COMMERCIAL NET LEASE REALTY, INC.
400 East South Street, Suite 500
Orlando, Florida 32801
March 29, 1996
To Our Stockholders:
You are cordially invited to attend the annual meeting of stockholders
of Commercial Net Lease Realty, Inc. on May 16, 1996 at 10:00 a.m. The
directors and officers of the Company look forward to greeting you personally.
Enclosed for your review are the proxy, proxy statement and notice of meeting
for the annual meeting of stockholders.
The Company has seen significant growth over the past three years.
During this period, including the offering completed in early 1996, the
Company has raised a total of $183.9 million of equity through the sale of
13,862,500 shares of common stock. The net proceeds of these offerings have
been invested in additional net leased properties and have provided a
significant equity base for the Company to build upon. As of February 28,
1996, the Company owned 166 properties representing an initial investment of
$261 million compared with 41 properties and a $24 million investment three
years ago. More importantly, we believe the property portfolio has grown in
quality, as we have provided increased diversification by geography, tenant,
and retail line of trade.
This growth, we believe, requires corresponding corporate changes and,
primarily for this reason, this year's proxy requests your vote on three
proposals in addition to the usual vote for election of directors. The
proposals generally are designed to amend the Company's governing documents
and to increase the Company's authorized shares in order to facilitate the
Company's future growth. These proposals also will affect your rights as
stockholders, as discussed more fully in the enclosed proxy statement.
To permit the Company to conduct additional public or private offerings,
acquire additional properties and effect stock dividends or stock splits, the
Board of Directors proposes to increase the number of authorized shares of
common stock from 30,000,000 to 50,000,000 shares. This will leave a
significant number of shares available for issuance for purposes to be
determined by the Board of Directors. Additionally, the Board of Directors
proposes to authorize 15,000,000 shares of preferred stock to provide the
Company with increased access to the capital markets with a different cost
profile relative to shares of common stock.
Lastly, the Board of Directors seeks your approval to amend the
Company's Articles of Incorporation thereby providing the Company with
increased flexibility in possible future amendments to the Articles.
Currently, a two-thirds majority is required and we are seeking to change this
to a simple majority. Since shares that are not voted count against the
approval of proposed amendments, at times it can be difficult to get the
required minimum votes cast without additional cost and delay.
Since each of these three proposals in this proxy statement require a
two-thirds majority, it is very important that you vote your shares. By doing
so, the company can avoid the cost of having to solicit stockholders for their
votes.
The proposals included in this proxy statement reflect changes
consistent with the Company's past growth and its anticipated future growth
and success in the coming years. Therefore, the Board of Directors
unanimously recommends that you vote to approve each of the proposals
presented in this proxy statement.
Sincerely,
James M. Seneff, Jr. Robert A. Bourne
Chairman of the Board and Vice Chairman of the Board and
Chief Executive Officer Secretary/Treasurer
COMMERCIAL NET LEASE REALTY, INC.
400 East South Street, Suite 500
Orlando, Florida 32801
-----------------------------------------------
Notice of Annual Meeting of Stockholders
To Be Held May 16, 1996
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NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
COMMERCIAL NET LEASE REALTY, INC. will be held at 10:00 a.m. local time, on
May 16, 1996, at the Marriott Hotel, 400 West Livingston Street, Orlando,
Florida, for the following purposes:
1. To elect six directors.
2. To approve an amendment to the Company's Articles of Incorporation
increasing the number of authorized shares of Common Stock from
30,000,000 to 50,000,000, including a corresponding 20,000,000
share increase in the authorized shares of Excess Stock.
3. To approve an amendment to the Company's Articles of Incorporation
authorizing the issuance of 15,000,000 shares of Preferred Stock,
including a corresponding 15,000,000 share increase in the
authorized shares of Excess Stock.
4. To approve an amendment to the Company's Articles of Incorporation
permitting the Company to amend the Articles of Incorporation upon
the affirmative vote of a majority of votes entitled to vote at a
meeting.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on February 23, 1996,
will be entitled to notice of and to vote at the annual meeting or at any
adjournment thereof.
Stockholders are cordially invited to attend the meeting in person.
WHETHER OR NOT YOU NOW PLAN TO ATTEND THE MEETING, YOU ARE ASKED TO COMPLETE,
DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD FOR WHICH A POSTAGE PAID
RETURN ENVELOPE IS PROVIDED. If you decide to attend the meeting you may
revoke your Proxy and vote your shares in person. It is important that your
shares be voted.
By Order of the Board of Directors
Robert A. Bourne
Secretary
March 29, 1996
Orlando, Florida
COMMERCIAL NET LEASE REALTY, INC.
400 East South Street, Suite 500
Orlando, Florida 32801
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PROXY STATEMENT
-----------------------------------------------
This Proxy Statement is furnished by the Board of Directors of
Commercial Net Lease Realty, Inc. (the "Company") in connection with the
solicitation by management of proxies to be voted at the annual meeting of
stockholders to be held on May 16, 1996, and at any adjournment thereof, for
the purposes set forth in the accompanying notice of such meeting. All
stockholders of record at the close of business on February 23, 1996, will be
entitled to vote.
Any proxy, if received in time, properly signed and not revoked, will be
voted at such meeting in accordance with the directions of the stockholder.
If no directions are specified, the proxy will be voted FOR the election of
directors. Any stockholder giving a proxy has the power to revoke it at any
time before it is exercised. A proxy may be revoked (1) by delivery of a
written statement to the Secretary of the Company stating that the proxy is
revoked, (2) by presentation at the annual meeting of a subsequent proxy
executed by the person executing the prior proxy, or (3) by attendance at the
annual meeting and voting in person.
Votes cast in person or by proxy at the annual meeting will be tabulated
and a determination will be made as to whether or not a quorum is present.
The Company will treat abstentions as shares that are present and entitled to
vote for purposes of determining the presence or absence of a quorum, but as
unvoted for purposes of determining the approval of any matter submitted to
the stockholders. If a broker submits a proxy indicating that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote
with respect to such matter.
Solicitation of proxies will be made primarily by mail. However,
directors and officers of the Company also may solicit proxies by telephone or
telegram or in person. All of the expenses of preparing, assembling, printing
and mailing the materials used in the solicitation of proxies will be paid by
the Company. Arrangements may be made with brokerage houses and other
custodians, nominees and fiduciaries to forward soliciting materials, at the
expense of the Company, to the beneficial owners of shares held of record by
such persons. It is anticipated that this Proxy Statement and the enclosed
proxy first will be mailed to stockholders on or about March 29, 1996.
As of February 23, 1996, 15,688,672 shares of Common Stock of the
Company were outstanding. Each share of Common Stock entitles the holder
thereof to one vote on each of the matters to be voted upon at the annual
meeting. As of the record date, officers and directors of the Company had the
power to vote approximately 3.5% of the outstanding shares of Common Stock.
TABLE OF CONTENTS
-----------------
PROPOSAL I: Election of Directors
Executive Compensation
Compensation Committee Report
Performance Graph
PROPOSAL II: Amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock to
50,000,000 including a corresponding 20,000,000 share
increase in the authorized shares of Excess Stock
PROPOSAL III: Amendment to the Company's Articles of Incorporation to
authorize 15,000,000 shares of Preferred Stock including a
corresponding 15,000,000 share increase in the authorized
shares of Excess Stock
PROPOSAL IV: Amendment to the Company Articles of Incorporation to permit
future amendments to the Articles of Incorporation upon the
affirmative vote of a majority of votes entitled to vote at
a meeting
SECURITY OWNERSHIP
CERTAIN TRANSACTIONS
INDEPENDENT AUDITORS
OTHER MATTERS
PROPOSALS FOR NEXT ANNUAL MEETING
ANNUAL REPORT
APPENDIX A: Text of Amendments to Articles of Incorporation Regarding
Proposals II and III
PROPOSAL I
ELECTION OF DIRECTORS
NOMINEES
The persons named below have been nominated by the Board of Directors
for election as directors to serve until the next annual meeting of
stockholders or until their successors shall have been elected and qualified.
Mr. Lanier has been a director since April 1988 and Mr. Clark since 1991.
Messrs. Bourne, Cox and Seneff became directors in June 1992. Mr. Hinkle
became a director in June 1993. The table sets forth each nominee's name,
age, principal occupation or employment during at least the last five years,
and directorships in other public corporations.
The Company's officers and directors have advised the Company that they
intend to vote their shares of Common Stock for the election of each of the
nominees. Proxies will be voted FOR the election of the following nominees
unless authority is withheld.
Name and Age Background
- ------------ ----------
Robert A. Bourne, 48 Mr. Bourne has served as Vice Chairman of the
Board, Secretary and Treasurer of the Company
and CNL Realty Advisors, Inc. ("Realty
Advisors") since February 1996. Additionally,
he has served as a director of the Company since
June 1992 and a Director of Realty Advisors
since its inception in 1991. Previously, he
served as President of the Company from July
1992 until February 1996 and as President of
Realty Advisors from 1991 until February 1996.
Realty Advisors is responsible for the day-to-
day operation of the Company and performs
certain other administrative services for the
Company. See "Certain Transactions." Mr. Bourne
also serves as President of CNL Group, Inc. In
addition, Mr. Bourne is President, a director
and a registered principal of CNL Securities
Corp., President and a director of CNL
Investment Company, President of CNL Realty
Corp. and President and a director of CNL
Institutional Advisors, Inc., a registered
investment advisor. All of such entities are
affiliates of CNL Group, Inc., a privately held,
diversified real estate company of which Realty
Advisors is a wholly owned subsidiary. Since
joining CNL Group, Inc. in 1979, Mr. Bourne has
been active in the acquisition, development and
management of real estate projects throughout
the United States. Mr. Bourne formerly was a
Certified Public Accountant with Coopers &
Lybrand and a partner in the firm of Bourne &
Rose, P.A.
Edward Clark, 76 Mr. Clark served as President of the Company
from 1984 until July 1992. He has been a
consultant to Golden Corral Corporation and to
its parent corporation, Investors Management
Corporation, a privately held corporation, on
tax and financial matters since 1982. From 1966
to 1980, Mr. Clark, a certified public
accountant, was a partner in the public
accounting firm of Peat Marwick Mitchell & Co.
