
about the Mortgaged Property which, under any Environmental Requirement, require
special handling in collection, storage, treatment or disposal, or any other
form of cleanup or corrective action, Borrower shall, within thirty (30) days
after receipt of notice thereof from any Governmental Authority or from Lender,
take, at its sole cost and expense, such actions as may be necessary to fully
comply in all respects with all Environmental Requirements, provided, however,
that if such compliance cannot reasonably be completed within such thirty (30)
day period, Borrower shall commence such necessary action within such thirty
(30) day period and shall thereafter diligently and expeditiously proceed to
fully comply in all respects and in a timely fashion with all Environmental
Requirements. If Borrower fails to timely take, or to diligently and
expeditiously proceed to complete in a timely fashion, any such action, Lender
may, in its sole and absolute discretion, make advances or payments towards the
performance or satisfaction of the same, but shall in no event be under any
obligation to do so. All sums so advanced or paid by Lender (including, without
limitation, counsel and consultant fees and expenses, investigation and
laboratory fees and expenses, and fines or other penalty payments) and all sums
advanced or paid in connection with any judicial or administrative investigation
or proceeding relating thereto, will immediately, upon demand, become due and
payable from Borrower and shall bear interest at the Default Rate (as
hereinafter defined) from the date any such sums are so advanced or paid by
Lender until the date any such sums are repaid by Borrower to Lender. Borrower
will execute and deliver, promptly upon request, such instruments as Lender may
deem useful or necessary to permit Lender to take any such action, and such
additional notes and mortgages, as Lender may require to secure all sums so
advanced or paid by Lender. If a lien is filed against the Mortgaged Property by
any Governmental Authority resulting from the need to expend or the actual
expending of monies arising from an action or omission, whether intentional or
unintentional, of Borrower or for which Borrower is responsible, resulting in
the releasing, spilling, leaking, leaching, pumping, emitting, pouring, emptying
or dumping of any Hazardous Material into the waters or onto land located within
or without the State where the Mortgaged Property is located, then Borrower
will, within thirty (30) days from the date that Borrower is first given notice
that such lien has been placed against the Mortgaged Property (or within such
shorter period of time as may be specified by Lender if such Governmental
Authority has commenced steps to cause the Mortgaged Property to be sold
pursuant to such lien) either (a) pay the claim and remove the lien, or (b)
furnish a cash deposit, bond, or such other security with respect thereto as is
satisfactory in all respects to Lender and is sufficient to effect a complete
discharge of such lien on
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the Mortgaged Property. Lender may, at its option, at intervals of not less than
one year, or more frequently if Lender reasonably believes that a Hazardous
Material or other environmental condition violates or threatens to violate any
Environmental Requirement, cause an environmental audit of the Mortgaged
Property or portions thereof to be conducted to confirm Borrower's compliance
with the provisions of this paragraph, and Borrower shall cooperate in all
reasonable ways with Lender in connection with any such audit and shall pay all
costs and expenses incurred in connection therewith. Borrower will defend,
indemnify, and hold harmless Lender, its employees, agents, officers, and
directors, from and against any and all claims, demands, penalties, causes of
action, fines, liabilities, settlements, damages, costs, or expenses of whatever
kind or nature, known or unknown, foreseen or unforeseen, contingent or
otherwise (including, without limitation, counsel and consultant fees and
expenses, investigation and laboratory fees and expenses, court costs, and
litigation expenses) arising out of, or in any way related to, (i) any breach by
Borrower of any of the provisions of this paragraph, (ii) the presence,
disposal, spillage, discharge, emission, leakage, release, or threatened release
of any Hazardous Material which is at, in, on, under, about, from or affecting
the Mortgaged Property, including, without limitation, any damage or injury
resulting from any such Hazardous Material to or affecting the Mortgaged
Property or the soil, water, air, vegetation, buildings, personal property,
persons or animals located on the Mortgaged Property or on any other property or
otherwise, (iii) any personal injury (including wrongful death) or property
damage (real or personal) arising out of or related to any such Hazardous
Material, (iv) any lawsuit brought or threatened, settlement reached, or order
or directive of or by any Governmental Authority relating to such Hazardous
Material, or (v) any violation of any Environmental Requirement or any policy or
requirement of Lender hereunder. This indemnification shall, notwithstanding any
exculpatory or other provision of any nature whatsoever to the contrary set
forth in the Note, this Mortgage or any other document or instrument now or
hereafter executed and delivered in connection with the loan evidenced by the
Note and secured by this Mortgage, constitute the personal recourse
undertakings, obligations and liabilities of Borrower. If this Mortgage is
foreclosed or Borrower tenders a deed or assignment in lieu of foreclosure,
Borrower shall deliver the Mortgaged Property to the purchaser at foreclosure or
to Lender, its nominee, or wholly owned subsidiary, as the case may be, in a
condition that complies in all respects with all Environmental Requirements. The
obligations and liabilities of Borrower under this paragraph shall survive and
continue in full force and effect and shall not be terminated, discharged or
released, in whole or in part, irrespective of whether the Obligations has been
paid in full and irrespective of any foreclosure of this Mortgage or acceptance
by Lender, its nominee or wholly owned subsidiary of a deed or assignment in
lieu of
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foreclosure and irrespective of any other fact or circumstance of any nature
whatsoever.
(q) REPORTING REQUIREMENTS. Borrower hereby covenants and agrees to
deliver financial statements in accordance with its obligations set forth in
Section 4(c) of the Credit Agreement.
(r) INDEMNIFICATION. Borrower shall appear in and defend any suit,
action or proceeding that might in any way and in the sole judgment of Lender
affect the value of the Mortgaged Property, the validity, enforceability and
priority of this Mortgage or the rights and powers of Lender. Borrower shall, at
all times, indemnify, defend, hold harmless and on demand, reimburse Lender for
any and all loss, damages, expense or cost, including cost of evidence of title
and attorneys' fees, arising out of or incurred in connection with any such
suit, action or proceeding, (but excluding any such losses, claims, damages,
liabilities, costs and expenses directly caused to be incurred by reason of the
gross negligence or willful misconduct of the person otherwise to be indemnified
and held harmless under this Section) and the sum of such expenditures shall be
secured by this Mortgage and shall bear interest at the highest rate accruing on
the Obligations, not to exceed the maximum rate permitted by law, and shall be
due and payable on demand. Borrower shall pay cost of suit, cost of evidence of
title and reasonable attorneys' fees in any proceeding or suit, including
appellate proceedings, brought by Lender to foreclose or otherwise enforce this
Mortgage.
(s) ESTOPPEL CERTIFICATES. Borrower shall, within ten (10) days after
written request therefor from Lender, and at Borrower's expense, furnish to
Lender, or such other persons or entities as Lender shall designate, a duly
acknowledged and certified written statement setting forth the amount of the
Obligations, and stating either that no setoffs or defenses exist against such
debt, or, if such setoffs or defenses are alleged to exist, the nature and
amount thereof.
(t) CHANGES IN LAWS REGARDING TAXATION. In the event of the passage
after the date of this Mortgage of any law of the state in which the Real Estate
is located deducting from the value of real property for the purpose of taxation
any lien or encumbrance thereon or changing in any way the laws for the taxation
of mortgages or debts secured by mortgages for state or local purposes or the
manner of the collection of any such taxes, and imposing a tax, either directly
or indirectly, on this Mortgage, the Note or the other Credit Facility
Documents, Borrower shall, if permitted by law, pay any tax imposed as a result
of any such law within the statutory period or within fifteen (15) days after
demand by Lender, whichever is less, provided, however, that if, in the opinion
of the attorneys for Lender, Borrower is not permitted by law to pay such taxes,
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Lender shall have the right, at its option, to declare the Obligations due and
payable on a date specified in a prior notice to Borrower of not less than
thirty (30) days.
***[ 2. THE GROUND LEASE
-------------------
(a) THE GROUND LEASE. Borrower shall (i) pay all rents, additional
rents and other sums required to be paid by Borrower as ground lessee under and
pursuant to the provisions of the Ground Lease, it being agreed and understood
that such rents, additional rents and other sums shall be paid through funds
made available to Borrower from the Lockbox Account (as such term is defined in
the Credit Agreement) as permitted pursuant to the terms and conditions of the
Lockbox Agreement (as such term is defined in the Credit Agreement) to the
extent of available funds in such Lockbox Account, (ii) diligently perform and
observe all of the terms, covenants and conditions of the Ground Lease on the
part of Borrower, as ground lessee thereunder, to be performed and observed,
unless such performance or observance shall be waived or not required in
writing by the ground lessor under the Ground Lease, to the end that all things
shall be done which are necessary to keep unimpaired the rights of Borrower, as
ground lessee, under the Ground Lease, and (iii) promptly notify Lender of the
giving of any notice by the ground lessor under the Ground Lease to Borrower of
any default by Borrower in the performance or observance of any of the terms,
covenants or conditions of the Ground Lease on the part of Borrower, as ground
lessee thereunder, to be performed or observed and deliver to Lender a true
copy of each such notice. Borrower shall not, without the prior consent of
Lender, surrender the leasehold estate created by the Ground Lease or terminate
or cancel the Ground Lease or modify, change, supplement, alter or amend the
Ground Lease, in any respect, either orally or in writing, and Borrower hereby
assigns to Lender, as further security for the payment of the Obligations and
for the performance and observance of the terms, covenants and conditions of
this Mortgage, all of the rights, privileges and prerogatives of Borrower, as
ground lessee under the Ground Lease, to surrender the leasehold estate created
by the Ground Lease or to terminate, cancel, modify, change, supplement, alter
or amend the Ground Lease, and any such surrender of the leasehold estate
created by the Ground Lease or termination, cancellation, modification, change,
supplement, alteration or amendment of the Ground Lease without the prior
consent of Lender shall be void and of no force and effect. Without limiting
the generality of the other provisions of this Mortgage, and without waiving or
releasing Borrower from any of its obligations hereunder, Lender shall have
the right, but shall be under no obligation, to pay any sums and to perform any
act or take any action as may be appropriate to cause all of the terms,
covenants and conditions of the Ground Lease on the part of Borrower, as ground
lessee thereunder, to be performed or observed to be promptly performed or
observed on behalf of Borrower, to the end
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that the rights of Borrower in, to and under the Ground Lease shall be kept
unimpaired and free from default. If Lender shall make any payment or perform
any act or take action in accordance with the preceding sentence, Lender will
notify Borrower of the making of any such payment, the performance of any such
act, or the taking of any such action. In any such event, subject to the rights
of lessees and other occupants under the Leases, Lender and any person
designated by Lender shall have, and are hereby granted, the right to enter
upon the Mortgaged Property at any time and from time to time for the purpose
of taking any such action. If the ground lessor under the Ground Lease shall
deliver to Lender a copy of any notice of default sent by said ground lessor to
Borrower, as ground lessee under the Ground Lease, such notice shall constitute
full protection to Lender for any action taken or omitted to be taken by
Lender, in good faith, in reliance thereon. Borrower shall, from time to time,
obtain from the ground lessor under the Ground Lease such certificates of
estoppel with respect to compliance by Borrower with the terms of the Ground
Lease as may be requested by Lender. Borrower shall exercise each individual
option, if any, to extend or renew the term of the Ground Lease upon demand by
Lender made at any time within one (1) year of the last day upon which any such
option may be exercised, and Borrower hereby expressly authorizes and appoints
Lender its attorney-in-fact to exercise, either jointly or individually, any
such option in the name of and upon behalf of Borrower, which power of attorney
shall be irrevocable and shall be deemed to be coupled with an interest. ]***
***[ (b) NO MERGER OF FEE AND LEASEHOLD ESTATES. So long as any portion of
the Obligations shall remain unpaid, unless Lender shall otherwise consent,
the fee title to the Real Estate and the leasehold estate therein created
pursuant to the provisions of the Ground Lease shall not merge, but shall
always be kept separate and distinct, notwithstanding the union of such
estates in Borrower or in any other person, by purchase, operation of law or
otherwise. If Lender shall acquire the fee title to the Real Estate and the
leasehold estate therein created pursuant to the provisions of the Ground
Lease, by foreclosure of this Mortgage or otherwise, such estates shall not
merge as a result of such acquisition and shall remain separate and distinct
for all purposes after such acquisition unless and until Lender shall elect to
merge such estates.]***
***[ 3. BORROWER ACOUISITiON OF FEE ESTATE. So long as any portion of the
Obligations remains unpaid, unless Lender shall otherwise consent, if Borrower
shall acquire fee title to the Real Estate the lien of this Mortgage shall be
spread to cover the fee estate and said fee estate shall be deemed to be
included within the definition of the Mortgaged Property. Borrower shall, at
its sole cost and expense, execute such instruments as Lender deems useful or
necessary to subject the fee estate to the lien of this Mortgage.]***
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***[ 4. LANDLORD BANKRUPTCY. Upon the filing by or against the landlord
under the Ground Lease of a petition pursuant to Title 11 of the United States
Code as now constituted or hereafter amended or under any other applicable
Federal or state bankruptcy law or other similar law (the "Bankruptcy Code"),
and the subsequent rejection of the Ground Lease by the landlord thereunder,
Borrower shall not, without the prior written consent of Landlord, (i) elect to
treat the Ground Lease as terminated pursuant to Section 365(h) (1) of the
Bankruptcy Code, or (ii) pursuant to Section 365(h) (2) of the Bankruptcy Code,
offset against the rents reserved under the Ground Lease the amount of any
damages caused by the landlord's rejection of the Ground Lease. Borrower shall
promptly, and so as to be received prior to all hearing dates, return dates or
other deadlines, send to Lender copies of all notices, summonses, pleadings,
applications and other documents received by Borrower in connection with such
petition or proceeding by the landlord under the Ground Lease .]***
5. OFFSETS, COUNTERCLAIMS AND DEFENSES. Any assignee of this Mortgage
and the Note shall take the same free and clear of all offsets, counterclaims or
defenses of any nature whatsoever which Borrower may have against any assignor
of this Mortgage and the Note, and no such offset, counterclaim or defense shall
be interposed or asserted by Borrower in any action or proceeding brought by any
such assignee upon this Mortgage or the Note and any such right to interpose or
assert any such offset, counterclaim or defense in any such action or proceeding
is hereby expressly waived by Borrower.
6. NO CREDITS ON ACCOUNT OF THE OBLIGATIONS. Borrower will not claim
or demand or be entitled to any credit or credits on account of the Obligations
for any part of the Impositions assessed against the Mortgaged Property or any
part thereof and no deduction shall otherwise be made or claimed from the
taxable value of the Mortgaged Property, or any part thereof, by reason of this
Mortgage or the Obligations.
7. OTHER SECURITY FOR THE OBLIGATIONS. Borrower shall observe and
perform all of the terms, covenants and provisions contained in the Note and in
all other mortgages and other instruments or documents evidencing, securing or
guaranteeing payment of the Obligations, in whole or in part, or otherwise
executed and delivered in connection with the Note, this Mortgage or the loan
evidenced and secured thereby.
8. DOCUMENTARY STAMPS. If at any time the United States of America,
any state thereof, or any governmental subdivision of any such state, shall
require revenue or other stamps to be affixed to the Note or this Mortgage,
Borrower will pay for the same, with interest and penalties thereon, if any.
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9. PERFORMANCE OF OTHER AGREEMENTS. Borrower shall observe and perform
each and every term to be observed or performed by Borrower pursuant to the
terms of any agreement or recorded instrument affecting or pertaining to the
Mortgaged Property.
10. APPLICATION OF CONDEMNATION AWARDS.
-----------------------------------
(a) CONDEMNATION AWARD. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise, Borrower shall
continue to pay the obligations at the time and in the manner provided for its
payment in the Note and this Mortgage and the obligations shall not be reduced
until any award or payment therefor shall have been actually received and
applied by Lender to the discharge of the Obligations. Any eminent domain or
condemnation proceeds shall be paid directly to Lender and applied toward
reimbursement of all Lender's costs and expenses incurred in connection with
collecting the award (including, without limit, court costs and reasonable
attorneys' fees), and the balance applied upon the obligations whether or not
then due or payable in whatever manner Lender deems advisable.
(b) APPOINTMENT OF LENDER. Lender and each of its officers is
irrevocably appointed (which appointment is coupled with an interest)
attorney-in-fact for Borrower (with power of substitution) and is authorized to
receive, receipt for, discharge and satisfy any condemnation award or judgment,
whether joint or several, on behalf of Borrower, Borrower's legal
representatives, successors and assigns; provided, however, that Lender shall
not be liable for failure to collect any condemnation award. Although it is
hereby expressly agreed that the same shall not be necessary in any event,
Borrower shall, upon demand of Lender, make, execute and deliver any and all
assignments and other instruments sufficient for the purpose of assigning any
such award or payment to Lender, free and clear of any encumbrances of any kind
or nature whatsoever.
11. ADDITIONAL SECURITY/ASSIGNMENT OF RENTS AND LEASES.
---------------------------------------------------
(a) SECURITY INTEREST. (i) This Mortgage, as to any Equipment,
fixtures, accounts, general intangibles and order personal property included
within the definition of Mortgaged Property (collectively, "Personal Property"),
shall constitute a security agreement within the meaning of the Uniform
Commercial Code and Borrower grants to Lender a security interest in the
Equipment, fixtures, accounts, general intangibles and other personal property
of Borrower. Borrower agrees, upon request of Lender, to promptly furnish a list
of personal property owned by Borrower and subject to this Mortgage and, upon
request by Lender, to immediately execute, deliver and/or file any
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amendments to this Mortgage, any separate security agreement and all financing
statements to evidence and perfect the security interest in such personal
property contemplated by this Section. Lender and each of its officers is
irrevocably appointed (which appointment is coupled with an interest)
attorney-in-fact for Borrower (with power of substitution) and each is
authorized to execute, deliver and/or file any of such amendments to this
Mortgage, any separate security agreement and any financing statements.
(ii) Upon the occurrence of any Event of Default under this
Mortgage, Lender, in addition to any other rights and remedies which it may
have, shall have and may exercise immediately and without demand any and all
rights and remedies of a secured party under the Uniform Commercial Code or
otherwise provided by law or by this Mortgage including, without limit, the
right to require Borrower to assemble the personal property and make it
available to Lender at a place to be designated by Lender which is reasonably
convenient to such parties, the right to collect all accounts receivable, the
right to take possession of the personal property with or without demand and
with or without process of law and the right to sell and dispose of it and
distribute the proceeds according to law. Borrower agrees that any requirement
of reasonable notice, if any, shall be met if Lender sends notice to Borrower at
least five (5) days prior to the date of sale, disposition or other event giving
rise to the required notice. Borrower agrees that the proceeds of any
disposition of the personal property may be applied by Lender first to Lender's
reasonable expenses in connection with the disposition including, without limit,
reasonable attorneys' fees and legal expenses, and then to payment of the
Obligations.
(b) LICENSES AND PERMITS. As additional security for the Obligations
and to the extent permitted by their terms, Borrower assigns to Lender all of
Borrower's rights and interest in all licenses or permits affecting the
Mortgaged Property. This assignment shall not impose upon Lender any obligations
with respect to any license or permit. Borrower shall not cancel or amend any of
the licenses or permits assigned (nor permit any of them to terminate if they
are necessary or desirable for the operation of the Mortgaged Property) without
the first obtaining the written approval of Lender.
(c) ASSIGNMENT OF RENTS AND LEASES. (i) Borrower hereby absolutely and
unconditionally assigns to Lender all of Borrower's right, title and interest in
and to all Leases (but without an assumption by Lender of liabilities of
Borrower under any of the Leases by virtue of this assignment), and Borrower
assigns to Lender the Leases, Rents, issues and profits of the Mortgaged
Property provided, however, that upon payment in full of the Indebtedness and
performance of all Obligations under the Credit Agreement, Lender shall
terminate the assignment without
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representation (express or implied) and without any recourse whatsoever to
Lender.
(ii) At least annually, and more frequently if requested by
Lender, Borrower shall provide Lender with a certified rent roll and such other
information regarding the leases and/or occupancy agreements as Lender may
reasonably require.
(iii) Borrower acknowledges and confirms that Lender has a
present, possessory and "choate" interest in and to the Rents.
(iv) Lender shall at no time have any obligation whatever to
attempt to collect rent or other amounts from any tenant of the Mortgaged
Property. Further, Lender shall have no obligation to enforce any other
obligations owed by tenants of the Mortgaged Property. No action taken by Lender
under this Mortgage shall make Lender a "mortgagee in possession."
(v) Borrower shall not collect advance rent under any lease or
occupancy agreement pertaining to the Mortgaged Property in excess of one month
(other than as a security deposit) and Lender shall not be bound by any rent
prepayment made or received in violation of this prohibition.
(vi) At the option of Lender, this Mortgage shall become
subordinate, in whole or in part (but not with respect to priority as to
insurance proceeds or any condemnation award) to any or all leases and/or
occupancy agreements of all or part of the Mortgaged Property upon the execution
and recording by Lender of an affidavit to that effect.
***[ (vii) Lender shall have all of the rights against tenants of
the Mortgaged Property as set forth in Section 291-f of the Real Property Law of
New York.]***
(viii) In addition to the rights which Lender may have herein,
in the event of any default under this Mortgage, Lender, at its option, may
require Borrower to pay monthly in advance to Lender, or any receiver appointed
to collect the Rents, the fair and reasonable rental value for the use and
occupation of such part of the Mortgaged Property as may be in possession of
Borrower. Upon default in any such payment, Borrower will vacate and surrender
possession of the Mortgaged Property to Lender, or to such receiver and, in
default thereof, Borrower may be evicted by summary proceedings or otherwise.
(ix) Nothing contained in this Section 11(c) shall be
construed as imposing on Lender any of the obligations of the lessor under the
Leases.
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12. EVENTS OF DEFAULT AND REMEDIES.
-------------------------------
(a) EVENTS OF DEFAULT. Any one or more of the following events shall,
for purposes of this Mortgage, constitute an "Event of Default":
(i) If an Event of Default, as defined in the Credit
Agreement, shall occur.
(ii) Failure by Borrower to pay within twenty (20) days of
notice and demand by Lender, any installment of any assessment against
the Real Estate and/or Improvements for local improvements heretofore
or hereafter laid, which assessment is or may become payable in annual
or periodic installments and is or may become a lien on the Real Estate
and/or the Improvements, notwithstanding the fact that such installment
may not be due and payable at the time of such notice and demand.
(iii) The filing of any Federal tax lien against the Real
Estate and/or the Improvements and the same is not discharged of record
within thirty (30) days after the same is filed.
(iv) Any failure by Borrower (or any Guarantor) to comply with
any of the non-monetary terms, provisions, warranties or covenants of
this Mortgage, which failure continues for thirty (30) days after the
date of written notice to Borrower (or Guarantor) from Lender of such
default.
(v) Institution of foreclosure proceedings or other exercise
of rights and remedies under any mortgage, deed of trust or other lien
against the Real Estate and/or the Improvements (or any portion
thereof).
(vi) If an Event of Default shall occur under any other
mortgage or deed of trust securing the Obligations.
(vii) Any uninsured loss, theft, substantial damage or
destruction to the Real Estate and/or the Improvements in excess of
$50,000 or the issuance or filing of any attachment, levy, garnishment
or the commencement of any related proceeding or the commencement of
any other judicial process upon or in respect to the Real Estate and/or
the Improvements which is not discharged or dismissed within thirty
(30) days of the date of filing.
***[(viii) Any default by Borrower in the observance or
performance of any term, covenant or condition of the Ground Lease on
the part of Borrower, as ground lessee thereunder, to be observed or
performed, unless any such observance or
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performance shall have been waived or not required in writing by the
ground lessor under the Ground Lease, or if any one or more of the
events referred to in the Ground Lease shall occur which would or may
cause the Ground Lease to terminate without notice or action by the
ground lessor thereunder or which would entitle the ground lessor under
the Ground Lease to terminate the Ground Lease and the term thereof by
giving notice to Borrower, as ground lessee thereunder, or if the
leasehold estate created by the Ground Lease shall be surrendered, in
whole or in part, or if the Ground Lease shall be terminated or
cancelled for any reason or under any circumstance whatsoever, or if
any of the terms, covenants or conditions of the Ground Lease shall in
any manner be modified, changed, supplemented, altered or amended
without the consent of Lender;]***
(b) REMEDIES UPON EVENT OF DEFAULT. Upon the occurrence of any Event of
Default, Lender shall have the following rights and remedies:
(i) Declare all or part of the Obligations immediately due and
payable.
(ii) Demand that Borrower immediately surrender the possession
of the Mortgaged Property to Lender, and Borrower consents to Lender
taking possession of the Mortgaged Property and the books and records
relating to the Mortgaged Property.
(iii) Lease the Mortgaged Property and collect rents for the
account of Borrower.
(iv) Foreclose the interest of Borrower in the Mortgaged
Property by action pursuant to applicable law. Commencement of such an
action shall be deemed a declaration of acceleration pursuant to clause
(i) above.
(v) Lender is authorized and empowered to sell the Mortgaged
Property and convey the same to the purchaser thereof to the extent
permitted and pursuant to the procedures provided by applicable law.
Lender may direct the sale of the Mortgaged Property to be in one or
several parcels and in any order as Lender may elect in its sole
discretion at such time and place, upon such terms and after such
notice as may be required or permitted by applicable law.
(vi) Collect and receive all rents, profits and other amounts
that are due or shall subsequently become due under the terms of any
leases, land contract, or other agreements by which Borrower is leasing
or selling the
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Mortgaged Property or any interest in the Mortgaged Property. Lender
may also exercise any other rights or remedy of Borrower under any such
lease, land contract or other agreement. However, Lender shall have no
obligation to make any demand or inquiry as to the nature of
sufficiency of any payment received or to present or file any claim or
take any other action to collect or enforce the payment of any amounts
to which Lender may become entitled under this Mortgage. Similarly,
Lender shall not be liable for any of Borrower's obligations under any
such lease, land contract or other agreement.
(vii) Exercise all rights, remedies and privileges afforded a
"secured party" under Article 9 of the Uniform Commercial Code, with
respect to any of the Mortgaged Property which is personal property.
(viii) Enter upon the Mortgaged Property and take other
actions as Lender deems appropriate to perform Borrower's obligations
under this Mortgage to inspect, repair, protect or preserve the
Mortgaged Property, to investigate or test for the presence of any
Hazardous Materials and/or to appraise the Mortgaged Property.
(ix) Lender may, at its discretion, remedy any Event of
Default by Borrower and for such purpose shall have the right to enter
upon the Real Estate without thereby becoming liable to Borrower or any
person in possession thereof holding under Borrower. If Lender shall
remedy such a default or appear in, defend, or bring any action or
proceeding to protect its interest in the Mortgaged Property or to
foreclose this Mortgage or collect the Obligations, the costs and
expenses thereof (including reasonable attorneys' fees to the extent
permitted by law), with interest as provided in this paragraph, shall
be paid by Borrower to Lender upon demand. All such costs and expenses
incurred by Lender in remedying such default or in appearing in,
defending, or bringing any such action or proceeding shall be paid by
Borrower to Lender upon demand, with interest at the Default Rate (as
such term is defined in the Credit Agreement), provided, however, that
the Default Rate shall in no event exceed the maximum interest rate
which Borrower may by law pay, for the period after notice from Lender
that such costs or expenses were incurred to the date of payment to
Lender. To the extent any of the aforementioned costs or expenses paid
by Lender after default by Borrower shall constitute payment of (i)
taxes, charges or assessments which may be imposed by law upon the
Mortgaged Property, (ii) premiums on insurance policies covering the
Mortgaged Property, (iii) expenses incurred in upholding the lien of
this Mortgage, including, but not limited to, the costs and expenses of
any litigation to
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collect the indebtedness secured by this Mortgage or to prosecute,
defend, protect or preserve the rights and the lien created by this
Mortgage, or (iv) any amount, cost or charge to which Lender becomes
subrogated, upon payment, whether under recognized principles of law or
equity, or under express statutory authority; then, and in each such
event, such costs, expenses and amounts, together with interest thereon
at the Default Rate, shall be added to the indebtedness secured by this
Mortgage and shall be secured by this Mortgage.
(x) Pursue any other available remedy at law or equity to
enforce the payment of the Obligations.
(c) REMEDIES GENERALLY. (i) All remedies provided for in this Mortgage
shall be available to the extent not prohibited by law, and Lender shall have
the unrestricted right to exercise any summary proceeding available at law or in
equity in connection therewith. Each remedy shall be cumulative and additional
to any other remedy of Lender at law, in equity or by statute. No delay or
omission to exercise any right or power accruing upon any default or Event of
Default shall impair any such right or power or shall be construed to be a
waiver of, or acquiescence in, any such default or Event of Default.
(ii) Lender may waive any Event of Default and may rescind any
declaration of maturity of payments on the Obligations. In case of such waiver
or recision, Borrower and Lender shall be restored to their respective former
positions and rights under this Mortgage. Any waiver by Lender of any default or
Event of Default shall be in writing and shall be limited to the particular
default waived and shall not be deemed to waive any other default. Borrower
shall not be relieved of Borrower's obligation to pay the Obligations at the
time and in the manner provided for its payment in the Note and this Mortgage by
reason of (A) failure of Lender to comply with any request of Borrower to take
any action to foreclose this Mortgage or otherwise enforce any of the provisions
hereof or of the Note or any other Credit Facility Document, (B) the release,
regardless of consideration, of the whole or any part of the Mortgaged Property
or any other security for the Obligations, or (C) any agreement or stipulation
between Lender and any subsequent owner or owners of the Mortgaged Property or
other person extending the time of payment or otherwise modifying or
supplementing the terms of the Note or any other Credit Facility Document,
without first having obtained the consent of Borrower, and in the latter event,
Borrower shall continue to be obligated to pay the Obligations at the time and
in the manner provided in the Note and this Mortgage, as so extended, modified
and supplemented, unless expressly released and discharged from such obligation
by Lender in writing. Regardless of consideration, and without the necessity for
any notice to or consent by the holder of any
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subordinate lien, encumbrance, right, title or interest in or to the Mortgaged
Property, Lender may release any person at any time liable for the payment of
the Obligations or any portion thereof or any part of the security held for the
Obligations and may extend the time of payment or otherwise modify the terms of
the Note or this Mortgage, including, without limitation, a modification of the
interest rate payable on the principal balance of the Note, without in any
manner impairing or affecting this Mortgage or the lien thereof or the priority
of this Mortgage, as so extended and modified, as security for the Obligations
over any such subordinate lien, encumbrance, right, title or interest. Lender
may resort for the payment of the Obligations to any other security held by
Lender in such order and manner as Lender, in its discretion, may elect. Lender
may take action to recover the Obligations, or any portion thereof, or to
enforce any covenant hereof without prejudice to the right of Lender thereafter
to foreclose this Mortgage. Lender shall not be limited exclusively to the
rights and remedies herein stated but shall be entitled to every additional
right and remedy now or hereafter afforded by law. The rights of Lender under
this Mortgage shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision.
(d) RECEIVERS. Upon an Event of Default and commencement of foreclosure
proceedings to enforce the rights of Lender under this Mortgage, or the
commission of waste against the Mortgaged Property, Lender shall be entitled as
a matter of right, without regard to the value of the Mortgaged Property, to the
appointment of a receiver or receivers of the Mortgaged Property and of the
Rents, issues and profits of the Mortgaged Property, pending such proceedings
and without notice to Borrower .
(e) APPLICATION OF PROCEEDS. Any proceeds received by Lender from the
exercise of remedies in accordance with the terms of this Mortgage shall be
applied as follows:
(i) First, to pay all costs and expenses incidental to the
leasing, foreclosure, sale or other disposition of the Mortgaged
Property. These costs and expenses shall include, without limit,
reasonable compensation to Lender, and its agents and attorneys and any
taxes and assessments or other liens and encumbrances prior to the lien
of this Mortgage.
(ii) Second, to all reasonable sums expended or incurred by
Lender directly or indirectly in carrying out any term, covenant or
agreement under this Mortgage or any related document, together with
interest as provided in this Mortgage.
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(iii) Third, to the payment of the Obligations. If the
proceeds are insufficient to fully pay the Obligations, then
application shall be made first to late charges and interest accrued
and unpaid, then to any applicable prepayment premiums, then to unpaid
fees and other charges and then to the outstanding principal balance.
(iv) Fourth, any surplus remaining shall be paid to Borrower
or to whomsoever may be lawfully entitled.
(f) MARSHALLING. In the event of foreclosure of this Mortgage or the
enforcement by Lender of any other rights and remedies under this Mortgage,
Borrower waives any right in respect to marshalling of assets which secure the
Obligations or to require Lender to pursue its remedies against any other assets
or any other party which may be liable for any of the Obligations.
(g) FURTHER ACTIONS. Promptly upon the request of Lender, and at
Borrower's expense, Borrower shall execute, acknowledge and deliver any and all
further conveyances, documents, mortgages, deeds of trust, security agreements,
financing statements and assurances, and do or cause to be done all further acts
as Lender may from time to time require to confirm and protect the lien of this
Mortgage or otherwise to accomplish the purposes of this Mortgage.
(h) ATTORNEYS' FEES. Any reference in this Mortgage to attorneys' fees
shall refer to fees, charges, costs and expenses of in-house and outside
attorneys and paralegals, whether or not a suit or proceeding is instituted, and
whether incurred at the trial court level, on appeal, in a bankruptcy,
administrative or probate proceeding, in consultation with counsel, or
otherwise. All costs, expenses and fees of any nature for which Borrower is
obligated to reimburse or indemnify Lender are part of the Obligations secured
by this Mortgage and are payable upon demand, unless expressly provided
otherwise, with interest until repaid at the highest rate charged on any of the
Obligations (but not to exceed the maximum rate permitted by law).
13. MISCELLANEOUS.
--------------
(a) GOVERNING LAW. This Mortgage shall be construed in accordance with
the laws of the State of [STATE WHERE PREMISES ARE LOCATED].
(b) SUCCESSORS AND ASSIGNS. This Mortgage shall be binding upon the
successors and assigns of Borrower including, without limit, any debtor in
possession or trustee in bankruptcy for Borrower, and the rights and privileges
of Lender under this Mortgage shall inure to the benefit of their respective
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successors and assigns. This shall not be deemed a consent by Lender to a
conveyance by Borrower of all or any part of the Mortgaged Property or of any
ownership interest in Borrower.
(c) NOTICES. Notice from one party to another relating to this Mortgage
shall be deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or telecopier number set
forth in this Mortgage by any of the following means: (i) hand delivery, (ii)
registered or certified mail, postage prepaid, (iii) express mail or other
overnight courier service, or (iv) telecopy, telex or other wire transmission
with request for assurance of receipt in a manner typical with respect to
communications of that type. Notice made in accordance with these provisions
shall be deemed delivered on receipt if delivered by hand or wire transmission,
on the third business day after mailing if mailed by registered or certified
mail, or on the next business day after mailing or deposit with the postal
service or an overnight courier service if delivered by express mail or
overnight courier. Borrower's telecopier number is (313) 994-1376, and Lender's
telecopier number is (212) 318-1468.
(d) ENTIRE AGREEMENT: AMENDMENTS. This Mortgage and any agreement to
which it refers state all rights and obligations of the parties and supersede
all other agreements (oral or written) with respect to the lien granted by this
Mortgage. Any amendment of this Mortgage shall be in writing and shall require
the signature of Borrower and Lender.
(e) PARTIAL INVALIDITY. The invalidity or unenforceability of any
provision of this Mortgage shall not affect the validity or enforceability of
the remaining provisions of this Mortgage.
(f) SECURITY AGREEMENT. Unless specifically provided to the contrary,
all of the terms and provisions of the Credit Agreement are hereby incorporated
and shall become a part of this Mortgage.
(g) USURY LAWS. This Mortgage and the Note are subject to the express
condition that at no time shall Borrower be obligated or required to pay
interest on the principal balance due under the Note at a rate which could
subject the holder of the Note to either civil or criminal liability as a result
of being in excess of the maximum interest rate which Borrower is permitted by
law to contract or agree to pay. If by the terms of this Mortgage or the Note
Borrower is at any time required or obligated to pay interest on the principal
balance due under the Note at a rate in excess of such maximum rate, the rate of
interest under the Note shall be deemed to be immediately reduced to such
maximum rate and the interest payable shall be computed at such maximum rate and
all prior interest payments in excess of
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such maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Note.
(h) SOLE DISCRETION OF LENDER. Except as may otherwise be expressly
provided to the contrary, wherever pursuant to the Note, this Mortgage or any
other Credit Facility Document, Lender exercises any right given to it to
consent or not consent, or to approve or disapprove, or any arrangement or term
is to be satisfactory to Lender, the decision of Lender to consent or not
consent, or to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory, shall be in the sole and absolute discretion
of Lender and shall be final and conclusive.
(i) SUPERIOR MORTGAGE. If Borrower fails to pay any installment of
principal or interest or any other sum due under any mortgage or other lien
superior in lien to the lien of this Mortgage, as the same becomes due and
payable, Lender may, at its option, pay the same, and Borrower shall upon demand
reimburse Lender for all sums so expended by Lender, with interest at a rate per
annum equal to the Default Rate. All such sums expended by Lender, with
interest, shall be secured by this Mortgage.
(j) REASONABLENESS. If at any time Borrower believes that Lender has
not acted reasonably in granting or withholding any approval or consent under
the Note, this Mortgage or any other Credit Facility Document, as to which
approval or consent either Lender has expressly agreed to act reasonably, or
absent such agreement, a court of law having jurisdiction over the subject
matter would require Lender to act reasonably, then Borrower's sole remedy shall
be to seek injunctive relief or specific performance and no action for monetary
damages or punitive damages shall in any event or under any circumstance be
maintained by Borrower against Lender.
(k) RECOVERY OF SUMS REQUIRED TO BE PAID. Lender shall have the right
from time to time to take action to recover any sum or sums which constitute a
part of the Obligations as the same become due, without regard to whether or not
the balance of the Obligations shall be due, and without prejudice to the right
of Lender thereafter to bring an action of foreclosure, or any other action, for
a default or defaults by Borrower existing at the time such earlier action was
commenced.
(1) AUTHORITY. Borrower (and the undersigned representative of
Borrower, if any) has full power, authority and legal right to execute this
Mortgage, and to mortgage, give, grant, bargain, sell, alien, enfeoff, convey,
confirm and assign the Mortgaged Property pursuant to the terms hereof and to
keep and observe all of the terms of this Mortgage on Borrower's part to be
performed.
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(m) CERTAIN DEFINITIONS. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word "Borrower" shall mean each Borrower and any subsequent owner or owners of
the Mortgaged Property or any part thereof or interest therein; the word
"Lender" shall mean Lender or any subsequent holder of the Note; the word "Note"
shall mean the Note or any other evidence of indebtedness secured by this
Mortgage; the word "Guarantor" shall mean each person guaranteeing payment of
the obligations or any portion thereof or performance by Borrower of any of the
terms of this Mortgage and their respective heirs, executors, administrators,
legal representatives, successors and assigns; the word "person" shall include
an individual, corporation, partnership, trust, unincorporated association,
government, governmental authority, or other entity; the words "Mortgaged
Property" shall include any portion of the Mortgaged Property or interest
therein; the word "Obligations" shall mean all sums secured by this Mortgage;
and the word "default" shall mean the occurrence of any default by Borrower or
other person in the observance or performance of any of the terms, covenants or
provisions of the Note or this Mortgage on the part of Borrower or such other
person to be observed or performed without regard to whether such default
constitutes or would constitute upon notice or lapse of time, or both, an Event
of Default under this Mortgage. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural and vice
versa.
(n) WAIVER OF NOTICE. Borrower shall not be entitled to any notices of
any nature whatsoever from Lender except with respect to matters for which this
Mortgage and the Credit Agreement specifically and expressly provides for the
giving of notice by Lender to Borrower, and Borrower hereby expressly waives the
right to receive any notice from Lender with respect to any matter for which
this Mortgage or the Credit Agreement does not specifically and expressly
provide for the giving of notice by Lender to Borrower.
(o) ABSOLUTE AND UNCONDITIONAL OBLIGATION. Borrower acknowledges that
Borrower's obligation to pay the Obligations in accordance with the provision of
the Note and this Mortgage is and shall at all times continue to be absolute and
unconditional in all respects, and shall at all times be valid and enforceable
irrespective of any other agreements or circumstances of any nature whatsoever
which might otherwise constitute a defense to the Note or this Mortgage or the
obligation of Borrower thereunder to pay the Obligations or the obligations of
any other person relating to the Note or this Mortgage or the obligations of
Borrower under the Note or this Mortgage or otherwise with respect to the loan
secured hereby, and Borrower absolutely,
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unconditionally and irrevocably waives any and all right to assert any defense,
setoff, counterclaim or crossclaim of any nature whatsoever with respect to the
obligation of Borrower to pay the Obligations in accordance with the provisions
of the Note and this Mortgage or the obligations of any other person relating to
the Note or this Mortgage or obligations of Borrower under the Note or this
Mortgage or otherwise with respect to the loan secured hereby in any action or
proceeding brought by Borrower to collect the Obligations, or any portion
thereof, or to enforce, foreclose and realize upon the lien and security
interest created by this Mortgage or any other document or instrument securing
repayment of the Obligations, in whole or in part.
