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As filed with the Securities and Exchange Commission on September 1, 1995
Registration No. 33-61165
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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COMMERCIAL NET LEASE REALTY, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 56-1431377
(State or other jurisdiction of incorporation) (IRS Employer Identification No.)
400 East South Street, Suite 500
Orlando, Florida 32801
TELEPHONE: (407) 422-1574
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(Address, including zip code and telephone number, including area code, of
registrant's principal executive offices)
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KEVIN B. HABICHT, CHIEF FINANCIAL OFFICER
Commercial Net Lease Realty, Inc.
400 East South Street, Suite 500
Orlando, Florida 32801
Telephone: (407) 422-1574
(Name, address, including zip code and telephone number, including area code of
agent for service)
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Copies to:
THOMAS H. MCCORMICK, ESQ.
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
(202) 663-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE
SECURITIES TO THE PUBLIC:
As soon as practicable following the effective date of this
Registration Statement.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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COMMERCIAL NET LEASE REALTY, INC.
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404 AND ITEM 501 OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM LOCATION IN PROSPECTUS
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<S> <C>
1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus
Cover Page
2. Inside Front and Outside Back Cover Pages Cover of Prospectus
of Prospectus
3. Summary Information, Risk Factors and Prospectus Summary, Investment Considerations
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Description of Common Stock
10. Interests of Named Experts and Counsel Not Applicable
11. Material Changes Not Applicable
12. Incorporation of Certain Information by Incorporation of Certain Documents by Reference
Reference
13. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATAEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSITITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHLL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 1, 1995
[LOGO]
COMMERCIAL NET LEASE REALTY, INC.
$200,000,000
DEBT SECURITIES, COMMON STOCK AND COMMON STOCK WARRANTS
Commercial Net Lease Realty, Inc. (the "Company") may from time to time
offer in one or more series (i) its debt securities (the "Debt Securities),
which may be senior debt securities or subordinated debt securities, (ii) Common
Stock, par value $.01 per share (the "Common Stock"), or (iii) warrants to
purchase Common Stock (the "Common Stock Warrants"), with an aggregate public
offering price of up to $200,000,000 on terms to be determined at the time or
times of offering. The Debt Securities, Common Stock or Common Stock Warrants
(collectively, the "Offered Securities") may be offered, separately or together,
in separate classes or series in amounts, at prices and on terms to be set forth
in a supplement to this Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, ranking, currency,
form (which may be registered or bearer, or certified or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Company or
repayment at the option of the holder thereof, terms for sinking fund payments,
terms for conversion into Common Stock or other securities of the Company, and
any initial public offering price; (ii) in the case of Common Stock, any initial
public offering price; and (iii) in the case of Common Stock Warrants, the
duration, offering price, exercise price and detachability. In addition, such
specific terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Offered Securities, in each case as may be
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any agents or underwriters are involved in the sale of any of the Offered
Securities, their names and any applicable purchase price, fee, commission or
discount arrangement between or among them will be set forth or will be
calculable from the information set forth in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such class or series of Offered Securities.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
____________________
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
____________________
THE DATE OF THIS PROSPECTUS IS , 1995.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder and in accordance therewith files reports,
proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company with the Commission, may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, Seven
World Trade Center, 13th Floor, New York, New York 10048 and Suite 1400,
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material also can be obtained from the Public Reference Section
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Company's Common Stock is listed on the New
York Stock Exchange under the ticker symbol "NNN." Reports, proxy statements
and other information concerning the Company also may be inspected at the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement (the
"Registration Statement") (of which this Prospectus is a part) on Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Offered Securities. This Prospectus does not contain all of the information
set forth in the Registration Statement, including the exhibits and schedules
thereto, certain parts of which are omitted as permitted by the rules and
regulations of the Commission. Statements contained in this Prospectus as to
the contents of any document are necessarily summaries of such documents, and in
each instance reference is made to the copy of such documents filed with the
Commission, each such statement being qualified in all respects by such
reference. For further information regarding the Company and the Offered
Securities, reference is hereby made to the Registration Statement and to the
exhibits and schedules filed or incorporated as a part thereof which may be
obtained from the Commission at its principle office in Washington, D.C. upon
payment of the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:
a. Annual Report on Form 10-K for the fiscal year ended December 31,
1994; and
b. Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.
c. Quarterly Report on Form 10-Q for the quarter ended June 30,
1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Offered Securities shall be
deemed to be incorporated by reference in this Prospectus and to be part hereof
from the date of filing such documents.
Any statement contained herein, or in a document incorporated or deemed to
be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, on the written
request of any such person, a copy of any or all of the documents incorporated
herein by reference, except the exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Requests for
such copies should be directed to Kevin B. Habicht, Commercial Net Lease Realty,
Inc., 400 East South Street, Suite 500, Orlando, Florida 32801 (telephone
number: 407/ 422-1574).
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THE COMPANY
Commercial Net Lease Realty, Inc., a Maryland corporation (the "Company"),
is a real estate investment trust (a "REIT") formed in 1984 that acquires, owns
and manages a diversified portfolio of high-quality, single-tenant, freestanding
properties leased to major retail businesses under full-credit, long-term
commercial net leases. As of June 30, 1995, the Company owned 142 properties
acquired for an aggregate purchase price of approximately $194 million and
having an annualized current cash on cost return (on an Inclusive Cost basis as
defined below) of approximately 10.29%. For the purposes of the Prospectus,
"Inclusive Cost" means all costs related to acquisitions, including but not
limited to the purchase price, legal and accounting fees and expenses,
commissions and title insurance.
The Company focuses on acquiring freestanding properties that are located
within intensive commercial corridors near traffic generators, such as regional
malls, business developments and major thoroughfares. These properties, which
generally have purchase prices of up to $5 million, attract a wide array of
established retail tenants. Consequently, management believes that such
properties offer attractive opportunities for stable current return and
potential capital appreciation. In addition, management believes that the
location and design of properties in this niche provide flexibility in use and
tenant selection and an increased likelihood of advantageous re-lease terms.
The Company has been successful in attracting tenants that operate in a
variety of retail segments, including Eckerd Drug, Marshalls and Burger King,
and "category killer" retailers such as Barnes & Noble Bookstores, OfficeMax,
Computer City and Linens 'n Things. "Category killer" retailers offer an
extensive variety of merchandise in a defined product category at competitive
prices through a "superstore" format, providing the convenience of in-depth
product selection in a single location. The Company intends to continue leasing
properties it acquires in the future to "category killer" retailers or other
major national or regional retail businesses.
CNL Realty Advisors, Inc. (the "Advisor") is the Company's advisor. The
Advisor is a wholly owned subsidiary of CNL Group, Inc. ("CNL Group"), a
diversified real estate company with expertise in commercial net leased
investments that currently owns and manages, either directly or through
affiliates (collectively, "CNL Affiliates"), a property portfolio with a cost in
excess of $600 million. Under the direction of the Company's Board of
Directors, the Advisor has responsibility for the day-to-day operations of the
Company, including investment analysis and development, acquisitions, due
diligence, and asset management and accounting services. Management of the
Company believes that the Advisor's extensive experience and long-term
relationships throughout the commercial net leased property industry benefits
the Company in selecting, acquiring and managing its properties. In focusing on
acquiring freestanding properties that are located within intensive commercial
corridors which have been successful in attracting a variety of retail tenants,
including "category killer" retailers, management of the Company also believes
that the Advisor provides the Company with a competitive advantage in the
management and operation of its real estate assets and in the identification of
attractive investments. At the time the Company retained the Advisor in July
1992 the Company owned 28 properties leased to one tenant. The aggregate cost
of such properties was approximately $12.8 million. As of June 30, 1995, the
Company had acquired 117 additional properties leased to 28 tenants for an
aggregate purchase price of approximately $182.7 million, which currently
provide an annualized cash on cost return (on an Inclusive Cost basis) of
approximately 10.42% percent.
The principal office of the Company is located at 400 East South Street,
Suite 500, Orlando, Florida 32801 and the Company's telephone number is 407/
422-1574.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
for general corporate purposes, which may include the repayment of certain
indebtedness outstanding at such time, the acquisition of single tenant
freestanding properties as suitable opportunities arise and the expansion and
improvement of certain properties in the Company's portfolio.
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RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the six months ended
June 30, 1995 was 6.04, and for the years ended December 31, 1994, 1993 and
1992 was 12.86, 9.77 and 6.18, respectively. The Company had no debt for the
fiscal years ending December 31, 1991 and 1990. For the purposes of computing
these ratios, earnings have been calculated by adding fixed charges (excluding
capitalized interest) to income (loss) before taxes and extraordinary items.
Fixed charges consist of interest costs, whether expensed or capitalized, and
amortization of debt expense and discount or premium relating to any
indebtedness, whether expensed or capitalized.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will be direct obligations of the Company, which may be
secured or unsecured, and which may be senior or subordinated indebtedness of
the Company. The Debt Securities may be issued under one or more indentures,
each dated as of a date before the issuance of the Debt Securities to which it
relates and in the form that has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part, subject to such amendments or
supplements as may be adopted from time to time. Each such indenture
(collectively, the "Indenture") will be entered into between the Company and a
trustee (the "Trustee"), which may be the same Trustee. The Indenture will be
subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
statements made hereunder relating to the Indenture and the Debt Securities are
summaries of the provisions thereof, do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
provisions of the Indenture and such Debt Securities. Capitalized terms used
but not defined herein shall have the respective meanings set forth in the
Indenture.
TERMS
The particular terms of the Debt Securities offered by a Prospectus
Supplement will be described in the particular Prospectus Supplement, along with
any applicable modifications of or additions to the general terms of the Debt
Securities as described herein and in the applicable Indenture and any
applicable federal income tax considerations. Accordingly, for a description of
the terms of any series of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the description of the Debt
Securities set forth in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may
be issued without limits as to aggregate principal amount, in one or more
series, in each case as established from time to time by the Company's Board of
Directors or as set forth in the applicable Indenture or one or more indentures
supplemental to the Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuance of additional Debt Securities of such series.
Each Indenture will provide that the Company may, but need not, designate
more than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under an Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor trustee may be
appointed to act with respect to such series. If two or more persons are acting
as Trustee with respect to different series of Debt Securities, each such
Trustee shall be a Trustee of a trust under the applicable Indenture separate
and apart from the trust administered by any other Trustee and, except as
otherwise indicated herein, any action described herein to be taken by a Trustee
may be taken by each such Trustee with respect to, and only with respect to, the
one or more series of Debt Securities for which it is Trustee under the
applicable Indenture.
The following summaries set forth certain general terms and provisions of
the Indenture and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms of such
Debt Securities, including the following specific terms:
(1) the title of such Debt Securities;
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(2) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the portion of
the principal amount thereof payable upon declaration of acceleration of the
maturity thereof, or (if applicable) the portion of the principal amount of such
Debt Securities which is convertible into Common Stock or other equity
securities of the Company, or the method by which any such portion shall be
determined;
(4) if such Debt Securities are convertible, any limitation to the
ownership or transferability of the Common Stock or other equity securities of
the Company into which such Debt Securities are convertible in connection with
the preservation of the Company's status as a REIT;
(5) the date or dates, or the method for determining the date or dates, on
which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt Securities will
bear interest, if any;
(7) the date or dates, or the method for determining the date or dates,
from which any such interest will accrue, the dates upon which any such interest
will be payable, the record dates for payment of such interest or the method by
which any such dates shall be determined, the persons to whom such interest
shall be payable, and the basis upon which interest shall be calculated if other
than that of a 360-day year of twelve 30-day months;
(8) the place or places where the principal of (and premium, if any) or
interest, if any, on such Debt Securities will be payable, where such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange, and where notices or demands to or upon the Company in respect to such
Debt Securities and the applicable Indenture may be served;
(9) the period or periods within which, the price or prices at which, and
the terms and conditions upon which such Debt Securities may be redeemed, as a
whole or in part, at the option of the Company, if the Company is to have such
an option;
(10) the obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous provision or at
the option of a holder thereof, and the period or periods within which, the
price or prices at which and the terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, as a whole or in part,
pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign currency or
units of two or more foreign currencies or a composite currency or currencies,
and the terms and conditions relating thereto;
(12) whether the amount of payments of principal (and premium, if any) or
interest, if any, on such Debt Securities may be determined with reference to an
index, formula or other method (which index, formula or method may, but need not
be, based on a currency, currencies, currency unit or units or composite
currency or currencies) and the manner in which such amounts shall be
determined;
(13) any additions to, modifications of or deletions from the terms of such
Debt Securities with respect to the events of default or covenants set forth in
the applicable Indenture;
(14) whether such Debt Securities will be issued in certificated or book-
entry form;
(15) whether such Debt Securities will be in registered or bearer form or
both and, if and to the extent in registered form, the denominations thereof if
other than $1,000 and any integral multiple thereof and, if and to the extent in
bearer form, the denominations thereof and terms and conditions relating
thereto;
(16) the applicability, if any, of the defeasance and covenant defeasance
provisions described herein or set forth in the applicable Indenture, or any
modification thereof;
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(17) the terms, if any, upon which such Debt Securities may be convertible
into Common Stock or other equity securities of the Company (and the class
thereof) and the terms and conditions upon which such conversion will be
effected, including, without limitation, the initial conversion price or rate
and the conversion period;
(18) whether and under what circumstances the Company will pay additional
amounts on such Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether the Company will have the option to
redeem such Debt Securities in lieu of making such payment;
(19) the provisions, if any, relating to the security provided for such
Debt Securities; and
(20) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Any material U.S. federal income tax,
accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Except as may be set forth in the applicable Prospectus Supplement, the
Debt Securities will not contain any provisions that would limit the ability of
the Company to incur indebtedness or that would afford holders of Debt
Securities protection in a highly leveraged or similar action involving the
Company or in the event of a change of control of the Company. However, certain
restrictions on ownership and transfers of the Company's Common Stock and the
Company's other equity securities designed to preserve its status as a REIT may
act to prevent or hinder a change of control. See "Description of Common Stock
-- Restrictions on Ownership." Reference is made to the applicable Prospectus
Supplement for information with respect to any deletion from, modification of or
addition to the events of default or covenants of the Company that are described
below, including any addition of a covenant or other provision providing event
risk or similar protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the applicable Trustee's corporate trust office, the address
of which will be set forth in the applicable Prospectus Supplement; PROVIDED,
HOWEVER, that, at the Company's option, payment of interest may be made by check
mailed to the address of the person entitled thereto as it appears in the
applicable register for such Debt Securities or by wire transfer of funds to
such person at an account maintained within the United States.
