Capital Properties Inc 10-Q, filed May 5, 2021
Capital Properties Inc (CPTP)
About this 10-Q
Capital Properties Inc filed this 10-Q on May 5, 2021, covering the quarter ended March 31, 2021.
Headline figures
Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.05M
- down 12.3% from $1.2M a year earlier
- Net income
- $383K
- down 32.0% from net income of $563K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2021
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-08499
CAPITAL PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
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Rhode Island |
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05-0386287 |
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(State or other jurisdiction of |
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(IRS Employer |
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incorporation or organization) |
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identification No.) |
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5 Steeple Street, Unit 303 |
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Providence, Rhode Island |
02903 |
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(Address of principal executive offices) |
(Zip Code) |
(401) 435-7171
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12 (g) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Class A Common Stock, $.01 par value |
CPTP |
OTCQX |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of the "large accelerated filer," "accelerated filer," "non-accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer |
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Accelerated Filer |
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Non-Accelerated Filer |
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Smaller reporting company |
☒ |
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Emerging Growth Company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to it management’s assessment of the effectiveness of its internal control over financial reporting under Section 404 (b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued it audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of March 31, 2021, the Company had 6,599,912 shares of Class A Common Stock outstanding.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2021
TABLE OF CONTENTS
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Page |
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PART I – FINANCIAL INFORMATION |
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Item 1. |
3 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
10 |
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Item 4. |
12 |
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PART II – OTHER INFORMATION |
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Item 6. |
13 |
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14 |
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2
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, 2021 (Unaudited) |
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December 31, 2020 |
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ASSETS |
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Properties and equipment (net of accumulated depreciation) |
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$ |
6,734,000 |
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$ |
6,756,000 |
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Cash and cash equivalents |
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1,792,000 |
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1,642,000 |
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Prepaid and other |
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171,000 |
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101,000 |
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Prepaid income taxes |
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- |
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48,000 |
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Deferred income taxes associated with discontinued operations (Note 8) |
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119,000 |
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132,000 |
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$ |
8,816,000 |
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$ |
8,679,000 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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Liabilities: |
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Property taxes |
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$ |
250,000 |
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$ |
210,000 |
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Other |
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712,000 |
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563,000 |
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Income taxes payable |
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124,000 |
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- |
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Deferred income taxes, net |
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190,000 |
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234,000 |
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Liability associated with discontinued operations (Note 8) |
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437,000 |
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490,000 |
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1,713,000 |
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1,497,000 |
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Shareholders’ equity: |
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Class A common stock, $.01 par; authorized 10,000,000 shares; |
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issued and outstanding 6,599,912 shares |
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66,000 |
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66,000 |
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Capital in excess of par |
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782,000 |
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782,000 |
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Retained earnings |
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6,255,000 |
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6,334,000 |
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7,103,000 |
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7,182,000 |
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$ |
8,816,000 |
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$ |
8,679,000 |
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See notes to condensed consolidated financial statements.
3
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND SHAREHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(Unaudited)
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Three Months Ended March 31, |
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2021 |
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2020 |
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Revenue and other income: |
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Leasing revenue |
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$ |
1,048,000 |
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$ |
1,191,000 |
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Other income, interest |
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- |
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4,000 |
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1,048,000 |
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1,195,000 |
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Expenses: |
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Operating |
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164,000 |
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120,000 |
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General and administrative |
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353,000 |
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313,000 |
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517,000 |
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433,000 |
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Income from operations before income taxes |
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531,000 |
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762,000 |
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Income tax expense (benefit): |
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Current |
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192,000 |
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214,000 |
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Deferred |
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(44,000 |
) |
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(15,000 |
) |
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148,000 |
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199,000 |
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Net income |
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383,000 |
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563,000 |
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Retained earnings, beginning |
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6,334,000 |
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5,737,000 |
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Dividends on common stock ($.07 per share) |
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based upon 6,599,912 shares outstanding |
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(462,000 |
) |
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(462,000 |
) |
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Retained earnings, ending |
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6,255,000 |
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5,838,000 |
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Class A common stock |
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66,000 |
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66,000 |
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Capital in excess of par |
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782,000 |
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782,000 |
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Shareholders' equity, ending |
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$ |
7,103,000 |
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$ |
6,686,000 |
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Basic income per common share based upon 6,599,912 shares outstanding |
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$ |
0.06 |
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$ |
0.09 |
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See notes to condensed consolidated financial statements.
4
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(Unaudited)
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Three Months Ended March 31, |
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2021 |
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2020 |
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Cash flows from operating activities: |
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Continuing operations: |
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Income from continuing operations |
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$ |
383,000 |
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$ |
563,000 |
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Adjustments to reconcile income from continuing operations to net cash provided by operating activities, continuing operations: |
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Depreciation |
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22,000 |
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23,000 |
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Deferred income taxes |
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(44,000 |
) |
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(15,000 |
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Income taxes |
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172,000 |
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192,000 |
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Other, net changes in prepaids, property tax payable and other |
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93,000 |
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38,000 |
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Net cash provided by operating activities, continuing operations |
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626,000 |
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801,000 |
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Cash flows from investing activities: |
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Continuing operations: |
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Deferred revenue |
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26,000 |
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24,000 |
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Discontinued operations: |
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Cash used to settle obligations |
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(53,000 |
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(50,000 |
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Noncash adjustment to gain on sale of discontinued operations |
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13,000 |
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15,000 |
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Net cash (used in) discontinued operations |
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(40,000 |
) |
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(35,000 |
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Net cash (used in) investing activities |
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(14,000 |
) |
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(11,000 |
) |
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Cash flows used in financing activities, payment of dividends |
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(462,000 |
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(462,000 |
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Increase in cash and cash equivalents |
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150,000 |
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328,000 |
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Cash and cash equivalents, beginning |
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1,642,000 |
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1,262,000 |
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Cash and cash equivalents, ending |
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$ |
1,792,000 |
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$ |
1,590,000 |
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Supplemental disclosure: |
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Cash paid for income taxes |
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$ |
7,000 |
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$ |
8,000 |
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See notes to condensed consolidated financial statements.
5
CAPITAL PROPERTIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(Unaudited)
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1. |
Description of business: |
The operations of Capital Properties, Inc. and its wholly-owned subsidiary, Tri-State Displays, Inc. (collectively “the Company”) consist of the long-term leasing of certain of its real estate interests in and adjacent to the Capital Center area in downtown Providence, Rhode Island (upon the commencement of which the tenants have been required to construct buildings thereon, with the exception of the parking garage and Parcel 20) and the leasing of locations along interstate and primary highways in Rhode Island and Massachusetts to Lamar Outdoor Advertising, LLC (“Lamar”) which has constructed outdoor advertising boards thereon. The Company anticipates that the future development of its remaining properties in the Capital Center area will consist primarily of long-term ground leases. Pending this development, the Company leases these undeveloped parcels (other than Parcel 6C) for public parking to Metropark, Ltd.
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2. |
Basis of presentation and summary of significant accounting policies: |
Principles of consolidation:
The accompanying condensed consolidated financial statements include the accounts and transactions of the Company. All significant intercompany accounts and transactions have been eliminated in consolidation.
The accompanying condensed consolidated balance sheet as of December 31, 2020 has been derived from audited financial statements. The unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s latest Form 10-K for the year ended December 31, 2020.
In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary to present fairly the financial position as of March 31, 2021 and the results of operations for the three months ended March 31, 2021 and 2020, and cash flows for the three months ended March 31, 2021 and 2020.
The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.
Use of estimates:
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Environmental incidents:
The Company accrues a liability when an environmental incident has occurred and the costs are estimable. The Company does not record a receivable for recoveries from third parties for environmental matters until it has determined that the amount of the collection is reasonably assured. The accrued liability is relieved when the Company pays the liability or a third party assumes the liability. Upon determination that collection is reasonably assured or a third party assumes the liability, the Company records the amount as a reduction of expense.
6
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3. |
Properties and equipment: |
Properties and equipment consist of the following:
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March 31, 2021 |
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December 31, 2020 |
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Properties on lease or held for lease: |
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Land and land improvements |
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$ |
4,010,000 |
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$ |
4,010,000 |
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Steeple Street property under contract (see Note 6) |
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3,011,000 |
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$ |
3,011,000 |
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Office equipment |
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67,000 |
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67,000 |
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7,088,000 |
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7,088,000 |
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Less accumulated depreciation: |
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Land improvements on lease or held for lease |
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93,000 |
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93,000 |
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Steeple Street property under contract (see Note 6) |
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194,000 |
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172,000 |
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Office equipment |
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67,000 |
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67,000 |
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354,000 |
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332,000 |
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$ |
6,734,000 |
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$ |
6,756,000 |
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4. |
Liabilities, other: |
Liabilities, other consist of the following:
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March 31, 2021 |
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December 31, 2020 |
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Deferred revenue, Parcel 20 |
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$ |
225,000 |
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$ |
199,000 |
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Accrued professional fees |
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129,000 |
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152,000 |
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Deposits and prepaid rent |
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236,000 |
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121,000 |
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Accrued payroll and related costs |
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75,000 |
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75,000 |
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Other |
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47,000 |
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16,000 |
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$ |
712,000 |
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$ |
563,000 |
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5. |
Note Payable - Revolving Credit Line: |
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In March 2021, the Company entered into a financing agreement (“Agreement) with BankRI that provides for a revolving line-of-credit (“Line”) with a maximum borrowing capacity of $2,000,000 through March 2024. Amounts outstanding under the Agreement bear interest at the rate of the one-month LIBOR plus 200 basis points but not less than 3.25% or, at the option of the Company, the Wall Street Journal Prime Rate. The Line is secured by a First Mortgage on Parcel 5 in the Capital Center District in Providence, Rhode Island (the “Property”). The Line requires the maintenance of a debt service coverage ratio of not less than 1.25 to 1.0 on the Property and 1.20 to 1.0 for the Company. The Agreement contains other restrictive covenants, including, among others, a $250,000 limitation on the purchase of its outstanding capital stock in any twelve-month period. No advances have been made under the Line. |
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6. |
Description of leasing arrangements: |
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Long-term land leases:
Through March 31, 2021, excluding the Parcel 6C lease, the Company had entered into nine long-term land leases. On July 30, 2020 the tenant of Parcel 6C exercised its right to terminate its lease effective August 29, 2020. As of March 31, 2021, 2020, eight of the nine parcels under lease have completed construction of improvements thereon. The leases generally have a term of 99 years or more, are triple net and provide for periodic adjustment in rent of various types depending on the particular lease, and otherwise contain terms and conditions normal for such instruments
The Parcel 20 Steeple Street Building (“Building”) lease was accounted for as a sales-type lease due to the transfer of the Building to the tenant. The land directly under the Building was allocated in the determination of the value of the property transferred in accordance with ASC 360-20, Property, Plant and Equipment - Real Estate Sales. Since the initial investment by the tenant is and continues to be insufficient to recognize the transaction as a sale, in accordance with ASC 360-20, the Company will report the acquisition period rent and an allocable portion of the ground rent collected as deferred revenue on its consolidated balance sheet and will continue to include the property transferred in properties and equipment. When the Company determines that the tenant’s investment is sufficient or payments can be reasonably assured, the sale will be recognized in accordance with GAAP. The long-term ground lease of the land on Parcel 20 (exclusive of the Building) is accounted for as an operating lease, consistent with the Company’s other long-term ground leases.