***[ (p) TRUST FUND. Pursuant to Section 13 of the Lien Law of New
York, Borrower shall receive the advances secured hereby and shall hold the
right to receive such advances as a trust fund to be applied first for the
purpose of paying the cost of any improvement and shall apply such advances
first to the payment of the cost of any such improvement on the Mortgaged
Property before using any part of the total of the same for any other
purpose***
***[ (q) NON-RESIDENTIAL PROPERTY. This Mortgage does not cover real
property principally improved by one or more structures containing in the
aggregate six (6) or less residential dwelling units having their own separate
cooking facilities***
(r) WAIVER OF STATUTORY RIGHTS. Borrower shall not and will not apply
for or avail itself of any appraisement, valuation, stay, extension or exemption
laws, or any so-called "Moratorium Laws", now existing or hereafter enacted, in
order to prevent or hinder the enforcement or foreclosure of this Mortgage, but
hereby waives the benefit of such laws to the full extent that Borrower may do
so under applicable law. Borrower for itself and all who may claim through or
under it waives any and all right to have the property and estates comprising
the Mortgaged Property marshalled upon any foreclosure of the lien of this
Mortgage and agrees that any court having jurisdiction to foreclose such lien
may order the Mortgaged Property sold as an entirety. Borrower hereby waives for
itself and all who may claim through or under it, and to the full extent
Borrower may do so under applicable law, any and all rights of redemption from
sale under any order or decree of foreclosure of this Mortgage or granted under
any statute now existing or hereafter enacted.
(s) RELATIONSHIP. The relationship of Lender to Borrower hereunder is
strictly and solely that of lender and borrower and nothing contained in the
Note, this Mortgage or any other Credit Facility Document is intended to create,
or shall in any event or under any circumstance be construed as creating, a
partnership, joint venture, tenancy-in-common, joint tenancy or
-31-
220
other relationship of any nature whatsoever between Lender and Borrower other
than as lender and borrower.
(t) ACTIONS AND PROCEEDINGS. Lender shall have the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Borrower, which Lender, in its discretion, feels should be brought to protect
its interest in the Mortgaged Property.
(u) FILING OF MORTGAGE, ETC. Borrower forthwith upon the execution and
delivery of this Mortgage and thereafter, from time to time, will cause this
Mortgage, and any security instrument creating a lien or evidencing the lien
hereof upon the Mortgaged Property and each instrument of further assurance to
be filed, registered or recorded in such manner and in such places as may be
required by any present or future law in order to publish notice of and fully to
protect, preserve and perfect the lien hereof upon, and the interest of Lender
in, the Mortgaged Property. Borrower will pay all filing, registration and
recording fees, and all expenses incident to the preparation, execution and
acknowledgment of this Mortgage, any mortgage supplemental hereto, any security
instrument with respect to the Mortgaged Property, and any instrument of further
assurance, and all Federal, state, county and municipal taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of this Mortgage, any mortgage supplemental hereto, any security
instrument with respect to the Mortgaged Property or any instrument of further
assurance. Borrower shall hold harmless and indemnify Lender, its successors and
assigns, against any liability incurred by reason of the imposition of any tax
on the making and recording of this Mortgage.
(v) HEADINGS, ETC. The headings, titles and captions of various
paragraphs of this Mortgage are for convenience of reference only and are not to
be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
(w) INSPECTIONS. Any inspection, audit, appraisal or examination by
Lender or Lender's agents of the Mortgaged Property or of information or
documents pertaining to the Mortgaged Property is for the sole purpose of
protecting Lender's interests under this Mortgage and is not for the benefit or
protection of Borrower or any third party.
(x) JOINT AND SEVERAL LIABILITY. In the event that more than one person
or entity executes this Mortgage, the obligations of each person or entity shall
be joint and several.
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221
(y) WAIVER OF JURY TRIAL. BORROWER AND LENDER ACKNOWLEDGE THAT THE RIGHT
TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,
AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF
THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES
ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE
OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS MORTGAGE OR THE OBLIGATIONS.
(z) CONSUMER CREDIT. Notwithstanding anything in this Mortgage to the
contrary, this Mortgage shall not secure any portion of the Obligations which is
deemed to be consumer credit under the Truth in Lending Act.
(aa) RELEASE OF THIS MORTGAGE. Borrower's obligations under this
Mortgage shall terminate, and Lender shall release Borrower from its obligations
hereunder, upon payment in full of the Indebtedness (as such term is defined in
the Credit Agreement) or upon satisfaction of all terms and conditions of
Section 2 of the Credit Agreement in connection with the Revolving Loan related
to the Real Estate.
(ab) PERFORMANCE BY TENANT. Lender acknowledges that Borrower has
entered into the Lease which is subject and subordinate to this Mortgage
according to the terms and conditions of that certain Subordination,
Non-Disturbance and Attornment Agreement dated as of the date hereof among
Borrower, Lender and Tenant. Lender acknowledges that performance by Tenant
under the terms of the Lease shall constitute Borrower's performance of its
obligations under this Mortgage to the extent Tenant's performance satisfies
Borrower's obligations to Lender under this Mortgage. This provision is not
intended to be for the benefit of Tenant and Tenant is not a third party
beneficiary of such provision.
[INSERT OTHER STATE SPECIFIC PROVISIONS]
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IN WITNESS WHEREOF, Borrower has executed this Mortgage as of the day
and year noted above.
WITNESSES: BORROWER:
CAPTEC NET LEASE REALTY, INC.
- --------------------------
- --------------------------
By:
------------------------------------
Name:
Title:
-34-
223
STATE OF MICHIGAN )
: ss.:
COUNTY OF WASHTENAW )
The foregoing Mortgage was acknowledged before me the ____ day of
________________, 199_, by [NAME OF SIGNING INDIVIDUAL], a/the [OFFICIAL TITLE
OF SIGNING INDIVIDUAL] of CAPTEC NET LEASE REALTY, INC. a Michigan corporation
on such corporation's behalf.
-----------------------------------
Notary Public
County,
----------- ----------------
My Commission Expires:
-------------
[Notary Public's Seal]
Prepared By and When Recorded
Return To:
Battle Fowler LLP
75 E. 55th Street
New York, New York 10022
Attention: Charles J. Hamilton, Jr., Esq.
224
SCHEDULE A
----------
THIS SCHEDULE ATTACHED TO AND MADE A PART OF THE CERTAIN MORTGAGE, SECURITY
AGREEMENT AND ASSIGNMENT OF LEASES AND RENTS, EXECUTED BY CAPTEC NET LEASE
REALTY, INC., FOR THE BENEFIT OF CS FIRST BOSTON MORTGAGE CAPITAL CORP.
Land in the [CITY] [TOWNSHIP] [VILLAGE] of ___________, [COUNTY]
County, [STATE], described as:
225
EXHIBIT N
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CAPTEC FINANCIAL GROUP, INC.
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CAPTEC FINANCIAL GROUP, INC.
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TABLE OF CONTENTS
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Page
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I. CREDIT UNDERWRITING POLICIES
----------------------------
A. Introduction 2
1. Credit Philosophy 2
2. The Credit Organization 3
3. Delivering Quality Customer Service 4
B. Summary of the Credit Underwriting Process 5
C. Credit Committee 10
1. Committee Members 10
2. Voting Requirements 10
D. Credit Decision Making Authority 11
1. Credit Committee 11
2. Vice President - Credit and Credit Manager 11
E. Franchise/Chain Concept Underwriting Process 12
1. Minimum Concept Qualifications 12
2. Review of UFOC 13
3. Credit Analysis of Franchisor Financial Statements 16
4. Analysis of Unit Closure Statistics 18
5. Review of Litigation against Franchisor 19
6. Survey of Franchisees 20
7. Minimum Credit Standards for Franchisees 21
8. Report to Credit Committee on Concept 22
F. Financing Applicant Underwriting Process 24
1. Standard Application 24
2. Review of Applicant's Financial Statements 25
3. Selection of Guarantors 27
4. Review of Principals' Personal Financial Statements 28
5. Review of Principals' Prior Operating Experience 29
6. Obtaining and Reviewing Personal Credit Reports 30
7. Obtaining and Reviewing Business Credit Reports 31
8. Reference Investigation 33
9. Site Review 34
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I. CREDIT UNDERWRITING POLICIES (CONTINUED)
----------------------------------------
F. Financing Applicant Underwriting Process (Continued)
10. Review of Franchise Agreement 35
11. Report on Financing Application 36
12. Decision to Approve or Decline 37
13. Approval and Decline Letters 38
Fl. Supplemental Underwriting Requirements for
Franchise Loans Secured by Mortgages
1. Limitation on Loan Terms & Conditions 39
2. Franchise Concept Tiering System 42
3. Concepts Approved for Secured Franchise Business Loans 46
4. Loan-To-Value Ratios 47
5. Fixed Charge Coverage Ratios 48
6. Franchisee Operator Experience Requirements 49
7. Personal Guarantee Requirements 50
8. Borrower's Use of Loan Proceeds 51
9. Portfolio Concentration Limitations 52
10. Processing of Approval Loan Applications 53
G. Definitions of Credit Analysis Terms 54
H. Credit Monitoring 58
1. Updates on Franchise Concept Underwriting Reports 58
2. Monitoring Unit Level Performance Trends within Concepts 59
3. Monitoring High Concentration Customer Accounts 60
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II. COLLECTION POLICIES
-------------------
A. Introduction 61
1. Collection Philosophy 60
2. Portfolio Management Department Organization 63
B. Account Monitoring 64
1. Standardized Payment Due Dates 64
2. System Reports 65
3. On-Line Account Monitoring 65
3. Payment Receipts 66
4 Report Monitoring Frequency 66
C. Delinquent Accounts 67
1. Equipment Financings 67
a. Identification 67
b. S - 15 Day Procedures 67
c. 15 - 30 Day Procedures 67
d. 30 -45 Day Procedures 68
e. 45 - 90 Day Procedures 68
f. Continuous Contact 69
2. Mortgage Loans 70
a. Identification 70
b. 5 - 15 Day Procedures 70
c. 15 - 30 Day Procedures 70
d. 30-45 Day Procedures 71
e. 45-90 Day Procedures 71
f. Continuous Contact 72
D. Defaulted Accounts 73
1. Equipment Financings 73
a. Replacement of Franchisee and Assumption/Transfer
of Financing Contract 73
b. Repossession and Taking Legal Action 73
c. Remarketing within Franchise System 74
d. Remarketing to Third Parties 74
e. Enforcement of Rights under Financing Contract 75
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II. COLLECTION POLICIES (CONTINUED)
-------------------------------
f. Enforcement of Franchisor Guarantees and
Remarketing Agreements 75
g. Enforcement of Guarantees from Principals and
Other Obligor-Related Parties 76
2. Mortgage Loans 77
a. Replacement of Franchisee and Assumption/Transfer
of Financing Contract 77
b. Repossession and Taking Legal Action 77
c. Remarketing within Franchise System 78
d. Remarketing to Third Parties 78
f. Enforcement of Franchisor Guarantees and
Remarketing Agreements 78
E. Problem Resolution Tools
1. Franchisor Support 79
a. Agreements with Franchisor 79
b. Coordinating with Franchisor's Interests 79
2. Regional Sub-Franchisor Support 79
3. Vendor Support 80
4. Facilitating Franchise Unit Transfer 80
F. Prepayments 81
1. Methods of Quoting Prepayments 81
2. Penalty Computation 31
3. Waiver of Prepayment Penalties 82
G. Equipment Lease Expirations 83
1. Communication to Lessee 83
2. Pricing & Negotiating with Lessee 83
3. Handling and Sale of Returned Assets 84
H. Casualty & Theft 85
1. Insurance 85
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III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
----------------------------------------
A. Introduction 86
1. Documentation Department Organization 87
2. Delivering Quality Customer Service 88
B. Standardized Documentation 89
C. Documentation Checklists 90
D. Preparation of Documents 91
1. Preliminary Procedures 91
a. Documentation File 91
b. UCC and Financing Statements 91
2. Review of Documentation File 91
3. Assignment of Documentation File 91
4. Lease Document Package 92
a. Confirmation of Legal Entity 92
b. Arrangement for Direct Billing 92
c. UCC Searches 92
d. Contact Credit Department 92
5. Lease Documents 93
6. Verification of Returned Lease Documents from Lessee 94
7. Verification of Returned Lease Documents from Others 94
8. Confirmation of Delivery and Acceptance 95
9. Preparation for Funding 95
E. Legal Review of Documents 96
F. Executions of Documents 97
1. Lessee and Guarantors Signatures 97
2. Counsel Review 97
G. Funding Procedures 98
1. Master Lease Funding Disbursement Summary 98
2. Receipt of Post Closing Items 98
3. Lessee's Copy of the Lease 98
4. Final Submitting to Accounting 98
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IV. MORTGAGE LOAN DOCUMENTATION PROCEDURES
--------------------------------------
A. Introduction 100
1. Documentation Department Organization 100
2. Delivering Quality Customer Service 101
B. Standardized Documentation 102
C. Documentation Checklists 103
D. Preparation of Documents 104
1. Mortgage Documentation File 104
2. Initial Review of Documentation File 104
3. Assignment of Real Estate Documentation File 104
4. Commitment Letter 105
5. Mortgage Documentation Package 106
6. Mortgage Documents 107
a. Promissory Note 109
b. Mortgage or Deed of Trust 110
c. Estoppel Letters 111
d. Guarantee 112
e. Opinions of Counsel 113
f. Miscellaneous Closing Documents 114
g. Real Estate and Business Valuations 115
h. Environmental Site Assessments 116
i. Surveys 117
j. Certificate of Insurance 118
k. Title Commitment 119
l. Lien and Judgment Search Results 120
7. Prepayment Clauses 121
8. Verification of Returned Mortgage Documents
from Borrower 122
9. Verification of Returned Mortgage Documents
from Outside Services 122
10. Final Review of the Mortgage Document Package 122
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IV. MORTGAGE LOAN DOCUMENTATION PROCEDURES (CONTINUED)
--------------------------------------------------
E. Legal Review of Documents 123
F. Funding Procedures 124
G. Escrow Instructions 125
APPENDIX
- --------
Standard Credit Forms
- ---------------------
I.E.8 Report to Credit Committee on Concept (Guideline Form)
I.F.11 Report on Financing Application (Guideline Form)
I.F.12 Credit Transaction Form
I.F.13(a) Credit Approval Letter
I.F.13(b) Credit Decline Letter
Standard Collection Forms
- -------------------------
II.C.1.c Notice of Default Letter
II.C.1.d-1 Notice of Default and Acceleration of Payments Letter (Obligor)
II.C.1.d-2 Notice of Default and Demand for Payment Letter (Guarantor)
II.C.1.f Phone Log
II.G.1.a Notice of Termination ($1 purchase option)
II.G.1.b Notice of Termination (true lease)
II.G.2.a Bill of Sale
II.G.2.b Lease Renewal Agreement
Exhibits
- --------
I.F.1 Credit Application Form
II.B.2.a Delinquency Report
II.B.2.b Summary Past Due Report
III.D.5.a Equipment Lease Agreement
III.D.5.b Certificate of Delivery Acceptance
IV.C. Real Estate Document Checklist
IV.D.7.b Make-Whole Pre-Payment Clauses
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I. CREDIT UNDERWRITING POLICIES
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section A. INTRODUCTION
- --------------------------------------------------------------------------------
1. CREDIT PHILOSOPHY - Captec's credit philosophy has been developed and
refined throughout the Company's history and is viewed by management as
dynamic. The Company's credit policies have been developed internally -
designed for Captec's specific market focus on franchise and chain
restaurant businesses and the various types of financing products provided
to its customers in those markets. This is a specialized market demanding
specialized credit policies.
Captec's credit policies are proprietary. They have certain similarities to
traditional commercial finance credit policies, but in other ways are
unique to Captec.
Captec believes that the credit decision making process is one of measuring
strengths and weaknesses to make informed credit decisions. This is a
process that includes considering the many inter-related facts of a
particular applicant in relation to the Company's market expertise, past
financing experiences, and credit underwriting policies. As such, it is not
a process which can be entirely reduced to the administration of written
policy.
Therefore, these credit policies are designed as guidelines and principles
for conducting the day-to-day business of underwriting and monitoring the
credit-worthiness of Captec's potential and existing customers. These
policies are not intended to be all-inclusive or absolute.
With respect to credit decision making, Captec believes in the value of
utilizing the "committee process" in conjunction with independent analysis
and opinion formation. The Credit Committee is made up of persons who, on a
day-to-day basis, represent a number of different functions of the Company,
most of whom have a long-term vested interest in the Company's well-being.
Credit Committee meetings are an open forum for discussion of each proposed
financing based upon the information gathered during the credit analysis
process - all Credit Committee members are encouraged to freely communicate
their opinions. The Company believes that this approach leads to balanced
credit decisions.
2
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Revised July 1995
Section: 1. CREDIT UNDERWRITING POLICIES
Sub-Section A. INTRODUCTION
- --------------------------------------------------------------------------------
2. THE CREDIT ORGANIZATION - Captec has a Credit Department made up of a group
of employees dedicated to the credit underwriting and monitoring process.
Captec also has a Credit Committee which is responsible for making credit
approval decisions. The following is the organizational chart for the
credit organization.
|
Vice CREDIT COMMITTEE
President -------------- President
Credit CFO
| Sr.VP-S&M
| Credit Mgr.
Credit
Manager
|
-----------------------|--------------------
| | |
Credit Senior Credit
Analysts Credit Clerk
Analyst
The Credit Department reports to the Company's senior management via the Chief
Financial Officer and Senior Vice President - Administration.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section A. INTRODUCTION
- --------------------------------------------------------------------------------
3. DELIVERING QUALITY CUSTOMER SERVICE - The credit underwriting process
involves significant interaction with potential and existing customers. As
a result, personnel in the Credit Department play an important role in
delivering quality service to these customers.
The Credit Department's customer service role is also unique because it
must balance this commitment to deliver quality customer service with an
even higher commitment to making independent credit decisions, which
typically requires investigation and corroboration, rather than acceptance,
of information supplied by customers.
Among other things, quality customer service means:
- Professional communication
- Market expertise
- Timely response (see below)
- Genuine interest in the customers' needs
Timely response addresses all of the various ways in which the Credit
Department interfaces with customers. Most important of these is completing
and communicating the credit decision. To this end, the Credit Department
and Credit Committee should strive to maintain the standard of taking 5
business days subsequent to receipt of a completed application to
communicate a credit decision to all financing applicants and 10 business
days from receipt of all primary information to communicate a credit
decision on all franchise/chain concept reviews.
4
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: B. SUMMARY OF THE CREDIT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
The analysis and approval process of a credit application varies depending on
the nature of the credit (i.e. new program review, application under an
established program, vendor applications, etc.).
It is the responsibility of the Vice President - Credit to oversee the credit
analysis and approval process with support from the Credit Manager and Credit
Committee. The Credit Committee meets weekly at 10:00 AM on Monday and,
additionally, on an as needed basis as determined by the Vice President -
Credit. The Credit Committee reviews new franchise concepts, as well as
day-to-day transactions.
The following outlines the basic credit approval process used for the Company's
principal sources of business:
NEW FRANCHISE CONCEPT REVIEW
Captec's Sales & Marketing Department monitors many franchise concepts, ranging
from small, newly created concepts to large, mature concepts with established
track records. This monitoring effort identifies target concepts which are
selected to be considered for concept approval. At such time, the Sales &
Marketing Department submits a request to the Credit Department to conduct a
franchise concept review to determine if the concept should be approved for
Captec to provide financing to its franchisees.
A review of a new franchise concept involves analysis of the franchisor's
history and existing operations. If the program is approved, franchise lease
applications are reviewed on a deal by deal basis.
The following factors are included in reviewing a franchisor:
FRANCHISOR'S OPERATING HISTORY - A Uniform Franchise Offering Circular
(UFOC) is obtained for examination of a particular Franchisor. The
examination includes an analysis of the financial condition of the
franchisor, a study of the historical failure rates experienced by the
franchise system, a review of prior and pending litigation against the
franchisor, a review of the minimum financial requirements for new
franchisees, and consideration of the number of years in the business of
franchising.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: B. SUMMARY OF THE CREDIT UNDERWRITING PROCESS (CONT.)
- --------------------------------------------------------------------------------
EVALUATION OF THE BUSINESS OPPORTUNITY - A review of the quality of the
opportunity at the individual franchisee store unit level. This includes
review of the sales to investment ratio, unit level sales and income
statistics, the concept's market penetration, and the level of direct
competition.
EVALUATION & SURVEY OF EXISTING FRANCHISEES - A telephone survey of a
random sampling of existing franchisees. The survey addresses issues such
as historical and projected sales and profitability figures, the quality of
franchisor support, and overall franchisee satisfaction with their
franchise.
The franchise concept review must also include a review of the standard store
unit equipment package, the average prices thereof and the vendors from whom
Captec would purchase such equipment. Equipment items which are new to Captec
and of a material cost amount must be researched: product brochures obtained,
fair market prices verified and vendors subjected to reference checks.
In addition, the Credit Department must, in coordination with the sales
department, work together with the franchisor to discuss various options with
respect to support to be provided by the franchisor. This support can be in the
form of guarantees, limited recourse arrangements, remarketing agreements, etc.
Franchisor support may be offered in advance by the franchisor or may be
requested by Captec as a condition to concept approval. The concept analysis
must include consideration of the need for the franchisor's support relative to
such items as the financial strength of the typical franchisee and the
historical failure rates in the system. Additionally, the ability of the
franchisor to meet any of its support obligations, particularly financial and
operating obligations must be considered.
Other general information should be gathered regarding the franchisor's future
plans for royalty revenue growth, projected new franchise unit growth, and the
annual volume of financing expected to be utilized under the proposed financing
program.
All of this information must be summarized in a written report that is presented
to the Credit Committee for consideration. The Credit Committee is charged with
considering the credit quality of the franchisor as well as the "fit" of the
proposed program with Captec's market strategy. Based upon all of this
information, the Credit Committee must decide whether or not to approve the
concept.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: B. SUMMARY OF THE CREDIT UNDERWRITING PROCESS (CONT.)
- --------------------------------------------------------------------------------
FRANCHISEE APPLICATION REVIEW
A franchise concept review approval must include the establishment of standard
franchisee credit requirements and criteria. Each franchisee application must be
reviewed individually based upon these standards. Such standards typically
include minimum net worth and liquidity criteria, a range of acceptable "cost to
open" amounts and maximum debt to worth ratios.
A franchisee application review cannot be commenced by the Credit Department
until a countersigned proposal is received back from the franchisee and the
commitment fee is paid by such applicant. The commitment fee is refundable if
the application is declined, less expenses incurred by Captec, but is otherwise
non-refundable. Payment of this fee is an important indication of the
applicant's good faith in actually closing on the proposed financing. Thus, this
policy is intended to prevent the occurrence of withdrawn applications that
waste the time and efforts of the Credit Department and Credit Committee.
Additionally, the credit review process typically should not be commenced until
a complete application package is received from the applicant. Information
required for a franchisee application includes:
- Completed lease application
- Business financial statements (unless first time franchisee),
typically including 2 years of annual comparative financial
statements and, if financial statements are either prepared by
management or compiled, then 2 years of federal tax returns will
also be required
- Capitalization structure
- Bank references and verification of assets
- Demographic and site information
- Personal information on guarantors:
Personal financial statements (including personal income
statement) 2 most recent years' personal tax returns
- Monthly projections for the first 12 months of operation of the new
unit
- Summary of work experience and who will run the business
Review of a new franchisee requires an extensive investigation of the
applicant's principal officers. Information on the principals is very important
for new franchisee transactions, because they are generally the key to a
successful franchise store. In this regard, the
7
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- --------------------------------------------------------------------------------
analysis focuses on personal financial resources, personal credit reports and
previous operating experience. In addition, liquid assets, personal net worth,
initial cash investment, and secondary sources of household income are measured
against pre-established criteria. These criteria vary depending on the franchise
system and lease or loan requirements.
Review of multi-unit franchisees focuses on the operating history of the
existing store units and the capital resources available before and after
opening the proposed unit. Detailed analysis is conducted on the financial
results in an effort to measure financial strength and operating success. Key
ratios are measured against concept system-wide standards. Additionally,
personal financial resources and personal credit statements are analyzed.
Once the application is reviewed, a decision must be made by the Vice President
- - Credit and/or the Credit Manager as to whether the applicant is creditworthy
and is within Company guidelines (i.e., net worth, financial condition,
equipment, etc.). If the application fails to meet preliminary credit criteria,
the application is declined and the process ends. In an instance where the
credit is not strong enough to be considered as submitted, changes in the
structure may be suggested to the Captec sales representative.
If the application meets preliminary credit criteria, the process continues with
an investigation of bank and trade references. A Dun and Bradstreet report on
the company and credit bureau reports on the company's principals are obtained.
Financial statements are analyzed with a focus on net income, cash flow, net
worth, pertinent ratios, trends, and ability to service existing and additional
debt.
As a general guideline, the credit review should reveal various positive
attributes including (but not limited to) the following:
- Upward trend in sales and profits
- 3 years in business
- Positive cash flow to cover the current portion of long term debt
and lease payments
- Satisfactory bank and trade references
- Moderate leverage position
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: B. SUMMARY OF THE CREDIT UNDERWRITING PROCESS (CONT.)
- --------------------------------------------------------------------------------
These guidelines describe characteristics that may not all be present in each
transaction approved. Each company must be examined in light of its particular
circumstances. For example, leverage ratios often vary by concept and size of
business, or an applicant may have experienced prior operating losses but have
since successfully turned around its operations and returned to profitability.
Finally, the credit investigation and financial analysis must be summarized in
writing and the Vice President - Credit, Credit Manager or Credit Committee,
depending on the size of the transaction, must approve or reject the proposed
transaction.
9
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: C. CREDIT COMMITTEE
- --------------------------------------------------------------------------------
1. COMMITTEE MEMBERS - Members of the Credit Committee are: the President,
Chief Financial Officer, Senior Vice President - Sales & Marketing, Vice
President - Credit and Credit Manager. Additionally, the Senior Vice
President Administration, while not a Committee member, will typically
attend all meetings of the Credit Committee to monitor the status of the
financing applications.
2. VOTING REQUIREMENTS - The Credit Committee must operate under the following
voting rules:
a) Meeting Quorum: 75% of members, but the Vice President - Credit or
Credit Manager must always be present.
b) Approval Vote: 100% of members present.
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Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: D. CREDIT DECISION MAKING AUTHORITY
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1. CREDIT COMMITTEE - The Credit Committee is the senior credit body and has
ultimate authority for making any type of credit decision. Only the Credit
Committee has the authority to approve:
a) franchise and chain concepts;
b) transaction applications that exceed $150,000 in aggregate credit
exposure to a customer (including outstanding balances on existing
financings); and
c) any and all deviations from standard credit policies.
The Vice President - Credit and Credit Manager have authority to decline
concepts, although they should submit most concept reviews to Credit
Committee, even if the probable credit decision appears to be a decline of
the concept for program financing.
2. VICE PRESIDENT - CREDIT AND CREDIT MANAGER - The Vice President - Credit
and Credit Manager have the following approval authorities:
a) Individual Authority: Transactions that do not exceed $75,000 in
aggregate credit exposure to a customer (including outstanding balances
on existing financings), assuming the customer is in an approved
concept, may be approved by the sole authority of the Vice President -
Credit or Credit Manager.
b) Joint Credit Authority: Transactions that do not exceed $150,000 in
aggregate credit exposure to a customer (including outstanding balances
on existing financings), assuming the customer is operating an approved
concept, may be approved by the Vice President - Credit or Credit
Manager and one other member of the Credit Committee.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
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1. MINIMUM CONCEPT QUALIFICATIONS - To be considered for the concept
underwriting process, a franchise concept should typically meet the minimum
qualifications listed below.
- Minimum of 50 units, typically 100 or more units in operation
system-wide
- Minimum of 5 years of franchising experience by the franchisor
- Minimum net worth of $5 million
- Historical net profits for the past 2 years
- Low historical rates of failure by franchisees (i.e. unit closures)
- Limited historical levels of litigation against franchisor,
particularly with regard to franchisee complaints
Concepts that fall marginally below these standards may also be considered
at the discretion of the Credit Manager.
Chain concepts (i.e. - non-franchised concepts) may become mature, proven
successful systems with a smaller number of units than a franchised
concept. Therefore, the Credit Manager may override the minimum number of
units standard for Chain concepts if the other standards are met.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
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2. REVIEW OF UFOC - The Federal Trade Commission prohibits the offer or sale
of any franchise without first providing a Uniform Franchise Offering
Circular ("UFOC") to a prospective franchisee. Thus, all franchisors
maintain a current UFOC which they provide to Captec upon request.
The UFOC is an initial and primary source of information on the franchise
concept. The FTC has established a standard format for the UFOC and
requires a variety of information disclosure. As a result, the UFOC
contains extensive information on the franchisor and the concept, and
therefore, it must be utilized extensively during the concept underwriting
process. The UFOC review must include the following:
a) FRANCHISE CONCEPT AND OPERATION - The nature of the business being
franchised and the reasons for its success must be analyzed. Unit level
sales and operating costs, unit development costs, competitive
strengths and weaknesses and geographical penetration are factors to be
considered. This analysis must result in an assessment of the quality
of the unit level business opportunity.
b) MANAGEMENT AND OPERATING HISTORY - The history of the concept must be
reviewed, including the number of years in business, the number of
years engaged in franchising, and the history of the franchisor's
business strategies. Additionally, this must include a review of the
capabilities and business experience of the key directors, officers and
employees of the franchisor. The purpose of this analysis is to gain a
historical perspective on the franchisor's business and the strengths
and weaknesses of key personnel.
c) NUMBER OF UNITS - The number of existing store units, broken down
between company (franchisor) operated and franchisee units, must be
reviewed and analyzed. The percentage mix between company and
franchisee stores must be noted, along with new unit development plans
for the next year. Franchisor involvement in unit operations affects
the franchisor's mix of revenue and income sources and is an important
consideration when measuring the franchisor's capabilities in taking
over and operating troubled franchisee units. This analysis must assess
the size of the concept, the concept-wide unit growth trends, and the
degree to which the franchisor is involved in store operations.
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2. REVIEW OF UFOC (CONTINUED)
d) FRANCHISE FEES AND EXPENSES - This is an analysis of the various
fees required to be paid by the franchisee, which typically
includes a one-time franchise fee and training fee and ongoing
royalty and advertising fees. This analysis must compare these
fees to industry standards and to assess the impact of the fee
structure on the store unit level economics.
e) FRANCHISEE'S INITIAL INVESTMENT - The UFOC includes an outline of
the low to high range of total costs to a franchisee to open a new
store unit. Generally, these costs include the franchise fee,
land, building, leasehold improvements, equipment, initial
inventory, training expenses, pre-opening expenses and working
capital reserves. This information will be used as a basis for
reviewing franchisee applications to assess whether the
franchisee's actual costs, including the cost of the asset being
financed, are reasonable. Additionally, this analysis must include
a "sales to in vestment ratio" calculation, which compares average
annual unit sales to average cost to open a unit. This ratio is an
important measure of the quality of the business opportunity from
an economic standpoint.
f) DUTIES OF THE FRANCHISOR TO THE FRANCHISEES - This is a review of
the support systems provided by the franchisor for the benefit of
the franchisee. This support review must focus on the depth of the
training program and field operations support. The purpose of this
analysis is to become familiar with the support systems available
within the system and to compare such systems to industry
standards.
g) FRANCHISOR'S LITIGATION AND CLAIMS - The UFOC lists all pending or
threatened litigation against the franchisor and/or its directors
and shareholders and provides detailed information on each case.
This analysis must include an assessment of the quality of the
franchisor's relations with its franchisees, as well as any
significant financial risks facing the franchisor as a result of
litigation.
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SUB-SECTION: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
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2. REVIEW OF UFOC (CONTINUED)
h) FRANCHISE UNIT CLOSURES - The UFOC provides a three year history
of closures of franchise units as measured by termination of
franchise agreements (there is an individual franchise agreement
for each franchisee operated store unit). This information must be
analyzed closely in order to understand the nature of any
franchisee failures and to assess the success rate of the
franchisees.
i) FINANCIAL STATEMENTS - The UFOC includes audited financial
statements on the franchisor for three fiscal years. A complete
financial analysis must be performed on these financial
statements, including inputting the statement into Captec's
spreadsheet model, conducting ratio analyses, and reviewing cash
flow coverage and line-item trends.
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3. CREDIT ANALYSIS OF FRANCHISOR FINANCIAL STATEMENTS - The Franchisor's
financial statements must be input into Captec's financial statement
spreadsheet model as a basis for the analysis.
The review of the Franchisor's financial statements must include the
three most recent fiscal year-ends. Trends must be analyzed with respect
to revenue, profit and cash flow. Trends in revenues and expenses must
be analyzed on both a nominal dollar value and percentage basis.
Revenues must be broken down in terms of store sales, franchise fees and
royalty income. The mix must be analyzed in terms of where operating
profit is derived from, as well as the stage of the Franchisor (e.g. -
early stage, high growth, mature, etc.). Generally, revenue derived from
franchise fees should decrease as a percent of total revenue as the
Franchisor matures. Results in contrast to this general trend must be
examined and discussed in detail in the written report to Credit
Committee.
Ratios must be examined and compared to industry averages. This ratio
analysis must address the following key ratios: the Debt/Worth Ratio,
the Liquidity Ratio, the Cash Flow/CPLTD Ratio and the Fixed Charge
Coverage Ratio. Trends in these ratios must also be analyzed and
assessed with respect to the long-term financial viability of the
Franchisor and the concept. If the debt/equity ratio increases every
year, a detailed analysis must be performed to ascertain the reasons for
this trend. If the Cash Flow/CPLTD Ratio is less than 1.25:1, and/or the
Fixed Charge Coverage Ratio is less than 1.25:1, a detailed analysis
must be performed to assess the degree of risk that the Franchisor would
be unable to meet its financial obligations. Such negative trends must
be discussed in detail in the written report to Credit Committee.
The company's debt must be itemized and analyzed. Long-term debt must be
reviewed in detail, examining terms, financing sources, and the
composition of the current portion of long-term debt. A cash flow
analysis must be completed to ensure that the Franchisor has an
acceptable Cash Flow/CPLTD Ratio and Fixed Charge Coverage Ratio.
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3. CREDIT ANALYSIS OF FRANCHISOR FINANCIAL STATEMENTS (CONTINUED)
A detailed financial statement analysis must be included in the Report
to Credit Committee and the results of this analysis must be summarized
in the Recommendation section of the Report to Credit Committee. The
Credit Committee must consider this information when deciding whether to
extend credit to applicants operating in the concept.
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SUB-SECTION: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
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4. ANALYSIS OF UNIT CLOSURE STATISTICS - The UFOC discloses the number of
franchise agreements terminated for any reason over the past three
years. This information is broken down further to number of units
closed, number of units transferred, and number of units taken over by
the Franchisor. The number of terminated franchises is also broken down
as a percentage of the total number of units and by geographical
location. The reasons for the closures or transfers are also discussed
in detail.
The Report to Credit Committee must contain a section outlining the unit
closure statistics and discussing the pertinent details regarding such
closures. In general, a small number and percentage of terminated
franchise agreements is acceptable. However, a large number or
percentage of terminations, or negative trends in terminations, must be
closely examined. Issues mitigating any of these negative statistics
must be discussed in depth.
Poor franchise termination history generally suggests the potential of a
major weakness in the franchise system and, therefore, must also be
summarized in the Recommendation section of the Report to Credit
Committee. The Credit Committee must consider this information when
deciding whether to extend credit to applicants operating in the
concept.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
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5. REVIEW OF LITIGATION AGAINST FRANCHISOR - The UFOC discloses any
administrative, criminal or material civil action pending against the
Franchisor, any predecessor and any person identified as an officer
and/or director in the UFOC. The information contained in the UFOC on
each case must be reviewed and, if necessary, more detailed information
must be obtained, including a current status report.
Significant litigation pending between the Franchisor and its
Franchisees (significant in terms of either dollars or number of
actions) must be examined closely. This is often an indication of
weakness in the franchise system which ultimately could affect the
future earnings and financial strength of applicants.
Furthermore, if pending litigation is significant in terms of dollars,
the potential adverse affect on the company's financial condition must
be analyzed. Again, in such case further information must be obtained
on the status and range of the amount of contingent liability.
The Report to Credit Committee must contain a section outlining the
pending litigation and discussing the pertinent details regarding such
actions. Major litigation problems must also be summarized in the
Recommendation section of the Report to Credit Committee. The Credit
Committee must consider this information in deciding whether to extend
credit to applicants operating in the concept.
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SECTION: I. CREDIT UNDERWRITING POLICIES
SUB-SECTION: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
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6. SURVEY OF FRANCHISEES - When reviewing a Franchisor concept for
approval, a randomly selected sampling of existing Franchisees must be
surveyed. A minimum of 5% of the franchisees or 25 franchisees,
whichever is greater, must be surveyed. Franchisees must be selected
from different parts of the country. Information obtained from the
franchisees should include: 1) average sales; 2) the level of franchisee
profitability and how long it took them to become profitable; 3) whether
the franchisee is satisfied with both the pre-opening and ongoing
support from the franchisor; 4) does the franchisee believe that the
working capital requirements and other cost projections listed in the
UFOC are adequate. Each franchisee surveyed must also be asked if they
would recommend that other people become franchisees of the concept and
if they would open their store(s) again. Finally, the franchisee should
be asked if they are having any problems with their business.
The Report to Credit Committee must contain a section outlining the
results of the franchisee survey. Major franchisee concerns must also be
summarized in the Recommendation section of the Report to Credit
Committee. The Credit Committee must consider this information in
deciding whether to extend credit to applicants operating in the
concept.
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SECTION: I. CREDIT UNDERWRITING POLICIES
SUB-SECTION: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
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7. MINIMUM CREDIT STANDARDS FOR FRANCHISEES - When reviewing a franchise
concept for approval, general credit standards must be established for
typical franchisees. Many factors must be considered when setting the
standards, including: 1) the total cost to open a typical unit; 2) first
year sales and profitability averages; 3) mature store sales and
profitability averages; and 4) standard multi-unit development
requirements. In some instances, secondary sources of personal income
for the principals must also be considered when determining liquidity
requirements.
Also, the franchisor's stated financial requirements for franchisees
must be reviewed and compared to the results of Captec's analysis.
Ideally, Captec and the Franchisor will have similar credit standards.
If Captec's credit standards significantly exceed the Franchisor's
credit standards, the approval rate of franchisee applicants may be
below acceptable levels.
All financing programs require a clean credit bureau report on the
franchisee. Generally, a standard net worth requirement and an initial
capitalization requirement should also be established. Each credit has
unique circumstances and must be reviewed on an individual basis, taking
into account the credit standards established through this analysis.
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SECTION: I. CREDIT UNDERWRITING POLICIES
SUB-SECTION: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
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8. REPORT TO CREDIT COMMITTEE ON CONCEPT - Utilizing all of the information
and analysis derived from the concept underwriting process, the Credit
Department must prepare a written report on each franchisor (the
"Concept Underwriting Report"). The Concept Underwriting Report must
include the following:
- One page summary of Franchisor
- One page summary of the proposed financing program
- Discussion of concept and operations
- Discussion of management and operating history
- Discussion of fees paid by franchisees
- Discussion of training and support
- Discussion of unit level economics, including average unit sales,
average return on sales, average investment required to open a
unit and standard unit capitalization requirements
- Discussion of the results of the credit analysis of the
Franchisor's financial statements
- Discussion of unit closure statistics
- Discussion of survey of franchisees
- Recommendation
See Appendix I.E.8 for the guideline format of this report.
The report must be submitted to all members of the Credit Committee for their
review in advance of the committee meeting. The Credit Committee must review and
discuss the concept, decide whether or not to approve a financing program for
the franchisees and decide what the terms and conditions of the program will be.
Either prior to or as a result of the Credit Committee s review, there may be a
negotiating process that takes place with the franchisor regarding the structure
and nature of any recourse programs, remarketing agreements, the maximum
aggregate dollar amount of program financings, the maximum dollar amount of
individual transactions, and/or the standard rate of return on such
transactions.
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8. REPORT TO CREDIT COMMITTEE ON CONCEPT (CONTINUED)
The Credit Committee may, on occasion, limit the amount of a program
to establish a relationship with a franchisor and agree, after a
predetermined period of time, to review the performance of the portfolio
and update financial and credit information on the franchisor to
determine if the program should be increased. In such instances, the
Report to Credit Committee must be revised and resubmitted to Credit
Committee for final approval.
The Report to Credit Committee must be reviewed and approved by the
Credit Committee prior to accepting franchisee financing applications.
All concepts must pass this credit underwriting process in order to
become "Approved Concepts."
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SECTION: I. CREDIT UNDERWRITING POLICIES
SUB-SECTION: F. FINANCING APPLICANT UNDERWRITING PROCESS
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1. STANDARD APPLICATION - A credit application must be completed, signed
and dated by a proposed applicant and made a part of every credit file.
The credit application should be used as a starting point and should
indicate the applicant's name and address, the location to be financed,
the name, address and social security number of all guarantors, the
applicant's bank and trade references, a description of the assets to be
financed, and the amount and the costs of those assets. (see Exhibit
I.F.1 for the standard application form).
A signed credit application authorizes Captec as a potential creditor to
order credit bureau reports on the guarantors and obtain credit
information from current creditors. Therefore, such credit service
reports cannot be ordered or received prior to receiving a signed
application.
The application should be submitted to Captec accompanied by a check
from the applicant for payment of the commitment fee. A copy of the
check must be attached to the application and remain in the credit file.
No application can be processed prior to receipt of the properly signed
application form and the commitment fee. Upon receipt of the signed
application and check, the transaction must be input by Credit
Department personnel into the INFO-LEASE Credit Application Module
using the information from the application. An application number and
customer credit account number is assigned at that time. If the
applicant is an existing customer or applicant, the existing customer
credit account must be used in order that all pending, approved, and/or
closed transactions may be tracked by customer, enabling the efficient
monitoring of customer borrowing concentrations.
The Credit Application Module database must be maintained for each
application throughout the application, documentation and transaction
booking process. Each application will be tracked within this system to
monitor such items as credit decision status, open approval contingency
items, documentation checklists, asset cost and description information,
and projected funding date. Each application is tracked across
departments (from credit to documentation to accounting); therefore, the
assigned credit analyst must re-assign the approved application to
Documentation Department upon completion of the credit approval process.