Any interest not punctually paid or duly provided for on any date upon
which interest is payable with respect to a Debt Security ("Defaulted Interest")
will forthwith cease to be payable to the holder on the applicable regular
record date and may either be paid to the person in whose name such Debt
Security is registered at the close of business on a special record date (the
"Special Record Date") for the payment of such Defaulted Interest to be fixed by
the applicable Trustee, notice of which shall be given to the holder of such
Debt Security not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner, all as more completely described in
the applicable Indenture.
Subject to certain limitations applicable to Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Trustee. In
addition, subject to certain limitations applicable to Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer thereof at the corporate trust office of
the applicable Trustee. Every Debt Security surrendered for conversion,
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the
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applicable Prospectus Supplement refers to any transfer agent (in addition to
the Trustee) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location at which any such transfer
agent acts, except that the Company will be required to maintain a transfer
agent in each place of payment for such series. The Company may at any time
designate additional transfer agents with respect to any series of Debt
Securities.
Neither the Company nor any Trustee will be required (i) to issue, register
the transfer of or exchange Debt Securities of any series during a period
beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption; (ii) to register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed in
part; or (iii) to issue, register the transfer of or exchange any Debt Security
which has been surrendered for repayment at the option of the holder, except the
portion, if any, of such Debt Security not to be so repaid.
MERGER, CONSOLIDATION OR SALE
Each Indenture provides that the Company may consolidate with, or sell,
lease or convey all or substantially all of its assets to, or merge with or
into, any other corporation, provided that (a) either the Company must be the
continuing corporation, or the successor corporation (if other than the Company)
formed by or resulting from any such consolidation or merger or which shall have
received the transfer of such assets must expressly assume payment of the
principal of (and premium, if any), and interest on, all of the outstanding Debt
Securities and the due and punctual performance and observance of all of the
covenants and conditions contained in the applicable Indenture; (b) immediately
after giving effect to such transaction and treating any indebtedness which
becomes an obligation of the Company or any subsidiary as a result thereof as
having been incurred by the Company or such subsidiary at the time of such
transaction, no event of default under the applicable Indenture, and no event
which, after notice or the lapse of time, or both, would become such an event of
default, shall have occurred and be continuing; and (c) an officer's certificate
and legal opinion concerning such conditions shall be delivered to the Trustee.
CERTAIN COVENANTS
EXISTENCE. Except as permitted under " -- Merger, Consolidation or Sale,"
the Indenture will require the Company to do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence,
rights (by articles of incorporation, bylaws or statute) and franchises;
PROVIDED, HOWEVER, that the Company will not be required to preserve any right
or franchise if it determines that the preservation thereof is no longer
desirable in the conduct of its business.
MAINTENANCE OF PROPERTIES. The Indenture will require the Company to cause
all of its properties used or useful in the conduct of its business or the
business of any subsidiary to be maintained and kept in good condition and must
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be necessary so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times; PROVIDED, HOWEVER, that the Company and
its subsidiaries will not be prevented from selling or otherwise disposing for
value its properties in the ordinary course of business.
INSURANCE. The Indenture will require the Company to, and to cause each of
its subsidiaries to, keep or cause to be kept in force upon all of its
properties and operations policies of insurance carried with responsible
companies in such amounts and covering all such risks as shall be customary in
the industry in accordance with prevailing market conditions and availability.
PAYMENT OF TAXES AND OTHER CLAIMS. The Indenture will require the Company
to pay or discharge or cause to be paid or discharged (or, if applicable, cause
to be transferred to bond or other security), before the same shall become
delinquent, (a) all taxes, assessments and governmental charges levied or
imposed upon it or any subsidiary or upon the income, profits or property of the
Company or any subsidiary, and (b) all lawful claims for labor, materials and
supplied which, if unpaid, might by law become a lien upon the property of the
Company or any subsidiary, PROVIDED, HOWEVER, that the Company will not be
required to pay or discharge (or transfer to bond or other
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security) or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity it being contested in good faith
by appropriate proceedings.
PROVISION OF FINANCIAL INFORMATION. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Indenture will require the
Company, within 15 days after each of the respective dates by which the Company
would have been required to file annual reports, quarterly reports and other
documents with the Commission if the Company were so subject, (a) to transmit by
mail to all holders of Debt Securities, as their names and addresses appear in
the applicable register for such Debt Securities, without cost to such holders,
copies of the annual reports, quarterly reports and other documents that the
Company would have been required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act if the Company were subject to such Sections,
(b) to file with the Trustee copies of the annual reports, quarterly and other
documents that the Company would have been required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act if the Company were subject
to such Sections, and (c) to supply promptly upon written request and payment of
the reasonable cost of duplication and delivery, copies of such documents to any
prospective holder of Debt Securities.
ADDITIONAL COVENANTS. Any additional covenants of the Company with respect
to any of the series of Debt Securities will be set forth in the Prospectus
Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable indenture, the Indenture will
provide that the following events are "Events of Default" with respect to any
series of Debt Securities issued thereunder: (a) default for 30 days in the
payment of any installment of interest on any Debt Security of such series; (b)
default in the payment of the principal of (or premium, if any, on) any Debt
Security of such series at its maturity; (c) default in making any sinking fund
payment as required for any Debt Security of such series; (d) default in the
performance of any other covenant of the Company contained in the applicable
Indenture (other than a covenant added to such Indenture solely for the benefit
of a series of Debt Securities issued thereunder other than such series),
continued for 60 days after written notice as provided in such Indenture; (e)
default under any evidence of indebtedness of the Company or any mortgage,
indenture or other instrument under which such indebtedness is issued or by
which such indebtedness is secured which results in the acceleration of
indebtedness in an aggregate principal amount exceeding $10,000,000, but only if
such indebtedness is not discharged or such acceleration is not rescinded or
annulled as provided in the applicable Indenture; (f) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee, of the Company or of any Significant Subsidiary or of the
respective property of either; and (g) any other event of default provided with
respect to that series of Debt Securities. The term "Significant Subsidiary"
means each significant subsidiary (as defined in Regulation S-X promulgated
under the Securities Act) of the Company.
If an Event of Default under any Indenture with respect to Debt Securities
of any series issued thereunder at the time outstanding occurs and is
continuing, then in every such case the applicable Trustee or the holders of not
less than 25% in principal amount of the outstanding Debt Securities of that
series may declare the principal amount (or, if the Debt Securities of that
series are Original Issue Discount Securities or indexed securities, such
portion of the principal amount as may be specified in the terms thereof) of all
of the Debt Securities of that series to be due and payable immediately by
written notice thereof to the Company (and to the applicable Trustee if given by
the holders). However, at any time after such a declaration of acceleration
with respect to Debt Securities of such series (or of all Debt Securities then
outstanding under such Indenture, as the case may be) has been made, the holders
of not less than a majority in principal amount of Debt Securities of such
series (or of each series of Debt Securities then outstanding under such
Indenture, as the case may be) may rescind and annul such declaration and its
consequences if (a) the Company shall have deposited with such Trustee all
required payments of the principal of (and premium, if any) and interest on the
Debt Securities of such series (or of all Debt Securities then outstanding under
such Indenture, as the case may be), plus certain fees, expenses, disbursements
and advances of the applicable Trustee and (b) all events of default, other than
the nonpayment of accelerated principal (or specified portion thereof) with
respect to Debt Securities of such series (or of all Debt Securities then
outstanding under such Indenture, as the case may be) have been cured or waived
as provided in such Indenture. The Indenture will also provide that the holders
of not less than a majority in principal amount of the Debt Securities of any
series (or of each series of Debt Securities then outstanding under the
applicable Indenture, as the case may be) may waive any past default with
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respect to such series and its consequences, except a default (x) in the payment
of the principal of (or premium, if any) or interest on any Debt Security of
such series or (y) in respect of a covenant or provision contained in such
Indenture that cannot be modified or amended without the consent of the holder
of each outstanding Debt Security affected thereby.
The Indenture will provide that the Trustee thereunder is required to give
notice to the holders of Debt Securities issued thereunder within 90 days of a
default under the Indenture unless such default shall have been cured or waived;
PROVIDED, HOWEVER, that such Trustee may withhold notice to the holders of any
such series of Debt Securities of any default with respect to such series
(except a default in the payment of the principal of (or premium, if any) or
interest on any Debt Security of such series or in the payment of any sinking
fund installment in respect of any Debt Security of such series) if specified
responsible officers of the Trustee consider such withholding to be in the
interest of such holders.
The Indenture will provide that no holder of Debt Securities of any series
issued thereunder may institute any proceeding, judicial or otherwise, with
respect to such Indenture or for any remedy thereunder, except in the case of
the failure of the applicable Trustee, for 60 days, to act after it has received
a written request to institute proceedings in respect of an event of default
from the holders of not less than 25% in principal amount of the outstanding
Debt Securities of such series, as well as an offer of reasonable indemnity.
This provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on the Debt Securities held by that holder at the
respective due dates thereof.
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee thereunder is under no obligation to exercise any of its
rights or powers under such Indenture at the request or direction of any holders
of any series of Debt Securities then outstanding under such Indenture, unless
such holders shall have offered to such Trustee reasonable security or
indemnity. The holders of not less than a majority in principal amount of the
outstanding Debt Securities of any series (or of each series of Debt Securities
then outstanding under such Indenture, as the case may be) shall have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to such Trustee, or of exercising any trust or power conferred upon
such Trustee. However, such Trustee may refuse to follow any direction which is
in conflict with any law or such Indenture, which may involve such Trustee in
personal liability or which may be unduly prejudicial to the holders of Debt
Securities of such series not joining therein.
Within 120 days after the close of each fiscal year, the Company must
delivery to each Trustee under the Indentures a certificate, signed by one of
several specified officers, stating whether such officer has knowledge of any
default under the Indenture and, if so, specifying each such default and the
nature and status thereof.
MODIFICATION OF THE INDENTURES
Modifications and amendments of any Indenture may be made only with the
consent of the holders of not less than a majority in principal amount of all
outstanding Debt Securities issued thereunder which are affected by such
modification or amendment; PROVIDED, HOWEVER, that no such modification or
amendment may, without the consent of the holder of each such Debt Security
affected thereby, (a) change the stated maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security; (b)
reduce the principal amount of, or the rate of amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the holder
of any such Debt Security; (c) change the place of payment, or the currency or
currencies, for payment of principal of, or premium, if any, or interest on any
such Debt Security; (d) impair the right to institute suit for the enforcement
of any payment on or with respect to any such Debt Security; (e) reduce the
percentage of outstanding Debt Securities of any series necessary to modify or
amend the applicable Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in such Indenture; or (f) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of such Debt Security.
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The holders of a majority in aggregate principal amount of outstanding Debt
Securities of each series may, on behalf of all holders of Debt Securities of
that series, waive, insofar as that series is concerned, compliance by the
Company with certain covenants in the applicable Indenture, including those
described in " -- Certain Covenants."