7
Under the nine land leases, the tenants may negotiate tax stabilization treaties or other arrangements, appeal any changes in real property assessments, and pay real property taxes assessed on land and improvements under these arrangements. Accordingly, real property taxes payable by the tenants are excluded from both leasing revenues and leasing expenses on the accompanying condensed consolidated statements of income and shareholders’ equity. For the three months ended March 31, 2021 and 2020, real property taxes attributable to the Company’s land under these leases totaled $263,000 and $341,000, respectively.
With respect to Parcel 6C lease, on the termination date the annual rent was $220,000 and annual real estate taxes paid by the tenant equaled $311,000. The Company believes that the assessed value of Parcel 6C as agreed to by the City of Providence (“City”) and the former tenant of Parcel 6C is much greater than similar parcels in the Capital Center area and accordingly, the Company has commenced negotiations with the City to reduce the assessment.
Under two of the long-term land leases, the Company receives contingent rentals (based on a fixed percentage of gross revenue received by the tenants) which totaled $21,000 and $25,000 for the three months ended March 31, 2021 and 2020, respectively.
Lamar lease:
Tri-State Displays Inc. leases 23 outdoor advertising locations containing 44 billboard faces along interstate and primary highways in Rhode Island and Massachusetts to Lamar under a lease which expires in 2049. The Lamar lease provides, among other things, for the following: (1) the base rent will increase annually at the rate of 2.75% for each leased billboard location on June 1 of each year, and (2) in addition to base rent, for each 12-month period commencing each June 1 (each 12-month period a “Lease Year”), Lamar must pay to the Company within thirty days after the close of the Lease Year, 30% of the gross revenues from each standard billboard and 20% of the gross revenues from each electronic billboard for such Lease Year, reduced by the sum of (a) commissions paid to unrelated third parties and (b) base rent for each leased billboard for location for such Lease Year (“percentage rent”).
Parking lease:
The Company leases the undeveloped parcels of land in the Capital Center area (other than Parcel 6C) for public parking purposes to Metropark under a ten-year lease (the “Parking Lease”). The lease is cancellable as to all or any portion of the leased premises at any time on thirty days’ written notice in order for the Company or any new tenant of the Company to develop all or any portion of the leased premises. The Parking Lease provides for contingent rentals (based on a fixed percentage of gross revenue in excess of the base rent). There was no contingent rent for the three months ended March 31, 2021 and revenue for the three months ended March 31, 2020 was reduced by $34,000 due to the revision of the estimate of 2019’s contingent rent.
The COVID-19 pandemic and stay-at-home orders have had a significant adverse impact on Metropark’s parking operations. On July 31, 2020, Metropark and the Company entered into an agreement for revenue sharing at various percentages until parking revenues received by Metropark equal or exceed $70,000 per month whereupon Metropark would be obligated to resume regularly scheduled rental payments under its lease. Upon resumption of regularly scheduled rent payments, Metropark and the Company will share fifty (50) percent of the revenue in excess of $70,000 until the arrearage has been paid in full. If prior to payment in full of the arrearage one or more of the lots is removed from the Metropark lease for development, the amount of the then unpaid arrearage in the ratio of the number of parking spaces on the removed lot to the total parking spaces on all lots prior to such lot’s removal shall be deemed paid in full.
At March 31, 2021 the receivable from Metropark equaled $472,000 and was fully reserved. The Company will continue to recognize Metropark’s rent on a cash basis.
Historically, the Company has made financial statement footnote disclosure of the excess of straight-line rentals over contractual payments and its determination of collectability of such excess. Included in the amount of the excess were payments which under ASC 842 are deemed variable payments. As part of its ongoing review of the requirements of ASC 842, the Company has concluded that under ASC 842 variable rental payments should not be included in the straight-line rental amount. To the extent the Company determines that, with respect to any of its leases, the excess of straight-line rentals over contractual payments is not collectible, such excess is not recognized as revenue. Consistent with prior conclusions, the Company has determined that, at this time, the excess of straight-line rentals over contractual payments is not probable of collection. Accordingly, the Company has not included any part of that amount in revenue. As a matter of information only, as of March 31, 2021 the excess of straight-line rentals (calculated by excluding variable payments) over contractual payments was $83,793,000.
8
|
7. |
Income taxes, continuing operations: |
Deferred income taxes are recorded based upon differences between financial statement and tax basis amounts of assets and liabilities. The tax effects of temporary differences for continuing operations which give rise to deferred tax assets and liabilities are as follows:
|
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Gross deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
Property having a financial statement basis in excess of tax basis |
|
$ |
361,000 |
|
|
$ |
361,000 |
|
|
Accounts receivable |
|
|
116,000 |
|
|
|
98,000 |
|
|
Deferred income - conversion to cash basis of accounting for tax purposes |
|
|
52,000 |
|
|
|
56,000 |
|
|
Insurance premiums and accrued leasing revenues |
|
|
24,000 |
|
|
|
19,000 |
|
|
|
|
|
553,000 |
|
|
|
534,000 |
|
|
Gross deferred tax assets: |
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
|
(104,000 |
) |
|
|
(91,000 |
) |
|
Prepaid rent |
|
|
(54,000 |
) |
|
|
(24,000 |
) |
|
Accounts payable and accrued expenses |
|
|
(77,000 |
) |
|
|
(75,000 |
) |
|
Accrued property taxes |
|
|
(67,000 |
) |
|
|
(56,000 |
) |
|
Deferred income, Parcel 20 |
|
|
(61,000 |
) |
|
|
(54,000 |
) |
|
|
|
|
(363,000 |
) |
|
|
(300,000 |
) |
|
|
|
$ |
190,000 |
|
|
$ |
234,000 |
|
|
|
|
|
|
|
|
|
|
|
Prior to February 2017, the Company operated a petroleum storage facility (“Terminal”) through two wholly owned subsidiaries. On February 10, 2017, the Terminal was sold to Sprague Operating Resources, LLC (“Sprague”). In accordance with ASC 205-20, Presentation of Financial Statements – Discontinued Operations, the sale of the Terminal is accounted for as a discontinued operation.
Pursuant to the Terminal Sale Agreement, the Sale Price was reduced by $1,040,000, the estimated cost of a breasting dolphin to be constructed by Sprague adjacent to the Terminal’s Pier in order that the Pier can berth Panamax sized vessels. The Terminal Sale Agreement contained a cost sharing provision for the breasting dolphin whereby any cost incurred in connection with the construction of the breasting dolphin in excess of the initial estimate of $1,040,000 will be borne equally by Sprague and the Company subject to certain limitations, including, in the Company’s opinion, a 20% cap on the increase from the initial estimate, subject to a sharing arrangement. In November 2019, the Company received a demand letter from Sprague asserting that they were owed $427,000, which amount represents 50% of the actual costs incurred ($1,894,008) in excess of $1,040,000. The Company asserts that its obligation cannot exceed $104,000. The Company and Sprague have agreed to engage in mediation with respect to Sprague’s claim. The mediation is currently scheduled for early June 2021.
As part of the Terminal Sale Agreement, the Company has agreed to retain and pay for the environmental remediation costs associated with a 1994 storage tank fuel oil leak which allowed the escape of a small amount of fuel oil. In February 2020, the Company filed a revised Remediation Action Work Plan (“RAWP”) with the Rhode Island Department of Environmental Management (“RIDEM”) to describe the technical details associated with the preferred remedial activities and to update the previously filed RAWP. In 2019, the Company incurred remediation costs of $293,000 and, as a result of the revised remedial activities included in the 2020 RAWP, the remediation accrual was increased by $846,000 primarily due to design changes necessary to meet the requirements of applicable life safety codes resulting in an environmental remediation liability of $1,043,000 at December 31, 2019. In 2020, the Company incurred costs of $553,000 which reduced the remediation liability to $490,000 at December 31, 2020. For the three months ended March 31, 2021, the Company incurred costs of $53,000 which reduced the remediation liability to $437,000. Any subsequent increases or decreases to the expected cost of remediation will be recorded in the Company’s consolidated income statement as income or expense from discontinued operations. On March 9, 2021, the Company commenced operation of the remediation system.
|
9. |
Fair value of financial instruments: |
The Company believes that the fair values of its financial instruments, including cash and cash equivalents, receivables and payables, approximate their respective book values because of their short-term nature. The fair values described herein were determined using significant other observable inputs (Level 2) as defined by GAAP.
|
10. |
Subsequent events: |
At its April 28, 2021 regularly scheduled quarterly Board meeting, the Board of Directors voted to declare a quarterly dividend of $.07 per share for shareholders of record on May 14, 2021, payable May 28, 2021.