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SUB-SECTION: F. FINANCING APPLICANT UNDERWRITING PROCESS
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2. REVIEW OF APPLICANT'S FINANCIAL STATEMENTS
a) Credit Analysis Methods - When an applicant operates one or more
existing restaurants, current financial statements on the existing
operations must be submitted with the application. This information must
be input into Captec's spreadsheet model for summarization and ratio
analysis.
The financial statements must be reviewed on both a consolidated as well
as a unit level basis. Sales of existing restaurants must be analyzed
and compared to average per unit sales for the concept. Costs and
margins must also be compared to concept-wide averages. The balance
sheet must be analyzed in terms of trends, capitalization, Debt/Worth
Ratio and other pertinent ratios. The capitalization structure should be
closely analyzed to insure that the applicant has sufficient capital to
support its existing and planned future units. If funds are put into the
business as debt from the principals (e.g. - in the form of shareholder
notes) the notes should typically be required to be subordinated to the
Captec financings.
As with any existing company, part of the financial analysis must
include analyzing pertinent ratios and studying trends. Debt/Worth Ratio
should be moderate depending on the growth stage of the company. If a
high Debt/Worth Ratio exists, there must be numerous other redeeming
features for the application to receive further consideration for
approval. A typical maximum Debt/Worth Ratio is 3:1, but ratios may vary
both upwards and downwards for different concepts and the analyst must
give consideration to these variances.
Cash flow is very important and must be positive. The existing
operations of the applicant must be generating sufficient cash flow to
service all current obligations. A typical minimum Fixed Charge Coverage
Ratio would be 1.25:1.
An existing company's profitability must also be reviewed. Depending on
the stage of the company, profitability may or may not have been
reached. On a newer unit, there may be many pre-opening costs expensed
that have limited or prevented profitability. Also, if an applicant is
in a growth phase and opening several units, numerous start-up costs,
training and overhead are often being absorbed and may also prevent
profitability. All of these factors must be taken into account by the
analyst and each application must be analyzed based upon each particular
situation.
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2. REVIEW OF APPLICANT'S FINANCIAL STATEMENTS (CONTINUED)
b) Comparison with Franchisor's Minimum Credit Requirements - Once a
Franchise concept is approved, the Franchisor file is kept in the Credit
Department and used for reference. When an application for the system
is being reviewed, various assumptions must be compared with the
franchisor information for accuracy. This Franchisor file information
and the application must be compared with respect to the following:
- the cost to open
- site and store unit size
- the net worth and liquid assets of the applicant
- unit level sales results
- unit level profits as a percent of sales
This unit level economic information must be input into and tested using
Captec's unit level economics model. Any economic stresses noted from
this analysis must be discussed in the Report on Financing Application.
This information must be compared to both: 1) continuously monitor the
accuracy of the assumptions made in the Franchisor file; and 2) to
assess the strengths and weaknesses of the applicant relative to these
standards.
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3. SELECTION OF GUARANTORS - As a policy, all principal officers owning 10%
or more of the applicant organization must individually guarantee all
financings. However, their are common occurrences of exceptions to this
policy.
The most typical examples of an exception are:
1. organizations with substantial capital paid-in directly by the
principals (i.e. - the principals have significant capital at
stake in the business)
2. organizations with substantial net worth, many years in business
and/or insignificant mass of operations (as measured by such
statistics as total revenue and number of store units)
Generally, transactions must be proposed by the Sales & Marketing
Department with a requirement for guarantees, unless the applicant
organization is an obvious exception to the policy or unless the
applicant specifically states and satisfactory explains why guarantees
are not available.
All guarantees must be joint and several for the entire amount of the
financing. Exceptions to this policy may only be allowed in unusual
circumstances.
If an application submitted for credit underwriting is submitted without
a guarantee or with a limited guarantee, the credit analysis must
address the issue of whether the applicant qualifies for an exception
from the guarantee policies. All such exceptions must be discussed in
the Report on Financing Application and can only be approved by Credit
Committee.
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4. REVIEW OF PRINCIPALS' PERSONAL FINANCIAL STATEMENTS - All personal
financial statements must be submitted directly by the principals and
must be complete, signed and dated. All personal financial statements
should be no more than 6 months old.
Each line item must be reviewed and analyzed further, if needed. Cash
must be verified through bank references and/or current bank statements.
Marketable securities must be verified through securities account
statements. The valuation of certain assets, such as business interests,
must be reviewed to assess the reasonableness of the stated value. Total
debt indicated as owing to banks and others must be reconciled with the
individuals' credit bureau report to determine the accuracy and
completeness of the liabilities section of the personal financial
statement.
The strengths and weaknesses of the personal financial condition of all
principals, particularly those who are proposed as guarantors, must be
discussed in detail in the Report on Financing Application.
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REVISED JULY 1995
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5. Review of Principals' Prior Operating Experience - A resume must be
generally obtained on the principals, and the analyst must review their
background and experience.
Positive attributes include (but are not limited to):
- previous experience operating stores within the same concept or a
concept with similar operations requirements
- previous successful business ownership
- specific occupational expertise for persons serving in various
functional areas of the applicant's organization (e.g. - a person
serving as the CFO might have a background as a CPA, a financial
officer with previous employers, etc.)
- significant business contacts and presence within the operating
territory
In most cases the principals should have direct prior operating
experience within the concept or a similar concept. Any lack of such
prior experience is a major weakness and must be highlighted in the
Report on Financing Application.
With respect to franchise loans secured by mortgages, there are certain
specific, quantitative requirements regarding the principals' prior
operating experience. See Section I.F1.5 for further details regarding
these requirements.
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6. OBTAINING AND REVIEWING PERSONAL CREDIT REPORTS - A personal credit
bureau report must be obtained directly from the reporting agency on
every potential guarantor listed on an application. The reports should
generally be obtained via the Credit Department's on-line reporting
service.
A TRW is the standard report used. This report must be used to verify
current address, social security number, year of birth, spouses name and
employment. The profile summary must be reviewed, and includes the
number of accounts, satisfactory accounts, delinquent accounts, public
records, installment balances and payments, real-estate balances and
payments, revolving balances and availability, past due amounts, and
inquiries. Each trade account is listed separately and includes the name
of the creditor, the date the account was open, balance date and last
pay date. The high credit current balance, and monthly payment are also
listed. The account status reflects the last 24 months of payment
history. Inquiries over the past two years are listed.
Each account listed on the credit report must be reviewed to establish
prompt payment history and determine that the amount of personal debt is
not excessive. Should an account show any derogatory payment history, a
detailed written explanation must be provided by the principal and the
explanation must be acceptable to Captec.
The number of inquiries must be noted and assessed as an indication of
other funding sources the individuals may be working with and the
probability of recent similar credit requests.
Any derogatory payment history noted on a personal credit report must be
disclosed in the Report on Financing Application, along with the
person's explanation and the analyst's assessment of that explanation.
Also, any discrepancies between the debt indicated on the credit report
and the debt disclosed on the personal financial statement must be
indicated in the Report on Financing Application.
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7. Obtaining and Reviewing Business Credit Reports - A Dun & Bradstreet
Business Information Report must be obtained on every company applying
for credit to Captec. The D&B report contains extensive information on
the business which must be used for both information gathering and
information verification purposes.
The D&B report contains the company's complete legal name and address,
its business activity, a rating which is generally based on the
company's net worth, the year started and number of employees. The D&B
summarizes the company's financial statements, if the company has agreed
to provide D&B with such financial statements, and the report lists any
special events. Payment histories are outlined by vendor industry,
reflecting total dollar amount, high credit and payment history. A
paydex score is assigned based on this data and the percentage of
payments within the allotted terms are disclosed. Public filings are
listed including all suits, tax liens, and UCC filings. The D&B report
lists the location of the offices of the company, ownership structure
and background information on the officers. This information is
generally used for verification purposes.
The entire D&B report must be reviewed. Any derogatory information
regarding the business rating, special events, payments histories/paydex
score and public filings (e.g. - suits and tax liens) must be fully
investigated and discussed in the Report on Financing Application.
The information in the D&B report such as the name of legal entity,
summarized financial statements, names and backgrounds of officers, and
ownership structure must be compared to such information provided
directly by the customer. Any discrepancies between these information
sources must be fully investigated, and any such discrepancies that
cannot be satisfactorily reconciled must be discussed in the Report on
Financing Application.
All lending/leasing creditors listed in the D&B report must be compared
to the bank reference and financial statement information provided
directly by the customer. Any such creditors which were not disclosed by
the customer must be contacted as a bank reference. Furthermore, if
there are any creditors who were not disclosed by the customer and who
have material outstanding balances owed to them by the customer, the
reason for such omissions must be investigated by
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7. OBTAINING AND REVIEWING BUSINESS CREDIT REPORTS (CONTINUED)
discussion with the customer. Any omissions which cannot be
satisfactorily reconciled must be discussed in the Report on Financing
Application.
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8. REFERENCE INVESTIGATION - All bank and finance company references and
all material trade references, which are either supplied with the
application or discovered during the credit investigation, must be
contacted by the Credit Analyst.
When obtaining a bank reference, the Credit Analyst must speak directly
to the account officer assigned to the applicant, to ensure that
complete information is being provided. The Credit Analyst must inquire
about the following: length of their institution's relationship with the
applicant; average deposit balances; lending/financing history; and
detailed history and status on each outstanding obligation. In addition,
the Credit Analyst should ask the account officer other questions to
probe into their overall experience and satisfaction with the customer.
This can be accomplished by asking questions regarding the applicant's
business history, growth potential and other future business plans.
References from institutions (e.g. finance companies) that have only
secured term financings (e.g. equipment and real estate leases)
outstanding with the applicant will generally provide some limited
reference information, as compared to a bank relationship. For such
references, the Credit Analyst must inquire about the history of each
financing provided, including the following: commencement date; original
balance; type of financing; collateral; term of the financing; and
payment history.
Trade references must be investigated to determine if the applicant is
paying its suppliers on a timely basis. The Credit Analyst must inquire
about the following: average and high monthly balance, payment history,
length of the vendor's relationship with the applicant; and frequency of
purchases.
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9. SITE REVIEW - A complete demographics report is included in the credit
application and generally includes the description of the site
(including diagrams), main traffic generators, competition in the area,
population, and traffic counts. The depth of site review analysis
depends upon the type of financing being considered.
EQUIPMENT financing transactions require a compilation of site
information for presentation as a section in the Report on Financing
Application. This information must be generally compared to the standard
site requirements for the concept and any major discrepancies must be
noted in the Report on Financing Application.
REAL ESTATE MORTGAGE LOAN transactions require a detailed review of the
site information. In addition to the review of the demographics report,
this review must also include a review of the Franchisor's site analysis
and pictures and site drawings for the site. Furthermore, the Senior
Vice President - Sales & Marketing must review the entire site
information package and provide summary comments to the Credit Analyst
for inclusion in the Report on Financing Application. A detailed
discussion of the site must be included in the Report on Financing
Application, and the entire site package must be made available to
Credit Committee during the committee meeting.
REAL ESTATE NET LEASE transactions require the same level of review as
described above for real estate mortgage transactions. In addition, the
President or Senior Vice President - Sales & Marketing must physically
visit the site prior to the funding of the transaction. If this site
visit occurs after a credit approval, such approval must be made
contingent upon a satisfactory site visit. A detailed discussion of the
site must be included in the Report on Financing Application, and the
entire site package must be made available to Credit Committee during
the committee meeting.
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10. REVIEW OF FRANCHISE AGREEMENT - The franchise agreement must be reviewed
during the approval process. If the application is for a new store unit,
the franchise agreement may not be available when the application is
submitted to the Credit Department because it may not yet have been
executed by the franchisee and franchisor. The franchise agreement is
typically executed 1-3 months in advance of the unit opening, depending
on the concept. Review of the franchise agreement must be listed as a
credit contingency item if the agreement is not reviewed during the
application underwriting process, and it must be submitted, reviewed and
deemed acceptable to the Credit Department prior to the funding of the
transaction.
The review of the franchise agreement must verify that:
- the term of the proposed financing does not exceed the remaining
term of the franchise agreement; and
- the franchisee, as named in the franchise agreement, is the same
entity as the lessee/borrower under the proposed financing
If the review of the franchise agreement does not verify the above
criteria, the discrepancies must be discussed with the Credit Manager to
determine whether the applicant should immediately be disqualified for
financing. If, in the opinion of the Credit Manager, the application
merits consideration for approval despite any such discrepancy, then
such discrepancy must be discussed in the Report on Financing
Application.
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11. REPORT ON FINANCING APPLICATION - Once the credit analysis is completed,
the assigned Credit Analyst or the Credit Manager must prepare a
complete written analysis on the proposed transaction and present such
report to the Credit Committee or other appropriate decision-making
authority (see Policy I.D for determination of the appropriate credit
decision-making authority).
The Report on Financing Application must include the following:
- One page Transaction Summary
- Discussion of company structure
- Discussion of background of key personnel and financial strength
of guarantors
- Discussion of operating history
- Discussion of sources and uses of capital (for applications
related to development of new units)
- Discussion of the results of the credit analysis of the
applicant's historical financial statements (if applicant has
existing store operations)
- Discussion of the results of the credit analysis of the projected
unit level economics for the unit being financed (if application
is for a new unit)
- Discussion of site information
- Recommendation
- Attach a copy of the Captec spreadsheet model (if applicant has
existing store operations)
- Attach a copy of the Captec spreadsheet for modeling the unit
level economics
See Appendix I.F.11 for the guideline format for this report.
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12. DECISION TO APPROVE OR DECLINE - The Report on Financing Application
must be submitted to all members of the Credit Committee, or other
appropriate decision-making authority (see Policy I.D for determination
of the appropriate credit decision-making authority), for their review
in advance of the committee meeting. The Credit Committee or other
appropriate decision-making authority must review and discuss the Report
and decide whether to approve or decline the proposed financing.
The Credit Committee or other appropriate decision-making authority also
has the authority to change the terms and conditions of the proposed
financing if they are not acceptable as originally proposed. Any such
changes must be communicated by the Credit Manager to the assigned
account representative in the Sales & Marketing Department, that
representative must communicate such changes to the applicant and the
applicant must accept such changes in writing in order for a transaction
to be approved.
Credit Department personnel must maintain a Credit Transaction Form
which is attached to the credit file. See Appendix I.F.12 for the format
for this report. The credit decision must be indicated on this form,
along with all contingency items. In the case of approvals, all persons
voting on the credit decision (the attending Credit Committee members or
the other appropriate decision-making members) must initial the
approval.
Credit Department personnel must also post the credit decision and any
credit contingency items into the INFO-LEASE Credit Application Module.
Such personnel must then immediately re-assign the application to the
Documentation Department and place the physical credit file in Captec's
filing cabinets.
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13. APPROVAL AND DECLINE LETTERS - Approval and decline letter must conform
to the standard form for such letters. See Appendix I.F.13(a) for
standard form approval letters and Appendix I.F.13(b) for standard form
rejection letters.
These standard form letters have been designed to legally conform to
commercial law and Federal Regulation B (Equal Credit Opportunity)
requirements. Additionally, approval letters must specify certain
documentation requirements, the standards for which are determined
outside of the Credit Department. Therefore, only Captec's General
Counsel has authority to make changes to the standard form approval or
rejection letters.
If approved, an approval letter must be signed by the Vice President -
Credit or Credit Manager and sent to the customer, outlining the terms
and conditions of the approval and the file proceeds to the
documentation department. However, with respect to franchise loans
secured by mortgages, the communication of loan application approvals
must be coordinated with the issuance of a Commitment Letter by the
Documentation Department, as more fully described in Section I.F1.9.
If the transaction is declined, a rejection letter must be signed by the
Vice President - Credit or Credit Manager and sent to the applicant.
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SUB-SECTION: F1. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
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1. LIMITATIONS ON LOAN TERMS & CONDITIONS - Franchise loans secured by
mortgages must conform with the following terms and conditions as a
prerequisite for being considered for credit underwriting. Credit
applications with non-conforming terms and conditions must be returned
to the Sales & Marketing Department for restructuring.
a) FIXED RATE - All loans must provide for a fixed rate of interest for
the entire term of the loan. Rates may float prior to funding based
upon changes in the comparable-term U.S. Treasury Notes. The loan
interest rate will be priced based upon a spread over the Treasury
security most closely approximating the stated maturity of the loan.
b) SECURITY INTEREST - Loans must be secured by one of three types of
security interests:
FEE SIMPLE MORTGAGES provide a security interest in the Borrower's
restaurant building(s) and related land.
LEASEHOLD MORTGAGES provide a security interest in the Borrower's
ground lease. Leasehold mortgages are used in instances where the
Borrower leases the land under a ground lease from a third party
lessor.
BUSINESS ENTERPRISE LIENS provide a security interest in all of the
assets of the Borrower held at the unit that is the subject of the
financing. Business Enterprise Liens are typically used in instances
where the Borrower may have no land or building assets at the
subject unit.
At least 70% of loans made by the Company will be secured by fee simple
mortgages. No more than 30% of the loans will be secured by leasehold
mortgages and business enterprise liens. Senior management places the
limitations on the percentage of loans which can be secured by leasehold
mortgages and business enterprise liens. From time to time, such
limitations will be discussed in Credit Committee meetings and any
resulting changes to the limitations must be communicated by the Vice
President - Credit to the Sales & Marketing Department.
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1. LIMITATIONS ON LOAN TERMS & CONDITIONS (CONTINUED)
Furthermore, other underwriting and documentation policies will
vary, as noted elsewhere in the Operations Manual, depending upon
whether a loan is secured by a fee simple mortgage or a leasehold
mortgage.
c) MAXIMUM LOAN MATURITY - The maturity period for any loan must be
less than or equal to 15 years.
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1. LIMITATIONS ON LOAN TERMS & CONDITIONS (CONTINUED)
d) OTHER LOAN MATURITY RESTRICTIONS - Loan maturity periods are further
restricted as follows:
i) The loan maturity period may not be less than one half (1/2) of
the payment amortization period.
ii) The loan maturity period must be less than or equal to the
remaining term of the Borrower's franchise agreement; except
that variances from this policy are acceptable for only fully
amortizing loans that have a stated maturity that extends no
more than three (3) months beyond the franchise agreement
termination date.
e) MAXIMUM AMORTIZATION PERIOD - The loan amortization period for any
loan secured by a fee simple mortgage must be less than or equal to
20 years. The loan amortization period for any loan secured by a
leasehold mortgage or business enterprise lien must be less than or
equal to 15 years.
f) BALLOON LOANS - Loans secured by fee simple mortgages may be
structured with balloon amortizations. Balloon loans are not
permitted on loans secured by leasehold mortgages or business
enterprise liens. Furthermore, the aggregate balance of balloon
loans must not exceed 20% of the aggregate Secured Franchise
Business Loan portfolio. Senior management places limitations on the
percentage of loans which can have balloon features. From time to
time, such limitations will be discussed in Credit Committee
meetings and any resulting changes to the limitations must be
communicated by the Vice President - Credit to the Sales & Marketing
Department.
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2. FRANCHISE CONCEPT TIERING SYSTEM - Only for purposes of underwriting
franchise loans secured by mortgages, a tiering system has been
established which categorizes franchise concepts into two tiers. These
tiers are intended to delineate the relative level of credit risk
associated with loans to franchisees within such concepts, prior to
taking into account the results of the franchisee underwriting process
(see Section I.F). The franchisee underwriting process is critical to
the overall risk analysis associated with any loan application, and
thus, the tiering system is not an exclusive or absolute measure of the
credit risk of any loan. Notwithstanding the prior sentence, tier
rankings of approved concepts have the following meaning:
Tier I - Highest Overall Quality
Tier II - Strong Overall Quality
The tier classifications are used for purposes of stratifying certain
other loan underwriting criteria, as well as for stratifying certain
concept and borrower loan portfolio concentration limits (see Section
I.F1.8 for further information regarding concentration limits).
This tiering system, and the tier ranking assigned to any concept, are
confidential and should not be communicated to loan applicants or
franchisors. The purpose of this confidentiality is to avoid offending
franchisors and applicant's with differing views on the relative
strengths and weaknesses of their concept.
The Credit Committee is responsible for assigning tier rankings to each
approved concept. The Vice President - Credit is responsible for
communicating the tier rankings, and any changes thereto, to the Sales &
Marketing Department.
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2. FRANCHISE CONCEPT TIERING SYSTEM (CONTINUED)
The tier designation process, similar to the credit underwriting
process, involves the weighing of strengths and weaknesses and making
qualitative decisions based upon such information. The general criteria
to be used for classifying concepts by tier level are as follows:
- Size of system
- Maturity of system
- Degree of positive trademark recognition
- Degree of franchisor support
- Financial strength of franchisor
The size of the system (i.e. - number of stores under operation) is a
strong indicator of the credit risk associated with an individual
franchisee loan. It is an important measure of the scope and depth of a
concept. When accompanied by limited unit level closure statistics, the
size of the system is the best historical measure of the long-term
success of a concept at the unit level. Generally, Tier I concepts have
over 500 units (often over 1,000 units), and Tier II concepts have up to
500 units. Concepts which cross-over these general ranges are typically
tiered based upon other criteria and mitigating factors. Concepts with
over 1,000 units would, in nearly all cases, be classified as Tier I
concepts. As a general exception to the above tiering standards, casual
dining and family restaurant segment concepts will usually have lower
system unit size threshold levels due to the substantially higher unit
level revenues, capital costs and seating capacities.
The degree of maturity of a concept system is measured by such factors
as market penetration, growth rate, and number of years in operation.
Generally, Tier I concepts are more mature systems than Tier II
concepts.
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2. FRANCHISE CONCEPT TIERING SYSTEM (CONTINUED)
Often linked with system maturity is positive trademark recognition.
Concepts with a high level of positive trademark recognition generally
have the broadest appeal in the consumer market. Tier I concepts
generally are "household names" either regionally or nationally.
Franchisor support is an important component which contributes to the
stable, consistent operation of the franchise store unit, which in turn
promotes growth in the overall size of the system. Franchisors provide
support to their franchisees in very significant ways, including site
analysis and selection, personnel training, operational support, quality
control, and the development and production of national marketing and
advertising campaigns. Generally, the level of franchisor support is
strongest for Tier I concepts.
The financial strength of the franchisor is considered and can be
important, although its is not necessarily a major factor. There is no
requirement for credit ratings of the franchisor. A financially strong
franchisor can be a benefit in terms of future system growth
opportunities and general stability. However, a franchisor with more
limited financial strength may also be able to provide all of the
necessary support for the franchisee community and, as a result, may be
just as effective as a financially stronger franchisor. For example, the
parent companies of concepts such as Arby's, Denny's and Hardees have
below investment grade corporate ratings, yet these systems have
continued high level of franchisor support of the system.
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2. FRANCHISE CONCEPT TIERING SYSTEM (CONTINUED)
Mitigating factors which may positively affect the tier designation of a
concept include:
- Strong sales and unit growth rates
- Strong same store sales growth figures
- Superior unit level economics
- Superior management
- Beneficial Parent/Affiliate relationships
- Broad access to capital at the franchisor level
- Regional market strength
- Low unit level closure statistics
- Overall quality of the franchisees within the system
Mitigating factors which may negatively affect the tier designation of a
concept include:
- Detrimental Parent/Affiliate relationships
- High unit level closure statistics
- Poor franchisor management team
- Declining market penetration or trademark appeal
- Negative same store sales growth figures
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SECURED FRANCHISE BUSINESS LOANS
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3. CONCEPTS APPROVED FOR SECURED FRANCHISE BUSINESS LOANS - The following
concepts have been approved for the indicated types of security
interests (see definitions in Section I.F1.1(b)):
a) Fee Simple Mortgages
Tier I - Applebee's, Arby's, Boston Market, Burger King,
Chili's, Denny's, Hardees, Jack In The Box, KFC, Pizza
Hut, Red Robin, Taco Bell, TGI Friday's, and Wendy's.
Tier II - Carrows/Coco's, Church's/Popeye's, Eastside Mario's,
Golden Corral, Houlihan's, Kenny Rogers Roasters,
Shoney's, Sonic, and Taco Cabana.
b) Leasehold Mortgages -
Tier I - Applebee's, Arby's, Boston Market, Burger King,
Chili's, Denny's, Hardees, Jack In The Box, KFC, Pizza
Hut, Red Robin, Taco Bell, TGI Friday's, and Wendy's.
Tier II - Carrows/Coco's, Church' s/Popeye's, Eastside Mario's,
Golden Corral, Houlihan's, Kenny Rogers Roasters,
Shoney's, Sonic, and Taco Cabana.
c) Business Enterprise Liens
Tier I - Applebee's, Arby's, Burger King, KFC, Pizza Hut, Taco
Bell, and Wendy's.
Tier II - None
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4. LOAN-TO-VALUE RATIOS - Secured Franchise Business Loans must conform to
the following loan-to-value (LTV) ratio limitations.
a) Loans secured by fee simple mortgages must be based upon an
independent valuation of the land and building assets. The LTV ratio
for each loan must not exceed the lesser of 70% of an independent
valuation of the franchise enterprise (a business valuation which
includes land and building) or 100% of the real estate appraised
value. In addition, the LTV ratio of the aggregate portfolio of fee
simple mortgage loans must not exceed the lesser of 70% of the
business valuation (including land and building) or 92.5% of the
real estate appraised value.
b) Loans secured by leasehold mortgages or business enterprise liens
must be based upon an independent valuation of the franchise
enterprise (a business valuation). The LTV ratio must be less than
or equal to 70%.
In all instances, the independent valuation must be performed by a
nationally recognized valuation firm with extensive knowledge and
experience in the area of restaurant franchise finance. Section IV.D.6
further addresses the loan documentation requirements related to real
estate and business valuations.
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5. Fixed Charge Coverage Ratios - Minimum Fixed Charge Coverage Ratios are
required as a condition of approval of any application for a Secured
Franchise Business Loan. There are two levels of minimum Fixed Charge
Coverage Ratios.
a) If the loan is secured by a fee simple mortgage, then the Borrower
Entity must have a minimum Fixed Charge Coverage Ratio of 1.10:1.
Otherwise, if the loan is secured by a leasehold mortgage or a
business enterprise lien, the Borrower entity must have a minimum
Fixed Charge Coverage Ratio of 1.20:1.
In addition, the aggregate pool of loans secured by fee simple
mortgages must have a minimum Fixed Charge Coverage Ratio of 1.15:1
for the Borrower and 1.25:1 for the individual store unit, which the
loan will be extended.
b) If the loan is secured by a fee simple mortgage, then the individual
store unit to which the loan will be extended must have a minimum
Fixed Charge Coverage Ratio of 1.20:1. Otherwise, if the loan is
secured by a leasehold mortgage or a business enterprise lien, the
individual store unit must have a minimum Fixed Charge Coverage
Ratio of 1.40:1.
In addition, the aggregate pool of loans secured by a leasehold
mortgages and business enterprise liens must have a minimum Fixed
Charge Coverage Ratio of 1.35:1 for the Borrower and 1.25:1 for the
individual store unit, which the loan will be extended.
See section I.G for the definition of Fixed Charge Coverage Ratio.
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SECURED FRANCHISE BUSINESS LOANS
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6. Franchisee Operator Experience Requirements - Franchisee borrowers must
meet the following operating experience requirements in order to qualify
for a loan secured by a mortgage.
a) Franchisee borrowers must currently be operating at least two (2)
franchise units of the concept to which the loan will be extended.
b) A principal member of the management team of the franchisee borrower
must have at least two (2) years of experience in the management of
restaurant operations.
c) A principal member of the management team of the franchisee borrower
must have at least one (1) year of experience in the management of
restaurant operations within the concept to which the loan will be
extended.
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SUB-SECTION: F1. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
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7. PERSONAL GUARANTEE REQUIREMENTS - Personal guarantee requirements differ
depending upon whether the loan is secured by a fee simple mortgage or a
leasehold mortgage or business enterprise lien (see definitions in
Section I.Fl.1(b)).
a) Loans secured by fee simple mortgages are not required to be
guaranteed by the borrower. However, when circumstances allow,
personal guarantees should be obtained. Furthermore, the omission of
personal guarantee(s) from a loan application must be highlighted on
the face of the Report on Financing Application submitted to the
Credit Committee and must be considered by the Credit Committee
relative to the credit decision for that loan application.
b) Loans secured by leasehold mortgages and business enterprise liens
MUST have personal guarantee(s), unless the Borrower is operating 25
or more restaurants in one or more concepts. Such, personal
guarantees must be offered by at least one of the principal members
of the management team of the franchisee borrower.
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REVISED OCTOBER 1995
SECTION: I. CREDIT UNDERWRITING POLICIES
SUB-SECTION: F1. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
8. BORROWER'S USE OF LOAN PROCEEDS - The borrower must state the use of the
loan proceeds in the credit application. Generally, the borrower should
be using the loan proceeds to refinance existing indebtedness,
develop/acquire additional restaurant units, and/or for other purposes
relating to the operation of restaurant facilities. Any use of loan
proceeds outside of this scope must be noted in the Report on Financing
Application submitted to the Credit Committee. The Credit Committee is
responsible for determining whether the use of loan proceeds for reasons
beyond those noted herein is acceptable.
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REVISED OCTOBER 1995
SECTION: I. CREDIT UNDERWRITING POLICIES
SUB-SECTION: F1. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
9. PORTFOLIO CONCENTRATION LIMITATIONS - The Credit Committee will place
limitations on concept, borrower and geographic concentrations in the
portfolio of Secured Franchise Business Loans. Furthermore, the Chief
Financial Officer must be present at a Credit Committee meeting in which
changes to concentration limits are proposed and must vote affirmatively
for any concentration limit changes in order for such changes to become
effective.
The Vice President - Credit will maintain a written matrix which
specifies the current portfolio concept, borrower and geographic
concentration limits, and further, will be responsible for preparing and
circulating weekly reports to the Credit Committee detailing these
concentrations with respect to the outstanding loan balances and
remaining availability under the concentration limits. The Vice
President - Credit is also responsible for communicating the
limitations, and any changes thereto, to the Sales & Marketing
Department.
Such concentration limits will be stratified based upon the tier
designations assigned to each approved concept (see Section I.F1.2 and
Section I.Fl.3). Borrower concentration limits, as well as concept
concentration limits, will vary depending upon the applicable tier
ranking.
Borrower concentration limits will also vary depending upon whether a
borrower is a franchisor or a franchisee, within a given concept.
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REVISED OCTOBER 1995
SECTION: I. CREDIT UNDERWRITING POLICIES
SUB-SECTION: F1. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
10. PROCESSING OF APPROVED LOAN APPLICATIONS - Credit files for approved
applications for franchise loans secured by mortgages must be forwarded
to the Manager of Contract Administration - Real Estate for preparation
of the loan and mortgage documentation.
Commitment letters for such approved loan applications must be prepared
by the Documentation Department. Loan commitment letters may NOT be
prepared or executed by Credit Department or Sales & Marketing
Department personnel.
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REVISED JULY 1995
SECTION: I. CREDIT UNDERWRITING POLICIES
SUB-SECTION: G. DEFINITIONS OF CREDIT ANALYSIS TERMS
- --------------------------------------------------------------------------------
CASH FLOW - The sum or subtraction of the following items for the applicant
business for the applicable operating period:
+ Operating Cash Flow
- Debt Service
- Operating Lease Expense
--------------------------------
= Cash Flow
CASH FLOW/CPLTD RATIO - The product of the following equation, expressed as a
ratio (e.g. 1.25:1):
+ Net Income
+ Depreciation and Amortization
-----------------------------
= Subtotal
div Current Portion of Long-Term Debt
-----------------------------------------
= Cash Flow/CPLTD Ratio -
CURRENT ASSETS - The current assets as stated on the applicant's financial
statement.
CURRENT LIABILITIES - The current liabilities as stated on the applicant's
financial statement.
CURRENT PORTION OF LONG-TERM DEBT - The current portion of long-term debt due to
mature during the next comparable operating period, as stated on the applicant's
financial statement, plus, if not already included therein, the current portion
of principal payments imputed on all capital leases. (Note: See comments under
Interest Expense definition regarding FASB financial reporting standards for
capital leases. These same comments apply to this definition for the related
principal portion of such capital leases.)
CURRENT PORTION OF OPERATING LEASES - The amount of rent due under operating
leases for the next comparable operating period.
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Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: G. DEFINITIONS OF CREDIT ANALYSIS TERMS
- --------------------------------------------------------------------------------
DEBT SERVICE - The sum of Interest Expense, plus the amount of principal paid on
long-term debt, plus the amount of principal paid on capital leases, all for
the applicable operating period.
DEBT/WORTH RATIO - The product of the following equation, expressed as a ratio
(e.g. 2.0:1):
Total Liabilities
div Net Worth
--------------
= Debt/Worth Ratio
DEPRECIATION AND AMORTIZATION - The depreciation and amortization expense as
stated on the applicant's financial statement.
EBITDA - The sum of the following items for the applicant business for the
applicable operating period:
+ Net Income
+ Depreciation and Amortization
+ Interest Expense
+ Income Taxes
----------------
= EBITDA (earnings before interest, taxes, depreciation and
amortization)
FIXED CHARGE COVERAGE RATIO - The product of the following equation, expressed
as a ratio (e.g. 1.25:1):
Operating Cash Flow
div Fixed Charges
------------------
= Fixed Charge Coverage Ratio
FIXED CHARGES - The sum of the following items for the applicant business for
the applicable operating period:
+ Current Portion of Long-Term Debt
+ Interest Expense
+ Current Portion of Operating Leases
-------------------------------------
= Fixed Charges
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Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: G. DEFINITIONS OF CREDIT ANALYSIS TERMS
- --------------------------------------------------------------------------------
INTEREST EXPENSE - The interest expense as stated on the applicant's financial
statement, plus, if not already included therein, the interest expense imputed
on all capital leases. (Note: FASB financial reporting standards require the
interest imputed on capital leases to be recorded as interest expense and
included in the interest expense total on the financial statement. Therefore,
the interest expense as stated on the applicant's financial statement should
include the interest imputed on capital leases. If the financial statement has
been reviewed or audited, reliance may be placed on the audit firm to have
properly applied this principal. If the financial statement has not been
reviewed or audited, the analyst must determine if the imputed interest has been
properly stated, and if not, must add this interest as per the stated formula.)
LIQUIDITY RATIO - The product of the following equation, expressed as a ratio
(e.g. 1.25:1):
Current Assets
div Current Liabilities
-----------------------
= Liquidity Ratio
NET INCOME - The net income as stated on the applicant's financial statement.
NET WORTH - The net worth (e.g. - partners' capital or stockholders equity) as
stated on the applicant's financial statement. For a corporation, this will
include preferred stock, common stock, additional paid-in capital and retained
earnings, less any treasury stock or stock subscriptions receivable.
NON-RECURRING ITEMS - Items which, when computing cash flow, should be added
back to or subtracted from net income to normalize results. Examples of
Non-Recurring Items include, but are not limited to: gains on sales of assets,
expensed development costs for newly constructed store units, theft expenses,
non-recurring bank charges (e.g. - new facility fees) and discontinued
operations write-offs (on a case-by-case basis).
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Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: G. DEFINITIONS OF CREDIT ANALYSIS TERMS
- --------------------------------------------------------------------------------
OPERATING CASH FLOW - The sum or subtraction of the following items for the
applicant business for the applicable operating period:
+ Net Income
+ Depreciation and Amortization
+ Interest Expense
+ Operating Lease Expense
+/- Non-Recurring Items
---------------------------
= Operating Cash Flow
OPERATING LEASE EXPENSE - The amount of rental expense paid under operating
leases, as stated on the applicant's financial statements.
TOTAL LIABILITIES - The total liabilities as stated on the applicant's financial
statement, including current and long-term liabilities.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: H. CREDIT MONITORING
- --------------------------------------------------------------------------------
1. UPDATES ON FRANCHISE CONCEPT UNDERWRITING REPORTS - Once a Franchise
Concept is approved, the Franchisor file should be retained in the Credit
Department. Captec should be put on the franchisor's mailing list to
receive quarterly financial statements and any news releases on the
franchisor. All updated information must be informally reviewed by the
Credit Manager for major events or changes.
Each franchise concept must be formally reviewed on an annual basis. All
franchisors should be entered in the Credit Department's tracking system,
which provides a tickler report when the franchisor is up for an annual
review.
The annual franchise concept review should include the spreading of the
most recent audited and interim financial statements of the franchisor, a
review of the existing portfolio and a review and update of the written
Concept Underwriting Report so that it includes all current information on
the company. The Concept Underwriting Report should be submitted to Credit
Committee for renewal.
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Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: H. CREDIT MONITORING
- --------------------------------------------------------------------------------
2. MONITORING UNIT LEVEL PERFORMANCE TRENDS WITHIN CONCEPTS - As Captec
finances more franchisees in each concept and a portfolio is established,
unit level financial statements are obtained from a variety of customers.
The result is a resource of actual operating results from a cross-section
of stores within the concept.
The Vice President - Credit is responsible for overseeing the input of this
information into a database which accumulates this information and computes
average concept performance standards such as store sales, pertinent
margins, operating cost components and profits. These unit level
performance standards must be updated on an annual basis in conjunction
with the update of the Concept Underwriting Report. Any significant changes
in the standards must be noted in the updated report
Furthermore, the most current unit level performance standards must be
utilized when analyzing a new application for the concept, comparing the
applicant's projections to the standards.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: H. CREDIT MONITORING
- --------------------------------------------------------------------------------
3. MONITORING HIGH CONCENTRATION CUSTOMER ACCOUNTS - Customer accounts with
total exposure (outstanding balances) exceeding $700,000 ("high
concentration accounts") must be monitored on a continuous basis. It is the
duty of the Credit Manager to assign responsibility for monitoring each
high concentration account to a specific Credit Analyst.
Each high concentration account customer must provide Captec with quarterly
financial statements. Upon receipt, the quarterly financial information
must be input into the spreadsheet tracking system by the assigned Credit
Analyst. This system lists the customer name, details the transaction(s)
and total exposure with Captec, and lists the most recent financial
statement on file and when the next is due. A follow-up date is triggered
by this system.
The assigned Credit Analyst should perform the standard analysis on these
quarterly financial statements and report any significant changes in the
customer's financial trends and financial position to the Credit Manager.
The Credit Manager must report this information to the Credit Committee.
It is common for Captec's high concentration account customers to be in a
significant growth phase. Such growth can strain the capital resources,
management expertise and earnings trends of the customer. Therefore, when
monitoring such customers, the credit analysis should also include
comparison of projected to actual results and an on-going review of the
projected effects of growth on the financial position of the customer.
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II. COLLECTION POLICIES
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Section: II. COLLECTION POLICIES
Sub-Section: A. INTRODUCTION
- --------------------------------------------------------------------------------
1. COLLECTION PHILOSOPHY - Captec's collection philosophy has been developed
and refined throughout the Company's history and must be viewed as dynamic.
The company's collection policies have been developed internally - designed
for Captec's specific market focus on franchise and chain restaurant
businesses and the various types of financing products provided to its
customers in those markets. This is a specialized market demanding
specialized collection policies.
Captec's collection policies are proprietary. They have similarities to
other commercial finance institutions' collection policies, but in other
ways are unique to Captec
Captec's collection policies are founded upon the belief that the
collection process is both art and science. This is a process that includes
considering the many interrelated facts of a particular customer account in
relation to the Company's market expertise, past collection experiences,
and franchisor support agreements. As such, it is not a process which can
be entirely reduced to the administration of written policy.
Therefore, these policies are designed as guidelines and principals for
conducting the day-to-day business of monitoring and collecting balances
due on customer financing accounts. These policies are NOT intended to be
all-inclusive or absolute.
Captec believes in strict enforcement of the terms and conditions of its
financing contracts, and any guarantees thereon. The Portfolio Management
Department must be committed to the enforcement process and be prepared, at
all times, to use all of its resources to ensure such enforcement.
Captec's collection policies are also founded upon the belief that
enforcement of contracts within its specialized industry is often most
successful when there exists a spirit of cooperation between the various
parties having vested interests in resolving collection problems, including
on a case-by-case basis franchisors, sub-franchisors and/or franchisees.
In certain cases, this process may call for patience or limited forbearance
by Captec during the resolution negotiating process. However, ultimately
this process must be directed towards and lead to satisfactory resolution
of the customers' obligations to the Company; otherwise, the Portfolio
Management Department must pursue its collection objectives independent of
all other parties.
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Section: II. COLLECTION POLICIES
Sub-Section: A. INTRODUCTION
- --------------------------------------------------------------------------------
2. PORTFOLIO MANAGEMENT DEPARTMENT ORGANIZATION - The Portfolio Management
Department is made up of a group of employees dedicated to the collection
process. The following is an organizational chart for the Portfolio
Management Department
|
|
----------------------------
| |
Equipment Real Estate
Portfolio Portfolio
Manager Manager
(Future)
| |
----------------------------
|
|
Collectors
The Portfolio Management Department reports to the Company's Senior Management
via the Senior Vice President and General Counsel.
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- --------------------------------------------------------------------------------
Section: II. COLLECTION POLICIES
Sub-Section: B. ACCOUNT MONITORING
- --------------------------------------------------------------------------------
1. STANDARDIZED PAYMENT DUE DATES - Equipment lease payments are due on either
the 1st or 15th day of the month. Real estate leases are due on the 1st day
of the month. Real estate mortgages are due on the 1st day of the month.