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any holder of Debt Securities issued
thereunder for any of the following purposes: (a) to evidence the succession of
another person to the Company as obligor under such Indenture; (b) to add to the
covenants of the Company for the benefit of the holders of all or any series of
Debt Securities issued thereunder or to surrender any right or power conferred
upon the Company in such Indenture; (c) to add events of default for the benefit
of the holders of all or any series of Debt Securities issued thereunder; (d) to
add or change any provisions of such Indenture to facilitate the issuance of, or
to liberalize certain terms of, Debt Securities issued thereunder in bearer
form, or to permit or facilitate the issuance of such Debt Securities in
uncertificated form, provided that such action shall not adversely affect the
interests of the holders of such Debt Securities of any series in any material
respect; (e) to change or eliminate any provision of such Indenture, provided
that any such change or elimination shall become effective only when there are
no Debt Securities outstanding of any series issued thereunder created prior
thereto which are entitled to the benefit of such provision; (f) to secure the
Debt Securities issued thereunder; (g) to establish the form or terms of Debt
Securities of any series issued thereunder, including the provisions and
procedures, if applicable, for the conversion of such Debt Securities into
Common Stock of the Company; (h) to provide for the acceptance of appointment by
a successor Trustee or facilitate the administration of the trusts under such
Indenture by more than one Trustee; (i) to cure any ambiguity, defect or
inconsistency in such Indenture, provided that such action shall not adversely
affect the interests of holders of Debt Securities of any series issued
thereunder in any material respect; or (j) to supplement any of the provisions
of such Indenture to the extent necessary to permit or facilitate defeasance and
discharge of any series of such Debt Securities issued thereunder, provided that
such action shall not adversely affect the interests of the holders of the Debt
Securities of any series issued thereunder in any material respect.
The Indenture will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series issued
thereunder have given any request, demand, authorization, direction, notice,
consent or waiver thereunder or whether a quorum is present at a meeting of
holders of such Debt Securities, (a) the principal amount of an Original Issue
Discount Security that shall be deemed to be outstanding shall be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon declaration of acceleration of the maturity thereof; (b) the
principal amount of a Debt Security denominated in a foreign currency that shall
be deemed outstanding shall be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the U.S. dollar equivalent on the issue
date of such Debt Security of the amount determined as provided in (a) above);
(c) the principal amount of an indexed security that shall be deemed outstanding
shall be the principal face amount of such indexed security at original
issuance, unless otherwise provided with respect to such indexed security in the
applicable Indenture; and (d) Debt Securities owned by the Company or any other
obligor upon the Debt Securities or any affiliate of the Company or of such
other obligor shall be disregarded.
The Indenture will contain provisions for convening meetings of the holders
of Debt Securities of a series issued thereunder. A meeting may be called at
any time by the Trustee and also, upon request, by the Company or the holders of
at least 10% in principal amount of the outstanding Debt Securities of such
series, in any such case upon notice given as provided in the applicable
Indenture. Except for any consent that must be given by the holder of each Debt
Security affected by certain modifications and amendments of the Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present may be adopted by the affirmative vote of the holders of a
majority in principal amount of the outstanding Debt Securities of that series;
PROVIDED, HOWEVER, that, except as referred to above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the holders of a
specified percentage which is less than a majority in principal amount of the
outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the holders of such specified percentage in principal amount of the outstanding
Debt Securities of that series. Any resolution passed or decision taken at any
meeting of holders of Debt Securities of any series duly held in accordance with
the Indenture will be binding on all holders of Debt Securities of that series.
The quorum at any meeting called
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to adopt a resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding Debt Securities
of a series; PROVIDED, HOWEVER, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the holders of
not less than a specified percentage in principal amount of the outstanding Debt
Securities of a series, the persons holding or representing such specified
percentage in principal amount of the outstanding Debt Securities of such series
will constitute a quorum.
Notwithstanding the provisions described above, if any action is to be
taken at a meeting of holders of Debt Securities of any series with respect to
any request, demand, authorization, direction, notice, consent, waiver or other
action that the applicable Indenture expressly provides may be made, given or
taken by the holders of a specified percentage in principal amount of all
outstanding Debt Securities affected thereby, or of the holders of such series
and one or more additional series: (a) there shall be no minimum quorum
requirement for such meeting and (b) the principal amount of the outstanding
Debt Securities of such series that vote in favor of such request, demand,
authorization, direction, notice, consent, waiver or other action shall be taken
into account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given or taken
under the Indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company may discharge certain obligations to holders of any series of Debt
Securities that have not already been delivered to the Trustee for cancellation
and that either have become due and payable or will become due and payable
within one year (or scheduled for redemption within one year) by irrevocably
depositing with such Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness on
such Debt Securities in respect of principal (and premium, if any) and interest
to the date of such deposit (if such Debt Securities have become due and
payable) or to the stated maturity or redemption date, as the case may be.
The Indenture will provides that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either (a) to defease
and be discharged from any and all obligations (except for the obligation to pay
additional amounts, if any, upon the occurrence of certain events of tax,
assessment or governmental charge with respect to payments on such Debt
Securities and the obligations to register the transfer or exchange of such Debt
Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt
Securities, to maintain an office or agency in respect of such Debt Securities
and to hold moneys for payment in trust) with respect to such Debt Securities
("defeasance") or (b) to be released from its obligations with respect to such
Debt Securities under the applicable Indenture (being the restrictions described
under the caption "-- Certain Covenants") or if provided in the applicable
Prospectus Supplement, its obligations with respect to any other covenant, and
any omission to comply with such obligations shall not constitute a default or
an event of default with respect to such Debt Securities ("covenant
defeasance"), in either case upon the irrevocable deposit by the Company with
the applicable Trustee, in trust, of an amount, in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable at stated maturity, or Government Obligations (as defined
below), or both, applicable to such Debt Securities which through the scheduled
payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of (and premium, if any) and
interest on such Debt Securities, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company
has delivered to the applicable Trustee an opinion of Counsel (as specified in
the applicable Indenture) to the effect that the holders of such Debt Securities
will not recognize income, gain or loss for U.S. federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance or covenant defeasance had not
occurred, and such opinion of Counsel, in the case of defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of such
Indenture. In the event of such defeasance, the holders of such Debt Securities
would thereafter be able to look only to such trust fund for payment of
principal (and premium, if any) and interest.
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"Government Obligations" means securities which are (a) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged, or (b) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of actions by a central bank or other public institution of
or within the international banking community, (ii) the ECU both within the
European Monetary System and for the settlement of transactions by public
institutions of or within the European Communities or (iii) any currency unit or
composite currency other than the ECU for the purposes for which it was
established. Unless otherwise described in the applicable Prospectus
Supplement, all payments of principal of (and premium, if any) and interest on
any Debt Security that is payable in a Foreign Currency that ceases to be used
by its government of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any event of default, other than the event of default
described in clause (d) under "-- Events of Default, Notice and Waiver" with
respect to the specified sections in the applicable Indenture (which Sections
would no longer be applicable to such Debt Securities) or clause (g) thereunder
with respect to any other covenants as to which there has been covenant
defeasance, the amount in such currency, currency unit or composite currency in
which such Debt Securities are payable and Government Obligations on deposit
with the applicable Trustee, will be sufficient to pay amounts due on such Debt
Securities at the time of their stated maturity but may not be sufficient to pay
amounts due on such Debt Securities at the time of the acceleration resulting
from such event of default. In any such event, the Company would remain liable
to make payments of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERTIBLE DEBT SECURITIES
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include whether such Debt
Securities are convertible into Common Stock, the conversion price (or manner of
calculation thereof), the conversion period, provisions as to whether conversion
will be at the option of the holders or the Company, the events
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requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such Debt Securities and any
restrictions on conversion, including restrictions directed at maintaining the
Company's REIT status.
Reference is made to the section captioned "Description of Common Stock"
for a general description of the Common Stock to be acquired upon the conversion
of Debt Securities, including a description of certain restrictions on the
ownership of the Common Stock.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Company consists of 30,000,000 shares
of Common Stock, par value $0.01 per share, as well as 30,000,000 shares of
Excess Stock, par value $0.01 per share, issuable in exchange for Common Stock
as described in the Company's articles of incorporation. At June 30, 1995, the
Company had outstanding 11,633,672 shares of Common Stock. All issued and
outstanding shares of Common Stock are duly authorized, validly issued, fully
paid and nonassessable.
GENERAL
The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable upon conversion of Debt Securities or upon the exercise of the Warrants
to purchase Common Stock issued by the Company. The statements below describing
the Common Stock are in all respects subject to and qualified in their entirety
by reference to the applicable provisions of the Company's articles of
incorporation and bylaws.
COMMON STOCK
The holders of Common Stock elect all directors and are entitled to one
vote per share on all matters submitted to a vote of the stockholders.
Stockholders are entitled to receive dividends when, as and if declared by the
Board of Directors out of funds legally available for that purpose. Upon any
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share pro rata in any distribution to stockholders. Holders of
Common Stock have no preemptive, subscription or conversion rights. The Common
Stock will, when issued, be fully paid and nonassessable and will not be subject
to preemptive or other similar rights.
The Company purchased from six limited partnerships and one general
partnership 14 properties in July 1992, and purchased from a trust one property
in August 1993, in exchange for the issuance to the partnerships and the trust
of an aggregate of 346,172 shares of Common Stock (the "CNL Transaction"). All
of the shares issued in connection with the CNL Transaction are subject to
piggyback registration rights under certain circumstances.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT, not more than 50 percent in value of
its outstanding Common Stock may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year; the shares must be beneficially owned (without
reference to any rules of attribution) by 100 or more persons during at least
335 days of a taxable year of 12 months or during a proportionate
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part of a shorter taxable year; and certain other requirements must be
satisfied. See "Federal Income Tax Considerations--Taxation of the Company."
To ensure that five or fewer individuals do not own more than 50 percent in
value of the outstanding Common Stock, the Company's articles of incorporation
provide that, subject to certain exceptions, no holder may own, or be deemed to
own by virtue of the attribution provisions of the Code, more than 9.8 percent
in value (the "Ownership Limit") of the outstanding Common Stock. The Board of
Directors may waive the Ownership Limit if evidence satisfactory to the Company
and the Company's tax counsel is presented that such ownership will not then or
in the future jeopardize the Company's status as a REIT. As a condition of such
waiver, the Board of Directors may require opinions of counsel satisfactory to
it and/or an undertaking from the applicant with respect to preserving the
status of the company as a REIT.
The Ownership Limit will not be automatically removed even if the REIT
provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limitation is
increased. In addition to preserving the Company's status as a REIT, the
Ownership Limit may prevent any person or small group of persons from acquiring
unilateral control of the Company.
If the ownership, transfer or acquisition of shares of Common Stock, or
change in capital structure of the Company or other event or transaction would
result in (a) any Person (as defined below) owning (applying certain attribution
rules) Common Stock in excess of the Ownership Limit, (b) fewer than 100 Persons
owning the Common Stock, (c) the Company being "closely held" within the meaning
of Section 856(h) of the Code, or (d) the Company failing any of the gross
income requirements of Section 856(c) of the Code or otherwise failing to
qualify as a REIT, then the ownership, transfer or acquisition, or change in
capital structure or other event or transaction that would have such effect will
be void as to the purported transferee or owner, and the purported transferee or
owner will not have or acquire any rights to the Common Stock to the extent
required to avoid such a result. Common Stock owned, transferred or proposed to
be transferred in excess of the Ownership Limit or which would otherwise
jeopardize the Company's status as a REIT will automatically be converted to
Excess Stock. A holder of Excess Stock is not entitled to distributions, voting
rights, and other benefits with respect to such shares except for the right to
payment of the purchase price for the shares (or, in the case of a devise or
gift or similar event which results in the issuance of Excess Stock, the fair
market value at the time of such devise or gift or event) and the right to
certain distributions upon liquidation. Any dividend or distribution paid to a
proposed transferee or holder of Excess Stock shall be repaid to the Company
upon demand. Excess Stock shall be subject to repurchase by the Company at its
election. The purchase price of any Excess Stock shall be equal to the lesser
of (i) the price paid in such purported transaction (or, in the case of a devise
or gift or similar event resulting in the issuance of Excess Stock, the fair
market value at the time of such devise or gift or event), or (ii) the fair
market value of such Common Stock on the date on which the Company or its
designee determines to exercise its repurchase right. If the foregoing transfer
restrictions are determined to be void or invalid by virtue of any legal
decision, statute, rule or regulation, then the purported transferee of any
Excess Stock may be deemed, at the option of the Company, to have acted as an
agent on behalf of the Company in acquiring such Excess Stock and to hold such
Excess Stock on behalf of the Company.
For purposes of the Company's articles of incorporation, the term "Person"
shall mean an individual, corporation, partnership, estate, trust (including a
trust qualified under Section 401(a) or 501(c)(17) of the Code), a portion of a
trust permanently set aside to be used exclusively for the purposes described in
Section 642(c) of the Code, association, private foundation within the meaning
of Section 509(a) of the Code, joint stock company or other entity, or a group
as that term is used for purposes of Section 13(d)(3) of the Exchange Act; but
does not include an underwriter which participated in a public offering of
Common Stock for a period of sixty (60) days following the purchase by such
underwriter of Common Stock therein, provided that the foregoing exclusions
shall apply only if the ownership of such Common Stock by such underwriter would
not cause the Company to fail to qualify as a REIT by reason of being "closely
held" within the meaning of Section 856(a) of the Code or otherwise cause the
Company to fail to qualify as a REIT.