Willoughby T. Cox, Jr., 69 Mr. Cox currently is a private real estate
investor. From 1960 to 1985, Mr. Cox was a
Mortgage Loan Correspondent for the State of
Florida for Connecticut Mutual Life Insurance
Company. From 1978 through 1981, Mr. Cox also
was employed as a Florida Agriculture Mortgage
Loan Correspondent for Aetna Life and Casualty
Insurance Company. He currently serves as the
agricultural Loan Correspondent for the State of
Florida for Batterymarch-AgriVest, the successor
to the Agricultural Loan Department of
Connecticut Mutual Life Insurance Company. Mr.
Cox is a former director of Orange State Bank,
Landmark Bank of Orlando and Atico Savings Bank
and a former Vice Chairman of Pan American Bank
of Orlando. Mr. Cox has been involved in real
estate related activities in Florida since 1950,
including real estate brokerage, management,
mortgage lending, appraisal and construction.
Clifford R. Hinkle, 47 Since 1991, Mr. Hinkle has been the President of
Flagler Capital Corporation, which provides
financial advisory and investment consulting
services. Additionally, Mr. Hinkle was a
director of MHI Group, which owned and operated
funeral homes and cemeteries, until November
1995 and was its Chief Executive Officer from
April 1995 until November 1995. From 1987 to
1991, Mr. Hinkle was the Executive Director of
the State Board of Administration of Florida and
managed over $40 billion in various trust funds.
Ted B. Lanier, 61 Mr. Lanier was the Chief Executive Officer of
the Triangle Bank and Trust Company, Raleigh,
North Carolina ("Triangle"), from January 1988
until March 1991. Mr. Lanier also was the
Chairman of Triangle from January 1989 until
March 1991 and its President from January 1988
until January 1989. Since his retirement in
1991 as Chairman and Chief Executive Officer of
Triangle, Mr. Lanier has managed his personal
investments.
James M. Seneff, Jr., 49 Mr. Seneff has been Chief Executive Officer of
the Company since July 1992 and Chairman of the
Board of the Company since June 1992, as well as
Chief Executive Officer and Chairman of the
Board of Realty Advisors since its inception in
1991. Mr. Seneff has served as Chief Executive
Officer, director, and a principal stockholder
of CNL Group, Inc. since its formation in 1973.
From April until December 1986, Mr. Seneff
served on the Florida State Commission on
Ethics. Mr. Seneff served on the Florida
Investment Advisory Council, which oversees the
$40 billion Florida state retirement plan, from
1986 to 1994, and was Chairman of the Council
from 1991 to 1992. Since 1971, Mr. Seneff has
been active in the acquisition, development and
management of real estate projects throughout
the United States. Mr. Seneff is the brother-
in-law of Kevin B. Habicht, Chief Financial
Officer of the Company.
In the event that any nominee(s) should be unable to accept the office
of director, which is not anticipated, it is intended that the persons named
in the proxy will vote FOR the election of such other person in the place of
such nominee(s) for the office of director as the Board of Directors may
recommend. The affirmative vote of a plurality of the shares of Common Stock
present in person or represented by proxy and entitled to vote is required for
the election of directors.
A majority of the Company's directors are required to be independent, as
that term is defined in the Company's Articles of Incorporation. Messrs.
Clark, Cox, Hinkle and Lanier are independent directors.
COMPENSATION OF DIRECTORS
During the year ended December 31, 1995, each director who was a
director for the entire year was paid $12,000 for serving on the Board of
Directors. Each director received $1,000 per quarterly Board meeting attended
and $750 per committee meeting attended. Since May 1993, however, Messrs.
Seneff and Bourne have waived their directors' fees. The Board believes this
compensation level is comparable to that provided by many other companies in
the REIT industry.
The Board of Directors met 11 times during the year ended December 31,
1995 and the average attendance by directors at Board meetings was
approximately 97%. Each current member attended at least 92% of the total
meetings of the Board and of any committee on which he served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing Audit Committee, the members of which are
selected by the full Board of Directors each year. The current members of the
Audit Committee, who have served since June 1992, are Messrs. Clark, Cox and
Lanier. The Audit Committee makes recommendations to the Board as to the
independent accountants of the Company and reviews with such accounting firm
the scope of the audit and the results of the audit upon its completion. The
Audit Committee met once during the year ended December 31, 1995.
The Company has a standing Compensation Committee, the members of which
are selected by the full Board of Directors each year. The current members of
the Compensation Committee are Messrs. Clark, Hinkle and Lanier. The
principal function of the Compensation Committee is to make awards of stock
options under the 1992 Commercial Net Lease Realty, Inc. Stock Option Plan
(the "1992 Plan") and to set the terms of such stock options in accordance
with the terms of the 1992 Plan. The Compensation Committee met once during
the year ended December 31, 1995.
The Company does not have a nominating committee.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
Name Position
---- --------
James M. Seneff, Jr. Chief Executive Officer and
Chairman of the Board
Robert A. Bourne Vice Chairman of the Board and
Secretary/Treasurer
Gary M. Ralston President
Kevin B. Habicht Executive Vice President, Chief Financial
Officer, and Assistant Secretary
Mr. Ralston, age 45, has served as President of the Company and Realty
Advisors since February 1996. From December 1993 until February 1996 he
served as Executive Vice President and Chief Operating Officer of the Company
and Realty Advisors. Mr. Ralston previously served as Vice President of the
Company from July 1992 through December 1993 and as Vice President of Realty
Advisors from its inception in 1991 through December 1993. From 1988 to 1992,
he also served as a Senior Vice President of CNL Properties, Inc., a real
estate investment and asset/property management company affiliated with CNL
Group, Inc. From 1983 until 1988, Mr. Ralston was Vice President of ENCO, a
real estate investment and asset/property management firm located in Lakeland,
Florida. Mr. Ralston holds the Certified Commercial Investment Member and
Society of Industrial and Office Realtors designations and is also a Florida
licensed Real Estate Broker, Mortgage Broker and Certified Building
Contractor. Mr. Ralston is a member of the Board of Directors of the National
Association of Realtors, Vice Chairman of its Commercial Investment Committee
and a member of the Capital Consortium.
Mr. Habicht, age 36, has been Executive Vice President, Chief Financial
Officer and Assistant Secretary of the Company and Realty Advisors since
December 1993. Mr. Habicht previously served as Vice President of the Company
from July 1992 through December 1993 and as Vice President of Realty Advisors
from its inception in 1991 through December 1993. Since 1990, Mr. Habicht has
served as a Senior Vice President of CNL Institutional Advisors, Inc. and for
the last five years he also has served as Treasurer of CNL Investment Company,
Senior Vice President of CNL Management Company and Treasurer of CNL
Securities Corp. From 1981 to 1983, Mr. Habicht, a Certified Public
Accountant and a Chartered Financial Analyst, was employed by Coopers &
Lybrand, Certified Public Accountants. Mr. Habicht is the brother-in-law of
James M. Seneff, Jr., Chief Executive Officer and Chairman of the Board of the
Company.
The backgrounds of Messrs. Seneff and Bourne are described at "PROPOSAL
I - ELECTION OF DIRECTORS."
The Company and Realty Advisors employ certain other officers who also
have extensive experience in selecting and managing freestanding retail and
restaurant properties. In addition to the directors and executive officers
listed above, the following individuals are involved in the acquisition and
management of the Company's properties:
Robert D. Boos joined the Company in August of 1995 as Senior Vice
President of Corporate Acquisitions. From 1982 to 1995, Mr. Boos served as
Vice President of Real Estate and Development for Eckerd Drug Corporation, the
nation's third largest retail drug chain, with responsibility for the
implementation of the Company's new store development program. During his
tenure, he designed and implemented the Company's freestanding drug store
concept which now accounts for 75% of all new stores opened by Eckerd. Mr.
Boos has over 20 years of retail real estate experience beginning with
Ponderosa System, Inc. where he was Vice President of Real Estate. He is also
Florida State Director of the International Council of Shopping Centers
(ICSC), a member of the National Association of Corporate Real Estate
Executives (NACORE), and a Director of the Merchants Association of Florida.
Thomas E. Morse, age 64, has served as Senior Vice President of
Acquisitions for both the Company and Realty Advisors since December 1993 and
served as a Senior Vice President of CNL Properties, Inc. from 1991 to 1993.
Prior to joining CNL Properties, Inc., Mr. Morse spent 11 years with Ferncreek
Properties, first as an Executive Vice President (1982 to 1988) and then as
President (1988 to 1990). Mr. Morse is a member of the National Association
of Realtors and the Society of Industrial and Office Realtors.
Jeffrey F. Bass, age 44, has served as Vice President of Real Estate of
Realty Advisors since February 1994. Prior to joining Realty Advisors, Mr.
Bass was president of Jeffrey F. Bass & Associates, a real estate brokerage
firm (1989 to 1994), Executive Vice President of Gulfstream Retail Centers
(1988 to 1989), and Vice President and General Manager of the Florida retail
division of Vantage Properties, Inc. (1985 to 1988). Mr. Bass has 20 years of
experience in retail and real estate, beginning with five years at Eckerd Drug
Corporation where he was Real Estate Manager. He is a member of the National
Association of Corporate Real Estate Executives (NACORE).
Mez R. Birdie, age 46, joined CNL Properties, Inc. in 1992 as its
Director of Retail Management and has served as Vice President of Property
Management of both the Company and Realty Advisors since December 1993. From
1987 to 1992, Mr. Birdie served as Director of Property Management for Charles
Wayne Properties, Inc. Mr. Birdie has received the Certified Property Manager
designation awarded by the Institute of Real Estate Management and the
Certified Shopping Center Manager designation awarded by the International
Counsel of Shopping Centers (ICSC), and has a total of 14 years experience in
the field of commercial and residential property management.
Courtney S. Hubbard, age 32, joined Realty Advisors as Director of Due
Diligence and Research in February 1995. Prior to joining Realty Advisors,
Ms. Hubbard was a senior associate at Clayton, Roper & Marshall, a real estate
appraisal and consulting firm (1991 to 1995) and a senior associate with Kampe
Appraisals, Inc. (1989 to 1991). She holds a Master of Arts Degree in Real
Estate from the University of Florida. Ms. Hubbard is a MAI (Member,
Appraisal Institute), a certified general real estate appraiser in the State
of Florida, and a member of the Appraisal Institute's Admissions and Ethics
committees.