9
FORWARD LOOKING STATEMENTS
Certain portions of this report, and particularly the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as amended, which represent the Company’s expectations or beliefs concerning future events. The Company cautions that these statements are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements, including, without limitation, the following: the ability of the Company to generate adequate amounts of cash; the collectability of the excess of straight-line over contractual rents when due over the terms of the long-term leases; tenant default under one or more of the leases; the commencement of additional long-term land leases; changes in economic conditions that may affect either the current or future development on the Company’s parcels; the impact of the COVID-19 pandemic on the economy, parking operations, and the Company’s financial performance; and exposure to remediation costs associated with its former operation of the petroleum storage facility. The Company does not undertake the obligation to update forward-looking statements in response to new information, future events or otherwise.
|
1. |
Overview: |
Critical accounting policies:
The Company believes that its revenue recognition policy for long-term leases with scheduled rent increases meets the definition of a critical accounting policy which is discussed in the Company’s Form 10-K for the year ended December 31, 2020. There have been no changes to the application of this accounting policy since December 31, 2020.
|
2. |
Liquidity and capital resources: |
Historically, the Company has had adequate liquidity to fund its operations.
Cash and cash commitments:
At March 31, 2021, the Company had cash and cash equivalents of $1,792,000. The Company and its subsidiary each maintain checking and money market account in two banks, all of which accounts are insured by the Federal Deposit Insurance Corporation to a maximum of $250,000. The Company periodically evaluates the financial stability of the financial institutions at which the Company’s funds are held.
On July 30, 2020, the Company received notice that the tenant of Parcel 6C exercised their right to terminate the ground lease effective August 29, 2020. On the termination date, the annual rent on Parcel 6C was $220,000 and the annual real estate taxes paid by the tenant equaled $311,000. Upon termination, the real estate taxes became an obligation of the Company effective with the taxes assessed as of December 31, 2020. The Company believes that the assessed value of Parcel 6C as contained in a treaty between the City of Providence (“City”) and the tenant is much greater than similar parcels in the Capital Center area. The Company is not a party to the tax treaty. Accordingly, the Company has commenced negotiations with the City for a lower assessment.
As of May 5, 2021, all tenants have paid their monthly rent in accordance with their lease agreements except for Metropark. The coronavirus (COVID-19) pandemic and Rhode Island’s stay-at-home order has had a significant adverse impact on Metropark. The Company does not know when or if Metropark’s operations will return to normal. Metropark has not fully paid the rent from April 2020 through March 2021. For the three months ended March 31, 2021, Metropark has paid $2,000 of the total rent due of $134,000. At March 31, 2021, the total rent arrearage equals $472,000 and has been fully reserved by the Company. On July 31, 2020, Metropark and the Company entered into an agreement for revenue sharing at various percentages until parking revenues received by Metropark equal or exceed $70,000 per month whereupon Metropark would be obligated to resume regularly scheduled rental payments under its lease. Upon resumption of regularly scheduled rent payments, Metropark and the Company will share fifty (50) percent of the revenue in excess of $70,000 until the arrearage has been paid in full. If prior to payment in full of the arrearage one or more of the lots is removed from the Metropark lease for development, the amount of the then unpaid arrearage in the ratio of the number of parking spaces on the removed lot to the total parking spaces on all lots prior to such lot’s removal shall be deemed paid in full. Pending this recovery, the Company will continue to recognize Metropark’s rent on a cash basis.
The Company expects revenue from contingent rent in 2021 will materially decline for both Metropark and Lamar.
10
The Terminal Sale Agreement and related documentation provides that the Company is required to secure an approved remediation plan and to remediate contamination caused by a leak in 1994 from a storage tank at the Terminal. At March 31, 2021, the Company’s accrual for the remaining cost of remediation was $437,000 of which $42,000 is expected to be incurred in 2021. Any subsequent increases or decreases to the expected cost of remediation will be recorded in gain (loss) on sale of discontinued operations, net of taxes. On March 9, 2021, the Company commenced operation of the remediation system.
The Terminal Sale Agreement also contained a cost sharing provision for a breasting dolphin whereby any costs incurred in connection with the construction of the breasting dolphin in excess of the initial estimate of 1,040,000 would be borne equally by Sprague and the Company subject to certain limitations, including, in the Company’s opinion, a 20% cap on the increase from the initial estimate subject to the sharing arrangement. In November 2019, the Company received a demand letter from Sprague asserting that they were owed $427,000, which amount represents 50% of the actual costs incurred ($1,894,000) in excess of $1,040,000. The Company asserts that its obligation cannot exceed $104,000. The Company and Sprague have agreed to engage in mediation with respect to Sprague’s claim. The mediation is currently scheduled for June 2021.
The declaration of future dividends will depend on future earnings and financial performance.
|
3. |
Results of operations: |
Three months ended March 31, 2021 compared to three months ended March 31, 2020:
Revenue, leasing from continuing operations decreased $143,000 from 2020 due principally to a decrease in rent associated with Metropark ($100,000) and the termination of the Parcel 6C lease ($55,000) offset by an increase in rent from Lamar ($12,000).
Operating expenses increased $44,000 due principally to increased property tax expense due to the tenant’s termination of the Parcel 6C lease and maintenance expenses.
General and administrative expense increased $40,000 due principally to increased professional fees related to accounting matters ($8,000), legal costs ($19,000) associated with the Sprague breasting dolphin matter and the property taxes associated Parcel 6C, and costs associated with the bank line-of-credit ($10,000).
For the three months ended March 31, 2021 and 2020, the Company’s effective income tax rate is 28% and 26% of income from continuing operations.
11
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of the Company's management, including the Company's principal executive officer and the Company's principal financial officer. Based upon that evaluation, the principal executive officer and the principal financial officer concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.
There was no significant change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to affect, the Company's internal control over financial reporting. The Company continues to enhance its internal controls over financial reporting, primarily by evaluating and enhancing process and control documentation. Management discusses with and discloses these matters to the Audit Committee of the Board of Directors and the Company's auditors.
12
|
(b) |
Exhibits: |
|
3.1 |
||
|
|
|
|
|
3.2 |
||
|
|
|
|
|
10 |
Material contracts: |
|
|
|
|
|
|
|
Lease between Metropark, Ltd. and Company: |
|
|
|
|
|
|
|
|
|
|
|
(b) |
Loan Agreement between Bank Rhode Island and Company dated March 30, 2021. |
|
|
|
|
|
31.1 |
Rule 13a-14(a) Certification of Chairman and Principal Executive Officer |
|
|
|
|
|
|
31.2 |
Rule 13a-14(a) Certification of Treasurer and Principal Financial Officer |
|
|
|
|
|
|
32.1 |
||
|
|
|
|
|
32.2 |
||
|
|
|
|
|
101 |
The following financial information from the Company’s Quarterly Report on Form 10-Q for the Quarter ended March 31, 2021, filed with the Securities and Exchange Commission on May 5, 2021 formatted in eXtensible Business Reporting Language: |
|
|
|
|
|
|
|
(i) |
Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020 |
|
|
(ii) |
Condensed Consolidated Statements of Income and Shareholders’ Equity for the Three Months ended March 31, 2021 and 2020 |
|
|
(iii) |
Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2021 and 2020 |
|
|
(iv) |
Notes to Condensed Consolidated Financial Statements. |
13
In accordance with the requirements of the Exchange Act, the Issuer caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
CAPITAL PROPERTIES, INC. |
|
|
|
|
|
|
|
By |
/s/ Robert H. Eder |
|
|
|
Robert H. Eder |
|
|
|
Chairman and Principal Executive Officer |
|
|
|
|
|
|
By |
/s/ Susan R. Johnson |
|
|
|
Susan R. Johnson |
|
|
|
Treasurer and Principal Financial Officer |
DATED: May 5, 2021
14
Exhibit 10 (a) (ii)
LETTER AGREEMENT BETWEEN METROPARK, LTD AND ISSUER DATED JULY 31, 2020
July 31, 2020
Ms. Susan Johnson, Treasurer
Capital Properties, Inc.
5 Steeple Street, Unit 303
Providence, RI 02903
RE: Covid-19 Parking Lot Revenue Sharing
VIA Email
Dear Susan:
The Covid-19 pandemic and Rhode Island’s stay-at-home orders have had a significant adverse impact on Metropark. In mid-March, we closed our lots as there were few parking customers. We expect our operations will slowly return to normal over the next several months as the State has lifted the stay-at-home order and is gradually permitting certain business to resume operations. Accordingly, we are proposing to adjust our rental obligations under that certain lease between Capital Properties, Inc. and Metropark, Ltd, dated January 1, 2017 (the “Lease”) as described herein. All other covenants, terms and conditions of the Lease remain in full force and effect without modification.
To date we have paid all the rent due for the parking lots through March and have paid $32,290.75 towards the April through July rent resulting in a balance due CPI of $146,654.72 on July 31, 2020. The $146,654.72 together with the difference between our contractual rental obligation under the Lease of $44,673 per month (the “Monthly Contractual Rent”) and the amounts actually paid by us during the period from April 1, 2020 to the date of our return to payment of the Monthly Contractual Rent as required by this letter agreement is referred to as the “Cumulative Rental Arrearage” We will not be in a position to pay the Contractual Monthly Rent until operations are at approximately 80% of pre-pandemic levels.