2. SYSTEM REPORTS - The following reports must be generated at the stated
frequency and monitored as follows:
a) DELINQUENCY REPORT - Twice a week, after receipts have been
processed into the INFO-LEASE computer system, the Portfolio Managers
must run a Delinquency Report from the INFO-LEASE. This report lists
any amount past due for 5 days or more. Past due accounts are sorted in
the report by the number of days past due and the number of days since
the last payment, with each sort having the following categories: 5-30
days, 31-60 days, 61-90 days and over 90 days. The report must be
distributed to the Equipment Portfolio Manager, assigned Collector, and
General Counsel. These persons must review the report to remain
up-to-date regarding the status of payments and must discuss the
delinquent accounts to strategize on any necessary actions. See Exhibit
II.B.2(a) for a sample report.
b) SUMMARY PAST DUE REPORT - At the end of each month, after receipts
have been processed into the INFO-LEASE system, the Accounting
Department must run this report. This report lists any amount past due
for 5 days or more. Past due accounts aged in the report into the
following categories: 5-30 days, 31-60 days, 61-90 days and over 90
days. The report must be distributed to the Equipment Portfolio
Manager, assigned Collector, and General Counsel and Chief Financial
Officer. This report provides a month-end summary of the information in
the Delinquency Report and must be reviewed and monitored by the same
persons and in the same manner as the Delinquency Report. See Exhibit
II.B.2(b) for a sample report.
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Section: II. COLLECTION POLICIES
Sub-Section: B. ACCOUNT MONITORING
- --------------------------------------------------------------------------------
2. System Reports (Continued)
c) SUMMARY PAST DUE BY BANK REPORT - This report is identical to the
Summary Past Due Report except that it captures information only for
contracts securing borrowings at a specific lender. The report must be
run by the Accounting Department at each month-end. The Portfolio
Manager must review the report to ensure its accuracy and, thereafter,
forward a copy of the report to the respective lender.
d) ACCOUNTS RECEIVABLE TRIAL BALANCE BY DEALER - This report must be
run on a monthly basis by the Accounting Department. It outlines the
detail of all outstanding financing balances within a franchise/chain
concept. Report detail includes customer name, contract number,
contract start date, gross remaining balance, original term and
remaining term. It also reports the date of last payment made and next
payment due date as well as the total dollar amount currently due.
Copies of this report must be distributed to the Credit Manager,
Portfolio Manager, assigned Collector, General Counsel, Chief Financial
Officer and also to the Sales & Marketing Department. The report is
primarily generated for reporting information to franchisors who have
recourse or remarketing agreements with Captec, and it is the
responsibility of the Sales & Marketing Department personnel to
distribute these reports to franchisors.
3. ON-LINE ACCOUNT MONITORING - The Portfolio Manager and assigned Collector
also must monitor pay histories of past due accounts daily by use of the
on-line information screens on the INFO-LEASE computer system.
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Section: II. COLLECTION POLICIES
Sub-Section: B. ACCOUNT MONITORING
- --------------------------------------------------------------------------------
4. PAYMENT RECEIPTS - The majority of payments are made to lockbox accounts,
but receipts are also received in the mail direct to Captec's offices. On a
daily basis, the Accounting Department must provide to the Portfolio
Management Department a report of daily cash receipts. The cash receipts
reports will include contractual lease or loan payments, as well as other
billable items such as personal property taxes and late charges.
5. CHANGE INFORMATION - Any notification of changes received from the Lessees
are input into the INFO-LEASE database by the Equipment Portfolio Manager
and assigned Collector. Examples of change information include: change of
customer address, phone or location; change of asset location, change of
principals. Memos of changes are also routed to contract files.
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- --------------------------------------------------------------------------------
Section: II. COLLECTION POLICIES
Sub-Section: C. DELINQUENT ACCOUNTS
- --------------------------------------------------------------------------------
1. EQUIPMENT FINANCINGS
a. IDENTIFICATION - Delinquent accounts are identified by the account
monitoring procedures described in Section II.B.
b. 5 - 15 DAY PROCEDURES - All customers having amounts 5 days past due must
be immediately called by the assigned Collector, and the Collector should
attempt to arrange for the customer to make payment via overnight mail. The
Collector must advise the customer that a late charge will be assessed
shortly and that this is an opportunity for the customer to send their
payment in time to avoid the late charge. Customers who do not respond to
this call by making immediate payment must be brought by the Collector to
the Portfolio Manager's attention to discuss the customer's payment status
and to strategize on any further action required.
There is a 7 day grace period, after which late charges are assessed in an
amount equal to 10% of the past due payment. This grace period is not
stated in the contract and does not have to be granted to the customer. As
an internal policy, the grace period should typically be granted to the
customer, but the grace period generally should NOT be communicated to the
customer so as to avoid the abusive use of grace period by the customer.
c. 15 - 30 DAY PROCEDURE - If any amount due on an account (except nominal
amounts of under $100) becomes 15 days past due, a Notice Of Default with a
7 day cure period must be prepared by the assigned Collector and sent to
the customer and a copy must be sent to all guarantors (See Appendix
II.C.1.c for standard letter). During this time, the assigned Collector
must call the customer regularly to secure a "proposed" payment date and
amount. At the 15 day past due point, the Collector must advise the
Portfolio Manager of the collection history on the account and,
thereafter, the Portfolio Manager must remain involved in the collection
process and work closely with the Collector seeking to resolve the
delinquency.
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Section: II. COLLECTION POLICIES
Sub-Section: C. DELINQUENT ACCOUNTS
- --------------------------------------------------------------------------------
1. EQUIPMENT FINANCINGS (Continued)
d. 30 - 45 DAY PROCEDURES - If any amount due on an account (except nominal
amounts of under $100) becomes 30 days past due, the account must be
reassigned to the Portfolio Manager, although the previously assigned
Collector generally should remain active in supporting the on-going
collection process on the account. Immediately, a Notice Of Default and
Acceleration of Payments must be prepared by the Portfolio Manager and sent
to the customer (See Appendix II.C.1.d-1 for standard letter).
Additionally, a separate Guarantor Notice Of Default and Demand for Payment
letter must be sent to each guarantor, enclosing a copy of the letter to
the customer and outlining the guarantors' responsibilities (See Appendix
II.C.1.d-2 for standard letter). All copies of these letters must be sent
by both regular U.S. mail and by certified mail. These letters must
accelerate the contract balance and must make final demand for payment.
In addition to the above letter procedure and this time period, the
Portfolio Manager, with assistance as required from the previously assigned
Collector, must continue to speak with the customer and guarantors, their
legal counsel, and the franchisor, with the objective of resolving the
delinquency.
At the 30 day past due point, the Senior Vice President and General Counsel
must be notified of the status of the account and the actions taken on the
account to date. The Senior Vice President and General Counsel is
responsible for informing Captec's executive management of the account
status.
e. 45 - 90 DAY PROCEDURES - The Senior Vice President and General Counsel,
Portfolio Manager and Collector staff must all review possible transfer,
assumption or re-write opportunities within the chain concept system. Other
members of executive management and of the Sales & Marketing Department
should be consulted to help target potential equipment buyers and evaluate
the value of the equipment. If an asset sale is anticipated, the Portfolio
Manager must notify the customer of Captec's election to conduct a sale of
the assets. When necessary, a local collection attorney may also be
selected by the Senior Vice President and General Counsel. During this
period, a final resolution strategy must be determined and implemented.
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Section: II. COLLECTION POLICIES
Sub-Section: C. DELINQUENT ACCOUNTS
- --------------------------------------------------------------------------------
1. EQUIPMENT FINANCINGS (Continued)
f. CONTINUOUS CONTACT - Throughout the collection process, the Portfolio
Manager must oversee the activities of the entire Portfolio Management
Department with the objective of continuing dialogue with the customer to
effect payment. All verbal discussions with the customer (e.g. - telephone
calls, office visits, etc.) must be recorded in the Collectors or Portfolio
Managers phone log (see form in Appendix II.C.1.f).
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Revised July 1995
Section: II. COLLECTION POLICIES
Sub-Section: C. DELINQUENT ACCOUNTS
- --------------------------------------------------------------------------------
2. MORTGAGE LOANS
a. IDENTIFICATION - Delinquent accounts are identified by the account
monitoring procedures described in Section II.B.
b. 5 - 15 DAY PROCEDURES - All customers having amounts 5 days past due must
be immediately called by the assigned Collector, and the Collector should
attempt to arrange for the customer to make payment via overnight mail. The
Collector must advise the customer that a late charge will be assessed
shortly and that this is an opportunity for the customer to send their
payment in time to avoid the late charge. Customers who do not respond to
this call by making immediate payment must be brought by the Collector to
the Portfolio Manager's attention to discuss the customer's payment status
and to strategize on any further action required.
There is a 15 day grace period, after which late charges are assessed in an
amount equal to 5% of the past due payment. This grace period is stated in
the promissory note. The grace period generally should NOT be communicated
to the customer so as to avoid the abusive use of grace period by the
customer.
c. 15 - 30 DAY PROCEDURE - If any amount due on an account (except nominal
amounts of under $100) becomes 15 days past due, a Notice Of Default with a
5 day cure period must be prepared by the assigned Collector and sent to
the customer and a copy must be sent to all guarantors (See Appendix
II.C.1.c for standard letter). During this time, the assigned Collector
must call the customer regularly to secure a "proposed" payment date and
amount. At the 15 day past due point, the Collector must advise the
Portfolio Manager of the collection history on the account and,
thereafter, the Portfolio Manager must remain involved in the collection
process and work closely with the Collector seeking to resolve the
delinquency.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised July 1995
Section: II. COLLECTION POLICIES
Sub-Section: C. DELINQUENT ACCOUNTS
- --------------------------------------------------------------------------------
2. MORTGAGE LOANS (CONTINUED)
d. 30 - 45 DAY PROCEDURES - If any amount due on an account becomes 30 days
past due, the Portfolio Manager must notify the General Counsel to the
status of the account and the actions taken on the account to date. The
General Counsel shall inform Captec's executive management of any account
that becomes 30 day past due and provide the Portfolio Manager with the
proper procedure for Default and Acceleration notice in the jurisdiction
where the mortgaged premises are located. A Notice Of Default and
Acceleration of Payments must be prepared by the Portfolio Manager in
accordance with the General Counsel direction and sent to the customer.
Additionally, a separate Guarantor Notice Of Default and Demand for Payment
letter must be sent to each guarantor, enclosing a copy of the letter to
the customer and outlining the guarantors' responsibilities. All copies of
these letters must be sent by both regular U.S. mail and by certified mail.
These letters must accelerate the contract balance and must make final
demand for payment.
In addition to the above letter procedure at this time period, the
Portfolio Manager, with assistance as required from the previously assigned
Collector, must continue to speak with the customer and guarantors, their
legal counsel, and the franchisor, with the objective of resolving the
delinquency.
e. 45 - 90 DAY PROCEDURES - The Senior Vice President and General Counsel,
Portfolio Manager and Collector staff must all review possible transfer,
assumption or re-write opportunities within the chain concept system. Other
members of executive management and of the Sales & Marketing Department
should be consulted to help target potential buyers and evaluate the value
of the real estate.
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Revised July 1995
Section: II. COLLECTION POLICIES
Sub-Section: C. DELINQUENT ACCOUNTS
- --------------------------------------------------------------------------------
2. MORTGAGE LOANS (CONTINUED)
f. CONTINUOUS CONTACT - Throughout the collection process, the Portfolio
Manager must oversee the activities of the entire Portfolio Management
Department with the objective of continuing dialogue with the customer to
effect payment. All verbal discussions with the customer (e.g. - telephone
calls, office visits, etc.) must be recorded in the Collectors or Portfolio
Managers phone log (see form in Appendix II.C.1.f).
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Revised July 1995
Section: II. COLLECTION POLICIES
Sub-Section: D. DEFAULTED ACCOUNTS
- --------------------------------------------------------------------------------
1. EQUIPMENT FINANCINGS
a. REPLACEMENT OF FRANCHISEE & ASSUMPTION/TRANSFER OF FINANCING CONTRACT -
Generally, the most effective method of recovery on defaulted accounts is
the replacement of the franchisee and, in conjunction therewith, the
assumption or transfer of the leases to the new franchisee. This process
requires cooperation from and coordination with the franchisor or
sub-franchisor, as only those parties can effect the replacement of the
franchisee. The Portfolio Manager must determine whether the franchisor is
obligated to assist Captec with this process under the terms of a
remarketing agreement. Section II.E outlines methods for managing this
process. The Equipment Portfolio Manager must be directly involved in this
process.
b. FORECLOSURE AND TAKING LEGAL ACTION - If, after all attempts, payment has
not been received, and the Equipment Portfolio Manager and General Counsel
believe that it is in Captec's best interest to repossess the equipment,
the General Counsel must contact the obligor and seek voluntarily release
of the equipment into Captec's possession. If the obligor agrees to this
request, the Equipment Portfolio Manager must arrange for immediate pick-up
of the equipment by an outside contractor. In conjunction with the
repossession, the Equipment Portfolio Manager must arrange for storage of
the equipment and gain possession.
If the obligor refuses to voluntarily release the equipment, the General
Counsel must select local counsel to represent Captec and must instruct
local counsel to immediately file the necessary proceedings to enforce
Captec's rights to repossess the equipment. Thereafter, upon approval from
the court, the Equipment Portfolio Manager must appoint a contractor as
Captec's agent, and that agent must accompany the local sheriff to remove
the equipment and gain possession.
Other legal action may be required to attempt to collect any or all amounts
due under the contract from the obligor or any guarantors. If local counsel
is obtained to gain possession of the premises, such counsel must also be
instructed by the General Counsel regarding other legal action that the
General Counsel believes should be taken against these parties. Only the
General Counsel has the authority to commence further legal action against
obligors and related guarantors.
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Revised July 1995
Section: II. COLLECTION POLICIES
Sub-Section: D. DEFAULTED ACCOUNTS
- --------------------------------------------------------------------------------
1. EQUIPMENT FINANCINGS (CONTINUED)
c. REMARKETING WITHIN FRANCHISE SYSTEM - Generally, the Equipment Portfolio
Manager should attempt to sell forclosed premises to other franchisees of
the same concept. The repossessed equipment is typically worth the most to
another franchisee. The Equipment Portfolio Manager must determine whether
the franchisor is obligated to assist Captec with this process under the
terms of a remarketing agreement. See Section II.E for further information
regarding utilizing franchisor support.
The Equipment Portfolio Manager is responsible for all sale negotiations,
although final sale amounts must be approved by the Chief Financial
Officer. The Equipment Portfolio Manager should communicate pricing
information to the Chief Financial Officer during the negotiating process
so as to avoid delays in the sale closing process.
Sales to other franchisees can be effected as cash sales or can be
structured so as to be financed by Captec via a re-write of the contract,
subject to the standard credit approval process. Structuring sales using
Captec financing will often result in the realization of a higher recovery
amount, and therefore, the Equipment Portfolio Manager should always
include this option in the sale pricing negotiations.
d. REMARKETING TO THIRD PARTIES - Captec receives frequent requests to
purchase equipment from various users and dealers. The Equipment Portfolio
Manager is responsible for maintaining information files on these inquiries
and for cultivating further remarketing sources. If equipment is
repossessed, the Equipment Portfolio Manager must review these files in an
attempt to identify potential buyers for the assets. Potential buyers must
be contacted by the Equipment Portfolio Manager when equipment is available
for sale. The original vendor of the repossessed equipment may also be of
assistance, as outlined in Section II.E.3. The Company also subscribes to
various trade publications which advertise "want to buy" prospects, and
these can be reviewed for potential buyers. Consideration must also be
given to existing customers operating other similar concepts who have
indicated a need for additional equipment.
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Section: II. COLLECTION POLICIES
Sub-Section: D. DEFAULTED ACCOUNTS
- --------------------------------------------------------------------------------
1. EQUIPMENT FINANCINGS (CONTINUED)
e. ENFORCEMENT OF RIGHTS UNDER FINANCING CONTRACT - As described in Sections
II.C.1.d and II.C.1.e, Captec must send to the obligor a notice of
default, which notice accelerates all future payment due under the
contract. This notice states that Captec will pursue all remedies provided
for in the contract. If the obligor does not respond to this notice and
make an offer to satisfy their obligation, they must be considered for
legal action. The General Counsel must review the facts of the matter and
make a recommendation to the Executive Committee of whether legal action
should be taken. The Executive Committee must consider the probabilities of
prevailing in the legal action, the projected costs of such action and the
probabilities of collecting from the obligor, and thereafter, must decide
whether to take legal action. Subject to the realities of such
considerations as legal costs and insufficient financial resources of the
obligor, Captec's policy is to take legal action to recover material
deficiencies remaining after the sale of the equipment.
f. ENFORCEMENT OF FRANCHISOR GUARANTEES AND REMARKETING AGREEMENTS - The
Equipment Portfolio Manager must provide written notice to the franchisor
according to the provisions of their Remarketing Agreement with Captec
governing default situations. A follow-up phone call must be made by the
Equipment Portfolio Manager to the franchisor to discuss the details of the
default and to coordinate plans for the actions provided for in the
Agreement. If the franchisor does not respond promptly in accordance with
the Agreement and/or hesitates to effect its responsibilities in a timely
manner, the Equipment Portfolio Manager must notify the General Counsel,
and the General Counsel must assist the Equipment Portfolio Manager in
seeking enforcement of the terms of the Agreement.
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Section: II. COLLECTION POLICIES
Sub-Section: D. DEFAULTED ACCOUNTS
- --------------------------------------------------------------------------------
1. EQUIPMENT FINANCINGS (CONTINUED)
g. ENFORCEMENT ON GUARANTEES FROM PRINCIPALS AND OTHER OBLIGOR-RELATED PARTIES
- In conjunction with Section II.D. I.e and as described in Sections II.C.
1.d and II.C.1.e, The Equipment Portfolio Manager must also send a notice
of default and acceleration to each guarantor. This notice states that
Captec will pursue all remedies provided for in the guarantee.
Captec's standard guarantee is joint and several, allowing for collection
of the entire balance due from any one or combination of guarantors. For
each specific default, the Equipment Portfolio Manager and General Counsel
must review the guarantee document to understand all of the terms of the
guarantee, most importantly noting any non-standard language in the
document. Thereafter, the Equipment Portfolio Manager must contact each
guarantor in an attempt to collect payment under the guarantee.
If the guarantors do not respond to this notice and make an offer to
satisfy their obligation, they must be considered for legal action. The
General Counsel must review the facts of the matter and make a
recommendation to the Executive Committee of whether legal action should be
taken. The Executive Committee must consider the probability of prevailing
in the legal action, the projected costs of such action and the probability
of collecting from the obligor, and thereafter, must decide whether to take
legal action. Subject to the realities of such considerations as legal
costs and insufficient financial resources of the obligor, Captec's policy
is to take legal action to recover material deficiencies remaining after
the sale of the equipment.
h. BANKRUPTCY FILINGS - All notices of bankruptcy filings must be routed to
the Equipment Portfolio Manager, and the Equipment Portfolio Manager must
send a copy to the General Counsel. The Equipment Portfolio Manager, with
the assistance of the General Counsel, must take action to promptly require
the trustee to affirm or reject the lease. If the lease is rejected, the
Equipment Portfolio Manager must promptly repossess the equipment. The
Equipment Portfolio Manager is also responsible for filing claims with the
bankruptcy court, but such claims must be received and approved by the
General Counsel prior to filing.
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Revised July 1995
Section: II. COLLECTION POLICIES
Sub-Section: D. DEFAULTED ACCOUNTS
- --------------------------------------------------------------------------------
2. MORTGAGE LOANS
a. REPLACEMENT OF FRANCHISEE & ASSUMPTION/TRANSFER OF FINANCING CONTRACT -
Generally, the most effective method of recovery on defaulted accounts is
the replacement of the franchisee and, in conjunction therewith, the
assumption or transfer of the premises to the new franchisee. This process
requires cooperation from and coordination with the franchisor or
sub-franchisor, as only those parties can effect the replacement of the
franchisee. The Portfolio Manager must determine whether the franchisor is
obligated to assist Captec with this process under the terms of a
remarketing agreement. Section II.E outlines methods for managing this
process. The Portfolio Manager must be directly involved in this process.
b. FORECLOSURE AND TAKING LEGAL ACTION - If, after all attempts, payment has
not been received, and the executive management and General Counsel believe
that it is in Captec's best interest to foreclose the mortgage, the General
Counsel shall contact the obligor and seek voluntary release of the
premises. Upon obtaining consent from the executive management, the General
Counsel will prepare the necessary documents to effect this release of
possession. If the obligor fails to respond to the request for voluntary
release of the premises, the General Counsel shall select local counsel in
the area where the mortgaged premises are located and have that counsel
institute foreclosure proceedings. Local counsel shall also be instructed
to proceed with whatever actions is necessary to collect for any deficiency
resulting from the foreclosure action. Captec's policy is to take legal
action to recover material deficiencies remaining after the sale of the
mortgaged premises.
Other legal action may be required to attempt to collect any or all amounts
due under the promissory note from the guarantors. If local counsel is
obtained to gain possession of the premises, such counsel must also be
instructed by the General Counsel regarding other legal action that the
General Counsel believes should be taken against these parties. Only the
General Counsel or associated General Counsel has the authority to commence
further legal action against obligors and related guarantors.
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Revised July 1995
Section: II. COLLECTION POLICIES
Sub-Section: D. DEFAULTED ACCOUNTS
- --------------------------------------------------------------------------------
2. MORTGAGE LOANS (CONTINUED)
c. REMARKETING WITHIN FRANCHISE SYSTEM - Generally, the Portfolio Manager
should attempt to sell the foreclosed premises to other franchisees of the
same concept. The premises is typically worth the most to another
franchisee. The Portfolio Manager must determine whether the franchisor is
obligated to assist Captec with this process under the terms of a
remarketing agreement. See Section II.E for further information regarding
utilizing franchisor support.
The Portfolio Manager is responsible for all sale negotiations, although
final sale amounts must be approved by the Chief Financial Officer. The
Portfolio Manager should communicate pricing information to the Chief
Financial Officer during the negotiating process so as to avoid delays in
the sale closing process.
Sales to other franchisees can be effected as cash sales or can be
structured so as to be financed by Captec via a re-write of the contract,
subject to the standard credit approval process. Structuring sales using
Captec financing will often result in the realization of a higher recovery
amount, and therefore, the Portfolio Manager should always include this
option in the sale pricing negotiations.
d. REMARKETING TO THIRD PARTIES - If the Portfolio Manager is unsuccessful in
Remarketing the premises to a franchisee of the same concept, franchisees
and franchisors of like concepts shall be contacted. Use of Captec's data
bank containing over 4,150 names of franchisees and 90 names of franchisors
shall be used in this effort.
e. ENFORCEMENT OF FRANCHISOR GUARANTEES AND REMARKETING AGREEMENTS - The
Portfolio Manager must provide written notice to the franchisor according
to the provisions of their Remarketing Agreement with Captec governing
default situations. A follow-up phone call must be made by the Portfolio
Manager to the franchisor to discuss the details of the default and to
coordinate plans for the actions provided for in the Agreement. If the
franchisor does not respond promptly in accordance with the Agreement
and/or hesitates to effect its responsibilities in a timely manner, the
Portfolio Manager must notify the General Counsel, and the General Counsel
must assist the Portfolio Manager in seeking enforcement of the terms of
the Agreement.
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Section: II. COLLECTION POLICIES
Sub-Section: E. PROBLEM RESOLUTION TOOLS
- --------------------------------------------------------------------------------
1. FRANCHISOR SUPPORT
a) AGREEMENTS WITH FRANCHISOR - Captec has various written agreements with
franchisors which govern delinquency/default resolution procedures. In
seeking to resolve a problem customer account, the Senior Vice
President, General Counsel, Portfolio Manager and Collector must make
themselves familiar with the terms of any such agreement, discuss
strategies in connection with the agreement and, in certain
circumstances, consult with the Senior Vice President of Sales &
Marketing and the Sales Representative regarding the planned strategy.
Thereafter, the Portfolio Manager and Collector must contact the
franchisor to discuss the problem and agree on a collection strategy.
If the agreement with the franchisor calls for financial or physical
support, the Portfolio Manager also must discuss with the franchisor
how they intend to fulfill these obligations.
b) COORDINATING WITH FRANCHISOR'S INTERESTS - Even in the event that
Captec has no written agreement with a franchisor, the Portfolio
Management Department, in seeking to resolve a problem customer
account, must strategize on how to work within the franchisor's
interest and/or how to incorporate the franchisor into the collection
process. The Portfolio Manager must contact the franchisor and discuss
the problem with them, inquire as to whether the Franchisor is having
problems with the franchisee (past due royalties, weak unit sales,
operating weaknesses, management disputes, etc.). If the franchisor is
having problems, the Portfolio Manager must inquire about what actions
the franchisor intends to take against the franchisee. This information
will be considered by Captec in forming its collection strategy for the
specific account. It also helps to corroborate information provided by
the franchisee to Captec.
2. REGIONAL SUB-FRANCHISOR SUPPORT - In some franchise systems, the franchisor
has "delegated" its franchisee support systems to some form of
sub-franchisor. In these circumstances, the franchisor support problem
resolution tools must be adjusted to fit the sub-franchisor. The Portfolio
Management Department must seek to contact and develop relationships with
these sub-franchisors for the purpose of seeking assistance with problem
resolution.
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- --------------------------------------------------------------------------------
Section: II. COLLECTION POLICIES
Sub-Section: E. PROBLEM RESOLUTION TOOLS
- --------------------------------------------------------------------------------
3. VENDOR SUPPORT - In the event of a default leading to a repossession and
remarketing of the equipment, equipment vendors may be of assistance in
contacting potential buyers of the repossessed equipment.
4. FACILITATING FRANCHISE UNIT TRANSFER - The Portfolio Manager must negotiate
the terms of transfer and supply the prospective transferee with a credit
application package. The Portfolio Manager must notify the Credit Manager
of this action. The Portfolio Manager must remain in contact with the
potential replacement franchisee to encourage the timely completion of the
application. The applicant must be instructed to return the completed
application to the attention of the Portfolio Manager. Upon receipt of the
completed application, the package must be immediately delivered to the
Credit Manager for credit underwriting. In the event that the replacement
franchisee's credit application is approved, the Portfolio Manager must
communicate to the Manager of Contract Administration the nature of the
account and any special time urgencies for the documentation of the
replacement contracts. Thereafter, the Portfolio Manager must monitor the
progress of the documentation process to ensure that the
transfer/assumption/re-write is completed in a timely fashion and any
delinquency or default is cured.
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- --------------------------------------------------------------------------------
Revised July 1995
Section: II. COLLECTION POLICIES
Sub-Section: F. PREPAYMENTS
- --------------------------------------------------------------------------------
1. METHODS OF QUOTING PREPAYMENTS - The Portfolio Manager(s) are responsible
for quoting prepayments on contracts. Generally, lease contracts do not
have prepayment clauses and are non-cancelable agreements (except in the
case of purchase option windows provided in real estate leases). Loan
contracts may have stated prepayment penalty schedules.
a) EQUIPMENT LEASES - Prepayments are allowed but not encouraged by Captec
Prepayment amounts are computed by taking into consideration book
balances, residuals, prepayment penalties, unbilled property taxes,
sales taxes and various other transaction specific items. The Chief
Financial Officer is responsible for setting the methodology for making
these calculations. The Portfolio Manager is responsible for computing
prepayment amounts. Any deviations from the standard methods of
calculation must be must be approved by the Chief Financial Officer.
b) REAL ESTATE LEASES - Prepayments are generally not allowed, except in
the case of purchase option windows provided in real estate leases. All
other prepayment requests will typically be declined, but such requests
should be directed to the Sales Account Representative for customer
relations purposes. With respect to contractual purchase options, the
Portfolio Manager is responsible for computing the purchase amount,
taxes, etc. Any non-contractual prepayment amounts must be computed by
the Chief Financial Officer. In any event, all prepayment calculations
for real estate leases must be approved by the Chief Financial Officer.
c) REAL ESTATE MORTGAGE LOANS - Prepayments are allowed to the extent
provided for in the loan documents. The Portfolio Manager is
responsible for computing the principal balance, accrued interest,
prepayment penalties, recording fees, etc, in accordance with the loan
prepayment clause(s). All prepayment calculations for real estate
mortgage loans must be approved by the Chief Financial Officer.
2. PENALTY COMPUTATION - Generally, all prepayments will be subject to a
penalty. Penalties will be calculated according to the following: first in
accordance with contractual prepayment penalty agreements; and second in
accordance with computations set from time to time by Captec's Chief
Financial Officer.
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Section: II. COLLECTION POLICIES
Sub-Section: F. PREPAYMENTS
- --------------------------------------------------------------------------------
3. WAIVER OF PREPAYMENT PENALTIES - ONLY the Chief Financial Officer has the
authority to waive prepayment penalties. Requests for such waiver should be
communicated INTERNALLY to the Chief Financial Officer.
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Section: II. COLLECTION POLICIES
Sub-Section: G. EQUIPMENT LEASE EXPIRATIONS
- --------------------------------------------------------------------------------
1. COMMUNICATION TO LESSEE - Approximately 30 days prior to the expiration of
the lease term, the Portfolio Management Department must send a letter to
advise the Lessee of their end of lease options. In addition, an invoice
for the purchase price, in an amount as determined by the Equipment
Portfolio Manager (see Section II.G.2), must accompany the letter. See
Appendix II.G.la and II.G.lb for sample termination notices.
2. PRICING & NEGOTIATING WITH LESSEE - Approximately 10 days after mailing the
termination notice, the Equipment Portfolio Manager must contact the Lessee
by phone to determine if they choose to purchase the equipment, return the
equipment or extend the lease.
The purchase amount must been established by the Equipment Portfolio
Manager at time of invoice by using current market information, i.e. trade
papers and dealer information. In the event the lease has a pre-written
purchase agreement, that amount must be billed. The Equipment Portfolio
Manager has the authority to adjust the amount due, if circumstances
dictate. The purchase amount must be clearly noted as payable on the
termination date of the lease.
Subsequent to receipt of the entire purchase price, the Equipment Portfolio
Manager must have a bill of sale prepared, must execute the bill of sale
and send it to the lessee. See Appendix II.G.2a for standard form of bill
of sale. Any modifications to the standard form of bill of sale must be
approved by the General Counsel. A copy of the bill of sale must be filed
in the lease file.
The Equipment Portfolio Manager may negotiate terms for an extended payment
plan if necessary and is mutually agreed. In such event, the Equipment
Portfolio Manager must negotiate the terms of the extension or renewal and
produce appropriate documentation for execution. See Appendix II.G.2b for
the standard form of Lease Extension Agreement. The terms of extension
vary, dependent upon the needs of the Lessee as well as the willingness of
Captec.
If the Lessee does not respond in a timely manner to the termination letter
or does not pay the purchase price in a timely manner, the Lease Agreement
provides Captec with the right to collect month to month extension rentals
from the termination date through payment of the purchase price. Such
extension rentals
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Section: II. COLLECTION POLICIES
Sub-Section: G. EQUIPMENT LEASE EXPIRATIONS
- --------------------------------------------------------------------------------
2. PRICING & NEGOTIATING WITH LESSEE (CONTINUED)
are equal to the monthly rent required during the base term of the lease.
The Equipment Portfolio Manager has authority to use their own discretion
in choosing whether to enforce this provision of the lease. If such
extension rentals are to be enforced, the Equipment Portfolio Manager must
notify the Accounting Department to prepare an invoice for such amounts
due.
3. HANDLING AND SALE OF RETURNED ASSETS - The Lessee is required to provide
written notice of intent to return all, but not less than all, of the
leased equipment. The Equipment Portfolio Manager must instruct the Lessee
on where to ship the equipment, and should select a location that will lead
to the most efficient disposal of the equipment. The Lessee is responsible
for packaging, de-installation, insurance and freight charges to a site as
designated by Lessor.
If possible, the Equipment Portfolio Manager should attempt to negotiate a
sale of the equipment to a third party prior to shipment and, in such case,
must instruct the Lessee to ship from their site directly to the buyer.
Buyers must be solicited from various sources. They can be existing
Lessees, franchisees, franchisors, vendors or perhaps unrelated third party
buyers. The Equipment Portfolio Manager must negotiate the terms of the
equipment sale and facilitate invoices, purchase orders and any other
required documents. Captec has storage facilities available locally. If the
equipment is to be stored elsewhere, the Equipment Portfolio Manager must
arrange for the off-site storage.
The Equipment Portfolio Manager must arrange for any necessary inspections
as well as de-installation, if needed, at Lessee's expense. After
completion of rental payments, the Equipment Portfolio Manager must obtain
original documents, including UCC reassignments, from any assignee, in
order to be able to provide buyers with evidence of clear title. The
Equipment Portfolio Manager must forward original UCC's (keeping a copy in
the lease file) to the Documentation Department for processing the
termination of the UCC.
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Section: II. COLLECTION POLICIES
Sub-Section: H. CASUALTY & THEFT
- --------------------------------------------------------------------------------
1. INSURANCE REQUIREMENTS - Lessees are required to assume all risk of loss or
damage to the leased equipment. If there is a loss during the term of the
lease, the Lessee is required to report such to the Equipment Portfolio
Manager. In addition, Captec requires insurance from the Lessee naming
Captec as loss payee and additional insured. Therefore, in the event of a
loss, the insurance company will also notify Captec of the loss event.
The Equipment Portfolio Manager must work with Lessee and insurance company
to compensate Captec for the loss by replacement of the equipment or
payment of balance due under the lease. In some cases, a stipulated loss
value schedule may be part of the lease agreement and must be used to
determine the value of the loss.
Compensation may also be sought from the insurance companies for any
equipment which might be missing at time of repossession or termination.
In the event of a Notice of Insurance Cancellation during the lease term,
the Equipment Portfolio Manager must notify the Lessee that cancellation is
a condition of a default and must advise the Lessee of the requirement of
reinstatement of coverage. The Equipment Portfolio Manager must monitor
such accounts to verify that the insurance is actually reinstated.
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III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
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Section: III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
Sub-Section: A. INTRODUCTION
- --------------------------------------------------------------------------------
1. DOCUMENTATION DEPARTMENT ORGANIZATION - Captec has a Documentation
Department made up of a group of employees dedicated to production and
processing of all equipment lease documentation. The following is the
organizational chart for the documentation department organization.
|
|
-------------------
| Manager of |
| Contract |
| Administration |
| Equipment |
-------------------
|
|
-------------------
| Contract |
| Administrators |
-------------------
|
|
-------------------
| Contract |
| Clerk |
-------------------
The Documentation Department reports to the Company's senior management via
the Senior Vice President and General Counsel.
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Section: III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
Sub-Section: A. INTRODUCTION
- --------------------------------------------------------------------------------
2. DELIVERING QUALITY CUSTOMER SERVICE - The equipment lease documentation
process involves considerable interaction with Captec's lessees,
franchisors and equipment vendors. As a result, personnel in the
Documentation Department play an important role in delivering quality
service to these customers and suppliers.
The Documentation Department's customer service role is also unique since
it must balance this commitment to deliver quality customer service with
the requirement to produce documentation that protects Captec's interest in
the leased property and that complies with all laws, including those in the
lessee's place of business.
Among other things, quality customer service means:
- Professional communication
- Market expertise
- Timely response (see below)
- Genuine interest in the customers' needs
Timely response addresses all of the various ways in which the
Documentation Department interfaces with customers. This includes timely
preparation of documents, timely resolution of documentation issues,
facilitating timely execution of documents and timely completion of the
lease funding.
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- --------------------------------------------------------------------------------
Section: III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
Sub-Section: B. STANDARDIZED DOCUMENTATION
- --------------------------------------------------------------------------------
All equipment lease documentation must be prepared using Captec's standardized
documents. See Section III.D.5 for a list of the standard documentation. Any
changes to such standard documentation or any additional non-standard
documentation required for a specific lease must be pre-approved by the Senior
Vice President and General Counsel.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
Sub-Section: C. DOCUMENTATION CHECKLISTS
- --------------------------------------------------------------------------------
Each document required for a lease transaction must be input into the
Documentation Checklist included in the application file of the INFO-LEASE
Credit Application Module. There are pre-programmed standardized checklist
available for selection and modification. The Documentation Checklist must be
maintained at all times by the assigned Contract Administrator such that each
document required for a specific lease can be monitored as to its status.
The Manager of Contract Administration - Equipment is responsible for monitoring
the INFO-LEASE checklist reports to ensure that transactions are being processed
on a timely basis.
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- --------------------------------------------------------------------------------
Section: III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
1. PRELIMINARY PROCEDURES - Upon approval of a Credit application and receipt
of the Credit File, the following preliminary procedures occur:
a) DOCUMENTATION FILE - A Documentation File must be created by the
Credit Department from the Credit File and forwarded to the
Documentation Manager. The following documents must be copied from the
Credit File and placed into the Documentation File:
- Credit Approval Letter
- Report on Financing Application
- Lease Proposal
- Check evidencing payment of Commitment Fee
- Any other information necessary to prepare the Lease documents
b) UCC and Financing Statements - The Documentation Clerk must prepare
the following documents and send them to the Lessee:
- UCC financing statements
- Credit Approval Letter
- Insurance Request Letter
- Landlord's Waiver
- Letter to Lessee outlining the Closing Process
- Invoice and Payment Information for Equipment Vendors
2. REVIEW OF DOCUMENTATION FILE - Once the Documentation File has been
created, the Documentation Manager is required to review the file and
determine a projected funding date and identify any additional information
or clarification that is needed from the Credit Department regarding the
terms of the commitment.
3. ASSIGNMENT OF DOCUMENTATION FILE - After review, the Documentation Manager
must assign the file to a Contract Administrator, who has had previous
experience, if possible, with the concept account. The Documentation
Manager must update INFOLEASE to show the projected funding date and the
Contract Administrator worklist ID.
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- --------------------------------------------------------------------------------
Section: III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
4. LEASE DOCUMENT PACKAGE - The Contract Administrator must review the file to
determine what, if any, additional documents or information must be
obtained in order to prepare the Lease. Accordingly, the Contract
Administrator must prepare a Lease Documentation Package based on the
Lessee's business organization, the type of equipment being leased, the
equipment location and the terms of the lease commitment. In addition, the
following procedures must be completed by the Contractor Administrator:
a) CONFIRMATION OF LEGAL ENTITY - The Contract Administrator must
confirm the legal entity or the Lessee and order certified copies of
organizational documents and Certificates of Good Standing from the
state of organization and the state where the equipment is located.
b) ARRANGEMENT FOR DIRECT BILLING - The Contract Administrator must
contact the lessee to determine the name, address and phone number of
the vendor who will be supplying the leased equipment and arrange for
direct billing to Captec. At such time, the Contract Administrator must
also give the Documentation Clerk invoices to prepare an Equipment
Schedule for the Lease and any purchase orders required by equipment
vendors.
c) UCC SEARCHES - If the transaction is a sale/leaseback or if the
equipment has been delivered prior to Captec's UCC filings, the
Contract Administrator must order UCC searches.
d) CONTACT CREDIT DEPARTMENT - The Contract Administrator must contact
the Credit Department for approval of any increase in the amount of
funding requested by the Lessee or changes in the structure of the
commitment.
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Section: III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
5. LEASE DOCUMENTS - The Contract Administrator must prepare the following
documents that complete the Document Package and send them to the Lessee
via overnight courier:
- Equipment Lease Agreement
- Purchase Option Addendum
- Franchisee Addendum
- Certificate of Delivery Acceptance
- Certificate of Authority
- UCC-l with Equipment List (or UCC-3 if applicable)
- Bill of Sale (for salelease back)
- Personal/Corporate Guaranty
- Subordination Agreement
- Pay Proceeds Letter
- Cover Letter enclosing outlines of any additional documents or
information still needed from Lessee. Additional requirements
include:
- Fully-Executed Copy of Franchise Agreement
- Fully-Executed Copy of Landlord Lease (If premises are rented)
- Copy of Deed (If premises are owned)
- Legal Description of Premises (for Fixture Filings)
- Lessee's Federal ID Number
- Cover Letter also outlining any outstanding credit contingencies
such as:
- Verification of Liquid Assets
- Copies of Tax Returns
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Section: III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
Sub-Section: D. PREPARATION OF DOCUMENTS
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6. VERIFICATION OF RETURNED LEASE DOCUMENTS FROM LESSEE - The Contract
Administrator must follow up with the Lessee for timely return of properly
executed lease documents. Upon receipt of the returned documentation
package, the Contract Administrator is required to review the lease
documents signed by the Lessee. Specifically, the Contract Administrator
must verify the following:
- The signatures on the documents are authorized by the Lessee
- No changes have been made to the documents
- The documents contain original signatures
- All signatures on Personal and Corporate Guaranties are notarized
- The documents are properly dated
7. VERIFICATION OF RETURNED LEASE DOCUMENTS FROM OTHERS - The Contract
Administrator must review documents that are received separately from the
Lessee to verify the accuracy of the documents. These documents will
include:
- Original Invoices required from the equipment vendor that must
include a detailed description of the equipment, the location where
the equipment is to be delivered and show the purchaser as "Captec."
(unless it is a sale/leaseback)
- A Certificate of Insurance showing Captec as Additional Insured and
Loss Payee for liability and property damage coverage at equipment
location in amounts that are satisfactory to Captec.
- A Landlord's Waiver stating that the equipment is Captec's personal
property, that Captec may remove it at any time and that Captec will
be given notice if Lessee defaults under the landlord lease.
Mortgagee must also sign, if applicable.
- UCC searches to confirm that no prior liens exist. If the searches
do not show the Captec lease filing, the Contract Administrator must
complete a follow-up search.
- Copies of Organizational Documents and Good Standing Certificates to
confirm valid corporate status and authority.
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8. CONFIRMATION OF DELIVERY AND ACCEPTANCE - The Contract Administrator must
make a due diligence telephone call to the Lessee confirming the delivery
and acceptance of all equipment.
9. PREPARATION FOR FUNDING - After the equipment has been delivered and
installed and Captec has received a complete lease document package,
including original vendor invoices, the Documentation Department must
prepare the transaction for funding.