EXECUTIVE COMPENSATION
ANNUAL COMPENSATION
The following Summary Compensation Table shows the annual and long-term
compensation paid by the Company to the Chief Executive Officer for services
rendered in all capacities to the Company during the fiscal years ended
December 31, 1995, 1994 and 1993. No executive officer of the Company
received a total annual salary and bonus in excess of $100,000 from the
Company during the fiscal year ended December 31, 1995. The Company's
employees and executive officers also are employees and executive officers of
Realty Advisors and receive compensation from CNL Group, Inc. in part for
services in such capacities. See "Certain Transactions" for a description of
the fees payable and expenses reimbursed to Realty Advisors.
Summary Compensation Table
--------------------------
Annual Compensation (1) Long Term Compensation
---------------------- ----------------------
Name and Stock Option
Principal Position Year Salary Bonus Awards (Shares)
- ------------------ ---- ------ ----- ----------------------
James M. Seneff, Jr. 1995 $0 $0 -0-
Chief Executive
Officer & Chairman 1994 $0 $0 145,500
of the Board 1993 $0 $0 12,000
- ----------------------------
(1) Mr. Seneff became the Chief Executive Officer of the Company in July
1992. No executive officer received a salary or bonus from the Company
during 1995.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
There were no stock options granted to the Chief Executive Officer or
any other officer of the Company during the fiscal year ended December 31,
1995.
OPTIONS EXERCISED AND FISCAL YEAR-END VALUES
The following table sets forth certain information with respect to
unexercised stock options held by the Chief Executive Officer at December 31,
1995. The Chief Executive Officer did not exercise any stock options during
the fiscal year ended December 31, 1995.
Value of Unexercised
Number of Unexercised In-the-Money Options
Name Options at December 31, 1995 at December 31, 1995(1)
- ---- ---------------------------- ---------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
James M. Seneff,
Jr. 66,500 101,000 15,000 -0-
- ----------------------
(1) Based on the closing price of $12.75 on the New York Stock Exchange on
December 29, 1995.
The Company's only employee compensation plan is the 1992 Plan. The
Company does not have any other compensation or pension plans.
THE FOLLOWING SECTION OF THIS PROXY STATEMENT SHALL NOT BE DEEMED TO BE
INCORPORATED INTO ANY FILING BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, INCLUDING ANY SUCH INCORPORATION BY
REFERENCE OF ANY OTHER PORTIONS OF THIS PROXY STATEMENT.
COMPENSATION COMMITTEE REPORT
The Board of Directors appointed a Compensation Committee comprised of
the undersigned, Messrs. Clark, Hinkle and Lanier. Members of the
Compensation Committee, all of whom must be independent directors of the
Company, are selected each year by the full Board of Directors.
None of the officers of the Company, including the Chief Executive
Officer, have received any salary, bonus or other compensation from the
Company for services rendered, except for stock option grants pursuant to the
1992 Plan. Accordingly, the primary responsibility of the Compensation
Committee is to administer the 1992 Plan, which includes determining the
individuals to be granted stock option awards and defining the terms of such
awards, including the number of shares subject to each option, exercise price,
vesting schedule and expiration date.
The purpose of the 1992 Plan is to provide compensation to persons whose
services are considered essential to the growth and success of the Company.
By linking this compensation to the market performance of the Company's Common
Stock, the Company intends to provide additional incentive for officers and
key employees to enhance the value and success of the Company and align the
long-term interests of the officers and key employees with the interests of
the Company's stockholders.
During the fiscal year ended December 31, 1995, the Compensation
Committee did not make any option awards. Of the 600,000 shares authorized
under the 1992 Plan, 578,100 had been granted as of December 31, 1995. Stock
option grants in prior years provide for an exercise price equal to the fair
market value, as defined in the 1992 Plan, on the date of grant. In fixing
the grants of stock options to each of the officers, including the Chief
Executive Officer, the Compensation Committee makes a subjective assessment of
the general performance of the Company, the officer's contribution to the
Company's performance, the officer's anticipated performance and contributions
to the Company's achievement of its long-term goals and the position, level
and scope of the responsibility of the respective officer.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total
stockholder return on the Company's Common Stock, based on the market price of
the Common Stock and assuming reinvestment of dividends ("NNN"), with the
National Association of Real Estate Investment Trusts Equity Index ("NAREIT")
and the S&P 500 Index ("S&P 500") for the five year period commencing January
1, 1991 and ending December 31, 1995. The graph assumes the investment of
$100 on January 1, 1991.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[ PERFORMANCE GRAPH ]
PROPOSALS II AND III
APPROVAL OF AMENDMENT TO THE COMPANY'S ARTICLES OF
INCORPORATION (A) TO AUTHORIZE AN INCREASE IN THE AUTHORIZED
SHARES OF COMMON STOCK AND A CORRESPONDING INCREASE IN THE
AUTHORIZED SHARES OF EXCESS STOCK AND (B) TO AUTHORIZE
THE ISSUANCE OF PREFERRED STOCK AND A CORRESPONDING
INCREASE IN THE AUTHORIZED SHARES OF EXCESS STOCK
Effective as of March 20, 1996, the Board of Directors unanimously
approved, subject to approval of the stockholders at the Annual Meeting, an
amendment to Article VI of the Company's Articles of Incorporation, as amended
(the "Articles of Incorporation"), which (i) would increase the number of
shares of authorized Common Stock, $.01 par value (the "Common Stock"), from
thirty million (30,000,000) shares to fifty million (50,000,000) shares, (ii)
would authorize the Company to issue, from time to time, up to fifteen million
(15,000,000) shares of preferred stock, $.01 par value (the "Preferred
Stock"), with such rights, powers, preferences and terms as are determined by
the Board of Directors at the time of issuance, without further stockholder
action, and (iii) would increase in the number of shares of authorized shares
of Excess Stock, $.01 par value (the "Excess Stock"), from thirty million
(30,000,000) shares to sixty-five million (65,000,000) shares.
The text of the proposed amendments to Article VI is set forth in their
entirety in Appendix A of this Proxy Statement as if each of the proposals
contained herein have been adopted in their entirety. In the event that any
one of the proposals is not adopted, the proposed amendments to Article VI
will be modified accordingly.
The Board of Directors believes that the proposal to increase the number
of shares of Common Stock is in the best interests of the Company and its
stockholders. If the proposed amendment to increase the number of shares of
Common Stock is approved by stockholders, the Common Stock would be available
for issuance by the Board of Directors from time to time for stock dividends,
stock splits, raising capital through public or private offerings, ensuring
the availability of sufficient authorized shares, and providing shares for
possible future acquisitions and general corporate purposes. Such
availability of shares of Common Stock would eliminate the delay and expense
involved in first conducting a special meeting of stockholders to increase the
authorized shares of Common Stock and would provide the Company with the
flexibility to act in a timely manner to take advantage of favorable market
conditions and other opportunities, including issuing shares of Common Stock
pursuant to its effective shelf registration statement. As of February 28,
1996, 15,688,672 shares of Common Stock were issued and outstanding and
1,200,000 shares of Common Stock were reserved for issuance under the 1992
Plan. The number of shares of Common Stock issued and outstanding together
with the shares of Common Stock reserved for issuance pursuant to the 1992
Plan represent approximately 56% of the authorized Common Stock. The Board of
Directors has no current plans to issue any additional shares of Common Stock.
The Board of Directors believes that the proposal to authorize the
issuance of Preferred Stock is in the best interests of the Company and its
stockholders. If the proposed amendment to the Articles of Incorporation is
approved by the stockholders, the Preferred Stock would be available for
issuance by the Board of Directors from time to time for stock dividends,
financings, acquisitions or general corporate purposes. Such availability of
shares of Preferred Stock would eliminate the delay and expense involved in
first conducting a special meeting of stockholders to authorize the issuance
of such shares when needed and would provide the Company with the flexibility
to act in a timely manner to take advantage of favorable market conditions and
other opportunities. The Board of Directors has no current plans to issue any
shares of Preferred Stock. See " - Possible Effects of the Proposal to
Authorize Preferred Stock."
Stockholders of the Company do not have preemptive rights to subscribe
for or purchase any shares of Common Stock that may be issued in the future.
Shares of Common Stock and, once authorized, shares of Preferred Stock
generally may be issued by the Board of Directors for any proper corporate
purpose without further stockholder action, unless required by applicable
laws, rules or regulations. The rules of the New York Stock Exchange (the
"NYSE"), on which the Common Stock of the Company is currently quoted,
require, in certain limited circumstances, issuers having securities quoted on
the NYSE to obtain stockholder approval of the issuance of securities. See "
- - Characteristics of Common Stock."
The issuance of Preferred Stock is not currently authorized by the
Company's Articles of Incorporation, and, accordingly, no shares of Preferred
Stock are currently issued and outstanding or available for future issuance.
The following summary of the proposed amendments to Article VI of the
Company's Articles of Incorporation is qualified in its entirety by the
complete text of the proposed amendments set forth in Appendix A of this Proxy
Statement.
CHARACTERISTICS OF 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. In the
event stockholders approve the proposed amendment to authorize the issuance by
the Board of Directors of Preferred Stock, rights of stockholders to receive
dividends and to receive distributions upon any liquidation, dissolution or
winding up of the Company will be subject to the express terms of any shares
of Preferred Stock that may be issued and outstanding.
Issuers with stock quoted on the NYSE, the exchange on which the Common
Stock of the Company is currently quoted, are currently required under
applicable rules to obtain stockholder approval, prior to the issuance of
securities, in the following limited circumstances: (i) any transaction
(other than a public offering) where the sale or issuance of common stock (or
securities convertible into common stock) is or will be equal or will be in
excess of 20% or more of the voting power prior to issuance; or (ii) any
transaction (other than a public offering) where the number of shares of
common stock (or securities convertible into common stock) to be issued is or
will equal or will be in excess of 20% of the number of shares of common stock
outstanding prior to issuance.