All certificates representing Common Stock will bear a legend referring to
the restrictions described above.
The articles of incorporation of the Company provide that all persons who
own, directly or by virtue of the attribution provisions of the Code, more than
5.0 percent of the outstanding Common Stock, or such lower
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percentage as may be required pursuant to regulations under the Code or as may
be requested by the Board of Directors, must file a written notice with the
Company no later than January 31 of each year with respect to the prior year
containing (a) the name and address of such owner, (b) the number of shares of
Common Stock owned by such holder and (c) a description of how such shares are
held. In addition, each stockholder shall be required to disclose, upon demand,
to the Company in writing such information with respect to the direct indirect
and constructive ownership of shares as the directors deem necessary to comply
with the provisions of the Code as applicable to a REIT or to comply with the
requirements of any taxing authority or governmental agency.
The ownership limitations described above may have the effect of precluding
acquisitions of control of the Company by a third party.
TRANSFER AGENT
First Union National Bank of North Carolina is the Transfer Agent of the
Common Stock.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with any
other Offered Securities offered by any Prospectus Supplement and may be
attached to or separate from such Offered Securities. Each series of Common
Stock Warrants will be issued under a separate warrant agreement (each, a
"Warrant Agreement") to be entered into between the Company and a warrant agent
specified in the applicable Prospectus Supplement (the "Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with the
Common Stock Warrants of such series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
Common Stock Warrants. The following sets forth certain general terms and
provisions of the Common Stock Warrants offered hereby. Further terms of the
Common Stock Warrants and the applicable Warrant Agreements will be set forth in
the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the Common
Stock Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (a) the title of such Common Stock
Warrants; (b) the aggregate number of such Common Stock Warrants; (c) the price
or prices at which such Common Stock Warrants will be issued; (d) the number of
shares of Common Stock purchasable upon exercise of such Common Stock Warrants;
(e) the designation and terms of the other Offered Securities with which such
Common Stock Warrants are issued and the number of such Common Stock Warrants
issued with each such Offered Security; (f) the date, if any, on and after which
such Common Stock Warrants and the related Common Stock will be separately
transferable; (g) the price at which each share of Common Stock purchasable upon
exercise of such Common Stock Warrants may be purchased; (h) the date on which
the right to exercise such Common Stock Warrants shall commence and the date on
which such right shall expire; (i) the minimum or maximum amount of such Common
Stock Warrants which may be exercised at any one time; (j) information with
respect to book-entry procedures, if any; (k) any limitations on the
acquisition or ownership of such Common Stock Warrants which may be required in
order to maintain the status of the Company as a REIT; (l) a discussion of
certain federal income tax considerations; and (m) any other terms of such
Common Stock Warrants, including terms, procedures and limitations relating to
the exchange and exercise of such Common Stock Warrants.
Reference is made to the section captioned "Description of Common Stock"
for a general description of the Common Stock to be acquired upon the exercise
of the Common Stock Warrants, including a description of certain restrictions on
the ownership of Common Stock.
FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTION
The following is a summary of the material federal income tax consequences
of the ownership of the Common Stock of the Company, prepared by Shaw, Pittman,
Potts & Trowbridge, tax counsel to the Company ("Tax
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Counsel"). This discussion is based upon the laws, regulations, and reported
rulings and decisions in effect as of the date of this Prospectus (or, in the
case of certain regulations, proposed as of such date), all of which are subject
to change, retroactively or prospectively, and to possibly differing
interpretations. This discussion does not purport to deal with the federal
income tax consequences applicable to all investors in light of their particular
investment circumstances, or to all categories of investors, some of whom may be
subject to special rules (including, for example, insurance companies, tax-
exempt organizations, financial institutions, broker-dealers, foreign
corporations and persons who are not citizens or residents of the United
States). No ruling on the federal, state or local tax considerations relevant
to the operation of the Company, or to the purchase, ownership or disposition of
the Common Stock, has been requested from the Internal Revenue Service (the
"Service") or other tax authority. Tax Counsel has rendered certain opinions
discussed herein and believes that if the Service were to challenge the
conclusions of Tax Counsel, such conclusions should prevail in court. However,
opinions of counsel are not binding on the Service or on the courts, and no
assurance can be given that the conclusions reached by Tax Counsel would be
sustained in court. Investors should consult their own tax advisors in
determining the federal, state, local, foreign and other tax consequences to
them of the purchase, ownership and disposition of the Common Stock of the
Company.
TAXATION OF THE COMPANY
GENERAL. Since its inception, the Company has elected, and believes it has
qualified, to be taxed as a REIT for federal income tax purposes, as defined in
Sections 856 through 860 of the Code. The provisions of the Code pertaining to
REITs are highly technical and complex. If various conditions imposed by the
Code are met, a REIT is, with limited exceptions, not taxed at the corporate
level on income that is currently distributed to the REIT's stockholders.
Undistributed income is taxed at regular corporate rates and may be subject to a
4 percent excise tax. In addition, a REIT may be subject to the "alternative
minimum tax" on its items of tax preference and is subject to income tax at the
highest corporate rate on income from foreclosure property and to penalty taxes
on excessive unqualified income and prohibited transactions.
If the Company fails to qualify as a REIT for any taxable year and certain
relief provisions do not apply, the Company will be subject to federal income
tax (including alternative minimum tax) as an ordinary corporation on its
taxable income at regular corporate rates without any deduction or adjustment
for distributions to holders of Common Stock. To the extent that the Company
would, as a consequence, be subject to tax liability for any such year, the
amount of cash available for satisfaction of its liabilities and for
distribution to holders of Common Stock would be reduced. Distributions to
holders of Common Stock generally would be taxable as ordinary income to the
extent of current and accumulated earnings and profits and, subject to certain
limitations, would be eligible for the corporate dividends received deduction,
but there can be no assurance that any such distributions would be made. The
Company would not be eligible to elect REIT status for the four subsequent
taxable years, unless its failure to qualify was due to reasonable cause and not
willful neglect and unless certain other requirements were satisfied.
OPINION OF TAX COUNSEL. Based upon representations made by officers of the
Company with respect to relevant factual matters, upon the existing Code
provisions, rules and regulations promulgated thereunder (including proposed
regulations) and reported administrative and judicial interpretations thereof,
upon Tax Counsel's independent review of such documents and other information as
Tax Counsel deemed relevant in the circumstances and upon the assumption that
the Company will operate in the manner described in this Prospectus, Tax Counsel
has advised the Company that, in its opinion, (a) the Company has, for the years
1984 through 1994, met the requirements for qualification and taxation as a REIT
and (b) the Company's proposed method of operation will enable it to meet the
requirements for qualification and taxation as a REIT for 1995. It must be
emphasized, however, that the Company's ability to qualify as a REIT is
dependent upon actual operating results and future actions and events by the
Company and others, and no assurance can be given that the actual results of the
Company's operations and the future actions and events will enable the Company
to satisfy in any given year the requirements for qualification and taxation as
a REIT.
REQUIREMENTS FOR QUALIFICATION AS A REIT. As discussed more fully below,
the Code defines a REIT as a corporation (a) which is managed by one or more
trustees or directors; (b) the beneficial ownership of which is evidenced by
transferable shares, or by transferable certificates of beneficial interest; (c)
which would be taxable, but for Sections 856 through 860 of the Code, as a
domestic corporation; (d) which is neither a financial institution nor an
insurance company; (e) the beneficial ownership of which is held by 100 or more
persons; (f) which is not
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closely held; and (g) which meets certain other tests regarding the nature of
its assets and income and the amount of its distributions.
OWNERSHIP TESTS. More specifically, the ownership requirements of a REIT
are that (a) during the last half of each taxable year not more than 50 percent
of the Company's outstanding shares may be owned, directly or indirectly, by
five or fewer individuals and (b) there must be at least 100 stockholders on at
least 335 days of such 12-month taxable year (or a proportionate number of days
of a short taxable year). In order to meet these requirements, or to otherwise
obtain, maintain or reestablish REIT status, and for no other purpose, the
Company's articles of incorporation empowers the Board of Directors to redeem,
at its option, a sufficient number of shares or to restrict the transfer thereof
to bring or to maintain the ownership of shares of the Company in conformity
with the requirements of the Code. The redemption price to be paid will be fair
market value as reflected in the latest quotations, or, if no quotations are
available, the net asset value of the shares as determined by the Board of
Directors.
Under the Company's articles of incorporation, each holder of common stock
is required, upon demand, to disclose to the Board of Directors in writing such
information with respect to direct and indirect ownership of shares of the
Company as the Board of Directors deems necessary to comply with provisions of
the Code applicable to the Company, or to comply with the requirements of any
other appropriate taxing authority. Certain Treasury regulations govern the
method by which the Company is required to demonstrate compliance with these
stock ownership requirements and the failure to satisfy such regulations could
cause the Company to fail to qualify as a REIT. The Company has represented
that it has met, and expects to meet, these stock ownership requirements for
each taxable year.
ASSET TESTS. At the end of each quarter of a REIT's taxable year, at least
75 percent of the value of its total assets must consist of "real estate
assets," cash and cash items (including receivables) and government securities.
The balance of a REIT's assets generally may be invested without restriction,
except that holdings of securities not within the 75 percent class of assets
generally must not, with respect to any issuer, exceed 5 percent of the value of
the REIT's assets or 10 percent of the issuer's outstanding voting securities.
The term "real estate assets" includes real property, interests in real
property, leaseholds of land or improvements thereon, and any property
attributable to the temporary investment of new capital (but only if such
property is stock or a debt instrument and only for the one-year period
beginning on the date the REIT receives such capital). The Company has
represented that at the end of each quarter it has met, and expects in the
future to continue to meet, this asset test.
INCOME TESTS. A REIT also must meet three separate tests with respect to
its sources of income for each taxable year.
(i) THE 75 PERCENT AND 95 PERCENT TESTS. In general, at least 75 percent
of a REIT's gross income (excluding income from prohibited transactions) for
each taxable year must be from rents from real property, interest on obligations
secured by mortgages on real property, gains from the sale or other disposition
of real property and certain other sources. In addition, a REIT must derive at
least 95 percent of its gross income (excluding income from prohibited
transactions) for each taxable year from any combination of the items of income
which qualify under the 75 percent test, from dividends and interest and from
gains from the sale, exchange or other disposition of certain stocks and
securities.
Rents received by a REIT will qualify as "rents from real property" in
satisfying the gross income requirements described above only if several
conditions are met. First, the amount of rent must not be based in whole or in
part on the income or profits of any person. However, an amount received or
accrued generally will not be excluded from the term "rents from real property"
solely by reason of being based on a fixed percentage or percentages of receipts
of sales. The Company's leases provide for either fixed rent, sometimes with
scheduled escalations, or a fixed minimum rent and a percentage of gross
receipts in excess of some threshold. Second, the Code provides that rents
received from a tenant will not qualify as "rents from real property" in
satisfying the gross income tests if the Company, or an owner of 10 percent or
more of the Company, directly or constructively owns 10 percent or more of such
tenant (a "Related Party Tenant"). Third, if rent attributable to personal
property, leased in connection with a lease of real property, is greater than 15
percent of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents from real
property." The Company anticipates that none of its gross annual income will be
considered attributable to rents that are based in whole or in part on the
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income or profits of any person; that no more than a DE MINIMIS amount of its
gross annual income will be considered attributable to the rental of personal
property; and that none of its gross annual income will be from Related Party
Tenants. Finally, for rents received to qualify as "rents from real property,"
the Company generally must not operate or manage the property or furnish or
render services to tenants, other than through an "independent contractor" from
whom the Company derives no revenue. The "independent contractor" requirement,
however, does not apply to the extent the services provided by the Company are
"usually or customarily rendered" in connection with the rental space for
occupancy only and are not otherwise considered "rendered to the occupant." The
Company or CNL Advisors will provide certain services with respect to the
Properties. The Company does not anticipate that any of these services will be
(a) of a type other than those usually or customarily rendered in connection
with the rental space for occupancy only or (b) of a type considered rendered to
any of the occupants of the Properties.
Should an entity fail to satisfy either or both of the 75 percent or 95
percent tests for any taxable year, it may still qualify as a REIT if (a) such
failure is due to reasonable cause and not willful neglect; (b) it reports the
nature and amount of each item of its income on a schedule attached to its tax
return for such year; and (c) the reporting of any incorrect information is not
due to fraud with intent to evade tax. However, even if these three
requirements were met and the REIT were not disqualified, a penalty tax of 100
percent would be imposed by reference to the amount by which the REIT failed the
75 percent or 95 percent test (whichever amount is greater). No mitigation
provision applies if the 30 percent income test, described below, is failed. In
such case, the Company will cease to qualify as a REIT.