Until that level of operations is achieved, I propose that our partial monthly rental payment to CPI be based on an allocation of the total monthly revenue collected using the percentages noted in the table below. As discussed, Metropark will keep 100% of the first $20,000 of revenue collected and will split the amount in excess of the $20,000 in accordance with the percentages noted in the table below. The full amount of rent will be due once the lots generate $70,000 per month.
|
|
Revenue Split |
|||
|
Total Revenue |
|
Metropark Share |
|
Capital Share |
|
|
|
|
|
|
|
$0 - $20,000 |
|
100% |
|
0% |
|
$20,001 - $29,999 |
|
50% |
|
50% |
|
|
40% |
|
60% |
|
|
$40,000 - $69,999 |
|
30% |
|
70% |
|
Over $70,000 |
|
|
|
Full rent due |
By way of example, if August’s revenue is assumed to be $38,000, Metropark would keep $28,200 and make a partial payment of $9,800 to CPI:
|
Total Revenue |
|
Assumed Revenue for August $38,000 |
|
Metropark Share |
|
CPI Share |
|
|
|
|
|
|
|
|
|
$0 - $20,000 |
|
$20,000 |
|
$20,000 |
|
$0 |
|
$20,001 - $29,999 |
|
10,000 |
|
5,000 |
|
5,000 |
|
$30,000 - $39,999 |
|
8,000 |
|
3,200 |
|
4,800 |
|
|
|
$38,000 |
|
$28,200 |
|
$9,800 |
My intention is to pay all of the past due rent once operations return to “normal”. Once we have returned to paying the Monthly Contractual Rent, the amount of the Cumulative Rental Arrearage will be paid beginning with first day of month next following return to full payment of Monthly Contractual Rent by sharing with you fifty (50) percent of the revenues of the lots in excess of $70,000 per month until the arrearage has been discharged. If prior to payment in full of the arrearage, one or more lots is removed from the lease for development by you, the amount of the then unpaid Cumulative Rental Arrearage in the ratio of the number of parking spaces on the removed lot to the total parking spaces on all the lots prior to such lot’s removal shall be deemed paid in full. When the Cumulative Rental Arrearage has been paid in full, we will then become subject to the rental provisions of the Lease.
If you are in agreement with the above proposal, please sign and return this letter to me.
Sincerely,
/s/ Charles Meyers
Charles Meyers
President
|
AGREED AND ACCEPTED: |
||
|
Capital Properties, Inc |
||
|
By: |
|
/s/ Susan R. Johnson |
|
Print Name: |
|
Susan R. Johnson |
|
Title: |
|
Treasurer |
LOAN AGREEMENT
THIS LOAN AGREEMENT ("Agreement") is made this 30th day of March, 2021, by and between Bank Rhode Island, a financial institution chartered under the laws of the State of Rhode Island, having a place of business at One Turks Head Place, Providence, Rhode Island 02903, Attn: Commercial Real Estate Lending (the "Bank"), and Capital Properties, Inc., a Rhode Island corporation, having a principal place of business located at 5 Steeple Street, Unit 303, Providence, Rhode Island 02903 (the "Borrower").
W IT NE S S E TH:
WHEREAS, Borrower desires to obtain from Bank and Bank desires to extend to Borrower a line of credit in accordance with the terms set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and promises herein contained, the parties hereto agree as follows:
|
|
1. |
DEFINITIONS |
When used herein, the terms set forth below shall be defined as follows:
|
|
1.1 |
"Advance" shall mean each borrowing by Borrower pursuant to Section |
11-hereof.
1.2"Authorized Signer" individually and "Authorized Signers" shall mean Susan Johnson and/or such other persons as Borrower shall designate in writing to Bank.
1.3"Borrower Debt Service Coverage Ratio" shall be defined as the ratio of Borrower's Net Operating Income to interest payments due with respect to any obligations of Borrower for the period in question.
\
1.4"Business Day" shall mean any day which is not a Saturday or a Sunday and on which banks in the State of Rhode Island are not authorized or required to close.
1.5"Environmental Law" individually and "Environmental Laws" collectively shall mean any and all applicable foreign, federal, state and local environmental, health or safety statutes, laws, regulations, rules, ordinances, policies and rules or common law (whether now existing or hereafter enacted or promulgated), of all governmental agencies, bureaus or departments which may now or hereafter have jurisdiction over Borrower and all applicable judicial and administrative and regulatory decrees, judgments and orders, including common law rulings and determinations, relating to injury to, or the protection of, real or personal property or human health or the environment, including, without limitation, all requirements pertaining to reporting, licensing, permitting, investigation, remediation and removal of emissions, discharges, releases or threatened releases of Hazardous Materials (as hereinafter defined), chemical substances, pollutants or contaminants whether solid, liquid or gaseous in nature, into the environment or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of such Hazardous Materials, chemical substances, pollutants or contaminants.
|
|
1.6 |
"Event of Default" shall mean each and every event specified in Section |
8.1 hereof.
1.7"Hazardous Materials" shall mean any substance (i) the presence of which requires or may hereafter require notification, investigation or remediation under any Environmental Law; (ii) which is or becomes defined as a "hazardous waste", "hazardous material" or "hazardous substance" or "controlled industrial waste" or "pollutant" or "contaminant" under any present or future Environmental Law or amendments thereto including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601, et seq.) and any applicable local statutes and the regulations promulgated thereunder; (iii) which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by any governmental authority, agency, department, commission, board, agency or instrumentality of any foreign country, the United States, any state of the United States, or any political subdivision thereof to the extent any of the foregoing has or had jurisdiction over Borrower; or (iv) without limitation, which contains gasoline, diesel fuel or other petroleum products, asbestos or polychlorinated biphenyls.
1.8"Indemnified Parties" shall mean Bank, Bank's parent, subsidiaries and affiliates, each of their respective shareholders, directors, officers, employees and agents, and the successors and assigns of any of them.
1.9"Line of Credit" shall mean the Line of Credit to be extended to Borrower by Bank pursuant to Section 3.1 hereof.
1.10"Line of Credit Account" shall mean an account of Borrower with Bank into which Bank will credit sums Borrower may from time-to-time request under the Line of Credit pursuant to Section 3.1 hereof.
1.11"Line of Credit Limit" shall mean Two Million and 00/100 ($2,000,000.00) Dollars.
1.12"Line of Credit Note" shall mean the promissory note of even date herewith in the maximum principal amount of Two Million and 00/100 ($2,000,000.00) Dollars, as the same may be amended and/or restated from time to time.
|
|
1.13 |
"Line of Credit Termination Date" shall mean March 30, 2024. |
1.14"Loan and Security Documents" shall mean those documents referred to in Section 4.1.1 hereof, as each of the same may be amended and/or restated from time to time, and any and all other documents now or hereafter executed in connection with the Line of Credit.
2
1.15"Net Operating Income" shall mean for any period determined in accordance with United States Generally Accepted Accounting Principles ("GAAP"), as consistently applied by the Borrower, all income received by Borrower less all real estate taxes and assessments, insurance, other operating expenses made or incurred by Borrower, but excluding therefrom income taxes, interest and non-cash expenses.
1.16"Obligations" shall mean any and all indebtedness, obligations and liabilities of Borrower to Bank in connection with the Line of Credit of every kind and description, direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising, regardless of how the same arise or by what instrument, agreement or book account they may be evidenced or whether evidenced by any agreement, instrument or book account; including, without limitation, all principal, interest, taxes, fees, charges, expenses and reasonable attorneys' fees chargeable to Borrower or incurred by Bank in connection with the Line of Credit.
1.17"Property" shall mean the real estate located in Providence, Rhode Island and being designated as 50 Park Row West (Parcel 5) of Capital Center, as more particularly described in the Mortgage.
1.18"Property Ground Lease" shall mean that certain Ground Lease of the Property between the Borrower and Tenant dated December 30, 1988, as the same has been and may hereafter be amended and/or restated from time to time.
1.19"Property Debt Service Coverage Ratio" shall be defined as the ratio of the rental income for the period in question received by the Borrower from the Property determined in accordance with GAAP to interest payments actually accrued under the Line of Credit Note for the period in question.
1.20"Tenant" shall mean Avalonbay Communities, Inc., a Maryland corporation, together with its successors and/or assigns.
|
|
2. |
REPRESENTATIONS AND WARRANTIES OF BORROWER |
As a material inducement to Bank to enter into this Loan Agreement, Borrower represents and warrants to Bank, and such representations and warranties shall survive and shall be deemed to be continuing representations and warranties so long as any Obligations remain outstanding, as follows:
2.1Borrower has been duly incorporated and has the power and authority to own its properties and assets and to conduct its business and to enter into and perform this Agreement and the Loan and Security Documents executed by it and to incur the Obligations; Borrower is in good standing where organized and is qualified and in good standing as a foreign corporation in those jurisdictions where the conduct of its business or the ownership of its properties requires qualification; except where the failure to qualify would not have a material adverse affect on Borrower.
3
2.2Borrower is not in default in any material respect under any agreement to which it is a party or by which it is bound. The execution and performance of this Agreement and those Loan and Security Documents to be executed and performed by Borrower will not violate any law or the terms of Borrower's incorporation documents or by-laws, nor violate or result in a material default or acceleration of any of Borrower's obligations or in the creation or imposition of any lien or encumbrance upon any material portion of Borrower's assets (immediately, with the passage of time, or with the giving of notice and the passage of time) other than the liens created by the Loan and Security Documents.