CHARACTERISTICS OF PREFERRED STOCK
If the proposed amendment authorizing the issuance of Preferred Stock is
approved, the Board of Directors would be authorized to approve the issuance,
without the necessity of further stockholder action (unless required by
applicable laws, rules or regulations), of one or more series of Preferred
Stock, and to determine the rights, powers, preferences and terms of such
Preferred Stock, including, among other things: (i) the designation of the
series, which may be by distinguishing number, letter or title; (ii) the
dividend rate on the shares of the series, if any, whether any dividends shall
be cumulative and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of the series; (iii) the
redemption rights, including conditions and the price or prices, if any, for
shares of the series; (iv) the terms and amounts of any sinking fund for the
purchase or redemption of shares of the series; (v) the rights of the shares
of the series in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, and the relative
rights of priority, if any, of payment of shares of the series; (vi) whether
the shares of the series shall be convertible into shares of any other class
or series, or any other security, of the Company or any other corporation or
other entity, and, if so, the specification of such other class or series of
such other security, the conversion price or prices or dates on which such
shares shall be convertible and all other terms and conditions upon which such
conversion may be made; (vii) restrictions on the issuance of shares of the
same series or of any other class or series; (viii) the voting rights, if any,
of the holders of shares of the series; and (ix) any other relative rights,
preferences and limitations on that series.
If authorized, the Preferred Stock could be issued in one or more series
varying in such features as dividend, redemption, sinking fund and conversion
provisions, voting rights and the amount payable upon involuntary or voluntary
liquidation of the Company. Preferred Stock would be available for stock
dividends, possible future financings of, or acquisitions by, the Company and
for general corporate purposes without any legal requirement that further
stockholder authorization for the issuance thereof be obtained, unless
required by applicable laws, rules or regulations. See " - Characteristics of
Common Stock."
CHARACTERISTICS OF EXCESS STOCK
Currently, the Articles of Incorporation contain certain restrictions on
the number of shares of Common Stock that individual stockholders may own.
For the Company to qualify as a real estate investment trust (a "REIT") for
federal income tax purposes, not more than 50% in value of the outstanding
capital stock (including preferred stock) of the Company may be owned,
directly or indirectly, by five or fewer individuals (as defined in the
Internal Revenue Code of 1986, as amended (the "Code"), to include certain
entities) during the last half of a taxable year (other than the first year).
The capital stock also must be beneficially owned by 100 or more persons
during at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year. Because the Comany expects to
maintain its status as a REIT, the ownership limitation provision of the
Articles of Incorporation containing restrictions on the acquisition of its
Common Stock is intended to ensure compliance with these requirements.
Therefore, because the Board of Directors believes it is essential for the
Company to continue to qualify as a REIT for federal income tax purposes, the
Articles of Incorporation provide that no holder may own, or be deemed to own
by virtue of the applicable attribution provisions of the Code, more than 9.8%
(the "Ownership Limit") of the value of the issued and outstanding Common
Stock of the Company. Any transfer of shares of Common Stock that would (i)
create a direct or indirect ownership of shares of Common Stock in excess of
the Ownership Limit, (ii) result in the shares of Common Stock being owned by
fewer than 100 persons, or (iii) result in the Company being "closely held"
within the meaning of section 856(h) of the Code (collectively, a "Non-
Qualifyng Event"), will be null and void, and the intended transferee will
acquire no rights to such shares.
Any shares purported to be transferred or issued that would result in a
person owning shares that causes a Non-Qualifying Event will be automatically
converted into shares of Excess Stock, which will be transferred pursuant to
the Articles of Incorporation to the Company as trustee for the exclusive
benefit of the person or persons to whom the shares of Excess Stock are
ultimately transferred, until such time as the intended transferee retransfers
the shares of Excess Stock. Subject to the Ownership Limit, the shares of
Excess Stock may be retransferred by the intended transferee to any person (if
the shares of Excess Stock would not be shares of Excess Stock in the hands of
such person) at a price not to exceed the price paid by the intended
transferee (or, if no consideration was paid, fair market value on the date of
the purported transfer that resulted in shares of Excess Stock), at which
point the shares of Excess Stock will automatically be converted into the
stock to which the shares of Excess Stock are attributable. In addition, such
shares of Excess Stock held in trust are subject to purchase by the Company at
a purchase price equal to the price paid for the stock by the intended
transferee (or, if no consideration was paid, fair market value at the date in
which the Company purchases the shares of Excess Stock).
From and after the intended transfer that caused the issuance of shares
of Excess Stock, the intended transferee shall cease to be entitled to
distributions (except upon liquidation), voting rights and other benefits with
respect to such shares of the stock except the right to payment of the
purchase price for the shares of stock or the transfer of shares as provided
above. Any dividend or distribution paid to a proposed transferee on shares
of Excess Stock prior to the discovery by the Company that such shares of
stock have been transferred in violation of the provisions of the Articles of
Incorporation shall be repaid to the Company upon demand. Further, the
issuance of shares of Excess Stock has no dilutive effect on the then-issued
and outstanding shares of Common Stock.
Currently, the Articles of Incorporation authorize an equal number of
shares of Common Stock and Excess Stock. In the event the amendements to
Article VI are approved by stockholders of the Company, the Articles of
Incorporation would authorize an amount of Excess Stock equal to the aggregate
number of authorized shares of Common Stock and Preferred Stock which, in the
event that a Non-Qualifying Event occurs, would afford stockholders the same
protections against the Company's failure to qualify as a REIT as are now
currently in effect.
Excess Stock may be issued only upon the occurrance of a Non-Qualifying
Event and currently, there are no issued and outstanding shares of Excess
Stock.
VOTE REQUIRED TO AMEND THE ARTICLES OF INCORPORATION
The affirmative vote of the holders of a 66-2/3% of the shares of the
Common Stock outstanding and entitled to vote at the meeting is required to
approve amendments to the Articles of Incorporation. Accordingly, shares that
are not voted (whether by abstention, broker non-vote or otherwise) will have
the effect of counting against the approval of the proposed amendments to the
Articles of Incorporation.
PROPOSAL II
THE BOARD OF DIRECTORS DEEMS ADVISABLE, AND RECOMMENDS A VOTE FOR, THE
INCREASE IN THE AUTHORIZED SHARES OF COMMON STOCK FROM THIRTY MILLION
(30,000,000) TO FIFTY MILLION (50,000,000) SHARES AND THE CORRESPONDING TWENTY
MILLION (20,000,000) SHARE INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF
EXCESS STOCK.
PROPOSAL III
THE BOARD OF DIRECTORS DEEMS ADVISABLE, AND RECOMMENDS A VOTE FOR, THE
AUTHORIZATION TO ISSUE FIFTEEN MILLION (15,000,000) SHARES OF PREFERRED STOCK
AND THE CORRESPONDING FIFTEEN MILLION (15,000,000) SHARE INCREASE IN THE
NUMBER OF AUTHORIZED SHARES OF EXCESS STOCK.
A VOTE FOR PROPOSAL II OR III SHALL BE DEEMED A VOTE PERMITTING THE
BOARD OF DIRECTORS TO AMEND AND RESTATE THE ARTICLES OF INCORPORATION IN THEIR
ENTIRETY TO INCLUDE ALL AMENDMENTS ADOPTED BY THE SHAREHOLDERS AT THE ANNUAL
MEETING. IN THE EVENT THAT PROPOSALS II AND III ARE APPROVED BY STOCKHOLDERS
OF THE COMPANY, APPENDIX A SETS FORTH IN PERTINENT PART, THE AMENDED PORTION
OF THE ARTICLES OF INCORPORATION AS IF BOTH PROPOSALS HAVE BEEN APPROVED.
POSSIBLE EFFECTS OF THE PROPOSAL TO AUTHORIZE PREFERRED STOCK
Because the Board of Directors has not fixed, and does not believe that
it is advisable at this time to fix, the characteristics of any particular
series of Preferred Stock, each series will have the characteristics adopted
by the Board of Directors prior to the issuance of any shares of such series.
Such characteristics may affect the voting powers and the equity of the
holders of the Common Stock, as well as the funds available for dividends and
the distribution of assets upon liquidation. For example, the Preferred Stock
could be given more than one vote per share and a liquidation preference over
the Common Stock. Because dividends on preferred stock generally are paid
prior to dividends on common stock outstanding, Preferred Stock may affect the
funds available for dividends on the Common Stock. In addition, the issuance
of shares of Preferred Stock could cause a dilution of the voting rights, the
net earnings and the net book value per share of the Common Stock.
Although the Board of Directors has no present intention to do so, it
could, in the future, issue a series of Preferred Stock which, due to its
terms, could impede a merger, tender offer or other transaction that some, or
a majority, of the Company's stockholders might believe to be in their best
interests.
PROPOSAL IV
APPROVAL OF AMENDMENTS TO PARAGRAPH H OF SECTION 1 OF ARTICLE
VII AND TO ARTICLE XI OF THE COMPANY'S ARTICLES OF INCORPORATION
TO PERMIT THE COMPANY TO AMEND THE ARTICLES OF
INCORPORATION UPON THE AFFIRMATIVE VOTE OF
STOCKHOLDERS OF THE COMPANY HOLDING A
MAJORITY OF THE VOTES ENTITLED
TO VOTE AT A MEETING
Effective as of March 20, 1996, the Board of Directors unanimously
approved an amendment to paragraph H of Section 1 of Article VII and to
Article XI of the Company's Articles of Incorporation which would permit the
Company to amend the Articles of Incorporation upon the affirmative vote of
stockholders of the Company holding a majority of the votes entitled to vote
at a meeting. Presently, the Articles of Incorporation are silent regarding
stockholder approval of amendments to the Articles of Incorporation and
therefore, the Maryland General Corporation Law requires the affirmative vote
of stockholders holding 66-2/3% of the votes entitled to vote at a meeting to
approve amendments to the Articles of Incorporation.
The complete text of the proposed amendments are as follows:
ARTICLE VII
MATTERS RELATING TO THE POWERS OF THE CORPORATION AND ITS
DIRECTORS AND STOCKHOLDERS
SECTION 1. MATTERS RELATING TO THE BOARD OF DIRECTORS.
"H. ALTERATION OF AUTHORITY GRANTED TO THE BOARD OF DIRECTORS.