(ii) THE 30 PERCENT TEST. In addition to the 75 percent and 95 percent
tests, a REIT must derive less than 30 percent of its gross income (including
gross income from prohibited transactions) from the sale or other disposition of
(i) real property held for less than four years (other than foreclosure property
or property involuntarily or compulsorily converted through destruction,
condemnation or similar events ); (ii) stocks or securities held for less than
one year; and (iii) property sold or otherwise disposed of in a prohibited
transaction. The Company has represented that it has not recognized and does
not expect that it will recognize gross income of a type, in an amount or at a
time which would cause it to fail the 30 percent test.
DISTRIBUTION REQUIREMENTS. A REIT must distribute annually to its
stockholders ordinary income dividends in an amount equal to at least (a) 95
percent of the sum of (i) its "real estate investment trust taxable income"
(before deduction of dividends paid and excluding any net capital gains) and
(ii) the excess of net income from foreclosure property over the tax on such
income, minus (b) certain excess non-cash income. Real estate investment trust
taxable income generally is the taxable income of a REIT computed as if it were
an ordinary corporation, with certain adjustments. Distributions must be made
in the taxable year to which they relate or, if declared before the timely
filing of the REIT's tax return for such year and paid not later than the first
regular dividend payment after such declaration, in the following taxable year.
To the extent that the Company does not distribute all of its net capital gain
or distributes at least 95 percent, but less than 100 percent, of its real
estate investment trust taxable income, as adjusted, it will be subject to tax
thereon at regular ordinary and capital gain corporate tax rates. Furthermore,
if the Company should fail to distribute during each calendar year at least the
sum of (x) 85 percent of its ordinary income, (y) 95 percent of its net capital
gain net income for such year and (z) any undistributed taxable income from
prior periods, the Company would be subject to a 4 percent excise tax on the
excess of such required distribution over the amounts actually distributed.
The Company has represented that it has made and intends to make
distributions to stockholders that will be sufficient to meet the annual
distribution requirements. Under some circumstances, however, it is possible
that the Company may not have sufficient funds from its operations to pay cash
dividends to satisfy these distribution requirements. If the cash available to
the Company is insufficient, the Company might raise cash in order to make the
distributions by borrowing funds, issuing new securities or selling assets. If
the Company ultimately were unable to satisfy the 95 percent distribution
requirement, it would fail to qualify as a REIT and, as a result, would be
subject to federal income tax as an ordinary corporation without any deduction
or adjustment for distributions to holders of the Common Stock.
If the Company were to fail to meet the 95 percent distribution requirement
as a result of an adjustment to the Company's tax returns by the Service, the
Company could maintain its qualification as a REIT by paying a "deficiency
dividend" (plus a penalty and interest) within a specified period which will be
permitted as a deduction in the taxable year with respect to which the
adjustment is made.
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TAXATION OF TAXABLE DOMESTIC STOCKHOLDERS. For any taxable year in which
the Company qualifies as a REIT for federal income tax purposes, distributions
by the Company to its stockholders that are United States persons (generally,
any person other than a nonresident alien individual, a foreign trust or estate
or a foreign partnership or corporation) generally will be taxed as ordinary
income. Amounts received by such United States persons that are properly
designated as capital gain dividends by the Company generally will be taxed as
long-term capital gain (to the extent that they do not exceed the Company's
actual net capital gain for the taxable year) without regard to the period for
which the stockholder has held his Common Stock. However, corporate
stockholders may be required to treat up to 20 percent of certain capital gain
dividends as ordinary income. Such ordinary income and capital gain are not
eligible for the dividends received deduction allowed to corporations.
Distributions to such United States persons in excess of the Company's current
or accumulated earnings and profits will be considered first a tax-free return
of capital, reducing the tax basis of each stockholder's Common Stock, and then,
to the extent the distribution exceeds each stockholder's basis, a gain realized
from the sale of Common Stock. The Company will notify each stockholder as to
the portions of each distribution which, in its judgment, constitute ordinary
income, capital gain or return of capital. Any dividend that is (a) declared by
the Company in October, November or December of any calendar year and payable to
stockholders of record on a specified date in such months and (b) actually paid
by the Company in January of the following year, shall be deemed to have been
both paid by the Company and received by the stockholders on December 31 of such
calendar year and, as a result, will be includable in gross income of the
stockholders for the taxable year which includes such December 31.
Stockholders may not deduct on their income tax returns any net operating
or net capital losses of the Company. Net operating losses may be carried
forward by the Company for 15 years and used to reduce taxable income and the
amounts that the Company will be required to distribute in order to remain
qualified as a REIT. Net capital losses may be carried forward by the Company
for five years and used to reduce capital gains. Losses not used within the
relevant period expire.
Upon the sale or other disposition of the Company's Common Stock, a
stockholder generally will recognize capital gain or loss equal to the
difference between this amount realized on the sale or other disposition and the
adjusted basis of the shares involved in the transaction. Such gain or loss
will be long-term capital gain or loss if, at the time of sale or other
disposition, the shares involved have been held for more than one year. In
addition, if a stockholder receives a capital gain dividend with respect to a
share of Common Stock which he has held for six months or less at the time of
sale or other disposition, any loss recognized by the stockholder will be
treated as long-term capital loss to the extent of the amount of the capital
gain dividend that was treated as long-term capital gain.
Distributions from the Company and gain from the disposition of Common
Stock will not be treated as passive activity income and, therefore,
stockholders will not be able to apply any "passive activity losses" against
such income. Dividends from the Company (to the extent they do not constitute a
return of capital or capital gain dividends) and, on an elective basis, capital
gain dividends and gain from the disposition of Common Stock generally will be
treated as investment income for purposes of the investment income limitation.
The state and local income tax treatment of the Company and its
stockholders may not conform to the federal income tax treatment described
above. (For example, in most states, individual stockholders who are residents
of the state will be subject to state income tax on dividends and gains on their
shares in the Company, but the state of Delaware -- unlike most, if not all,
other states -- also taxes nonresident stockholders of a REIT on dividends and
gains from the REIT to the extent, if any, that such income is attributable to
property located in Delaware.) As a result, investors should consult their own
tax advisors for an explanation of how other state and local tax laws would
affect their investment in Common Stock.
BACKUP WITHHOLDING. The Company will report to its stockholders and the
IRS the amount of distributions paid during each calendar year, and the amount
of tax withheld, if any. Under the backup withholding rules, a stockholder may
be subject to backup withholding at a rate of 31 percent with respect to
distributions paid unless such other holder (i) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact, or
(ii) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. A stockholder that does not
provide the Company with his correct taxpayer identification number also may be
subject to penalties
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imposed by the IRS. Any amount paid as backup withholding will be creditable
against the stockholder's income tax liability.
TAXATION OF TAX-EXEMPT STOCKHOLDERS. Distributions by the Company to a
stockholder that is a tax-exempt entity generally will not constitute "unrelated
business taxable income" ("UBTI") as defined in Section 512(a) of the Code,
provided that the tax-exempt entity has not financed the acquisition of its
shares with "acquisition indebtedness" within the meaning of the Code and the
shares are not otherwise used in an unrelated trade or business of the tax-
exempt entity. For taxable years beginning after December 31, 1993, however,
qualified trusts that hold more than 10 percent (by value) of the shares of
certain REITs may be required to treat a certain percentage of the distributions
of such REITs as UBTI. The conditions which trigger this requirement do not
currently exist, and the Company does not anticipate that they will ever exist.
This requirement will apply only if (a) the REIT would not qualify as such for
federal income tax purposes but for the application of a "look-through"
exception to the five or fewer requirement applicable to shares being held by
qualified trusts and (b) the REIT is "predominantly held" by qualified trusts.
A REIT is predominantly held if either (i) a single qualified trust holds more
than 25 percent by value of the REIT interests or (ii) one or more qualified
trusts, each owning more than 10 percent by value of the REIT interests, hold in
the aggregate more than 50 percent of the REIT interests. The percentage of any
REIT dividend treated as UBTI is equal to the ratio of (i) the UBTI earned by
the REIT (treating the REIT as if it were a qualified trust and therefore
subject to tax on UBTI) to (ii) the total gross income (less certain associated
expenses of the REIT). A DE MINIMIS exception applies where the ratio set forth
in the preceding sentence is less than 5 percent for any year. For these
purposes, a qualified trust is any trust described in Section 401(a) of the Code
and exempt from tax under Section 501(a) of the Code. The provisions requiring
qualified trusts to treat a portion of REIT distributions as UBTI will not apply
if the REIT is able to satisfy the five or fewer requirements without relying
upon the "look-through" exception. The existing restrictions on ownership of
shares in the articles of incorporation will prevent the application of the
provisions treating a portion of the REIT distributions as UBTI to tax-exempt
entities purchasing shares pursuant to the Offering, absent a waiver of the
restrictions by the Board of Directors.
ERISA CONSIDERATIONS
THE FOLLOWING IS A SUMMARY OF MATERIAL CONSIDERATIONS ARISING UNDER THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA ") AND THE
PROHIBITED TRANSACTION PROVISIONS OF SECTION 4975 OF THE CODE THAT MAY BE
RELEVANT TO PROSPECTIVE INVESTORS. THIS DISCUSSION DOES NOT PURPORT TO DEAL
WITH ALL ASPECTS OF ERISA OR THE CODE THAT MAY BE RELEVANT TO PARTICULAR
INVESTORS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES. A PROSPECTIVE INVESTOR
THAT IS AN EMPLOYEE BENEFIT PLAN SUBJECT TO ERISA, A TAX-QUALIFIED RETIREMENT
PLAN, AN IRA, OR A GOVERNMENTAL, CHURCH, OR OTHER PLAN THAT IS EXEMPT FROM ERISA
IS ADVISED TO CONSULT ITS OWN LEGAL ADVISOR REGARDING THE SPECIFIC
CONSIDERATIONS ARISING UNDER APPLICABLE PROVISIONS OF ERISA, THE CODE, AND STATE
LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR SALE OF THE OFFERED SECURITIES
BY SUCH PLAN OR IRA.
FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS
A fiduciary of a pension, profit-sharing, retirement or other employee
benefit plan subject to ERISA (an "ERISA Plan") should consider the fiduciary
standards under ERISA in the context of the ERISA Plan's particular
circumstances before authorizing an investment of any portion of the ERISA
Plan's assets in the Offered Securities. Accordingly, such fiduciary should
consider (a) whether the investment satisfies the diversification requirements
of Section 404(a)(1)(C) of ERISA; (b) whether the investment is in accordance
with the documents and instruments governing the ERISA Plan as required by
Section 404(a)(1)(D) of ERISA; (c) whether the investment is prudent under
Section 404(a)(1)(B) of ERISA; and (d) whether the investment is solely in the
interests of the ERISA Plan participants and beneficiaries and for the exclusive
purpose of providing benefits to the ERISA Plan participants and beneficiaries
and defraying reasonable administrative expenses of the ERISA Plan as required
by Section 404(a)(1)(A) of ERISA.
In addition to the imposition of fiduciary standards, ERISA and Section
4975 of the Code prohibit a wide range of transactions between an ERISA Plan, an
IRA, or certain other plans (collectively, a "Plan") and persons
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who have certain specified relationships to the Plan ("parties in interest"
within the meaning of ERISA and "disqualified persons" within the meaning of the
Code). Thus, a Plan fiduciary or person making an investment decision for a
Plan also should consider whether the acquisition or the continued holding of
the Offered Securities might constitute or give rise to a direct or indirect
prohibited transaction.
PLAN ASSETS
The prohibited transaction rules of ERISA and the Code apply to
transactions with a Plan and also to transactions with the "plan assets" of a
Plan. The "plan assets" of a Plan include the Plan's interest in an entity in
which the Plan invests and, in certain circumstances, the assets of the entity
in which the Plan holds such interest. The term "plan assets" is not
specifically defined in ERISA or the Code, nor, as of the date hereof, has it
been interpreted definitively by the courts in litigation. On November 13,
1986, the United States Department of Labor, the governmental agency primarily
responsible for administering ERISA, adopted a final regulation (the "DOL
Regulation") setting out the standards it will apply in determining whether an
equity investment in an entity will cause the assets of such entity to
constitute "plan assets." The DOL Regulation applies for purposes of both ERISA
and Section 4975 of the Code.
Under the DOL Regulation, if a Plan acquires an equity interest in an
entity, which equity interest is not a "publicly-offered security," the Plan's
assets generally would include both the equity interest and an undivided
interest in each of the entity's underlying assets unless certain specified
exceptions apply. The DOL Regulation defines a publicly-offered security as a
security that is "widely held," "freely transferable," and either part of a
class of securities registered under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or sold pursuant to an
effective registration statement under the Securities Act (provided the
securities are registered under the Exchange Act within 120 days after the end
of the fiscal year of the issuer during which the offering occurred). The
Common Stock is being sold in an offering registered under the Securities Act
and will be registered within the relevant time period under Section 12(b) of
the Exchange Act.