2.3This Agreement, the Loan and Security Documents, and all other agreements, documents or instruments to be delivered by Borrower in connection with the transactions contemplated hereunder have each been duly authorized, executed and delivered and the transactions contemplated hereby or thereby have been duly authorized. This Agreement, the Loan and Security Documents and such other agreements, documents or instruments constitute Borrower's valid and legally binding obligations and are enforceable against Borrower in accordance with their respective terms, subject to applicable bankruptcy, insolvency and other laws affecting the rights of creditors generally.
2.4There is no claim, loss contingency, litigation or proceeding pending or, to the best of Borrower's knowledge, threatened against or otherwise affecting Borrower which involves the possibility of any judgment or liability not fully covered by insurance or which may result in a material adverse change in Borrower's condition, financial or otherwise.
2.5Borrower owns or leases all property, tangible and intangible, including without limitation, customer lists, patents, trademarks and trade names, necessary to conduct the business in which it is engaged in the manner in which that business has been conducted, and its properties are free and clear of all security interests, encumbrances or liens except as permitted by Section 5.5 hereto, and it will defend its properties against all claims and demands of all persons (other than Bank and the parties named in Section 5.5 hereto, with respect to the liens described therein, if any) at any time claiming an interest therein.
2.6Borrower's financial statements furnished to Bank are materially complete and accurate presentations of its financial condition as of the respective dates thereof, and have been prepared in accordance with GAAP consistently applied; and, since the respective dates of the financial statements there has been no material adverse change in Borrower's financial condition and there has been no transaction affecting Borrower other than in the ordinary course of business.
2.7Borrower has filed all federal, state and local tax returns and other reports required to be filed and has paid or made adequate provision for payment of all taxes, assessments and other governmental charges.
2.8No representation, warranty or statement by Borrower contained herein or in any certificate or other document furnished or to be furnished pursuant hereto contains, or at the time of delivery shall contain, any untrue statement of material fact, or omits, or shall omit at the time of delivery, to state a material fact necessary to make it not misleading.
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2.9To the best of Borrower's knowledge, the execution, delivery and performance of this Agreement and the Loan and Security Documents by Borrower will not constitute a fraudulent conveyance under any applicable law.
2.10Borrower has not used, nor will it use or permit others to use any of the proceeds of the Line of Credit, directly or indirectly, for the purpose of purchasing or carrying any "margin stock" within the meaning of Regulation U (12 CFR Part 221), or any "margin security" within the meaning of Regulation G (12 CFR Part 207), of the Board of Governors of the Federal Reserve System or to reduce or retire any indebtedness originally incurred to purchase or carry any such margin stock or margin security within the meaning of such Regulations or for any other purpose which might constitute the transactions contemplated hereby a "purpose credit" within the meaning of said Regulations, or cause this Agreement to violate Regulation U, or any other regulation of the Board of Governors of the Federal Reserve System, or the Securities Exchange Act of 1934.
2.11Borrower has complied in all material respects with all laws, regulations and orders applicable to its business, including those pertaining to federal securities requirements, zoning, environment, health and safety, and the present uses of its properties do not violate in any material respect any such laws, regulations and orders.
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2.12 |
Borrower will use the proceeds of the Line of Credit for working capital |
purposes.
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3. |
LINE OF CREDIT PROVISIONS |
Following the execution and delivery of this Agreement and the Loan and Security Documents, Bank, subject to the terms and conditions hereinafter set forth, agrees to extend the Line of Credit to Borrower as follows:
3.1Line of Credit. Provided that no Event of Default shall have occurred and no condition which, with the giving of notice or the passage of time or both would constitute an Event of Default shall exist, and subject to the terms and conditions of this Agreement and the conditions precedent enumerated in Section 4 hereof, Bank agrees to make the Line of Credit available to Borrower until the Line of Credit Termination Date. Borrower may use the Line of Credit by borrowing, repaying and reborrowing; provided however, that at no time shall the aggregate principal amount outstanding under the Line of Credit exceed the Line of Credit Limit.
3. I. IThe borrowing procedures under the Line of Credit shall be as follows. Upon notice from an Authorized Signer indicating that Borrower wishes to borrow under the Line of Credit, Bank will lend and forthwith credit to the Line of Credit Account such sums as Borrower may from time-to-time request; provided, however, that in no event shall Bank lend or credit to the Line of Credit Account any sums which would increase the amount outstanding under the Line of Credit to an amount in excess of the Line of Credit Limit. Borrower may add or remove persons as Authorized Signers by written notice to Bank, such addition or removal to be effective upon actual receipt of such notice by Bank. Borrower shall file with Bank a specimen signature of each Authorized Signer. Bank shall incur no liability to Borrower by acting upon instructions hereunder which the recipient thereof believes in good
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faith to have been given by an Authorized Signer, and Borrower shall be liable to Bank for all Advances made by Bank hereunder on the basis of such instructions. Whether or not Borrower receives notice of debits or credits to the Line of Credit Account, or the Advances or repayments, the amounts owing hereunder and under the Line of Credit Note shall be as indicated by Bank's records, absent manifest error. All instructions shall be given by 2:30 p.m. on any Business Day in order to be effective that day. If given after 2:30 p.m., such instructions shall be effective as of the next Business Day.
3.1.2Each borrowing under the Line of Credit shall be evidenced by and repayable in accordance with the terms and provisions of the Line of Credit Note. Bank shall enter as debits against indebtedness evidenced by the Line of Credit Note, all Advances, interest charges, expenses and other items properly chargeable with respect to the Line of Credit, and shall enter as credits against the indebtedness evidenced by the Line of Credit Note all payments made by Borrower on account of such indebtedness. The outstanding balance of the Line of Credit shall be the amount reflected on Bank's ledger, computer or other records, such information to be readily transcribable onto any allonge or other addendum attached to the Line of Credit Note which shall be conclusive evidence of the amount of the indebtedness, absent manifest error. If the debit balance of the Line of Credit Note at any time exceeds the Line of Credit Limit, Borrower shall forthwith pay to Bank that amount necessary to reduce the debit balance of the Line of Credit Note to the Line of Credit Limit. Bank may at any time and from time to time in its sole discretion enter as debits against the Line of Credit Account the amount of any interest, fees, charges or expenses due from Borrower hereunder or under the Line of Credit Note which are not paid in full when due.
3.1.3Upon the earlier to occur of: (a) the Line of Credit Termination Date; or (b) the occurrence of an Event of Default hereunder: (i) Bank shall be under no further obligation to make any Advances under the Line of Credit; (ii) all sums owing by Borrower under the Line of Credit Note shall, at the option of Bank, be immediately due and payable; and
(iii) Bank shall be authorized to debit any account of Borrower with Bank for the amount of the principal, interest, fees, expenses and charges which shall be due and payable under the Line of Credit Note.
3.2Day of Payment. Whenever any payment to be made in connection with the Line of Credit Note shall become due and payable on a day which is not a Business Day, such payment may be made on the next succeeding Business Day and, in the case of any payment of principal, such extension of time shall in such case be included in computing interest in such payment.
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4. |
CONDITIONS PRECEDENT TO THE INITIAL ADVANCE AND SUBSEQUENT ADVANCES |
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4.1Line of Credit. Borrower shall satisfy the following conditions prior to the making of the first Advance under the Line of Credit: all of the representations and warranties set forth in Section 2 hereof shall be true and correct in all material respects; there shall have been no material adverse change in the business, assets, operations, property or condition of Borrower; no Event of Default shall have occurred, and then be continuing; no condition which, with the passage of time or the giving of notice or both would constitute an Event of Default,
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shall exist; the Line of Credit Termination Date shall not have passed; and, Borrower shall have delivered to Bank, all in form and substance satisfactory to Bank in its sole discretion, each of the following:
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4.1.1 |
Loan and Security Documents: |
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(a) |
Note; |
(b)Open-End Mortgage and Security Agreement, Collateral Assignment of Leases and Rents to Secure Present and Future Loans Under Chapter 25 of Title 34 of the General Laws and Fixture Filing from Borrower with respect to the Property (the "Mortgage");
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(c) |
UCC-1 Financing Statement; and |
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(d) |
Indemnity Agreement Regarding Hazardous Materials. |
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4.1.2 |
Corporate and Other Documents: |
(a)Certificate of Secretary of Borrower containing copies of resolutions of the Board of Directors of Borrower authorizing the execution, delivery and performance of this Loan Agreement, the Loan and Security Documents, any document or instrument to be delivered pursuant hereto, and the transactions contemplated herein and therein, and identifying the officer or manager authorized to execute same;
(b)certificate of reasonably recent dates of the Secretary of the State of Rhode Island, certifying that Borrower is in good standing in such jurisdiction;
(c)evidence that Tenant maintains risk, hazard and fire insurance for the Property from an insurance company and in a form reasonably acceptable to Bank and Borrower;
(d)evidence of comprehensive general liability insurance (broad form COL endorsement) for the Property, naming Bank as lender's loss payable and additional insured;
(e)proof of filing of financing statements necessary to perfect the security interest of Bank granted pursuant to the mortgage on the Property as Bank shall require;
(f)ALTA Mortgagee's Policy of Title Insurance providing insurance coverage in the amount of $2,000,000 with respect to Bank's mortgage on the Property; and
(g)such other documents or instruments as Bank shall reasonably request at any time or from time to time.
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4.1.3Legal Opinion: Opinion of Hinckley Allen & Snyder LLP, counsel to Borrower, in a form and substance reasonably satisfactory to Bank.
4.2Subsequent Advances etc. All of the representations and warranties of Borrower set forth in Section 2 hereof shall be true and correct in all material respects; no Event of Default shall have occurred and then be continuing; no condition which, with the passage of time or the giving of notice or both would constitute an Event of Default, shall exist; the Line of Credit Termination Date shall not have passed; and, in addition, if requested by Bank, Borrower agrees to deliver to Bank such other documents and instruments as Bank shall reasonably require.