The affirmative vote of that proportion of the then-outstanding Capital
Stock necessary to approve an amendment to this Charter pursuant to the
MGCL and Article XI hereof shall be required to amend, repeal or adopt
any provision inconsistent with Section 1 of this Article VII or with
Section 3.12 of the Bylaws of the Corporation (including defined terms
therein)."
ARTICLE XI
AMENDMENT
"The Corporation reserves the right at any time and from time to time to
amend, alter, change or repeal any provision contained in its Charter
and any other provisions authorize by the laws of the State of Maryland
at the time in force may be added or inserted in the manner now or
hereafter prescribe herein or by applicable law, and all rights,
preferences and privileges of whatsoever nature conferred upon
stockholder, directors or any other persons whomsoever by and pursuant
to this Charter in its present form or as hereafter amended are granted
subject to the rights reserved in this Article XI; provided, however,
that (i) any amendment or repeal of Articles VII, IX or this Article XI
of this Charter shall not adversely affect any right or protection
existing hereunder immediately prior to such amendment or repeal and,
(ii) notwithstanding any provision of law to the contrary, any amendment
to, or repeal of, this Charter shall be approved by stockholders of the
Corporation by the affirmative vote of a majority of all of the votes
entitled to be cast on such amendment or repeal."
The Board of Directors believes that the proposal to reduce the
stockholder vote required to amend the Articles of Incorporation is in the
best interests of the Company and its stockholders. Reducing the vote
required to amend the Articles of Incorporation provides the Board of
Directors with greater flexibility to increase the authorized capital of the
Company for purposes the Board determines to be in the best interests of the
Company. Such purposes could include stock dividends, stock splits, raising
capital through a public or private offering, ensuring the availability of
sufficient authorized shares, and providing shares for possible future
acquisitions and other general corporate purposes. The Board of Directors
believes that requiring an affirmative vote of 66-2/3% of the votes entitled
to vote at a meeting in order to amend the Articles of Incorporation could
have a detrimental effect on the Company in some cases.
VOTE REQUIRED TO AMEND THE ARTICLES OF INCORPORATION
The affirmative vote of the holders of a 66-2/3% of the shares of the
Common Stock outstanding and entitled to vote at the meeting is required to
approve amendments to the Articles of Incorporation. Accordingly, shares that
are not voted (whether by abstention, broker non-vote or otherwise) will have
the effect of counting against the approval of the proposed amendment to the
Articles of Incorporation.
THE BOARD OF DIRECTORS DEEMS ADVISABLE, AND RECOMMENDS A VOTE FOR, THE
AMENDMENT TO PARAGRAPH H OF SECTION 1 OF ARTICLE VII AND TO ARTICLE XI OF THE
ARTICLES OF INCORPORATION.
SECURITY OWNERSHIP
The following table sets forth, as of February 28, 1996, the number and
percentage of outstanding shares beneficially owned by all persons known by
the Company to own beneficially more than five percent of the Company's Common
Stock, by each director and nominee, by each of the executive officers named
in "Executive Compensation," above, and by all officers and directors as a
group, based upon information furnished to the Company by such stockholders,
officers and directors. Unless otherwise noted below, the persons named in
the table have sole voting and sole investment power with respect to each of
the shares beneficially owned by such person.
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned of Shares
- ------------------- ------------------ ---------
Robert A. Bourne (1) 360,262 (2)(3) 2.3%
400 East South Street, Suite 500
Orlando, Florida 32801
Edward Clark (4) 2,610 (5) (6)
5204 Shamrock Drive
Raleigh, North Carolina 27612
Willoughby T. Cox, Jr. (4) 2,625 (7) (6)
200 Pasadena Place
Orlando, Florida 32802
Clifford R. Hinkle (4) 7,775 (8) (6)
108 East Jefferson, Suite D
Tallahassee, Florida 32304
Ted B. Lanier (4) 7,325 (9) (6)
1818 Windmill Drive
Sanford, North Carolina 27330
James M. Seneff, Jr. (1) 416,867 (2)(10) 2.7%
400 East South Street, Suite 500
Orlando, Florida 32801
Public Employees Retirement 930,000 5.9%
System of Ohio
277 East Town Street
Columbus, Ohio 43215
All directors and executive 555,919
officers as a group (9 persons) (2)(3)(5)(7)(8)(9)(10)(11) 3.5%
- ----------------------------------------
(1) A director and executive officer of the Company.
(2) Of these shares, 310,699 shares are held by six limited partnerships, of
which Messrs. Bourne and Seneff are general partners. In addition,
35,473 of these shares are held by a trust of which Mr. Seneff serves as
trustee. Messrs. Bourne and Seneff disclaim beneficial ownership of
these shares, except to the extent of their respective percentage
interests in each of these entities.
(3) Includes 1,730 shares held by Mr. Bourne as custodian for his minor
children and 47,833 shares subject to currently exercisable options.
(4) A director of the Company.
(5) Includes 185 shares held by Mr. Clark's spouse and 2,125 shares subject
to currently exercisable options.
(6) Less than 1 percent.
(7) Includes 2,125 shares subject to currently exercisable options.
(8) Includes 800 vested shares held by Flagler Capital Corporation Profit
Sharing Plan on behalf of Mr. Hinkle, who is the sole participant, 2,125
shares subject to currently exercisable options, 250 shares held by Mr.
Hinkle as custodian for his son under the Uniform Gift to Minors Act,
and 1,000 shares held by Mr. Hinkle's spouse.
(9) Includes 1,700 shares held by Mr. Lanier's spouse, and 2,125 shares
subject to currently exercisable options.
(10) Includes 66,500 shares subject to currently exercisable options.
(11) Includes 66,334 shares subject to currently exercisable options held by
other executive officers.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (the "SEC") and the New York Stock Exchange. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Forms 3, 4 and 5 they
file.
Based solely on the Company's review of the copies of such forms it has
received and written representations from certain reporting persons that they
were not required to file Forms 5 for the last fiscal year, the Company
believes that all its officers, directors, and greater than ten percent
beneficial owners complied with all filing requirements applicable to them
with respect to transactions during fiscal 1995, except Gary M. Ralston, who
was late filing one Form 4 reporting a purchase of 1,000 shares of the
Company's Common Stock in a single transaction.
CERTAIN TRANSACTIONS
Administration of the day-to-day operations of the Company is provided
by Realty Advisors, a subsidiary of CNL Group, Inc., of which Messrs. Seneff
and Bourne are affiliates, pursuant to the terms of an advisory agreement (the
"Advisory Agreement"). All of the officers of Realty Advisors also are
officers of the Company. Realty Advisors also serves as the Company's
consultant in connection with policy decisions to be made by the Company's
Board of Directors, manages the Company's properties and renders such other
services as the Board of Directors deems appropriate. Realty Advisors also
bears the expense of providing the executive and administrative personnel,
office space and services required in rendering such services to the Company.
Realty Advisors is at all times subject to the supervision of the Board of
Directors of the Company and has only such functions and authority as the
Company may delegate to it as the Company's agent.
The Advisory Agreement provides that Realty Advisors is entitled to
receive an annual advisory fee (the "Advisory Fee"), paid monthly, equal to
seven percent (7%) of Funds From Operations (as defined in the Advisory
Agreement) up to $10,000,000, six percent (6%) of Funds From Operations in
excess of $10,000,000 but less than $20,000,000, and five percent (5%) of
Funds From Operations in excess of $20,000,000. In addition, the Advisory
Agreement provides that, to the extent that the Board of Directors requests
that Realty Advisors render services other than those otherwise required to be
performed, such additional services shall be compensated separately on terms
to be agreed upon.
The aggregate Advisory Fee incurred by the Company to Realty Advisors
during the year ended December 31, 1995 was $1,001,225.
The Company's Board of Directors (including a majority of its
independent directors) approved the payment to Realty Advisors of an
acquisition fee equal to 1.5 percent of the cost of 22 properties and four
buildings acquired by the Company in 1995 that were not developed by or
purchased from affiliates of CNL Group, Inc. and an expense reimbursement
equal to 0.5 percent of such costs to cover costs incurred on behalf of the
Company in site selection and acquisition activities (including travel and
related items) of Realty Advisors. During 1995, the Company incurred $703,022
in acquisition fees and $234,341 in expense reimbursements payable to Realty
Advisors with respect to these properties.
The term of the Advisory Agreement expired January 1, 1996, subject to
successive one-year renewals upon mutual consent of the parties. The Company
has renewed the Advisory Agreement for 1996 by a unanimous vote of directors.
The Advisory Agreement may be terminated for cause by either party thereto, or
by the mutual consent of the parties (by a majority of the independent
directors of the Company or a majority of the Board of Directors of Realty
Advisors, as the case may be), upon 90 days written notice.
During 1995, the Company acquired five properties for purchase prices
totalling $17,968,518 from affiliates of CNL Group, Inc. who had developed the
properties. The purchase prices paid by the Company for these properties
include development fees totalling $1,105,689. No acquisition fees or expense
reimbursement fees were paid to Realty Advisors in connection with acquisition
of these properties.
INDEPENDENT AUDITORS
Upon recommendation of and approval by the Audit Committee, KPMG Peat
Marwick LLP has been selected to act as independent certified public
accountants for the Company during the current fiscal year.
A representative of KPMG Peat Marwick LLP will be present at the annual
meeting and will be provided with the opportunity to make a statement if
desired. Such representative will also be available to respond to appropriate
questions.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at
the annual meeting other than those stated above. If any other business
should come before the annual meeting, the person(s) named in the enclosed
proxy will vote thereon as he or they determine to be in the best interests of
the Company.
PROPOSALS FOR NEXT ANNUAL MEETING
Any stockholder proposal to be considered for inclusion in the Company's
proxy statement and form of proxy for the annual meeting of stockholders to be
held in 1996 must be received at the Company's office at 400 East South
Street, Suite 500, Orlando, Florida 32801, no later than November 29, 1996.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 1995, accompanies this Proxy Statement.