The DOL Regulation provides that a security is "widely held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. However, a class of securities will not fail
to be "widely held" solely because the number of independent investors falls
below 100 subsequent to a public offering as a result of events beyond the
issuer's control. The Company expects the Common Stock to be "widely held."
The DOL Regulation provides that whether a security is "freely
transferable" is a factual question to be determined on the basis of all the
relevant facts and circumstances. The DOL Regulation further provides that when
a security is part of an offering in which the minimum investment is $10,000 or
less, as is the case with this Offering, certain restrictions ordinarily will
not affect, alone or in combination, the finding that such securities are freely
transferable. The Company believes that the restrictions imposed under the
articles of incorporation on the transfer of the Common Stock are limited to
restrictions on transfer generally permitted under the DOL Regulation and are
not likely to result in the failure of the Common Stock to be "freely
transferable." See "Description of Common Stock-Restrictions on Transfer." The
DOL Regulation only establishes a presumption in favor of a finding of free
transferability and, therefore, no assurance can be given that the Department of
Labor and the U.S. Treasury Department would not reach a contrary conclusion
with respect to the Common Stock.
Assuming that the Common Stock will be "widely held" and "freely
transferable," the Company believes that the Common Stock will be publicly-
offered securities for purposes of the DOL Regulation and that the assets of the
Company will not be deemed to be "plan assets" of any plan that invests in the
Common Stock.
Additional ERISA considerations that apply to the acquisition or continued
holding of Offered Securities that are Common Stock Warrants or Debt Securities
which are convertible into equity securities will be contained in the applicable
Prospectus Supplement.
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<PAGE>
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents. Any such underwriter or agent involved in the offer
and sale of the Offered Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, related to the prevailing market prices at the
time of sale, or at negotiated prices. The Company also may, from time to time,
authorize underwriters acting as the Company's agents to offer and sell the
Offered Securities upon the terms and conditions set forth in an applicable
Prospectus Supplement. In connection with the sale of Offered Securities,
underwriters may be deemed to have received compensation from the Company in the
form of underwriting discounts or commissions and may also receive commissions
from purchasers of Offered Securities for whom they may act as agent.
Underwriters may sell Offered Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions from the
underwriters or commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities and any discounts,
concessions or commissions allowed by underwriters to participating dealers will
be set forth in the applicable Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of the Offered Securities may be deemed
to be underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the Offered Securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the aggregate principal amount of Securities sold
pursuant to Contracts shall be not less or more than, the respective amounts
stated in the applicable Prospectus Supplement. Institutions with whom
Contracts, when authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions, and other institutions, but will in all cases be
subject to the approval of the Company. Contracts will not be subject to any
conditions except (i) the purchase by an institution of the Offered Securities
covered by its Contracts shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which such institution is
subject and (ii) if the Offered Securities are being sold to underwriters, the
Company shall have sold to such underwriters the total principal amount of the
Offered Securities less the principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
EXPERTS
The financial statements incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K have been audited by KPMG Peat Marwick
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of such firm given upon the their authority as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for the Company
by Shaw, Pittman, Potts & Trowbridge, Washington, D.C., a partnership including
professional corporations. In addition, the description of
-22-
<PAGE>
federal income tax consequences contained in this Prospectus is based upon the
opinion of Shaw, Pittman, Potts & Trowbridge.
-23-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below are the amounts of fees and expenses (other than
underwriting discounts and commissions) to be paid by the Company in connection
with the offering of the Offered Securities. All amounts set forth below, with
the exception of the SEC Registration Fee and the NASD Filing, are estimated.
SEC Registration Fee $ 68,966
NASD Filing Fee $ 20,500
Printing and Mailing Costs $ 100,000
Accounting Fees and Expenses $ 30,000
Legal Fees and Expenses $ 150,000
Blue Sky Fees and Expenses $ 20,000
Miscellaneous $ 10,000
---------
Total $ 399,466
---------
---------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation provide that the liability of the
directors and officers of the Company for money damages shall be eliminated to
the maximum extent permitted by Maryland law. Under current Maryland law, the
directors are liable to the Company or its stockholders for money damages only
for liability resulting from (i) acts or omissions committed in bad faith
involving active and deliberate dishonesty that were material to the cause of
action adjudicated, as established by a final judgment or (ii) actual receipt of
an improper benefit or profit in money, property or services. The Articles of
Incorporation also provide that no amendment thereto may limit or eliminate this
limitation of liability with respect to events occurring prior to the effective
date of such amendment.
The Company's Articles of Incorporation and Bylaws require the Company to
indemnify its directors and officers to the fullest extent permitted by Maryland
law. Under current Maryland law, the Company will indemnify (i) any director or
officer who has been successful, on the merits or otherwise, in the defense of a
proceeding to which he was made a party by reason of his service in that
capacity, against reasonable expense incurred by him in connection with the
proceeding and (ii) any present or former director or officer against any claim
or liability unless it is established that (a) his act or omission was material
to the matter giving rise to the proceeding and was committed in bad faith or
was the result of active and deliberate dishonesty; (b) he actually received an
improper personal benefit in money, property or services; or (c) in the case of
a criminal proceeding, he had reasonable cause to believe that his act or
omission was unlawful. In addition, the Company's Bylaws require it to pay or
reimburse, in advance of the final disposition of a proceeding, reasonable
expenses incurred by a present or former director or officer or any person who
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, who is made a party to a proceeding by reason of his status as a
director, officer, employee or agent, to the fullest extent provided by Maryland
law. Current Maryland law provides that the Company shall have received, before
providing any such payment or reimbursement, (i) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by Maryland
law and the Bylaws and (ii) a written undertaking by or on his behalf to repay
the amount paid or reimbursed by the Company if it shall ultimately
II-1
<PAGE>
be determined that the standard of conduct was not met. The Company's Bylaws
also permit the Company to provide indemnification, payment or reimbursement of
expenses to any employee or agent of the Company in such capacity.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in a successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 16. EXHIBITS
The following exhibits, as noted, are filed herewith, previously have been
filed, or will be filed by amendment.
EXHIBIT NO.
(PER EXHIBIT
TABLES IN
ITEM 601 OF
REGULATION S-K) DESCRIPTION
--------------- -----------
*1.1 Form of Underwriting Agreement for Debt Securities.
*1.2 Form of Underwriting Agreement for Equity Securities.
3.1 Articles of Incorporation of the Registrant (filed as
Exhibit 3.3(i) to the Registrant's Registration Statement
No. 1-11290 on Form 8-B, and incorporated herein by
reference).
3.2 Bylaws of the Registrant (filed as Exhibit 3(ii) to the
Registrant's Registration Statement No. 33-83110 on Form
S-3, and incorporated herein by reference).
4.1 Specimen Certificate of Common Stock, par value $.01 per
share, of the Registrant (filed as Exhibit 3.4 to the
Registrant's Registration Statement No. 1-11290 on Form 8-B,
and incorporated herein by reference).
4.2 Form of Indenture. Filed herewith.
4.3 Form of Debt Security (included in Exhibit 4.2)
*4.4 Form of Common Stock Warrant Agreement.
5 Opinion of Counsel, including consent. Previously filed.
8 Opinion of Counsel regarding Tax Matters, including consent.
Filed herewith.
10.1 Stock Purchase Agreement dated as of January 23, 1992, by
and among the Registrant, CNL Group, Inc. and certain
entities affiliated therewith (filed as Exhibit 10.4 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991 (the "1991 Form 10-K"), and incorporated
herein by reference).
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<PAGE>
EXHIBIT NO.
(PER EXHIBIT
TABLES IN
ITEM 601 OF
REGULATION S-K) DESCRIPTION
--------------- -----------
10.2 Letter Agreement dated July 10, 1992, amending Stock
Purchase Agreement dated January 23, 1992 (filed as Exhibit
10.34 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1992, and incorporated herein by
reference).
10.3 Form of Advisory Agreement between Registrant and CNL Realty
Advisors, Inc. (filed as Exhibit 10.21 to the Registrant's
Report on Form 8 dated April 29, 1992, amending the 1991
Form 10-K, and incorporated herein by reference).
10.4 Advisory Agreement between Registrant and CNL Realty
Advisors, Inc. effective as of April 1, 1993 and renewed as
of January 1, 1994 (filed as Exhibit 10.04 to Amendment No.
1 to the Registrant's Registration Statement No. 33-61214 on
Form S-2, and incorporated herein by reference).
10.5 Revolving Loan Agreement, dated as of August 24, 1993, by
and between Registrant and SouthTrust Bank of Alabama,
National Association (filed as Exhibit 10.05 to the
Registrant's Registration Statement No. 33-69072 on Form
S-2, and incorporated herein by reference).
10.6 Commitment letter dated September 14, 1993 from First Union
National Bank of Florida relating to a $20,000,000 loan
(filed as Exhibit 10.06 to the Registrant's Registration
Statement No. 33-69072 on Form S-2, and incorporated herein
by reference).
10.7 Revolving Line of Credit and Security Agreement, dated as of
September 28, 1993, by and between Registrant and First
Union National Bank of Florida (filed as Exhibit 10.07 to
Amendment No. 2 to the Registrant's Registration Statement
No. 33-69072 on Form S-2, and incorporated herein by
reference).
10.8 Intercreditor Agreement by and between SouthTrust Bank of
Alabama, National Association, and First Union National Bank
of Florida (filed as Exhibit 10.08 to Amendment No. 2 to the
Registrant's Registration Statement No. 33-69072 on Form
S-2, and incorporated herein by reference).
10.9 Revolving Line of Credit and Security Agreement, dated as of
July 25, 1994, among Registrant, certain lenders listed
therein and First Union National Bank of Florida, as the
Agent, relating to a $100,000,000 loan (filed as Exhibit
10.11 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1994, and incorporated herein by
reference).
10.10 1992 Commercial Net Lease Realty, Inc. Stock Option Plan
(filed as Exhibit 10(x) to the Registrant's Registration
Statement No. 33-83110 on Form S-3, and incorporated herein
by reference).
10.11 Interest Rate Cap Agreement dated February 28, 1994 by and
between the Registrant and First Union National Bank of
North Carolina (filed as Exhibit 10(xi) to the Registrant's
Registration Statement No. 33-83110 on Form S-3, and
incorporated herein by reference).
10.12 Interest Rate Cap Agreement dated December 23, 1994, by
and between the Registrant and First Union National Bank
of Florida (filed as Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1994, and incorporated herein by reference).
10.13 Amended and Restated Line of Credit and Security Agreement,
dated April 13, 1995, among Registrant, certain lenders
listed therein and First Union National Bank of Florida,
as the Agent relating to a $100,000,000 loan (filed as
Exhibit 10.13 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995 and
incorporated herein by reference).
12 Statement of Computation of Ratios of Earnings to Fixed
Charges. Filed herewith.
24.1 Power of Attorney (contained on the signature page hereto).
II-3
<PAGE>
EXHIBIT NO.
(PER EXHIBIT
TABLES IN
ITEM 601 OF
REGULATION S-K) DESCRIPTION
--------------- -----------
24.2 Consent of KPMG Peat Marwick. Filed herewith.
24.3 Consent of Counsel. Included in Exhibits 5 and 8.
**25 Statement of Eligibility of Trustee on Form T-1(1).
___________________________
* To be filed by amendment or incorporated by reference in connection with
the offering of the Offered Securities.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) See Item 15 for Registrant's undertaking with respect to indemnification.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) that, individually or
in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement.
PROVIDED, HOWEVER, that subparagraphs (b)(1)(i) and (b)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in the periodic reports filed
with or furnished to the Commission by the Registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), that are incorporated by reference in this
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
(c) The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act, each filing
of the Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such Securities at that
time shall be deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions under Item 15 above, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(e) The undersigned Registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with
the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Orlando, State of Florida on September 1, 1995.
COMMERCIAL NET LEASE REALTY, INC.
(Registrant)
By: /s/ James M. Seneff, Jr.
-----------------------------------
James M. Seneff, Jr.
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned hereby
constitutes and appoints Robert A. Bourne and James M. Seneff, Jr. and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, with full power to act alone, to sign any and all
documents (including both pre- and post-effective amendments in connection with
this Registration Statement), and to file the same, with all exhibits thereto,
and all documents in connection therewith, with the Securities and Exchange
Commission, granting onto said attorneys-in-fact and agents and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their or his substitutes or substitute, may lawfully do or cause to be done by
virtue thereof.
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the capacity
and on the dates indicated.
SIGNATURE TITLE DATE
Chairman of the Board
/s/ James M. Seneff, Jr. (Principal Executive Officer) September 1, 1995
------------------------------
James M. Seneff, Jr.