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5. |
NEGATIVE COVENANTS OF BORROWER |
Borrower covenants and agrees that during the term of this Agreement and so long as any Obligations remain outstanding, it will not, without the prior written consent of Bank:
5.1Make any change in its majority ownership or control; purchase or redeem any of its capital stock in an amount exceeding $250,000 in any calendar year; consolidate or merge with or make any acquisition of any other corporation, partnership, company or business; reorganize or recapitalize; or give any preferential treatment to any corporation, partnership, company or person whatsoever, including without limitation, any of its shareholders.
5.2Sell, lease, transfer or dispose of any of its assets relating to the Property; provided, however, (i) that Borrower may sell its finished goods inventory in the ordinary course of its business (excluding, however, any sale made in partial or total satisfaction of a debt); and
(ii) Borrower may dispose of equipment which has become outdated or is not used by or useful to Borrower if and so long as Borrower replaces the same with equipment of greater value.
5.3Guarantee, endorse, or otherwise become liable for or upon the obligations of any person, corporation, partnership or entity, except: (i) by endorsement for deposit in the ordinary course of business; or (ii) as otherwise required or permitted by this Agreement.
5.4Become or remain obligated for any indebtedness (whether in the form of a debt obligation or otherwise) except:
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(a) |
indebtedness to Bank hereunder; and |
(b)current trade, utility or non-extraordinary accounts payable arising or incurred in the ordinary course of business.
5.5Create, incur, assume or permit to exist, any mortgage, pledge, lien, security interest or other encumbrance on the Property; provided, however, that the foregoing restrictions shall not apply to:
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(a) |
mortgages, pledges, liens, security interests or other encumbrances |
in favor of Bank;
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(b)liens for taxes, assessments and other governmental charges and levies not yet delinquent or which are payable without penalty or interest or (if foreclosure, distraint, sale or other similar proceeding shall not have been commenced) which are being contested in good faith by appropriate proceedings diligently conducted, if such reservation or other appropriate provision, if any, as shall be required by generally accepted accounting principles shall have been made therefore;
(c)liens of carriers, warehousemen, materialmen and mechanics incurred in the ordinary course of business for sums not yet due; and
(d)liens, encumbrances, pledges or deposits of personal property incurred in the ordinary course of business in connection with workmen's compensation, unemployment insurance and other social security legislation or to secure performance of statutory obligations, surety and appeal bonds, performance or return of money bonds and other obligations of a like nature, exclusive of obligations for the payment of money borrowed.
5.6Purchase or acquire obligations of any third party other than direct obligations of the United States of America or of Bank and certificates of deposit in banks insured by the Federal Deposit Insurance Corporation.
5.7Make any substantial change in, or cease in whole or in part, its present business; or engage in any other material activities apart from its present business.
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6. |
AFFIRMATIVE COVENANTS OF BORROWER |
Borrower covenants and agrees that it will during the term hereof and so long as any Obligations remain outstanding:
6.1Furnish or cause to be furnished to the Bank the following, each of which shall be in form and substance satisfactory to the Bank, and shall be certified by the Borrower to be true, correct and complete:
6.1.1Within one hundred twenty (120) days after the end of each calendar during the term of the Line of Credit, (i) annual federal income tax returns of Borrower, together with all schedules and attachments thereto, and (ii) audited annual financial statement of Borrower prepared by an independent certified public accountant in accordance with GAAP;
6.1.2Within one hundred twenty (120) days after the end of each calendar year during the term of the Line of Credit, (i) cash flow schedules showing the financial condition of Borrower and all properties owned in whole or in part by Borrower (including but not limited to the Property), (ii) annual operating statements on the Property, and (iii) an updated rent roll of the Property; and
6.1.3Promptly and in form satisfactory to Bank, such other information regarding the operations or financial condition of Borrower as Bank may reasonably request from time to time.
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6.2Enforce the Property Ground Lease to cause Tenant to maintain at all times risk, hazard and fire insurance for the Property from an insurance company and in a form reasonably acceptable to Bank and Borrower (it being acknowledged and agreed that the coverage and amount of Tenant's insurance policies furnished to Bank as of the date hereof are satisfactory for the purposes hereof).
6.3Maintain general liability insurance coverage of such types and in such amounts as shall be satisfactory to Bank in its sole discretion, but in any event no less than One Million and 00/100 ($1,000,000.00) Dollars per occurrence, and Bank shall be named as additional insured on any and all policies evidencing such insurance coverage and providing not less than thirty (30) days-notice of cancellation to Bank.
6.4Permit Bank, through its authorized representatives, to perform commercial finance examinations and/or appraisals of Borrower's business and assets and to examine the books, records and assets of every kind and description of Borrower, at Borrower's reasonable expense at all reasonable times.
6.5Promptly notify Bank of any condition or event which constitutes, or would constitute with the passage of time or giving of notice or both, a default under this Agreement, or the Loan and Security Documents or any other document or instrument issued in connection herewith, and promptly notify Bank of any changes in its financial condition which, individually or cumulatively, may result in a material adverse change in its financial condition.
6.6Maintain in good standing its corporate existence and its status as a foreign corporation qualified to do business in those jurisdictions where it is required to be qualified.
6.7If it shall now or hereafter maintain an employee benefit plan subject to the Employee Retirement Income Security Act of 1974 (hereinafter "ERISA"), promptly: (i) notify Bank of the filing of a notice with the Pension Benefit Guaranty Corporation ("PBGC") pursuant to ERISA that the plan is to be terminated; and (ii) notify Bank of the notice or institution of any proceedings by the PBGC under ERISA.
6.8At any time and from time to time upon request of Bank, execute and deliver to Bank in form and substance satisfactory to Bank, negotiable promissory notes for any or all of the Obligations and/or such other documents in respect of the Obligations as Bank shall request to evidence or perfect the Obligations or Bank's security interest in its collateral for the Obligations, or any documents in respect of the Obligations which may be necessary to comply with the law of the State of Rhode Island or the law of any other states in which Borrower may be conducting business or to which Borrower may be subject.
6.9Pay or deposit promptly when due all taxes, assessments and governmental charges upon or relating to its income, or the operation of its business or otherwise, for which it is liable and upon request submit to Bank proof satisfactory to Bank that such payments and deposits have been made. Borrower acknowledges that the Loan will be placed on a tax monitoring system with the costs to be borne by the Borrower.
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6.10Maintain the operating account ("Operating Account") for the Property with the Bank, and retain Bank as Borrower's main bank of account and deposit. Borrower hereby authorizes and directs Bank to debit the Operating Account and make automatic transfers from the Operating Account to make any and all payments required to be made by Borrower in connection with the Line of Credit including, but not limited to, monthly payments of principal and interest under the Line of Credit Note, late fees, service charges or other fees or expenses as may become due under any one or more of the documents, instruments or agreements now or hereafter executed in connection with or related to the Line of Credit. It is further anticipated that Borrower will review with Bank its ability to manage Borrower's cash investments.
6.11Maintain at all times a Property Debt Service Coverage Ratio of not less than 1.25x to 1.0, which ratio shall be tested on an annual basis at the end of each fiscal year of Borrower beginning with and including the fiscal year ending December 31, 2021; provided, however, that the foregoing covenant shall be inapplicable, and failure to satisfy the foregoing covenant shall not be deemed a default, with respect to any fiscal year in which Borrower has not borrowed any Advance under the Line of Credit.
6.12Maintain at all times a Borrower Debt Service Coverage Ratio of not less than l .20x to 1.0, which ratio shall be tested on an annual basis at the end of each fiscal year of Borrower beginning with and including the fiscal year ending December 31, 2021; provided, however, that the foregoing covenant shall be inapplicable, and failure to satisfy the foregoing covenant shall not be deemed a default, with respect to any fiscal year in which Borrower has not borrowed any Advance under the Line of Credit.
6.13Maintain at all times a ratio of the Line of Credit to the value of the Property (as determined by the most recent appraisal prepared for and accepted by Bank), which shall not exceed sixty-five (65%) percent. Bank reserves the right to have the Property reappraised from time to time, which appraisal shall be in form and substance satisfactory to Bank and shall be at Bank's sole cost and expense, except as provided in the following sentence. If an Event of Default has occurred or is confirmed by such appraisal, Borrower shall, upon demand by Bank, immediately pay the cost of such appraisal to the Bank.
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7. |
HAZARDOUS MATERIALS |
7.1Representations and Warranties. Borrower represents and warrants to Bank, and such representations and warranties shall survive and shall be deemed to be continuing representations and warranties so long as any Obligations remain outstanding, as follows:
7.1.1Borrower or its Tenant under the Property Ground Lease has obtained all permits, licenses and other authorizations which are required under all Environmental Laws, except to the extent failure to have any such permit, license or authorization would not have a material adverse effect on the business, financial condition or operations of Borrower or any of its properties. Borrower, and any property or vessel owned, occupied or operated by Borrower, is in compliance with all Environmental Laws and is in compliance with the terms and conditions of all such permits, licenses and authorizations, and is
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in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules and timetables contained in any applicable Environmental Laws or in any regulation, code, plan, order, decree, judgment, injunction, notice or demand letter issued, entered, promulgated or approved thereunder, except to the extent failure to comply would not have a material adverse effect on the business, financial condition or operations of Borrower.
7.1.2No notice, notification, demand, request for information, citation, summons or order has been issued, no complaint has been filed, no penalty has been assessed and no investigation or review is pending or threatened in writing by any governmental or other entity with respect to any alleged failure by Borrower to have any permit, license or authorization required in connection with the conduct of its business or with respect to any Environmental Laws, including, without limitation, Environmental Laws relating to the generation, treatment, storage, recycling, transportation , disposal or release of any Hazardous Materials.