By Order of the Board of Directors
Robert A. Bourne
Secretary
March 29, 1996
Orlando, Florida
APPENDIX A
ARTICLE VI
AUTHORIZED STOCK
SECTION 1. TOTAL CAPITALIZATION
The total number of shares of all classes of capital stock that the
Corporation has authority to issue is one hundred thirty million (130,000,000)
shares consisting of (i) fifty million (50,000,000) shares of common stock,
par value $0.01 (the "Common Stock"); (ii) fifteen million (15,000,000) shares
of preferred stock, par value $0.01 (the "Preferred Stock"); and sixty-five
million (65,000,000) shares of excess stock, par value $0.01 (the "Excess
Stock). The aggregate par value of all of the authorized shares of all
classes of capital stock having a par value is $1,300,000.
SECTION 2. CAPITAL STOCK
A. COMMON STOCK
(1). COMMON STOCK SUBJECT TO TERMS OF PREFERRED STOCK. The
Common Stock shall be subject to the express terms of the Preferred Stock.
(2). DIVIDEND RIGHTS. The holders of shares of Common
Stock shall be entitled to receive such dividends as may be declared by the
Board of Directors of the Corporation out of funds legally available therefor.
(3). RIGHTS UPON LIQUIDATION. In the event of any
voluntary or involuntary liquidation, dissolution or winding up, or any
distribution of the assets, of the Corporation, the aggregate amount available
for distribution to holders of shares of Common Stock (including, for purposes
of this sentence, holders of shares of Excess Stock) shall be determined by
applicable law. Except as provided below, each holder of shares of the Common
Stock shall be entitled to receive that portion of such aggregate amount,
ratably with (i) each other holder of shares of Common Stock and (ii) each
holder of shares of Excess Stock, as the number of shares of the Common Stock
held by such holder bears to the total number of shares of Common Stock and
Excess Stock. Anything herein to the contrary notwithstanding, in no event
shall the amount payable to a holder of shares with respect to Excess Stock
hereunder exceed (i) the price per share such holder paid for the Common Stock
in the purported Transfer (as that term is defined in paragraph A of Section 3
of this Article VI) that resulted in the Excess Stock or (ii) if the holder
did not give full value for such Excess Stock (as through a gift, devise or
other event or transaction), a price per share equal to the Market Price (as
the term is defined in paragraph A of Section 3 of this Article VI) for the
shares of the Common Stock on the date of the purported Transfer that resulted
in such Excess Stock. Any amount available for distribution in excess of the
foregoing limitations shall be paid ratably to holders of Common Stock and
other holders of Excess Stock resulting from the exchange of Common Stock to
the extent permitted by the foregoing limitations.
(4). VOTING RIGHTS. Except as may be provided in this
Charter, and subject to the express terms of any series of Preferred Stock,
the holders of shares of the Common Stock shall have the exclusive right to
vote on all matters (as to which a common stockholder shall be entitled to
vote) at all meetings of the stockholders of the Corporation, an shall be
entitled to one (1) vote for each share of the Common Stock entitled to vote
at such meetings.
B. PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or
more series as authorized by the Board of Directors. Prior to the issuance of
shares of each such series, the Board of Directors, by resolution, shall fix
the number of shares to be included in each series, and the terms, rights,
restrictions and qualifications of the shares of each series. The authority
of the Board of Directors with respect to each series shall include, but not
be limited to, determination of the following:
(i) The designation of the series, which may be by distinguishing
number, letter or title.
(ii) The dividend rate on the shares of the series, if any, whether any
dividends shall be cumulative and, if so, from which date or
dates, and the relative rights of priority, if any, of payment of
dividends on shares of the series.
(iii) The redemption rights, including conditions and the price or
prices, if any, for shares of the series.
(iv) The terms and amounts of any sinking fund for the purchase or
redemption of shares of the series.
(v) The rights of the shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Corporation, and the relative rights of
priority, if any, of payment of shares of the series.
(vi) Whether the shares of the series shall be convertible into shares
of any other class or series, or any other security, of the
Corporation or any other corporation or other entity, and, if so,
the specification of such other class or series of such other
security, the conversion price or prices or dates on which such
shares shall be convertible and all other terms and conditions
upon which such conversion may be made.
(vii) Restrictions on the issuance of shares of the same series or of
any other class or series.
(viii) The voting rights, if any, of the holders of shares of the
series.
(ix) Any other relative rights, preferences and limitations on that
series.
Subject to the express provisions of any other series of Preferred Stock
then outstanding, notwithstanding any other provision of this Charter, the
Board of Directors may increase or decrease (but not below the number of
shares of such series then outstanding) the number of shares, or alter the
designation or classify or reclassify any unissued shares of a particular
series of Preferred Stock, by fixing or altering, in one or more respects,
from time to time before issuing the shares, the terms, rights, restrictions
and qualifications of the shares of any such series of Preferred Stock.
SECTION 3. RESTRICTIONS ON TRANSFER; ACQUISITIONS AND REDEMPTION SHARES
A. DEFINITIONS. For purposes of Sections 3 and 4 of this Article
VI, the following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of shares of
Capital Stock by an individual who would be treated as an owner of such shares
under Section 542(a)(2) of the Code, either directly or constructively through
the application of Section 544, as modified by Section 856(h)(1)(B). For
purposes of this definition, the term "individual" also shall include any
organization, trust or other entity that is treated as an individual for
purposes of Section 542(a)(2) of the Code. The terms "Beneficial Owner,"
"Beneficially Own," "Beneficially Owns" and "Beneficially Owned" shall have
correlative meanings.
"Beneficiary" shall mean a beneficiary of the Trust as
determined pursuant to paragraph A of Section 4 of this Article VI.
"Board of Directors" shall mean the Board of Directors of
the Corporation.
"Bylaws" shall mean the Bylaws of the Corporation.
"Capital Stock" shall mean collectively the stock of the
Corporation that is either Common Stock and Preferred Stock.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute thereto. Reference to any
provision of the Code shall mean such provision as in effect from time to
time, as the same may be amended, and any successor thereto, as interpreted by
any applicable regulations thereto and judicial decisions as in effect from
time to time.
"Constructive Ownership" shall mean ownership of shares of
Capital Stock by a Person who would be treated as an owner of such shares,
either actually or constructively, through the application of Section 318 of
the Code, as modified by Section 856(d)(5) thereof. The terms "Constructive
Owner," "Constructively Own," "Constructively Owns" and "Constructively Owned"
shall have correlative meanings.
"Market Price" on any day shall mean the average of the
Closing Prices for the ten (10) consecutive Trading Days immediately preceding
such day (or those days during such 10-day period for which Closing Prices are
available). The "Closing Price" on any day shall mean the last sale price,
regular way, on such day or if no such sale takes place on that day, the
average of the closing bid and asked prices, regular way, in either case as
reported on the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or the American Stock Exchange, or if the Capital Stock is not so
listed or admitted to trading, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange (including the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
System) on which the Capital Stock is listed or admitted to trading or, if the
Capital Stock is not so listed or admitted to trading, the last quoted price,
or if not quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in
use, the principal automated quotation system then in use or, if the Capital
Stock is not so quoted by any such system, the average of the closing bid and
asked prices as furnished by a professional market maker selected by the Board
of Directors making a market in the Capital Stock or, if there is no such
market maker or such closing prices otherwise are not available, the fair
market value of the Capital Stock as of such day, as determined by the Board
of Directors in its discretion.
"Ownership Limit" shall mean 9.8 percent of the Value of the
outstanding Capital Stock.
"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 for or 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 Securities Exchange Act of 1934, as
amended; but does not include an underwriter which participated in a public
offering of Capital Stock for a period of sixty (60) days following the
purchase by such underwriter of Capital Stock therein, provided that the
foregoing exclusion shall apply in an underwriting only if the ownership of
such Capital Stock by such underwriter would not cause the Corporation 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 Corporation to fail to
qualify as a REIT.
"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock, the purported beneficial
transferee for whom the Purported Record Transferee would have acquired shares
of Capital Stock if such Transfer had been valid under paragraph B of this
Section 3.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Stock, the record holder of the
Capital Stock if such Transfer had been valid under paragraph B of this
Section 3.
"REIT" shall mean a real estate investment trust under Sections
856 through 860 of the Code.
"Restriction Termination Date" shall mean the first day on which
the Board of Directors and the stockholders of the Corporation determine that
it is no longer in the best interests of the Corporation to attempt, or
continue, to qualify as a REIT.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Capital Stock is listed or admitted to
trading is open for the transaction of business or, if the Capital Stock is
not listed or admitted to trading, shall mean any day other than a Saturday,
Sunday or other day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Transfer" shall mean any sale, transfer, gift, hypothecation,
assignment, devise or other disposition of Capital Stock (including (i) the
granting of any option (including any option to acquire any option or any
series of such options) or entering into any agreement for the sale, transfer
or other disposition of Capital Stock or (ii) the sale, transfer, assignment
or other disposition of any securities or rights convertible into or
exchangeable for Capital Stock), whether voluntary or involuntary, of record
constructively or beneficially, and whether by operation of law or otherwise.
The terms "Transfers" and "Transferred" shall have correlative meanings.
"Trust" shall mean the trust created pursuant to paragraph A of
Section 4 of this Article VI.
"Trustee" shall mean the Corporation as trustee for the Trust, and
any successor trustee appointed by the Corporation.
"Value" shall mean, as of any given date, the Market Price per
share of each class of Capital Stock then outstanding, multiplied by the
number of shares of such class then outstanding.
B. OWNERSHIP AND TRANSFER LIMITATION
(1) Notwithstanding any other provision of this Charter, except as
provided in paragraph I of this Section 3 and Section 5 of this Article VI,
prior to the Restriction Termination Date, no Person shall Beneficially or
Constructively Own shares of Capital Stock in excess of the Ownership Limit.
(2) Notwithstanding any other provision of this Charter, except as
provided in paragraph I of this Section 3 and Section 5 of this Article VI,
prior to the Restriction Termination Date, any Transfer, change in the capital
structure of the Corporation, or other purported change in Beneficial or
Constructive Ownership of Capital Stock that, if effective, would result in
any Person Beneficially or Constructively Owning Capital Stock in excess of
the Ownership Limit shall be void ab initio as to the Transfer, change in the
capital structure of the Corporation, or other purported change in Beneficial
or Constructive Ownership with respect to that number of shares of Capital
Stock which would otherwise be Beneficially or Constructively Owned by Such
Person in excess of the Ownership Limit, and neither the Purported Beneficial
Transferee nor the Purported Record Transferee shall acquire any rights in
that number of shares of Capital Stock.