/s/ Robert A. Bourne Director and President September 1, 1995
------------------------------
Robert A. Bourne
Executive Vice President and
Chief Financial Officer
/s/ Kevin B. Habicht (Principal Financial Officer) September 1, 1995
------------------------------
Kevin B. Habicht
Secretary/Treasurer
/s/ Lynn E. Rose (Principal Accounting Officer) September 1, 1995
------------------------------
Lynn E. Rose
/s/ Edward Clark Director September 1, 1995
------------------------------
Edward Clark
/s/ Willoughby T. Cox, Jr. Director September 1, 1995
------------------------------
Willoughby T. Cox, Jr.
/s/ Clifford R. Hinkle Director September 1, 1995
------------------------------
Clifford R. Hinkle
/s/ Ted B. Lanier Director September 1, 1995
------------------------------
Ted B. Lanier
II-6
<PAGE>
EXHIBITS
SEQUENTIAL
EXHIBIT NO. DOCUMENT PAGE NO.
----------- -------- -------
*1.1 Form of Underwriting Agreement for Debt Securities.
*1.2 Form of Underwriting Agreement for Equity Securities.
3.1 Articles of Incorporation of the Registrant (filed as Exhibit
3.3(i) to the Registrant's Registration Statement No. 1-11290 on
Form 8-B, and incorporated herein by reference).
3.2 Bylaws of the Registrant. (filed as Exhibit 3.3(ii) to the
Registrant's Registration Statement No. 33-83110 on Form S-3,
and incorporated herein by reference).
4.1 Specimen Certificate of Common Stock, par value $.01 per share,
of the Registrant (filed as Exhibit 3.4 to the Registrant's
Registration Statement No. 1-11290 on Form 8-B, and incorporated
herein by reference).
4.2 Form of Indenture. Previously filed.
4.3 Form of Debt Security (included in Exhibit 4.2)
*4.4 Form of Common Stock Warrant Agreement.
5 Opinion of Counsel, including consent. Previously filed.
8 Opinion of Counsel regarding Tax Matters, including consent.
Filed herewith.
10.1 Stock Purchase Agreement dated as of January 23, 1992, by and
among the Registrant, CNL Group, Inc. and certain entities
affiliated therewith (filed as Exhibit 10.4 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991
(the "1991 Form 10-K"), and incorporated herein by reference).
10.2 Letter Agreement dated July 10, 1992, amending Stock Purchase
Agreement dated January 23, 1992 (filed as Exhibit 10.34 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992, and incorporated herein by reference).
10.3 Form of Advisory Agreement between Registrant and CNL Realty
Advisors, Inc. (filed as Exhibit 10.21 to the Registrant's Report
on Form 8 dated April 29, 1992, amending the 1991 Form 10-K, and
incorporated herein by reference).
10.4 Advisory Agreement between Registrant and CNL Realty Advisors,
Inc. effective as of April 1, 1993 and renewed as of January 1,
1994 (filed as Exhibit 10.04 to Amendment No. 1 to the
Registrant's Registration Statement No. 33-61214 on Form S-2, and
incorporated herein by reference).
10.5 Revolving Loan Agreement, dated as of August 24, 1993, by and
between Registrant and SouthTrust Bank of Alabama, National
Association (filed as Exhibit 10.05 to the Registrant's
Registration Statement No. 33-69072 on Form S-2, and incorporated
herein by reference).
10.6 Commitment letter dated September 14, 1993 from First Union
National Bank of Florida relating to a $20,000,000 loan (filed as
Exhibit 10.06 to the Registrant's Registration Statement
No. 33-69072 on Form S-2, and incorporated herein by reference).
II-7
<PAGE>
SEQUENTIAL
EXHIBIT NO. DOCUMENT PAGE NO.
----------- -------- -------
10.7 Revolving Line of Credit and Security Agreement, dated as of
September 28, 1993, by and between Registrant and First Union
National Bank of Florida (filed as Exhibit 10.07 to Amendment
No. 2 to the Registrant's Registration Statement No. 33-69072 on
Form S-2, and incorporated herein by reference).
10.8 Intercreditor Agreement by and between SouthTrust Bank of
Alabama, National Association, and First Union National Bank of
Florida (filed as Exhibit 10.08 to Amendment No. 2 to the
Registrant's Registration Statement No. 33-69072 on Form S-2, and
incorporated herein by reference).
10.9 Revolving Line of Credit and Security Agreement, dated as of July
25, 1994, among Registrant, certain lenders listed therein and
First Union National Bank of Florida, as the Agent, relating to a
$100,000,000 loan (filed as Exhibit 10.11 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1994, and incorporated herein by reference).
10.10 1992 Commercial Net Lease Realty, Inc. Stock Option Plan (filed
as Exhibit 10(x) to the Registrant's Registration Statement No.
33-83110 on Form S-3, and incorporated herein by reference).
10.11 Interest Rate Cap Agreement dated February 28, 1994 by and
between the Registrant and First Union National Bank of North
Carolina (filed as Exhibit 10(xi) to the Registrant's
Registration Statement No. 33-83110 on Form S-3, and incorporated
herein by reference).
10.12 Interest Rate Cap Agreement dated December 23, 1994, by
and between the Registrant and First Union National Bank
of Florida (filed as Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the year ended December
31, 1994, and incorporated herein by reference).
10.13 Amended and Restated Line of Credit and Security Agreement,
dated April 13, 1995, among Registrant, certain lenders
listed therein and First Union National Bank of Florida,
as the Agent relating to a $100,000,000 loan (filed as
Exhibit 10.13 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995 and
incorporated herein by reference).
12 Statement of Computation of Ratios of Earnings to Fixed
Charges. Filed herewith.
24.1 Power of Attorney (contained on the signature page hereto).
24.2 Consent of KPMG Peat Marwick. Filed herewith.
24.3 Consent of Counsel. Included in Exhibits 5 and 8.
**25 Statement of Eligibility of Trustee on Form T-1(1).
___________________________
* To be filed by amendment or incorporated by reference in connection with
the offering of the Offered Securities.
** To be filed by amendment.
II-8
<PAGE>
[Letterhead of Shaw, Pittman, Potts & Trowbridge]
September 1, 1995
Commercial Net Lease Realty, Inc.
400 E. South Street
Suite 500
Orlando, Florida 32801
Gentlemen:
In connection with the filing of a registration statement on
Form S-3 dated July 20, 1995 (the "Registration Statement"), you
have asked us to render an opinion with respect to the
qualification of Commercial Net Lease Realty, Inc. ("CNL Realty")
as a real estate investment trust ("REIT") under sections 856
through 860 of the Internal Revenue Code and with respect to the
matters discussed under the heading "Federal Income Tax
Considerations" of that certain prospectus included in the
Registration Statement (the "Prospectus"). (Our references
herein to "the Code" are to the Internal Revenue Code of 1986, as
amended, with respect to taxable years ending on or after January
1, 1987, and to the Internal Revenue Code of 1954, as amended,
with respect to taxable years ending on or before December 31,
1986.)1
We have served as special counsel for CNL Realty in
connection with the filing of the Registration Statement and from
time to time in the past have represented CNL Realty on specific
matters as requested by CNL Realty. Specifically for the purpose
of this opinion, we have examined and relied upon the following:
copies of CNL Realty's Articles of Incorporation and any
amendments thereto; its Federal Forms 1120 for its taxable years
1984 through 1993 and a draft copy of its Federal Form 1120 for
its 1994 taxable year (in which tax returns we observe that CNL
Realty has elected to be treated as a real estate investment
trust); the Prospectus; copies of executed leases covering real
property owned by CNL Realty; the following published reports for
1984 through 1994 -- its Annual Reports to Stockholders and its
Form 10-K reports for 1984 through 1994, its quarterly reports to
shareholders and its Form 10-Q reports for each of the
---------------
1 All section references herein are to the Code or to the regulations
issued thereunder.
<PAGE>
[Shaw, Pittman, Potts & Trowbridge Logo]
Commercial Net Lease Realty, Inc.
September 1, 1995
Page 2
quarters ended March 31, 1984, through June 30, 1995, and the proxy
statements for its 1984 through 1994 Annual Meetings of
Shareholders; and its Form S-11 Registration Statement as filed
with the Securities and Exchange Commission on August 15, 1984.
We have not served as general counsel to CNL Realty and have
not been involved in decisions regarding the day-to-day operation
of CNL Realty and its properties. We have, however, discussed
the mode of operation of CNL Realty with its officers with a view
to learning information relevant to the opinions expressed herein
and have received and relied upon a certificate from CNL Realty
with respect to certain matters. A copy of the certificate is
attached.
We have discussed with management of CNL Realty arrangements
relating to the management of its properties, the relationships
of CNL Realty with tenants of such properties, and certain terms
of leases of such properties to tenants, with a view to assuring
that at the close of each quarter of the taxable years covered by
this opinion it met the asset composition requirements set forth
in section 856(c)(5), and with a view to assuring that, with
respect to years covered by this opinion (and as projected by CNL
Realty management for all of 1995), it satisfied (or will satisfy
for 1995) the 95%, 75%, and 30% gross income tests set forth in
sections 856(c)(2), (3), and (4), respectively. We have further
reviewed with management of CNL Realty the requirements that the
beneficial ownership of a REIT be held by 100 or more persons for
at least 335/365ths of each taxable year and that a REIT must
satisfy the diversity of ownership requirements of section 856(h)
as such requirements existed in the years covered by this
opinion, and we have been advised by management that at all times
during the years covered by this opinion (and specifically on
each record date for the payment of dividends during 1984 through
the date hereof) CNL Realty has had more than 1,000 shareholders
of record, that CNL Realty maintains the records required by
section 1.857-8 of the Treasury Regulations, that no later than
January 30 of each year it sent the demand required by section
1.857-8(d) of the Treasury Regulations to each shareholder of
record owning one percent or more of the outstanding shares of
CNL Realty on the appropriate date required by said regulation,
and that the actual ownership of CNL Realty shares was such that,
to the best knowledge of its management (based upon responses to
the aforesaid demands, any filing of a Schedule 13D under the
Securities Exchange Act of 1934, as amended, or any other sources
of information), CNL Realty satisfied the applicable requirements
of section 856(h). Further, we have examined various property
leases and lease supplements relating to the properties that CNL
Realty owns, and although leases relating to certain properties
which CNL Realty owns have not been made available to us, CNL
Realty has represented with respect to such leases that they will
conform in all material respects to a form of lease agreement
provided to us. On the basis of discussions with management of
<PAGE>
[Shaw, Pittman, Potts & Trowbridge Logo]
Commercial Net Lease Realty, Inc.
September 1, 1995
Page 3
CNL Realty, we are not aware that CNL Realty's election to be a
REIT has been terminated or challenged by the Internal Revenue
Service or any other party or that CNL Realty has revoked its
election to be a REIT for any such prior year so as to make CNL
Realty ineligible to qualify as a REIT for the years covered by
this opinion.
In rendering the opinions set forth herein, we are assuming
that copies of documents examined by us are true copies of
originals thereof and that the information concerning CNL Realty
set forth in CNL Realty's Federal income tax returns, and in the
Prospectus, as well as the information provided us by CNL
Realty's management are true and correct. We have no reason to
believe that such assumptions are not warranted.
Based upon the foregoing, we are of the opinion that CNL
Realty was a "real estate investment trust" as defined by section
856(a) for its taxable years ended December 31, 1984 through
December 31, 1994, and its proposed method of operation will
enable it to meet the requirements for qualification and taxation
as a REIT for its taxable year ending December 31, 1995. However,
with respect to the 1995 year and all future years, we note that
CNL Realty's status as a real estate investment trust at any time
is dependent among other things upon its meeting the requirements
of section 856 throughout the year and for the year as a whole.
In addition, we have participated in the preparation of the
material under the heading "Federal Income Tax Considerations" in
the Prospectus, and we are of the opinion that the matters
described therein are accurate and we consent to your filing of
this opinion as an exhibit to the Registration Statement.
This opinion is based upon the existing provisions of the
Code (or predecessor provisions, as applicable), rules and
regulations (including proposed regulations) promulgated
thereunder, and reported administrative and judicial
interpretations thereof, all of which are subject to change,
possibly with retroactive effect. This opinion is limited to the
specific matters covered hereby and should not be interpreted to
imply that the undersigned has offered its opinion on any other
matter.
Very truly yours,
SHAW, PITTMAN, POTTS & TROWBRIDGE
By: /s/Charles B. Temkin
--------------------------
Charles B. Temkin, P.C.
<PAGE>
COMMERCIAL NET LEASE REALTY, INC.
400 E. South Street, Suite 500
Orlando, Florida 32801-2878
CERTIFICATE
September 1, 1995
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037-1128
Gentlemen:
In connection with the opinion letter to be issued by you
with respect to the qualification of Commercial Net Lease Realty,
Inc. (formerly CNL Realty Investors, Inc.) ("CNL Realty") as a
real estate investment trust ("REIT") under sections 856 through
860 of the Internal Revenue Code of 1954 and the Internal Revenue
Code of 1986, as applicable (the "Code"), and with respect to the
matters discussed under the heading "Federal Income Tax
Considerations" in the prospectus included in the registration
statement on Form S-3 dated July 20, 1995 (the "Prospectus", CNL
Realty, intending that you shall rely on the contents of this
Certificate, represents to you as follows:
1. CNL Realty has been and will be operated in accordance
with the terms and provisions of the Articles of Incorporation of
Commercial Net Realty, Inc., as amended from time to time.