7.1.3No written notification of the existence of, a release of or a threat of release of any Hazardous Materials has been filed by or on behalf of Borrower and no property now or previously owned, leased or used by Borrower is listed or, to the best of Borrower's knowledge, proposed for listing on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or on any similar state list of sites requiring investigation or clean-up.
7.1.4There are no liens or encumbrances arising under or pursuant to any Environmental Laws on any of the real property or properties owned, occupied or operated by Borrower which have a material adverse effect on Borrower's occupancy and operation of such property and to Borrower's knowledge, no governmental actions have been taken or are in process which could subject any of such properties to such liens or encumbrances or, as a result of which Borrower would be required to place any notice or restriction relating to the presence of Hazardous Materials at any property owned by it in any deed to such property.
7.1.5Neither Borrower nor, to the best knowledge of Borrower, any previous owner, tenant, occupant or operator of the Property has (i) engaged in or permitted any operations or activities upon or any use or occupancy of such property, or any portion thereof, for the purpose of or in any way involving the handling, manufacture, treatment, storage, use, generation, release, discharge, refining, dumping or disposal (whether legal or illegal, accidental or intentional) of any Hazardous Materials on, under, in or about such prope1ty, except to the extent commonly used in day-to-day operations of such property and in such case only in compliance with all Environmental Laws, or (ii) transported or arranged for the transportation of any Hazardous Materials to, from or across such property except to the extent commonly used in day-to-day operations of such property and, in such case, in compliance with, all Environmental Laws; nor to the best knowledge of Borrower have any Hazardous Materials migrated from other properties upon, about or beneath such property, nor, to the best knowledge of Borrower are any Hazardous Materials presently constructed, deposited, stored or otherwise located on, under, in or about such property except to the extent commonly used in day-to-day operations of such property and, in such case, in compliance with, all Environmental Laws and to the extent that any such Hazardous Materials are constructed, deposited, stored or otherwise located on, under,
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in or about such property in any material amount, Borrower will list such Hazardous Materials on Schedule 7.1.5 hereto.
7.2Compliance with Laws. Borrower shall comply in all material respects with all Environmental Laws. In the event that any Hazardous Materials are found on the Property, Borrower shall, or shall cause its tenant to, immediately contain and remove the same in compliance with all Environmental Laws.
7.3Notice of Failure. Borrower shall immediately notify Bank in writing of the issuance of any written notice, notification, demand, request for information, citation, summons or order, the filing of any complaint, the assessment of any penalty, or the pendency or threat of any investigation or review by any governmental or other entity with respect to the alleged failure of Borrower to have any permit, license or authorization required in connection with the conduct of its business or otherwise with respect to any Environmental Laws.
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7.4 |
Notice of Release. Borrower shall immediately notify Bank in writing of: |
(i) any potential or known release or threat of release of any Hazardous Materials at, on or from any property or vessel owned, occupied or operated by Borrower; (ii) the filing of any written notification of the existence of, a release of or a threat of release of any Hazardous Materials by or on behalf of Borrower; (iii) the written threat or institution of any enforcement, cleanup, removal or other action by any governmental or other entity pursuant to any Environmental Laws, and (iv) the written threat or making of any written claims by any third party against Borrower or any property or vessel owned, operated or occupied by Borrower, relating to the existence of, or damage, loss or injury from, any Hazardous Materials.
7.5Indemnification. Borrower will indemnify and hold each of the Indemnified Parties harmless from and against any claim, cost, damage, expense (including, without limitation, reasonable attorneys' fees and expenses), loss, liability, or judgment now or hereafter arising as a result of any claims for environmental cleanup costs, any resulting damage to the environment and any other environmental claims against any of the Indemnified Parties with respect to any property owned, operated or occupied by Borrower or involving Borrower in any other capacity. Borrower will further indemnify, defend and hold each of the Indemnified Parties harmless from and against all loss, damage, liability and expense, including, without limitation, reasonable attorneys' fees and expenses, suffered or incurred by any of the Indemnified Parties with respect to any property owned, operated or occupied by Borrower or involving Borrower in any other capacity under or on account of the administration or enforcement of any Environmental Laws or any legal action relating to the release, threat of release, transportation, storage, disposition or removal of any Hazardous Materials, including the assertion of any lien by reason of the release or threat of release of Hazardous Materials. THIS COVENANT OF INDEMNIFICATION SHALL SURVIVE ONE YEAR FOLLOWING THE TERMINATION OF THE LINE OF CREDIT AND REPAYMENT, SATISFACTION AND DISCHARGE OF THE OBLIGATIONS.
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8. |
EVENTS OF DEFAULT AND ACCELERATION |
8.1The occurrence of any one or more of the following shall constitute an Event of Default hereunder:
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8.1.1Failure to make any payment of any principal, interest or other charges in respect of any of the Obligations within ten (10) days of the date on which the same shall be due.
8.1.2Default in the observance or performance of any covenant or agreement of Borrower herein set forth or set forth in any of the Loan and Security Documents or in any agreement, note or instrument heretofore, now or hereafter executed by Borrower in favor of Bank (other than those set forth in this Section 8.1) which is not cured within thirty (30) days of written notice from Bank;
8.1.3If any representation, warranty, certificate, schedule or other information made or furnished by Borrower herein or pursuant hereto or pursuant to the Loan and Security Documents is or shall be incorrect, untrue or misleading in any material respect at the time made or given;
8.1.4Default in the performance of any material obligations of Borrower to any third party; unless the Borrower is disputing such obligation in good faith and has set aside adequate reserves therefor;
8.1.5Any change for any reason whatsoever in the majority ownership or control of Borrower other than as expressly permitted hereunder;
8.1.6Loss, theft, damage or destruction of any portion of Property of Borrower for which there is either no insurance coverage or for which, in the opinion of Bank, there is insufficient insurance coverage or the making of any levy, seizure or attachment upon any portion of the property of Borrower, provided that Borrower shall not be deemed to be in default of this provision if Borrower has maintained or caused to be maintained the insurance coverage required by Section 6.2 and Section 6.3 hereof;
8.1.7Insolvency of Borrower or failure of Borrower generally to pay its debts as they come due or if a creditors' committee is appointed for the business of Borrower; or if Borrower makes a general assignment for the benefit of creditors, or an Order for Relief is entered with respect to Borrower under the federal bankruptcy laws as now or hereafter constituted, or if a case in bankruptcy or a petition for reorganization or to effect a plan or arrangement with creditors is filed by or against Borrower; or if Borrower applies for or permits the appointment of a receiver, trustee, custodian or liquidator for any of its property or assets, or if any such receiver, trustee, custodian or liquidator is appointed for any of such property or assets; and, in the case of any one of the above actions or proceedings commenced against Borrower, such action or proceeding is not dismissed within sixty (60) days;
8.1.8If a proceeding is filed or commenced by or against Borrower for its dissolution or liquidation and in the event of a proceeding commenced against Borrower the same remains undismissed or unstayed for a period of sixty (60) days; or if Borrower voluntarily or involuntarily dissolves or is dissolved, terminates or is terminated;
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8.1.9If Borrower is enjoined, restrained or in any way prevented by a final, non-appealable Court or Administrative order from conducting all or any material part of its business affairs;
8.1.10The occurrence of an Event of Default under any one or more of the Loan and Security Documents or under any other document, instrument or agreement now or hereafter evidencing, securing or executed in connection with any indebtedness or obligation of Borrower to the Bank;
8.1.11The entry of a final judgment for the payment of money in excess of an aggregate of One Hundred Thousand and 00/100 ($100,000.00) Dollars shall be rendered against the Borrower, and the same shall remain undischarged for a period of thirty (30) consecutive days, during which execution shall not be effectively stayed;
8.1.12The occurrence of any attachment of any deposits or other property of the Borrower in the hands or possession of the Bank, or the occurrence of any attachment of any other property of the Borrower in an amount exceeding One Hundred Thousand and 00/100 ($100,000.00) Dollars which shall not be discharged within thirty (30) days of the date of such attachment;
8.1.13Default with respect to any evidence of indebtedness of the Borrower (other than to the Bank) relating to the Property, if the effect of such default is to accelerate the maturity of such indebtedness or to permit the holder thereof to cause such indebtedness to become due prior to the stated maturity thereof, or if any indebtedness of the Borrower (other than to the Bank) is not paid when due and payable, whether at the due date thereof or a date fixed for prepayment, whether by acceleration or otherwise;
8.1.14The Borrower attempts to assign its rights under this Agreement or any interest herein, or if the Property is conveyed or encumbered contrary to the provisions of this Agreement;
8.1.15Any "Event of Default" as defined in the Property Ground Lease (in each case only to the extent that such Event of Default is not cured by any leasehold mortgagee as permitted under the Property Ground Lease) or termination of the Property Ground Lease; or
8.1.16The Property is materially damaged or destroyed by fire or other casualty or cause, and as a result thereof, Tenant has exercised any contractual right it may have to terminate the Property Ground Lease.
8.2If any Event of Default shall occur, then or at any time thereafter, Bank may declare the Obligations to be immediately due and payable, without notice, protest, presentment or demand, all of which are hereby expressly waived by Borrower.
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9.1The failure of Bank at any time or times hereafter to require strict performance by Borrower of any of the provisions, warranties, terms or conditions contained in this Agreement, in any of the Loan and Security Documents, or in any other agreement, guaranty, note, instrument or document now or at any time or times hereafter executed by Borrower and delivered to Bank shall not waive, affect or diminish any right of Bank at any time or times hereafter to demand strict performance thereof; and, no rights of Bank hereunder shall be deemed to have been waived by any act or knowledge of Bank, its agents, officers or employees, unless such waiver is contained in an instrument in writing signed by an officer of Bank. No waiver by Bank of any of its rights on any one occasion shall operate as a waiver of any other of its rights or any of its rights on a future occasion.