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Section: III. EQUIPMENT LEASE DOCUMENTATION PROCEDURES
Sub-Section: E. LEGAL REVIEW OF DOCUMENTS
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If the Lessee has requested changes to the standard lease documents, the
Documentation Department must seek approval by Captec's General Counsel. The
Documentation Manager may assist the Contract Administrator in negotiating the
lease documents and landlord waivers, with final approval of Captec's General
Counsel.
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Sub-Section: F. EXECUTION OF DOCUMENTS
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1. LESSEE AND GUARANTORS SIGNATURES - The documents must be sent by the
Documentation Department to the Lessee unsigned. The lessee and guarantors
are required to sign the documents and return them to the Contract
Administrator. Furthermore, the signatures of the guarantors must be
notarized.
2. COUNSEL REVIEW - The signed lease documents must be presented by the
Contract Administrator to Captec's General Counsel for execution. (If
Captec's General Counsel is not available, the file must be presented to
the Chief Financial Officer.) Captec's General Counsel is required to
review the entire documentation file with the Commitment Letter to insure
that all terms and contingencies of Captec's approval are met prior to
executing the documents.
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Sub-Section: G. FUNDING PROCEDURES
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1. MASTER LEASE FUNDING DISBURSEMENT SUMMARY - The transaction will fund
after the documents have been executed by Captec. At that time, the Master
Lease Funding Disbursement Summary, outlining the vendors and the amounts
to be paid, must be approved and issued to the Accounting Department. The
Accounting Department will prepare payments to vendors as outlined in the
disbursement summary.
2. RECEIPT OF POST CLOSING ITEMS - Any items approved by Captec's General
Counsel for receipt on a post closing basis must be obtained by the
Contract Administrator within 30 days of funding.
3. LESSEE'S COPY OF THE LEASE - A fully-executed copy of the Lease (with all
attachments and addendums), the Certification of Delivery Acceptance and
any Guaranties must be returned to the Lessee by the Documentation
Department.
4. FINAL SUBMITTING TO ACCOUNTING - The Contract Administrator or the
Documentation Clerk must place the documents in order in the lease file,
complete any final data entries and submit the file to the Accounting
Department for booking and billing.
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Sub-Section: A. INTRODUCTION
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1. DOCUMENTATION DEPARTMENT ORGANIZATION - Captec has a Real Estate
Documentation Department made up of a group of employees dedicated to
production and processing of all mortgage documentation. The following is
the organizational chart for the Real Estate Documentation Department.
|
|
----------------
| Manager of |
| Contract |
|Administration |
| Real Estate |
----------------
|
|
----------------
| Contract |
|Administrators |
| (Future) |
----------------
|
|
----------------
| Contract |
| Clerk |
| (Future) |
----------------
The Real Estate Documentation Department reports to the Company's senior
management via the Senior Vice President - Administration.
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2. DELIVERING QUALITY CUSTOMER SERVICE - The mortgage documentation process
involves considerable interaction with Captec's borrowers and franchisors.
As a result, personnel in the Real Estate Documentation Department play an
important role in delivering quality service to these customers and
sellers.
The Real Estate Documentation Department's customer service role is also
unique since it must balance this commitment to deliver quality customer
service with the requirement to produce documentation that protects
Captec's interest in the mortgaged property and that complies with all
laws, including those in the borrower's place of business and the location
of the real estate.
Among other things, quality customer service means:
- Professional communication
- Market expertise
- Timely response (see below)
- Genuine interest in the customers' needs
Timely response addresses all of the various ways in which the Real Estate
Documentation Department interfaces with customers. This includes timely
preparation of documents, timely resolution of documentation issues,
facilitating timely execution of documents and timely completion of the
mortgage funding.
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Section: IV. MORTGAGE LOAN DOCUMENTATION PROCEDURES
Sub-Section: B. STANDARDIZED DOCUMENTATION
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All mortgage documentation must be prepared using Captec's standardized
documents, as modified to conform with local requirements. See Section IV.D.6
for a list of the standard documentation. Any changes to such standard
documentation or any additional non-standard documentation required for a
specific mortgage must be pre-approved by the Senior Vice President -
Administration.
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Sub-Section: C. DOCUMENTATION CHECKLISTS
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Each document required for a mortgage transaction must be inputted into the Real
Estate Document Checklist. There are pre-established standardized checklists
available for selection and modification. The Real Estate Document Checklist
must be maintained at all times by the assigned Contract Administrator such that
each document required for a specific mortgage can be monitored as to its
status. See Exhibit IV.C for a sample Real Estate Documentation Checklist.
The Manager of Contract Administration - Real Estate is responsible for
monitoring the Real Estate Document Checklist reports to ensure that
transactions are being processed on a timely basis.
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Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
1. MORTGAGE DOCUMENTATION FILE - Upon approval of a mortgage loan application,
the Mortgage Documentation File must be created by the Credit Department
from the Credit File and forwarded to the Manager of Contract
Administration - Real Estate. The following documents must be copied from
the Credit File and placed into the Mortgage Documentation File:
- Credit Approval Letter
- Transaction Summary
- Mortgage Loan Proposal Letter
- Check evidencing payment of Commitment Fee
- Any other information necessary to prepare the mortgage documents
2. INITIAL REVIEW OF DOCUMENTATION FILE - Once the Mortgage Documentation File
has been created, the Manager of Contract Administration - Real Estate is
required to review the file and identify any additional information or
clarification that is needed from the Credit Department regarding the terms
of the commitment.
3. ASSIGNMENT OF REAL ESTATE DOCUMENTATION FILE - After review, the Manager of
Contract Administration - Real Estate must assign the file to a Contract
Administrator. The Manager of Contract Administration - Real Estate must
update the Real Estate Document Checklist to show the projected funding
date.
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4. COMMITMENT LETTER - The Manager of Contract Administration - Real Estate
must prepare the Commitment Letter in accordance with the terms of the
Mortgage Loan Proposal Letter but incorporate any modifications or
additions called for in the Credit Approval Letter. Upon completion, the
Manager of Contract Administration - Real Estate must have the Commitment
Letter reviewed by the Senior Vice President - Administration and the Sales
Representative. After the review process of the Commitment Letter has been
completed, the Manager of Contract Administration - Real Estate is required
to incorporate all necessary changes to the Commitment Letter.
The Commitment Letter must be signed by the Senior Vice President -
Administration or in his absence, the Chief Financial Officer or the
President. The signed Commitment Letter must be sent by the Manager of
Contract Administration - Real Estate to the Borrower via overnight
courier.
If the Borrower requests material changes to the Commitment Letter, the
Manager of Contract Administration - Real Estate must have the changes
reviewed by the Senior Vice President - Administration or Vice President -
Credit, who determines if the Commitment Letter needs to be resubmitted to
the Credit Committee. If these changes are determined to require additional
approval from the Credit Committee, the revised Commitment Letter must also
be resubmitted to the Senior Vice President - Administration or an
authorized officer of Captec. Once completed, the Manager of Contract
Administration - Real Estate sends the Commitment Letter to the Borrower
via overnight courier.
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Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
5. MORTGAGE DOCUMENT PACKAGE - Upon receipt of the Commitment Letter, signed by
the Borrower, and the remainder of the Commitment Fee, the Contract
Administrator must prepare and send the Real Estate Document Checklist to
the Borrower via facsimile. In addition, the Contract Administrator must
contact the Borrower to determine what, if any, additional documents or
information must be obtained in order to prepare the Mortgage Document
Package and coordinate the ordering of outside services. Accordingly, the
Contract Administrator must prepare a Mortgage Document Package based on the
Borrower's business organization, the property location and the terms of the
Commitment Letter. Specifically, the following procedures must be completed
by the Contractor Administrator:
a) CONFIRMATION OF LEGAL ENTITY - The Contract Administrator must
confirm the legal entity of the Borrower and order certified copies of
organizational documents and certificates of good standing/authority
from the state of organization and, if different, the state where the
property is located.
b) ORDER OF OUTSIDE SERVICES - The Contract Administrator must contact
the Borrower to coordinate the ordering of outside services. These
services include Real Estate and Business Valuation, Environmental Site
Assessment, Survey, Title Insurance, and Lien and Judgment searches.
See Section IV.D.6.
c) CONTACT CREDIT DEPARTMENT - The Contract Administrator must contact
the Credit Department for approval of any increase in the amount of
funding requested by the Borrower, clearing of any credit contingency
requirements and/or changes in the structure of the Commitment Letter.
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Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS - The Contract Administrator must prepare, or request
the preparation by third parties of, the following documents that complete
the Mortgage Document Package. Upon completion, the Contract Administrator
must promptly send the Mortgage Document Package to the Borrower via
overnight courier:
- Promissory Note
- Mortgage or Deed of Trust
- Estoppel Letters
- Guarantee
- Forms of Opinions of Counsel
- Miscellaneous Closing Documents
- Cover Letter outlining any additional documents or information still
needed from the Borrower. Additional requirements include:
- Fully-Executed Copy of Franchise Agreement
- Lessee's Federal ID Number
- Cover Letter also outlining any outstanding credit contingencies
such as:
- Verification of Liquid Assets
- Copies of Tax Returns
- Studies on Demographics and/or Competition
In addition, the Contract Administrator must obtain the following outside
services with the Borrower:
- Real Estate and Business Valuation
- Environmental Site Assessment
- Survey
- Certificate of Insurance
- Title Commitment
- Lien and Judgment Search Results
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Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
a) PROMISSORY NOTE - The purpose of the Promissory Note is to evidence the
Borrower's obligation to repay the mortgage loan to Captec and to
identify key agreements and terms of repayment between the Borrower and
Captec. The Contract Administrator is required to review and confirm
that the following information found in the Promissory Note is
accurate:
- Name of the Borrower;
- Amount of the mortgage loan;
- Interest payable on the outstanding balance of the mortgage loan;
- Monthly payments;
- Term of the mortgage loan;
- Amortization period of the mortgage loan.
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- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
b) MORTGAGE OR DEED OF TRUST - In general, the Mortgage or Deed of Trust
provides Captec with a lien on and a security interest in the real
estate and/or improvements. The Real Estate Documentation Department is
responsible for determining if a Mortgage or Deed of Trust is required
in the State in which the property is located. In those States where a
Deed of Trust is employed, the trustee must be approved by the Contract
Administrator.
The Contract Administrator must prepare the Mortgage or Deed of Trust
on Captec's standard forms, modified to conform with state law
requirements. These forms will include, among others, the following
provisions:
- LIENS - The Borrower must keep the property free from all liens
and/or encumbrances (other than those acceptable to Captec)
throughout the term of the loan.
- COMPLIANCE WITH LAW - The Borrower must comply with all laws,
ordinances, orders, rules and regulations of any governmental
authority having jurisdiction over the property.
- UTILITIES - The Borrower must pay all utility charges related to the
property.
- TAXES - The Borrower must pay all real estate taxes, assessments, ad
valorem taxes or gross receipt taxes imposed by any authority having
the power to tax the property. The Borrower must further agree to
pay all personal property taxes related to the property.
- MAINTENANCE AND REPAIRS - The Borrower must maintain the property in
good repair, order and condition.
- INSURANCE - The Borrower must maintain policies of insurance, in
amounts and with insurance companies as are satisfactory to Captec.
- ALTERATIONS - The Borrower must not make material alterations to the
property unless prior written approval is obtained from Captec. The
cost of all alterations will be paid for by the Borrower.
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- --------------------------------------------------------------------------------
b) MORTGAGE OR DEED OF TRUST (CONTINUED)
- ASSIGNMENT AND SUBLETTING - The Borrower will not be permitted
to transfer or assign the property without prior written
approval from Captec.
- HAZARDOUS MATERIALS - The Borrower must make certain
representations and warranties for the benefit of Captec
regarding hazardous materials and relevant environmental laws,
and must further agree to indemnify and hold harmless Captec
from any loss, liability, damage or expense that Captec may
incur as a result thereof.
- LEGAL DESCRIPTION - The legal description of the property on
the Mortgage or Deed of Trust must conform to the legal
description found on the Title Commitment.
- LEASE AND/OR LICENSING AGREEMENTS - If the Borrower has a lease
and/or licensing agreement with an operating entity who has the
right to conduct franchise operations on the property, an
assignment (on Captec's standard form) of the Borrower's rights
and interest in that lease and/or licensing agreement must be
given to Captec.
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Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
c) ESTOPPEL LETTERS -
FRANCHISOR ESTOPPEL LETTER - The Franchisor must provide to Captec an
Estoppel Letter, stating that the Borrower has entered into a franchise
agreement with the Franchisor and that the franchise agreement is in
full force and effect. The Franchisor must also state that the Borrower
is not in default under the franchise agreement as of the closing date.
In addition, the Contract Administrator must review and confirm that
the Borrower has a valid franchise agreement in place for the property
and that the franchise agreement has a term that is equal to or greater
than the term of the mortgage loan (except as outlined in Section
I.F1.1).
GROUND LEASE LANDLORD ESTOPPEL LETTER - The Ground Lease Landland must
provide to Captec an Estoppel Letter, stating that the Borrower has
entered into a ground lease with the Landlord and that the ground lease
is in full force and effect. The Landlord must also state that the
Borrower is not in default under the ground lease as of the closing
date. In addition, the Contract Administrator must review and confirm
that the Borrower has a valid ground lease in place for the property
and that the ground lease has a term that is equal to or greater than
the term of the mortgage loan.
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Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
d) GUARANTEE - The Contract Administrator is responsible for obtaining
Guarantees from those principals of the borrowing entity as are
indicated in the Credit Approval Letter. In general, the Guarantees are
full and unconditional and will guarantee the full performance and
payment of all obligations of the Borrower under the Promissory Note,
the Mortgage or Deed of Trust, and all other documents evidencing or
securing the mortgage loan.
The Contract Administrator must use Captec's standard form and confirm
that the correct Guarantor(s)' names, Borrower's name and loan amount
appear on all Guarantees. In addition, the Contract Administrator must
verify that all Guarantees are properly executed and notarized.
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Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
e) OPINIONS OF COUNSEL - The Contract Administrator must confirm that all
of the legal opinions are issued in the name of Captec. The following
legal opinions are required and must be reviewed by the Contract
Administrator and obtained as of the closing:
- BUSINESS ENTITY - A legal opinion must verify that the Borrower
is a duly formed and valid existing entity and qualified to do
business in the jurisdiction where the property is located;
- OBTAINED APPROVALS - A legal opinion confirming all approvals
necessary as a condition of the Borrower entering into,
executing, and delivering the mortgage loan documents has been
obtained;
- VALID AND BINDING AGREEMENT - A legal opinion stating that the
Promissory Note, the Mortgage or Deed of Trust, and all other
documents executed by the Borrower and delivered to Captec in
connection with the transaction are valid and binding
obligations of the Borrower and enforceable in accordance with
their terms.
In addition, the Contract Administrator is to obtain a legal opinion
that confirms that the Guarantees from the individuals are valid and
binding obligations of the Guarantors.
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Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
f) MISCELLANEOUS CLOSING DOCUMENTS - The Contract Administrator must
review and confirm that the following Miscellaneous Closings Documents
are accurate:
- CERTIFICATE OF BORROWER - The Certificate of Borrower provides
additional representation and warranties supplemental to those
set forth in the Promissory Note and Mortgage or Deed of Trust.
- CERTIFICATE OF GUARANTOR - The Certificate of Guarantor
provides additional representation and warranties supplemental
to those set forth in the Guarantees.
- CERTIFICATE OF OCCUPANCY - If the mortgage interest includes a
newly constructed building, the Contract Administrator must
obtain from the Borrower a copy of a valid Certificate of
Occupancy issued for the property.
- CLOSING STATEMENT - The Closing Statement provides loan
disbursement instructions.
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Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
g) REAL ESTATE AND BUSINESS VALUATIONS - All valuations must be prepared
by Deloitte & Touche's Valuation and Realty Consulting Group.
Valuations for loans secured by a Mortgage or Deed of Trust on a fee
interest in the property will be based upon the real estate value,
prepared by Deloitte & Touche. The maximum loan-to-value (LTV) ratios
for such loans will be as follows:
Tier LTV
---- ---
I 90%
II 85%
III 80%
Valuations for loans secured by a Mortgage or Deed of Trust on a
leasehold interest in the property must be based upon the business
enterprise value, as calculated by Deloitte & Touche. The maximum
loan-to-value (LTV) for such loans will be 70%.
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Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
h) ENVIRONMENTAL SITE ASSESSMENTS - The Borrower is required to obtain a
Phase I Environmental Site Assessment, prepared by a certified
Environment Engineer or an engineer who is licensed and authorized to
conduct business in the state where the property is located.
The Environmental Site Assessment must be addressed to Captec, and the
Contract Administrator must review and confirm that the Environmental
Engineer has not discovered any conditions that will lead to the
evidence of an environmental hazard or condition with respect to the
site. If environmental conditions do exist, Captec will reject the site
or require the Borrower to engage in a Phase II Environmental Site
Assessment to develop and implement further studies and a remediation
program.
An Environmental Site Assessment provided by the Borrower may be used
if the assessment was completed less than one year from the expected
closing date and accompanied by a reliance letter, addressed to Captec
and signed by the engineer.
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- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
i) SURVEYS - Mortgage loans require a survey to conform to the ALTA-ACSM
survey standards. The survey must be certified to the Borrower, Captec,
and the Title Company and contain sufficient information and analysis
to satisfy Captec.
Once the survey is completed, the Contract Administrator must review
and confirm the following information:
- The legal description of the property found on the survey must
conform to the legal description found on the Title Commitment;
- All easements and all other matters affecting the title as
noted in the Title Commitment are to be shown on the survey;
- The building and all other major improvements are to be shown
on the survey and located within the applicable building set
back lines;
- There are no encroachments from adjoining properties onto the
property and no encroachments from the property onto adjoining
properties.
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- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
j) CERTIFICATE OF INSURANCE - The Contract Administrator must review and
confirm that a Certificate of Insurance is issued by a company that is
acceptable to Captec and includes the following types and amounts of
insurance coverage, with loss payable clauses in favor of Captec:
- Comprehensive general liability and property damage insurance
with initial limits of at least $2,000,000/$2,000,000 for
bodily injury and/or death and $1,000,000 for property damage;
- Fire and extended coverage insurance on a replacement form with
inflation-guard, vandalism and malicious mischief endorsements;
- Flood insurance, in amounts acceptable to Captec, unless
evidence is provided that the property is not located in a
federally designated flood plain area;
- Rent loss or business interruption insurance covering a period
of not less than three (3) months;
Furthermore, the Contract Administrator must confirm that the Borrower has
delivered evidence to Captec, on the closing date, that all policies of
insurance are paid in full and are in full force and effect for not less than
one (1) year from the closing date and contain the following items:
- Captec is named as an additional insured;
- Each policy cannot be modified, amended or canceled without
thirty (30) days' prior written notice to Captec;
- Appropriate clauses pursuant to which the insurance carriers
waive all rights of subrogation against the insured party and
all additional insured parties with respect to all losses
payable under such policies;
- Appropriate clauses that any loss otherwise payable under such
policies will be payable notwithstanding any act or negligence
of Captec or the Borrower.
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- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
k) TITLE COMMITMENT - The Contract Administrator must review and confirm
that the Title Commitment:
- appears in the most recent ALTA form without standard
exceptions;
- names Captec as insured;
- has the correct amount of the mortgage loan as the insured
amount;
- is issued by a title company that is acceptable to Captec;
- includes title endorsements deemed necessary by Captec's
counsel;
- must be subject to no exceptions, unless approved by Captec
prior to the closing date;
- includes an itemization of all outstanding and pending special
assessments or states that there are none;
- includes an itemization of all taxes affecting the property and
states whether the taxes are current;
- has attached copies of all instruments creating exceptions to
the title of the property;
- has the closing date as its effective date.
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- --------------------------------------------------------------------------------
Revised July 1995
Section: IV. MORTGAGE LOAN DOCUMENTATION PROCEDURES
Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
6. MORTGAGE DOCUMENTS (CONTINUED)
l) LIEN AND JUDGMENT SEARCH RESULTS - The Contract Administrator must
order all UCC and other Lien Searches, such as tax liens and judgment
liens. The lien searches are required to be completed in the State and
County in which the Borrower's chief executive office is located, and
in the State and County where the property to be financed is located.
In addition to the Borrower, Lien Searches may be required on
individual Guarantors, and in the case of a Borrower that is a limited
partnership, lien searches must be completed on the general partners.
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- --------------------------------------------------------------------------------
Revised July 1995
Section: IV. MORTGAGE LOAN DOCUMENTATION PROCEDURES
Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
7. PREPAYMENT CLAUSES - The Contract Administrator is responsible for
reviewing and confirming that the correct Prepayment Clause is found in the
Promissory Note. Captec has two variations of a Prepayment Clause, as
described below.
a) MAKE-WHOLE PRE-PAYMENT CLAUSE - Under the make-whole provision, the
Borrower is not allowed to prepay the loan during its first or second
year. But commencing in the third year, the Borrower may elect to
prepay the entire outstanding balance. In addition to the outstanding
loan balance, the Borrower agrees to pay a premium, if applicable,
based on a predetermined formula that guarantees Captec an agreed upon
yield. (See Exhibit IV.D.7(b)) This clauses is the prefered prepayment
provision.
b) PREPAYMENT PREMIUM SCHEDULE - If the Borrower elects to prepay all or a
portion of the outstanding balance on the loan, the following schedule
of premiums must be collected:
Year(s) Premium
------- -------
1 5%
2 4%
3 3%
4 2%
5-10 1%
c) ONE-TIME PREMIUM-FREE PRE-PAYMENT CLAUSE - Supplemental to the
Pre-Payment Clauses above, certain mortgage loans may include an
additional option allowing the Borrower to prepay the loan, without a
premium, during a pre-determined, single thirty (30) day period,
occurring during the seventh to tenth year of the loan.
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- --------------------------------------------------------------------------------
Revised July 1995
Section: IV. MORTGAGE LOAN DOCUMENTATION PROCEDURES
Sub-Section: D. PREPARATION OF DOCUMENTS
- --------------------------------------------------------------------------------
8. VERIFICATION OF RETURNED MORTGAGE DOCUMENTS FROM BORROWER - The Contract
Administrator must follow up with the Borrower for timely return of the
properly executed Mortgage Document Package. Upon receipt of the Mortgage
Document Package, the Contract Administrator is required to verify the
following:
- The signatures on the documents are authorized by the Borrower;
- No changes have been made to the documents;
- The documents contain original signatures;
- All signatures on personal and corporate Guarantees are notarized;
- The documents are properly dated, witnessed, and notarized.
9. VERIFICATION OF RETURNED MORTGAGE DOCUMENTS FROM OUTSIDE SERVICES - The
Contract Administrator must review documents that are received separately
from the Borrower to verify the accuracy of the documents.
10. FINAL REVIEW OF THE MORTGAGE DOCUMENT PACKAGE - The Mortgage Document
Package must be presented by the Contract Administrator to the Manager of
Contract Administration - Real Estate for final review. The Manager of
Contract Administration - Real Estate is required to review the entire
Documentation File with the Commitment Letter to insure that all terms and
contingencies of Captec's approval are met.
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- --------------------------------------------------------------------------------
Revised July 1995
Section: IV. MORTGAGE LOAN DOCUMENTATION PROCEDURES
Sub-Section: E. LEGAL REVIEW OF DOCUMENTS
- --------------------------------------------------------------------------------
If the Borrower has requested changes to the standard Mortgage Documents, the
Real Estate Documentation Department must seek approval by the Senior Vice
President - Administration. The Manager of Contract Administration - Real Estate
may assist the Contract Administrator in negotiating the Mortgage Documents and
with the final approval from the Senior Vice President - Administration.
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- --------------------------------------------------------------------------------
Revised July 1995
Section: IV. MORTGAGE LOAN DOCUMENTATION PROCEDURES
Sub-Section: F. FUNDING PROCEDURES
- --------------------------------------------------------------------------------
1. MORTGAGE FUNDING DISBURSEMENT SUMMARY - The transaction will be in a
position to fund after all documents, listed in the Mortgage Document
Checklist, have been received by the Real Estate Documentation Department
and the executed Mortgage or Deed of Trust has been delivered to the Title
Company. At that time, the Mortgage Funding Disbursement Summary, outlining
the amounts to be disbursed to the Title Company, must be issued to the
Accounting Department.
2. RECEIPT OF POST CLOSING ITEMS - Any items approved by the Senior Vice
President - Administration for receipt on a post closing basis must be
obtained by the Contract Administrator within 30 days of funding.
3. BORROWER'S COPY OF THE MORTGAGE - A copy of the fully-executed Promissory
Note and Mortgage or Deed of Trust (with all attachments and addendums),
and any Guaranties must be delivered to the Borrower by the Real Estate
Documentation Department promptly after funding.
4. FINAL SUBMITTING TO ACCOUNTING - The Contract Administrator or the
Documentation Clerk must place the documents in order in the Mortgage
Documentation File, complete any final data entries and submit the file to
the Accounting Department for final booking and billing.
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- --------------------------------------------------------------------------------
Revised July 1995
Section: IV. MORTGAGE LOAN DOCUMENTATION PROCEDURES
Sub-Section: G. ESCROW INSTRUCTIONS
- --------------------------------------------------------------------------------
The Real Estate Documentation Department must send to the Title Company the
executed Mortgage or Deed of Trust, the fluids to be disbursed, and written
escrow instructions. These escrow instructions must authorize the Title Company
to record the Mortgage or Deed of Trust, disburse the funds in accordance with
Captec's Closing Statement and issue its Title Commitment. Once the Contract
Administrator has confirmed that the Title Company is prepared to issue its
Title Commitment, the Mortgage or Deed of Trust will be released and recorded.
125
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APPENDIX
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- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.E.8 - Report to Credit Committee on Concept (Guideline Form)
- --------------------------------------------------------------------------------
FORMAT & OUTLINE
CONCEPT UNDERWRITING REPORT
-------------------------------------------------------
FRANCHISOR/CHAIN SUMMARY
Franchisor: Name & Address]
Number of Units: Franchised - ____
Company owned - ____
Projected Units: ____ new units over the next year
Franchisee Fee: $______
Investment per Unit: $_______ - $_______
Asset Cost:
Land $_______ - $_______
Building $_______ - $_______
Equipment $_______ - $_______
Franchisor Sales: $___ Million(FYE___)
Business Nature: ______________________
Ownership: ________________
2
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- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.E.8 - Report to Credit Committee on Concept (Guideline Form)
(CONTINUED)
- --------------------------------------------------------------------------------
PROPOSED FINANCING PROGRAM
Program Description: A $_________ financing facility for the financing of
[real estate/equipment] for [Concept] [franchisees].
Type of Financing:
Real Estate [Net Lease or Mortgage]
Equipment [Lease or Loan]
Asset Financing Amount:
Real Estate Up to $_________ per location (__% of cost)
Equipment Up to $_________ per location (__% of cost)
Term:
Real Estate ___Years
Equipment ___ Months
Amortization Periods:
Real Estate [fully amortizing or balloon]
Equipment [fully amortizing or balloon]
Yields Anticipated: Describe nature of anticipated yields and status of
rate negotiations.
Equipment Package: List major equipment items.
Franchisor Support: Describe the general aspects of any contractual support
from the Franchisor, including the details of any
remarketing and recourse agreements.
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- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.E.8 - Report to Credit Committee on Concept (Guideline Form)
(CONTINUED)
- --------------------------------------------------------------------------------
CONCEPT UNDERWRITING FINDINGS
Concept and Operation
- ---------------------
Typically should include discussion of:
- franchisor's headquarters location
- method of franchising/licensing
- concept features (including description of products sold and target
- market)
- typical building features (for restaurants)
- typical site features
- list of direct competition
- discussion of competitive advantages
Management and Operating History
- --------------------------------
Typically should include discussion of:
- history of concept and major events during its history
- ownership structure
- number of units in operation and growth trends
- number of outstanding development agreements
- projected new unit openings during next year
- summary background information on principal officers and directors
Fees Paid by the Franchisee
- ---------------------------
Franchise Fee: indicate fee for first franchise unit and the fee schedule
for multiple units
Royalty Fee: ___% of net sales, payable _________
Also, describe any unique features to the royalty
arrangements
Joint Marketing Fee: ___% of net sales, payable _________
Also, describe any unique features to the royalty
arrangements
Franchisee Ad
Requirements: Indicate any requirements imposed on the franchisee for
spending advertising dollars in the local market.
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- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.E.8 - Report to Credit Committee on Concept (Guideline Form)
(CONTINUED)
- --------------------------------------------------------------------------------
Investment Requirements
- -----------------------
The following is a summary of the estimated costs, exclusive of land and
building investments, that the franchisee may be required to incur:
- --------------------------------------------------------------------------------
ITEM HIGH LOW
- --------------------------------------------------------------------------------
Franchise Fee $0 $0
- --------------------------------------------------------------------------------
Architect/Engineering 0 0
- --------------------------------------------------------------------------------
Equipment- 0 0
Kitchen, Furniture, POS
- --------------------------------------------------------------------------------
Signage 0 0
- --------------------------------------------------------------------------------
Working Capital I 0 0
Pre-Opening
- --------------------------------------------------------------------------------
Leasehold Improvements 0 0
- --------------------------------------------------------------------------------
TOTAL $0 $0
- --------------------------------------------------------------------------------
The above costs are exclusive of land and building investments the franchisee
may be required to incur. These costs vary widely due to geographic areas, code
requirements, condition of the structure, building design and size of building.
However, the typical range of land and building costs are as follows:
- --------------------------------------------------------------------------------
ITEM HIGH LOW
- --------------------------------------------------------------------------------
Land $0 $0
- --------------------------------------------------------------------------------
Improvements on Land 0 0
- --------------------------------------------------------------------------------
Building 0 0
- --------------------------------------------------------------------------------
TOTAL $0 $0
- --------------------------------------------------------------------------------
Training and Support
- --------------------
Typically should include discussion of:
- description of standard pre-opening training program, noting who
receives training, location of training, length of training period and
nature of training process
- description of other support features such as: site selection, design
and construction assistance, promotional and advertising programs,
grand opening assistance, and on-going operations monitoring
Financial Requirements and Average Sales
- ----------------------------------------
Describe the minimum franchisee financial requirements (including net worth and
liquidity thresholds) and comment on the sufficiency of these requirements.
5
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.E.8 - Report to Credit Committee on Concept (Guideline Form)
(CONTINUED)
- --------------------------------------------------------------------------------
Discuss the average sales per store unit broken down as follows:
- for franchised units
- for company operated units
- system-wide
Discuss other unit level economic measures such as various expense components
expressed as a percent of sales, average cash flow as a percent of sales, and
average net income as a percent of sales.
Financial Condition
- -------------------
Discuss the findings of the analysis of the franchisor's financial statements.
Attach to the report the detailed financial statement spreadsheets which were
prepared by the Credit Department. Highlight all pertinent trends, ratios and
balances. Discuss all significant strengths and weaknesses.
Closures
- --------
For the past five years the following number of franchised units closed for any
reason:
Fiscal year Ending
19 19 19 19 19
-- -- -- -- --
Discuss the reasons behind all closures.
Franchisee Survey
- -----------------
Indicate how many franchisees were surveyed (indicate number and % of franchise
units represented by respondents) and their mix between single-unit versus
multi-unit operators. Indicate the trends noted from the responses, including
satisfaction ratings for both their own stores, the concept in general and the
franchisor's support efforts. Indicate the range of average store unit sales
represented by the respondents. Indicate any unusual comments or concerns noted
by the respondents. Summarize the Credit Department's overall impressions from
the survey responses.
Recommendation
- --------------
Summarize all strengths and weaknesses identified during the underwriting
process, generally devoting a single sentence to each. Highlight any information
which is incomplete. Make a recommendation for approval or decline based upon
these issues.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.F.11 - Report on Financing Application (Guideline Form)
- --------------------------------------------------------------------------------
TRANSACTION SUMMARY
LESSEE:
-----------------
GUARANTORS:
-----------------
CONCEPT:
-----------------
TRANSACTION
TYPE:
-----------------
LOCATION:
-----------------
PROJECTED
OPENING:
-----------------
PURCHASE PRICE: $
-----------------
TERM:
------
RATE:
------
PURCHASE OPTION: %
---
CLOSING FEE: %
---
IRR: %
---
IRR w/ RESIDUAL: %
---
TOTAL IRR: %
---
TRANSACTION:
Summarize the nature of the proposed transaction. Enumerate the total
outstanding credit exposure to the customer, both before and after the proposed
transaction.
7
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.F.11 - Report on Financing Application (Guideline Form)
(CONTINUED)
- --------------------------------------------------------------------------------
ORGANIZATION BACKGROUND:
Provide a summarization of the applicant's business structure, operating history
and current operations.
KEY PERSONNEL:
Summarize the findings of the review of principals' prior operating experience
(see Policy I.F.5)
GUARANTORS:
Provide a detailed discussion of the findings from the review of principals'
personal financial statements (see Policy I.F.4) and the review of personal
credit reports (see Policy I.F.6).
FINANCIAL ANALYSIS:
Discuss in detail all of the findings from the review of the applicant's
financial statements (see Policy I.F.2).
Note what references were contacted, any derogatory comments received from such
references and the analysts findings with respect to such comments (see Policy
I.F.8).
For all applications related to a newly opened store unit, discuss in detail
(and attach as an exhibit) the results of the credit analysis of the unit level
economics for the new unit.
SOURCES AND USES:
For all applications related to a newly opened store unit, provide a chart
indicating the sources and uses of capital and discuss whether these amounts
reconcile with the expected sources and uses of capital as outlined in the
Report to Credit Committee on Concept (see Policy I.E.7).
SITE ANALYSIS:
Discuss in detail all of the findings from site review (see Policy I.F.9).
8
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.F.11 - Report on Financing Application (Guideline Form)
(CONTINUED)
- --------------------------------------------------------------------------------
OTHER:
Discuss any other unusual positive or negative findings of the underwriting
process which the analyst believes to be material to the credit decision.
RECOMMENDATION:
The analyst must state a recommendation to approve or decline, and note any
contingencies for approvals. The primary strengths and weaknesses of the
application must be highlighted, along with the principle reasons supporting the
recommendation
9
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.F.12 - Credit Transaction Form
- --------------------------------------------------------------------------------
APPROVAL SHEET
- -------------------------------------------------- -----------------------------
LESSOR: APPLICATION #
- -------------------------------------------------- -----------------------------
LESSEE: CCA NO.:
- -------------------------------------------------- -----------------------------
AMOUNT: APPROVAL NO.:
- -------------------------------------------------- -----------------------------
FRANCHISE: LOGGED IN:
- -------------------------------------------------- -----------------------------
APPROVED AT: SALESMAN:
- -------------------------------------------------- -----------------------------
BY: RECOURSE:
- -------------------------------------------------- -----------------------------
AMOUNT: TERM
- -------------------------------------------------- -----------------------------
DATE: RATE: DISCOUNT:
- -------------------------------------------------- -----------------------------
EXPIRATION RATE: APPROVAL: PURCHASE OPTION:
- -------------------------------------------------- -----------------------------
RATE FACTOR: CLOSING FEE:
- -------------------------------------------------- -----------------------------
TRANSACTION TYPE: REAL ESTATE: EQUIPMENT:
- -------------------------------------------------- -----------------------------
CAPTEC APPROVAL
BY: DATE:
-------------------------------- -------------------------
COMMENTS:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
- --------------------------------------- -------------------- -------------------
APPROVAL REQUIREMENTS DATE REQUESTED DATE RECEIVED
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
- --------------------------------------- -------------------- -------------------
REJECTED AT: BY: DATE: REASON:
--------------------- -------- ------ -----------------
WITHDRAWN BY: DATE: REASON:
------------------------------ ------- ---------------
- ----------------------- -------------------- -----------------------------------
DATE STATUS OTHER COMMENTS
- ----------------------- -------------------- -----------------------------------
- ----------------------- -------------------- -----------------------------------
- ----------------------- -------------------- -----------------------------------
- ----------------------- -------------------- -----------------------------------
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.F.13.a - Credit Approval Letter
- --------------------------------------------------------------------------------
[Date]
[Address]
Dear [Mr/Ms. Lessee],
We are pleased to inform you that the lease application of [Applicant Name] has
been approved. This lease approval is subject to the following terms and
conditions:
LESSEE:
LOCATION:
LESSOR: Captec Financial Group, Inc. or its assignee
COST: $
EQUIPMENT: Restaurant Equipment
BASE TERM
COMMENCEMENT: [First or Fifteenth] of the month following equipment
acceptance.
BASE LEASE TERM: [#] Months
INTERIM RENT: Pro rata daily rate for the period between equipment
acceptance date and commencement of base term.
MONTHLY
PAYMENT FACTOR: [ ]
Payments are subject to change to reflect changes in money
market rates that may occur prior to Base Lease Term
Commencement date.
PAYMENT FREQUENCY: First and last month's rent is due upon closing. All
remaining payments are due monthly in advance.
PURCHASE OPTION: At the end of the Base Term or any renewal term, the Lessee
may purchase the equipment for [__% of the original
equipment cost] [the fair market value] [$1.00].
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.F.13.a - Credit Approval Letter (CONTINUED)
- --------------------------------------------------------------------------------
NET LEASE: This shall he a net lease. The Lessee will be
unconditionally obligated to pay rent during the base term.
All taxes (except income taxes of the Lessor), maintenance,
insurance, risk of loss, and risk of obsolescence during the
term will he at the sole risk and expense of the Lessee.
CONDITIONS: This approval is subject to the following conditions:
- Documentation acceptable to all parties to the Lease.
- Lessee agrees that approval of documents will not be
unreasonably withheld.
- No material adverse change in the financial condition of
the Lessee or any Guarantor prior to the closing.
- Complete legal description of all properties (see
enclosed forms).
- Lessee shall reimburse Lessor for all Uniform Commercial
Code filing and search costs incurred by Lessor as well
as any other fees or charges incurred in relation to
filing or recording any documents in connection with
this lease agreement or any supplemental documents.
- See enclosed list for further documentation
requirements.
- Personal Guarantees of [ ].
The rate expires 30 days from the approval date. This approval is good for 90
days from the approval date of [- -95]. In order for the approval to hold, the
lease must be funded by [- -95]. If the transaction has not been closed on or
before this date, the application must be re-approved and updated financial
information may be required. An additional processing fee of $150.00 is charged
if an application requires re-approval. This approval is also contingent upon
acceptable documentation and insurance coverage.
Please acknowledge your acceptance and understanding of these terms and
conditions by signing below and returning the original signed copy to Captec
Financial Group, Inc. The commitment fee previously submitted is a cost of
business and does not apply toward the lease payments. In the event Lessee fails
to enter into the Lease, the commitment fee will he forfeited to Lessor as
liquidated damages.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.F.13.a - Credit Approval Letter (CONTINUED)
- --------------------------------------------------------------------------------
If you have any questions or concerns, please contact at (313)994-5505.
Sincerely,
- ------------------------
Credit Manager
Accepted and understood by:
- -----------------------------------------------------------
Date
13
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: I.F.13.b - Credit Decline Letter
- --------------------------------------------------------------------------------
[Date]
(Address]
Dear [Mr/Ms. Lessee],
Thank you for applying to Captec for credit. We have given your request careful
consideration and regret that we are unable to extend credit to you at this
time.
Captec is required by Federal Reserve Board regulations to provide you, upon
timely request, specific reason(s) for the denial of business credit. [Reasons
for denial include: No P.G. of spouse who is operator, derogatory personal
credit.]
If you wish further information please contact:
Captec Financial Group, Inc.
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
Ann Arbor, MI 48106
Attention: Credit Department
Phone: (313)994-5505
In contacting the Credit Department, please specifically identify that your
request is made pursuant to Regulation B, and provide an address and all the
information specified. We will contact you with the reason(s) for denial within
thirty (30) days of receiving your written request
The Federal Equal Credit Opportunity Act prohibits creditors from discriminating
against credit applicants on the basis of race, color, religion, national
origin, sex, marital status, age (provided the applicant has the capacity to
enter into a binding contract); because all or part of the applicant's income
derives from any public assistance program; or because the applicant has in good
faith exercised any right under the Consumer Credit Protection Act. The federal
agency that administers compliance with this law concerning this creditor is the
Federal Trade Commission, Equal Credit Opportunity, Washington, DC 20580.
Sincerely,
- ----------------------
Credit Manager
14
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: ll.C.1.c - Notice of Default Letter
- --------------------------------------------------------------------------------
Date
Name
Company
Address
City, State Zip
RE: LEASE#
Dear ____________:
YOU ARE HEREBY NOTIFIED that pursuant to section 15(i) of your lease with CAPTEC
FINANCIAL GROUP, INC. (Lessor) dated the _____ day of_______, 199_, you are in
default for non payment of rent for the Month(s) of________________ in the total
sum of $_______________.
You are hereby granted 7 days from date hereof to cure said default or Lessor
shall declare the remaining __ payments totaling $________ due and payable
forthwith as well as requiring the return of the equipment described in Exhibit
A of said Lease, pursuant to Section 15(b) of said Lease, and to exercise any
and all other remedies provided for default in Section 15(b) as well as any
other rights provided by law.
All questions should be directed to the under signed by mail directed to the
Lessor at 24 Frank Lloyd Wright Drive, Lobby L, 4th Floor, Ann Arbor, MI 48106
or by telephone at (3l3)-994-5505.
Sincerely,
CAPTEC FINANCIAL GROUP, INC.
BY:
----------------------
ITS
-----------------------
15
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: ll.C.1.d-1 - Notice of Default & Acceleration of Payments
Letter (Obligor)
- --------------------------------------------------------------------------------
DATE
NAME
COMPANY NAME
ADDRESS
RE: LEASE#
Dear
On [DATE] a Notice of Default was sent to you, certified mall, providing you
with an opportunity to cure your lease default within seven days from that date.
Since we have not received that payment, your account remains in default and
that option to cure that default is hereby withdrawn.