(3) Notwithstanding any other provision of this Charter, except as
provided in Section 5 of this Article VI, prior to the Restriction Termination
Date, any Transfer, change in the capital structure of the Corporation, or
other purported change in ownership of Capital Stock that, if effective, would
result in the Capital Stock being owned by fewer than 100 Persons (determined
without reference to any rules of attribution) shall be void ab initio as to
the Transfer, change in the capital structure of the Corporation, or other
purported change in ownership with respect to that number of shares which
otherwise would be owned by the transferee, and the intended transferee or
subsequent owner (including a Beneficial Owner) shall acquire no rights in
that number of shares of Capital Stock.
(4) Notwithstanding any other provisions of this Charter except
Section 5 of this Article VI, prior to the Restriction Termination Date, any
Transfer, change in the capital structure of the Corporation, or other
purported change in Beneficial Ownership of shares of Capital Stock that, if
effective, would cause the Corporation to fail to qualify as a REIT by reason
of being "closely held" within the meaning of Section 856(h) of the Code or
otherwise, directly or indirectly, would cause the Corporation to fail to
qualify as a REIT shall be void ab initio as to the Transfer, change in the
capital structure of the Corporation, or other purported change in Beneficial
Ownership with respect to that number of shares of Capital Stock which would
cause the Corporation to be "closely held" within the meaning of Section
856(h) of the Code or otherwise, directly or indirectly, would cause the
Corporation to fail to qualify as a REIT, and the intended transferee or
subsequent Beneficial Owner shall acquire no rights in that number of shares
of Capital Stock.
C. EXCHANGE FOR EXCESS STOCK
(1) If, notwithstanding the other provisions contained in
this Article VI, at any time prior to the Restriction Termination Date, there
is a purported Transfer, change in the capital structure of the Corporation or
other purported change in the Beneficial or Constructive Ownership of Capital
Stock such that any person would either Beneficially or Constructively Own
Capital Stock in excess of the Ownership Limit, then, except as otherwise
provided in paragraph I of this Section 3, such shares of Capital Stock
(rounded up to the next whole number of shares) in excess of the Ownership
Limit automatically shall be exchanged for an equal number of shares of Excess
Stock having terms, rights, restrictions and qualifications identical thereto,
except to the extent that this Article VI requires different terms. Such
exchange shall be effective as of the close of business on the business day
next preceding the date of the purported Transfer, change in capital structure
or other change in purported Beneficial or Constructive Ownership of Capital
Stock.
(2) If, notwithstanding the other provisions contained in
this Article VI, prior to the Restriction Termination Date, there is a
purported Transfer, change in the capital structure of the Corporation or
other purported change in Beneficial Ownership of Capital Stock which, if
effective, would cause the Corporation to fail to qualify as a REIT by reason
of being "closely held" within the meaning of Section 856(h) of the Code, or
otherwise, directly or indirectly would cause the Corporation to fail to
qualify as a REIT, then the shares of Capital Stock (rounded up to the next
whole number of shares), being Transferred or which are otherwise affected by
the change in capital structure or other purported change in Beneficial
Ownership and which, in any case, would cause the Corporation to be "closely
held" within the meaning of such Section 856(h) or otherwise would cause the
Corporation to fail to qualify as a REIT automatically shall be exchanged for
an equal number of shares of Excess Stock having terms, rights, restrictions
and qualifications identical thereto, except to the extent that this Article
VI requires different terms. Such exchange shall be effective as of the close
of business on the business day next preceding the date of the purported
Transfer, change in capital structure or other purported change in Beneficial
Ownership.
D. REMEDIES FOR BREACH. If the Board of Directors or its
designee shall at any
time determine in good faith that a Transfer or change in the capital
structure of the Corporation has taken place in violation of paragraph B of
this Section 3 or that a Person intends to acquire or has attempted to acquire
Beneficial or Constructive Ownership of any shares of Capital Stock in
violation of paragraph B of this Section 3, the Board of Directors or its
designee shall take such actions as it deems advisable to refuse to give
effect to or to prevent such Transfer, change in capital structure of the
Corporation or other attempt to acquire Beneficial or Constructive Ownership
of any shares of Capital Stock, including, but not limited to, refusing to
give effect thereto on the books of the Corporation or instituting injunctive
proceedings with respect thereto; provided, however, that any Transfer, change
in the capital structure of the Corporation, attempted Transfer or other
attempt to acquire Beneficial or Constructive Ownership of any shares of
Capital Stock in violation of subparagraphs (2), (3) and (4) of paragraph B of
this Section 3 (as applicable) shall be void ab nitio and where applicable
automatically shall result in the exchange described in paragraph C of this
Section 3, irrespective of any action (or inaction) by the Board of Directors
or its designee.
E. NOTICE OF RESTRICTED TRANSFER. Any Person who acquires or
attempts to acquire Beneficial or Constructive Ownership of shares of Capital
Stock in violation of paragraph B of this Section 3 and any Person who
Beneficially or Constructively owns Excess Stock pursuant to paragraph C of
this Section 3 shall immediately give written notice to the Corporation, or,
in the event of a proposed or attempted Transfer or purported change in
Beneficial Ownership, shall give at least fifteen (15) days prior written
notice to the Corporation, of such event and shall promptly provide to the
Corporation such other information as the Corporation may request in order to
determine the effect, if any, of such Transfer, attempted Transfer or
purported change in Beneficial Ownership on the Corporation's status as a
REIT.
F. OWNERS REQUIRED TO PROVIDE INFORMATION. Prior to the
Restriction Termination Date:
(1) Every Beneficial or Constructive Owner of more than
5.0 percent, or such lower percentages as required pursuant to regulations
under the Code or as may be requested by the Board of Directors, of the Value
of the outstanding Capital Stock of the Corporation shall annually, no later
than January 31 of each calendar year, give written notice to the Corporation
stating (i) the name and address of such Beneficial or Constructive Owner;
(ii) the number of shares of Capital Stock Beneficially or Constructively
Owned and (iii) a description of how such shares are held. Each such
Beneficial or Constructive Owner promptly shall provide to the Corporation
such additional information as the Corporation, in its sole discretion, may
request in order to determine the effect, if any, of such Beneficial or
Constructive Ownership on the Corporation's status as a REIT and to ensure
compliance with the Ownership Limit.
(2) Each person who is a Beneficial or Constructive Owner
of Capital Stock and each Person (including the stockholder of record) who is
holding Capital Stock for a Beneficial or Constructive Owner promptly shall
provide to the Corporation such information as the Corporation, in its sole
discretion, may request in order to determine the Corporation's status as a
REIT, to comply with the requirements of any taxing authority or other
governmental agency, to determine any such compliance or to ensure compliance
with the Ownership Limit.
G. REMEDIES NOT LIMITED. Noting contained in this Article VI
except Section 5 hereof shall limit scope or application of the provisions of
this Section 3, the ability of the Corporation to implement or enforce
compliance with the terms thereof or the authority of the Board of Directors
to take any such other action or actions as it may deem necessary or advisable
to protect the Corporation and the interests of its stockholders by
preservation of the Corporation's status as a REIT and to ensure compliance
with the Ownership Limit, including, without limitation, refusal to give
effect to a transaction on the books of the Corporation.
H. AMBIGUITY. In the case of an ambiguity in the application of
any of the provisions of this Section 3, including any definition contained in
paragraph A hereof, the Board of Directors shall have the power and authority,
in its sole discretion, to determine the application of the provisions of this
Section 3 with respect to any situation based on the facts known to it.
I. EXCEPTION. The Board of Directors, upon receipt of a ruling
from the Internal Revenue Service, an opinion of counsel, or other evidence
satisfactory to the Board of Directors, in its sole discretion, in each case
to the effect that the restrictions contained in subparagraph 3 and
subparagraph 4 of paragraph B of this Section 3 will not be violated, may
waive, in whole or in part, the application of the Ownership Limit with
respect to any Person. In connection with any exemption, the Board of
Directors may require such representations and undertakings from such Person
and may impose such other conditions as the Board deems necessary, in its sole
discretion, to determine the effect, if any, of the proposed Transfer on the
Corporation's status as a REIT.
J. LIMITATIONS ON MODIFICATIONS.
(1) The Ownership Limit may not be increased (nor may any
additional ownership limitations be created) if, after giving effect to such
increase or creation, the Corporation would be "closely held" within the
meaning of Section 856(h) of the Code (assuming ownership of shares of Capital
Stock by all Persons equal to the greater of the Beneficial Ownership of
Capital Stock by such Person or the Ownership Limit).
(2) Prior to any modification of the Ownership Limit, the
Board of Directors may require such opinions of counsel, affidavits,
undertakings or agreements as it may deem necessary, advisable or prudent in
order to determine or ensure the Corporation's status a REIT.
K. LEGEND. Each certificate for shares of Capital Stock shall
bear substantially the following legend:
"The securities represented by this certificate are subject
to restrictions on transfer for the purpose of maintenance of the
Corporation's status as a real estate investment trust under the Internal
Revenue Code of 1986, as amended (the "Code"). Except as otherwise provided
pursuant to the Charter of the Corporation, no Person may (i) Beneficially or
Constructively Own shares of Capital Stock in excess of 9.8 percent of the
Value of the outstanding shares of Capital Stock of the Corporation; or (ii)
Beneficially Own Capital Stock which would result in the Corporation being
"closely held" under Section 856(h) of the Code or otherwise would cause the
Corporation to fail to qualify as a REIT. Any Person who attempts or proposes
to Beneficially or Constructively Own shares of Capital Stock in excess of the
above limitations must notify the Corporation in writing at least fifteen (15)
days prior to the proposed or attempted transfer. If the transfer restrictions
referred to herein are violated, the shares of Capital Stock represented
hereby automatically will be exchanged for shares of Excess Stock and will be
held in trust by the Corporation, all as provided in the Charter of the
Corporation. All capitalized terms in this legend have the meanings
identified in the Corporation's Charter, as the same may be amended or
restated from time to time, a copy of which, including the restrictions on
transfer, will be sent without charge to each stockholder who so requests."