2. CNL Realty has been and will be operated in a manner
consistent with the statements and representations set forth in
the Prospectus.
3. The beneficial ownership of CNL Realty has been held by
100 or more persons for at least 335/365ths of (a) each of CNL
Realty's taxable years from 1984 through 1994 and (b) the current
taxable year to date.
<PAGE>
Shaw, Pittman, Potts & Trowbridge
September 1, 1995
Page 2
4. On each record date for the payment of dividends from
1984 through August 1, 1995, CNL Realty has had more than 1,000
shareholders of record.
5. CNL Realty has adopted December 31 as its taxable year-
end for U.S. federal income tax purposes.
6. CNL Realty has maintained the records required by
section 1.857-8(d) of the Treasury Regulations, and no later than
January 30 of each year from 1985 through 1995, it sent the
demand required by section 1.857-8(d) of the Treasury Regulations
to each shareholder of record owning one percent or more of the
outstanding shares of CNL Realty.
7. To the best knowledge of CNL Realty's management (based
upon any responses to demands made pursuant to section 1.857-8(d)
of the Treasury Regulations, any filing of a Schedule 13D under
the Securities Exchange Act of 1934, as amended, or any other
sources of information), the actual ownership of CNL Realty
shares has satisfied the applicable requirements of section
856(h) of the Code during the last half of each of CNL Realty's
taxable years from 1984 through 1994 and during the period July
1, 1995 through September 1, 1995.
8. CNL Realty filed an election to be a real estate
investment trust with its tax return for its taxable year ending
December 31, 1984, and since that time, such election has not
been terminated, challenged or revoked.
9. All leases, subleases and amendments thereto and other
agreements which were executed as of September 1, 1995, with
respect to all of the real property owned by CNL Realty and all
of the real property which CNL Realty intends to purchase in the
near future have been provided to you for your examination, and
such leases, subleases and amendments thereto and other
agreements represent all covenants, promises, agreements,
warranties, representations and conditions between CNL Realty and
its tenants and subtenants.
10. The terms of the leases executed, or to be executed,
for the properties in Brandon, Florida, and Plantation, Florida,
that CNL Realty leases for operation as Barnes and Noble stores
are the same in all material respects as those included in the
Lease Agreement between Barnes and Noble Superstore, Inc. and
Commercial Net Lease Realty, Inc., dated July 28, 1994 (covering
a property in Lakeland, Florida, leased for operation as a Barnes
and Noble store).
11. The terms of the leases executed for the fifteen
properties that CNL Realty leases for operation as Hi-Lo
Automotive stores are the same in all material respects as those
included in the Lease Agreement between Hi-Lo Auto Supply, L.P.
and Commercial Net Lease Realty, Inc., dated October 18, 1994
(covering a property in Baton Rouge, Louisiana, leased for
operation as a Hi-Lo Automotive store).
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Shaw, Pittman, Potts & Trowbridge
September 1, 1995
Page 3
12. The terms of the leases to be executed for any other
properties that CNL Realty purchases in the future are or will be
structured so that amounts derived from such leases are rents
from real property within the meaning of section 856(d) of the
Code.
13. For each taxable year from 1984 through 1994, at least
75 percent of the gross income derived by CNL Realty consisted of
(i) amounts derived from the rental of the real property held by
CNL Realty (collectively the "Properties") which qualified as
rents from real property within the meaning of section 856(d) of
the Code; (ii) interest on obligations secured by mortgages on
real property or on interests in real property; (iii) any gain
realized upon the sale or other disposition of real property
which is not described in section 1221(1) of the Code; and
(iv) amounts described in sections 856(c)(3)(D) through
856(c)(3)(I) of the Code; and CNL Realty will conduct its
business so that at least 75 percent of its gross income will be
derived from such sources in its current and future taxable
years.
14. For each taxable year from 1984 through 1994, at least
95 percent of the gross income derived by CNL Realty consisted of
(i) the items of income described in paragraph 13 above; (ii)
gain from the sale or other disposition of stock or securities
which are not property described in section 1221(1) of the Code;
and (iii) interest and dividends; and CNL Realty will conduct its
business so that at least 95 percent of its gross income will be
derived from such sources in its current and future taxable
years.
15. For each taxable year from 1984 through 1994, less than
30 percent of the gross income of CNL Realty was derived from the
sale or other disposition of (i) stock or securities held for
less than one year, (ii) property in a transaction which is a
prohibited transaction, as defined in section 857(b)(6) of the
Code, and (iii) real property (including interests in real
property and interests in mortgages on real property) held for
less than four years, other than property compulsorily or
involuntarily converted within the meaning of section 1033 of the
Code and property which is "foreclosure property" within the
meaning of section 856(e) of the Code; and CNL Realty will
conduct its business so that less than 30 percent of its gross
income will be derived from the sale or disposition of such
assets in its current and future taxable years.
16. For each taxable year from 1984 through 1994, neither
CNL Realty, nor any person which was not an "independent
contractor" within the meaning of section 856(d)(3) of the Code
from which CNL Realty did not derive or receive any income,
furnished or rendered services other than those customarily
furnished or rendered in connection with the rental of real
property only within the meaning of section 856(d)(1)(B) of the
Code; and neither CNL Realty, nor any person which is not an
"independent contractor" within the meaning of section 856(d)(3)
of the Code from which CNL Realty does not derive or receive any
income, will furnish or render such services in CNL Realty's
current and future taxable years.
17. For each taxable year from 1984 through 1994, neither
CNL Realty, nor any person which was not an "independent
contractor" within the meaning of section 856(d)(3) of the Code
from which CNL Realty did not derive or receive any income,
rendered any services that
<PAGE>
Shaw, Pittman, Potts & Trowbridge
September 1, 1995
Page 4
were primarily for the convenience of any of the occupants of the
Properties, within the meaning of section 1.512(b)-1(c)(5) of the
Treasury Regulations; and neither CNL Realty, nor any person
which is not an "independent contractor" within the meaning of
section 856(d)(3) of the Code from which CNL Realty does not
derive or receive any income, will render such services in CNL
Realty's current and future taxable years.
18. For each taxable year from 1984 through 1994, CNL
Realty did not receive or accrue rent attributable to personal
property in situations where the average adjusted bases of the
personal property leased in connection with each lease of real
property by CNL Realty exceeded 15 percent of the average
adjusted bases of the real property and the personal property
together, within the meaning of section 856(d)(1) of the Code,
and CNL Realty will not receive or accrue such rent in its
current and future taxable years.
19. For each taxable year from 1984 through 1994, CNL
Realty did not receive or accrue, directly or indirectly, rent or
interest with respect to real or personal property, where the
determination of the amount of rent or interest depended in whole
or in part on the income or profits derived by any person from
the property; and CNL Realty will not receive or accrue such rent
in its current and future taxable years. This paragraph does not
apply to (i) interest or rents based on a fixed percentage or
percentages of receipts or sales within the meaning of sections
856(d)(2)(A) or 856(f)(1)(A) of the Code or (ii) interest
received from a debtor which derives substantially all of its
gross income, with respect to the real property securing the debt
obligation from which the interest is derived, from the leasing
of substantially all of its interests in such property to
tenants, where the amounts received from the debtor as interest
are attributable to qualified rents (within the meaning of
section 856(d)(6)(B) of the Code) received by the debtor from
such tenants, within the meaning of section 856(f)(2) of the
Code.
20. For each taxable year from 1984 through 1994, CNL
Realty did not receive or accrue, directly or indirectly, rents
from any person in which it owned (a) in the case of a
corporation, 10 percent or more of the total combined voting
power of all classes of stock entitled to vote, or 10 percent or
more of the total number of shares of all classes of stock, or
(b) in the case of an entity other than a corporation, an
interest of 10 percent or more in the assets or net profits of
such entity; and CNL Realty will not receive or accrue rent from
such persons in its current and future taxable years. For
purposes of this paragraph, ownership is determined by taking
into account the attribution rules of section 318 (as modified by
section 856(d)(5)) of the Code.
21. At the close of each quarter of each taxable year from
September 30, 1984, through June 30, 1995, at least 75 percent of
the value of CNL Realty's total assets were represented by real
estate assets (as defined by section 856(c)(6)(B) of the Code),
cash and cash items (including receivables) and government
securities; and CNL Realty will conduct its business so that at
least 75 percent of the value of its total assets are represented
by real estate assets (as defined by section 856(c)(6)(B) of the
Code), cash and cash items (including receivables), and
government securities, in its current and all future taxable
years.
<PAGE>
Shaw, Pittman, Potts & Trowbridge
September 1, 1995
Page 5
22. At the close of each quarter of each taxable year from
September 30, 1984, through June 30, 1995, not more than 25
percent of the value of CNL Realty's total assets were
represented by securities (other than government securities or
securities treated as real estate assets pursuant to section
856(c)(6)(B) of the Code), and no such securities of any one
issuer exceeded 5 percent of the value of the total assets of CNL
Realty; and CNL Realty will conduct its business so that not more
than 25 percent of the value of its total assets are represented
by securities (other than government securities or securities
treated as real estate assets pursuant to section 856(c)(6)(B) of
the Code), and no such securities of any one issuer will exceed
five percent of the value of the total assets of CNL Realty, in
its current and all future taxable years.
23. At the close of each quarter of each taxable year from
September 30, 1984, through June 30, 1995, CNL Realty did not
hold securities (other than government securities or securities
treated as real estate assets pursuant to section 856(c)(6)(B) of
the Code) that constituted more than 10 percent of the
outstanding voting securities of any one issuer, and CNL Realty
will conduct its business so that it does not hold such
securities, in its current and all future taxable years.
24. CNL Realty has made distributions to stockholders in
each taxable year from 1984 through 1994 of at least 95 percent
of its "real estate investment trust taxable income" (determined
consistent with section 857(a)(1)(A)(i) of the Code) plus at
least 95 percent of the excess of any "net income from
foreclosure property" over the tax imposed by the Code on such
net income, if any, as such terms are defined in sections
857(b)(2) and 857(b)(4)(B), respectively, of the Code, during the
taxable year involved or during the period thereafter as
described in section 858 of the Code; and CNL Realty intends to
make such distributions in its current and all future taxable
years.
25. CNL Realty has at all times beneficially held all of
its assets for investment purposes and not as (i) stock in trade
or other property of a kind which would properly be includible in
inventory if on hand at the close of the taxable year or
(ii) property held primarily for sale to customers in the
ordinary course of the trade or business of CNL Realty; and CNL
Realty intends to continue to hold its assets in the same manner
in its current and all future taxable years.
26. CNL Realty has not made any distributions to its
shareholders with respect to any class or series of capital stock
that was not pro rata with respect to such class or series, with
no preference to any share of stock as compared with other shares
of the same class or series, and has not made any distributions
that give a preference to one class or series of stock as
compared with another class or series except to the extent that
the former is entitled (without reference to waivers of their
rights by shareholders) to such preference, and CNL Realty
intends not to make any such distributions in its current and all
future taxable years.
27. Representations herein as to the Properties will also
be true with respect to the properties acquired by CNL Realty
after the date hereof.
<PAGE>
Shaw, Pittman, Potts & Trowbridge
September 1, 1995
Page 6
28. CNL Realty will use its best efforts to conduct its
business so that it will continue to be organized and operated in
a manner that will allow it to qualify as a REIT pursuant to
sections 856 through 860 of the Code.
COMMERCIAL NET LEASE REALTY, INC.
By: /s/ Kevin B. Habicht
--------------------------------------
Kevin B. Habicht, Executive Vice President
<PAGE>
EXHIBIT 12
COMMERCIAL NET LEASE REALTY, INC.
STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1995 1994 1993 1992
-------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Income Before 6,192,444 8,915,373 3,521,914 1,561,682
Extraordinary Item
Fixed Charges:
Interest 1,090,670 497,670 381,075 301,761
Amortization of Loan Costs 138,829 254,080 20,421 0
--------- --------- --------- ---------
1,229,499 751,750 401,496 301,761
Net Income Before Extraordinary
Item and Fixed Charges 7,421,943 9,667,123 3,923,410 1,863,443
Divided by Fixed Charges 1,229,499 751,750 401,496 301,761
--------- --------- --------- ---------
Ratio of Earnings to Fixed Charges 6.04 12.86 9.77 6.18
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<PAGE>
Exhibit 24.2
[KPMG Peat Marwick LLP--letterhead]
The Board of Directors
Commercial Net Lease Realty, Inc.
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Orlando, Florida
September 18, 1995