YOU ARE HEREBY NOTIFIED THAT CAPTEC FINANCIAL GROUP, INC. HEREBY ELECTS,
ACCORDING TO THE TERMS OF YOUR LEASE AGREEMENT, TO ACCELERATE YOUR REMAINING
PAYMENTS AT THIS TIME.
DEMAND IS HEREBY MADE FOR PAYMENT IN FULL FOR THE REMAINING RENTALS AND ACCRUED
FEES ON YOUR ACCOUNT IN THE AMOUNT OF _________________ WITHIN TEN (10) DAYS
FROM DATE OF THIS NOTICE AND THE IMMEDIATE RETURN OF EQUIPMENT AS PROVIDED IN
YOUR LEASE.
If these funds are not in our possession by that date, we will have our
attorneys commence action under the Lease and pursue our remedies provided in
your Lease Agreement as well as any other rights provided by law.
You may contact the undersigned at (313) 994-5505 with any questions you might
have concerning your account balance.
Sincerely,
CAPTEC FINANCIAL GROUP, INC.
By:
---------------------------
Patricia A. Devine
Its: Equipment Portfolio Manager
---------------------------
Via Certified Mail
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: ll.C.1.d-2 - Notice of Default and Demand for Payment
Letter (Guarantor)
- --------------------------------------------------------------------------------
DATE
NAME
COMPANY
ADDRESS
CITY, STATE ZIP
RE: LEASE #
DEAR (GUARANTOR)
The subject Lease is in Default as evidenced by a copy of the enclosed Notice to
the Lessee. Accordingly, Captec Financial Group, Inc. has elected, pursuant to
the terms of said Lease to accelerate the remaining payments so that there is
presently due and payable the sum of $____________.
As a Guarantor under said Lease dated the ___ day of__________ 199__ you agreed
"to pay on demand all sums due and to become due, to you (Captec) from the
Obligor...." In addition, if this matter is referred to an attorney you are
obligated to pay attorney fees and costs.
DEMAND IS HEREBY MADE FOR PAYMENT IMMEDIATELY OF THE ENTIRE BALANCE SET FORTH
ABOVE. IF CERTIFIED FUNDS ARE NOT RECEIVED BY US WITHIN TEN (10) DAYS FROM DATE
OF THIS NOTICE WE WILL REFER THIS MATTER TO OUR ATTORNEYS FOR IMMEDIATE ACTION.
If you have any questions concerning this balance please contact the undersigned
at (313) 994-5505.
Sincerely,
CAPTEC FINANCIAL GROUP, INC.
By:
-----------------
Its:
----------------
Via Certified Mail
17
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: II.C.1.f- Phone Log
- --------------------------------------------------------------------------------
PHONE LOG
COMPANY NAME:___________________________________________
PHONE NO:_______________________________________________
FAX NO:_________________________________________________
LEASE NO:_______________________________________________
CONTACT:________________________________________________
- ---------- -------------- -------------- --------------------- -----------------
INVOICE DUE DATE AMOUNT LATE CHG. TOTAL
- ---------- -------------- -------------- --------------------- -----------------
- -------- -----------------------------------------------------------------------
DATE NOTES
- -------- -----------------------------------------------------------------------
- -------- -----------------------------------------------------------------------
- -------- -----------------------------------------------------------------------
- -------- -----------------------------------------------------------------------
- -------- -----------------------------------------------------------------------
- -------- -----------------------------------------------------------------------
- -------- -----------------------------------------------------------------------
- -------- -----------------------------------------------------------------------
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: II.G.1.a - Notice of Termination ($1 purchase option)
- --------------------------------------------------------------------------------
DATE
NAME
COMPANY
ADDRESS
CITY, STATE ZIP
Re: Lease No.
Dear__________:
Our records indicate that the term of your lease with Captec Leasing Company
will expire on _____________,l99__.
Your lease was structured so that you would have ownership of the equipment at
the term of the lease. After receipt of your final rental payment, a Bill of
Sale will be sent to you.
We have enjoyed out business relationship and would be please to offer our
leasing services to you in the future. If you have any questions regarding the
above, please call me at 3l3/994-55O5.
Yours very truly,
CAPTEC FINANCIAL GROUP, INC.
By:___________________
Its:___________________
19
378
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: II.G.1.b - Notice of Termination (true lease)
- --------------------------------------------------------------------------------
DATE
NAME
COMPANY
ADDRESS
CITY, STATE ZIP
RE: LEASE NO.
Dear
Our records indicate that the term of your lease with Captec Leasing Company
will expire on _________ __, 199__.
After receipt of your final rental payment, you will have two options. First you
may purchase the equipment for the sum of ________________ (see our invoice
enclosed). This sum must be received in our office no later than _____________
__, 199__.
Secondly, if you do not wish to purchase the equipment you must return it to a
designated location as directed in writing at your expense, on or before
_____________ __, 199__. Please note that your are liable for the same monthly
payment provided for in your lease until the equipment is received at the site
as instructed.
We have enjoyed our business relationship and would be pleased to offer out
leasing services to you in the future. If you have any questions regarding the
above, please call me at 313/994-5505.
Yours very truly,
CAPTEC FINANCIAL GROUP, INC.
By:_________________
Its:________________
20
379
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: II.G.2.a - Bill of Sale
- --------------------------------------------------------------------------------
BILL OF SALE
In consideration of the sum of __________________________________________and
/100 ($________) Dollars, receipt of which is hereby acknowledged, CAPTEC
FINANCIAL GROUP, INC. ("Seller") does hereby sell and transfer to___________.
("Buyer") the following described personal property:
SEE SCHEDULE A ATTACHED HERETO
The above described personal property is in a used condition, having been leased
by the Buyer in the exercise of its rights under a lease. The Seller in neither
a manufacturer nor distributor of, nor dealer or merchant in, said personal
property.
THE SELLER MAKES NO WARRANTY OF TITLE OR THAT SAID PROPERTY IS FREE OF LIENS OR
CLAIMS IN FAVOR OF OTHERS, AND MAKES NO WARRANTY OF MERCHANTABILITY IN RESPECT
TO SAID PERSONAL PROPERTY, WHICH PROPERLY IS SOLD IN AN "AS IS, WHERE IS"
CONDITION, WITH ALL FAULTS. BY ACCEPTANCE OF DELIVERY OF SAID PROPERTY, THE
BUYER AFFIRMS THAT IT HAS NOT RELIED ON THE SELLER'S SKILL OR JUDGMENT TO SELECT
OR FURNISH SAID PROPERTY FOR ANY PARTICULAR PURPOSE, AND THAT THE SELLER MAKES
NO WARRANTY THAT SAID PROPERTY IS FIT FOR ANY PARTICULAR PURPOSE AND THAT THERE
ARE NO REPRESENTATIONS OR WARRANTIES, EXPRESSED, IMPLIED OR STATUTORY, THAT
EXTEND BEYOND THE DESCRIPTION OF SAID PROPERTY ABOVE SET FORTH.
This is a final and exclusive expression of the agreement of the Seller and the
Buyer and no course of dealing or usage of trade or course of performance shall
be relevant to explain or supplement any term expressed in this agreement.
By acceptance of delivery of said property, the Buyer acknowledges that the
Buyer has either examined said property as fully as desired, or has been given
the opportunity for such examination and has been given the opportunity for such
examination and has refused to make such examination.
IN WITNESS WHEREOF, Seller has executed this instrument this day of____________.
CAPTEC FINANCIAL GROUP, INC.
24 Frank Lloyd Wright Drive
P.O. Box 544
Ann Arbor, Michigan 48106-0544
By: _____________________
Its: _____________________
21
380
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: APPENDIX
Sub-Section: II.G.2.b - Lease Renewal Agreement
- --------------------------------------------------------------------------------
LEASE RENEWAL AGREEMENT
-----------------------
This agreement is executed pursuant to Lease Agreement No. ________ dated ____,
199_ (the "Lease Agreement"). Lessor and Lessee hereby agree that, for the
purposes of extending the Basic Term of the Lease Agreement, the terms of the
Lease Agreement shall be amended as follows:
5. BASIC TERM: _______ (_) months commencing on________________ and ending on
_________.
7. BASIC RENT: ________________ (_) payments of$_________ (plus applicable
sales/use tax) payable monthly on the ____________________ (_) day of each
successive month commencing ________________________. Followed by __________ (_)
payments of $_________ (plus applicable sales/use tax) payable monthly on the
____________________ (_ ) day of each successive month commencing______________.
In all other respects, the terms and conditions of the Lease Agreement and the
Equipment Schedule shall remain the same and continue to be in effect.
LESSEE HEREBY ACKNOWLEDGES RECEIPT OF A TRUE COPY OF THIS AGREEMENT.
LESSOR: LESSEE:
CAPTEC FINANCIAL GROUP
------------------------------
By: By:
------------------------- ---------------------------
(Signature) (Signature)
Name: Name:
----------------------- --------------------------
(Print Name & Title)
Date: Date:
------------------------ -------------------------
22
381
EXHIBITS
1
382
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: EXHIBITS
Sub-Section: I.F.1 - Credit Application Form
- --------------------------------------------------------------------------------
2
383
24 Frank Lloyd Wright Drive 800-522-7832
Lobby L. 4th Floor [CAPTEC FINANCIAL GROUP LOGO] 313-994-5505
P.O. Box 544
Ann Arbor, MI 48106-0544
SALESPERSON ___________ LEASE APPLICATION DATE _______________
COMPANY NAME ___________________________________________________________________
ADDRESS ________________________________________________________________________
City County State Zip
PHONE _____________________ CONTACT ___________________________________________
ADDRESS OF INSTALLATION: SAME ____ OTHER ______________________________________
TIME IN BUSINESS ______ TYPE OF BUSINESS _______________________________________
CIRCLE ONE: Corporation Partnership Proprietorship
================================================================================
GUARANTOR
- ------------------- ----------------------- -------------------------
NAME NAME NAME
- ------------------- ----------------------- -------------------------
TITLE TITLE TITLE
- ------------------- ----------------------- -------------------------
HOME ADDRESS HOME ADDRESS HOME ADDRESS
- ------------------- ----------------------- -------------------------
- ------------------- ----------------------- -------------------------
- ------------------- ----------------------- -------------------------
S.S# S.S# S.S#
- ------------------- ----------------------- -------------------------
PHONE PHONE PHONE
** IF LESS THAN ONE YEAR AT THIS ADDRESS, PLEASE ALSO INCLUDE PREVIOUS ADDRESS.
================================================================================
BANK REFERENCES
BANK BRANCH/LOCATION PHONE ACCOUNT# OFFICERS CH SV LN
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
TRADE REFERENCES
FIRM CONTACT CITY/STATE PHONE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
EQUIPMENT
VENDORS______________________ PHONE_________________ SALESPERSON________________
ADDRESS ________________________________________________________________________
EQUIPMENT DESCRIPTION (INCLUDE MODEL AND SERIAL NUMBERS WHEN AVAILABLE):
____________________________________ COST ___________ TAX _______________
____________________________________ TOTAL ___________ CUST. DWNPMT ______
____________________________________ TERM ____________ RATE ______________
____________________________________ # ADVANCE PMTS ______________________
384
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: EXHIBITS
Sub-Section: II.B.2.a - Delinquency Report
- --------------------------------------------------------------------------------
3
385
Collection Reports - 25
- --------------------------------------------------------------------------------
Collection Report Menu
- --------------------------------------------------------------------------------
DELINQUENCY REPORT
PURPOSE
This report lists past-due contracts, sorting them by delinquency status
(number of days past due) and by number of days since a payment has been
made.
Characteristics
Frequency Upon request.
Generation This report is selected from the Collection
Report Menu.
Format The contracts are listed in numerical order.
Examples of headings printed on the report
are as follows:
"PAST DUE OVER 90 DAYS
LAST PAYMENT OVER 90 DAYS AGO"
"PAST DUE OVER 90 DAYS
LAST PAYMENT 61-90 DAYS AGO"
"PAST DUE 61-90 DAYS
LAST PAYMENT OVER 90 DAYS AGO"
Fields
CONTRACT NUMBER The contract number within the lessor.
CUSTOMER NAME The customer's name.
PAST DUE The total amount past due.
- --------------------------------------------------------------------------------
Info-Lease(R) Report Guide Rev VIII
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26 - Collection Reports
- --------------------------------------------------------------------------------
COLLECTION REPORT MENU
- --------------------------------------------------------------------------------
Delinquency Report cont....
RENTAL PAYMENT The scheduled payment amount.
LAST PAYMENT DATE The date of the last payment. This could be
either a default or manually entered date.
NEXT DUE DATE The due date of the next payment.
BOOK EXPOSURE The book exposure is calculated as follows:
Net Investment
+ Unearned ITC
-----------------
= Book Exposure
See Appendix 2 - 1 for net investment
calculation.
Note: The Book Exposure is printed if the
contract is over 60 days past due and
the last payment was over 60 days ago
(Delinquency Report only).
BALANCE REMAINING The contract balance remaining.
This is printed if the contract is past-due
less than or equal to 60 days, or the last
payment was less than or equal to 60 days
ago.
TOTALS Totals are printed for PAST DUE and BALANCE
REMAINING if the contract is past-due less
than or equal to 60 days, or the last payment
was less than or equal to 60 days ago. They
are also printed for RENTAL PAYMENT.
Totals are printed for PAST DUE and BOOK
EXPOSURE if the contract is over 60 days
past-due and the last payment was over 60
days ago. They are also printed for RENTAL
PAYMENT.
NUMBER OF CONTRACTS The total contracts within their past-due and
last payment date categories.
- --------------------------------------------------------------------------------
Info-Lease(R) Report Guide Rev VIII
Decision Systems, Inc. 04/1989
387
Collection Reports - 27
DELINQUENCY.RPT INFO-LEASE TEST SYSTEM PAGE 5
03/10/1989 DELINQUENCY REPORT
AS OF MARCH 10, 1989
PAST DUE 3-30 DAYS
LAST PAYMENT 1-30 DAYS AGO
RENTAL LAST NEXT BALANCE
CONTRACT NUMBER CUSTOMER NAME PAST DUE PAYMENT PAYMENT DATE DUE DATE REMAINING
- --------------- ------------- -------- ------- ------------ -------- ---------
001-0000009-000 SUMMIT DESIGN COMPANY 21,323.70 21,323.70 02/27/1989 03/01/1989 725,005.80
001-0000009-001 SUMMIT DESIGN COMPANY 5,786.46 5,786.46 02/27/1989 03/01/1989 219,885.48
001-0000009-002 SUMMIT DESIGN COMPANY 6,817.73 6,817.73 02/27/1989 03/01/1989 299,980.12
001-0000009-003 SUMMIT DESIGN COMPANY 5,141.76 5,141.76 02/27/1989 03/01/1989 241,662.72
001-0000009-004 SUMMIT DESIGN COMPANY 4,595.84 4,595.84 02/27/1989 03/01/1989 229,792.00
001-0000009-005 SUMMIT DESIGN COMPANY 6,596.87 6,596.87 02/27/1989 03/01/1989 349,634.11
001-0000009-006 SUMMIT DESIGN COMPANY 8,417.20 8,417.20 02/27/1989 03/01/1989 454,528.80
001-0000030-000 COLLINS BUILDING & DEVELOPMENT 1,248.27 1,248.27 02/22/1989 03/01/1989 21,220.59
001-0000030-001 COLLINS BUILDING & DEVELOPMENT 506.12 506.12 02/22/1989 03/01/1989 8,604.04
001-0000088-016 SETHE COMPANY 4,293.30 4,293.30 02/06/1989 03/01/1989 90,159.30
001-0000098-000 MILTON INC. 6,357.95 6,357.95 02/03/1989 03/01/1989 95,369.25
001-0000098-001 MILTON INC. 430.32 430.32 02/03/1989 03/01/1989 6,454.80
001-0000098-002 MILTON INC. 539.15 539.15 02/03/1989 03/01/1989 10,243.85
001-0000098-003 MILTON INC. 132.73 132.73 02/03/1989 03/01/1989 2,787.33
001-0000151-000 SOUTH ORTHOPEDIC SURGERY 859.56 859.56 02/21/1989 03/01/1989 29,225.04
001-0000192-000 TATES, D HERMAN 1,104.31 1,104.31 02/23/1989 03/01/1989 8,834.48
001-0000204-000 CLARK COMPANY 1,126.84 1,126.84 02/06/1989 03/01/1989 28,171.00
001-0000277-000 ROUNDLAKE LUMBER & MOLDING CO 3,923.37 3,923.37 02/23/1989 03/01/1989 176,551.65
001-0000277-001 ROUNDLAKE LUMBER & MOLDING CO 340.23 340.23 02/23/1989 03/01/1989 17,011.50
001-0000277-002 ROUNDLAKE LUMBER & MOLDING CO 827.27 827.27 02/23/1989 03/01/1989 47,154.39
001-0000311-002 A-PLUS CHEMICAL CO., INC. 625.82 625.82 02/06/1989 03/01/1989 36,297.56
001-0000398-000 CELLWAY MEDICAL CLINIC, LTD. 9,136.88 9,136.88 02/02/1989 03/01/1989 529,939.04
001-0000034-000 H & L FAST PRINT 641.66 641.66 03/01/1989 03/01/1989 19,249.80
001-0000034-001 H & L FAST PRINT 395.33 395.33 03/01/1989 03/01/1989 13,045.89
001-0000051-001 DEHLER ASSOCIATES INC 1,156.38 1,156.38 03/03/1989 03/01/1989 21,971.22
001-0000051-002 DEHLER ASSOCIATES INC 79.27 79.27 03/03/1989 03/01/1989 1,823.21
001-0000051-004 DEHLER ASSOCIATES INC 578.78 578.78 03/03/1989 03/01/1989 10,418.04
001-0000094-000 QUINN INDUSTRIES 1,508.65 1,508.65 03/22/1989 03/01/1989 3,017.33
001-0000094-001 QUINN INDUSTRIES 388.97 388.99 03/22/1989 03/01/1989 4,667.86
001-0000094-002 QUINN INDUSTRIES 53.97 53.97 03/22/1989 03/01/1989 701.61
001-0000094-003 QUINN INDUSTRIES 296.21 296.21 03/22/1989 03/01/1989 4,739.36
001-0000094-004 QUINN INDUSTRIES 114.35 114.35 03/22/1989 03/01/1989 2,401.35
001-0000094-005 QUINN INDUSTRIES 284.70 284.70 03/22/1989 03/01/1989 6,832.80
001-0000094-006 QUINN INDUSTRIES 989.78 989.79 03/22/1989 03/01/1989 7,918.31
001-0000129-000 BLOCKE BUILDING CORPORATION 304.88 304.88 03/10/1989 03/01/1989 8,536.64
001-0000370-001 SET MANUFACTURING CORPORATION 1,726.41 1,734.59 03/20/1989 03/01/1989 102,332.63
001-0000379-001 BILL D. TULL, M.D., P.C. 189.42 473.54 03/01/1989 03/01/1989 18,657.48
001-0000398-003 CELLWAY MEDICAL CLINIC, LTD. 112.77 393.68 03/01/1989 03/01/1989 22,552.53
001-0000398-004 CELLWAY MEDICAL CLINIC, LTD. 488.45 749.05 03/01/1989 03/01/1989 44,682.40
001-0000449-000 TYSON INDUSTRIES 449.20 23,100.55 03/01/1989 03/01/1989 69,750.85
---------- ---------- ----------
TOTALS: 99,890.86 123,376.08 3,991,812.16
NUBER OF CONTRACTS: 40
388
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
Section: EXHIBITS
Sub-Section: II.B.2.b - Summary Past Due Report
- --------------------------------------------------------------------------------
4
389
Collection Reports - 13
- --------------------------------------------------------------------------------
COLLECTION REPORT MENU
- --------------------------------------------------------------------------------
SUMMARY PAST DUE REPORT
PURPOSE
The Summary Past Due Report lists past-due contracts by aging category,
including ones with only miscellaneous amounts past due. This report also
provides a summmary by aging category of the receivable balances for contracts.
CHARACTERISTICS
Frequency This is considered a period-end report, but may be
requested at any time.
Generation This report is selected from the Collection Report
Menu.
In addition to the standard sort options, you are
given the option to have the residual added to
the CBR on the report.
Format The left side of the report displays the past-
due payment aging fields, and the right side lists
the contract balance remaining and any receivable
writedown that may have been entered. Grand totals
of all fields are printed at the end of the
report. The contract information is listed in
numerical order. Following each primary page
break, a Portfolio Percent Report will be printed
that summarizes the past-due contracts as a
percentage of the entire portfolio. A summary page
follows the report, which shows general ledger
totals.
- --------------------------------------------------------------------------------
Info-Lease(R) Report Guide Rev VIII
Decision Systems, Inc. 04/1989
390
14 - Collection Reports
- --------------------------------------------------------------------------------
COLLECTION REPORT MENU
- --------------------------------------------------------------------------------
SUMMARY PAST DUE REPORT CONT....
FIELDS
CONTRACT NUMBER The contract number within the lessor.
CUSTOMER NAME The customer's name.
PAYMENTS PAST DUE BY The list of past-due amounts in their respective
AGING CATEGORIES aging categories.
LATE CHRGS The total late charges past due.
INTEREST The total interest past due.
MISC The total miscellaneous charges past due.
TAXES The total taxes past due.
TOT PAST DUE The total contract amount past due.
CONTRACT BALANCE The receivable balance appears in the aging
REMAINING/WRITEDOWN category corresponding to the oldest payment.
Ex: A contract has three payments past due as
follows:
01-30 $775.00
31-60 $775.00
61-90 $775.00
The contract balance remaining is $15,500, and
will be printed in the 61-90 aging
classification.
- --------------------------------------------------------------------------------
Info-Lease(R) Report Guide Rev VIII
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Collection Reports - 15
- --------------------------------------------------------------------------------
COLLECTION REPORT MENU
- --------------------------------------------------------------------------------
SUMMARY PAST DUE REPORT CONT....
CONTRACT BALANCE If there has been a writedown to the receivable,
REMAINING/WRITEDOWN the writedown amount is printed as a negative
CONT.... amount below the receivable balance.
Note: The Renewal CBR or "OPEN RNWL" will be
printed if the original CBR goes to zero
and the contract has been renewed (Renewal
Module only).
SUMMARY PAGES
Following each primary page break, a Portfolio Percent Report will be
printed that summarizes the past-due contracts as a percentage of the
entire portfolio.
The last page of the report prints a miscellaneous general ledger
summary. The payments to each individual account are reported along with
the identifying general ledger account number and description.
- --------------------------------------------------------------------------------
Info-Lease(R) Report Guide Rev VIII
Decision Systems, Inc. 04/1989
392
Collection Reports - 17
SUMMARY.PASTDUE.RPT INFO-LEASE TEST SYSTEM PAGE 8
03/10/1989 SUMMARY PAST DUE REPORT FOR MARCH 10, 1989
PAYMENTS PAST DUE BY AGING CATEGORY CBR + RESIDUAL/WRITEDOWN
CONTRACT NUMBER 3-30 31-60 61-90 91-OVER LATE CHRGS GROUPED ACCORDING TO AGING CATEGORY
CUSTOMER NAME INTEREST MISC TAXES TOT PAST DUE 3-30 31-60 61-90 91-OVER
- --------------- -------- -------- ----- ------- ------------- ---- ----- ----- -------
001-0000222-006
FILING FEES 5.00 0.00
001-0000239-000 0.00 0.00 0.00 0.00 0.00
WILLIAMS TRACTOR CO 0.00 86.54
JANUARY LATE CHARGE 86.54 0.00
001-0000241-000 0.00 0.00 0.00 0.00 0.00
WILKINSONS DEVELOP & CONSTRC 0.00 123.45
JANUARY LATE CHARGE 123.45 0.00
001-0000247-000 6,007.21 6,007.21 6,007.21 24,028.84 0.00 258,310.03
HUELDON ASSOCIATES 0.00 0.00 42,050.47
001-0000247-001 523.33 523.33 523.33 2,093.32 0.00 25,119.84
HUELDON ASSOCIATES 0.00 0.00 3,663.31
001-0000254-000 0.00 0.00 0.00 0.00 0.00
WILSON TRANSPORTATION 0.00 2,388.06
LEASE PAYMENT FROM
12-1 THRU 1-1 745.76 50.26
LEASE PAYMENT FROM
1-1 THRU 2-1 745.76 50.26
LEASE PAYMENT FROM
2-1 THRU 3-1 745.76 50.26
001-0000277-000 3,923.37 0.00 0.00 0.00 0.00 186,153.65
ROUNDLAKE LUMBER A MOLDING CO 0.00 0.00 3,923.37
001-0000277-001 340.23 0.00 0.00 0.00 0.00 17,011.50
ROUNDLAKE LUMBER & HOLDING CO 0.00 0.00 340.23
001-0000277-002 827.27 0.00 0.00 0.00 0.00 47,154.39
ROUNDLAKE LUMBER S HOLDING CO 0.00 830.27
FILING FEES 3.00 0.00
001-0000303-000 1,761.09 1,761.09 0.00 0.00 0.00 88,054.50
SMITH MOTOR CAR COMPANY, LTD 0.00 3,747.59
DECEMBER LATE CHARGE 111.82 0.00
JANUARY LATE CHARGE 113.59 0.00
001-0000311-002 625.82 0.00 0.00 0.00 0.00 36,297.56
A-PLUS CHEMICAL CO., INC. 0.00 41.93 667.75
001-0000336-005 912.99 30.43 0.00 0.00 0.00 53,896.84
REST LINE REFRIGERATION CO INC 0.00 0.00 943.42
001-0000370-001 1,726.41 0.00 0.00 0.00 0.00 106,413.63
LOW MANUFACTURING, INC. 0.00 0.00 1,726.41
001-0000379-001 189.42 0.00 0.00 0.00 0.00 18,658.48
BILL A. TULM, M.D., P.C. 0.00 0.00 189.42
393
Collection Reports - 18
SUMMARY.PASTDUE.RPT INFO-LEASE TEST SYSTEM PAGE 13
03/10/1989 SUMMARY PAST DUE REPORT FOR MARCH 10, 1989
PORTFOLIO PERCENT
CBR
WITH
PAST DUE DAYS % PORTFOLIO RESIDUAL NO. OF CONTRACTS
- ------------- ----------- ----------- ----------------
30 TO 30 9,580.60 1
31 TO 60 20.68 44,589,332.07 27
61 TO 90 9.28 20,009,695.06 24
OVER 90 69.23 149,260,696.01 42
===== ============== ====
TOTAL 99.20 213,869,303.74 94
TOTAL CBR BALANCE WITH RESIDUAL 215,590,990.52
TOTAL NO. OF CONTRACTS............ 135
394
Collection Reports - 19
SUMMARY.PASTDUE.RPT INFO-LEASE TEST SYSTEM PAGE 12
03/10/1989 SUMMARY PAST DUE REPORT FOR MARCH 10, 1989
MISCELLANEOUS PASTDUE SUMMARY
CL ACCOUNT NUMBER DESCRIPTION AMOUNT
- ----------------- ----------- ------
LLL.3501.BBB.RR.00 Other Insurance Fees 400.00
LLL.3501.BBB.RR.00 Setup Charges 15.50
LLL.2095.BBB.RR.00 Property Tax 333.33
LLL.3501.BBB.RR.00 Insurance Fees 46.50
UNKNOWN 15.50
0022 UNKNOWN 138.29
LLL.3502.BBB.RR.00 Service Fees 200.00
TOTAL MISCELLANEOUS PAST DUE 1,149.12
395
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: EXHIBITS
Sub-Section: III.D.5(a) - Equipment Lease Agreement
- --------------------------------------------------------------------------------
5
396
24 Frank Lloyd Wright Drive
Captec Lobby L, 4th Floor LEASE AGREEMENT
P.O. Box 544
Ann Arbor, Michigan 48106-0544
- ----------------------------------------------------------------------------------------------------------------
QTY. DESCRIPTION OF LEASED EQUIPMENT MODEL NO. SERIAL NO.
- ----------------------------------------------------------------------------------------------------------------
NEITHER VENDOR
NOR ANY SALESMAN
IS AN AGENT OF
LESSOR NOR ARE
THEY AUTHORIZED TO
WAIVE OR ALTER THE
TERMS OF THIS
LEASE. THEIR
REPRESENTATIONS
SHALL IN NO WAY
AFFECT LESSEE OR
LESSOR'S RIGHTS OR
OBLIGATIONS AS
HEREIN SET FORTH.
- ----------------------------------------------------------------------------------------------------------------
EQUIPMENT LOCATION: (If other than Billing Address of Lessee)
Street Address City County State Zip
- ----------------------------------------------------------------------------------------------------------------
- -------------------------------------------------- ----------------------------------------------------------
RENTAL PAYMENT SCHEDULE ADVANCE PAYMENT
Check for this amount must accompany Lease Application
BASE LEASE TERM ----------------------------------------------------------
RENTAL Commencement Date________________________
TERM
________ Payments of $_____per [ ] month [ ] 1st and last ____________
[ ] quarter $__________________________ [ ] Other____________________
Followed By _______________
______ ________ Payments of $_____per [ ] month Inclusive of applicable tax
[ ] quarter
[ ] Months Inclusive/Exclusive of applicable tax
[ ] Quarters
- -------------------------------------------------- ----------------------------------------------------------
================================================================================================================
1. PURCHASE AND ACCEPTANCE: Lessee requests Lessor to purchase the Equipment from a supplier (the "Supplier")
and arrange for delivery to Lessee, which shall be deemed complete upon the Commencement Date. Lessor shall have
no responsibility for delay or failure of Supplier to fill the order for the Equipment.
- ----------------------------------------------------------------------------------------------------------------
2. DISCLAIMER OF WARRANTIES AND CLAIMS; LIMITATION OF REMEDIES. THERE ARE NO WARRANTIES BY OR ON
BEHALF OF LESSOR. Lessee acknowledges and agrees by his signature below as follows:
(a) LESSOR MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE CONDITION OF THE EQUIPMENT. ITS
MERCHANTABILITY, ITS FITNESS OR SUITABILITY FOR ANY PARTICULAR PURPOSE, ITS DESIGN, ITS CAPACITY, ITS
QUALITY, OR WITH RESPECT TO ANY CHARACTERISTICS OF THE EQUIPMENT;
(b) Lessee has fully inspected the Equipment which it has requested Lessor to acquire from Lessee's
selected Supplier and Lease to Lessee and the Equipment is in good condition and to Lessee's complete
satisfaction and Lessee hereby approves the contract by which Lessor has acquired the Equipment;
(c) Lessee leases the Equipment "as is" and with all faults;
(d) Lessee specifically acknowledges that the Equipment is leased to Lessee solely for commercial or
business purposes and not for personal, family, household, or agricultural purposes;
(e) if the Equipment is not property installed, does not operate as represented or warranted by the
Supplier or manufacturer, or is unsatisfactory for any reason, regardless of cause or consequence.
Lessee's only remedy, if any, shall be against the Supplier or manufacturer of the Equipment and not
against Lessor;
(f) Provided Lessee is not in default under this Lease, Lessor assigns to Lessee any warranties made
by the Supplier or the manufacturer of the Equipment; and
(g) LESSEE SHALL HAVE NO REMEDY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES AGAINST LESSOR: and
(h) NO DEFECT, DAMAGE, OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE SHALL RELIEVE LESSEE OF THE
OBLIGATION TO PAY RENT OR RELIEVE LESSEE OF ANY OTHER OBLIGATION UNDER THIS LEASE.
-------------------
The parties have specifically negotiated and agreed to the foregoing paragraph. INITIALS
- ----------------------------------------------------------------------------------------------------------------
3. STATUTORY FINANCE LEASE. Lessee agrees and acknowledges that it is the intent of both parties to this Lease
that it qualify as a statutory finance lease under Article 2A of the Uniform Commercial Code. Lessee
acknowledges and agrees that Lessee has selected both: (1) the Equipment: and (2) the Supplier from whom Lessor
is to purchase the Equipment. Lessee acknowledges that Lessor has not participated in any way in Lessee's
selection of the Equipment or of the Supplier, and Lessor has not selected, manufactured, or supplied the
Equipment. LESSEE IS ADVISED THAT IT MAY HAVE RIGHTS UNDER THE CONTRACT EVIDENCING THE LESSOR'S PURCHASE OF THE
EQUIPMENT FROM THE SUPPLIER CHOSEN BY LESSEE AND THAT LESSEE SHOULD CONTACT THE SUPPLIER OF THE EQUIPMENT FOR A
DESCRIPTION OF ANY SUCH RIGHTS.
THE ADDITIONAL PROVISIONS ON THE REVERSE SIDE HEREOF ARE INCLUDED IN, AND MADE A
PART OF, THIS LEASE. THIS IS A NON-CANCELABLE LEASE FOR THE TERM INDICATED ABOVE.
LESSOR LESSEE
- ------------------------------------------------------------ ------------------------------------------------
ACCEPTED:
--------------------------------------------------------- --------------------------------------------
LESSOR LESSEE (COMPLETE LEGAL NAME)
DATE: ___________________________________________________ ADDRESS ____________________________________
CITY ___________COUNTY ______ST ___ZIP______
BY:______________________________________________________
AUTHORIZED SIGNATURE PHONE (___)_____________ DATE_______________
BY: X_______________________________________
LEASE NO:________________________________________________ AUTHORIZED SIGNATURE
- ------------------------------------------------------------ ------------------------------------------------
397
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Section: EXHIBITS
Sub-Section: III.D.5(b) - Certificate of Delivery Acceptance
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6
398
24 Frank Lloyd Wright Drive
Captec Lobby L, 4th Floor LEASE AGREEMENT
P.O. Box 544
Ann Arbor, Michigan 48106-0544
- ----------------------------------------------------------------------------------------------------------------
QTY. DESCRIPTION OF LEASED EQUIPMENT MODEL NO. SERIAL NO.
- ----------------------------------------------------------------------------------------------------------------
NEITHER VENDOR
NOR ANY SALESMAN
IS AN AGENT OF
LESSOR NOR ARE
THEY AUTHORIZED TO
WAIVE OR ALTER THE
TERMS OF THIS
LEASE. THEIR
REPRESENTATIONS
SHALL IN NO WAY
AFFECT LESSEE OR
LESSOR'S RIGHTS OR
OBLIGATIONS AS
HEREIN SET FORTH.
- ----------------------------------------------------------------------------------------------------------------
EQUIPMENT LOCATION: (If other than Billing Address of Lessee)
Street Address City County State Zip
- ----------------------------------------------------------------------------------------------------------------
- -------------------------------------------------- ----------------------------------------------------------
RENTAL PAYMENT SCHEDULE ADVANCE PAYMENT
Check for this amount must accompany Lease Application
BASE LEASE ----------------------------------------------------------
RENTAL Commencement Date________________________
TERM
________ Payments of $_____per [ ] month [ ] 1st and last ____________
[ ] quarter $__________________________ [ ] Other____________________
Followed By _______________
______ ________ Payments of $_____per [ ] month Inclusive of applicable tax
[ ] quarter
[ ] Months (Includes Advance Rentals)
[ ] Quarters
- -------------------------------------------------- ----------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
LESSEE'S CERTIFICATE OF DELIVERY ACCEPTANCE
We are pleased to confirm to you as follows:
1. All of the equipment described in the attached Lease has been delivered to and received by the
undersigned Lessee; that all installation of other work necessary prior to the use thereof has been
completed; that said equipment has been examined and/or tested and is in good operating order and
condition and is in all respects satisfactory to the undersigned and as represented, and that said
equipment has been accepted by the undersigned and complies with all terms of the attached Lease.
Consequently, Lessor is hereby authorized to pay for the leased equipment and commence said lease.
2. In the future, in the event that said equipment fails to perform as expected or represented Lessee
will continue to honor the attached Lease by continuing to make monthly payments in the normal course
of business and will look solely to the seller or manufacturer for the performance of all covenants
and warranties. In addition, Lessee will indemnify Lessor and hold them harmless from any
nonperformance of the aforementioned equipment, hereinafter referred to as "Accepted Items".
RENT PAYMENT DATE: _______ DAY OF EACH MONTH.
(If the Acceptance Date is not a rent payment date, interim rent will be added to the first rent
payment as provided in Section 4 of the Lease.)
3. LESSEE'S ASSURANCES. Lessee represents, warrants and agrees as follows:
(a) The representations and warranties of Lessee in Section 13 of the Agreement are true and correct
on and as of the below Acceptance Date as though made as of that date. The representations and
warranties of any guarantor of Lessee's obligations under the Lease contained in the related guaranty
are similarly true and correct.
(b) Lessee has received, inspected and approved the Accepted Items. They are in good working order and
conform to the Lease and all applicable specifications. Lessee will not terminate, repudiate or modify
the Lease as to the Accepted Items or reject or revoke its acceptance of the Accepted Items for any
reason whatsoever. The above information concerning the Accepted Items is true, correct and complete.
The Accepted Items are being placed in service on the Acceptance Date, which, unless Lessor has
consented otherwise, is the date on which Lessee is signing this Certificate of Acceptance.
(c) No Event of Default under the Lease has occurred. There has been no adverse change in the business
or financial condition of Lessee or any such guarantor since the date of the most recent financial
statements submitted to Lessor before Lessor signed the Lease.
4. WARRANTY AND RELATED MATTERS. Lessor has not selected, manufactured or supplied the Accepted Items.
Lessor is acquiring the Accepted Items in connection with the Lease. Lessee has received a copy of and
has approved the purchase order(s) or contracts(s) for the Accepted Items. Lessee acknowledges that it
has selected the supplier(s) of the Accepted Items. Lessor hereby informs Lessee that Lessee may have
rights under the purchase order(s) or contract(s) for the Accepted Items and advises Lessee to contact
such supplier(s) for a description of any such rights.
This certificate shall not be considered to alter, construe. or amend the terms of the aforesaid
Agreement(s).
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- ------------------------------------------------------------ ------------------------------------------------
--------------------------------------------------------- --------------------------------------------
LESSEE (COMPLETE LEGAL NAME) SUPPLIER
BILLING ADDRESS _________________________________________ ADDRESS ____________________________________
CITY ___________COUNTY ______ST ___ZIP___________________ CITY ___________COUNTY ______ST ___ZIP______
PHONE (___)_____________ ACCEPTANCE DATE_________________ PHONE (___)_____________ DATE_______________
BY: X____________________________________________________ CONTACT_____________________________________
AUTHORIZED SIGNATURE
LEASE NO:________________________________________________
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399
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Section: EXHIBITS
Sub-Section: IV.C - Real Estate Document Checklist
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7
400
MORTGAGE CHECKLIST
Lender: _______________________________________________________
Borrower: _______________________________________________________
Restaurant: _______________________________________________________
Property Location: _______________________________________________________
Closing Date: _______________________________________________________
Funding Account: _______________________________________________________
DOCUMENTATION REQUIREMENTS
Real Estate Document Requirements
Doc's Date Received Person
PRELIMINARY INFORMATION Sent Due Date Responsible Comments
Checklist Created 7/5/95
-------------------------------------------------------------------------------------------
1 Proposal Letter/Commitment Fee SalesRep
-------------------------------------------------------------------------------------------
2 Commitment Letter/2nd Commit. Fee LPerkins
-------------------------------------------------------------------------------------------
PRELIMINARY SITE INFORMATION
-------------------------------------------------------------------------------------------
3 Site Inspection SalesRep MAXIMUM OF ACTUAL COSTS: $1,000/SITE
-------------------------------------------------------------------------------------------
4 Site Plan Customer
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5 City Map Customer
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6 Aerial Photographs Customer
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7 Site Photographs Customer
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8 Demographic Study Customer
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9 Competition Study Customer
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BORROWER OPERATIONS INFORMATION
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10 Franchise Agreement Customer
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11 Area Development Agreement Customer
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12 Franchise Site Approval Customer
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BORROWER ORGANIZATIONAL INFORMATION
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13 Articles of Incorporation LPerkins
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14 Bylaws (Certified) Customer
-----------------------------------------------------------------------------------------
15 Good Standing Certificate LPerkins
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16 Qualification as Foreign Corporation LPerkins
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17 Incumbency Certificate Customer
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18 Resolutions Customer
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GUARANTOR(S) ORGANIZATION INFORMATION
-----------------------------------------------------------------------------------------
19 Articles of Incorporation LPerkins
-----------------------------------------------------------------------------------------
20 Bylaws (Certified) Customer
-----------------------------------------------------------------------------------------
21 Good Standing Certificate LPerkins
-----------------------------------------------------------------------------------------
22 Qualification as Foreign Corporation LPerkins
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TITLE INFORMATIOM
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23 Title Commitment LPerkins $2,000/$1000,000 OF VALUE, AN
ADDITIONAL $1.00/$1,000 UP TO
$10,000,000
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24 Documents Noted as Exemptions LPerkins
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25 Survey LPerkins "AS BUILT" $2,500 TO $4,500 CAN
BE SELECTED BY CUST.SATIS. TO CFG
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26 Real Property Tax Bills Customer
-----------------------------------------------------------------------------------------
27 UCC Search Results LPerkins COMBINED WITH ITEM #29 COSTS WILL
BE APPROX. $200/$300
-----------------------------------------------------------------------------------------
28 Tax Lien Search Results LPerkins SEE ITEM #28
-----------------------------------------------------------------------------------------
29 Documents Required to Clear Title LPerkins
-----------------------------------------------------------------------------------------
SITE INFORMATION
30 Business Valuation Customer $1,300.00/site
-----------------------------------------------------------------------------------------
31 Environmental Report(s) Customer $2,700 TO $2,900 SELECTED BY CUST.
SATIS. TO CFG
-----------------------------------------------------------------------------------------
32 Zoning/Building Letter(s) Customer
-----------------------------------------------------------------------------------------
33 Certificate of Occupancy Customer
-----------------------------------------------------------------------------------------
34 Health Permits Customer
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35 Other Licenses Customer RETAIL
-----------------------------------------------------------------------------------------
INSURANCE INFORMATION
-----------------------------------------------------------------------------------------
36 Insurance Certificate Customer
-----------------------------------------------------------------------------------------
CLOSING INFORMATION
37 Mortgage MCPS
-----------------------------------------------------------------------------------------
38 Promissory Note MCPS
-----------------------------------------------------------------------------------------
39 Subordination Agreement MCPS
-----------------------------------------------------------------------------------------
40 Guaranty MCPS
-----------------------------------------------------------------------------------------
41 Certificate of Borrower MCPS
-----------------------------------------------------------------------------------------
42 Certificate of Guarantor MCPS
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43 Electronic Funds Transfer Auth. MCPS
-----------------------------------------------------------------------------------------
44 Franchisor Estoppel Letter MCPS
-----------------------------------------------------------------------------------------
45 UCC Financing Statement MCPS
-----------------------------------------------------------------------------------------
46 Title Policy LPerkins
-----------------------------------------------------------------------------------------
47 Title Affidavit (by Borrower) LPerkins
-----------------------------------------------------------------------------------------
48 Wiring Instructions Customer
-----------------------------------------------------------------------------------------
49 Closing Statement LPerkins
-----------------------------------------------------------------------------------------
50 Opinion of Counsel MCPS INCLUDED IN LEGAL BILL OF CFG
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51 Escrow Closing Letter MCPS
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52 UCC Financing Statement Customer
-----------------------------------------------------------------------------------------
53 Consent & Waiver (if Ground Lease) MCPS
401
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Section: EXHIBITS
Sub-Section: IV.D.7(b) - Make-Whole Pre-Payment Clause
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8
402
MAKE-WHOLE PRE-PAYMENT CLAUSE
Except as provided herein, Borrower may not prepay this Note during the
first and second Loan Years. Commencing with the third Loan Year and if no Event
of Default exists, Borrower may voluntarily prepay the entire unpaid Principal
Sum on any date on which a Monthly Installment is payable. Borrower must give
Lender at least thirty (30) days prior written notice of Borrower's intention to
prepay. Once given, such notice may not be withdrawn, and failure to prepay in
accordance with the notice shall be an Event of Default. The prepayment of the
Principal Sum shall be accompanied by a payment of all accrued and unpaid
interest and a premium for prepayment.