SECTION 4. EXCESS STOCK.
A. OWNERSHIP IN TRUST. Upon any purported Transfer, change in
the capital structure of the Corporation or other purported change in
Beneficial Ownership that results in Excess Stock pursuant to paragraph C of
Section 3 of this Article VI, such Excess Stock shall be deemed to have been
transferred to the Corporation as Trustee of a Trust for the benefit of such
Beneficiary or Beneficiaries to whom an interest in such Excess Stock may
later be transferred pursuant to paragraph E of this Section 4. Shares of
Excess Stock so held in trust shall be issued and outstanding stock of the
Corporation. The Purported Record Transferee shall have no rights in such
Excess Stock except the right to designate a transferee of such Excess Stock
upon the terms specified in paragraph E of this Section 4. The Purported
Beneficial Transferee shall have no rights in such Excess Stock except as
provided in paragraph C of this Section 4.
B. DIVIDEND RIGHTS. Excess Stock shall not be entitled to any
dividends. Any dividend or distribution paid prior to the discovery by the
Corporation that the shares of Capital Stock have been exchanged for Excess
Stock shall be repaid to the Corporation upon demand, and any dividend or
distribution declared but unpaid at the time of such discovery shall be
rescinded as void ab initio with respect to such shares of Excess Stock.
C. RIGHTS UPON LIQUIDATION.
(1) Except as provided below, in the event of any voluntary
or involuntary liquidation, dissolution or winding up, or any other
distribution of the assets, of the Corporation, each holder of shares of
Excess Stock resulting from the exchange of Preferred Stock of any specified
series shall be entitled to receive, ratably with each other holder of shares
of Excess Stock resulting from the exchange of shares of Preferred Stock of
such series and each holder of shares of Preferred Stock of such series, such
accrued and unpaid dividends, liquidation preferences and other preferential
payments, if any, as are due to holders of shares of Preferred Stock of such
series. In the event that holders of shares of any series of Preferred stock
are entitled to participate in the Corporation's distribution of its residual
assets, each holder of shares of Excess Stock resulting from the exchange of
Preferred Stock of any such series shall be entitled to participate, ratably
with (i) each other holder of shares of Excess stock resulting from the
exchange of shares of Preferred Stock of all series entitled to so
participate; (ii) each holder of shares of Preferred Stock of all series
entitled to so participate; and (iii) each holder of shares of Common Stock
and Excess Stock resulting from the exchange of shares of Common Stock (to the
extent permitted by paragraph C of Section 3 of Article VI hereof), that
portion of the aggregate assets available for distribution (determined in
accordance with applicable law) as the number of shares of such Excess Stock
held by such holder bears to the total number of (i) outstanding shares of
Excess Stock resulting from the exchange of Preferred Stock of all series
entitled to so participate; (ii) outstanding shares of Preferred Stock of all
series entitled to so participate; and (iii) outstanding shares of Common
Stock and shares of Excess Stock resulting from the exchange of shares of
Common Stock. The Corporation, as holder of the Excess Stock in trust, or, if
the Corporation shall have been dissolved, any trustee appointed by the
Corporation prior to its dissolution, shall distribute ratably to the
Beneficiaries of the Trust, when determined, any such assets received in
respect of the Excess Stock in any liquidation, dissolution or winding up, or
any distribution of the assets, of the Corporation. Anything to the contrary
herein notwithstanding, in no event shall the amount payable to a holder with
respect to shares of Excess Stock resulting from the exchange of shares of
Preferred Stock exceed (i) the price per share such holder paid for the
Preferred Stock in the purported Transfer that resulted in the Excess Stock or
(ii) if the holder did not give full value for such Excess Stock (as through a
gift, devise or other event or transaction), a price per share equal to the
Market Price for the shares of Preferred Stock on the date of the purported
Transfer that resulted in such Excess Stock. Any amount available for
distribution in excess of the foregoing limitations shall be paid ratably to
the holders of shares of Preferred Stock and other holders of Excess Stock
resulting from the exchange of Preferred Stock to the extent permitted by the
foregoing limitations.
(2) Except as provided below, in the event of any
voluntary of involuntary liquidation, dissolution or winding up, or any other
distribution of the assets, of the Corporation, each holder of shares of
Excess Stock resulting from the exchange of Common Stock shall be entitled to
receive, ratably with (i) each other holder of shares of such Excess Stock and
(ii) each holder of Common Stock, that portion of the aggregate assets
available for distribution to holders of shares of Common Stock (including
holders of Excess Stock resulting from the exchange of Common Stock pursuant
to paragraph C of Section 3 of Article VI hereof), determined in accordance
with applicable law, as the number of shares of such Excess Stock held by such
holder bears to the total number of shares of outstanding Common Stock and
outstanding Excess Stock resulting from the exchange of Common Stock then
outstanding. The Corporation, as holder of the Excess Stock in trust, or, if
the Corporation shall have been dissolved, any trustee appointed by the
Corporation prior to its dissolution, shall distribute ratably to the
Beneficiaries of the Trust, when determined, any such assets received in
respect of the Excess Stock in any liquidation, dissolution or winding up, or
any distribution of the assets, of the Corporation. Anything herein to the
contrary notwithstanding, in no event shall the amount payable to a holder
with respect to shares of Excess Stock exceed (i) the price per share such
holder paid for the Common Stock in the purported Transfer that resulted in
the Excess Stock or (ii) if the holder did not give full value for such Excess
Stock (as through a gift, devise or other event or transaction), a price per
share equal to the Market Price for the shares of Common Stock on the date of
the purported Transfer that resulted in such Excess Stock. Any amount
available for distribution in excess of the foregoing limitations shall be
paid ratably to the holders of shares of Common Stock and other holders of
Excess Stock resulting from the exchange of Common Stock to the extent
permitted by the foregoing limitations.
D. VOTING RIGHTS. The holders of shares of Excess Stock shall
not be entitled to vote on any matters (except as required by MGCL).
E. RESTRICTIONS ON TRANSFER; DESIGNATION OF BENEFICIARY.
(1) Excess Stock shall not be transferable. The Purported
Record Transferee may freely designate a Beneficiary of its interest in the
Trust (representing the number of shares of Excess Stock held by the Trust
attributable to a purported Transfer that resulted in the Excess Stock, if (i)
the shares of Excess Stock held in the Trust would not be Excess Stock in the
hands of such Beneficiary and (ii) the Purported Beneficial Transferee does
not receive a price for designating such Beneficiary that reflects a price per
share for such Excess Stock that exceeds (x) the price per share such
Purported Beneficial Transferee paid for the Capital Stock in the purported
Transfer that resulted in the Excess Stock or (y) if the Purported Beneficial
Transferee did not give value for such shares of Excess Stock (as through a
gift, device or other event or transaction), a price per share equal to the
Market Price for the shares of Capital Stock on the date of the purported
Transfer that resulted in the Excess Stock . Upon such transfer of an
interest in the Trust, the corresponding shares of Excess Stock in the Trust
automatically shall be exchanged for an equal number of shares of Capital
Stock and such shares of Capital Stock shall be transferred of record to the
Beneficiary of the interest in the Trust designated by the Purported Record
Transferee, as described above, if such Capital Stock would not be Excess
Stock in the hands of such Beneficiary. Prior to any transfer of any interest
in the Trust, the Purported Record Transferee must give advance notice to the
Corporation of the intended transfer and the Corporation must have waived in
writing its purchase rights under paragraph F of this Section 4.
(2) Notwithstanding the foregoing, if a Purported
Beneficial Transferee receives a price for designating a Beneficiary of an
interest in the Trust that exceeds the amounts allowable under subparagraph
(1) of this paragraph E, such Purported Beneficial Transferee shall pay, or
cause the Beneficiary of the interest in the Trust to pay, such excess to the
Corporation.
(3) If any of the transfer restrictions set forth in this
paragraph E, or any application thereof, is determined to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the Purported
Record Transferee may be deemed, at the option of the Corporation, to have
acted as the agent of the Corporation in acquiring the Excess Stock as to
which such restrictions would, by their terms, apply, and to hold such Excess
Stock on behalf of the Corporation.
F. PURCHASE RIGHT IN EXCESS STOCK. Shares of Excess Stock shall
be deemed to have been offered for sale to the Corporation, or its designee,
at a price per share equal to the lesser of (i) the price per share in the
transaction that created such Excess Stock (or, in the case of devise or gift,
the Market Price at the time of such devise or gift) and (ii) the Market Price
of the Capital Stock exchanged for such Excess Stock on the date the
Corporation, or its designee, accepts such offer. The Corporation shall have
the right to accept such offer for a period of ninety (90) days after the
later of (i) the date of the purported Transfer, change in capital structure
of the Corporation or purported change in Beneficial Ownership which resulted
in such Excess Stock and (ii) the date on which the Board of Directors
determines in good faith that a Transfer, change in capital structure of the
Corporation or purported change in Beneficial Ownership resulting in Excess
Stock has occurred, if the Corporation does not receive a notice pursuant to
paragraph E of Section 3 of this Article VI, but in no event later than a
permitted Transfer pursuant to and in compliance with the terms of paragraph E
of this Section 4.
G. REMEDIES NOT LIMITED. Nothing contained in this Article VI
except Section 5 hereof shall limit scope or application of the provisions of
this Section 4, the ability of the Corporation to implement or enforce
compliance with the terms thereof or the authority of the Board of Directors
to take any such other action or actions as it may deem necessary or advisable
to protect the Corporation and the interests of its stockholders by
preservation of the Corporation's status as a REIT and to ensure compliance
with the Ownership Limit, including, without limitation, refusal to give
effect to a transaction on the books of the Corporation.
SECTION 5. SETTLEMENTS.
Nothing in Sections 3 and 4 of this Article VI shall preclude the
settlement of any transaction with respect to the Capital Stock entered into
through the facilities of the New York Stock Exchange or other national
securities exchange on which the Capital Stock is listed.
SECTION 6. SEVERABILITY.
If any provision of this Article VI or any application of any such
provision is determined to be void, invalid or unenforceable by any court
having jurisdiction over the issue, the validity and enforceability of the
remainder of this Article VI shall not be affected and other applications of
such provision shall be affected only to the extent necessary to comply with
the determination of such court.