9.2Except as otherwise specifically provided herein, any demand or notice required or permitted to be given hereunder shall be deemed effective when deposited in the United States mail, and sent by certified mail, return receipt requested, postage prepaid, addressed to Bank and to Borrower, as appropriate (or to such other address as may be provided by the party to be notified, on ten (10) days prior written notice to the other parties), as follows:
5 Steeple Street, Unit 303
Providence, Rhode Island 02903
Stephen J. Carlotti, Esq. Hinckley Allen & Snyder LLP
100 Westminster Street, Suite 1500 Providence, Rhode Island 02903
Bank Rhode Island One Turks Head Place
Providence, Rhode Island 02903
Attn: Commercial Real Estate Lending
Steven P. DeLuca, Esq.
Wieck DeLuca & Gemma Incorporated One Turks Head Place, Suite 1300 Providence, Rhode Island 02903
9.3Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law; should any portion of this Agreement be declared invalid for any reason in any jurisdiction, such declaration shall have no effect upon the remaining portions of this Agreement. Furthermore, the entirety of this Agreement shall continue in full force and effect in all other jurisdictions and said remaining portions of this Agreement shall continue in full force and effect in the subject jurisdiction as if this Agreement had been executed with the invalid portions thereof deleted.
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9.4The provisions of this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of Bank and Borrower; provided, however, Borrower may not assign any of its rights or delegate any of its obligations hereunder without the prior written consent of Bank.
9.5This Agreement is and shall be deemed to be a contract entered into and made pursuant to the laws of the State of Rhode Island, without reference to conflict of laws principles, and shall in all respects be governed, construed, applied and enforced in accordance with the laws of said State. ANY CAUSE OF ACTION ARISING BETWEEN OR AMONG THE PARTIES, WHETHER UNDER THIS AGREEMENT OR OTHERWISE, SHALL BE BROUGHT ONLY IN A COURT HAVING JURISDICTION AND VENUE AT PROVIDENCE, RHODE ISLAND. BORROWER CONSENTS TO AND CONFERS PERSONAL JURISDICTION OVER IT BY SUCH COURT OR COURTS AND AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY MAILING A COPY OF THE SUMMONS TO IT AT THE ADDRESS FOR NOTICE TO BORROWER SET FORTH IN SECTION 9.2 ABOVE, AND IN ANY SUCH ACTION EACH OF BORROWER AND BANK KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES THE RIGHT TO DEMAND A TRIAL BY JURY. BORROWER AND BANK MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS LOAN AGREEMENT OR ANY OTHER LOAN AND SECURITY DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR BANK TO ACCEPT THIS LOAN AGREEMENT AND MAKE ADVANCES UNDER THE LINE OF CREDIT.
9.6This Agreement represents the entire Agreement between the parties with respect to the matters set forth herein and supersedes all prior written or oral agreements or understandings, if any.
9.7If at any time or times hereafter, Bank shall employ counsel in any capacity in connection with the transactions contemplated by this Agreement or any other agreement, guaranty, notice, instrument or document heretofore, now or at any time or times hereafter executed by Borrower and delivered to Bank, whether before or after the occurrence of any Event of Default, or to collect any of the Obligations, then in any of such events, all of the reasonable attorneys' fees arising from such services, and any reasonable expenses, costs, and charges relating thereto, shall be part of the Obligations, payable on demand and bearing interest thereon at the same rate provided in the "Note.
9.8Borrower hereby grants to Bank a lien, security interest and right of setoff as security for all liabilities and obligations to Bank, whether now existing or hereafter arising, upon and against all deposits, credits, collateral, instruments, documents, securities and other property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank and its successors and assigns, or in transit to any of them and without regard to whether Bank received the same in pledge for safekeeping, as agent for collection or transmission or otherwise or whether Bank had conditionally released the same, all
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of which shall at all times constitute additional security for the Obligations. At any time from and after the occurrence of an Event of Default, without demand or notice, Bank may setoff the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Line of Credit. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURED THE LINE OF CREDIT, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
9.9All agreements between Borrower and Bank are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to Bank for the use or the forbearance of the indebtedness evidenced hereby exceed the maximum permissible under applicable law. As used herein, the term "applicable law" shall mean the law in effect as of the date hereof provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest, then the Line of Credit Note shall be governed by such new law as of its effective date. In this regard, it is expressly agreed that it is the intent of Borrower and Bank in the execution, delivery and acceptance of the Line of Credit Note to contract in strict compliance with the laws of the State of Rhode Island from time to time in effect. If, under or from any circumstances whatsoever, fulfillment of any provision hereof or of any of the Loan and Security Documents at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever Bank should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest. This provision shall control every other provision of all agreements between Borrower and Bank.
9.10Bank may at any time pledge all or any portion of its rights under the Loan and Security Documents including any portion of the Line of Credit Note to any of the twelve
(12) Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or enforcement thereof shall release Bank from its obligations under any of the Loan and Security Documents.
9.11Bank shall have the unrestricted right at any time or from time to time, and without the consent of Borrower to assign all or any portion of its rights and obligations hereunder to any other persons or entities (each, an "Assignee"). Bank shall endeavor to provide notice to Borrower promptly after such assignment, and Borrower agrees that it shall execute, or cause to be executed such documents including, without limitation, amendments to this Agreement and to any other documents, instruments and agreements executed in connection herewith as Bank shall deem reasonably necessary to effect the foregoing. In addition, at the request of the Bank and any such Assignee, Borrower shall issue one or more new promissory notes, as applicable, to any such Assignee and, if Bank has retained any of its rights and obligations hereunder following such assignment, to Bank, which new promissory notes shall be issued in replacement of, but not in discharge of, the liability evidenced by the promissory note
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held by Bank prior to such assignment and shall reflect the amount of the respective commitments and loans held by such Assignee and Bank after giving effect to such assignment. Upon the execution and delivery of appropriate assignment documentation, amendments and any other documentation required by Bank in connection with such assignment, and the payment by Assignee of the purchase price agreed to by Bank and such Assignee, such Assignee shall be a party to this Agreement and shall have all of the rights and obligations of Bank hereunder (and under any and all other guaranties, documents, instruments and agreements executed in connection herewith) to the extent that such rights and obligations have been assigned by Bank pursuant to the assignment documentation between Bank and such Assignee, and Bank shall be released from its obligations hereunder and thereunder to a corresponding extent.
9.12Bank shall have the unrestricted right at any time and from time to time, and without the consent of or notice to Borrower, to grant to any other persons or entities (each a "Participant") participating interests in Bank's obligations to lend hereunder and/or any or all of the loans held by Bank hereunder. In the event of any such grant by Bank of a participating interest to a Participant, whether or not upon notice to Borrower, Bank shall remain responsible for the performance of its obligations hereunder and Borrower shall continue to deal solely and directly with Bank in connection with Bank's rights and obligations hereunder. Bank may furnish any information concerning Borrower in its possession from time to time to prospective Assignees and Participants, provided that Bank shall require any such prospective Assignee or Participant to maintain the confidentiality of such information.
9.13Upon receipt of an affidavit by an officer of Bank as to the loss, theft, destruction or mutilation of the Line of Credit Note or any other security document which is not of public record, Borrower will issue, in lieu thereof, replacement Line of Credit Note or other security document in the same principal amount thereof and otherwise of like tenor.
9.14Each reference to Borrower shall be construed in the masculine, feminine, neuter, singular or plural as the context may require, and shall be deemed to include the legal successors and assigns of Borrower, all of which shall be bound by the provisions hereof.
9.15The section headings are included for convenience only and shall not be deemed to be a part of this Agreement.
9.16This Agreement represents the entire Agreement between the parties with respect to the matters set forth herein and supersedes all prior written or oral agreements or understandings, if any.
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10. |
TERM OF AGREEMENT |
The term of this Agreement shall commence on the date hereof and shall continue in full force and effect and be binding upon Borrower until all Obligations shall have been fully paid and satisfied; provided, however, that the indemnification provisions of Section 7.5 hereof shall survive termination of the Line of Credit and repayment, satisfaction and discharge of the Obligations.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first written above.
WITNESS:Capital Properties, Inc.
By: /s/ Susan R. Johnson
Susan R. Johnson Treasurer
WITNESS:Bank Rhode Island
By:_/s/ Keb H. Brackenbury
Keb H. Brackenbury Senior Vice President
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Exhibit 31.1
CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Robert H. Eder, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Capital Properties, Inc. and Subsidiaries; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
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(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that was materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: May 5, 2021 |
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/s/ Robert H. Eder |
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Robert H. Eder |
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Chairman and Principal Executive Officer |
Exhibit 31.2
CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Susan R. Johnson, certify that:
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1. |
I have reviewed this quarterly report on Form 10-Q of Capital Properties, Inc. and Subsidiaries; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
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(a) |
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that was materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
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(a) |
all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: May 5, 2021 |
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/s/ Susan R. Johnson |
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Susan R. Johnson |
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Treasurer and Principal Financial Officer |
Exhibit 32.1
CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Capital Properties, Inc. (the Company) on Form 10-Q for the quarterly period ended March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert H. Eder, Chairman and Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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/s/ Robert H. Eder |
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Robert H. Eder |
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Chairman and Principal Executive Officer |
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May 5, 2021 |
Exhibit 32.2
CAPITAL PROPERTIES, INC. AND SUBSIDIARIES
Certification Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Capital Properties, Inc. (the Company) on Form 10-Q for the quarterly period ended March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Susan R. Johnson, Treasurer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
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(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
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/s/ Susan R. Johnson |
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Susan R. Johnson, Treasurer |
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and Principal Financial Officer |
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May 5, 2021 |