Borrower acknowledges that (i) Lender is entitled to receive an agreed
yield on the Loan and (ii) Lender may not realize such yield if the Principal
Sum is repaid prior to the Maturity Date. Accordingly, Lender shall not be
required to accept any tender of prepayment of the Principal Sum at any time
when the Reinvestment Rate is lower than the Stated Rate unless such tender also
includes a sum of money (the "Additional Sum") equal to the present value
computed at the Reinvestment Rate of the difference between a stream of monthly
payments necessary to amortize the Principal Balance of the Stated Rate and a
stream of monthly payments necessary to amortize the Principal Balance at the
Reinvestment Rate (the "Differential"). In the event the Differential is less
than zero no Additional Sum will be required.
For purposes hereof (a) the Stated Rate is ___________________________
(___%) percent, and (b) the Reinvestment Rate is the Yield on a United States
Treasury Note of a constant maturity rate maturing closest in time but prior to
the Maturity Date, as reported in THE WALL STREET JOURNAL on the fifth (5th)
business day preceding the prepayment date.
In addition to the Additional Sum, if any, every tender of prepayment of
the Principal Sum shall be accompanied by a payment equal to (x) all accrued but
unpaid interest and other charges to the date of prepayment and (y) an
administrative fee equal to one half of one percent (.05%) of the Principal Sum
being prepaid but not less than $1,000 (collectively "Other Charges").
If, by reason of an Event of Default, the unpaid balance of the
Principal Sum is accelerated, such acceleration shall be deemed to be a
prepayment and Borrower shall pay to Lender, in addition to all other sums due
as a result of the acceleration, any Additional Sum and Other Charges. In the
event of an acceleration in the first or second Loan Year, Borrower shall be
required to pay a prepayment premium equal to five (5%) percent of the unpaid
Principal Sum together with any Additional Sums and Other Charges.
If a partial prepayment of the Principal Sum occurs as a result of the
application by Lender of Taking Proceeds or Insurance Proceeds, as provided in
the Indenture no Additional Sum or Other Charges shall be payable and each
Monthly Installment thereafter shall be reduced to an amount which will amortize
the then unpaid Principal Sum at the Interest Rate over the then remaining
Number of Monthly Installments.
403
EXHIBIT O
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404
EXHIBIT P
---------
405
================================================================================
CAPTEC NET LEASE REALTY, INC.,
[TENANT)
AND
CS FIRST BOSTON MORTGAGE CAPITAL CORP.
----------------------------------------------------------------
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
----------------------------------------------------------------
Dated:
Location:
RECORD AND RETURN TO:
Battle Fowler LLP
75 East 55th Street
New York, New York 10022
Attention: Charles J. Hamilton, Jr., Esq.
The premises described within this instrument are also known as Section
___, Block ___ and Lot ___ on the Official Tax Map of __________ County.
================================================================================
406
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
[Note: Change Lender to Prime Landlord form for
Sublease Transactions]
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this
"Agreement") is made and entered into as of the ____ day of ____________, 19__,
by and among (i) [TENANT], [ENTITY] ("Tenant"); (ii) CAPTEC NET LEASE REALTY,
INC., a Michigan Corporation ("Landlord"); and (iii) CS FIRST BOSTON MORTGAGE
CAPITAL CORP., a Delaware corporation ("Lender").
WITNESSETH:
-----------
WHEREAS, Lender is the holder of that certain mortgage/deed of trust,
dated _______________, 199 ("Mortgage/Deed of trust") encumbering that certain
parcel of real property and the improvements thereon, commonly known as the
_____________ located at____________________________ in Schedule 1 attached
hereto and incorporated herein by this reference (the "Property");
WHEREAS, Lender and Landlord are parties to the Mortgage/Deed of
Trust, pursuant to which Landlord financed the Property from Lender; and
WHEREAS, Landlord and Tenant are parties to that certain Lease, dated
______________, 199 (the "Lease"), pursuant to which Tenant leased the Property
from Landlord.
NOW, THEREFORE, in consideration for the mutual covenants and
agreements contained herein, the sufficiency of which is hereby acknowledged,
the parties hereto hereby agree as follows:
1. SUBORDINATION. The Lease and all of the terms, covenants and
provisions thereof and all rights, remedies and options of Tenant thereunder are
hereby made, and shall at all times continue to be, subject, junior and
subordinate in all respects to the Mortgage/Deed of Trust and to the lien
thereof and to all increases, renewals, modifications, spreaders,
consolidations, replacements and extensions thereof and to the rights of Lender
thereunder and to any and all sums secured thereby, with the same force and
effect as if the Mortgage/Deed of Trust and all other such instruments had been
executed, delivered and recorded prior to the execution of the Lease.
2. NON-DISTURBANCE. So long as (i) the term of the Lease shall have
commenced pursuant to the provisions thereof, (ii) Tenant shall be in possession
of the Property, (iii) the Lease shall be in full force and effect and (iv)
Tenant is not in
1
407
default in the payment of rent or any other sums payable under the Lease or any
of the other terms, covenants or conditions of the Lease on Tenant's part to be
performed beyond any applicable grace or cure period provided in the Lease,
then: (a) Tenant's possession of the Property shall not be diminished or
interfered with by Lender or any third party purchaser; (b) the Lease shall not
be terminated or affected by the foreclosure of the Mortgage/Deed of Trust or
the Lender's exercise of any remedy provided for in the Mortgage/Deed of Trust;
and (c) in the event that Lender forecloses upon the Property, Lender shall
elect to preserve the Lease as a lease between Lender and Tenant in accordance
with the terms of this Agreement.
3. ATTORNMENT. In the event that Lender or any successors in interest
to Lender shall become the owner of the Property by reason of the foreclosure of
the Mortgage/Deed of Trust or the acceptance of a deed or assignment in lieu of
foreclosure or otherwise, then:
(a) Tenant shall be bound to Lender, and Lender shall be bound to
Tenant, under all of the terms, covenants and conditions of the Lease for the
balance of the term thereof remaining, and any extensions or renewals thereof
which may be effected in accordance with any option therefor contained in the
Lease, with the same force and effect as if Lender were the original landlord
under the Lease, except that Paragraph 3(b) below and the other provisions of
this Agreement shall modify the Lease, and Tenant does hereby attorn to Lender
as its landlord, said attornment to be effective and self-operative without the
execution of any further instruments; provided, however, that within ten (10)
days after receipt of written request therefor from Lender, Tenant will execute
and deliver to Lender any instrument or other documents reasonably requested by
Lender to confirm Tenant's attornment to Lender.
(b) Notwithstanding the foregoing, however, it is agreed that in no
event shall Lender:
(1) be liable for any act or omission of any prior landlord
(including Landlord);
(2) be obligated to cure any defaults of any prior landlord
(including Landlord) which occurred prior to the date that
Lender succeeded to the interest of such prior landlord
under the Lease; provided that from and after the date
Lender becomes owner of the Property, Lender shall be
obligated to cure any continuing non-monetary default of the
landlord under the Lease to the extent such default is
capable of being cured by Lender;
2
408
(3) be subject to any offsets or defenses which Tenant may be
entitled to assert against any prior landlord (including
Landlord) with respect to events occurring prior to the date
Lender succeeded to Landlord's interest;
(4) be bound by any rent or other amounts paid by Tenant to any
prior landlord (including Landlord) more than one (1) month in
advance of the date that Lender succeeded to the interest of
such prior landlord under the Lease; or
(5) be bound by any amendment or modification of the Lease or any
supplemental agreement made without the written consent of
Lender.
(c) The terms of the Lease shall be further amended by (i)
substituting the provisions of the Mortgage/Deed of Trust with respect to the
disposition of any casualty insurance proceeds or condemnation awards, (ii)
removing any indemnity provision of whatever nature contained in the Lease
running from Landlord to Tenant, (iii) removing any offsets, claims or
counterclaims which shall have accrued to Tenant against Landlord prior to the
date on which Lender or its successor in interest shall have become the owner
of the Property and (iv) providing that Lender shall not be liable for any
security deposit or other monies not actually received by Lender.
4. AMENDMENTS. Tenant shall not, without the prior written consent of
Lender (a) enter into any agreement amending, modifying or terminating the
Lease, (b) prepay any of the rents, additional rents or other sums due under the
Lease for more than one (1) month in advance of the due date thereof, (c)
voluntarily surrender the Property or terminate the Lease without cause or
shorten the term thereof, or (d) assign the Lease or sublet the Property or any
part thereof; and any such amendment, modification, termination, prepayment,
voluntary surrender, assignment or subletting, without the prior written consent
of Lender shall not be binding on Lender.
5. TENANT'S REPRESENTATIONS AND WARRANTIES. Tenant hereby represents and
warrants to Lender that as of the date hereof (a) Tenant is the owner and holder
of the tenant's interest under the Lease, (b) a true and complete copy of the
Lease is annexed hereto and made a part hereof as Schedule 2 and the Lease has
not been modified or amended, (c) the Lease is in full force and effect and the
term thereof commenced on ________________, pursuant to the provisions thereof,
(d) the Property has been completed and Tenant has taken possession of the same
on a rent paying basis, (e) neither Tenant nor the
3
409
Landlord is in default under any of the terms, covenants or provisions of the
Lease and Tenant to the best of its knowledge knows of no event which but for
the passage of time or the giving of notice or both would constitute an event of
default by Tenant or the Landlord under the Lease, (f) neither Tenant nor the
Landlord has commenced any action or given or received any notice for the
purpose of terminating the Lease, (g) all rents, additional rents and other sums
due and payable under the Lease have been paid in full and no rents, additional
rents or other sums payable under the Lease have been paid for more than one (1)
month in advance of the due dates thereof, and (h) there are no offsets or
defenses to the payment of the rents, additional rents, or other sums payable
under the Lease.
6. PAYMENT OF RENT TO LENDER. Tenant agrees to pay the rent and any
other payments due under the Lease to Lender upon receipt of written notice from
Lender that it has succeeded to the interest of Landlord under the Lease, and
Landlord agrees that Tenant is entitled to rely conclusively upon such notice
without any duty of inquiry.
7. LIMITATION ON LIABILITY OF LENDER. There shall be no personal
liability on the part of Lender or any officer, director, employee, shareholder
or partner of Lender for the performance of the Lease or any covenant or
agreement contained therein or in this Agreement. Tenant shall look solely to
Lender's estate and interest in the Property, if any, for the satisfaction of
every remedy of Tenant for any breach by Lender under the Lease or this
Agreement or otherwise arising out of or in connection with the Lease, and
Lender is hereby released or relieved of any other liability hereunder and under
the Lease. Tenant agrees that with respect to any money judgment which may be
obtained or secured by Tenant against Lender, Tenant shall look solely to the
estate or interest owned by Lender in the Property and Tenant will not collect
or attempt to collect any such claim out of any other assets of Lender.
8. PERFORMANCE BY LENDER: CONFLICT. Nothing in this Agreement shall be
or be deemed to be an agreement by Lender to perform any obligation of Landlord
under the Lease unless and until the Lender acquires the Property, and then only
if required to do so by the terms of the Lease, as modified and limited by this
Agreement. In the event of any conflict between the terms of this Agreement and
the terms of the Lease, the terms of this Agreement shall control.
9. NOTICES. Any notice required or permitted to be given hereunder
shall be in writing and may be given by personal delivery, certified mail,
return receipt requested or by nationally recognized overnight courier service
and if given personally or by mail or by courier service, shall be deemed
sufficiently given if addressed to the parties at the addresses
4
410
set forth below. Any party may by notice specify a different address for notice
purposes.
Addresses for Notices:
To Lender: CS First Boston Mortgage
Capital Corp.
55 E. 52nd Street
New York, New York 10055
Attention: Laura Goldberg
To Landlord: Captec Net Lease Realty, Inc.
24 Frank Lloyd Wright Drive
Lobby L, 4th Floor
P.O. Box 544
Ann Arbor, Michigan 48106-0544
To Tenant: [TENANT]
--------------------------------------------
--------------------------------------------
--------------------------------------------
10. SUCCESSORS AND ASSIGNS. This Agreement and each and every covenant
and provision contained herein shall be binding upon and shall inure to the
benefit of the parties hereto and their respective representatives, successors
and assigns.
11. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by
and construed in accordance with the laws of the jurisdiction in which the
Property is located.
12. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY,
INTENTIONALLY AND FREELY WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY OTHER PARTY HERETO IN RESPECT OF ANY MATTER ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
[SIGNATURE PAGE FOLLOWS]
5
411
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date herein above first written.
WITNESSES: TENANT:
-------
[TENANT]
_________________________________ By___________________________
_________________________________ Its____________________________
LANDLORD:
---------
CAPTEC NET LEASE REALTY, INC.
_________________________________ By___________________________
_________________________________ Its_____________________________
WITNESSES: LENDER:
-------
CS FIRST BOSTON MORTGAGE
CAPITAL CORP.
_________________________________ By___________________________
_________________________________ Its_____________________________
6
412
STATE OF _____________ )
: ss.
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this ___ day of
________, 199_, by __________________, as ___________ of [TENANT], (TENANT
ENTITY] on behalf of the [ENTITY].
--------------------------------------
Notary Public
_________ County, ____________________
My commission Expires: _______________
[Notary Public's Seal]
STATE OF MICHIGAN )
: ss.
COUNTY OF WASHTENAW)
The foregoing instrument was acknowledged before me this ___ day of
________, 199_, by __________________, as _________ of CAPTEC NET LEASE REALTY,
INC., a Michigan corporation, on behalf of the corporation.
--------------------------------------
Notary Public
Washtenaw County, Michigan
My commission Expires: _______________
[Notary Public's Seal]
STATE OF NEW YORK)
: ss.
COUNTY OF NEW YORK)
The foregoing instrument was acknowledged before me this ___ day of
________, 199_, by __________________, as _________ of CS FIRST BOSTON MORTGAGE
CAPITAL CORP., a Delaware corporation, on behalf of the corporation.
--------------------------------------
Notary Public
_________ County, ____________________
My commission Expires: _______________
[Notary Public's Seal]
Drafted By and When Recorded
Return to:
- ---------------------------
- ---------------------------
- ---------------------------
- ---------------------------
7
413
SCHEDULE 1 to
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
Land situated in the _______________ of ___________, County of
_____________, State of _________________ , and more particularly described as
follows:
8
414
SCHEDULE 2 to
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
[Copy of the Lease]
9
415
EXHIBIT Q
---------
416
I. CREDIT UNDERWRITING POLICIES
1
417
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section A. INTRODUCTION
- --------------------------------------------------------------------------------
1. CREDIT PHILOSOPHY - Captec's credit philosophy has been developed and
refined throughout the Company's history and is viewed by management as
dynamic. The Company's credit policies have been developed internally-
designed for Captec's specific market focus on franchise and chain
restaurant businesses and the various types of financing products
provided to its customers in those markets. This is a specialized market
demanding specialized credit policies.
Captec's credit policies are proprietary. They have certain similarities
to traditional commercial finance credit policies, but in other ways are
unique to Captec
Captec believes that the credit decision making process is one of
measuring strengths and weaknesses to make informed credit decisions.
This is a process that includes considering the many inter-related facts
of a particular applicant in relation to the Company's market expertise,
past financing experiences, and credit underwriting policies. As such,
it is not a process which can be entirely reduced to the administration
of written policy.
Therefore, these credit policies are designed as guidelines and
principles for conducting the day-to-day business of underwriting and
monitoring the credit-worthiness of Captec's potential and existing
customers. These policies are NOT intended to be all-inclusive or
absolute.
With respect to credit decision making, Captec believes in the value of
utilizing the "committee process" in conjunction with independent
analysis and opinion formation. The Credit Committee is made up of
persons who, on a day-to-day basis, represent a number of different
functions of the Company, most of whom have a long-term vested interest
in the Company's well-being. Credit Committee meetings are an open
forum for discussion of each proposed financing based upon the
information gathered during the credit analysis process - all Credit
Committee members are encouraged to freely communicate their opinions.
The Company believes that this approach leads to balanced credit
decisions.
2
418
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section A. INTRODUCTION
- --------------------------------------------------------------------------------
2. THE CREDIT ORGANIZATION - Captec has a Credit Department made up of a
group of employees dedicated to the credit underwriting and monitoring
process. Captec also has a Credit Committee which is responsible for
making credit approval decisions. The following is the organizational
chart for the credit organization.
------------ ------------------
Vice Credit Committee
President - ----------------
Credit ------ President
------------ CFO
Sr. VP-S&M
------------ Credit Mgr.
Credit
Manager ------------------
------------
--------------------------------------------
------------ ------------ ------------
Credit Senior Credit
Analysts Credit Clerk
Analyst
------------ ------------ ------------
The Credit Department reports to the Company's senior management via the Chief
Financial Officer and Senior Vice President - Administration.
3
419
CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section A. INTRODUCTION
- --------------------------------------------------------------------------------
3. DELIVERING QUALITY CUSTOMER SERVICE - The credit underwriting process
involves significant interaction with potential and existing customers.
As a result, personnel in the Credit Department play an important role
in delivering quality service to these customers.
The Credit Department's customer service role is also unique because it
must balance this commitment to deliver quality customer service with
an even higher commitment to making independent credit decisions, which
typically requires investigation and corroboration, rather than
acceptance, of information supplied by customers.
Among other things, quality customer service means:
- Professional communication
- Market expertise
- Timely response (see below)
- Genuine interest in the customers' needs
Timely response addresses all of the various ways in which the Credit
Department interfaces with customers. Most important of these is
completing and communicating the credit decision. To this end, the
Credit Department and Credit Committee should strive to maintain the
standard of taking 5 business days subsequent to receipt of a completed
application to communicate a credit decision to all financing applicants
and 10 business days from receipt of all primary information to
communicate a credit decision on all franchise/chain concept reviews.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: B. SUMMARY OF THE CREDIT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
The analysis and approval process of a credit application varies depending on
the nature of the credit (i.e. new program review, application under an
established program, vendor applications, etc.).
It is the responsibility of the Vice President - Credit to oversee the credit
analysis and approval process with support from the Credit Manager and Credit
Committee. The Credit Committee meets weekly at 10:00 AM on Monday and,
additionally, on an as needed basis as determined by the Vice President -
Credit. The Credit Committee reviews new franchise concepts, as well as
day-to-day transactions.
The following outlines the basic credit approval process used for the Company's
principal sources of business:
NEW FRANCHISE CONCEPT REVIEW
Captec's Sales & Marketing Department monitors many franchise concepts, ranging
from small, newly created concepts to large, mature concepts with established
track records. This monitoring effort identifies target concepts which are
selected to be considered for concept approval. At such time, the Sales &
Marketing Department submits a request to the Credit Department to conduct a
franchise concept review to determine if the concept should be approved for
Captec to provide financing to its franchisees.
A review of a new franchise concept involves analysis of the franchisor's
history and existing operations. If the program is approved, franchise lease
applications are reviewed on a deal by deal basis.
The following factors are included in reviewing a franchisor:
FRANCHISOR'S OPERATING HISTORY - A Uniform Franchise Offering Circular
(UFOC) is obtained for examination of a particular Franchisor. The
examination includes an analysis of the financial condition of the
franchisor, a study of the historical failure rates experienced by the
franchise system, a review of prior and pending litigation against the
franchisor, a review of the minimum financial requirements for new
franchisees, and consideration of the number of years in the business of
franchising.
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Sub-Section: B. SUMMARY OF THE CREDIT UNDERWRITING PROCESS (CONT.)
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EVALUATION OF THE BUSINESS OPPORTUNITY - A review of the quality of the
opportunity at the individual franchisee store unit level. This includes
review of the sales to investment ratio, unit level sales and income
statistics, the concept's market penetration, and the level of direct
competition.
EVALUATION & SURVEVY OF EXISTING FRANCHISEES - A telephone survey of a
random sampling of existing franchisees. The survey addresses issues
such as historical and projected sales and profitability figures, the
quality of franchisor support, and overall franchisee satisfaction with
their franchise.
The franchise concept review must also include a review of the standard store
unit equipment package, the average prices thereof and the vendors from whom
Captec would purchase such equipment. Equipment items which are new to Captec
and of a material cost amount must be researched: product brochures obtained,
fair market prices verified and vendors subjected to reference checks.
ln addition, the Credit Department must, in coordination with the sales
department, work together with the franchisor to discuss various options with
respect to support to be provided by the franchisor. This support can be in the
form of guarantees, limited recourse arrangements, remarketing agreements, etc.
Franchisor support may be offered in advance by the franchisor or may be
requested by Captec as a condition to concept approval. The concept analysis
must include consideration of the need for the franchisor's support relative to
such items as the financial strength of the typical franchisee and the
historical failure rates in the system. Additionally, the ability of the
franchisor to meet any of its support obligations, particularly financial and
operating obligations must be considered.
Other general information should be gathered regarding the franchisor's future
plans for royalty revenue growth, projected new franchise unit growth, and the
annual volume of financing expected to be utilized under the proposed financing
program.
All of this information must be summarized in a written report that is presented
to the Credit Committee for consideration. The Credit Committee is charged with
considering the credit quality of the franchisor as well as the "fit" of the
proposed program with Captec's market strategy. Based upon all of this
information, the Credit Committee must decide whether or not to approve the
concept.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: B. SUMMARY OF THE CREDIT UNDERWRITING PROCESS (CONT.)
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FRANCHISEE APPLICATION REVIEW
A franchise concept review approval must include the establishment of standard
franchisee credit requirements and criteria. Each franchisee application must be
reviewed individually based upon these standards. Such standards typically
include minimum net worth and liquidity criteria, a range of acceptable "cost to
open" amounts and maximum debt to worth ratios.
A franchisee application review cannot be commenced by the Credit Department
until a countersigned proposal is received back from the franchisee and the
commitment fee is paid by such applicant. The commitment fee is refundable if
the application is declined, less expenses incurred by Captec, but is otherwise
non-refundable. Payment of this fee is an important indication of the
applicant's good faith in actually closing on the proposed financing. Thus, this
policy is intended to prevent the occurrence of withdrawn applications that
waste the time and efforts of the Credit Department and Credit Committee.
Additionally, the credit review process typically should not be commenced until
a complete application package is received from the applicant. Information
required for a franchisee application includes:
- Completed lease application
- Business financial statements (unless first time franchisee),
typically including 2 years of annual comparative financial
statements and, if financial statements are either prepared by
management or compiled, then 2 years of federal tax returns will
also be required
- Capitalization structure
- Bank references and verification of assets
- Demographic and site information
- Personal information on guarantors:
Personal financial statements (including personal income statement)
2 most recent years' personal tax returns
- Monthly projections for the first 12 months of operation of the new
unit
- Summary of work experience and who will run the business
Review of a new franchisee requires an extensive investigation of the
applicant's principal officers. Information on the principals is very important
for new franchisee transactions, because they are generally the key to a
successful franchise store. In this regard, the
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analysis focuses on personal financial resources, personal credit reports and
previous operating experience. In addition, liquid assets, personal net worth,
initial cash investment, and secondary sources of household income are measured
against pre-established criteria. These criteria vary depending on the franchise
system and lease or loan requirements.
Review of multi-unit franchisees focuses on the operating history of the
existing store units and the capital resources available before and alter
opening the proposed unit. Detailed analysis is conducted on the financial
results in an effort to measure financial strength and operating success. Key
ratios are measured against concept system-wide standards. Additionally,
personal financial resources and personal credit statements are analyzed.
Once the application is reviewed, a decision must be made by the Vice President
- - Credit and/or the Credit Manager as to whether the applicant is creditworthy
and is within Company guidelines (i.e., net worth, financial condition,
equipment, etc.). If the application fails to meet preliminary credit criteria,
the application is declined and the process ends. In an instance where the
credit is not strong enough to be considered as submitted, changes in the
structure may be suggested to the Captec sales representative.
If the application meets preliminary credit criteria, the process continues with
an investigation of bank and trade references. A Dun and Bradstreet report on
the company and credit bureau reports on the company's principals are obtained.
Financial statements are analyzed with a focus on net income, cash flow, net
worth, pertinent ratios, trends, and ability to service existing and additional
debt.
As a general guideline, the credit review should reveal various positive
attributes including (but not limited to) the following:
- Upward trend in sales and profits
- 3 years in business
- Positive cash flow to cover the current portion of long term debt
and lease payments
- Satisfactory bank and trade references
- Moderate leverage position
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Sub-Section: B. SUMMARY OF THE CREDIT UNDERWRITING PROCESS (CONT.)
- --------------------------------------------------------------------------------
This guidelines describe characteristics that may not all be present in each
transaction approved. Each company must be examined in light of its particular
circumstances. For example, leverage ratios often vary by concept and size of
business, or an applicant may have experienced prior operating losses but have
since successfully turned around its operations and returned to profitability.
Finally, the credit investigation and financial analysis must be summarized in
writing and the Vice President - Credit, Credit Manager or Credit Committee,
depending on the size of the transaction, must approve or reject the proposed
transaction.
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Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: C. CREDIT COMMITTEE
- --------------------------------------------------------------------------------
1. COMMITTEE MEMBERS - Members of the Credit Committee are: the President,
Chief Financial Officer, Senior Vice President - Sales & Marketing, Vice
President - Credit and Credit Manager. Additionally, the Senior Vice
President Administration, while not a Committee member, will typically
attend all meetings of the Credit Committee to monitor the status of the
financing applications.
2. VOTING REQUIREMENTS - The Credit Committee must operate under the
following voting rules:
a) Meeting Quorum: 75% of members, but the Vice President - Credit or
Credit Manager must always be present.
b) Approval Vote: 100% of members present.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: D. CREDIT DECISION MAKING AUTHORITY
- --------------------------------------------------------------------------------
1. CREDIT COMMITTEE - The Credit Committee is the senior credit body and
has ultimate authority for making any type of credit decision. Only the
Credit Committee has the authority to approve:
a) franchise and chain concepts;
b) transaction applications that exceed $150,000 in aggregate credit
exposure to a customer (including outstanding balances on existing
financings); and
c) any and all deviations from standard credit policies.
The Vice President - Credit and Credit Manager have authority to decline
concepts, although they should submit most concept reviews to Credit
Committee, even if the probable credit decision appears to be a decline
of the concept for program financing.
2. VICE PRESIDENT - CREDIT AND CREDIT MANAGER - The Vice President - Credit
and Credit Manager have the following approval authorities:
a) Individual Authority: Transactions that do not exceed $75,000 in
aggregate credit exposure to a customer (including outstanding
balances on existing financings), assuming the customer is in an
approved concept, may be approved by the sole authority of the Vice
President - Credit or Credit Manager.
b) Joint Credit Authority: Transactions that do not exceed $150,000 in
aggregate credit exposure to a customer (including outstanding
balances on existing financings), assuming the customer is operating
an approved concept, may be approved by the Vice President - Credit
or Credit Manager and one other member of the Credit Committee.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
1. MINIMUM CONCEPT QUALIFICATIONS - To be considered for the concept
underwriting process, a franchise concept should typically meet the
minimum qualifications listed below.
- Minimum of 50 units, typically 100 or more units in operation
system-wide
- Minimum of 5 years of franchising experience by the franchisor
- Minimum net worth of $5 million
- Historical net profits for the past 2 years
- Low historical rates of failure by franchisees (i.e. unit closures)
- Limited historical levels of litigation against franchisor,
particularly with regard to franchisee complaints
Concepts that fall marginally below these standards may also be
considered at the discretion of the Credit Manager.
Chain concepts (i.e. - non-franchised concepts) may become mature,
proven successful systems with a smaller number of units than a
franchised concept. Therefore, the Credit Manager may override the
minimum number of units standard for Chain concepts if the other
standards are met.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
2. REVIEW OF UFOC - The Federal Trade Commission prohibits the offer or
sale of any franchise without first providing a Uniform Franchise
Offering Circular ("UFOC") to a prospective franchisee. Thus, all
franchisors maintain a current UFOC which they provide to Captec upon
request.
The UFOC is an initial and primary source of information on the
franchise concept. The FTC has established a standard format for the
UFOC and requires a variety of information disclosure. As a result, the
UFOC contains extensive information on the franchisor and the concept,
and therefore, it must be utilized extensively during the concept
underwriting process. The UFOC review must include the following:
a) FRANCHISE CONCEPT AND OPERATION - The nature of the business being
franchised and the reasons for its success must be analyzed. Unit
level sales and operating costs, unit development costs, competitive
strengths and weaknesses and geographical penetration are factors to
be considered. This analysis must result in an assessment of the
quality of the unit level business opportunity.
b) MANAGEMENT AND OPERATING HISTORY - The history of the concept must
be reviewed, including the number of years in business, the number
of years engaged in franchising, and the history of the franchisor's
business strategies. Additionally, this must include a review of the
capabilities and business experience of the key directors, officers
and employees of the franchisor. The purpose of this analysis is to
gain a historical perspective on the franchisor's business and the
strengths and weaknesses of key personnel.
c) NUMBER OF UNITS - The number of existing store units, broken down
between company (franchisor) operated and franchisee units, must be
reviewed and analyzed. The percentage mix between company and
franchisee stores must be noted, along with new unit development
plans for the next year. Franchisor involvement in unit operations
affects the franchisor' mix of revenue and income sources and is
an important consideration when measuring the franchisor's
capabilities in taking over and operating troubled franchisee units.
This analysis must assess the size of the concept, the concept-wide
unit growth trends, and the degree to which the franchisor is
involved in store operations.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
2. REVIEW OF UFOC (CONTINUED)
d) FRANCHISE FEES AND EXPENSES - This is an analysis of the various fees
required to be paid by the franchisee, which typically includes a
one-time franchise fee and training fee and ongoing royalty and
advertising fees. This analysis must compare these fees to industry
standards and to assess the impact of the fee structure on the store
unit level economics.
e) FRANCHISEE'S INITIAL INVESTMENT - The UFOC includes an outline of the
low to high range of total costs to a franchisee to open a new store
unit. Generally, these costs include the franchise fee, land, building,
leasehold improvements, equipment, initial inventory, training expenses,
pre-opening expenses and working capital reserves. This information will
be used as a basis for reviewing franchisee applications to assess
whether the franchisee's actual costs, including the cost of the asset
being financed, are reasonable. Additionally, this analysis must include
a "sales to investment ratio" calculation, which compares average annual
unit sales to average cost to open a unit. This ratio is an important
measure of the quality of the business opportunity from an economic
standpoint.
f) DUTIES OF THE FRANCHISOR TO THE FRANCHISEES - This is a review of the
support systems provided by the franchisor for the benefit of the
franchisee. This support review must focus on the depth of the training
program and field operations support. The purpose of this analysis is to
become familiar with the support systems available within the system and
to compare such systems to industry standards.
g) FRANCHISOR'S LITIGATION AND CLAIMS - The UFOC lists all pending or
threatened litigation against the franchisor and/or its directors and
shareholders and provides detailed information on each case. This
analysis must include an assessment of the quality of the franchisor's
relations with its franchisees, as well as any significant financial
risks facing the franchisor as a result of litigation.
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Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
2. REVIEW OF UFOC (CONTINUED)
h) FRANCHISE UNIT CLOSURES - The UFOC provides a three year history of
closures of franchise units as measured by termination of franchise
agreements (there is an individual franchise agreement for each
franchisee operated store unit). This information must be analyzed
closely in order to understand the nature of any franchisee failures
and to assess the success rate of the franchisees.
i) FINANCIAL STATEMENTS - The UFOC includes audited financial
statements on the franchisor for three fiscal years. A complete
financial analysis must be performed on these financial statements,
including inputting the statement into Captec's spreadsheet model,
conducting ratio analyses, and reviewing cash flow coverage and
line-item trends.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
3. CREDIT ANALYSIS OF FRANCHISOR FINANCIAL STATEMENTS - The Franchisor's
financial statements must be input into Captec's financial statement
spreadsheet model as a basis for the analysis.
The review of the Franchisor's financial statements must include the
three most recent fiscal year-ends. Trends must be analyzed with respect
to revenue, profit and cash flow. Trends in revenues and expenses must
be analyzed on both a nominal dollar value and percentage basis.
Revenues must be broken down in terms of store sales, franchise fees and
royalty income. The mix must be analyzed in terms of where operating
profit is derived from, as well as the stage of the Franchisor (e.g. -
early stage, high growth, mature, etc.). Generally, revenue derived from
franchise fees should decrease as a percent of total revenue as the
Franchisor matures. Results in contrast to this general trend must be
examined and discussed in detail in the written report to Credit
Committee.
Ratios must be examined and compared to industry averages. This ratio
analysis must address the following key ratios: the Debt/Worth Ratio,
the Liquidity Ratio, the Cash Flow/CPLTD Ratio and the Fixed Charge
Coverage Ratio. Trends in these ratios must also be analyzed and
assessed with respect to the long-term financial viability of the
Franchisor and the concept. If the debt/equity ratio increases every
year, a detailed analysis must be performed to ascertain the reasons for
this trend. If the Cash Flow/CPLTD Ratio is less than 1.25:1, and/or the
Fixed Charge Coverage Ratio is less than 1.25:1, a detailed analysis
must be performed to assess the degree of risk that the Franchisor would
be unable to meet its financial obligations. Such negative trends must
be discussed in detail in the written report to Credit Committee.
The company's debt must be itemized and analyzed. Long-term debt must be
reviewed in detail, examining terms, financing sources, and the
composition of the current portion of long-term debt. A cash flow
analysis must be completed to ensure that the Franchisor has an
acceptable Cash Flow/CPLTD Ratio and Fixed Charge Coverage Ratio.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
3. CREDIT ANALYSIS OF FRANCHISOR FINANCIAL STATEMENTS (CONTINUED)
A detailed financial statement analysis must be included in the Report
to Credit Committee and the results of this analysis must be
summarized in the Recommendation section of the Report to Credit
Committee. The Credit Committee must consider this information when
deciding whether to extend credit to applicants operating in the
concept.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
4. ANALYSIS OF UNIT CLOSURE STATISTICS - The UFOC discloses the number of
franchise agreements terminated for any reason over the past three
years. This information is broken down further to number of units
closed, number of units transferred, and number of units taken over by
the Franchisor. The number of terminated franchises is also broken down
as a percentage of the total number of units and by geographical
location. The reasons for the closures or transfers are also discussed
in detail.
The Report to Credit Committee must contain a section outlining the unit
closure statistics and discussing the pertinent details regarding such
closures. In general, a small number and percentage of terminated
franchise agreements is acceptable. However, a large number or
percentage of terminations, or negative trends in terminations, must be
closely examined. Issues mitigating any of these negative statistics
must be discussed in depth.
Poor franchise termination history generally suggests the potential of a
major weakness in the franchise system and, therefore, must also be
summarized in the Recommendation section of the Report to Credit
Committee. The Credit Committee must consider this information when
deciding whether to extend credit to applicants operating in the
concept.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
5. REVIEW OF LITIGATION AGAINST FRANCHISOR - The UFOC discloses any
administrative, criminal or material civil action pending against the
Franchisor, any predecessor and any person identified as an officer
and/or director in the UFOC. The information contained in the UFOC on
each case must be reviewed and, if necessary, more detailed information
must be obtained, including a current status report.
Significant litigation pending between the Franchisor and its
Franchisees (significant in terms of either dollars or number of
actions) must be examined closely. This is often an indication of
weakness in the franchise system which ultimately could affect the
future earnings and financial strength of applicants.
Furthermore, if pending litigation is significant in terms of dollars,
the potential adverse affect on the company's financial condition must
be analyzed. Again, in such case further information must be obtained on
the status and range of the amount of contingent liability.
The Report to Credit Committee must contain a section outlining the
pending litigation and discussing the pertinent details regarding such
actions. Major litigation problems must also be summarized in the
Recommendation section of the Report to Credit Committee. The Credit
Committee must consider this information in deciding whether to extend
credit to applicants operating in the concept.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
6. SURVEY OF FRANCHISEES - When reviewing a Franchisor concept for
approval, a randomly selected sampling of existing Franchisees must be
surveyed. A minimum of 5% of the franchisees or 25 franchisees,
whichever is greater, must be surveyed. Franchisees must be selected
from different parts of the country. Information obtained from the
franchisees should include: 1) average sales; 2) the level of franchisee
profitability and how long it took them to become profitable; 3) whether
the franchisee is satisfied with both the pre-opening and ongoing
support from the franchisor; 4) does the franchisee believe that the
working capital requirements and other cost projections listed in the
UFOC are adequate. Each franchisee surveyed must also be asked if they
would recommend that other people become franchisees of the concept and
if they would open their store(s) again. Finally, the franchisee should
be asked if they are having any problems with their business.
The Report to Credit Committee must contain a section outlining the
results of the franchisee survey. Major franchisee concerns must also be
summarized in the Recommendation section of the Report to Credit
Committee. The Credit Committee must consider this information in
deciding whether to extend credit to applicants operating in the
concept.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
7. MINIMUM CREDIT STANDARDS FOR FRANCHISEES - When reviewing a franchise
concept for approval, general credit standards must be established for
typical franchisees. Many factors must be considered when setting the
standards, including: 1) the total cost to open a typical unit; 2) first
year sales and profitability averages; 3) mature store sales and
profitability averages; and 4) standard multi-unit development
requirements. In some instances, secondary sources of personal income
for the principals must also be considered when determining liquidity
requirements.
Also, the franchisor's stated financial requirements for franchisees
must be reviewed and compared to the results of Captec's analysis.
Ideally, Captec and the Franchisor will have similar credit standards.
If Captec's credit standards significantly exceed the Franchisor's
credit standards, the approval rate of franchisee applicants may be
below acceptable levels.
All financing programs require a clean credit bureau report on the
franchisee. Generally, a standard net worth requirement and an initial
capitalization requirement should also be established. Each credit has
unique circumstances and must be reviewed on an individual basis, taking
into account the credit standards established through this analysis.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
8. REPORT TO CREDIT COMMITTEE ON CONCEPT - Utilizing all of the information
and analysis derived from the concept underwriting process, the Credit
Department must prepare a written report on each franchisor (the
"Concept Underwriting Report"). The Concept Underwriting Report must
include the following:
- One page summary of Franchisor
- One page summary of the proposed financing program
- Discussion of concept and operations
- Discussion of management and operating history
- Discussion of fees paid by franchisees
- Discussion of training and support
- Discussion of unit level economics, including average unit sales,
average return on sales, average investment required to open a
unit and standard unit capitalization requirements
- Discussion of the results of the credit analysis of the
Franchisor's financial statements
- Discussion of unit closure statistics
- Discussion of survey of franchisees
- Recommendation
See Appendix I.E.8 for the guideline format of this report.
The report must be submitted to all members of the Credit Committee for
their review in advance of the committee meeting. The Credit Committee
must review and discuss the concept, decide whether or not to approve a
financing program for the franchisees and decide what the terms and
conditions of the program will be.
Either prior to or as a result of the Credit Committee's review, there
may be a negotiating process that takes place with the franchisor
regarding the structure and nature of any recourse programs, remarketing
agreements, the maximum aggregate dollar amount of program financings,
the maximum dollar amount of individual transactions, and/or the
standard rate of return on such transactions.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: E. FRANCHISE/CHAIN CONCEPT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
8. REPORT TO CREDIT COMMITTEE ON CONCEPT (CONTINUED)
The Credit Committee may, on occasion, limit the amount of a program to
establish a relationship with a franchisor and agree, after a
predetermined period of time, to review the performance of the portfolio
and update financial and credit information on the franchisor to
determine if the program should be increased. In such instances, the
Report to Credit Committee must be revised and resubmitted to Credit
Committee for final approval.
The Report to Credit Committee must be reviewed and approved by the
Credit Committee prior to accepting franchisee financing applications.
All concepts must pass this credit underwriting process in order to
become "Approved Concepts."
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
1. STANDARD APPLICATION - A credit application must be completed, signed
and dated by a proposed applicant and made a part of every credit file.
The credit application should be used as a starting point and should
indicate the applicant's name and address, the location to be financed,
the name, address and social security number of all guarantors, the
applicant's bank and trade references, a description of the assets to be
financed, and the amount and the costs of those assets. (see Exhibit
I.F.1 for the standard application form).
A signed credit application authorizes Captec as a potential creditor to
order credit bureau reports on the guarantors and obtain credit
information from current creditors. Therefore, such credit service
reports cannot be ordered or received prior to receiving a signed
application.
The application should be submitted to Captec accompanied by a check
from the applicant for payment of the commitment fee. A copy of the
check must be attached to the application and remain in the credit file.
No application can be processed prior to receipt of the properly signed
application form and the commitment fee. Upon receipt of the signed
application and check, the transaction must be input by Credit
Department personnel into the INFO-LEASE Credit Application Module
using the information from the application. An application number and
customer credit account number is assigned at that time. If the
applicant is an existing customer or applicant, the existing customer
credit account must be used in order that all pending, approved, and/or
closed transactions may be tracked by customer, enabling the efficient
monitoring of customer borrowing concentrations.
The Credit Application Module database must be maintained for each
application throughout the application, documentation and transaction
booking process. Each application will be tracked within this system to
monitor such items as credit decision status, open approval contingency
items, documentation checklists, asset cost and description information,
and projected funding date. Each application is tracked across
departments (from credit to documentation to accounting); therefore, the
assigned credit analyst must re-assign the approved application to
Documentation Department upon completion of the credit approval process.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
2. REVIEW OF APPLICANT'S FINANCIAL STATEMENTS
a) CREDIT ANALYSIS METHODS - When an applicant operates one or more
existing restaurants, current financial statements on the existing
operations must be submitted with the application. This information must
be input into Captec's spreadsheet model for summarization and ratio
analysis.
The financial statements must be reviewed on both a consolidated as well
as a unit level basis. Sales of existing restaurants must be analyzed
and compared to average per unit sales for the concept. Costs and
margins must also be compared to concept-wide averages. The balance
sheet must be analyzed in terms of trends, capitalization, Debt/Worth
Ratio and other pertinent ratios. The capitalization structure should be
closely analyzed to insure that the applicant has sufficient capital to
support its existing and planned future units. If funds are put into the
business as debt from the principals (e.g. - in the form of shareholder
notes) the notes should typically be required to be subordinated to the
Captec financings.
As with any existing company, part of the financial analysis must
include analyzing pertinent ratios and studying trends. Debt/Worth Ratio
should be moderate depending on the growth stage of the company. If a
high Debt/Worth Ratio exists, there must be numerous other redeeming
features for the application to receive further consideration for
approval. A typical maximum Debt/Worth Ratio is 3:1, but ratios may vary
both upwards and downwards for different concepts and the analyst must
give consideration to these variances.
Cash flow is very important and must be positive. The existing
operations of the applicant must be generating sufficient cash flow to
service all current obligations. A typical minimum Fixed Charge Coverage
Ratio would be 1.25:1.
An existing company's profitability must also be reviewed. Depending on
the stage of the company, profitability may or may not have been
reached. On a newer unit, there may be many pre-opening costs expensed
that have limited or prevented profitability. Also, if an applicant is
in a growth phase and opening several units, numerous start-up costs,
training and overhead are often being absorbed and may also prevent
profitability. All of these factors must be taken into account by the
analyst and each application must be analyzed based upon each particular
situation.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
2. REVIEW OF APPLICANT'S FINANCIAL STATEMENTS (CONTINUED)
b) COMPARISON WITH FRANCHISOR'S MINIMUM CREDIT REQUIREMENTS - Once a
Franchise concept is approved, the Franchisor file is kept in the Credit
Department and used for reference. When an application for the system is
being reviewed, various assumptions must be compared with the franchisor
information for accuracy. This Franchisor file information and the
application must be compared with respect to the following:
- the cost to open
- site and store unit size
- the net worth and liquid assets of the applicant
- unit level sales results
- unit level profits as a percent of sales
This unit level economic information must be input into and tested using
Captec's unit level economics model. Any economic stresses noted from
this analysis must be discussed in the Report on Financing Application.
This information must be compared to both: 1) continuously monitor the
accuracy of the assumptions made in the Franchisor file; and 2) to
assess the strengths and weaknesses of the applicant relative to these
standards.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
3. SELECTION OF GUARANTORS - As a policy, all principal officers owning 10%
or more of the applicant organization must individually guarantee all
financings. However, their are common occurrences of exceptions to this
policy.
The most typical examples of an exception are:
1. organizations with substantial capital paid-in directly by
the principals (i.e. - the principals have significant
capital at stake in the business)
2. organizations with substantial net worth, many years in
business and/or insignificant mass of operations (as measured
by such statistics as total revenue and number of store
units)
Generally, transactions must be proposed by the Sales & Marketing
Department with a requirement for guarantees, unless the applicant
organization is an obvious exception to the policy or unless the
applicant specifically states and satisfactory explains why guarantees
are not available.
All guarantees must be joint and several for the entire amount of the
financing. Exceptions to this policy may only be allowed in unusual
circumstances.
If an application submitted for credit underwriting is submitted without
a guarantee or with a limited guarantee, the credit analysis must
address the issue of whether the applicant qualifies for an exception
from the guarantee policies. All such exceptions must be discussed in
the Report on Financing Application and can only be approved by Credit
Committee.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
4. REVIEW OF PRINCIPALS' PERSONAL FINANCIAL STATEMENTS - All personal
financial statements must be submitted directly by the principals and
must be complete, signed and dated. All personal financial statements
should be no more than 6 months old.
Each line item must be reviewed and analyzed further, if needed. Cash
must be verified through bank references and/or current bank statements.
Marketable securities must be verified through securities account
statements. The valuation of certain assets, such as business interests,
must be reviewed to assess the reasonableness of the stated value. Total
debt indicated as owing to banks and others must be reconciled with the
individuals' credit bureau report to determine the accuracy and
completeness of the liabilities section of the personal financial
statement.
The strengths and weaknesses of the personal financial condition of all
principals, particularly those who are proposed as guarantors, must be
discussed in detail in the Report on Financing Application.
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Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
5. REVIEW OF PRINCIPALS' PRIOR OPERATING EXPERIENCE - A resume must be
generally obtained on the principals, and the analyst must review their
background and experience.
- Positive attributes include (but are not limited to):
- previous experience operating stores within the same concept or a
concept with similar operations requirements
- previous successful business ownership
- specific occupational expertise for persons serving in various
functional areas of the applicant's organization (e.g. - a person
serving as the CFO might have a background as a CPA, a financial
officer with previous employers, etc.)
- significant business contacts and presence within the operating
territory
In most cases the principals should have direct prior operating
experience within the concept or a similar concept. Any lack of such
prior experience is a major weakness and must be highlighted in the
Report on Financing Application.
With respect to franchise loans secured by mortgages, there are certain
specific, quantitative requirements regarding the principals' prior
operating experience. See Section I.Fl.5 for further details regarding
these requirements.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
6. OBTAINING AND REVIEWING PERSONAL CREDIT REPORTS - A personal credit
bureau report must be obtained directly from the reporting agency on
every potential guarantor listed on an application. The reports should
generally be obtained via the Credit Department's on-line reporting
service.
A TRW is the standard report used. This report must be used to verify
current address, social security number, year of birth, spouses name and
employment. The profile summary must be reviewed, and includes the
number of accounts, satisfactory accounts, delinquent accounts, public
records, installment balances and payments, real-estate balances and
payments, revolving balances and availability, past due amounts, and
inquiries. Each trade account is listed separately and includes the name
of the creditor, the date the account was open, balance date and last
pay date. The high credit, current balance, and monthly payment are also
listed. The account status reflects the last 24 months of payment
history. Inquiries over the past two years are listed.
Each account listed on the credit report must be reviewed to establish
prompt payment history and determine that the amount of personal debt is
not excessive. Should an account show any derogatory payment history, a
detailed written explanation must be provided by the principal and the
explanation must be acceptable to Captec.
The number of inquiries must be noted and assessed as an indication of
other funding sources the individuals may be working with and the
probability of recent similar credit requests.
Any derogatory payment history noted on a personal credit report must be
disclosed in the Report on Financing Application, along with the
person's explanation and the analyst's assessment of that explanation.
Also, any discrepancies between the debt indicated on the credit report
and the debt disclosed on the personal financial statement must be
indicated in the Report on Financing Application.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
7. OBTAINING AND REVIEWING BUSINESS CREDIT REPORTS - A Dun & Bradstreet
Business Information Report must be obtained on every company applying
for credit to Captec The D&B report contains extensive information on
the business which must be used for both information gathering and
information verification purposes.
The D&B report contains the company's complete legal name and address,
its business activity, a rating which is generally based on the
company's net worth, the year started and number of employees. The D&B
summarizes the company's financial statements, if the company has agreed
to provide D&B with such financial statements, and the report lists any
special events. Payment histories are outlined by vendor industry,
reflecting total dollar amount, high credit and payment history. A
paydex score is assigned based on this data and the percentage of
payments within the allotted terms are disclosed. Public filings are
listed including all suits, tax liens, and UCC filings. The D&B report
lists the location of the offices of the company, ownership structure
and background information on the officers. This information is
generally used for verification purposes.
The entire D&B report must be reviewed. Any derogatory information
regarding the business rating, special events, payments histories/paydex
score and public filings (e.g. - suits and tax liens) must be fully
investigated and discussed in the Report on Financing Application.
The information in the D&B report such as the name of legal entity,
summarized financial statements, names and backgrounds of officers, and
ownership structure must be compared to such information provided
directly by the customer. Any discrepancies between these information
sources must be fully investigated, and any such discrepancies that
cannot be satisfactorily reconciled must be discussed in the Report on
Financing Application.
All lending/leasing creditors listed in the D&B report must be compared
to the bank reference and financial statement information provided
directly by the customer. Any such creditors which were not disclosed by
the customer must be contacted as a bank reference. Furthermore, if
there are any creditors who were not disclosed by the customer and who
have material outstanding balances owed to them by the customer, the
reason for such omissions must be investigated by
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
7. OBTAINING AND REVIEWING BUSINESS CREDIT REPORTS (CONTINUED)
discussion with the customer. Any omissions which cannot be
satisfactorily reconciled must be discussed in the Report on Financing
Application.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
8. REFERENCE INVESTIGATION - All bank and finance company references and
all material trade references, which are either supplied with the
application or discovered during the credit investigation, must be
contacted by the Credit Analyst.
When obtaining a bank reference, the Credit Analyst must speak directly
to the account officer assigned to the applicant, to ensure that
complete information is being provided. The Credit Analyst must inquire
about the following: length of their institution's relationship with the
applicant; average deposit balances; lending/financing history; and
detailed history and status on each outstanding obligation. In addition,
the Credit Analyst should ask the account officer other questions to
probe into their overall experience and satisfaction with the customer.
This can be accomplished by asking questions regarding the applicant's
business history, growth potential and other future business plans.
References from institutions (e.g. finance companies) that have only
secured term financings (e.g. equipment and real estate leases)
outstanding with the applicant will generally provide some limited
reference information, as compared to a bank relationship. For such
references, the Credit Analyst must inquire about the history of each
financing provided, including the following: commencement date; original
balance; type of financing; collateral; term of the financing; and
payment history.
Trade references must be investigated to determine if the applicant is
paying its suppliers on a timely basis. The Credit Analyst must inquire
about the following: average and high monthly balance, payment history,
length of the vendor's relationship with the applicant; and frequency of
purchases.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
9. SITE REVIEW - A complete demographics report is included in the credit
application and generally includes the description of the site
(including diagrams), main traffic generators, competition in the area,
population, and traffic counts. The depth of site review analysis
depends upon the type of financing being considered.
EQUIPMENT financing transactions require a compilation of site
information for presentation as a section in the Report on Financing
Application. This information must be generally compared to the standard
site requirements for the concept and any major discrepancies must be
noted in the Report on Financing Application.
REAL ESTATE MORTGAGE LOAN transactions require a detailed review of the
site information. In addition to the review of the demographics report,
this review must also include a review of the Franchisor's site analysis
and pictures and site drawings for the site. Furthermore, the Senior
Vice President - Sales & Marketing must review the entire site
information package and provide summary comments to the Credit Analyst
for inclusion in the Report on Financing Application. A detailed
discussion of the site must be included in the Report on Financing
Application, and the entire site package must be made available to
Credit Committee during the committee meeting.
REAL ESTATE NET LEASE transactions require the same level of review as
described above for real estate mortgage transactions. In addition, the
President or Senior Vice President - Sales & Marketing must physically
visit the site prior to the funding of the transaction. If this site
visit occurs after a credit approval, such approval must be made
contingent upon a satisfactory site visit. A detailed discussion of the
site must be included in the Report on Financing Application, and the
entire site package must be made available to Credit Committee during
the committee meeting.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
10. REVIEW OF FRANCHISE AGREEMENT - The franchise agreement must be reviewed
during the approval process. If the application is for a new store unit,
the franchise agreement may not be available when the application is
submitted to the Credit Department because it may not yet have been
executed by the franchisee and franchisor. The franchise agreement is
typically executed 1-3 months in advance of the unit opening, depending
on the concept. Review of the franchise agreement must be listed as a
credit contingency item if the agreement is not reviewed during the
application underwriting process, and it must be submitted, reviewed and
deemed acceptable to the Credit Department prior to the funding of the
transaction.
The review of the franchise agreement must verity that:
- the term of the proposed financing does not exceed the remaining
term of the franchise agreement; and
- the franchisee, as named in the franchise agreement, is the same
entity as the lessee/borrower under the proposed financing
If the review of the franchise agreement does not verity the above
criteria, the discrepancies must be discussed with the Credit Manager to
determine whether the applicant should immediately be disqualified for
financing. If, in the opinion of the Credit Manager, the application
merits consideration for approval despite any such discrepancy, then
such discrepancy must be discussed in the Report on Financing
Application.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
11. REPORT ON FINANCING APPLICATION - Once the credit analysis is completed,
the assigned Credit Analyst or the Credit Manager must prepare a
complete written analysis on the proposed transaction and present such
report to the Credit Committee or other appropriate decision-making
authority (see Policy I.D for determination of the appropriate credit
decision-making authority).
The Report on Financing Application must include the following:
- One page Transaction Summary
- Discussion of company structure
- Discussion of background of key personnel and financial strength
of guarantors
- Discussion of operating history
- Discussion of sources and uses of capital (for applications
related to development of new units)
- Discussion of the results of the credit analysis of the
applicant's historical financial statements (if applicant has
existing store operations)
- Discussion of the results of the credit analysis of the projected
unit level economics for the unit being financed (if application
is for a new unit)
- Discussion of site information
- Recommendation
- Attach a copy of the Captec spreadsheet model (if applicant has
existing store operations)
- Attach a copy of the Captec spreadsheet for modeling the unit
level economics
See Appendix I.F.11 for the guideline format for this report.
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Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
12. DECISION TO APPROVE OR DECLINE - The Report on Financing Application
must be submitted to all members of the Credit Committee, or other
appropriate decision-making authority (see Policy I.D for determination
of the appropriate credit decision-making authority), for their review
in advance of the committee meeting. The Credit Committee or other
appropriate decision-making authority must review and discuss the Report
and decide whether to approve or decline the proposed financing.
The Credit Committee or other appropriate decision-making authority also
has the authority to change the terms and conditions of the proposed
financing if they are not acceptable as originally proposed. Any such
changes must be communicated by the Credit Manager to the assigned
account representative in the Sales & Marketing Department, that
representative must communicate such changes to the applicant and the
applicant must accept such changes in writing in order for a transaction
to be approved.
Credit Department personnel must maintain a Credit Transaction Form
which is attached to the credit file. See Appendix I.F.12 for the
format for this report. The credit decision must be indicated on this
form, along with all contingency items. In the case of approvals, all
persons voting on the credit decision (the attending Credit Committee
members or the other appropriate decision-making members) must
initial the approval.
Credit Department personnel must also post the credit decision and any
credit contingency items into the INFO-LEASE Credit Application Module.
Such personnel must then immediately re-assign the application to the
Documentation Department and place the physical credit file in Captec's
filing cabinets.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F. FINANCING APPLICANT UNDERWRITING PROCESS
- --------------------------------------------------------------------------------
13. APPROVAL AND DECLINE LETTERS - Approval and decline letter must conform
to the standard form for such letters. See Appendix I.F.13(a) for
standard form approval letters and Appendix I.F.13(b) for standard form
rejection letters.
These standard form letters have been designed to legally conform to
commercial law and Federal Regulation B (Equal Credit Opportunity)
requirements. Additionally, approval letters must specify certain
documentation requirements, the standards for which are determined
outside of the Credit Department. Therefore, only Captec's General
Counsel has authority to make changes to the standard form approval or
rejection letters.
If approved, an approval letter must be signed by the Vice President -
Credit or Credit Manager and sent to the customer, outlining the terms
and conditions of the approval and the file proceeds to the
documentation department. However, with respect to franchise loans
secured by mortgages, the communication of loan application approvals
must be coordinated with the issuance of a Commitment Letter by the
Documentation Department, as more fully described in Section I.F1.9.
If the transaction is declined, a rejection letter must be signed by the
Vice President - Credit or Credit Manager and sent to the applicant.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: F1. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
1. LIMITATIONS ON LOAN TERMS & CONDITIONS - Franchise loans secured by
mortgages must conform with the following terms and conditions as a
prerequisite for being considered for credit underwriting. Credit
applications with non-conforming terms and conditions must be returned
to the Sales & Marketing Department for restructuring.
a) FIXED RATE - All loans must provide for a fixed rate of interest for
the entire term of the loan. Rates may float prior to funding based upon
changes in the comparable-term U.S. Treasury Notes. The loan interest
rate will be priced based upon a spread over the Treasury security most
closely approximating the stated maturity of the loan.
b) SECURITY INTEREST - Loans must be secured by one of three types of
security interests:
FEE SIMPLE MORTGAGES provide a security interest in the Borrower's
restaurant building(s) and related land.
LEASEHOLD MORTGAGES provide a security interest in the Borrower's
ground lease. Leasehold mortgages are used in instances where the
Borrower leases the land under a ground lease from a third party
lessor.
BUSINESS ENTERPRISE LIENS provide a security interest in all of the
assets of the Borrower held at the unit that is the subject of the
financing. Business Enterprise Liens are typically used in instances
where the Borrower may have no land or building assets at the
subject unit.
At least 70% of loans made by the Company will be secured by fee
simple mortgages. No more than 30% of the loans will be secured by
leasehold mortgages and business enterprise liens. Senior management
places the limitations on the percentage of loans which can be
secured by leasehold mortgages and business enterprise liens. From
time to time, such limitations will be discussed in Credit Committee
meetings and any resulting changes to the limitations must be
communicated by the Vice President - Credit to the Sales & Marketing
Department.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
1. LIMITATIONS ON LOAN TERMS & CONDITIONS (CONTINUED)
Furthermore, other underwriting and documentation policies will vary, as
noted elsewhere in the Operations Manual, depending upon whether a loan
is secured by a fee simple mortgage or a leasehold mortgage.
c) MAXIMUM LOAN MATURITY - The maturity period for any loan must be less
than or equal to 15 years.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
1. LIMITATIONS ON LOAN TERMS & CONDITIONS (CONTINUED)
d) OTHER LOAN MATURITY RESTRICTIONS - Loan maturity periods are further
restricted as follows:
i) The loan maturity period may not be less than one half (1/2) of
the payment amortization period.
ii) The loan maturity period must be less than or equal to the
remaining term of the Borrower's franchise agreement; except
that variances from this policy are acceptable for only fully
amortizing loans that have a stated maturity that extends no
more than three (3) months beyond the franchise agreement
termination date.
e) MAXIMUM AMORTIZATION PERIOD - The loan amortization period for any
loan secured by a fee simple mortgage must be less than or equal to 20
years. The loan amortization period for any loan secured by a leasehold
mortgage or business enterprise lien must be less than or equal to 15
years.
f) BALLOON LOANS - Loans secured by fee simple mortgages may be
structured with balloon amortizations. Balloon loans are not permitted
on loans secured by leasehold mortgages or business enterprise liens.
Furthermore, the aggregate balance of balloon loans must not exceed 20%
of the aggregate Secured Franchise Business Loan portfolio. Senior
management places limitations on the percentage of loans which can have
balloon features. From time to time, such limitations will be discussed
in Credit Committee meetings and any resulting changes to the
limitations must be communicated by the Vice President - Credit to the
Sales & Marketing Department.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
2. FRANCHISE CONCEPT TIERING SYSTEM - Only for purposes of underwriting
franchise loans secured by mortgages, a tiering system has been
established which categorizes franchise concepts into two tiers. These
tiers are intended to delineate the relative level of credit risk
associated with loans to franchisees within such concepts, prior to
taking into account the results of the franchisee underwriting process
(see Section I.F). The franchisee underwriting process is critical to
the overall risk analysis associated with any loan application, and
thus, the tiering system is not an exclusive or absolute measure of the
credit risk of any loan. Notwithstanding the prior sentence, tier
rankings of approved concepts have the following meaning:
Tier I - Highest Overall Quality
Tier II - Strong Overall Quality
The tier classifications are used for purposes of stratifying certain
other loan underwriting criteria, as well as for stratifying certain
concept and borrower loan portfolio concentration limits (see Section
I.F1.8 for further information regarding concentration limits).
This tiering system, and the tier ranking assigned to any concept, are
confidential and should not be communicated to loan applicants or
franchisors. The purpose of this confidentiality is to avoid offending
franchisors and applicant's with differing views on the relative
strengths and weaknesses of their concept.
The Credit Committee is responsible for assigning tier rankings to each
approved concept. The Vice President - Credit is responsible for
communicating the tier rankings, and any changes thereto, to the Sales &
Marketing Department.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
2. FRANCHISE CONCEPT TIERING SYSTEM (CONTINUED)
The tier designation process, similar to the credit underwriting
process, involves the weighing of strengths and weaknesses and making
qualitative decisions based upon such information. The general criteria
to be used for classifying concepts by tier level are as follows:
- Size of system
- Maturity of system
- Degree of positive trademark recognition
- Degree of franchisor support
- Financial strength of franchisor
The size of the system (i.e. - number of stores under operation) is a
strong indicator of the credit risk associated with an individual
franchisee loan. It is an important measure of the scope and depth of a
concept. When accompanied by limited unit level closure statistics, the
size of the system is the best historical measure of the long-term
success of a concept at the unit level. Generally, Tier I concepts have
over 500 units (often over 1,000 units), and Tier II concepts have up to
500 units. Concepts which cross-over these general ranges are typically
tiered based upon other criteria and mitigating factors. Concepts with
over 1,000 units would, in nearly all cases, be classified as Tier I
concepts. As a general exception to the above tiering standards, casual
dining and family restaurant segment concepts will usually have lower
system unit size threshold levels due to the substantially higher unit
level revenues, capital costs and seating capacities.
The degree of maturity of a concept system is measured by such factors
as market penetration, growth rate, and number of years in operation.
Generally, Tier I concepts are more mature systems than Tier II
concepts.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
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Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
2. FRANCHISE CONCEPT TIERING SYSTEM (CONTINUED)
Often linked with system maturity is positive trademark recognition.
Concepts with a high level of positive trademark recognition generally
have the broadest appeal in the consumer market. Tier I concepts
generally are "household names" either regionally or nationally.
Franchisor support is an important component which contributes to the
stable, consistent operation of the franchise store unit, which in turn
promotes growth in the overall size of the system. Franchisors provide
support to their franchisees in very significant ways, including site
analysis and selection, personnel training, operational support, quality
control, and the development and production of national marketing and
advertising campaigns. Generally, the level of franchisor support is
strongest for Tier I concepts.
The financial strength of the franchisor is considered and can be
important, although its is not necessarily a major factor. There is no
requirement for credit ratings of the franchisor. A financially strong
franchisor can be a benefit in terms of future system growth
opportunities and general stability. However, a franchisor with more
limited financial strength may also be able to provide all of the
necessary support for the franchisee community and, as a result, may be
just as effective as a financially stronger franchisor. For example, the
parent companies of concepts such as Arby's, Denny's and Hardees have
below investment grade corporate ratings, yet these systems have
continued high level of franchisor support of the system.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
2. FRANCHISE CONCEPT TIERING SYSTEM (CONTINUED)
Mitigating factors which may positively affect the tier designation of a
concept include:
- Strong sales and unit growth rates
- Strong same store sales growth figures
- Superior unit level economics
- Superior management
- Beneficial Parent/Affiliate relationships
- Broad access to capital at the franchisor level
- Regional market strength
- Low unit level closure statistics
- Overall quality of the franchisees within the system
Mitigating factors which may negatively affect the tier designation of a
concept include:
- Detrimental Parent/Affiliate relationships
- High unit level closure statistics
- Poor franchisor management team
- Declining market penetration or trademark appeal
- Negative same store sales growth figures
45
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
3. CONCEPTS APPROVED FOR SECURED FRANCHISE BUSINESS LOANS - The following
concepts have been approved for the indicated types of security
interests (see definitions in Section I.F1.1(b)):
a) Fee Simple Mortgages
Tier I - Applebee's, Arby's, Boston Market, Burger King,
Chili's, Denny's, Hardees, Jack In The Box, KFC, Pizza
Hut, Red Robin, Taco Bell, TGI Friday's, and Wendy's.
Tier II - Carrows/Coco's, Church's/Popeye's, Eastside Mario's,
Golden Corral, Houlihan's, Kenny Rogers Roasters,
Shoney's, Sonic, and Taco Cabana.
b) Leasehold Mortgages
Tier I - Applebee's, Arby's, Boston Market, Burger King,
Chili's, Denny's, Hardees, Jack In The Box, KFC, Pizza
Hut, Red Robin, Taco Bell, TGI Friday's, and Wendy's.
Tier II - Carrows/Coco's, Church's/Popeye's, Eastside Mario's,
Golden Corral, Houlihan's, Kenny Rogers Roasters,
Shoney's, Sonic, and Taco Cabana.
c) Business Enterprise Liens
Tier I - Applebee's, Arby's, Burger King, KFC, Pizza Hut, Taco
Bell, and Wendy's.
Tier II - None
46
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
4. LOAN-TO-VALUE RATIOS - Secured Franchise Business Loans must conform to the
following loan-to-value (LTV) ratio limitations.
a) Loans secured by fee simple mortgages must be based upon an
independent valuation of the land and building assets. The LTV ratio
for each loan must not exceed the lesser of 70% of an independent
valuation of the franchise enterprise (a business valuation which
includes land and building) or 100% of the real estate appraised
value. In addition, the LTV ratio of the aggregate portfolio of fee
simple mortgage loans must not exceed the lesser of 70% of the
business valuation (including land and building) or 92.5% of the real
estate appraised value.
b) Loans secured by leasehold mortgages or business enterprise liens must
be based upon an independent valuation of the franchise enterprise (a
business valuation). The LTV ratio must be less than or equal to 70%.
In all instances, the independent valuation must be performed by a nationally
recognized valuation firm with extensive knowledge and experience in the area of
restaurant franchise finance. Section IV.D.6 further addresses the loan
documentation requirements related to real estate and business valuations.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
5. FIXED CHARGE COVERAGE RATIOS - Minimum Fixed Charge Coverage Ratios are
required as a condition of approval of any application for a Secured
Franchise Business Loan. There are two levels of minimum Fixed Charge
Coverage Ratios.
a) If the loan is secured by a fee simple mortgage, then the Borrower
Entity must have a minimum Fixed Charge Coverage Ratio of 1.10:1.
Otherwise, if the loan is secured by a leasehold mortgage or a
business enterprise lien, the Borrower entity must have a minimum
Fixed Charge Coverage Ratio of 1.20:1.
In addition, the aggregate pool of loans secured by fee simple
mortgages must have a minimum Fixed Charge Coverage Ratio of 1.15:1
for the Borrower and 1.25:1 for the individual store unit, which the
loan will be extended.
b) If the loan is secured by a fee simple mortgage, then the individual
store unit to which the loan will be extended must have a minimum
Fixed Charge Coverage Ratio of 1.20:1. Otherwise, if the loan is
secured by a leasehold mortgage or a business enterprise lien, the
individual store unit must have a minimum Fixed Charge Coverage Ratio
of 1.40:1.
In addition, the aggregate pool of loans secured by a leasehold
mortgages and business enterprise liens must have a minimum Fixed
Charge Coverage Ratio of 1.35:1 for the Borrower and 1.25:1 for the
individual store unit, which the loan will be extended.
See section I.G for the definition of Fixed Charge Coverage Ratio.
48
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
6. FRANCHISEE OPERATOR EXPERIENCE REQUIREMENTS - Franchisee borrowers must
meet the following operating experience requirements in order to qualify
for a loan secured by a mortgage.
a) Franchisee borrowers must currently be operating at least two (2)
franchise units of the concept to which the loan will be extended.
b) A principal member of the management team of the franchisee borrower
must have at least two (2) years of experience in the management of
restaurant operations.
c) A principal member of the management team of the franchisee borrower
must have at least one (1) year of experience in the management of
restaurant operations within the concept to which the loan will be
extended.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
7. PERSONAL GUARANTEE REQUIREMENTS - Personal guarantee requirements differ
depending upon whether the loan is secured by a fee simple mortgage or a
leasehold mortgage or business enterprise lien (see definitions in Section
I.F1.1(b)).
a) Loans secured by fee simple mortgages are not required to be
guaranteed by the borrower. However, when circumstances allow,
personal guarantees should be obtained. Furthermore, the omission of
personal guarantee(s) from a loan application must be highlighted on
the face of the Report on Financing Application submitted to the
Credit Committee and must be considered by the Credit Committee
relative to the credit decision for that loan application.
b) Loans secured by leasehold mortgages and business enterprise liens
must have personal guarantee(s), unless the Borrower is operating 25
or more restaurants in one or more concepts. Such, personal guarantees
must be offered by at least one of the principal members of the
management team of the franchisee borrower.
50
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
8. BORROWER'S USE OF LOAN PROCEEDS - The borrower must state the use of
the loan proceeds in the credit application. Generally, the borrower
should be using the loan proceeds to refinance existing indebtedness,
develop/acquire additional restaurant units, and/or for other purposes
relating to the operation of restaurant facilities. Any use of loan
proceeds outside of this scope must be noted in the Report on
Financing Application submitted to the Credit Committee. The Credit
Committee is responsible for determining whether the use of loan
proceeds for reasons beyond those noted herein is acceptable.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
9. PORTFOLIO CONCENTRATION LIMITATIONS - The Credit Committee will place
limitations on concept, borrower and geographic concentrations in the
portfolio of Secured Franchise Business Loans. Furthermore, the Chief
Financial Officer must be present at a Credit Committee meeting in which
changes to concentration limits are proposed and must vote affirmatively
for any concentration limit changes in order for such changes to become
effective.
The Vice President - Credit will maintain a written matrix which specifies
the current portfolio concept, borrower and geographic concentration
limits, and further, will be responsible for preparing and circulating
weekly reports to the Credit Committee detailing these concentrations with
respect to the outstanding loan balances and remaining availability under
the concentration limits. The Vice President - Credit is also responsible
for communicating the limitations, and any changes thereto, to the Sales &
Marketing Department.
Such concentration limits will be stratified based upon the tier
designations assigned to each approved concept (see Section I.Fl.2 and
Section I.F1.3). Borrower concentration limits, as well as concept
concentration limits, will vary depending upon the applicable tier ranking.
Borrower concentration limits will also vary depending upon whether a
borrower is a franchisor or a franchisee, within a given concept.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised October 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: Fl. SUPPLEMENTAL UNDERWRITING REQUIREMENTS FOR
SECURED FRANCHISE BUSINESS LOANS
- --------------------------------------------------------------------------------
10. PROCESSING OF APPROVED LOAN APPLICATIONS - Credit files for approved
applications for franchise loans secured by mortgages must be forwarded to
the Manager of Contract Administration - Real Estate for preparation of the
loan and mortgage documentation.
Commitment letters for such approved loan applications must be prepared by
the Documentation Department. Loan commitment letters may not be prepared
or executed by Credit Department or Sales & Marketing Department personnel.
53
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: G. DEFINITIONS OF CREDIT ANALYSIS TERMS
- --------------------------------------------------------------------------------
CASH FLOW - The sum or subtraction of the following items for the applicant
business for the applicable operating period:
+ Operating Cash Flow
+ Debt Service
- Operating Lease Expense
-------------------------------
= Cash Flow
CASH FLOW/CPLTD RATIO - The product of the following equation, expressed as a
ratio (e.g. 1.25:1):
+ Net Income
+ Depreciation and Amortization
-----------------------------
= Subtotal
div Current Portion of Long-Term Debt
-------------------------------------------------
= Cash Flow/CPLTD Ratio
CURRENT ASSETS - The current assets as stated on the applicant's financial
statement.
CURRENT LIABILITIES - The current liabilities as stated on the applicant's
financial statement.
CURRENT PORTION OF LONG-TERM DEBT - The current portion of long-term debt due to
mature during the next comparable operating period, as stated on the applicant's
financial statement, plus, if not already included therein, the current portion
of principal payments imputed on all capital leases. (Note: See comments under
Interest Expense definition regarding FASB financial reporting standards for
capital leases. These same comments apply to this definition for the related
principal portion of such capital leases.)
CURRENT PORTION OF OPERATING LEASES - The amount of rent due under operating
leases for the next comparable operating period.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: G. DEFINITIONS OF CREDIT ANALYSIS TERMS
- --------------------------------------------------------------------------------
DEBT SERVICE - The sum of Interest Expense, plus the amount of principal paid on
long-term debt, plus the amount of principal paid on capital leases, all for
the applicable operating period.
DEBT/WORTH RATIO - The product of the following equation, expressed as a ratio
(e.g. 2.0:1):
Total Liabilities
div Net Worth
----------------
= Debt/Worth Ratio
DEPRECIATION AND AMORTIZATION - The depreciation and amortization expense as
stated on the applicant's financial statement.
EBITDA - The sum of the following items for the applicant business for the
applicable operating period:
+ Net Income
+ Depreciation and Amortization
+ Interest Expense
+ Income Taxes
--------------------
= EBITDA (earnings before interest, taxes, depreciation and
amortization)
FIXED CHARGE COVERAGE RATIO - The product of the following equation, expressed
as a ratio (e.g. 1.25:1):
Operating Cash Flow
div Fixed Charges
----------------------
= Fixed Charge Coverage Ratio
FIXED CHARGES - The sum of the following items for the applicant business for
the applicable operating period:
+ Current Portion of Long-Term Debt
+ Interest Expense
+ Current Portion of Operating Leases
-------------------------------------------
= Fixed Charges
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: G. DEFINITIONS OF CREDIT ANALYSIS TERMS
- --------------------------------------------------------------------------------
INTEREST EXPENSE - The interest expense as stated on the applicant's financial
statement, plus, if not already included therein, the interest expense imputed
on all capital leases. (Note: FASB financial reporting standards require the
interest imputed on capital leases to be recorded as interest expense and
included in the interest expense total on the financial statement. Therefore,
the interest expense as stated on the applicant's financial statement should
include the interest imputed on capital leases. If the financial statement has
been reviewed or audited, reliance may be placed on the audit firm to have
properly applied this principal. If the financial statement has not been
reviewed or audited, the analyst must determine if the imputed interest has been
properly stated, and if not, must add this interest as per the stated formula.)
LIQUIDITY RATIO - The product of the following equation, expressed as a ratio
(e.g. 1.25:1):
Current Assets
div Current Liabilities
---------------------------
= Liquidity Ratio
NET INCOME - The net income as stated on the applicant's financial statement.
NET WORTH - The net worth (e.g. - partners' capital or stockholders equity) as
stated on the applicant's financial statement. For a corporation, this will
include preferred stock, common stock, additional paid-in capital and retained
earnings, less any treasury stock or stock subscriptions receivable.
NON-RECURRING ITEMS - Items which, when computing cash flow, should be added
back to or subtracted from net income to normalize results. Examples of
Non-Recurring Items include, but are not limited to: gains on sales of assets,
expensed development costs for newly constructed store units, theft expenses,
non-recurring bank charges (e.g. - new facility fees) and discontinued
operations write-offs (on a case-by-case basis).
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: G. DEFINITIONS OF CREDIT ANALYSIS TERMS
- --------------------------------------------------------------------------------
OPERATING CASH FLOW - The sum or subtraction of the following items for the
applicant business for the applicable operating period:
+ Net Income
+ Depreciation and Amortization
+ Interest Expense
+ Operating Lease Expense
+/- Non-Recurring Items
---------------------------
= Operating Cash Flow
OPERATING LEASE EXPENSE - The amount of rental expense paid under operating
leases, as stated on the applicant's financial statements.
TOTAL LIABILITIES - The total liabilities as stated on the applicant's financial
statement, including current and long-term liabilities.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: H. CREDIT MONITORING
- --------------------------------------------------------------------------------
1. UPDATES ON FRANCHISE CONCEPT UNDERWRITING REPORTS - Once a Franchise
Concept is approved, the Franchisor file should be retained in the Credit
Department. Captec should be put on the franchisor's mailing list to
receive quarterly financial statements and any news releases on the
franchisor. All updated information must be informally reviewed by the
Credit Manager for major events or changes.
Each franchise concept must be formally reviewed on an annual basis. All
franchisors should be entered in the Credit Department's tracking system,
which provides a tickler report when the franchisor is up for an annual
review.
The annual franchise concept review should include the spreading of the
most recent audited and interim financial statements of the franchisor, a
review of the existing portfolio and a review and update of the written
Concept Underwriting Report so that it includes all current information on
the company. The Concept Underwriting Report should be submitted to Credit
Committee for renewal.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Revised July 1995
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: H. CREDIT MONITORING
- --------------------------------------------------------------------------------
2. MONITORING UNIT LEVEL PERFORMANCE TRENDS WITHIN CONCEPTS - As Captec
finances more franchisees in each concept and a portfolio is established,
unit level financial statements are obtained from a variety of customers.
The result is a resource of actual operating results from a cross-section
of stores within the concept.
The Vice President - Credit is responsible for overseeing the input of this
information into a database which accumulates this information and computes
average concept performance standards such as store sales, pertinent
margins, operating cost components and profits. These unit level
performance standards must be updated on an annual basis in conjunction
with the update of the Concept Underwriting Report. Any significant changes
in the standards must be noted in the updated report.
Furthermore, the most current unit level performance standards must be
utilized when analyzing a new application for the concept, comparing the
applicant's projections to the standards.
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CAPTEC FINANCIAL GROUP, INC. OPERATIONS POLICY MANUAL
- --------------------------------------------------------------------------------
Section: I. CREDIT UNDERWRITING POLICIES
Sub-Section: H. CREDIT MONITORING
- --------------------------------------------------------------------------------
3. MONITORING HIGH CONCENTRATION CUSTOMER ACCOUNTS - Customer accounts with
total exposure (outstanding balances) exceeding $700,000 ("high
concentration accounts") must be monitored on a continuous basis. It is the
duty of the Credit Manager to assign responsibility for monitoring each
high concentration account to a specific Credit Analyst.
Each high concentration account customer must provide Captec with quarterly
financial statements. Upon receipt, the quarterly financial information
must be input into the spreadsheet tracking system by the assigned Credit
Analyst. This system lists the customer name, details the transaction(s)
and total exposure with Captec, and lists the most recent financial
statement on file and when the next is due. A follow-up date is triggered
by this system.
The assigned Credit Analyst should perform the standard analysis on these
quarterly financial statements and report any significant changes in the
customer's financial trends and financial position to the Credit Manager.
The Credit Manager must report this information to the Credit Committee.
It is common for Captec's high concentration account customers to be in a
significant growth phase. Such growth can strain the capital resources,
management expertise and earnings trends of the customer. Therefore, when
monitoring such customers, the credit analysis should also include
comparison of projected to actual results and an on-going review of the
projected effects of growth on the financial position of the customer.
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AMENDMENT NO.1
TO CREDIT AGREEMENT BETWEEN
CAPTEC FINANCIAL GROUP FUNDING CORPORATION, BORROWER,
AND
CS FIRST BOSTON MORTGAGE CAPITAL CORP., LENDER
Section 4(c)(iv)(C) of the above named Credit Agreement dated February 26, 1996
(the "Agreement") is hereby amended and restated, so as to be and read in its
entirety as follows:
(C) Subordinated Debt payable to the Parent in an aggregate
principal amount not to exceed at any time the sum of 10% of the then aggregate
principal amount outstanding of the Revolving Loans plus $500,000; provided,
however, that the Borrower may incur Subordinated Debt in an aggregate principal
amount in excess of the sum of 10% of the then aggregate principal amount
outstanding of the Revolving Loans plus $500,000 provided (i) the proceeds of
such excess Subordinated Debt is used by Borrower to fund the origination of
Loans and (ii) any such excess Subordinated Debt is prepaid in full on the date
of the next succeeding Credit Event.
IN WITNESS WHEREOF, Lender and Borrower have caused this amendment to be duly
executed so as to be effective as of March 31, 1996.
LENDER BORROWER
- ------ --------
CS FIRST BOSTON MORTGAGE CAPTEC FINANCIAL GROUP
CAPITAL CORP. FUNDING CORPORATION
By: /s/ Emily Youssouf By: /s/ W. Ross Martin
------------------------------ -----------------------------
Name: Emily Youssouf Name: W. Ross Martin
Title: Director Title: Vice President
Address: Chief Executive Office:
- -------- -----------------------
55 East 52nd Street 24 Frank Lloyd Wright Drive
New York, New York 10055 Lobby L, 4th Floor
Ann Arbor, Michigan 48106-0544